An investment in shares of our common stock involves a high degree of
risk. You should carefully consider the following information about these risks, together with the other information appearing elsewhere in this Quarterly Report on Form
10-Q,
including our financial
statements and related notes hereto, before deciding to invest in our common stock. The occurrence of any of the following risks could have a material adverse effect on our business, financial condition, results of operations and future growth
prospects or cause our actual results to differ materially from those contained in forward-looking statements we have made in this report and those we may make from time to time. In these circumstances, the market price of our common stock could
decline; and you may lose all or part of your investment. We cannot assure you that any of the events discussed below will not occur.
Risks
Related to Our Financial Position and Capital Needs
We have incurred net losses since our inception and anticipate that we will continue to
incur net losses for the foreseeable future.
Investment in biopharmaceutical product development is highly speculative because it
entails substantial upfront capital expenditures and significant risk that any potential product candidate will fail to demonstrate adequate efficacy or an acceptable safety profile, gain regulatory approval or be commercially viable. We are a
clinical stage biopharmaceutical company with limited operating history. We have no products approved for commercial sale and have not generated any product revenues to date, and we continue to incur significant research and development and other
expenses related to our ongoing operations and clinical development of entinostat. As a result, we are not and have never been profitable and have incurred losses in each period since our inception in 2005.
For the six months ended June 30, 2017, we reported a net loss of $26.6 million; and as of June 30, 2017, we had an accumulated
deficit of $332.0 million, which included
non-cash
charges for stock-based compensation, preferred stock accretion and extinguishment charges. We expect to continue to incur significant losses for the
foreseeable future, and we expect these losses to increase as we continue our research and development of, and seek regulatory approvals for, our product candidates. We may also
21
encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the
rate of future growth of our expenses and our ability to generate revenues, if any. Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders equity and working capital.
We currently have no source of product revenue and may never achieve or maintain profitability.
Our ability to generate product revenue and become profitable depends upon our ability to successfully commercialize our two product
candidates, entinostat and SNDX-6352. We do not anticipate generating revenue from the sale of our product candidates for the foreseeable future. Our ability to generate future product revenue also depends on a number of additional factors,
including, but not limited to, our ability to:
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successfully complete the research and clinical development of, and receive regulatory approval for, our product candidates;
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launch, commercialize and achieve market acceptance of our product candidates, and if launched independently, successfully establish a sales, marketing and distribution infrastructure;
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continue to build a portfolio of product candidates through the acquisition or
in-license
of products, product candidates or technologies;
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initiate preclinical and clinical trials for any additional product candidates that we may pursue in the future;
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establish and maintain supplier and manufacturing relationships with third parties, and ensure adequate and legally compliant manufacturing of bulk drug substances and drug products to maintain that supply;
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obtain coverage and adequate product reimbursement from third-party payors, including government payors;
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establish, maintain, expand and protect our intellectual property rights; and
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attract, hire and retain additional qualified personnel. In addition, because of the numerous risks and uncertainties associated with drug development, we are unable to predict the timing or amount of increased
expenses, and if or when we will achieve or maintain profitability. In addition, our expenses could increase beyond expectations if we decide to or are required by the FDA or foreign regulatory authorities to perform studies or trials in addition to
those that we currently anticipate. Even if we complete the development and regulatory processes described above, we anticipate incurring significant costs associated with launching and commercializing entinostat or SNDX-6352 and any other product
candidates we may develop.
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Even if we generate revenues from the sale of our product candidates, we may not become
profitable and may need to obtain additional funding to continue operations or acquire additional products that will require additional funding to develop them. If we fail to become profitable or do not sustain profitability on a continuing basis,
then we may be unable to continue our operations at planned levels and be forced to reduce our operations or even shut down.
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We will require additional capital to finance our planned operations, which may not be available to us on
acceptable terms, or at all. As a result, we may not complete the development and commercialization of, or obtain regulatory approval for, entinostat or SNDX-6352 or develop new product candidates.
Our operations have consumed substantial amounts of cash since our inception, primarily due to our research and development efforts. We expect
our research and development expenses to increase substantially in connection with our ongoing and planned activities. We believe that our existing cash, cash equivalents and short-term investments will fund our projected operating expenses and
capital expenditure requirements for at least the next 12 months. Unexpected circumstances may cause us to consume capital more rapidly than we currently anticipate. For example, we may discover that we need to conduct additional activities that
exceed our current budget to achieve appropriate rates of patient enrollment, which would increase our development costs.
In any event,
we will require additional capital to continue the development of, obtain regulatory approval for, and to commercialize entinostat and SNDX-6352 and any future product candidates. Any efforts to secure additional financing may divert our management
from our
day-to-day
activities, which may adversely affect our ability to develop and commercialize entinostat and SNDX-6352. In addition, we cannot guarantee that
future financing will be available in sufficient amounts or on terms acceptable to us, if at all. If we do not raise additional capital when required or on acceptable terms, we may need to:
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delay, scale back or discontinue the development or commercialization of our product candidates or cease operations altogether;
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seek strategic alliances for entinostat or SNDX-6352 on terms less favorable than might otherwise be available; or
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relinquish, or license on unfavorable terms, our rights to technologies or any future product candidates that we otherwise would seek to develop or commercialize ourselves.
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If we need to conduct additional fundraising activities and we do not raise additional capital in sufficient amounts or on terms acceptable to
us, we may be prevented from pursuing development and commercialization efforts, which will harm our business, operating results and prospects.
Our future funding requirements, both short- and long-term, will depend on many factors, including:
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the initiation, progress, timing, costs and results of clinical trials of our product candidates;
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the outcome, timing and cost of seeking and obtaining regulatory approvals from the FDA and comparable foreign regulatory authorities, including the potential for such authorities to require that we perform more trials
than we currently expect;
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the cost to establish, maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with
licensing, preparing, filing, prosecuting, defending and enforcing any patents or other intellectual property rights;
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market acceptance of our product candidates;
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the cost and timing of selecting, auditing and developing manufacturing capabilities, and potentially validating manufacturing sites for commercial-scale manufacturing;
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the cost and timing for obtaining pricing and reimbursement, which may require additional trials to address pharmacoeconomic benefit;
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the cost of establishing sales, marketing and distribution capabilities for our product candidates if either candidate receives regulatory approval and we determine to commercialize it ourselves;
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the costs of acquiring, licensing or investing in additional businesses, products, product candidates and technologies;
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the effect of competing technological and market developments; and
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our need to implement additional internal systems and infrastructure, including financial and reporting systems, as we grow our company.
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If we cannot expand our operations or otherwise capitalize on our business opportunities because we cannot secure sufficient capital, our
business, financial condition and results of operations could be materially adversely affected.
23
Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
We have incurred substantial losses during our history. We do not expect to become profitable in the near future, and we may
never achieve profitability. Unused losses generally are available to be carried forward to offset future taxable income, if any, until such unused losses expire. Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, if a
corporation undergoes an ownership change, generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period, the corporations ability to use its
pre-change
net operating loss carryforwards, or NOLs, and other
pre-change
tax attributes (such as research tax credits) to offset its post-change taxable income or
taxes may be limited. We completed an analysis through April 30, 2016 and determined that on March 30, 2007 and August 21, 2015 ownership changes had occurred. We may have experienced an ownership change subsequent to April 30,
2016; and we may also experience ownership changes in the future as a result of shifts in our stock ownership, some of which may be outside of our control. As a result, our ability to use our
pre-change
NOLs
to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise
limited, which could accelerate or permanently increase state taxes owed.
Risks Related to Our Business and Industry
Entinostat and SNDX-6352 are currently our only product candidates. If we are unable to successfully complete clinical development of, obtain regulatory
approval for and commercialize entinostat or SNDX-6352, our business prospects will be significantly harmed.
Entinostat and
SNDX-6352 are currently our only product candidates. Our financial success will depend substantially on our ability to effectively and profitably commercialize entinostat or SNDX-6352. In order to commercialize entinostat and SNDX-6352, we will be
required to obtain regulatory approvals by establishing that each of them is sufficiently safe and effective. The clinical and commercial success of entinostat and SNDX-6352 will depend on a number of factors, including the following:
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timely commencement and completion of the planned Phase 1b/2 clinical trials of entinostat in combination with
Keytruda
,
Tecentriq
and
Bavencio
®
(avelumab) and the Phase 1 clinical trial of SNDX-6352;
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timely patient enrollment and completion of the Phase 3 clinical trial in advanced HR+, HER2- breast cancer, which may be significantly slower than we currently anticipate and will depend substantially upon the
satisfactory performance of ECOG-ACRIN and the NCI and other third-party contractors for entinostat;
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whether we are required by the FDA or foreign regulatory authorities to conduct additional clinical trials;
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the prevalence and severity of adverse side effects in any of our clinical trials;
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the ability to demonstrate safety and efficacy of entinostat and SNDX-6352 for their proposed indications and the timely receipt of necessary marketing approvals from the FDA and foreign regulatory authorities;
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achieving and maintaining compliance with all applicable regulatory requirements;
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the availability, perceived advantages, relative cost, relative safety and relative efficacy of alternative and competing treatments;
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the effectiveness of our own or our potential strategic collaborators marketing, sales and distribution strategy and operations in the United States and abroad;
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the ability of our third-party contract manufacturers to produce trial supplies of entinostat and SNDX-6352, and to develop, validate and maintain a commercially viable manufacturing process that is compliant with
current Good Manufacturing Practice regulations, or cGMP;
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the availability of commercial supplies of therapeutics, including
exemestane,
Keytruda, Tecentriq
and
Bavencio
, and clinical supplies of investigational drugs, to support the development and
marketing of the entinostat therapy as a component of a combination drug regimen for entinostat;
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our ability to successfully commercialize our product candidates in the United States and abroad, whether alone or in collaboration with others; and
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our ability to enforce our intellectual property rights in and to entinostat and SNDX-6352.
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If we fail to obtain regulatory approval for our product candidates, we will not be able to generate product sales, which will have a material
adverse effect on our business and our prospects.
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Our strategy of combining entinostat with immune checkpoint inhibitors is clinically untested and we may
fail to show that the combination is safe and well tolerated and demonstrates additional clinical benefit from the combination.
Preclinical studies conducted by us and others suggest a strong rationale for combining entinostat with immune checkpoint inhibitors to
enhance the immune systems ability to detect and eliminate tumor cells. Our approach is to conduct Phase 1 and 2 clinical trials in patients with tumors that are known to be responsive to immune checkpoint inhibitors and assess both the safety
and efficacy, including durability of response, of the combination of entinostat plus a checkpoint inhibitor. However, we have not yet demonstrated the safety or the benefit of this combination in humans and we may be unable to establish a
clinically meaningful benefit for patients without added toxicity.
Although the NCI has entered into a SPA, agreement with the FDA relating to the
pivotal Phase 3 clinical trial of entinostat for advanced HR+, HER2- breast cancer, this agreement does not guarantee any particular outcome with respect to regulatory review of the trial or any associated NDA for entinostat.
