Risks Related to Our Business
Investing in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below, together with all of the other information contained in this Quarterly Report on Form 10-Q and in the other periodic and current reports and other documents we file with the Securities and Exchange Commission, before deciding to invest in our common stock. If any of the following risks materialize, our business, financial condition, results of operation and future prospects will likely be materially and adversely affected. In that event, the market price of our common stock could decline and you could lose all or part of your investment.
Risks Related to Our Pending merger
There is no assurance that the proposed merger between us and Achieve will be completed in a timely manner or at all. If the merger with Achieve is not consummated, our business could suffer materially and our stock price could decline.
The consummation of the proposed merger between us and Achieve is subject to a number of closing conditions, including the approval by our stockholders and other customary closing conditions. The parties are targeting a closing of the transaction in mid-2017. However, there can be no assurance that the proposed merger will be consummated on the desired timeframe, or at all.
If the proposed merger between us and Achieve is not consummated, we may be subject to a number of material risks, and our business and stock price could be adversely affected, as follows:
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we have incurred and expect to continue to incur significant expenses related to the proposed merger with Achieve even if the merger is not consummated;
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we could be obligated to pay Achieve up to a $1.0 million termination fee and/or up to $0.5 million in merger related expenses in connection with the termination of the merger agreement, depending on the reason for the termination;
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the market price of our common stock may decline to the extent that the current market price reflects a market assumption that the proposed merger will be completed; and
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we may not be able to pursue an alternate merger transaction if the proposed merger with Achieve is not completed.
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If the merger is not completed, our board of directors may decide to pursue a dissolution and liquidation of the company. In such an event, the amount of cash available for distribution to our stockholders will depend heavily on the timing of such liquidation as well as the amount of cash that will need to be reserved for commitments and contingent liabilities.
There can be no assurance that the merger will be completed. If the merger is not completed, our board of directors may decide to pursue a dissolution and liquidation of the company. In such an event, the amount of cash available for distribution to our stockholders will depend heavily on the timing of such decision, as with the passage of time the amount of cash available for distribution will be reduced as we continue to fund our operations. In addition, if our board of directors was to approve and recommend, and our stockholders were to approve, a dissolution and liquidation of the company, we would be required under Delaware corporate law to pay out outstanding obligations, as well as to make reasonable provision for contingent and unknown obligations, prior to making any distributions in liquidation to our stockholders. Our commitments and contingent liabilities may include severance obligations, regulatory and clinical obligations remaining under our clinical trials, fees and expenses related to the merger and non-cancelable lease obligations. As a result of this requirement, a portion of our assets may need to be reserved pending the resolution of such obligations. In addition, we may be subject to litigation or other claims related to a dissolution and liquidation. If a dissolution and liquidation were pursued, our board of directors, in consultation with its advisors, would need to evaluate these matters and make a determination about a reasonable amount to reserve. Accordingly, holders of our common stock could lose all or a significant portion of their investment in the event of a liquidation, dissolution or winding up of our company.
The issuance of shares of our common stock to Achieve stockholders in the pending merger will dilute substantially the voting power of our current stockholders.
If the pending merger is completed, each outstanding share of Achieve common stock will be converted into the right to receive approximately 4,242.8904 shares of our common stock, subject to certain adjustments. Immediately following the merger, our equityholders are expected to own approximately 25% of the outstanding capital stock of the combined company on a fully diluted basis, and the Achieve stockholders are expected to own approximately 75% of the outstanding capital stock of the combined company on a fully diluted basis. Accordingly, the issuance of shares of our common stock to Achieve stockholders in the merger will
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reduce significantly
the relative voting power of each share of our common stock held by our current equityholders. Consequently, our equityholders as a group will have significantly less influence over the management and policies of the combined company after the merger than
prior to the merger.
We have incurred and will continue to incur significant transaction costs in connection with the merger.
We have incurred and will continue to incur significant transaction costs in connection with the merger. We estimate that we will incur aggregate direct transaction costs of approximately $2.9 million associated with the merger and $0.5 million that we may pay on behalf of Achieve, as well as additional costs associated with the commencement of the combined company’s operation as a public company, which cannot be estimated accurately at this time.
The pendency of the merger could have an adverse effect on the trading price of our common stock and our business, financial condition, results of operations or business prospects.
While there have been no significant adverse effects to date, the pendency of the merger could disrupt our businesses in the following ways, including:
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the attention of our management may be directed toward completion of the merger and related matters and may be diverted from the day-to-day business operations, including identifying a collaboration partner to further the development of apatorsen and from other opportunities that otherwise might be beneficial to us; and
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third parties may seek to terminate or renegotiate their relationships with us as a result of the merger, whether pursuant to the terms of their existing agreements with us or otherwise.
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Should they occur, any of these matters could adversely affect the trading price of our common stock or harm our financial condition, results of operations or business prospects.
As a result of the custirsen phase 3 trial results and the reductions in our workforce, we have only 12 employees remaining. If we are unable to retain the remaining employees, our ability to consummate the pending merger may be delayed or seriously jeopardized.
On February, October and November 2016, we announced workforce reductions, which have reduced the headcount to 12 remaining employees. Our cash conservation activities may yield unintended consequences, such as attrition beyond the planned reductions in workforce and reduced employee morale, which may cause the remaining 12 employees to seek alternate employment. Competition among biotechnology companies for qualified employees is intense, and the ability to retain the remaining employees is critical to our ability to effectively manage our resources and to consummate the pending merger. Additional attrition could have a material adverse effect on our business, including delaying the completion of wind down activities related to our custirsen clinical trials and related operations and increasing the time and funds required. In addition, as a result of the reduction in our workforce, we face an increased risk of employment litigation.
Risks Related to our Business
We have incurred losses since inception and anticipate that we will continue to incur losses for the foreseeable future. We have never had any products available for commercial sale and we may never achieve or sustain profitability.
We are a clinical-stage biopharmaceutical company, are not profitable, have incurred losses in each year since our inception and do not expect to become profitable in the foreseeable future. We have never had any products available for commercial sale, and we have not generated any revenue from product sales nor do we anticipate that we will generate revenue from product sales in the near future. Our revenue to date has been collaboration revenue under the Collaboration Agreement with Teva, which was terminated in April 2015. In addition, custirsen did not demonstrate its intended benefit in any phase 3 clinical trial and its development has been discontinued. Our other product candidate, apatorsen, is earlier in its development and will require a collaboration partner to fund the required additional development. We have not yet submitted any products for approval by regulatory authorities, and we continue to incur research and development and general and administrative expenses related to our operations. We expect to continue to incur losses for the foreseeable future. If we do not find a collaboration partner to fund additional development of apatorsen or apatorsen otherwise fails in clinical trials or does not gain regulatory approval, or if apatorsen does not achieve market acceptance, we may never become profitable. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods.
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We cannot give any assurance that apatorsen will continue to b
e developed, receive regulatory approval or be successfully commercialized.
