Investing
in our common stock involves a high degree of risk. We have described below a number of uncertainties and risks which, in addition
to uncertainties and risks presented elsewhere in this Quarterly Report, may adversely affect our business, operating results and
financial condition. The uncertainties and risks enumerated below as well as those presented elsewhere in this Quarterly
Report, and those included in our Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC should be
considered carefully in evaluating our company and our business and the value of our securities.
Risks Relating to Our Stage
of Development and Capital Structure
We
have a history of losses.
Since
inception in 1996 through September 30, 2017, we have accumulated losses totaling approximately $205.4 million. On September 30,
2017, we had a working capital surplus of approximately $12.9 million and stockholders’ equity of approximately $11.6 million
Our net losses for the three most recent fiscal years have been approximately $21.1 million, $20.9 million and $22.6 million for
2016, 2015 and 2014, respectively. We have generated no significant revenue from the sales of our proposed products.
Our
ability to generate revenues and achieve profitability will depend upon our ability to complete the development of our proposed
products, obtain the required regulatory approvals, manufacture and market and sell our proposed products. To date, we have not
generated any revenue from the commercial sale of our proposed products. No assurances can be given as to exactly when, if at all,
we will be able to fully develop, commercialize, market, sell and/or derive any, let alone material, revenues from our proposed
products.
We
will need to raise additional capital to continue operations.
Since our inception, we
have funded our operations through the sale of our securities, credit facilities, the exercise of options and warrants, and to
a lesser degree, from grants and research contracts and other revenue generating activities such as licensing. As of September
30, 2017, we had cash, cash equivalents and short-term investments on hand of approximately $14.1 million. We cannot assure you
that we will be able to secure additional capital through financing transactions, including issuance of debt, licensing agreements
or grants. Our inability to license our intellectual property, obtain grants or secure additional financing will materially impact
our ability to fund our current and planned operations.
We have spent and expect
to continue spending substantial cash in the research, development, clinical and pre-clinical testing of our proposed products
with the goal of ultimately obtaining FDA approval and equivalent international approvals to market such products. We will require
additional capital to conduct research and development, establish and conduct clinical and pre-clinical trials, enter into commercial-scale
manufacturing arrangements and to provide for marketing and distribution of our products. We cannot assure you that financing will
be available if needed. If additional financing is not available, we may not be able to fund our operations, develop or enhance
our technologies, take advantage of business opportunities or respond to competitive market pressures. If we exhaust our cash reserves
and are unable to secure adequate additional financing, we may be unable to meet operating obligations which could result in us
initiating bankruptcy proceedings or delaying, or eliminating some or all of our research and product development programs.
We may not be able to continue as a going
concern if we do not obtain additional financing.
We have incurred losses since our inception and
have not demonstrated an ability to generate revenues from sales or services. Our ability to continue as a going concern
is dependent on generating cash from the sale of our common stock and/or obtaining debt financing. Our cash, cash equivalents
and short-term investment balance at September 30, 2017 was approximately $14.1 million. Based on our current expected level of
operating expenditures, we expect to be able to fund our operations through December 2018. Our ability to remain a going
concern is wholly dependent upon our ability to continue to obtain sufficient financing to fund our operations.
Accordingly, despite our ability to secure capital
in the past, there is no assurance that additional equity or debt financing will be available to us when needed. In the event that
we are not able to secure financing, we may be forced to curtail operations, delay or stop ongoing clinical trials, cease operations
altogether or file for bankruptcy.
Risks
Relating to Our Business
Following our announcements regarding
the negative results from our Phase 2 study, we may not generate any future revenues from NSI-189 or its underlying intellectual
property and securing additional financing may be more difficult.
On July 25, 2017, we announced
that our Phase 2 study of NSI-189 in subjects with MDD failed to achieve statistical significance on its primary endpoint. Following
these clinical results, we may not generate any future revenues from NSI-189 or its underlying intellectual property. Additionally,
after similar results, other companies in our industry have found it more difficult to raise capital and when they have been able
to raise capital, it has typically been under less favorable terms.
Our
business is dependent on the successful development of our product candidates and our ability to raise additional capital.
Our business is significantly
dependent on our product candidates which are currently at different phases of pre-clinical and clinical development. The process
to approve our product candidates is time-consuming, involves substantial expenditures of resources, and depends upon a number
of factors, including the availability of alternative treatments, and the risks and benefits demonstrated in our clinical trials.
Our success will depend on our ability to achieve scientific and technological advances and to translate such advances into FDA-approvable,
commercially competitive products on a timely basis. Failure can occur at any stage of the process. On July 25, 2017, we announced
that our Phase 2 clinical trial of NSI-189 in MDD failed to achieve statistical significance on its primary endpoint. We are currently
evaluating the Phase 2 trial data. If we are not successful in developing our product candidates, we will have invested substantial
amounts of time and money without developing revenue-producing products. As we enter a more extensive clinical program for our
product candidates, the data generated in these studies may not be as compelling as the earlier results. This, in turn, could adversely
impact our ability to raise additional capital and pursue our business plan and planned research and development efforts.
Our proposed products
are not likely to be commercially available for at least several years, if at all. Our development schedules for our proposed products
may be affected by a variety of factors, including technological difficulties, clinical trial failures, regulatory hurdles, competitive
products, intellectual property challenges and/or changes in governmental regulation, many of which will not be within our control.
Any delay in the development, introduction or marketing of our product candidates could result either in such products being marketed
at a time when their cost and performance characteristics would not be competitive in the marketplace or in the shortening of their
commercial lives. In light of the long-term nature of our projects, the unproven technology involved and the other factors described
elsewhere in this section, there can be no assurance that we will be able to successfully complete the development or marketing
of any of our proposed product candidates.
Our
business relies on technologies that we may not be able to commercially develop and we are unable to predict when or if we will
be able to earn revenues.