The protocol for the pivotal Phase 3 trial of entinostat in combination with exemestane in advanced HR+, HER2- breast cancer was reviewed and
agreed upon by the FDA under an SPA agreement with the NCI. The SPA agreement allows for FDA evaluation of whether a clinical trial protocol could form the primary basis of an efficacy claim in support of an NDA. The SPA is an agreement that a Phase
3 clinical trials design, clinical endpoints, patient population and statistical analyses are sufficient to support the efficacy claim. Agreement on the SPA is not a guarantee of approval; and there is no assurance that the design of, or data
collected from, the trial will be adequate to obtain the requisite regulatory approval. Further, obtaining clinical trial data meeting the clinical endpoints in satisfaction of the SPA does not guarantee approval. The SPA is not binding on the FDA
if public health concerns unrecognized at the time the SPA was entered into become evident or other new scientific concerns regarding product safety or efficacy arise. In addition, upon written agreement of both the FDA and the NCI, the SPA may be
changed, and the FDA retains significant latitude and discretion in interpreting the terms of the SPA and any resulting trial data. As a result, we do not know how the FDA will interpret the parties respective commitments under the SPA, how it
will interpret the data and results from the pivotal Phase 3 clinical trial, whether the FDA will require that we conduct or complete one or more additional clinical trials to support potential approval or whether entinostat will receive any
regulatory approvals. ECOG-ACRIN, with sponsorship and funding support from the NCI, is conducting the pivotal Phase 3 clinical trial, which began enrollment in the second quarter of 2014.
If the Phase 3 clinical trial of entinostat in combination with exemestane in advanced HR+, HER2- breast cancer patients fails to demonstrate
safety and efficacy to the satisfaction of regulatory authorities or does not otherwise produce positive results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and
commercialization of entinostat.
Before obtaining marketing approval from regulatory authorities for the sale of entinostat, we
or our collaborators must conduct extensive trials to demonstrate the safety and efficacy of entinostat in humans. We have entered into an arrangement with ECOG-ACRIN to conduct the Phase 3 clinical trial of entinostat in combination with exemestane
in advanced HR+, HER2- breast cancer patients. The trial will measure two primary endpoints of progression free survival, or PFS, and overall survival. Based on information received from ECOG-ACRIN to date, PFS data is expected in the first half of
2018 and overall survival data no sooner than the second half of 2019. If the Phase 3 clinical trial meets the PFS endpoint and the interim analysis of overall survival demonstrates a favorable trend, we expect to submit an NDA based on this data in
2018. However, if the trial does not meet the PFS endpoint, we will not be able to submit an NDA unless and until we receive data demonstrating that the primary endpoint for overall survival has been achieved. In addition, based on scientific advice
from the European Medicines Agency, the current Phase 3 clinical trial is not likely to be sufficient to receive regulatory approval in Europe for entinostat to treat advanced HR+, HER2- breast cancer, and it is unclear whether we would be able to
complete an alternate clinical trial that would be sufficient.
Despite the results reported in our Phase 2b clinical trial for entinostat
in advanced estrogen receptor positive, or ER+, breast cancer, we do not know whether the Phase 3 clinical trial in advanced HR+, HER2- breast cancer will demonstrate adequate efficacy and safety to result in regulatory approval to market entinostat
in any particular cancer indications or jurisdiction. Additionally, while we do not expect that there will be overlapping toxicities between entinostat and exemestane, we cannot be certain that we will not observe these toxicities or unexpected side
effects in the Phase 3 clinical trial.
Clinical testing is expensive and difficult to design and implement, can take many years to
complete and is inherently uncertain as to the outcome. A failure of one or more trials can occur at any stage of testing. The outcome of preclinical studies and early clinical trials may not accurately predict the success of later trials, and
interim results of a trial do not necessarily predict final results. For example, with the emergence of the new therapies such as
Kisqali
and
Ibrance
, patients enrolled in the Phase 3 clinical trial may be different than those enrolled
in our previous Phase 2b clinical trial in that they may have received
Kisqali
and
Ibrance
prior to our trial and therefore may respond differently to treatment with entinostat. A number of companies in the pharmaceutical and
biotechnology industries have suffered significant setbacks in advanced trials due to lack of efficacy or unacceptable safety profiles, notwithstanding promising results in earlier trials.
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The failure of ECOG-ACRIN or the NCI to adequately perform its obligations and responsibilities in the
conduct of the Phase 3 clinical trial or to meet expected deadlines could substantially harm our business because we may not obtain regulatory approval for entinostat in a timely manner, or at all.
We have entered into an arrangement with ECOG-ACRIN, pursuant to which it, with sponsorship and funding support by the NCI, is conducting the
Phase 3 clinical trial of entinostat in combination with exemestane in advanced HR+, HER2- breast cancer patients. While we provide operational and logistical support for the trial, we have limited control of their activities. We cannot control
whether or not ECOG-ACRIN will devote sufficient time and resources to the trial, including as a result of any reduction or delay in government funding or sponsorship of the activities of ECOG-ACRIN or the NCI. If ECOG-ACRIN or the NCI does not
successfully carry out its obligations and responsibilities or meet expected deadlines or if the quality or accuracy of the clinical data that ECOG-ACRIN obtains is compromised due to the failure to adhere to cGMPs, clinical protocols, regulatory
requirements or for other reasons, the Phase 3 clinical trial may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize, entinostat. As a result, our results of operations and the
commercial prospects for entinostat would be harmed, our costs could increase and our ability to generate revenues could be delayed.
Although the Phase 3 clinical trial is being conducted by ECOG-ACRIN, we are responsible for ensuring that each of our trials is conducted in
accordance with the applicable protocol and legal, regulatory and scientific standards, and our reliance on ECOG-ACRIN does not relieve us of our regulatory responsibilities. We are required to comply with Good Clinical Practice, or GCP, which are
regulations and guidelines enforced by the FDA, the Competent Authorities of the Member States of the European Economic Area and foreign regulatory authorities for any product in clinical development. Regulatory authorities enforce GCP through
periodic inspections of trial sponsors, principal investigators and clinical trial sites. If we fail to comply with applicable GCP, the clinical data generated in our trials may be deemed unreliable and the FDA or foreign regulatory authorities may
require us to perform additional trials before approving our marketing applications. We cannot assure that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our trials comply with GCP requirements.
In addition, we must conduct our trials with products produced under cGMP requirements. Failure to comply with any of these regulations may require us to repeat preclinical and clinical trials, which would delay the regulatory development process.
If there are delays in completing the Phase 3 clinical trial for entinostat in advanced HR+, HER2- breast cancer, we will be delayed in
commercializing entinostat, our development costs may increase and our business may be harmed.
The Phase 3 clinical trial of
entinostat in combination with exemestane in advanced HR+, HER2- breast cancer commenced in the second quarter of 2014, and ECOG-ACRIN expects to have PFS data from this trial in the first half of 2018. However, to date, ECOG-ACRINs enrollment
of patients in this trial has been slower than expected. We do not know whether this trial will need to be restructured, or will be completed on schedule or at all. Our product development costs will increase if we experience delays in clinical
testing. Significant trial delays also could shorten any periods during which we may have the exclusive right to commercialize entinostat or allow our competitors to bring products to market before we do, which would impair our ability to
successfully capitalize on entinostat and may harm our business, results of operations and prospects. Events which may result in a delay or unsuccessful completion of clinical development of entinostat include, among other things:
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failure of ECOG-ACRIN to timely identify and enroll patients in the Phase 3 clinical trial;
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feedback from the FDA and foreign regulatory authorities, institutional review boards, or IRBs, or the data safety monitoring board, or results from clinical trials that might require modification to a clinical trial
protocol;
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imposition of a clinical hold by the FDA or other regulatory authorities, a decision by the FDA, other regulatory authorities, IRBs or the company, or a recommendation by a data safety monitoring board to suspend or
terminate trials at any time for safety issues or for any other reason;
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deviations from the trial protocol by clinical trial sites and investigators or failure to conduct the trial in accordance with regulatory requirements;
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failure of third parties, such as ECOG-ACRIN or contract research organizations, or CROs, to satisfy their contractual duties or meet expected deadlines;
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withdrawal of sponsorship of the NCI because of a failure of ECOG-ACRIN to meet certain performance metrics in the clinical trial;
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delays in the testing, validation, manufacturing and delivery of entinostat to the clinical trial sites;
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unexpectedly high rate of patients withdrawing consent or being lost to
follow-up;
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delays caused by patients dropping out of a trial due to side effects or disease progression;
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unacceptable risk-benefit profile or unforeseen safety issues or adverse side effects;
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failure to demonstrate the efficacy of entinostat in this clinical trial;
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inability to identify and maintain a sufficient number of clinical trial sites, many of which may already be engaged in other clinical trial programs, including some that may be for the same indication;
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withdrawal of clinical trial sites from our clinical trials as a result of changing standards of care or the ineligibility of a site to participate in our trials; or
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changes in government regulations or administrative actions or lack of adequate funding to continue the trials.
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An inability by us to timely complete clinical development could result in additional costs to us or impair our ability to generate product
revenues or development, regulatory, commercialization and sales milestone payments and royalties on product sales.
If we are or our collaborators
are unable to enroll patients in clinical trials, these clinical trials may not be completed on a timely basis or at all.
The
timely completion of clinical trials largely depends on patient enrollment. Many factors affect patient enrollment, including:
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perception about the relative efficacy of our product candidates versus other compounds in clinical development or commercially available;
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evolving standard of care in treating cancer patients with immuno-oncology agents;
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the size and nature of the patient population;
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the number and location of clinical trial sites enrolled;
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competition with other organizations or our own clinical trials for clinical trial sites or patients;
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the eligibility and exclusion criteria for the trial;
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the design of the trial;
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ability to obtain and maintain patient consents; and
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risk that enrolled subjects will drop out before completion.
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As a result of the above
factors, there is a risk that our or our collaborators clinical trials may not be completed on a timely basis or at all.
We are dependent on
Merck, Genentech, Merck KGaA and Pfizer and any future collaborators to perform satisfactorily under our agreements.
Under the
agreements with Merck, Genentech, Merck KGaA and Pfizer and any future collaborations, we will be dependent on our collaborators performance of their responsibilities and their cooperation with us. Our collaborators may not perform their
obligations under our agreements with them or otherwise cooperate with us. We cannot control whether our collaborators will devote the necessary resources to the activities contemplated by our collaborative agreements, nor can we control the timing
of their performance. Our collaborators may choose to pursue existing or alternative technologies in preference to those being developed in collaboration with us. Disputes may arise between us and our collaborators that delay the development and
commercialization of our product candidates, disputes that may be difficult and costly to resolve, or may not be resolved. In addition, a collaborator for the potential product may have the right to terminate the collaboration at its discretion and,
for example, Merck has the right to terminate the Merck agreement for any reason after a specified advance notice period. Any termination may require us to seek a new collaborator, which we may not be able to do on a timely basis, if at all, or may
require us to delay or scale back the commercialization efforts or spend additional money to complete the clinical trial. The occurrence of any of these events could adversely affect the commercialization of entinostat and materially harm our
business.
If we are unable to enter into additional clinical collaborations with developers of immune checkpoint inhibitors or other
combination therapies to explore the same or additional indications, the commercial potential of entinostat could be limited. Such collaborations are complex, and any potential discussions may not result in a definitive agreement for many reasons.
For example, whether we reach a definitive agreement for a clinical collaboration will depend, among other things, upon our respective assessments of the other partys resources and expertise, the terms and conditions of the proposed
collaboration, and the proposed collaborators evaluation of a number of factors. Those factors may include the design or results of our clinical trials, the potential market for the combination therapy, the costs and complexities of
manufacturing and delivering the potential product to patients, the potential of competing products, and industry and market conditions generally.
The actions of KHK and any other current or future sublicensees could adversely affect our business.