We conducted seven randomized phase 2 clinical trials evaluating apatorsen in several cancer indications. All but one of the phase 2 clinical trials for apatorsen failed to meet their pre-defined clinical endpoints. Completing additional clinical trials will be required to establish the safety and efficacy of this product candidate. We currently do not have sufficient capital to conduct additional clinical trials for apatorsen without a strategic partner, raising additional funds or completing a strategic transaction committed to the development of apatorsen. We are currently undertaking efforts to identify a third party to develop and, if approved, commercialize apatorsen. If we identify such a third party by August 2017 and our pending acquisition is completed, our stockholders will receive contingent value rights, or CVRs, to receive 80% of the consideration, less certain offsets, received by the combined company during the five-year period after the completion of the merger as a result of the achievement of certain clinical milestones, regulatory milestones, sales-based milestones and/or up-front payment milestones relating to apatorsen. We cannot give any assurance that we will be able to identify and enter into an agreement with a third party to develop and potentially commercialize apatorsen by August 2017, or if we do, that any consideration will ever be received by the combined company or distributed to our stockholders. If we are unable to enter into an agreement with a third party regarding the development of apatorsen by August 2017, the development of apatorsen may be delayed or terminated.
If we are able to enter into an agreement with a third party to develop apatorsen, the failure of apatorsen to be shown safe or effective in one or more indications could negatively impact the development of apatorsen in other indications, could result in the suspension or termination of apatorsen development and commercialization plans and could cause the CVRs to be of no or little value. Further, apatorsen consideration, if any, received beyond August 2022 would accrue to the benefit of the combined company stockholders generally and not to the CVR holders.
Our clinical development program for apatorsen may not receive regulatory approval either if apatorsen fails to demonstrate that it is safe and effective in clinical trials and consequently fail to obtain necessary approvals from the regulatory agencies, or if we have inadequate
financial or other resources to advance apatorsen through the clinical trial process.
If competitive products developed by third parties show significant benefit in the cancer indications in which we are developing apatorsen, any planned supportive or primary registration trials may be delayed, altered or not initiated and apatorsen may never receive regulatory approval. Any failure to obtain regulatory approval of apatorsen could have a material and adverse effect on our business.
Because we depend on financing from third parties for our operations, our business may fail if such financing becomes unavailable or is not available on commercially reasonable terms.
To date, we have financed our operations primarily through the sale of our equity securities and from payments we received pursuant to the Collaboration Agreement with Teva. In April 2015, our Collaboration Agreement with Teva was terminated, and we will not receive any future payments from Teva. We believe that our existing capital resources and interest on such resources will be sufficient to meet our current operating requirements for at least the next 12 months. However, if the timeline to complete the recently announced merger takes longer than anticipated or is not completed, we change our development plans or elect to further develop apatorsen, cannot find third-party collaborators to fund further development of apatorsen, our trials proceed slower or take longer than expected to complete, we acquire rights to new product candidates, do not successfully defend litigation or engage in commercialization and product launch activities, we will need additional capital sooner than we expect. Our future capital requirements will depend on many factors, including, without limitation:
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the timing of completion of the pending merger with Achieve;
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whether we modify our development program for apatorsen, including terminating and starting new trials;
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whether we are able to enter into additional third-party collaborative partnerships to develop and/or commercialize apatorsen on terms that are acceptable to us, or at all;
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the scope and results of our clinical trials;
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our ability to forecast the cost of our ongoing development activities;
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whether we experience delays in our development program of apatorsen, or experience slower-than-anticipated product development or rate of events;
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conducting studies required to obtain regulatory approvals for apatorsen from regulatory agencies;
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the availability of third parties to perform the key development tasks for apatorsen, including conducting preclinical studies and clinical trials and manufacturing apatorsen to be tested in those studies and trials and the associated costs of those services;
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the costs involved in preparing, filing, prosecuting, maintaining, defending the validity of and enforcing patent claims and other costs related to patent rights and other intellectual property rights, including litigation costs and the results of such litigation;
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whether opportunities to acquire additional product candidates arise and the costs of acquiring and developing those product candidates;
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the costs to defend, and the results of, litigation; and
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whether we engage in commercialization and product launch activities.
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If we are unable to raise funds on acceptable terms when it becomes necessary to do so, we may not be able to continue developing apatorsen, acquire or develop
additional
product candidates or respond to competitive pressures or unanticipated requirements. For these reasons, any inability to raise additional funds when we require it could have a material adverse effect on our business.
We intend to partner with third-party collaborators with respect to the development and commercialization of apatorsen, and we cannot control whether we will be able to do so on favorable terms, if at all.
We are currently undertaking efforts to identify and enter into an agreement with a third party to fund and undertake the development and potential commercialization of apatorsen. If we are not able to do so by August 2017 and the pending merger is completed, the CVRs will be terminated and the CVR holders will not realize any value from the CVRs.
We will be competing with many other companies as we seek partners for apatorsen and may not be able to compete successfully against those companies. If we are not able to enter into collaboration arrangements for apatorsen, we would be required to undertake and fund further development, clinical trials, manufacturing and commercialization activities solely at our own expense and risk. If we are unable to finance and/or successfully execute those expensive activities, or we delay such activities due to capital availability, our business could be materially and adversely affected, and potential future product launch could be materially delayed, be less successful, or we may be forced to discontinue clinical development of our product candidate.
Clinical trials may not demonstrate a clinical benefit of apatorsen.
Positive results from preclinical studies and clinical trials, including any exploratory results from the apatorsen clinical trials conducted to date should not be relied on as evidence that on-going, amended, or later-stage or large-scale clinical trials will succeed.
We, or a collaboration partner, will be required to demonstrate with substantial evidence through well-controlled clinical trials that apatorsen is safe and effective for use in a diverse population before we or a collaboration partner can seek regulatory approvals for its commercial sale. Success in early clinical trials does not mean that future clinical trials will be successful because evaluation of apatorsen in later-stage clinical trials may fail to demonstrate sufficient safety and efficacy to the satisfaction of regulatory agencies, despite having progressed through initial clinical trials. For example, all our phase 3 clinical trials for custirsen failed to meet their clinical endpoints, even after encouraging results in earlier trials. Further, preliminary or top-line results from clinical trials may not be confirmed in final data, or may change materially.
Even after the completion of phase 3 clinical trials, regulatory agencies may disagree with our clinical trial design and our interpretation of data, and may require us to conduct additional clinical trials to demonstrate the efficacy of apatorsen.
We may choose to make amendments to ongoing studies for any reason including to analyze final top line data earlier than planned. Any future amendments may compromise the integrity of the clinical trial results and may not be acceptable to regulators.
We rely on third parties to manufacture and supply apatorsen and other agents used in our clinical trials and potential future commercial use. A decrease in the availability or quality of apatorsen or agents could increase clinical trial costs, delay or halt clinical development or regulatory approval or commercialization of apatorsen, resulting in additional losses and depriving us of potential product revenue.