We have allocated the
majority of our resources to the development of our stem cell and small molecule technologies. Our ability to generate revenue
and operate profitably will depend on being able to develop these technologies for human applications. These are emerging technologies
that may have limited human application. On July 25, 2017, we announced that our Phase 2 clinical trial of NSI-189 in MDD failed
to achieve statistical significance on its primary endpoint. We are currently evaluating the Phase 2 trial data. We cannot guarantee
that we will be able to develop our technologies or that if developed, our technologies will result in commercially viable products
or have any commercial utility or value. We anticipate that the commercial sale of our proposed products and/or royalty/licensing
fees related to our technologies, will be our primary sources of revenue. We recognized revenue of approximately $16,000, $10,000
and $19,000 for the years ended December 31, 2016, 2015 and 2014, respectively, related to the licensing of certain intellectual
property to third parties and certain subcontractor services that we provided. If we are unable to develop our technologies, we
may never realize any significant revenue. Additionally, given the uncertainty of our technologies, product candidates and the
need for government regulatory approval, we cannot predict when, or if ever, we will be able to realize revenues related to our
products. As a result, we will be primarily dependent on our ability to raise capital through the sale of our securities for the
foreseeable future.
Our
product development programs are based on novel technologies in an emerging field and are inherently risky.
We are subject to the risks inherent in the development
of products based on new technologies. The novel nature of therapies in the field of regenerative medicine creates significant
challenges in regard to product development and optimization, manufacturing, government regulation, third party reimbursement,
and market acceptance. For example, the pathway to regulatory approval for cell-based therapies, including our stem cell based
product candidates, may be more complex and lengthy than the pathway for conventional drugs. These challenges may prevent us from
developing and commercializing products on a timely or profitable basis or at all. Regenerative medicine is still an emerging field.
There can be no assurances that we will ultimately produce any viable commercialized products and processes. Even if we are able
to produce a commercially viable product, there may be strong competitors in this field and our products may not be able to successfully
compete against them.
Our stem cell therapy programs rely on experimental
surgical devices and experimental and highly invasive surgical procedures.
We are subject to the risks inherent in the use
and development of experimental surgical devices and procedures. We have limited experience with medical devices and must rely
on outside consultants and manufacturers to develop and seek any required approvals for the device we use in connection with our
stem cell therapy program. Additionally, the surgical procedures required to administer our stem cell therapies are experimental,
highly invasive and is required to be performed by highly experienced neurosurgeons who have received special training. We cannot
guarantee consistent and safe performance of these devices or the surgical procedures. A surgery related adverse event may result
in a clinical hold and may have long-term and damaging effects on our ability to complete development of the stem cell therapy
programs, including the completion of any ongoing or planned clinical trials. Even if one or more of our programs is successful
and receives marketing approval from a regulatory authority, due to the specialized nature of the device and surgical procedure,
there may not be sufficient train surgeons to administer our therapy.
We are unable to
predict when or if we will be able to earn revenues.
Given the uncertainty
of our technologies and the need for government regulatory approval, we cannot predict when, or if ever, we will be able to realize
revenues related to our products.
Our proposed products
are not likely to be commercially available for at least several or more years, if ever. Accordingly, we do not foresee generating
any significant revenue during such time. As a result, we will be primarily dependent on our ability to raise capital through the
sale of our securities to fund our operations for the foreseeable future.
Our reliance on
third parties to manufacture and store our stem cells and small molecule compounds could adversely impact our business.
We currently outsource
most of the manufacturing of our stem cells and small molecule pharmaceutical compounds to third party contractors and as such
have limited ability to adequately control the manufacturing process and the safe storage thereof. Any manufacturing or storage
irregularity, error, or failure to comply with applicable regulatory procedure would require us to find new third parties to outsource
our manufacturing and storage responsibilities or our business would be impacted.
The manufacture of our
therapeutic products is a complicated and difficult process, dependent upon substantial know-how and subject to the need for continual
process improvements. In addition, our suppliers’ ability to scale-up manufacturing to satisfy the various requirements of
our planned clinical trials is uncertain. Additionally, many of the materials that we use to prepare our cell-based products are
highly specialized, complex and available from only a limited number of suppliers. The loss of one or more of these sources would
likely delay our ability to conduct planned clinical trials and otherwise adversely affect our business.
If
we are unable to complete pre-clinical and clinical testing and trials or if clinical trials of our product candidates are prolonged,
delayed, suspended, terminated or fail to reach their endpoints, our business and results of operations could be materially harmed.
Although we have commenced
a number of trials, the ultimate outcome of the trials is uncertain. On July 25, 2017, we announced that our Phase 2 clinical trial
of NSI-189 in MDD failed to achieve statistical significance on its primary endpoint. We are currently evaluating the Phase 2 trial
data. If we are unable to satisfactorily complete our other trials, or if such trials also yield unsatisfactory results, we may
be unable to obtain regulatory approval for and commercialize our proposed products. No assurances can be given that our clinical
trials will be completed or result in successful outcomes. A number of events, including any of the following, could delay the
completion of our planned clinical trials and negatively impact our ability to obtain regulatory approval for, and to market and
sell, a particular product candidate:
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conditions imposed on us by the FDA or any foreign regulatory authority regarding the scope or
design of our clinical trials;
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delays in obtaining, or our inability to obtain, required approvals from institutional review boards,
or IRBs, or other reviewing entities at clinical sites selected for participation in our clinical trials;
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insufficient supply or deficient quality of our product candidates or other materials necessary
to conduct our clinical trials;
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delays in obtaining regulatory agency agreement for the conduct of our clinical trials;
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lower than anticipated enrollment and retention rate of subjects in clinical trials;
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serious and unexpected side effects experienced by patients in our clinical trials which are related
to the use of our product candidates; or
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failure of our third-party contractors to meet their contractual obligations to us in a timely
manner.
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Clinical trials may also
be delayed or terminated as a result of ambiguous or negative interim results. In addition, a clinical trial may be suspended or
terminated by us, the FDA, clinical trial site IRB’s, or a data safety monitoring board, or DSMB, overseeing the clinical
trial at issue, or other regulatory authorities due to a number of factors. Additionally, changes in regulatory requirements and
guidance may occur and we may need to amend clinical trial protocols to reflect these changes. Amendments may require us to resubmit
our clinical trial protocols to IRBs for reexamination, which may impact the cost, timing or successful completion of a clinical
trial. We do not know whether our clinical trials will be conducted as planned, will need to be restructured or will be completed
on schedule, if at all. Delays in our clinical trials will result in increased development costs for our drug candidates. In addition,
if we experience delays in the completion of, or if we terminate, any of our clinical trials, the commercial prospects for our
drug candidates may be harmed and our ability to generate product revenues will be jeopardized. Furthermore, many of the factors
that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of
regulatory approval of a drug candidate. If regulatory authorities do not approve our products or if we fail to maintain regulatory
compliance, we would be unable to commercialize our proposed products, and our business and results of operations could be materially
harmed.