We currently sublicense entinostat to third parties for development and commercialization in certain foreign jurisdictions. Specifically, we
have a sublicense agreement with KHK under which we granted KHK an exclusive sublicense to develop and commercialize entinostat in Japan and Korea. It is possible that any clinical trials conducted by KHK and other current or future sublicensees in
their respective jurisdictions could have negative results, which in turn could have a material adverse effect on the development of entinostat for development and commercialization in the United States and the rest of the world.
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We are dependent on UCB to comply with the terms of our license agreement for SNDX-6352.
Our commercial success also depends upon our ability to develop, manufacture, market and sell SNDX-6352. In July 2016, we entered into the UCB
license agreement pursuant to which we obtained a worldwide, sublicenseable, exclusive license to SNDX-6352, an
IND-ready
anti-CSF-1R
monoclonal antibody. Under the UCB license agreement, we are dependent on UCBs performance of its responsibilities and its cooperation with us. UCB may
not perform its obligations under the UCB license agreement or otherwise cooperate with us. We cannot control whether UCB will devote the necessary resources to its obligations under the UCB license agreement, nor can we control the timing of its
performance. For example, under the UCB license agreement, UCB is transferring to us certain data and materials, providing limited technical assistance and certain transitional services, and manufacturing and suppling us with a preliminary supply of
SNDX-6352, which we expect will assist us with the development, manufacture and commercialization of SNDX-6352. If UCB fails to complete such technology transfer or to supply us with sufficient quantities of SNDX-6352, our efforts to develop and
commercialization SNDX-6352 may be delayed or may fail. Additionally, certain of the rights licensed to us under the UCB license agreement are
in-licensed
by UCB from third parties. We are dependent on UCB
maintaining the applicable third-party license agreements in full force and effect, which may include activities and performance obligations that are not within our control. If any of these third-party license agreements is terminated, certain of
our rights to develop, manufacture, commercialize or sell SNDX-6352 may be terminated as well. The occurrence of any of these events could adversely affect the development and commercialization of SNDX-6352, and materially harm our business.
We may be required to relinquish important rights to and control over the development and commercialization of our product candidates to our current or
future collaborators.
Our collaborations, including any future strategic collaborations we enter into, could subject us to a
number of risks, including:
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we may be required to undertake the expenditure of substantial operational, financial and management resources;
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we may be required to issue equity securities that would dilute our existing stockholders percentage of ownership;
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we may be required to assume substantial actual or contingent liabilities;
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we may not be able to control the amount and timing of resources that our strategic collaborators devote to the development or commercialization of our product candidates;
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strategic collaborators may delay clinical trials, provide insufficient funding, terminate a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new version of a product
candidate for clinical testing;
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strategic collaborators may not pursue further development and commercialization of products resulting from the strategic collaboration arrangement or may elect to discontinue research and development programs;
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strategic collaborators may not commit adequate resources to the marketing and distribution of our product candidates, limiting our potential revenues from these products;
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disputes may arise between us and our strategic collaborators that result in the delay or termination of the research, development or commercialization of our product candidates or that result in costly litigation or
arbitration that diverts managements attention and consumes resources;
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strategic collaborators may experience financial difficulties;
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strategic collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in a manner that could jeopardize or invalidate our proprietary information or expose
us to potential litigation;
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business combinations or significant changes in a strategic collaborators business strategy may also adversely affect a strategic collaborators willingness or ability to complete its obligations under any
arrangement;
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strategic collaborators could decide to move forward with a competing product candidate developed either independently or in collaboration with others, including our competitors; and
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strategic collaborators could terminate the arrangement or allow it to expire, which would delay the development and may increase the cost of developing, our product candidates.
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We may explore strategic collaborations that may never materialize or may fail.
We may periodically explore a variety of possible strategic collaborations in an effort to gain access to additional product candidates or
resources. At the current time, we cannot predict what form such a strategic collaboration might take. We are likely to face significant competition in seeking appropriate strategic collaborators, and strategic collaborations can be complicated and
time consuming to negotiate and document. We may not be able to negotiate strategic collaborations on acceptable terms, or at all. We are unable to predict when, if ever, we will enter into any additional strategic collaborations because of the
numerous risks and uncertainties associated with establishing them.
28
The regulatory approval processes of the FDA and foreign regulatory authorities are lengthy, time-consuming
and inherently unpredictable. Our inability to obtain regulatory approval for our product candidates could harm our business.
The
time required to obtain approval by the FDA and foreign regulatory authorities is unpredictable, but typically takes many years following the commencement of preclinical studies and clinical trials and depends upon numerous factors, including the
substantial discretion of the regulatory authorities. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidates clinical development and
may vary among jurisdictions. We have not obtained regulatory approval for any of our product candidates, and it is possible that we will never obtain regulatory approval for our existing product candidates or any future product candidates.
Our product candidates could fail to receive regulatory approval from the FDA or foreign regulatory authorities for many reasons, including but
not limited to:
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failure to demonstrate that our product candidates are safe and effective;
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failure of clinical trials to meet the primary endpoints or level of statistical significance required for approval;
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failure to demonstrate that the clinical and other benefits of a product candidate outweigh any of its safety risks;
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disagreement with our interpretation of data from preclinical studies or clinical trials;
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disagreement with the design or implementation of our or our collaborators trials;
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the insufficiency of data collected from trials of our product candidates to support the submission and filing of an NDA or other submission or to obtain regulatory approval;
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failure to obtain approval of the manufacturing and testing processes or facilities of third-party manufacturers with whom we contract for clinical and commercial supplies;
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receipt of a negative opinion from an advisory committee due to a change in the standard of care regardless of the outcome of the clinical trials; or
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changes in the approval policies or regulations that render our preclinical and clinical data insufficient for approval.
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The FDA or foreign regulatory authorities may require more information, including additional preclinical or clinical data, to support
approval, which may delay or prevent approval and our commercialization plans, or may cause us to decide to abandon our development program. Even if we were to obtain approval, regulatory authorities may approve entinostat and/or SNDX-6352 for a
more limited patient population than we request, may grant approval contingent on the performance of costly post-marketing trials, may impose a risk evaluation and mitigation strategy (REMS) or foreign regulatory authorities may require
the establishment or modification of a similar strategy that may, for instance, restrict distribution of entinostat and impose burdensome implementation requirements on us, or may approve it with a label that does not include the labeling claims
necessary or desirable for the successful commercialization of entinostat, all of which could limit our ability to successfully commercialize our product candidates.
We are not developing entinostat as a monotherapy. A shortage in the supply of exemestane, Keytruda, Tecentriq, Bavencio or other drugs used in
combination with entinostat or cessation of development efforts for investigational agents being studied with entinostat could increase our development costs and adversely affect our ability to commercialize entinostat, and any unexpected adverse
events with any of the drugs used in combination with entinostat could halt or delay development of entinostat.
Cancer drugs have
from time to time been in short supply and, because many or all of these cancer drugs are also widely used in cancer treatment currently, we will compete with a broad range of healthcare providers and other companies for availability of those drugs.
Any shortage of exemestane
, Keytruda
,
Tecentriq
,
Bavencio
or other drugs that we are testing in combination with entinostat could adversely affect our ability to timely conduct the Phase 3 clinical trial in advanced HR+, HER2-
breast cancer and the Phase 1b/2 clinical trials in NSCLC, melanoma, microsatellite stable colorectal cancer, ovarian cancer, and TNBC, and if entinostat receives regulatory approval, to commercialize entinostat for treatment of advanced HR+, HER2-
breast cancer, NSCLC, melanoma, microsatellite stable colorectal cancer, ovarian cancer, or TNBC. A shortage of supply may also result in an increase, which could be significant, in our costs of procuring exemestane.
Additionally, because entinostat is being developed for use in combination with other cancer treatments, the development of entinostat may be
delayed or halted if unexpected adverse events occurring in patients are attributed to entinostat. Likewise, new adverse events emerging from commercialized or development stage drugs being administered with entinostat may limit or halt the
potential of such combinations.
29
Our product candidates may not achieve adequate market acceptance among physicians, patients, healthcare
payors and others in the medical community to be commercially successful.
Even if our product candidates receive regulatory
approval, they may not gain sufficient market acceptance among physicians, patients, healthcare payors and others in the medical community. Our commercial success also depends on coverage and adequate reimbursement by third-party payors, including
government payors, which may be difficult or time-consuming to obtain, may be limited in scope and may not be obtained in all jurisdictions in which we may seek to market our product candidates. The degree of market acceptance will depend on a
number of factors, including:
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the efficacy, including durability of response, and safety profile as demonstrated in trials;
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the timing of market introduction as well as competitive products;
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the clinical indications for which the product candidate is approved;
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acceptance of the product candidate as a safe and effective treatment by physicians, clinics and patients;
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the potential and perceived advantages of our product candidates over alternative treatments;
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the cost of treatment in relation to alternative treatments;
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the availability of coverage and adequate reimbursement and pricing by third parties and government authorities;
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relative convenience and ease of administration;
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the frequency and severity of adverse events;
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the effectiveness of sales and marketing efforts; and
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unfavorable publicity relating to our product candidates.
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If our product candidates are
approved but do not achieve an adequate level of acceptance by physicians, hospitals, healthcare payors and patients, we may not generate sufficient revenue to become or remain profitable.
We rely on third-party suppliers to manufacture and distribute our clinical drug supplies for our product candidates, we intend to rely on third parties
for commercial manufacturing and distribution of our product candidates and we expect to rely on third parties for manufacturing and distribution of preclinical, clinical and commercial supplies of any future product candidates.
We do not currently have, nor do we plan to acquire, the infrastructure or capability to manufacture or distribute preclinical, clinical or
commercial quantities of drug substance or drug product, including entinostat and SNDX-6352. While we expect to continue to depend on third-party manufacturers for the foreseeable future, we do not have direct control over the ability of these
manufacturers to maintain adequate manufacturing capacity and capabilities to serve our needs, including quality control, quality assurance and qualified personnel. We are dependent on our third-party manufacturers for compliance with cGMPs and for
manufacture of both active drug substances and finished drug products. Facilities used by our third-party manufacturers to manufacture drug substance and drug product for commercial sale must be approved by the FDA or other relevant foreign
regulatory agencies pursuant to inspections that will be conducted after we submit our NDA or relevant foreign regulatory submission to the applicable regulatory agency. If our third-party manufacturers cannot successfully manufacture materials that
conform to our specifications and/or the strict regulatory requirements of the FDA or foreign regulatory agencies, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. Furthermore, these third-party
manufacturers are engaged with other companies to supply and/or manufacture materials or products for such companies, which also exposes our third-party manufacturers to regulatory risks for the production of such materials and products. As a
result, failure to meet the regulatory requirements for the production of those materials and products may also affect the regulatory clearance of a third-party manufacturers facility. If the FDA or a foreign regulatory agency does not approve
these facilities for the manufacture of our product candidates, or if it withdraws its approval in the future, we may need to find alternative manufacturing facilities, which would impede or delay our ability to develop, obtain regulatory approval
for or market our product candidates, if approved.
A breakthrough therapy designation by the FDA for entinostat may not lead to a faster
development or regulatory review or approval process, and it does not increase the likelihood that entinostat will receive marketing approval.