We do not own or operate manufacturing facilities, and we depend on third-party contract manufacturers for production of apatorsen and rely on other companies and their manufacturers for other agents used in all of our clinical trials. We lack the resources and the capability to manufacture apatorsen ourselves. To date, our product candidates, including apatorsen have been manufactured in limited quantities for preclinical studies and clinical trials. All active pharmaceutical ingredients, or API, and drug product for our product candidates have been manufactured for us by third parties pursuant to a purchase order or short-term contract that has been fulfilled.
If, in the future, apatorsen is approved for commercial sale, we or any pharmaceutical partner that has licensed apatorsen, if any, may need to manufacture apatorsen in commercial quantities. We cannot provide assurance that the third-party manufacturers with which we have contracted in the past will have sufficient capacity to satisfy future manufacturing needs, that additional purchases of API or drug product will be negotiated with these or alternative manufacturers on terms favorable to us, if at all, or that the pharmaceutical partner that has licensed apatorsen, if any, will have sufficient capacity or expertise to satisfy future needs.
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Third-party manufacturers may fail to perform under their contractual obligations, or may fail to deliver the required commercial quantities of bulk API or finished drug product on a timely
basis and at commercially reasonable prices. We have experienced manufacturing quality issues resulting in an unusable lot of one of our product candidates in the past. Any performance failure on the part of our contract manufacturers could delay clinical
development or regulatory approval or commercialization of apatorsen, depriving us of potential product revenue and resulting in additional losses. If an alternate manufacturer is required to be identified and qualified, clinical trials, regulatory submis
sions, required approvals or commercialization of apatorsen may be delayed or suspended, which may cause higher costs and could prevent successful commercialization of apatorsen. If one or more replacement manufacturers capable of production at a reasonabl
y favorable cost, in adequate volumes, of adequate quality and on a timely basis, cannot be identified, demand for apatorsen likely cannot be met and clinical trials could be delayed or we could lose potential revenue. The ability to replace an existing AP
I manufacturer may be difficult because the number of potential manufacturers is limited to approximately five manufacturers, and regulatory agencies must inspect any replacement manufacturer and review information related to product produced at the manufa
cturer before they can begin manufacturing our product candidates. It may be difficult or impossible to identify and engage a replacement manufacturer on acceptable terms in a timely manner, if at all. We expect to continue to depend on third-party contrac
t manufacturers for the foreseeable future.
Apatorsen requires precise, high-quality manufacturing. Any of our contract manufacturers will be subject to ongoing periodic unannounced inspection by regulatory agencies to ensure strict compliance with current Good Manufacturing Practices, or cGMP, and other applicable government regulations and corresponding standards. If a contract manufacturer fails to achieve and maintain high manufacturing standards in compliance with cGMP regulations, manufacturing errors may be experienced resulting in patient injury or death, product recalls or withdrawals, delays or interruptions of production or failures in product testing or delivery, delay or prevention of filing or approval of marketing applications for apatorsen, cost overruns or other problems that could seriously affect our business.
Significant manufacturing scale-up may require additional validation studies, which the regulatory agencies must review and approve. Additionally, any third-party manufacturers retained to manufacture apatorsen on a commercial scale must pass regulatory agencies’ pre-approval inspection for conformance to cGMP regulations before approval of apatorsen can be obtained. If manufacturing capacity for apatorsen in conformance with cGMP regulations is not successfully increased, the regulatory approval or commercial launch of apatorsen may be delayed or there may be a shortage in supply.
We also rely on third parties for the provision of other agents used in our clinical trials, and in some circumstances these agents are provided to us at no cost. We have no assurance that these third-parties will continue to provide their products to us at no cost.
If our competitors develop and market products that are more effective, safer or less expensive than apatorsen, our clinical trials and commercial opportunities will be negatively affected.
The life sciences industry is highly competitive, and we face significant competition from many pharmaceutical, biopharmaceutical and biotechnology companies that are researching and marketing products designed to address cancer indications for which apatorsen is currently being developed or for which apatorsen may be developed in the future. We are aware of several other companies that are developing therapeutics that seek to promote tumor cell death. Several therapies have been recently approved by the FDA in indications for which apatorsen may be developed in the future, and we expect more to be approved in the future.
Substantial advancements in the treatment of cancer have occurred in the past two years and new products from our competitors have been approved for marketing on the basis of showing a survival advantage. Apatorsen may be developed in the future by a collaboration partner in any number of cancer indications, including in bladder cancer. Any product we may develop in the future is likely to face competition from other drugs and therapies. Many of our competitors have significantly greater financial, manufacturing, marketing and drug development resources than we do. Large pharmaceutical companies, in particular, have extensive experience in clinical testing and in obtaining regulatory approvals for drugs. These companies also have significantly greater research and marketing capabilities than we do. In addition, many universities and private and public research institutes are, or may become, active in cancer research, and develop products that may directly compete with ours. If our competitors market products that are more effective, safer or less expensive than our future product candidates, if any, or that reach the market sooner than our future product candidates, if any, we may not achieve commercial success.
If new therapies become broadly used, additional clinical trials of apatorsen in combination with these new therapies may be required to demonstrate safety and efficacy of the combination. Additional trials will delay the development of apatorsen and increase our costs. The failure of apatorsen to work in combination with these new therapies would have an adverse effect on our business.
As new therapies are developed, these therapies will need to be assessed to determine whether to conduct clinical trials of apatorsen in combination with them to demonstrate safety and efficacy of the combination. If it is determined appropriate to conduct additional
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clinical trials of apatorsen in combination with these new therapies, the development of apatorsen will be delayed and our costs will be increased. If these clinical trials generate safety concerns or lack of efficacy, our business would
be adversely affected.
We rely, in part, on third parties to conduct our clinical trial for apatorsen and may rely on third parties to conduct future clinical trials, if any. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, regulatory approval for or commercialization of apatorsen may not be obtained.
To implement our product development strategies, we rely on third parties, such as collaborators, contract research organizations, medical institutions, clinical investigators and contract laboratories, to conduct clinical trials of apatorsen. Although we rely on third parties to conduct our clinical trials, we are responsible for ensuring that each of our clinical trials is conducted in accordance with our development plan and protocol. Moreover, regulatory agencies require us to comply with regulations and standards, commonly referred to as Good Clinical Practices, or GCPs, for conducting, monitoring, recording and reporting the results of clinical trials to ensure that the data and results are scientifically credible and accurate and that the clinical trial subjects are adequately informed of the potential risks of participating in clinical trials. Our reliance on third parties does not relieve us of these responsibilities and requirements. If the third parties conducting our clinical trials do not perform their contractual duties or obligations, do not meet expected deadlines or need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to GCPs or for any other reason, we may need to enter into new arrangements with alternative third parties and our clinical trials may be extended, delayed or terminated. In addition, a failure by such third parties to perform their obligations in compliance with GCPs may cause our clinical trials to fail to meet regulatory requirements, which may require us to repeat our clinical trials.
Our clinical trial may be suspended or terminated at any time, including by regulatory agencies, a Data Safety Monitoring Board overseeing the clinical trial at issue, by a clinical trial site or investigator, or by us. Any failure or significant delay in completing our clinical trial for apatorsen could materially harm the commercial prospects for apatorsen.