The
results of pre-clinical studies and clinical trials may not be predictive of the results of our later-stage clinical trials and
our proposed products may not have favorable results in later-stage clinical trials or receive regulatory approval.
Seemingly positive results
from pre-clinical studies or clinical studies should not be relied upon as evidence that our clinical trials will succeed. Even
if our product candidates achieve positive results in pre-clinical studies or during our Phase 1 and Phase 2 studies, we will be
required to demonstrate through further clinical trials that our product candidates are safe and effective for use in a diverse
population before we can seek regulatory approvals for their commercial sale. There is typically an extremely high rate of attrition
from the failure of product candidates as they proceed through clinical trials. If any product candidate fails to demonstrate sufficient
safety and efficacy in any clinical trial, then we may experience potentially significant delays in, or be required to abandon
development of that product candidate. Additionally, failure to demonstrate safety and efficacy results acceptable to the FDA in
later stage trials could impair our development prospects and even prevent regulatory approval of our current and future product
candidates. Any such delays or abandonment in our development efforts of any of our product candidates would materially impair
our ability to generate revenues.
We
are subject to numerous risks inherent in conducting clinical trials.
We outsource the management
of our clinical trials to third parties. Agreements with clinical investigators and medical institutions for clinical testing and
with other third parties for data management services, place substantial responsibilities on these parties that, if unmet, could
result in delays in, or termination of, our clinical trials. For example, if any of our clinical trial sites fail to comply with
FDA-approved good clinical practices, we may be unable to use the data gathered at those sites. If these clinical investigators,
medical institutions or other third parties do not carry out their contractual duties or obligations or fail to meet expected deadlines,
or if the quality or accuracy of the clinical data they obtain is compromised due to their failure to adhere to our clinical protocols
or for other reasons, our clinical trials may be extended, delayed or terminated, and we may be unable to obtain regulatory approval
for, or successfully commercialize, our proposed products. Delays in recruitment, lack of clinical benefit or unacceptable side
effects would delay or prevent the completion of our clinical trials.
We or our regulators may
suspend or terminate our clinical trials for a number of reasons. We may voluntarily suspend or terminate our clinical trials if
at any time we believe they present an unacceptable risk to the patients enrolled in our clinical trials or do not demonstrate
clinical benefit. In addition, regulatory agencies may order the temporary or permanent discontinuation of our clinical trials
at any time if they believe that the clinical trials are not being conducted in accordance with applicable regulatory requirements
or that they present an unacceptable safety risk to the patients enrolled in our clinical trials.
Our clinical trial operations
are subject to regulatory inspections at any time. If regulatory inspectors conclude that we or our clinical trial sites are not
in compliance with applicable regulatory requirements for conducting clinical trials, we may receive reports of observations or
warning letters detailing deficiencies, and we will be required to implement corrective actions. If regulatory agencies deem our
responses to be inadequate, or are dissatisfied with the corrective actions we or our clinical trial sites have implemented, our
clinical trials may be temporarily or permanently discontinued, we may be fined, we or our investigators may be precluded from
conducting any ongoing or any future clinical trials, the government may refuse to approve our marketing applications or allow
us to manufacture or market our products, and we may be criminally prosecuted.
The lengthy approval process
as well as the unpredictability of future clinical trial results may result in our failing to obtain regulatory approval for our
proposed products, which would materially harm our business, results of operations and prospects.
We may be subject
to litigation that will be costly to defend or pursue and uncertain in its outcome.
Our business may bring
us into conflict with licensees, licensors, or others with whom we have contractual or other business relationships or with our
competitors or others whose interests differs from ours. If we are unable to resolve these conflicts on terms that are satisfactory
to all parties, we may become involved in litigation brought by or against such parties. Any litigation is likely to be expensive
and may require a significant amount of management's time and attention, at the expense of other aspects of our business. The outcome
of litigation is always uncertain, and in some cases, could include judgments against us which could have a materially adverse
effect on our business.
We may not be able
to obtain government or third-party payor coverage and reimbursement.
Our ability to successfully
commercialize our product candidates, if approved, depends to a significant degree on the ability of patients to be reimbursed
for the costs of such products and related treatments. We cannot assure you that reimbursement in the U.S. or in foreign countries
will be available for any products developed, or, if available, will not decrease in the future, or that reimbursement amounts
will not reduce the demand for, or the price of, our products. There is considerable pressure to reduce the cost of therapeutic
products. Government and other third-party payors are increasingly attempting to contain health care costs by limiting both coverage
and the level of reimbursement for new therapeutic products and by refusing, in some cases, to provide any coverage for uses of
approved products for disease indications for which the FDA or other relevant authority has not granted marketing approval. Moreover,
in some cases, government and other third-party payors have refused to provide reimbursement for uses of approved products for
disease indications for which the FDA or other relevant authority has granted marketing approval. Significant uncertainty exists
as to the reimbursement status of newly approved health-care products or novel therapies such as ours. We cannot predict what additional
regulation or legislation relating to the health care industry or third-party coverage and reimbursement may be enacted in the
future or what effect such regulation or legislation may have on our business. If additional regulations are overly onerous or
expensive or if healthcare related legislation makes our business more expensive or burdensome than originally anticipated, we
may be forced to significantly downsize our business plans or completely abandon the current business model.
Our products may not be profitable due
to manufacturing costs and our inability to receive favorable pricing.
Our products may be significantly
more expensive to manufacture than other drugs or therapies currently on the market today due to a fewer number of potential manufacturers,
greater level of needed expertise and other general market conditions affecting manufacturers of our proposed products. Even if
we are able to receive approval for the reimbursement of our proposed products the amount of reimbursement may be significantly
less than the manufacturing costs of our products. Additionally, other market factors may limit the price which we can charge for
our proposed products while still being competitive. Accordingly, even if we are successful in developing our proposed products,
we may not be able to charge a high enough price for us to earn a profit.