We have received breakthrough therapy designation from the FDA for entinostat when used in combination with exemestane based on the overall
survival results from our completed Phase 2b clinical trial in advanced HR+, HER2- breast cancer. A breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or
life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints. The Phase 2b trial showed statistically
significant improvements in PFS, the primary endpoint, and OS, an exploratory endpoint. Receipt of a breakthrough therapy designation for a drug candidate may not result in a faster development process or review compared to drugs considered for
approval under
30
conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, the FDA may later decide that entinostat no longer meets the conditions for qualification or decide that
the time period for FDA review will not be shortened. For instance, if results from the Phase 3 clinical trial do not confirm the improvements in PFS or overall survival observed in our Phase 2b clinical trial, the FDA may rescind our
breakthrough therapy designation.
Even if our product candidates receive regulatory approval, they may still face future development and regulatory
difficulties.
Even if we obtain regulatory approval for our product candidates, they would be subject to ongoing requirements by
the FDA and foreign regulatory authorities governing the manufacture, quality control, further development, labeling, packaging, storage, distribution, safety surveillance, import, export, advertising, promotion, recordkeeping and reporting of
safety and other post-market information. The FDA and foreign regulatory authorities will continue to closely monitor the safety profile of any product even after approval. If the FDA or foreign regulatory authorities become aware of new safety
information after approval of a product candidate, they may require labeling changes or establishment of a REMS or similar strategy, impose significant restrictions on its indicated uses or marketing, or impose ongoing requirements for potentially
costly post-approval studies or post-market surveillance.
In addition, manufacturers of drug products and their facilities are subject to
continual review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP regulations and standards. If we or a regulatory agency discover previously unknown problems with a product, such as adverse events of
unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory agency may impose restrictions on that product, the manufacturing facility or us, including withdrawal of the product from the market
or suspension of manufacturing, or we may recall the product from distribution. If we, or our third-party manufacturers, fail to comply with applicable regulatory requirements, a regulatory agency may:
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issue warning letters or untitled letters;
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mandate modifications to promotional materials or require us to provide corrective information to healthcare practitioners;
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require us to enter into a consent decree, which can include imposition of various fines, reimbursements for inspection costs, required due dates for specific actions and penalties for noncompliance;
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seek an injunction or impose civil or criminal penalties or monetary fines;
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suspend or withdraw regulatory approval;
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suspend any ongoing clinical trials;
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refuse to approve pending applications or supplements to applications filed by us;
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suspend or impose restrictions on operations, including costly new manufacturing requirements; or
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seize or detain products, or refuse to permit the import or export of products.
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The
occurrence of any event or penalty described above may inhibit our ability to commercialize and generate revenue from the sale of our product candidates.
Advertising and promotion of any product candidate that obtains approval in the United States will be heavily scrutinized by the FDA, the
Department of Justice, the Department of Health and Human Services Office of Inspector General, state attorneys general, members of Congress, other government agencies and the public. Violations, including promotion of our products for
unapproved (or
off-label)
uses, may be subject to enforcement letters, inquiries and investigations, and civil and criminal sanctions by the government. Additionally, foreign regulatory authorities will
heavily scrutinize advertising and promotion of any product candidate that obtains approval in their respective jurisdictions.
In the
United States, engaging in the impermissible promotion of our products for
off-label
uses can also subject us to false claims litigation under federal and state statutes, which can lead to administrative,
civil and criminal penalties, damages, monetary fines, disgorgement, individual imprisonment, exclusion from participation in Medicare, Medicaid and other federal healthcare programs, curtailment or restructuring of our operations and agreements
that materially restrict the manner in which a company promotes or distributes drug products. These false claims statutes include, but are not limited to, the federal civil False Claims Act, which allows any individual to bring a lawsuit against an
individual or entity, including a pharmaceutical or biopharmaceutical company on behalf of the federal government alleging the knowing submission of false or fraudulent claims, or causing to present such false or fraudulent claims, for payment or
approval by a federal program such as Medicare or Medicaid. These False Claims Act lawsuits against pharmaceutical and biopharmaceutical companies have increased significantly in number and breadth, leading to several substantial civil and criminal
settlements regarding certain sales practices, including promoting
off-label
drug uses involving fines in excess of $1.0 billion. This growth in litigation has increased the risk that a pharmaceutical
company will have to defend a false claim action, pay settlement fines or restitution, agree to comply with burdensome reporting and compliance obligations, and be excluded from participation in Medicare, Medicaid and other federal and state
healthcare programs. If we, or any partner that we may engage, do not lawfully promote our approved products, we may become subject to such litigation, which have a material adverse effect on our business, financial condition and results of
operations.
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Our product candidates may cause undesirable side effects or have other properties that could delay or
prevent their regulatory approval, limit the commercial scope of their approved use, or result in significant negative consequences following any marketing approval.
Undesirable side effects caused by our product candidates could cause the interruption, delay or halting of the trials and could result in a
more restrictive label or the delay or denial of regulatory approval by the FDA or other foreign regulatory authorities. In our Phase 2b clinical trial of entinostat in advanced HR+, HER2- breast cancer, the most significant adverse events were
fatigue, gastrointestinal disturbances and hematologic toxicities, all of which occurred in higher numbers than in the placebo group. Results of the clinical trials may reveal a high and unacceptable severity and prevalence of side effects or other
unexpected characteristics. In such event, the trials could be suspended or terminated, or the FDA or foreign regulatory authorities could deny approval of our product candidates for any or all targeted indications. Drug-related side effects could
affect patient recruitment or the ability of enrolled subjects to complete the trial or result in potential product liability claims. Any of these occurrences may harm our business, financial condition and prospects.
Additionally, if our product candidates receive marketing approval, and we or others later identify undesirable side effects, a number of
potentially significant negative consequences could result, including:
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we may suspend marketing of, or withdraw or recall, the product;
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regulatory authorities may withdraw approvals;
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regulatory authorities may require additional warnings on the product labels;
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the FDA or other regulatory authorities may issue safety alerts, Dear Healthcare Provider letters, press releases or other communications containing warnings about the product;
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the FDA may require the establishment or modification of a REMS or foreign regulatory authorities may require the establishment or modification of a similar strategy that may, for instance, restrict distribution of the
product and impose burdensome implementation requirements on us;
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regulatory authorities may require that we conduct post-marketing studies;
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we could be sued and held liable for harm caused to subjects or patients; and
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our reputation may suffer.
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Any of these events could prevent us from achieving or maintaining
market acceptance of our product candidates for use in targeted indications or otherwise materially harm its commercial prospects, if approved, and could harm our business, results of operations and prospects.
Our failure to obtain regulatory approval in international jurisdictions would prevent us from marketing our product candidates outside the United
States.
In order to market and sell our product candidates in other jurisdictions, we must obtain separate marketing approvals
for those jurisdictions and comply with their numerous and varying regulatory requirements. We may not obtain foreign regulatory approvals on a timely basis, or at all. The approval procedure varies among countries and can involve additional
testing. The time required to obtain approval may differ substantially from that required to obtain FDA approval. The regulatory approval process outside the United States generally includes all of the risks associated with obtaining FDA approval.
In addition, in many countries outside the United States, product reimbursement approvals must be secured before regulatory authorities will approve the product for sale in that country. Obtaining foreign regulatory approvals and compliance with
foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our product candidates in certain countries. Further, clinical trials conducted in one country may not
be accepted by regulatory authorities in other countries and regulatory approval in one country does not ensure approval in any other country, while a failure or delay in obtaining regulatory approval in one country may have a negative effect on the
regulatory approval process in others. For example, based on scientific advice from the European Medicines Agency, the current Phase 3 clinical trial is likely to be insufficient to receive regulatory approval in Europe for entinostat to treat
advanced HR+, HER2- breast cancer. Our failure to obtain approval of our product candidates by foreign regulatory authorities may negatively impact the commercial prospects of such product candidates and our business prospects could decline. Also,
if regulatory approval for our product candidates is granted, it may be later withdrawn. If we fail to comply with the regulatory requirements in international jurisdictions and receive applicable marketing approvals, our target market will be
reduced and our ability to realize the full market potential for our product candidates will be harmed and our business may be adversely affected.
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We face significant competition from other biotechnology and pharmaceutical companies, and our operating
results will suffer if we fail to compete effectively.
The pharmacologic treatment of NSCLC, melanoma, microsatellite stable
colorectal cancer, ovarian cancer, TNBC patients includes chemotherapies and therapies targeting specific gene mutations. More recently, immune checkpoint inhibitors have been approved for NSCLC, melanoma and ovarian cancer and are under
investigation for TNBC and microsatellite stable colorectal cancer. Currently there are few approved combination immuno-oncology therapies although numerous drugs are undergoing active clinical investigation. We believe that if entinostat in
combination with either
Keytruda
,
Tecentriq
or
Bavencio
were approved for the treatment of NSCLC, melanoma, microsatellite stable colorectal cancer, ovarian cancer or TNBC, it would face competition from
standard-of-care
approaches and other investigational drugs being tested in combination with any of these approaches.
If entinostat in combination with exemestane were approved for treatment of advanced HR+, HER2- breast cancer, it could face competition from
other therapies recently approved for use in combination with hormone therapy in this population, including
Ibrance
,
Kisqali
,
Afinitor
, and other therapies currently in Phase 3 clinical development such as abemaciclib, being
developed by Eli Lilly and Company.
Many of our existing or potential competitors have substantially greater financial, technical and
human resources than we do and significantly greater experience in the discovery and development of product candidates, obtaining FDA and other regulatory approvals of products and the commercialization of those products. Our competitors may be more
successful than us in obtaining FDA approval for drugs and achieving widespread market acceptance. Our competitors drugs may be more effective or more effectively marketed and sold than any drug we may commercialize and may render our product
candidates obsolete or
non-competitive
before we can recover the expenses of developing and commercializing any of our product candidates. Our competitors may also obtain FDA or other regulatory approval for
their products more rapidly than we may obtain approval for ours. We anticipate that we will face intense and increasing competition as new drugs enter the market and advanced technologies become available.
We believe that our ability to successfully compete will depend on, among other things:
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the efficacy and safety profile of our product candidates relative to marketed products and product candidates in development by third parties;
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the time it takes for our product candidates to complete clinical development and receive marketing approval;
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our ability to commercialize our product candidates if they receive regulatory approval;
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the price of our product candidates, including in comparison to branded or generic competitors;
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whether coverage and adequate levels of reimbursement are available under private and governmental health insurance plans, including Medicare;
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our ability to manufacture commercial quantities of our product candidates if they receive regulatory approval; and
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acceptance of entinostat in combination with exemestane
, Keytruda, Tecentriq, Bavencio
and other drugs by physicians and other healthcare providers.
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Even if we obtain regulatory approval of our product candidates, the availability and price of our competitors products could limit the
demand and the price we are able to charge. We may not be able to implement our business plan if the acceptance of our product candidates is inhibited by price competition or the reluctance of physicians to switch from existing methods of treatment,
or if physicians switch to other new drug or biologic products or choose to reserve our drugs for use in limited circumstances.
Adverse events in
the field of immuno-oncology could damage public perception of our product candidates and negatively affect our business.
The commercial success of our product candidates will depend in part on public acceptance of the use of cancer immunotherapies. Adverse events
in clinical trials of our product candidates or in clinical trials of others developing similar products and the resulting publicity, as well as any other adverse events in the field of immuno-oncology that may occur in the future, could
result in a decrease in demand for any products that we may develop. If public perception is influenced by claims that the use of cancer immunotherapies is unsafe, our product candidates may not be accepted by the general public or the medical
community.