We do not know whether our clinical trial for apatorsen will proceed or be completed on schedule, if at all, or whether we will be able to identify a collaboration partner to fund and manage any future preclinical studies or clinical trials, as applicable. The completion of our clinical trial currently in progress could also be substantially delayed or prevented by several factors, including:
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delay or failure to complete the merger with Achieve ;
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the strategic development plan of the combined company following completion of the pending merger;
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termination of the clinical trial by us, by one or more clinical trial sites, investigators, data safety monitoring boards, granting or regulatory agencies;
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delay or failure to obtain sufficient manufacturing supply of apatorsen, or expiration of our existing supply of apatorsen prior to completing our ongoing clinical trial;
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lack of efficacy evidenced during the clinical trial;
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slower than expected final analysis of the clinical trial data;
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failure of patients to complete the clinical trial;
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unforeseen safety issues;
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inability or unwillingness of patients or medical investigators to follow the clinical trial protocol;
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inability to monitor patients adequately during or after treatment;
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introduction of competitive products that may impede our ability to retain patients in the clinical trial; and
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delay in submission or acceptance of protocol amendments, if any.
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Apatorsen may cause undesirable and potentially serious side effects during clinical trials that could delay or prevent its regulatory approval or commercialization.
Adverse events have been reported for patients in all of the clinical trials evaluating apatorsen, and serious adverse events were reported for approximately half the patients in a Phase 1 clinical trial evaluating apatorsen in patients with solid tumors. Since patients in our clinical trials have advanced stages of cancer, we expect that additional adverse events, including serious adverse events, will occur.
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Undesirable side effects caused by apatorsen could cause us or regulatory authorities to amend, interrupt, delay or halt clinical trials and could result in the denial of regulatory approval by regulatory agencies for any or all targeted indications or dec
rease the competitive opportunity of apatorsen which may decrease sales potential. This, in turn, could prevent commercialization of apatorsen and generating revenue from its sale. In addition, if apatorsen receives marketing approval and we or others late
r identify undesirable side effects caused by the product:
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the ongoing clinical trial may be terminated and further product development ceased;
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regulatory authorities may withdraw their approval of the apatorsen;
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apatorsen may be recalled, or a change in the way it is administered may be required, additional clinical trials may be required or a change in the labeling of apatorsen may be necessary;
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apatorsen may become less competitive and sales may decrease; and
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our reputation may suffer.
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Any one or a combination of these events could prevent achievement or maintenance of market acceptance of apatorsen or could substantially increase the costs and expenses of commercializing the product, which in turn could delay or prevent the generation of significant revenue from the sale of the product. Historic events have raised questions about the safety of other companies’ marketed drugs and may result in increased cautiousness by regulatory agencies in reviewing new drugs based on safety, efficacy or other regulatory considerations and may result in significant delays in obtaining regulatory approvals, additional clinical trials being required, or more stringent product labeling requirements. Any delay in obtaining, or the inability to obtain, applicable regulatory approvals would prevent commercialization of apatorsen.
If we were to be successfully sued related to our products or operations, we could face substantial liabilities that may exceed our resources.
We may be held liable if any of our products or operations cause injury or death or are found otherwise unsuitable during product testing, manufacturing, marketing or sale. These risks are inherent in the development of pharmaceutical products. We currently maintain commercial general and umbrella liability policies with combined limits of $10.0 million per occurrence and in the aggregate, in addition to a $10.0 million per claim and annual aggregate product liability insurance policy related to our clinical trials consistent with industry standards. When necessary for our products, we intend to obtain additional product liability insurance. Insurance coverage may be prohibitively expensive, may not fully cover potential liabilities or may not be available in the future. Inability to obtain sufficient insurance coverage at an acceptable cost or otherwise to protect against potential product liability claims could prevent or inhibit the commercialization of our products. If we were to be sued for any injury caused by or associated with our products or operations, the litigation could consume substantial time and attention of our management, and the resulting liability could exceed our total assets.
Even if regulatory approval to market apatorsen is received, the market may not be receptive to the product.
Even if apatorsen obtains regulatory approval, it may not gain market acceptance among physicians, patients, healthcare payors and/or the medical community. We believe that the degree of market acceptance will depend on a number of factors, including:
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efficacy, safety and tolerability of apatorsen;
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timing of market introduction of competitive products;
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availability of coverage and reimbursement from government and other third-party payors;
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potential advantages or disadvantages over alternative treatments;
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strength of marketing and distribution support;
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price of our apatorsen, both in absolute terms and relative to alternative treatments; and
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sequencing of available products.
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If our future product candidates fail to achieve market acceptance, we may not be able to generate significant revenue or achieve or sustain profitability.
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The successful commercialization of apatorsen will depend in part on the extent to which governmental autho
rities and health insurers establish adequate coverage and reimbursement levels and pricing policies.
Successful sales of apatorsen will depend, in part, on the extent to which coverage and reimbursement for the product will be available from government and health administration authorities, private health insurers and other third-party payors. To manage healthcare costs, many governments and third-party payors increasingly scrutinize the pricing of new products and require greater levels of evidence of favorable clinical outcomes and cost-effectiveness before extending coverage. In light of such challenges to prices, we cannot be sure that coverage for apatorsen will be obtained or, if available, that the reimbursement rates will be adequate. If adequate levels of coverage and reimbursement for apatorsen cannot be attained, its marketability will be negatively and materially impacted.
Moreover, eligibility for coverage and reimbursement does not imply that a drug will be paid for in all cases or at a rate that covers costs, including research, development, manufacture, sale and distribution. In addition, obtaining and maintaining adequate coverage and reimbursement status is time-consuming and costly. Third party payors may deny coverage and reimbursement status altogether of a given drug product, or cover the product but may also establish prices at levels that are too low to enable us to realize an appropriate return on our investment in product development. Further, one payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage for the product. Because the rules and regulations regarding coverage and reimbursement change frequently, in some cases at short notice, even when there is favorable coverage and reimbursement, future changes may occur that adversely impact the favorable status.
The unavailability or inadequacy of third-party coverage and reimbursement could have a material adverse effect on the market acceptance of any of our future products and the future revenues we may expect to receive from those products. In addition, we are unable to predict what additional legislation or regulation relating to the healthcare industry or third-party coverage and reimbursement may be enacted in the future, or what effect such legislation or regulation would have on our business.
We may fail to acquire and develop additional products or product candidates at all or on commercially reasonable terms.
We currently do not have internal discovery capabilities and depend on pharmaceutical and biotechnology companies and other researchers to sell or license products or product candidates to us. If we are unable to complete the merger with Achieve, we may be required to identify alternative sources of product candidates.