We
are dependent on the acceptance of our products by the healthcare community.
Our product candidates,
if approved for marketing, may not achieve market acceptance since hospitals, physicians, patients or the medical community, in
general, may decide not to accept and utilize these products. The products that we are attempting to develop represent substantial
departures from established treatment methods and will compete with a number of more conventional therapies marketed by major pharmaceutical
companies. If the healthcare community does not accept our products for any reason, our business will be materially harmed.
We depend on a limited number of employees
and consultants for our continued operations and future success.
We are highly dependent
on a limited number of employees and outside consultants. Although we have entered into employment and consulting agreements
with these parties, these agreements can be terminated at any time. The loss of any of our employees or consultants
could adversely affect our opportunities and materially harm our future prospects. In addition, we anticipate growth
and expansion into areas and activities requiring additional expertise, such as clinical testing, regulatory compliance, manufacturing
and marketing. We anticipate the need for additional management personnel as well as the development of additional expertise
by existing management personnel. There is intense competition for qualified personnel in the areas of our present and planned
activities, and there can be no assurance that we will be able to attract and retain the qualified personnel necessary for the
development our business.
The employment contracts
of certain key employees contain significant anti-termination provisions which could make changes in management difficult or expensive.
We have entered into employment
agreements with Mr. Daly and Dr. Johe. Each of these employment agreements require the payment of severance, in the event certain
conditions are met, if these individuals are terminated or resign under certain conditions. These provisions will make the replacement
of these employees very costly and could cause difficulty in effecting any required changes in management or a change in control.
Our
competition has significantly greater experience and financial resources.
The biotechnology industry
is characterized by rapid technological developments and a high degree of competition. We compete against numerous companies, many
of which have substantially greater resources. Several such enterprises have initiated cell therapy research programs and/or efforts
to treat the same diseases which we target. Given our current stage of development and resources, it may be extremely difficult
for us to compete against more developed companies.
As a result, our proposed
products could become obsolete before we recoup any portion of our related research and development and commercialization expenses.
Competition in the biopharmaceutical industry is based significantly on scientific and technological factors. These factors include
the availability of patent and other protection for technology and products, the ability to commercialize technological developments
and the ability to obtain governmental approval for testing, manufacturing and marketing. We compete with specialized biopharmaceutical
firms in the United States, Europe and elsewhere, as well as a growing number of large pharmaceutical companies that are applying
biotechnology to their operations. Many major pharmaceutical companies have developed or acquired internal biotechnology capabilities
or made commercial arrangements with other biopharmaceutical companies. These companies, as well as academic institutions and governmental
agencies and private research organizations, also compete with us in recruiting and retaining highly qualified scientific personnel
and consultants. Our ability to compete successfully with other companies in the pharmaceutical field will also depend to a considerable
degree on the continuing availability of capital to us.
We believe that our proposed
products under development and in pre-clinical testing and clinical trials will address unmet medical needs for those indications
for which we are focusing our development efforts. Our competition will be determined in part by the potential indications for
which our proposed products are developed and ultimately approved by regulatory authorities. Additionally, the timing of market
introduction of some of our proposed products or of competitors’ products may be an important competitive factor. Accordingly,
the relative speed with which we can develop our proposed products, complete preclinical testing, clinical trials and approval
processes and supply commercial quantities to market is expected to be important competitive factors. We expect that competition
among products approved for sale will be based on various factors, including product efficacy, safety, reliability, availability,
price and patent position.
Our outsource model depends on third
parties to assist in developing and testing our proposed products.
Our strategy for the development,
clinical and pre-clinical testing and commercialization of our proposed products is based in large part on an outsource model.
This model requires us to engage third parties in order to further develop our technology and products as well as for the day to
day operations of our business. In the event we are not able to enter into such relationships in the future, our ability to operate
and develop products may be seriously hindered or we may be required to spend considerable time and resources to bring such functions
in-house. Either outcome could result in our inability to develop a commercially feasible product or in the need for substantially
more working capital to complete the research in-house.
The commercialization of therapeutic
products exposes us to product liability claims.
Product liability claims
could result in substantial litigation costs and damage awards against us. We attempt to mitigate this risk by obtaining and maintaining
appropriate insurance coverage. Historically, we have obtained liability insurance that covers our clinical trials. If we begin
commercializing products, we will need to increase our insurance coverage. We may not be able to obtain insurance on acceptable
terms, if at all, and the policy limits on our insurance policies may be insufficient to cover our potential liabilities.
We currently rely
heavily upon third party FDA-regulated manufacturers and suppliers for our products
We currently manufacture
our cells both in-house and on an outsource basis. We outsource the manufacturing of our pharmaceutical compound to third party
manufacturers. We manufacture cells in-house which are not required to meet stringent FDA requirements. We use these cells in our
research and collaborative programs. At present, we outsource all the manufacturing and storage of our stem cells and pharmaceuticals
compound to be used in clinical testing, and which are subject to higher FDA requirements, to Charles River Laboratories, Inc.,
of Wilmington, Massachusetts (stem cells) and Albany Molecular Resources, Inc. (small molecule). Failure by our contract manufacturer
to achieve and maintain high manufacturing standards could result in patient injury or death, product recalls or withdrawals, delays
or failures in testing or delivery, cost overruns, or other problems that could seriously hurt our business. Contract manufacturers
may encounter difficulties involving production yields, quality control, and quality assurance. These manufacturers are subject
to ongoing periodic and unannounced inspections by the FDA and corresponding state and foreign agencies to ensure strict compliance
with cGMPs, GTPs and other applicable government regulations and corresponding foreign standards; however, we do not have control
over third-party manufacturers’ compliance with these regulations and standards.
Because manufacturing
facilities are subject to regulatory oversight and inspection, failure to comply with regulatory requirements could result in material
manufacturing delays and product shortages, which could delay or otherwise negatively impact our clinical trials and product development.