Future adverse events in immuno-oncology or the biopharmaceutical industry could also result in greater governmental
regulation, stricter labeling requirements and potential regulatory delays in the testing or approvals of our products. Any increased scrutiny could delay or increase the costs of obtaining regulatory approval for our product candidates.
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We must attract and retain additional highly skilled employees in order to succeed.
To succeed, we must recruit, retain, manage and motivate qualified clinical, scientific, technical and management personnel and we face
significant competition for experienced personnel. If we do not succeed in attracting and retaining qualified personnel, particularly at the management level, it could adversely affect our ability to execute our business plan and harm our operating
results. In particular, the loss of one or more of our executive officers could be detrimental to us if we cannot recruit suitable replacements in a timely manner. The competition for qualified personnel in the pharmaceutical industry is intense and
as a result, we may be unable to continue to attract and retain qualified personnel necessary for the development of our business or to recruit suitable replacement personnel.
Many of the other pharmaceutical companies that we compete against for qualified personnel have greater financial and other resources,
different risk profiles and a longer history in the industry than we do. They also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high-quality candidates than
what we have to offer. If we are unable to continue to attract and retain high-quality personnel, the rate and success at which we can discover and develop product candidates and our business will be limited.
Even if we commercialize our product candidates, they or any other product candidates that we develop, may become subject to unfavorable pricing
regulations or third-party coverage or reimbursement practices, which could harm our business.
Our ability to successfully
commercialize entinostat, or any other product candidates that we develop, will depend in part on the extent to which coverage and adequate reimbursement for these products and related treatments will be available from government healthcare
programs, private health insurers, managed care plans and other organizations. Government authorities and other third-party payors, such as private health insurers and health maintenance organizations, determine which medications they will cover and
establish reimbursement levels. Government authorities and other third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors are requiring that
drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products.
We
cannot be sure that coverage and reimbursement will be available for any product that we commercialize and, if reimbursement is available, what the level of reimbursement will be. Limitation on coverage and reimbursement may impact the demand for,
or the price of, and our ability to successfully commercialize entinostat or any other product candidates that we develop.
There may be
significant delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the indications for which the drug is approved by the FDA or foreign regulatory authorities. 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 our costs, including research, development, manufacture, sale and distribution expenses. Interim reimbursement levels for new drugs, if
applicable, may also not be sufficient to cover our costs and may only be temporary. Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for
lower cost drugs and may be incorporated into existing payments for other services. 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.
Private
payors often follow the Centers for Medicare and Medicaid Services decisions regarding coverage and reimbursement to a substantial degree. However, one payors determination to provide coverage for a drug product does not assure that other
payors will also provide coverage for the drug product. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our products to each
payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. Our inability to promptly obtain coverage and adequate reimbursement rates from both government-funded and
private payors for any approved products that we develop could have an adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.
The regulations that govern marketing approvals, coverage and reimbursement for new drug products vary widely from country to country. Current
and future legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals. Some countries require approval of the sale price of a drug before it can be marketed. In
many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is
granted. As a result, we may obtain marketing approval for our product candidates in a particular country, but be subject to price regulations that delay our commercial launch of the product, possibly for lengthy time periods, which could negatively
impact the revenues we generate from the sale of the product in that particular country. Adverse pricing limitations may hinder our ability to recoup our investment even if our product candidates obtain marketing approval.
34
There can be no assurance that our product candidates, if they are approved for sale in the
United States or in other countries, will be considered medically reasonable and necessary for a specific indication, that it will be considered cost effective by third-party payors, that coverage and an adequate level of reimbursement will be
available, or that third-party payors reimbursement policies will not adversely affect our ability to sell our product candidates profitably.
We do not currently have any sales, marketing or distribution experience or infrastructure.
In order to market any approved product candidate in the future, we must build our sales, marketing, managerial and other
non-technical
capabilities or make arrangements with third parties to perform these services, as we do not presently have such capabilities. To develop our internal sales, distribution and marketing capabilities, we
would have to invest significant amounts of financial and management resources in the future. For drugs where we decide to perform sales, marketing and distribution functions ourselves, we could face a number of challenges, including that:
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we may not be able to attract and build a significant marketing or sales force;
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the cost of establishing, training and providing regulatory oversight for a marketing or sales force may not be justifiable in light of the revenues generated by any particular product;
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our direct or indirect sales and marketing efforts may not be successful; and
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there are significant legal and regulatory risks in drug marketing and sales that we have never faced, and any failure to comply with all legal and regulatory requirements for sales, marketing and distribution could
result in enforcement action by the FDA or other authorities that could jeopardize our ability to market the product or could subject us to substantial liability.
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Alternatively, we may rely on third parties to launch and market our product candidates, if approved. We may have limited or no control over
the sales, marketing and distribution activities of these third parties and our future revenue may depend on the success of these third parties. Additionally, if these third parties fail to comply with all applicable legal or regulatory
requirements, the FDA or another governmental agency could take enforcement action that could jeopardize our ability to market the product candidate.
Current and future legislation may increase the difficulty and cost for us to commercialize our product candidates and affect the prices we may obtain.
The United States and many foreign jurisdictions have enacted or proposed legislative and regulatory changes affecting the
healthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any product candidate for which we obtain marketing approval. For
example, then President Obama signed into law the Affordable Care Act. Among other cost containment measures, the Affordable Care Act established an annual, nondeductible fee on any entity that manufactures or imports branded prescription drugs and
biologic agents, a Medicare Part D coverage gap discount program, and a formula that increased the rebates a manufacturer must pay under the Medicaid Drug Rebate Program. There have been judicial and Congressional challenges to certain aspects of
the Affordable Care Act, and we expect there will be additional challenges and amendments in the future. Some of the provisions of the Affordable Care Act have yet to be implemented, and there have been judicial and Congressional challenges to
certain aspects of the Affordable Care Act. In January 2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under the Affordable Care Act to waive, defer, grant exemptions from, or delay
the implementation of any provision of the Affordable Care Act that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. The U.S. House of
Representatives passed legislation known as the American Health Care Act of 2017 in May 2017. More recently, the Senate Republicans introduced and then updated a bill to replace the Affordable Care Act known as the Better Care Reconciliation Act of
2017. The Senate Republicans also introduced legislation to repeal the Affordable Care Act without companion legislation to replace it, and a skinny version of the Better Care Reconciliation Act of 2017. Each of these measures was
rejected by the full Senate. Congress will likely consider other legislation to replace elements of the Affordable Care Act. We continue to evaluate the effect that the ACA and its possible repeal and replacement has on our business.
Other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. For example, in August 2011, then
President Obama signed into law the Budget Control Act of 2011, which, among other things, created the Joint Select Committee on Deficit Reduction to recommend to Congress proposals in spending reductions. The Joint Select Committee on Deficit
Reduction did not agree upon a targeted deficit reduction of at least $1.2 trillion for fiscal years 2012 through 2021, triggering the Affordable Care Acts automatic reduction to several government programs. This included aggregate reductions
to Medicare payments to providers of up to 2% per fiscal year, effective as of 2013. Further legislation has extended the 2% reduction to 2025. In January 2013, then President Obama signed into law the American Taxpayer Relief Act of 2012,
which, among other things, reduced Medicare payments to several types of providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. Further, there has been increasing
legislative and enforcement interest in the United States with respect to specialty drug pricing practices. Specifically, there have been several recent U.S. Congressional inquiries and proposed bills designed to, among other things, bring more
transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the cost of drugs under Medicare, and reform government program reimbursement methodologies for drugs.
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We expect that the Affordable Care Act, as well as other current or future healthcare reform
measures may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved product. This could seriously harm our future revenues. Any reduction in reimbursement from Medicare or other
government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or
commercialize our products.
Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of
our product candidates.
We face an inherent risk of product liability exposure related to the testing of our product candidates
in human trials and will face an even greater risk if we commercially sell any products that we may develop. Product liability claims may be brought against us by subjects enrolled in our trials, patients, healthcare providers or others using,
administering or selling our products. If we cannot successfully defend ourselves against claims that our product candidates or other products that we may develop caused injuries, we could incur substantial liabilities. Regardless of merit or
eventual outcome, liability claims may result in:
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decreased demand for our product candidates;
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termination of clinical trial sites or entire trial programs;
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injury to our reputation and significant negative media attention;
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withdrawal of trial participants;
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significant costs to defend the related litigation;
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substantial monetary awards to trial subjects or patients;
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diversion of management and scientific resources from our business operations; and
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the inability to commercialize any products that we may develop.
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While we currently hold
trial liability insurance coverage consistent with industry standards, this may not adequately cover all liabilities that we may incur. We also may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy
any liability that may arise in the future. We intend to expand our insurance coverage for products to include the sale of commercial products if we obtain marketing approval for our product candidates, but we may be unable to obtain commercially
reasonable product liability insurance. A successful product liability claim or series of claims brought against us, particularly if judgments exceed our insurance coverage, could decrease our cash and adversely affect our business and financial
condition.
Our relationships with customers and third-party payors will be subject to applicable anti-kickback, fraud and abuse, transparency and
other healthcare laws and regulations as well as privacy and data security laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm, fines, exclusion from participation in government
healthcare programs, curtailments or restrictions of our operations, administrative burdens and diminished profits and future earnings.
Healthcare providers, physicians and third-party payors play a primary role in the recommendation and prescription of any product candidates
for which we obtain marketing approval. Our current and future arrangements with physicians, third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the
business or financial arrangements and relationships through which we conduct clinical research and market, sell and distribute our products for which we obtain marketing approval. Restrictions under applicable federal and state healthcare laws and
regulations, include, but are not limited to, the following:
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the federal Anti-Kickback Statute prohibits persons from, among other things, knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or
reward, or in return for, the referral of an individual for the furnishing or arranging for the furnishing, or the purchase, lease or order, or arranging for or recommending purchase, lease or order, or any good or service for which payment may be
made under a federal healthcare program such as Medicare and Medicaid;
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the federal false claims and civil monetary penalties laws, including the federal civil False Claims Act, imposes criminal and civil penalties, including through civil whistleblower or qui tam actions, against
individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the
federal government;
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the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information
Technology for Economic and Clinical Health Act, and their implementing regulations, or HIPAA, imposes civil and criminal liability for, among other things, knowingly and willfully executing a scheme to defraud any healthcare benefit program,
knowingly and willfully embezzling or stealing any money or other assets of a health care benefit program,
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willfully obstructing a criminal investigation of a health care fraud offense, knowingly and willfully making false statements relating to healthcare matters, or knowingly obtaining or disclosing
individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA;
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HIPAA also imposes obligations on certain covered entity health care providers, health plans and health care clearinghouses as well as their business associates that perform certain services involving the use or
disclosure of individually identifiable health information with respect to safeguarding the privacy, security and transmission of individually identifiable health information;
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the federal Open Payments program, created as part of the Physician Payments Sunshine Act under Section 6002 of the Affordable Care Act and its implementing regulations, requires certain manufacturers of drugs,
devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Childrens Health Insurance Program to report annually to the U.S. Department of Health and Human Services information related to
payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals and applicable manufacturers and applicable group purchasing organizations
to report annually to the U.S. Department of Health and Human Services ownership and investment interests held by physicians (as defined above) and their immediate family members; and
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analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by
non-governmental
third-party payors, including private insurers; state and foreign laws that require pharmaceutical companies to comply with the pharmaceutical industrys voluntary compliance guidelines and the
relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers; state and foreign laws that require drug manufacturers to report information related to payments and other
transfers of value to physicians and other healthcare providers or marketing expenditures; state and foreign laws that govern the privacy and security of health information in certain circumstances, many of which differ from each other in
significant ways and often are not preempted by HIPAA, thus complicating compliance efforts; and federal, state, and foreign laws that govern the privacy and security of other personal information, including federal and state consumer protection
laws, state data security laws, and data breach notification laws (a data breach affecting sensitive personal information, including health information, could result in significant legal and financial exposure and reputational damages).