To successfully build a product pipeline, we would be required to identify, select and acquire pharmaceutical product candidates. Proposing, negotiating and implementing an economically viable product acquisition or license is a lengthy and complex process. We compete for partnering arrangements and license agreements with pharmaceutical and biotechnology companies and academic research institutions. Our competitors may have stronger relationships with third parties with whom we are interested in collaborating and/or may have more established histories of developing and commercializing products. As a result, our competitors may have a competitive advantage in entering into partnering arrangements with such third parties. In addition, even if we find promising product candidates, and generate interest in a partnering or strategic arrangement to acquire such product candidates, we may not be able to acquire rights to additional product candidates or approved products on terms that we find acceptable, if at all. If we fail to acquire and develop product candidates from others, we may be unable to grow our business.
We expect that any product candidate that we acquire rights to will require additional development efforts prior to commercial sale, including extensive clinical evaluation and approval by regulatory agencies. All product candidates are subject to the risks of failure inherent in pharmaceutical product development, including the possibility that the product candidate will not be shown to be sufficiently safe and effective for approval by regulatory authorities. Even if the product candidates are approved, we can make no assurance that we would be capable of economically producing the product or that the product would be commercially successful.
We may be adversely affected if our controls over financial reporting fail or are circumvented.
We regularly review and update our internal controls, disclosure controls and procedures, and corporate governance policies. In addition, although not required, we have chosen under the Sarbanes Oxley Act of 2002 to report annually on our internal control over financial reporting. If it were to be determined that our internal control over financial reporting is not effective, such shortcoming could have an adverse effect on our business and financial results and the price of our common stock could be negatively affected. This reporting requirement could also make it more difficult or more costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. Any system of internal controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Any failure or circumvention of the controls and procedures or failure to comply with regulation concerning control and procedures could have a material effect on our business, results of operation and financial condition. Any of these events could result in an adverse reaction in the financial marketplace due to a loss of investor confidence in the reliability of our financial statements, which ultimately could negatively affect the market price of our shares, increase the volatility of our stock price and adversely affect our ability to raise
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additional funding. The effect of these events could also make it more difficult for us to a
ttract and retain qualified persons to serve on our Board and our Board committees and as executive officers.
Risks Related to Our Intellectual Property
Our proprietary rights may not adequately protect apatorsen.
Our commercial success will depend in part on our ability to obtain patents and/or regulatory exclusivity and maintain adequate protection for apatorsen in the United States and other countries. We or a collaboration partner, if any, will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that apatorsen is covered by valid and enforceable patents or are effectively maintained as trade secrets.
We and/or a collaboration partner, if any, may apply for additional patents covering apatorsen as we deem appropriate. We or our collaboration partner, if any, may, however, fail to apply for patents on important technologies or apatorsen in a timely fashion, if at all. Our existing patents and any future patents we or our collaboration partner, if any, obtain may not be sufficiently broad to prevent others from practicing our technologies or from developing competing products and technologies. In addition, we do not always control the patent prosecution of subject matter that we license from others. Accordingly, we are sometimes unable to exercise a significant degree of control over such intellectual property as we would over our own.
Moreover, the patent positions of biopharmaceutical companies are highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. As a result, the validity and enforceability of our patents cannot be predicted with certainty. In addition, the U.S. Supreme Court has revised certain tests regarding granting patents and assessing the validity of patents to make it more difficult to obtain patents. As a consequence, issued patents may be found to contain invalid claims according to the revised standards. Some of our patents or those of collaborators may be subject to challenge and subsequent invalidation or significant narrowing of claim scope in a re-examination proceeding, or during litigation, under the revised criteria. We cannot guarantee that:
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we or our licensors were the first to make the inventions covered by each of our issued patents and pending patent applications;
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we or our licensors were the first to file patent applications for these inventions;
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others will not independently develop similar or alternative technologies or duplicate any of our technologies;
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any of our or our licensors’ pending patent applications will result in issued patents;
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any of our or our licensors’ patents will be valid or enforceable;
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any patents issued to us or our licensors and collaboration partners will provide us with any competitive advantages, or will not be challenged by third parties; and
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we will develop additional proprietary technologies that are patentable, or the patents of others will not have an adverse effect on our business.
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The actual protection afforded by a patent varies on a product-by-product basis, from country to country and depends on many factors, including the type of patent, the scope of its coverage, the availability of regulatory related extensions, the availability of legal remedies in a particular country and the validity and enforceability of the patents. Our ability or the ability of a collaboration partner, if any, to maintain and solidify our proprietary position for apatorsen will depend on our success in obtaining effective claims and enforcing those claims once granted. Our issued patents and those that may issue in the future, or those licensed to us or collaboration partners, if any, may be challenged, invalidated, unenforceable or circumvented, and the rights granted under any issued patents may not provide us with proprietary protection or competitive advantages against competitors with similar products. Due to the extensive amount of time required for the development, testing and regulatory review of a potential product, it is possible that, before apatorsen can be commercialized, any related patent may expire or remain in force for only a short period following commercialization, thereby reducing any advantage of the patent.
We also rely on trade secrets to protect some of our technology, especially where it is believed that patent protection is not appropriate or obtainable. However, trade secrets are difficult to maintain. While we use reasonable efforts to protect our trade secrets, our or our collaboration partners’ employees, consultants, contractors or scientific and other advisors may unintentionally or willfully disclose our proprietary information to competitors. Enforcement of claims that a third party has illegally obtained and is using trade secrets is expensive, time consuming and uncertain. In addition, non-U.S. courts are sometimes less willing than U.S. courts to protect trade secrets. If our competitors independently develop equivalent knowledge, methods and know-how, we would not be able to assert our trade secrets against them and our business could be harmed.
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We may not
be able to protect our intellectual property rights throughout the world.
Filing, prosecuting and defending patents on apatorsen, when and if we have any, in every jurisdiction would be prohibitively expensive. Competitors may use our technologies in jurisdictions where we or our licensors have not obtained patent protection to develop their own products. These products may compete with our products, when and if we have any, and may not be covered by any of our or our licensors’ patent claims or other intellectual property rights.
The laws of some non-U.S. countries do not protect intellectual property rights to the same extent as the laws of the United States, and many companies have encountered significant problems in protecting and defending such rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biotechnology and/or pharmaceuticals, which could make it difficult for us to stop the infringement of our patents. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of our business.
We may become involved in disputes with past or potential future collaborators over intellectual property ownership, and publications by our research collaborators and scientific advisors could impair our ability to obtain patent protection or protect our proprietary information, which, in either case, could have a significant effect on our business.
Inventions discovered under research, material transfer or other such collaborative agreements may become jointly owned by us and the other party to such agreements in some cases and the exclusive property of either party in other cases. Under some circumstances, it may be difficult to determine who owns a particular invention, or whether it is jointly owned, and disputes could arise regarding ownership of those inventions. These disputes could be costly and time consuming and an unfavorable outcome could have a significant adverse effect on our business if we were not able to protect or license rights to these inventions. In addition, our research collaborators and scientific advisors generally have contractual rights to publish our data and other proprietary information, subject to our prior review. Publications by our research collaborators and scientific advisors containing such information, either with our permission or in contravention of the terms of their agreements with us, may impair our ability to obtain patent protection or protect our proprietary information, which could significantly harm our business.