Moreover, we do not have quantity or volume commitment orders from these manufacturers and we cannot assure you that the manufacturers
will be able to manufacture in the quantity we require on a timely basis or at all. In the event we are required to seek alternative
third-party suppliers or manufacturers, they may require us to purchase a minimum amount of materials or could require other unfavorable
terms. Any such event would materially impact our business prospects and could delay the development of our products. Moreover,
there can be no assurance that any manufacturer or supplier that we select will be able to supply our products in a timely or cost-effective
manner or in accordance with applicable regulatory requirements or our specifications. In addition, due to the novelty of our products
and product development, there can be no assurances that we would be able to find other suitable third-party FDA-regulated manufacturers
on a timely basis and at terms reasonable to us. Even if we were to locate alternative manufacturers there may be delays before
they are able to begin manufacturing. Failure to secure such third-party manufacturers or suppliers would materially impact our
business.
We
rely on third parties to conduct our clinical trials and perform data collection and analysis, which may result in costs and delays
that prevent us from successfully commercializing our product candidates.
We do not have the in-house
capability to conduct clinical trials for our product candidates. We rely, and will rely in the future, on medical institutions,
clinical investigators, contract research organizations, contract laboratories, and collaborators to perform data collection and
analysis and other aspects of our clinical trials. Our reliance on these third parties for clinical development activities results
in reduced control over these activities. Furthermore, these third parties may also have relationships with other entities, some
of which may be our competitors. Our preclinical activities or clinical trials conducted in reliance on third parties may be delayed,
suspended, or terminated if:
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the third parties do not successfully carry out their contractual duties;
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the third parties fail to meet FDA and other regulatory obligations or expected deadlines;
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we replace a third party for any reason; or
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the quality or accuracy of the data obtained by third parties is compromised due to their failure
to adhere to clinical protocols, regulatory requirements, or for other reasons.
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Third party performance
failures may increase our development costs, delay our ability to obtain regulatory approval, and delay or prevent the commercialization
of our product candidates. While we believe that there are numerous alternative sources to provide these services, in the event
that we seek such alternative sources, we may not be able to enter into replacement arrangements without incurring delays or additional
costs.
Risks
Relating to Intellectual Property
We may not be able to withstand challenges
to our intellectual property rights.
We rely on our intellectual
property, including issued and applied-for patents, as the foundation of our business. Our intellectual property rights may come
under challenge. No assurances can be given that our current and potential future patents will survive such challenges. For example,
in 2005 one of our patents was challenged in the USPTO. Although we prevailed in this particular matter, these cases are complex,
lengthy, expensive, and could potentially be adjudicated adversely to our interests, removing the protection afforded by an issued
patent. The viability of our business would suffer if such patent protection were limited or eliminated. Moreover, the costs associated
with defending or settling intellectual property claims would likely have a material adverse effect on our business and future
prospects.
We may not be able to adequately protect
against the piracy of the intellectual property in foreign jurisdictions.
We conduct research in
countries outside of the U.S., including through our subsidiary in the People’s Republic of China. A number of our competitors
are located in these countries and may be able to access our technology or test results. The laws protecting intellectual property
in some of these countries may not adequately protect our trade secrets and intellectual property. The misappropriation of our
intellectual property may materially impact our position in the market and any competitive advantages, if any, that we may have.
We may infringe
the intellectual property rights of others and may not be able to obtain necessary licenses to third-party patents and other rights.
A number of companies,
universities and research institutions have filed patent applications or have received patents relating to technologies in our
field. We cannot predict which, if any, of these applications will issue as patents or how many of these issued patents will be
found valid and enforceable. There may also be existing issued patents on which we would infringe by the commercialization of our
product candidates. If so, we may be prevented from commercializing these products unless the third party is willing to grant a
license to us. We may be unable to obtain licenses to the relevant patents at a reasonable cost, if at all, and may also be unable
to develop or obtain alternative non-infringing technology. If we are unable to obtain such licenses or develop non-infringing
technology at a reasonable cost, our business could be significantly harmed. Also, any infringement lawsuits commenced against
us may result in significant costs, divert our management’s attention and result in an award against us for substantial damages,
or potentially prevent us from continuing certain operations.
Risks
Relating to Our Common Stock
The market price for our common shares
is particularly volatile.
The market for our common
shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will
continue to be more volatile than those of a seasoned issuer. The volatility in our share price is attributable to a number of
factors. Mainly however, we are a speculative or “risky” investment due to our limited operating history, lack of significant
revenues to date and the uncertainty of FDA approval. By way of example, on July 25, 2017, we announced that our Phase 2 clinical
trial of NSI-189 in MDD failed to achieve statistical significance on its primary endpoint. As a result of this announcement, the
market price or our common stock decreased substantially. As a consequence of this enhanced risk, more risk-adverse investors may,
under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to
sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer.
Additionally, in the past, plaintiffs have often initiated securities class action litigation against a company following periods
of volatility in the market price of its securities. We may in the future be the target of similar litigation. Securities litigation
could result in substantial costs and liabilities and could divert management’s attention and resources.
The following factors
may add to the volatility in the price of our common shares: actual or anticipated variations in our quarterly or annual operating
results; the results of clinical trials for our product candidates; FDA’s determination with respect to filings for new clinical
studies, new drug applications and new indications; government regulations; announcements of significant acquisitions, strategic
partnerships or joint ventures; our capital commitments; offerings of our securities and additions or departures of our key personnel.
Many of these factors are beyond our control and may decrease the market price of our common shares, regardless of our operating
performance. We cannot make any predictions or projections as to what the prevailing market price for our common shares will be
at any time, including as to whether our common shares will sustain their current market prices, or as to what effect the sale
of shares or the availability of common shares for sale at any time will have on the prevailing market price.
If we are unable
to satisfy NASDAQ maintenance requirements, our common stock may be delisted from NASDAQ, which could impair the liquidity and
the value of our common stock.
Continued listing on NASDAQ
generally requires that meet certain listing maintenance requirements. If we are unable to satisfy NASDAQ’S maintenance requirements,
our common stock may be delisted from NASDAQ. In such event, trading in our common stock would likely take place in the over-the-counter
market on the “OTC Markets” or the “OTC Bulletin Board.” Consequently, the liquidity of our common stock
could be impaired, not only in the number of shares of common stock which could be bought and sold, but also through delays in
the timing of transactions, a reduction in security analysts and new media coverage and lower prices for our common stock than
might otherwise be obtained. While the shares of our common stock meet current NASDAQ listing requirements and are currently listed
on The Nasdaq Capital Market, there can be no assurance that we will meet the criteria for continued listing.