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Efforts to ensure that our business arrangements with third parties and our business generally, will comply with applicable
healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law interpreting applicable
fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and
administrative penalties, damages, fines, individual imprisonment, exclusion from government funded healthcare programs, such as Medicare and Medicaid, contractual damages, reputational harm, additional reporting requirements and oversight if we
become subject to a corporate integrity agreement or similar agreement to resolve allegations of
non-compliance
with these laws, and the curtailment or restructuring of our operations. Defending against any
such actions can be costly, time-consuming and may require significant financial and personnel resources. Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired.
Further, if any physician or other healthcare provider or entity with whom we expect to do business is found not to be in compliance with applicable laws, that person or entity may be subject to criminal, civil or administrative sanctions, including
exclusions from government-funded healthcare programs.
Risks Related to Intellectual Property
If we are unable to obtain or protect intellectual property rights, we may not be able to compete effectively in our market.
Our success depends in significant part on our and our licensors and licensees ability to establish, maintain and protect patents
and other intellectual property rights and operate without infringing the intellectual property rights of others. We have filed patent applications both in the United States and in foreign jurisdictions to obtain patent rights to inventions we have
discovered. We have also licensed from third parties rights to patent portfolios. Some of these licenses give us the right to prepare, file and prosecute patent applications and maintain and enforce patents we have licensed, and other licenses may
not give us such rights.
The patent prosecution process is expensive and time-consuming, and we and our current or future licensors and
licensees may not be able to prepare, file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we or our licensors or licensees will fail to identify patentable aspects of
inventions made in the course of development and commercialization activities before it is too late to obtain patent protection on them. Moreover, in some circumstances, we may not have the right to control the preparation, filing and prosecution of
patent applications, or to maintain the patents, covering technology that we license from or license to third parties and are reliant on our licensors or licensees. Therefore, these patents and applications may not be prosecuted and enforced in a
manner consistent with the best interests of our business. If our current or future licensors or licensees fail to establish, maintain or protect such patents and other intellectual property rights, such rights may be reduced or eliminated. If our
licensors or licensees are not fully cooperative or disagree with us as to the prosecution, maintenance or enforcement of any patent rights, such patent rights could be compromised.
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The patent position of biotechnology and pharmaceutical companies generally is highly uncertain,
involves complex legal and factual questions and has in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our and our current or future licensors or
licensees patent rights are highly uncertain. Our and our licensors or licensees pending and future patent applications may not result in patents being issued which protect our technology or products, in whole or in part, or which
effectively prevent others from commercializing competitive technologies and products. The patent examination process may require us or our licensors or licensees to narrow the scope of the claims of our or our licensors or licensees
pending and future patent applications, which may limit the scope of patent protection that may be obtained. It is possible that third parties with products that are very similar to ours will circumvent our or our licensors or licensees
patents by means of alternate designs or processes. We cannot be certain that we are the first to invent the inventions covered by pending patent applications and, if we are not, we may be subject to priority disputes. We may be required to disclaim
part or all of the term of certain patents or all of the term of certain patent applications. There may be prior art of which we are not aware that may affect the validity or enforceability of a patent claim. There also may be prior art of which we
are aware, but which we do not believe affects the validity or enforceability of a claim, which may, nonetheless, ultimately be found to affect the validity or enforceability of a claim. No assurance can be given that if challenged, our patents
would be declared by a court to be valid or enforceable or that even if found valid and enforceable, a competitors technology or product would be found by a court to infringe our patents. We may analyze patents or patent applications of our
competitors that we believe are relevant to our activities, and consider that we are free to operate in relation to our product candidate, but our competitors may achieve issued claims, including in patents we consider to be unrelated, which block
our efforts or may potentially result in our product candidate or our activities infringing such claims. The possibility exists that others will develop products which have the same effect as our products on an independent basis which do not
infringe our patents or other intellectual property rights, or will design around the claims of patents that we have had issued that cover our products. Our and our licensors or licensees patent applications cannot be enforced against
third parties practicing the technology claimed in such applications unless and until a patent issues from such applications, and then only to the extent the issued claims cover the technology.
Furthermore, given the amount of time required for the development, testing and regulatory review of new product candidates, patents
protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products
similar or identical to ours. Entinostat composition of matter U.S. Patent RE39,754, which we licensed from Bayer, covers the chemical entity of entinostat and any crystalline or
non-crystalline
form of
entinostat and expires in September 2017. We expect to seek extensions of patent terms where these are available in any countries where we are prosecuting patents. This includes in the United States under the Drug Price Competition and Patent Term
Restoration Act of 1984, which permits a patent term extension of up to five years beyond the expiration of the patent. However, the applicable authorities, including the FDA in the United States, and any equivalent regulatory authorities in other
countries, may not agree with our assessment of whether such extensions are available, and may refuse to grant extensions to our patents, or may grant more limited extensions than we request. If this occurs, our competitors may take advantage of our
investment in development and trials by referencing our clinical and preclinical data and launch their product earlier than might otherwise be the case.
The portfolio we licensed from Bayer also includes U.S. Patent 7,973,166, or the 166 patent, which covers a crystalline polymorph of
entinostat which is referred to as crystalline polymorph B, the crystalline polymorph used in the clinical development of entinostat. Many compounds can exist in different crystalline forms. A compound which in the solid state may exhibit multiple
different crystalline forms is called polymorphic, and each crystalline form of the same chemical compound is termed a polymorph. A new crystalline form of a compound may arise, for example, due to a change in the chemical process or the
introduction of an impurity. Such new crystalline forms may be patented. The 166 patent expires in 2029. On March 7, 2014, our licensor Bayer applied for reissue of the 166 patent. The reissue application seeks to add three
inventors not originally listed on the 166 patent. The reissue application does not seek to amend the claims issued in the 166 patent. On April 28, 2015, the USPTO
re-issued
the 166
patent as U.S. patent RE45,499. RE45,499 reissued with the same claims originally issued in the 166 patent and the list of inventors on RE45,499 now lists the additional three inventors that were not included on the 166 patent. The
166 patent has now been surrendered in favor of RE45,499. RE45,499 has the same term as the initial term of the 166 patent, which expires in August 2029. After expiry of RE39,754 in September 2017, a competitor may develop a competing
polymorphic form other than based on polymorph B, which could compete with polymorph B.
In spite of our efforts and efforts of our
licensor, we may not be successful in defending the validity of the claims of the RE45,499 reissue patent or any of its foreign counterparts. If the claims of the 166 patent or any of its counterparts are found to be invalid by a competent
court, we may not be able to effectively block entry of generic versions of our entinostat crystalline polymorph B candidate products into markets where the crystalline polymorph B patent claims are found to be invalid. Additionally, even
if we submit an NDA before the expiration of U.S. Patent RE45,499 and are successful in obtaining an extension of the term of U.S. Patent RE45,499 based on FDA regulatory delays, such extension will only extend the term of RE45,499 for a few
additional years (up to a maximum of five additional years for patent claims covering a new chemical entity).
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The portfolio we licensed from UCB includes patent applications with pending claims directed to
the composition of matter of SNDX-6352 (a humanized, full-length IgG4 (kappa light chain) antibody with high affinity for the
CSF-1R)
as well as claims directed to methods of use of SNDX-6352. There is no
guarantee that any patents will be granted based on the pending applications we licensed from UCB or even if one or more patents are granted that the claims issued in those patents would cover SNDX-6352 or methods of using SNDX-6352. Based on the
priority date and filing date of the applications in the portfolio we licensed from UCB, we expect that a patent, if any, granted based on the currently pending applications would expire in 2034. The actual term of any patents granted based on the
pending applications we licensed from UCB can only be determined after such patents are actually granted.
We may not be able to protect our
intellectual property rights throughout the world.
Filing, prosecuting, enforcing and defending patents on product candidates in
all countries throughout the world is prohibitively expensive, and our or our licensors intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of
some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we and our licensors may not be able to prevent third parties from practicing our and our
licensors inventions in countries outside the United States, or from selling or importing products made using our and our licensors inventions in and into the United States or other jurisdictions. Competitors may use our and our
licensors technologies in jurisdictions where we have not obtained patent protection to develop their own products and may export otherwise infringing products to territories where we and our licensors have patent protection, but enforcement
is not as strong as that in the United States. These products may compete with our product candidates and our and our licensors patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
Many companies have encountered significant problems in protecting and defending intellectual property 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 biopharmaceuticals, which could make it difficult
for us and our licensors to stop the infringement of our and our licensors patents or marketing of competing products in violation of our and our licensors proprietary rights generally. Proceedings to enforce our and our licensors
patent rights in foreign jurisdictions could result in substantial costs and divert our attention from other aspects of our business, could put our and our licensors patents at risk of being invalidated or interpreted narrowly and our and our
licensors patent applications at risk of not issuing and could provoke third parties to assert claims against us or our licensors. We or our licensors may not prevail in any lawsuits that we or our licensors initiate and the damages or other
remedies awarded, if any, may not be commercially meaningful.
The requirements for patentability may differ in certain countries,
particularly developing countries. For example, unlike other countries, China has a heightened requirement for patentability, and specifically requires a detailed description of medical uses of a claimed drug. In India, unlike the United States,
there is no link between regulatory approval of a drug and its patent status. Furthermore, generic drug manufacturers or other competitors may challenge the scope, validity or enforceability of our or our licensors patents, requiring us or our
licensors to engage in complex, lengthy and costly litigation or other proceedings. Generic drug manufacturers may develop, seek approval for, and launch generic versions of our products. In addition to India, certain countries in Europe and
developing countries, including China, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In those countries, we and our licensors may have limited remedies if patents are infringed or if
we or our licensors are compelled to grant a license to a third party, which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our and our licensors efforts to enforce
intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we own or license.
If we breach our license agreement with Bayer related to entinostat or if the license agreement is otherwise terminated, we could lose the ability to
continue the development and commercialization of entinostat.
Our commercial success depends upon our ability to develop,
manufacture, market and sell entinostat. In March 2007, we entered into a license, development and commercialization agreement, or the Bayer license agreement, with Bayer pursuant to which we obtained a worldwide, exclusive license to develop and
commercialize entinostat and any other products containing the same active ingredient. The Bayer license agreement, as amended, permits us to use entinostat or other licensed products under the Bayer license agreement for the treatment of any human
disease, and we are obligated to use commercially reasonable efforts to develop, manufacture and commercialize licensed products for all commercially reasonable indications.