The intellectual property protection for apatorsen depends on third parties.
We have exclusively licensed from UBC certain issued patents and pending patent applications covering the respective antisense sequences underlying apatorsen and its commercialization and use, and we have licensed from Ionis certain issued patents and pending patent applications directed to product compositions and chemical modifications used in apatorsen for commercialization, use and the manufacturing thereof. We have also received a sublicense from Ionis under certain third-party patent portfolios directed to such modifications.
The patents and pending patent applications underlying our licenses do not fully cover all potential modifications and uses of apatorsen. In the case of patents and patent applications licensed from Ionis, we do not have and have not had any control over the filing, prosecution or enforcement of these patents or patent applications. We cannot be certain that such prosecution efforts have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents. We also cannot be assured that our licensors or their respective licensing partners will agree to enforce any such patent rights at our request or devote sufficient efforts to attain a desirable result. Any failure by our licensors or any of their respective licensing partners to properly protect the intellectual property rights relating to apatorsen could have a material adverse effect on our financial condition and results of operation.
If we breach any of the agreements under which we license rights to apatorsen or technology from third parties, we could lose license rights that are important to our business. Certain of our license agreements may not provide an adequate remedy for a breach by the licensor.
We license the development and commercialization rights for apatorsen. Under such licenses, we are subject to various obligations such as sublicensing, royalty and milestone payments, annual maintenance fees, limits on sublicensing, insurance obligations and the obligation to use commercially reasonable best efforts to develop and exploit the licensed technology. If we fail to comply with any of these obligations or otherwise breach these agreements, our licensors may have the right to terminate the license in whole or in part or to terminate the exclusive nature of the license. We may also become involved in disputes with current or former licensors regarding the meaning of certain terms in the license agreements, including terms related to royalty and milestone payments and termination, which may result in costly and time consuming litigation. Loss of any of these licenses or the exclusivity rights provided by the licenses, or disputes with current or former licensors, could harm our financial condition and results of operations. In addition, certain of our license agreements with UBC eliminate our ability to obtain money damages in respect of certain claims against UBC.
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The patent protection for apatorsen may expire before we are able to
maximize its commercial value, which may subject us to increased competition and reduce or eliminate our opportunity to generate product revenue.
The patents for apatorsen have varying expiration dates and, when these patents expire, we may be subject to increased competition and we may not be able to recover our development costs. For example, certain of the U.S. patents directed to apatorsen and its use that have been licensed from UBC are expected to expire in 2023. In some of the larger economic territories, such as the United States and Europe, patent term extension/restoration may be available to compensate for time taken during aspects of the product candidate’s regulatory review. We cannot, however, be certain that an extension will be granted or, if granted, what the applicable time period or the scope of patent protection afforded during any extended period will be. In addition, even though some regulatory agencies may provide some other exclusivity for a product candidate under its own laws and regulations, we may not be able to qualify the product candidate or obtain the exclusive time period.
If we are unable to obtain patent term extension/restoration or some other exclusivity, we could be subject to increased competition and our opportunity to establish or maintain product revenue could be substantially reduced or eliminated. Furthermore, we may not have sufficient time to recover our development costs prior to the expiration of our U.S. and non-U.S. patents.
We may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights and we may be unable to protect our rights to, or use of, our technology.
If we choose to go to court to stop someone else from using the inventions claimed in our patents or our licensed patents, that individual or company has the right to ask the court to rule that these patents are invalid and/or should not be enforced against that third party. These lawsuits are expensive and would consume time and other resources even if we were successful in stopping the infringement of these patents. In addition, there is a risk that the court will decide that these patents are invalid or unenforceable and that we do not have the right to stop the other party from using the inventions. The U.S. Supreme Court has revised certain tests regarding granting patents and assessing the validity of patents to make it more difficult to obtain patents. Some of our issued patents may be subject to challenge and subsequent invalidation under the revised criteria. There is also the risk that, even if the validity or unenforceability of these patents is upheld, the court will narrow the scope of our claim or will refuse to stop the other party on the grounds that such other party’s activities do not infringe our rights.
If we wish to use the technology or compound claimed in issued and unexpired patents owned by others, we will need to obtain a license from the owner, enter into litigation to challenge the validity or enforceability of the patents or incur the risk of litigation in the event that the owner asserts that we infringed its patents. The failure to obtain a license to technology or the failure to challenge an issued patent that we may require to discover, develop or commercialize apatorsen may have a material adverse effect on us.
If a third party asserts that we infringed its patents or other proprietary rights, we could face a number of risks that could seriously harm our results of operations, financial condition and competitive position, including:
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patent infringement and other intellectual property claims, which would be costly and time consuming to defend, whether or not the claims have merit, and which could delay the regulatory approval process and divert management’s attention from our business;
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substantial damages for past infringement, which we may have to pay if a court determines that apatorsen or our technologies infringe a competitor’s patent or other proprietary rights;
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a court prohibiting us from selling or licensing our technologies or future drugs unless the third party licenses its patents or other proprietary rights to us on commercially reasonable terms, which it is not required to do; and
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if a license is available from a third party, we may have to pay substantial royalties or lump-sum payments or grant cross licenses to our patents or other proprietary rights to obtain that license.
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The biotechnology industry has produced a proliferation of patents, and it is not always clear to industry participants, including us, which patents cover various types of products or methods of use. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform. If we are sued for patent infringement, we would need to demonstrate that apatorsen or methods of use either do not infringe the patent claims of the relevant patent, and/or that the patent claims are invalid, and/or that the patent is unenforceable and we may not be able to do this. Proving invalidity, in particular, is difficult since it requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents.
U.S. patent laws as well as the laws of some foreign jurisdictions provide for provisional rights in published patent applications beginning on the date of publication, including the right to obtain reasonable royalties, if a patent subsequently issues and certain other conditions are met.
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Because some patent applications in the United States may be maintained in secrecy until the patents are
issued, because patent applications in the United States and many foreign jurisdictions are typically not published until 18 months after filing and because publications in the scientific literature often lag behind actual discoveries, we cannot be certain
that others have not filed patent applications for technology covered by our licensors’ issued patents or our pending applications or our licensors’ pending applications, or that we or our licensors were the first to invent the technology.
Patent applications filed by third parties that cover technology similar to ours may have priority over our or our licensors’ patent applications and could further require us to obtain rights to issued patents covering such technologies. If another party files a U.S. patent application on an invention similar to ours, we may elect to participate in or be drawn into an interference proceeding declared by the U.S. Patent and Trademark Office to determine priority of invention in the United States. The costs of these proceedings could be substantial, and it is possible that such efforts would be unsuccessful, resulting in a loss of our U.S. patent position with respect to such inventions. Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to raise the funds necessary to continue our operations. We cannot predict whether third parties will assert these claims against us or against the licensors of technology licensed to us, or whether those claims will harm our business. If we are forced to defend against these claims, whether they are with or without any merit and whether they are resolved in favor of or against us or our licensors, we may face costly litigation and diversion of management’s attention and resources. As a result of these disputes, we may have to develop costly non-infringing technology, or enter into licensing agreements. These agreements, if necessary, may be unavailable on terms acceptable to us, if at all, which could seriously harm our business or financial condition.