While we continue to monitor
our compliance with the requirements for continued listing on The Nasdaq Capital Market, we cannot assure you that we will not
fail to satisfy one of the criteria in the future. If that were to occur, NASDAQ may take steps to delist our common stock. A delisting
would likely have a negative effect on the price of our common stock and would likely impair your ability to sell or purchase our
common stock if and when you wish to do so. In the event of a delisting, we cannot assure you that any action we take to restore
listing would be successful. Even if successful, we cannot assure you that any such action would stabilize the market price of
our common stock, improve the liquidity of our common stock, or prevent our future non-compliance with NASDAQ listing requirements.
Further, if we were to be delisted from The Nasdaq Capital Market, our common stock would no longer be recognized as a “covered
security” and we would be subject to regulation in each state in which we offer our securities. Thus, delisting from NASDAQ
could adversely affect our ability to raise additional financing through the public or private sale of equity securities, would
significantly impact the ability of investors to trade our securities and would negatively impact the value and liquidity of our
common stock. Delisting could also have other negative results, including the potential loss of confidence by employees, the loss
of institutional investor interest and fewer business development opportunities.
If our common stock were delisted from NASDAQ,
the Company would be subject to the risks relating to penny stocks
.
If our common stock were to be delisted from trading
on NASDAQ and the trading price of the common stock were below $5.00 per share on the date the common stock were delisted, trading
in our common stock would also be subject to the requirements of certain rules promulgated under the Securities Exchange Act of
1934, as amended (the “Exchange Act”). These rules require additional disclosure by broker-dealers in connection with
any trades involving a stock defined as a "penny stock" and impose various sales practice requirements on broker-dealers
who sell penny stocks to persons other than established customers and accredited investors, generally institutions. These additional
requirements may discourage broker-dealers from effecting transactions in securities that are classified as penny stocks, which
could severely limit the market price and liquidity of such securities and the ability of purchasers to sell such securities in
the secondary market. A penny stock is defined generally as any non-exchange listed equity security that has a market price of
less than $5.00 per share, subject to certain exceptions.
The
requirements of being a public company may strain our resources, divert management’s attention and affect our ability to
attract and retain qualified board members.
As a public company, we
incur significant legal, accounting and other expenses that we would not incur as a private company, including costs associated
with public company reporting requirements. We also incur costs associated with the Sarbanes-Oxley Act of 2002, as amended, the
Dodd-Frank Wall Street Reform and Consumer Protection Act and related rules implemented or to be implemented by the SEC and the
Nasdaq. The expenses incurred by public companies generally for reporting, insurance and corporate governance purposes have been
increasing. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities
more time-consuming and costly. These laws and regulations could also make it more difficult or costly for us to obtain certain
types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and
coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations 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
our executive officers and may divert management’s attention. Furthermore, if we are unable to satisfy our obligations as
a public company, we could be subject to delisting of our common stock, fines, sanctions and other regulatory action and potentially
civil litigation.
We
have never paid a cash dividend and do not intend to pay cash dividends on our common stock in the foreseeable future.
We have never paid cash
dividends nor do we anticipate paying cash dividends in the foreseeable future. Accordingly, any return on your investment will
be as a result of stock appreciation if any.
Our anti-takeover
provisions may delay or prevent a change of control, which could adversely affect the price of our common stock.
Our amended and restated
certificate of incorporation and amended and restated bylaws contain provisions that may make it difficult to remove our board
of directors and management and may discourage or delay “change of control” transactions, which could adversely affect
the price of our common stock. These provisions include, among others:
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our board of directors is divided into three classes, with each class serving for a staggered three-year
term, which prevents stockholders from electing an entirely new board of directors at an annual meeting;
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advance notice procedures that stockholders must comply with in order to nominate candidates to
our board of directors and propose matters to be brought before an annual meeting of our stockholders may discourage or deter a
potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise
attempting to obtain control of our company; and
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our board of directors may, without stockholder approval, issue series of preferred stock, or rights
to acquire preferred stock, that could dilute the interest of, or impair the voting power of, holders of our common stock or could
also be used as a method of discouraging, delaying or preventing a change of control.
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If
securities or industry analysts do not publish research reports, or publish unfavorable research about our business, the price
and trading volume of our common stock could decline.
The trading market for
our common stock will depend in part on the research and reports that securities or industry analysts publish about us and our
business. We currently have limited research coverage by securities and industry analysts. In the event an analyst downgrades our
securities the price of our securities would likely decline. If analysts cease to cover us or fails to publish regular reports
on us, interest in our securities could decrease, which could cause the price of our common stock and other securities and their
trading volume to decline.
Our
board of directors has broad discretion to issue additional securities which might dilute the net tangible book value per share
of our common stock for existing stockholders.
We are entitled under
our certificate of incorporation to issue up to 300,000,000 shares of common stock and 7,000,000 “blank check” shares
of preferred stock. Shares of our blank check preferred stock provide our board of directors with broad authority to determine
voting, dividend, conversion, and other rights. As of September 30, 2017, we have issued and outstanding 15,146,027 shares of common
stock and we have 10,874,337 shares of common stock reserved for future grants under our equity compensation plans and for issuances
upon the exercise or conversion of currently outstanding options, warrants and convertible securities. As of September 30, 2017,
we had 1,000,000 shares of preferred stock issued and outstanding. Accordingly, we are entitled to issue up to 273,979,636 additional
shares of common stock and 6,000,000 additional shares of “blank check” preferred stock. Our board may generally issue
those common and preferred shares, or convertible securities to purchase those shares, without further approval by our shareholders.
Any preferred shares we may issue will have such rights, preferences, privileges and restrictions as may be designated from time-to-time
by our board, including preferential dividend rights, voting rights, conversion rights, redemption rights and liquidation provisions.
It is likely that we will be required to issue a large amount of additional securities to raise capital in order to further our
development and marketing plans. It is also likely that we will be required to issue a large amount of additional securities to
directors, officers, employees and consultants as compensatory grants in connection with their services, both in the form of stand-alone
grants or under our various stock plans. The issuance of additional securities may cause substantial dilution to our shareholders.
Risks Related to Government
Regulation and Approval of our Product Candidates.
The regulatory approval
processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and our products
may not receive regulatory approval.