We are obligated to pay Bayer up to approximately $50.0 million in the aggregate upon obtaining certain milestones in the development and
marketing approval of entinostat, assuming that we pursue at least two different indications for entinostat or any other licensed product under the Bayer license agreement. We are also obligated to pay Bayer $100.0 million in aggregate sales
milestones, and a tiered, single-digit royalty on net sales by us, our affiliates and sublicensees of entinostat and any other licensed products under the Bayer license agreement. We are obligated to pay Bayer these royalties on a
country-by-country
basis for the life of the relevant licensed patents covering such product or 15 years after the first commercial sale of such product in such country,
whichever is longer. We cannot determine the date on which our royalty payment obligations to Bayer would expire because no commercial sales of entinostat have occurred and the
last-to-expire
relevant patent covering entinostat in a given country may change in the future.
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The Bayer license agreement will remain in effect until the expiration of our royalty obligations
under the agreement in all countries. Either party may terminate the Bayer license agreement in its entirety or with respect to certain countries in the event of an uncured material breach by the other party. Either party may terminate the Bayer
license agreement if voluntary or involuntary bankruptcy proceedings are instituted against the other party, if the other party makes an assignment for the benefit of creditors, or upon the occurrence of other specific events relating to the
insolvency or dissolution of the other party. Bayer may terminate the Bayer license agreement if we seek to revoke or challenge the validity of any patent licensed to us by Bayer under the Bayer license agreement or if we procure or assist a third
party to take any such action.
If the Bayer license agreement is terminated, we would not be able to develop, manufacture, market or sell
entinostat and would need to negotiate a new or reinstated agreement, which may not be available to us on equally favorable terms, or at all.
If we
breach the UCB license agreement related to SNDX-6352 or if the UCB license agreement is otherwise terminated, we could lose the ability to continue the development and commercialization of SNDX-6352.
Our commercial success depends upon our ability to develop, manufacture, market and sell SNDX-6352. Subject to the achievement of certain
milestone events, we may be required to pay UCB up to $119.5 million in
one-time
development and regulatory milestone payments over the term of the UCB license agreement. In the event that we or any of
our affiliates or sublicensees commercializes SNDX-6352, we will also be obligated to pay UCB low double-digit royalties on sales, subject to reduction in certain circumstances, as well as up to an aggregate of $250 million in potential
one-time
sales-based milestone payments based on achievement of certain annual sales thresholds. Under certain circumstances, we may be required to share a percentage of
non-royalty
income from sublicensees, subject to certain deductions, with UCB.
Either party may
terminate the UCB license agreement in its entirety or with respect to certain countries in the event of an uncured material breach by the other party. Either party may terminate the UCB license agreement if voluntary or involuntary bankruptcy
proceedings are instituted against the other party, if the other party makes an assignment for the benefit of creditors, or upon the occurrence of other specific events relating to the insolvency or dissolution of the other party. UCB may terminate
the UCB license agreement if we seek to revoke or challenge the validity of any patent licensed to us by UCB under the UCB license agreement or if we procure or assist a third party to take any such action.
Unless terminated earlier in accordance with its terms, the UCB license agreement will continue on a
country-by-country
and
product-by-product
basis until the later of: (i) the expiration of all of the licensed patent rights
in such country; (ii) the expiration of all regulatory exclusivity applicable to the product in such country; and (iii) 10 years from the date of the first commercial sale of the product in such country. We cannot determine the date
on which our royalty payment obligations to UCB would expire because no commercial sales of SNDX-6352 have occurred and the
last-to-expire
relevant patent covering
SNDX-6352 in a given country may change in the future.
If the UCB license agreement is terminated, we would not be able to develop,
manufacture, market or sell SNDX-6352 and would need to negotiate a new or reinstated agreement, which may not be available to us on equally favorable terms, or at all.
Changes in patent law could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.
As is the case with other biotechnology and pharmaceutical companies, our success is heavily dependent on intellectual property, particularly
patents. Obtaining and enforcing patents in the biopharmaceutical industry involve technological and legal complexity, and obtaining and enforcing biopharmaceutical patents is costly, time-consuming, and inherently uncertain. The Supreme Court has
ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to
our and our licensors ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by Congress, the federal courts, and the U.S. Patent
and Trademark Office, or USPTO, the laws and regulations governing patents could change in unpredictable ways that may weaken our and our licensors ability to obtain new patents or to enforce existing patents and patents we and our licensors
or collaborators may obtain in the future. In view of recent developments in U.S. patent laws, in spite of our efforts and the efforts of our licensors, we may face difficulties in obtaining allowance of our biomarker based patient selection patent
claims or if we are successful in obtaining allowance of our biomarker based patient selection claims, we or our licensor may be unsuccessful in defending the validity of such claims if challenged before a competent court.
Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our and our licensors patent
applications and the enforcement or defense of our or our licensors issued patents. On September 16, 2011, the Leahy-Smith America Invents Act, or the America Invents Act, was signed into law. The America Invents Act includes a number of
significant changes to U.S. patent law. These include provisions that affect the way patent applications are prosecuted and may also affect patent
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litigation. The USPTO recently developed new regulations and procedures to govern administration of the American Invents Act, and many of the substantive changes to patent law associated with the
America Invents Act and in particular, the first to file provisions, only became effective on March 16, 2013. Accordingly, it is not clear what, if any, impact the America Invents Act will have on the operation of our business. However, the
America Invents Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our or our licensors patent applications and the enforcement or defense of our or our licensors issued patents, all of
which could harm our business and financial condition.
Obtaining and maintaining our patent protection depends on compliance with various
procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for
non-compliance
with these requirements.
Periodic maintenance and annuity fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several
stages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an
inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application,
resulting in partial or complete loss of patent rights in the relevant jurisdiction.
Non-compliance
events that could result in abandonment or lapse of a patent or patent application include failure to respond
to official actions within prescribed time limits,
non-payment
of fees and failure to properly legalize and submit formal documents. If we or our licensors fail to maintain the patents and patent applications
covering our product candidates, our competitors might be able to enter the market, which would harm our business.
We may become involved in
lawsuits to protect or enforce our intellectual property, which could be expensive, time-consuming and unsuccessful and have an adverse effect on the success of our business and on our stock price.
Third parties may infringe our or our licensors patents or misappropriate or otherwise violate our or our licensors intellectual
property rights. In the future, we or our licensors may initiate legal proceedings to enforce or defend our or our licensors intellectual property rights, to protect our or our licensors trade secrets or to determine the validity or
scope of intellectual property rights we own or control. Also, third parties may initiate legal proceedings against us or our licensors to challenge the validity or scope of intellectual property rights we own or control. The proceedings can be
expensive and time-consuming and many of our or our licensors adversaries in these proceedings may have the ability to dedicate substantially greater resources to prosecuting these legal actions than we or our licensors can. Accordingly,
despite our or our licensors efforts, we or our licensors may not be able to prevent third parties from infringing upon or misappropriating intellectual property rights we own or control, particularly in countries where the laws may not
protect our rights as fully as in the United States. Litigation could result in substantial costs and diversion of management resources, which could harm our business and financial results. In addition, in an infringement proceeding, a court may
decide that a patent owned by or licensed to us is invalid or unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our or our licensors patents do not cover the technology in question. An
adverse result in any litigation proceeding could put one or more of our or our licensors patents at risk of being invalidated, held unenforceable or interpreted narrowly.
Third-party preissuance submission of prior art to the USPTO, or opposition, derivation, reexamination,
inter partes
review or
interference proceedings, or other preissuance or post-grant proceedings in the United States or other jurisdictions provoked by third parties or brought by us or our licensors or collaborators may be necessary to determine the priority of
inventions with respect to our or our licensors patents or patent applications. An unfavorable outcome could require us or our licensors to cease using the related technology and commercializing our product candidates, or to attempt to license
rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us or our licensors a license on commercially reasonable terms or at all. Even if we or our licensors obtain a license, it may be
non-exclusive,
thereby giving our competitors access to the same technologies licensed to us or our licensors. In addition, if the breadth or strength of protection provided by our or our licensors patents and
patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates. Even if we successfully defend such litigation or proceeding, we may incur
substantial costs and it may distract our management and other employees. We could be found liable for monetary damages, including treble damages and attorneys fees, if we are found to have willfully infringed a patent.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that
some of our confidential information could be compromised by disclosure during this process. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or
investors perceive these results to be negative, it could have a downward effect on the price of shares of our common stock.
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Third parties may initiate legal proceedings against us alleging that we infringe their intellectual
property rights or we may initiate legal proceedings against third parties to challenge the validity or scope of intellectual property rights controlled by third parties, the outcome of which would be uncertain and could have an adverse effect on
the success of our business.
Third parties may initiate legal proceedings against us or our licensors or collaborators alleging
that we or our licensors or collaborators infringe their intellectual property rights or we or our licensors or collaborators may initiate legal proceedings against third parties to challenge the validity or scope of intellectual property rights
controlled by third parties, including in oppositions, interferences, reexaminations,
inter partes
reviews or derivation proceedings before the United States or other jurisdictions. These proceedings can be expensive and time-consuming and
many of our or our licensors adversaries in these proceedings may have the ability to dedicate substantially greater resources to prosecuting these legal actions than we or our licensors or collaborators can.
An unfavorable outcome could require us or our licensors or collaborators to cease using the related technology or developing or
commercializing our product candidates, or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us or our licensors or collaborators a license on commercially reasonable
terms or at all. Even if we or our licensors or collaborators obtain a license, it may be
non-exclusive,
thereby giving our competitors access to the same technologies licensed to us or our licensors or
collaborators. In addition, we could be found liable for monetary damages, including treble damages and attorneys fees, if we are found to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our
product candidates or force us to cease some of our business operations, which could materially harm our business.
We may be subject to claims by
third parties asserting that we or our employees have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property.
Many of our employees, including our senior management, were previously employed at universities or at other biotechnology or pharmaceutical
companies, including our competitors or potential competitors. Some of these employees executed proprietary rights,
non-disclosure
and
non-competition
agreements in
connection with such previous employment. Although we try to ensure that our employees do not use the proprietary information or
know-how
of others in their work for us, we may be subject to claims that we or
these employees have used or disclosed confidential information or intellectual property, including trade secrets or other proprietary information, of any such employees former employer. Litigation may be necessary to defend against these
claims.
In addition, for some of our
in-licensed
patents and patent applications, we do not have
access to any patent assignments or employee agreements demonstrating that all inventors have assigned their rights to the inventions or related patents. As a result, we may be subject to claims of ownership by such inventors.
If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property
rights or personnel or sustain damages. Such intellectual property rights could be awarded to a third party, and we could be required to obtain a license from such third party to commercialize our technology or products. Such a license may not be
available on commercially reasonable terms or at all. Even if we successfully prosecute or defend against such claims, litigation could result in substantial costs and distract management.
Our inability to protect our confidential information and trade secrets would harm our business and competitive position.
In addition to seeking patents for some of our technology and products, we also rely on trade secrets, including unpatented
know-how,
technology and other proprietary information, to maintain our competitive position. We seek to protect these trade secrets, in part, by entering into
non-disclosure
and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, third-party manufacturers, consultants, advisors and other third parties. We also enter into
confidentiality and invention or patent assignment agreements with our employees and consultants. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may
not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts
both within and outside the United States may be less willing or unwilling to protect trade secrets. If a competitor lawfully obtained or independently developed any of our trade secrets, we would have no right to prevent such competitor from using
that technology or information to compete with us, which could harm our competitive position.
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We rely significantly on information technology and any failure, inadequacy, interruption or security lapse
of that technology, including any cyber security incidents, could harm our ability to operate our business effectively.