We may be subject to damages resulting from claims that we, or our employees or consultants, have wrongfully used or disclosed alleged trade secrets of third parties.
Many of our employees were previously employed, and certain of our consultants are currently employed, at universities or biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we have not received any claim to date, we may be subject to claims that these employees or consultants or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of these current or former employers. Litigation may be necessary to defend against these claims. If we fail in defending such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. We may be subject to claims that employees of our partners or licensors of technology licensed by us have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. We may become involved in litigation to defend against these claims. If we fail in defending such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel.
Risks Related to our Common Stock
The price for our common stock is volatile.
The market prices for our common stock and that of emerging life science companies generally have historically been highly volatile. For example, after the announcement of data from recent custirsen and apatorsen clinical trials, we experienced significant decreases in our stock price. Future announcements concerning us, our pending merger, the results of our clinical trials or our competitors may also have a significant effect on the market price of our common stock. The stock markets also experience significant price and volume fluctuation unrelated to the operating performance of particular companies. These market fluctuations may also adversely affect the market price of our common stock.
An increase in the market price of our common stock, which is uncertain and unpredictable, may be the sole source of gain from an investment in our common stock. An investment in our common stock may not be appropriate for investors who require dividend income. We have never declared or paid cash dividends on our capital stock and do not anticipate paying any cash dividends on our capital stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business. As a result, capital appreciation, if any, of our common stock will be the sole source of gain for stockholders for the foreseeable future. Accordingly, an investment in our common stock may not be appropriate for investors who require dividend income or investors who are not prepared to bear a significant risk of losses from such an investment.
The price of our common stock does not meet the requirements for continued listing on The NASDAQ Capital Market. If we fail to regain compliance with the minimum listing requirements, our common stock will be subject to delisting. Our ability to complete the pending merger or publicly or privately sell equity securities and the liquidity of our common stock could be adversely affected if our common stock is delisted.
The continued listing standards of The NASDAQ Capital Market require, among other things, that the minimum bid price of a listed company’s stock be at or above $1.00. If the minimum bid price is below $1.00 for a period of more than 30 consecutive trading days, the listed company will fail to be in compliance with The NASDAQ Capital Market’s listing rules and, if it does not regain
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compliance within the grace period, will be subject to delisting. As previously reported, on
August 22, 2016, we received a notice from the NASDAQ Listing Qualifications Department notifying us that for 30 consecutive trading days, the bid price of our common stock had closed below the minimum $1.00 per share requirement. In accordance with The N
ASDAQ Capital Market’s listing rules, we were afforded 180 calendar days, or until February 21, 2017, to regain compliance with the bid price requirement. In order to regain compliance, the bid price of our common stock must close at a price of at least $1
.00 per share for a minimum of 10 consecutive trading days. On February 22, 2017, we received a second notice from the NASDAQ Listing Qualifications Department notifying us that we had not regained compliance with the bid price requirement during the 180 c
alendar days, and that we may be eligible for an additional 180-day compliance period if we meet the market value of publicly held shares requirement for continued listing, all other initial inclusion requirements for The NASDAQ Capital Market, except for
the bid price requirement, and provide written notice that we intend to regain compliance with the bid price requirement during the second 180-day compliance period, by effecting a reverse stock split if necessary. We believe we are eligible for the addit
ional 180-day compliance period, and intend to meet the bid price requirement by effecting a reverse stock split upon the completion of our pending merger.
If we fail to regain compliance, our common stock will be subject to delisting. Delisting from The NASDAQ Capital Market could adversely affect our ability to raise additional financing through the public or private sale of equity securities, would significantly affect the ability of investors to trade our securities and would negatively affect the value and liquidity of our common stock. Delisting could also have other negative results, including the potential loss of confidence by employees, the loss of institutional investor interest and fewer business development opportunities. Delisting would also prevent us from satisfying a closing condition for the pending merger, and, in such event, Achieve may elect not to consummate the merger. In addition, the combined company must submit a new application for listing on The NASDAQ Capital Market after the merger pursuant to the reverse merger rules, and the combined company will need to meet NASDAQ’s minimum listing requirements.
We are at risk of securities class action litigation.
In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities, including in circumstances where such declines occur in close proximity to the announcement of clinical trial results, as well as following certain significant business transactions, such as the announcement of a merger. This risk is especially relevant for us because we recently announced a pending merger with Achieve. Additionally, our stock price and those of other biotechnology and biopharmaceutical companies have experienced significant stock price volatility in recent years. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business. Any stockholder litigation challenging the pending merger may also delay completion of the merger in the expected timeframe or altogether.
If we raise additional capital, the terms of the financing transactions may cause dilution to existing stockholders or contain terms that are not favorable to us.
To date, our sources of cash have been limited primarily to proceeds from the private or public placement of our securities and reimbursement for custirsen-related development expenses from our prior strategic collaboration with Teva, which terminated in April 2015. In the future, we may seek to raise additional financing through private placements or public offerings of our equity or debt securities. We cannot be certain that additional funding will be available on acceptable terms, if at all. To the extent that we raise additional financing by issuing equity securities, we may do so at a price per share that represents a discount to the then-current per share trading price of our common stock and our stockholders may experience significant dilution. Any debt financing, if available, may involve restrictive covenants, such as limitations on our ability to incur additional indebtedness, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely affect our ability to conduct our business.
Risks Related to Our Industry
There is a high risk that our drug development activities will not result in commercial products.
We or a collaborator, if any, will need to complete significant additional clinical trials before we or they can demonstrate that apatorsen is safe and effective to the satisfaction of regulatory agencies. Clinical trials are expensive and uncertain processes that take years to complete. Failure can occur at any stage of the process, and successful early clinical trials do not ensure that later clinical trials will be successful. In later-stage clinical trials, apatorsen may fail to show desired efficacy and safety traits despite having progressed through initial clinical trials. For example, all of our phase 3 clinical trials for custirsen and all but one of our phase 2 trials for apatorsen failed to meet their clinical endpoints, even after positive results in earlier trials. A number of companies in the pharmaceutical industry have suffered significant setbacks in advanced clinical trials, even after obtaining promising results in earlier clinical trials. In addition, a clinical trial may prove successful with respect to a secondary objective, but fail to demonstrate clinically significant benefits with respect to a primary objective. Failure to satisfy a primary objective in a phase 3 clinical trial (registration trial) would generally mean that a product candidate would not receive regulatory approval.
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The regulatory approval process is expensive, time consuming and uncertain and may prevent us from obtaining approvals for the commercialization of some or all of our product candidates.