The time required to obtain approval by the FDA
and comparable foreign authorities is inherently unpredictable but typically takes many years following the commencement of 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 drug
candidate’s clinical development and may vary among jurisdictions. We have not obtained regulatory approval for any product
candidate and it is possible that none of our existing product candidates or any product candidates we may seek to develop in the
future will ever obtain regulatory approval.
Our drug candidates could fail to receive regulatory approval for many
reasons, including the following:
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the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials;
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we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product
candidate is safe and effective for its proposed indication;
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the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign
regulatory authorities for approval;
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we may be unable to demonstrate that a product candidate?s clinical and other benefits outweigh its safety risks;
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the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies
or clinical trials;
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the data collected from clinical trials of our product candidates may not be sufficient to support the submission of a BLA,
NDA or other submission or to obtain regulatory approval in the United States or elsewhere;
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the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party
manufacturers with which we contract for clinical and commercial supplies; or
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the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a
manner rendering our clinical data insufficient for approval.
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We are currently undertaking
clinical trials for our lead products candidates NSI-189 and NSI-566. We cannot assure you that we will successfully
complete any clinical trials in connection with such INDs. Further, we cannot predict when we might first submit any
product license application (NDA or BLA) for FDA approval or whether any such product license application will be granted on a
timely basis, if at all. Any delay in obtaining, or failure to obtain, such approvals could have a material adverse
effect on the marketing of our products and our ability to generate product revenue.
Development of our
product candidates is subject to extensive government regulation.
Our research and development
efforts, as well as any future clinical trials, and the manufacturing and marketing of any products we may develop, will be subject
to, and restricted by, extensive regulation by governmental authorities in the U.S. and other countries. The process of obtaining
FDA and other necessary regulatory approvals is lengthy, expensive and uncertain. FDA and other legal and regulatory requirements
applicable to our proposed products could substantially delay or prevent us from initiating additional clinical trials. We may
fail to obtain the necessary approvals to commence clinical testing or to manufacture or market our potential products in reasonable
time frames, if at all. In addition, the U.S. Congress and other legislative bodies may enact regulatory reforms or restrictions
on the development of new therapies that could adversely affect the regulatory environment in which we operate or the development
of any products we may develop.
A substantial portion
of our research and development entails the use of stem cells obtained from human tissue. The U.S. federal and state governments
and other jurisdictions impose restrictions on the acquisition and use of human tissue, including those incorporated in federal
Good Tissue Practice, or “GTP,” regulations. These regulatory and other constraints could prevent us from obtaining
cells and other components of our products in the quantity or of the quality needed for their development or commercialization.
These restrictions change from time to time and may become more onerous. Additionally, we may not be able to identify or develop
reliable sources for the cells necessary for our potential products — that is, sources that follow all state and federal
laws and guidelines for cell procurement. Certain components used to manufacture our stem and progenitor cell product candidates
will need to be manufactured in compliance with the FDA’s GMP. Accordingly, we will need to enter into supply agreements
with companies that manufacture these components to GMP standards. There is no assurance that we will be able to enter into any
such agreements.
Noncompliance with applicable
regulatory requirements can subject us, our third party suppliers and manufacturers and our other collaborators to administrative
and judicial sanctions, such as, among other things, warning letters, fines and other monetary payments, recall or seizure of products,
criminal proceedings, suspension or withdrawal of regulatory approvals, interruption or cessation of clinical trials, total or
partial suspension of production or distribution, injunctions, limitations on or the elimination of claims we can make for our
products, refusal of the government to enter into supply contracts or fund research, or government delay in approving or refusal
to approve new drug applications.
We cannot predict if or when we will
be able to commercialize our products due to regulatory constraints.
Federal, state and local
governments and agencies in the U.S. (including the FDA) and governments in other countries have significant regulations in place
that govern many of our activities. We are, or may become, subject to various federal, state and local laws, regulations
and recommendations relating to safe working conditions, laboratory and manufacturing practices, the experimental use of animals
and the use and disposal of hazardous or potentially hazardous substances used in connection with its research and development
work. The preclinical testing and clinical trials of our proposed products are subject to extensive government regulation that
may prevent us from creating commercially viable products. In addition, our sale of any commercially viable product will be subject
to government regulation from several standpoints, including manufacturing, advertising, marketing, promoting, selling, labeling
and distributing. If, and to the extent that, we are unable to comply with these regulations, our ability to earn revenues,
if any, will be materially and negatively impacted.
If our clinical
trials fail to demonstrate that any of our product candidates are safe and effective for the treatment of particular diseases,
the FDA may require us to conduct additional clinical trials or may not grant us marketing approval for such product candidates
for those diseases.
We are not permitted to
market our product candidates in the United States until we receive approval of a BLA or NDA from the FDA. Before obtaining regulatory
approvals for the commercial sale of any product candidate for a target indication, we must demonstrate with evidence gathered
in preclinical and well-controlled clinical trials, and, with respect to approval in the United States, to the satisfaction of
the FDA and, with respect to approval in other countries, similar regulatory authorities in those countries, that the product candidate
is safe and effective for use for that target indication and that the manufacturing facilities, processes and controls used to
produce the product are compliant with applicable statutory and regulatory requirements. Our failure to adequately demonstrate
the safety and effectiveness of any of our product candidates for the treatment of particular diseases may delay or prevent our
receipt of the FDA’s approval and, ultimately, may prevent commercialization of our product candidates for those diseases.
The FDA has substantial discretion in deciding whether, based on the benefits and risks in a particular disease, any of our product
candidates should be granted approval for the treatment of that particular disease. Even if we believe that a clinical trial or
trials has demonstrated the safety and statistically significant efficacy of any of our product candidates for the treatment of
a disease, the results may not be satisfactory to the FDA. Preclinical and clinical data can be interpreted by the FDA and other
regulatory authorities in different ways, which could delay, limit or prevent regulatory approval. If regulatory delays are significant
or regulatory approval is limited or denied altogether, our financial results and the commercial prospects for those of our product
candidates involved will be harmed, and our prospects for profitability will be significantly impaired.
Satisfaction of these
and other regulatory requirements is costly, time consuming, uncertain, and subject to unanticipated delays. Despite our efforts,
our drug candidates may not:
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offer improvement over existing comparable products;
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be proven safe and effective in clinical trials; or
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meet applicable regulatory standards.