Despite
the implementation of security measures, our internal computer systems and those of third parties with which we contract are vulnerable to damage from cyber-attacks, computer viruses, unauthorized access, natural disasters, terrorism, war and
telecommunication and electrical failures. System failures, accidents or security breaches could cause interruptions in our operations, and could result in a material disruption of our clinical and commercialization activities and business
operations, in addition to possibly requiring substantial expenditures of resources to remedy. The loss of clinical trial data could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the
data. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and our product
research, development and commercialization efforts could be delayed.
Risks Related to Ownership of Our Common Stock
The market price of our stock may be volatile and you could lose all or part of your investment.
The trading price of our common stock is highly volatile and subject to wide fluctuations in response to various factors, some of which we
cannot control. In addition to the factors discussed in this Risk Factors section and elsewhere in this report, these factors include:
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the success of competitive products or technologies;
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regulatory actions with respect to our products or our competitors products;
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actual or anticipated changes in our growth rate relative to our competitors;
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announcements by us or our competitors of significant acquisitions, strategic collaborations, joint ventures, collaborations or capital commitments;
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results of trials of our product candidates or those of our competitors;
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regulatory or legal developments in the United States and other countries;
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developments or disputes concerning patent applications, issued patents or other proprietary rights;
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the recruitment or departure of key personnel;
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the level of expenses related to our product candidates or clinical development programs;
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actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts;
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variations in our financial results or those of companies that are perceived to be similar to us;
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fluctuations in the valuation of companies perceived by investors to be comparable to us;
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share price and volume fluctuations attributable to inconsistent trading volume levels of our shares;
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announcement or expectation of additional financing efforts;
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sales of our common stock by us, our insiders or our other stockholders;
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changes in the structure of healthcare payment systems;
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market conditions in the pharmaceutical and biotechnology sectors; and
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general economic, industry, political and market conditions.
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In addition, the stock market in
general, and the NASDAQ Global Select Market and biopharmaceutical companies in particular, frequently experiences extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of such
companies. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance. The realization of any of the above risks or any of a broad range of other risks, including
those described in this Risk Factors section, could have a dramatic and negative impact on the market price of our common stock.
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We may sell additional equity or debt securities or enter into other arrangements to fund our operations,
which may result in dilution to our stockholders and impose restrictions or limitations on our business.
Until we can generate a
sufficient amount of revenue from our products, if ever, we expect to finance future cash needs through public or private equity or debt offerings. In April 2017, we filed a shelf registration statement on Form
S-3
(Registration
No. 333-217172)
that allows us to sell up to an aggregate of $200 million of our common stock, which includes up to $50.0 million
designated in the prospectus supplement for an
at-the-market
offering program. We may also seek additional funding through government or other third-party funding and
other collaborations, strategic alliances and licensing arrangements. These financing activities may have an adverse impact on our stockholders rights as well as on our operations, and such additional funding may not be available on reasonable
terms, if at all. If we raise additional funds through the issuance of additional debt or equity securities, it may result in dilution to our existing stockholders and/or increased fixed payment obligations. Furthermore, these securities may have
rights senior to those of our common stock and could contain covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire,
sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Additionally, if we seek funds through arrangements with collaborative partners, these arrangements may
require us to relinquish rights to some of our technologies or product candidates or otherwise agree to terms unfavorable to us. Any of these events could significantly harm our business, financial condition and prospects.
If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding
our stock, our stock price and trading volume could decline.
The trading market for our common stock is influenced by the
research and reports that industry or securities analysts publish about us or our business. If no or few securities or industry analysts commence coverage of us, the trading price for our stock could be negatively impacted. In the event we obtain
securities or industry analyst coverage, if any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model, our intellectual property or our stock performance, or if our trials or operating results fail to
meet the expectations of analysts, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause
our stock price or trading volume to decline.
Our principal stockholders and management own a significant percentage of our stock and will be able
to exert significant control over matters subject to stockholder approval.
As of June 30, 2017, our executive officers,
directors, holders of 5% or more of our capital stock and their respective affiliates beneficially own approximately 58% of our outstanding voting stock. These stockholders may be able to determine all matters requiring stockholder approval. For
example, these stockholders may be able to control elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets or other major corporate transaction. This may prevent or discourage unsolicited
acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders. The interests of this group of stockholders may not always coincide with your interests or the interests of other
stockholders and they may act in a manner that advances their best interests and not necessarily those of other stockholders, including seeking a premium value for their common stock, and might affect the prevailing market price for our common
stock.
We are an emerging growth company as defined in the JOBS Act and will be able to avail ourselves of reduced disclosure
requirements applicable to emerging growth companies, which could make our common stock less attractive to investors and adversely affect the market price of our common stock.
For so long as we remain an emerging growth company as defined in the JOBS Act, we may take advantage of certain exemptions from
various requirements applicable to public companies that are not emerging growth companies including:
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the provisions of Section 404(b) of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, requiring that our independent registered public accounting firm provide an attestation report on the effectiveness of
our internal control over financial reporting;
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the say on pay provisions (requiring a
non-binding
stockholder vote to approve compensation of certain executive officers) and the say on golden parachute
provisions (requiring a
non-binding
stockholder vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations) of the
Dodd-Frank Act and some of the disclosure requirements of the Dodd-Frank Act relating to compensation of our chief executive officer;
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the requirement to provide detailed compensation discussion and analysis in proxy statements and reports filed under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and instead provide a reduced
level of disclosure concerning executive compensation; and
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any rules that the Public Company Accounting Oversight Board may adopt requiring mandatory audit firm rotation or a supplement to the auditors report on the financial statements.
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We may take advantage of these exemptions until we are no longer an emerging growth company. We would cease to be an
emerging growth company upon the earliest of: (i) the first fiscal year following the fifth anniversary of our IPO; (ii) the first fiscal year after our annual gross revenues are $1.0 billion or more; (iii) the date
on which we have, during the previous three-year period, issued more than $1.0 billion in
non-convertible
debt securities; or (iv) as of the end of any fiscal year in which the market value of our
common stock held by
non-affiliates
exceeded $700 million as of the end of the second quarter of that fiscal year.
We currently intend to take advantage of some, but not all, of the reduced regulatory and reporting requirements that will be available to us
so long as we qualify as an emerging growth company. For example, we have irrevocably elected not to take advantage of the extension of time to comply with new or revised financial accounting standards available under Section 102(b)
of the JOBS Act. Our independent registered public accounting firm will not be required to provide an attestation report on the effectiveness of our internal control over financial reporting so long as we qualify as an emerging growth
company, which may increase the risk that material weaknesses or significant deficiencies in our internal control over financial reporting go undetected. Likewise, so long as we qualify as an emerging growth company, we may elect
not to provide you with certain information, including certain financial information and certain information regarding compensation of our executive officers, that we would otherwise have been required to provide in filings we make with the
Securities and Exchange Commission, or SEC, which may make it more difficult for investors and securities analysts to evaluate our company. We cannot predict if investors will find our common stock less attractive because we may rely on these
exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, and our stock price may be more volatile and may decline.
We will continue to incur significant costs as a result of operating as a public company, and our management will devote substantial time to compliance
initiatives.
We completed our initial public offering on March 8, 2016. As a newly public company, we incur significant
legal, accounting and other expenses that we did not incur as a private company, and these expenses may increase even more after we are no longer an emerging growth company. We are subject to the reporting requirements of the Exchange
Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Protection Act, as well as rules adopted, and to be adopted, by the SEC and the NASDAQ Global Select Market. Our management and other personnel devote a substantial amount of time to
these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. The increased costs will increase our net loss. For example,
these rules and regulations have made it more difficult and more expensive for us to obtain director and officer liability insurance and we were required to incur substantial costs to maintain the sufficient coverage. We cannot predict or estimate
the amount or timing of additional costs we may incur to respond to these requirements. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board
committees or as executive officers.
These rules and regulations are often subject to varying interpretations, in many cases due to their
lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs
necessitated by ongoing revisions to disclosure and governance practices.
Sales of a substantial number of shares of our common stock in the public
market could cause our stock price to fall.
Sales of a substantial number of shares of our common stock in the public market
could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock.
Some of the holders of our securities have rights, subject to certain conditions, to require us to file registration statements covering their
shares or to include their shares in registration statements that we may file for ourselves or other stockholders. Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under
the Securities Act except for shares held by our affiliates, as defined in Rule 144 under the Securities Act. Any sales of securities by these stockholders could have a material adverse effect on the trading price of our common stock.
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We may be subject to securities litigation, which is expensive and could divert management attention.
The market price of our common stock may be volatile, and in the past, companies that have experienced volatility in the market
price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our managements
attention from other business concerns, which could seriously harm our business.
If we fail to maintain an effective system of internal control
over financial reporting in the future, we may not be able to accurately report our financial condition, results of operations or cash flows, which may adversely affect investor confidence in us and, as a result, the value of our common stock.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for financial reporting and
disclosure controls and procedures. Commencing after the filing of our initial annual report on
Form 10-K,
we will be required, under Section 404 of the Sarbanes-Oxley Act, to furnish a report by
management on, among other things, the effectiveness of our internal control over financial reporting. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial
reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting that results in more than a reasonable possibility that a material misstatement of annual or interim financial statements
will not be prevented or detected on a timely basis. Section 404 of the Sarbanes-Oxley Act also generally requires an attestation from our independent registered public accounting firm on the effectiveness of our internal control over financial
reporting. However, for as long as we remain an emerging growth company as defined in the JOBS Act, we intend to take advantage of the exemption permitting us not to comply with the independent registered public accounting firm attestation
requirement.
Our compliance with Section 404 will require that we incur substantial expense and expend significant management
efforts. We currently do not have an internal audit group, and we will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge, and compile the system and process
documentation necessary to perform the evaluation needed to comply with Section 404. We may not be able to complete our evaluation, testing and any required remediation in a timely fashion. During the evaluation and testing process, if we
identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal control over financial reporting is effective. We cannot assure you that there will not be material weaknesses
or significant deficiencies in our internal control over financial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition, results of
operations or cash flows. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our
internal control over financial reporting once that firm begin its Section 404 reviews, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we
could be subject to sanctions or investigations by the NASDAQ Global Select Market, the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other
effective control systems required of public companies, could also restrict our future access to the capital markets.
Some provisions of our
charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would benefit our stockholders and may prevent attempts by our stockholders to replace or remove our
current management.
Provisions in our amended and restated certificate of incorporation and amended and restated bylaws, as well
as provisions of Delaware law, could make it more difficult for a third party to acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders, or remove our current management. These provisions include:
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authorizing the issuance of blank check preferred stock, the terms of which we may establish and shares of which we may issue without stockholder approval;
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prohibiting cumulative voting in the election of directors, which would otherwise allow for less than a majority of stockholders to elect director candidates;
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prohibiting stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of our stockholders;
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eliminating the ability of stockholders to call a special meeting of stockholders; and
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establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon at stockholder meetings.
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These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more
difficult for stockholders to replace members of our board of directors, who are responsible for appointing the
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members of our management. Because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, or the DGCL, which may
discourage, delay or prevent someone from acquiring us or merging with us whether or not it is desired by or beneficial to our stockholders. Under the DGCL, a corporation may not, in general, engage in a business combination with any holder of 15%
or more of its capital stock unless the holder has held the stock for three years or, among other things, the board of directors has approved the transaction. Any provision of our amended and restated certificate of incorporation or amended and
restated bylaws or Delaware law that has the effect of delaying or deterring a change of control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some
investors are willing to pay for our common stock.