The research, testing, manufacturing, labeling, approval, selling, marketing and distribution of drug products are subject to extensive regulation by regulatory agencies, which regulations differ from country to country. We are not permitted to market our product candidate in the United States until we receive approval of an application for market approval from regulatory agencies. We have not submitted an application for or received marketing approval for our apatorsen. Obtaining approval of an application for market approval can be a lengthy, expensive and uncertain process. In addition, failure to comply with regulatory agencies’ requirements may, either before or after product approval, if any, subject us to administrative or judicially imposed sanctions, including:
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restrictions on the products, manufacturers or manufacturing process;
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civil and criminal penalties;
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suspension or withdrawal of regulatory approvals;
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product seizures, detentions or import bans;
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voluntary or mandatory product recalls and publicity requirements;
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total or partial suspension of production;
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imposition of restrictions on operations, including costly new manufacturing requirements; and
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refusal to approve pending applications for market approval or supplements to approved applications for market approval.
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Regulatory approval of an application for market approval or application for market approval supplement is not guaranteed, and the approval process is expensive and may take several years. Regulatory agencies also have substantial discretion in the drug approval process. Despite the time and expense exerted, failure can occur at any stage, and we or a collaborator, if any, could encounter problems that could cause us or them to abandon clinical trials or to repeat or perform additional preclinical studies and clinical trials. The number of preclinical studies and clinical trials that will be required for regulatory agencies’ approval varies depending on the drug candidate, the disease or condition that the drug candidate is designed to address, and the regulations applicable to any particular drug candidate. Regulatory agencies can delay, limit or deny approval of a drug candidate for many reasons, including:
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a drug candidate may not be deemed safe or effective;
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regulatory agencies may not find the data from preclinical studies and/or clinical trials sufficient;
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regulatory agencies might not approve our third-party manufacturer’s processes or facilities;
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regulatory agencies may change its approval policies or adopt new regulations; and
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third-party products may enter the market and change approval requirements.
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Even if we or a collaborator, if any, obtains regulatory approvals for apatorsen, the terms of approvals and ongoing regulation of apatorsen may limit how we or a collaborator, if any, manufactures and markets apatorsen, which could materially affect our ability to generate revenue.
If apatorsen was approved, it and its manufacturer will be subject to continual review. Any regulatory approval that we or a collaborator, if any, receives for apatorsen is likely to be subject to limitations on the indicated uses for which the end product may be marketed, or include requirements for potentially costly post-approval follow-up clinical trials. In addition, if regulatory agencies approve apatorsen, the labeling, packaging, adverse event reporting, storage, advertising and promotion for the end product will be subject to extensive regulatory requirements. The manufacturers of apatorsen, when and if it has any, will also be required to comply with cGMP regulations, which include requirements relating to quality control and quality assurance, as well as the corresponding maintenance of records and documentation. Further, regulatory agencies must approve these manufacturing facilities before they can be used to manufacture our product, when and if apatorsen has any, and these facilities are subject to ongoing regulatory inspection. If the manufacturer fails to comply with the regulatory requirements of regulatory agencies, or if previously unknown problems with apatorsen are discovered, we could be subject to administrative or judicially imposed sanctions, including:
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restrictions on the product, manufacturers or manufacturing process;
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civil or criminal penalties or fines;
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product seizures, detentions or import bans;
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voluntary or mandatory product recalls and publicity requirements;
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suspension or withdrawal of regulatory approvals;
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total or partial suspension of production;
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imposition of restrictions on operations, including costly new manufacturing requirements; and
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refusal to approve pending applications for market approval or supplements to approved applications for market approval.
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In addition, regulatory agencies may change their policies and additional regulations may be enacted that could prevent or delay regulatory approval of apatorsen. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States, Canada or abroad. If we are not able to maintain regulatory compliance, we would likely not be permitted to market apatorsen and we may not achieve or sustain profitability.
If government and third-party payors fail to provide coverage and adequate reimbursement rates for apatorsen, our revenue and potential for profitability will be reduced.
In the United States and elsewhere, our product revenue will depend principally on the reimbursement rates established by third-party payors, including government health administration authorities, managed-care providers, public health insurers, private health insurers and other organizations. These third-party payors are increasingly challenging the price, and examining the cost-effectiveness, of medical products and services. In addition, significant uncertainty exists as to the reimbursement status, if any, of newly approved drugs, pharmaceutical products or product indications. We or a collaborator, if any, may need to conduct post-marketing clinical trials in order to demonstrate the cost-effectiveness of apatorsen, if any. Such clinical trials may require us or a collaborator, if any, to commit a significant amount of management time and financial and other resources. If reimbursement of such product is unavailable or limited in scope or amount or if pricing is set at unsatisfactory levels, our revenue could be reduced.
In some countries other than the United States, particularly the countries of the European Union and Canada, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, obtaining pricing approval from governmental authorities can take six to 12 months or longer after the receipt of regulatory marketing approval of a product for an indication. To obtain reimbursement or pricing approval in some countries, we or a collaborator, if any, may be required to conduct a clinical trial that compares the cost-effectiveness of apatorsen to other available therapies. If reimbursement of such product candidate is unavailable or limited in scope or amount or if pricing is set at unsatisfactory levels, our revenue could be reduced.
Domestic and foreign governments continue to propose and pass legislation designed to reduce the cost of healthcare, including drugs. In the United States, there have been, and we expect that there will continue to be, federal and state proposals to implement similar governmental control. In addition, increasing emphasis on managed care in the United States will continue to put pressure on the pricing of pharmaceutical products. For example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, or collectively, PPACA, became law in the United States. PPACA substantially changes the way healthcare is financed by both governmental and private insurers and significantly affects the pharmaceutical industry.
We anticipate that the PPACA, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and downward pressure on the price for any approved product, and could seriously harm our prospects. In addition, the Medicare and Medicaid program and state healthcare laws and regulations may also be modified to change the scope of covered products and/or reimbursement methodology. Cost control initiatives could decrease the established reimbursement rates that we receive for apatorsen in the future, which would limit our revenue and profitability. Legislation and regulations affecting the pricing of pharmaceutical products, including apatorsen, may change at any time, which could further limit or eliminate reimbursement rates for apatorsen or other product candidates.
Failure to obtain regulatory approval outside of the United States and Canada would prevent us from marketing our product candidates abroad.
We or a collaborator may market apatorsen outside of the United States and Canada. In order to market apatorsen in the European Union and many other non-North American markets, we or a collaborator, if any, must obtain separate regulatory approvals. We have had limited interactions with non-North American regulatory authorities. Approval procedures vary among countries and can involve additional testing, and the time required to obtain approval may differ from that required to obtain FDA approval. Approval by the FDA or other regulatory authorities does not ensure approval by regulatory authorities in other countries, and approval by one or more non-North American regulatory authorities does not ensure approval by regulatory authorities in other countries or by the FDA. The non-North American regulatory approval process may include all of the risks associated with obtaining FDA approval. We or a collaborator, if any, may not obtain non-North American regulatory approvals on a timely basis, if at all. We or a collaborator, if any, may not be able to file for non-North American regulatory approvals and may not receive necessary approvals to commercialize apatorsen in any market.
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