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In addition, in the course
of its review of a BLA or NDA or other regulatory application, the FDA or other regulatory authorities may conduct audits of the
practices and procedures of a company and its suppliers and contractors concerning manufacturing, clinical study conduct, non-clinical
studies and several other areas. If the FDA and/or other regulatory authorities conducts an audit relating to a BLA, NDA or other
regulatory application and finds a significant deficiency in any of these or other areas, the FDA or other regulatory authorities
could delay or not approve such BLA, NDA or other regulatory application. If regulatory delays are significant or regulatory approval
is limited or denied altogether, our financial results and the commercial prospects for those of our products or product candidates
involved will be harmed, and our prospects for profitability will be significantly impaired.
Both before and
after marketing approval, our product candidates are subject to extensive and rigorous ongoing regulatory requirements and continued
regulatory review, and if we fail to comply with these continuing requirements, we could be subject to a variety of sanctions.
Both before and after
the approval of our product candidates, we, our product candidates, our operations, our facilities, our suppliers, and our contract
manufacturers, contract research organizations, and contract testing laboratories are subject to extensive regulation by governmental
authorities in the United States and other countries, with regulations differing from country to country. In the United States,
the FDA regulates, among other things, the pre-clinical testing, clinical trials, manufacturing, safety, efficacy, potency, labeling,
packaging, adverse event reporting, storage, record keeping, quality systems, advertising, promotion, sale and distribution of
therapeutic products. These requirements include submissions of safety and other post-marketing information and reports, registration,
as well as continued compliance with cGMP, requirements and current good clinical practice, or cGCP, requirements for any clinical
trials that we conduct post-approval. Failure to comply with applicable requirements could result in, among other things, one or
more of the following actions: restrictions on the marketing of our products or their manufacturing processes, notices of violation,
untitled letters, warning letters, civil penalties, fines and other monetary penalties, unanticipated expenditures, delays in approval
or refusal to approve a product candidate, suspension or withdrawal of regulatory approvals, product, seizure or detention, voluntary
or mandatory product recalls and related publicity requirements, interruption of manufacturing or clinical trials, operating restrictions,
injunctions, import or export bans, and criminal prosecution. We or the FDA, or an institutional review board, may suspend or terminate
human clinical trials at any time on various grounds, including a finding that subjects are being exposed to an unacceptable health
risk.
The FDA’s policies may change and additional
government regulations may be enacted that could prevent, limit or delay regulatory approval of our drug candidates. If we are
slow or unable to adapt to changes in existing or new requirements or policies, or if we are not able to maintain regulatory compliance,
we may lose any marketing approval that we may have obtained, which would adversely affect our business, prospects and ability
to achieve or sustain profitability.
If side effects are identified during the
time our drug candidates are in development or after they are approved and on the market, we may choose to or be required to perform
lengthy additional clinical trials, discontinue development of the affected drug candidate, change the labeling of any such products,
or withdraw any such products from the market, any of which would hinder or preclude our ability to generate revenues.
Undesirable side effects caused by our drug candidates
could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label
or the delay or denial of regulatory approval by the FDA or other comparable foreign authorities. Drug-related side effects could
affect patient recruitment or the ability of enrolled patients to complete a trial or result in potential product liability claims.
Any of these occurrences may harm our business, financial condition and prospects significantly. Even if any of our drug candidates
receives marketing approval, as greater numbers of patients use a drug following its approval, an increase in the incidence of
side effects or the incidence of other post-approval problems that were not seen or anticipated during pre-approval clinical trials
could result in a number of potentially significant negative consequences, including:
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regulatory authorities may withdraw their approval of the product;
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regulatory authorities may require the addition of labeling statements, such as warnings or contradictions;
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we may be required to change the way the product is administered, conduct additional clinical trials
or change the labeling of the product;
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we could be sued and held liable for harm caused to patients; and
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our reputation may suffer.
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Any of these events could substantially increase
the costs and expenses of developing, commercializing and marketing any such drug candidates or could harm or prevent sales of
any approved products.
Even if our product candidates receive regulatory
approval in the United States, we may never receive approval or commercialize our products outside of the United States.
In order to market any products outside of the
United States, we must establish and comply with numerous and varying regulatory requirements of other countries regarding safety
and efficacy. Approval procedures vary among countries and can involve additional product testing and additional administrative
review periods. The time required to obtain approval in other countries might differ from that required to obtain FDA approval.
The regulatory approval process in other countries may include all of the risks detailed above regarding FDA approval in the United
States as well as other risks. Regulatory approval in one country does not ensure regulatory approval in another, but a failure
or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in others. Failure
to obtain regulatory approval in other countries or any delay or setback in obtaining such approval would impair our ability to
develop foreign markets for our drug candidates.
Our product candidates for which we intend
to seek approval as biologic products may face competition sooner than anticipated.
We expect our stem cell product candidates to be
regulated by the FDA as biologic products and we intend to seek approval for these products pursuant to the BLA pathway. The Biologics
Price Competition and Innovation Act of 2009, or BPCIA, created an abbreviated pathway for the approval of biosimilar and interchangeable
biologic products. The abbreviated regulatory pathway establishes legal authority for the FDA to review and approve biosimilar
biologics, including the possible designation of a biosimilar as “interchangeable” based on its similarity to an existing
brand product. Under the BPCIA, an application for a biosimilar product cannot be approved by the FDA until 12 years after the
original branded product was approved under a BLA. The law is complex and is still being interpreted and implemented by the FDA.
As a result, its ultimate impact, implementation, and meaning are subject to uncertainty. While it is uncertain when such processes
intended to implement BPCIA may be fully adopted by the FDA, any such processes could have a material adverse effect on the future
commercial prospects for our biologic products.
We believe that any of
our product candidates approved as a biologic product under a BLA should qualify for the 12-year period of exclusivity. However,
there is a risk that this exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider
our drug candidates to be reference products for competing products, potentially creating the opportunity for generic competition
sooner than anticipated. Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of our reference
products in a way that is similar to traditional generic substitution for non-biologic products is not yet clear, and will depend
on a number of marketplace and regulatory factors that are still developing.