ITEM
1. BUSINESS
Overview
We
are a biotechnology company focused on designing, developing and commercializing innovative therapies and proprietary medical
approaches to stimulate and to guide an anti-tumor immune response for the treatment of cancer. Our core platform technology,
ImmunoPulse®, is a drug-device therapeutic modality comprised of a proprietary intratumoral electroporation delivery device.
The ImmunoPulse® platform is designed to deliver plasmid DNA-encoded drugs directly into a solid tumor and promote an immunological
response against cancer. The ImmunoPulse® device can be adapted to treat different tumor types, and consists of an electrical
pulse generator, a reusable handle and disposable applicators. Our lead product candidate, ImmunoPulse® IL-12, uses our electroporation
device to deliver a plasmid DNA-encoded interleukin-12 (“IL-12”), called tavokinogene telseplasmid (“TAVO”),
with the aim of reversing the immunosuppressive microenvironment in the treated tumor. The activation of the appropriate inflammatory
response can drive a systemic anti-tumor response against untreated tumors in other parts of the body. In February 2017, we received
Fast Track designation from the U.S. Food and Drug Administration (“FDA”) for TAVO in metastatic melanoma, which could
qualify TAVO for expedited FDA review, a rolling Biologics License Application review and certain other benefits.
Our
current focus is to pursue our study of TAVO in combination with KEYTRUDA® (pembrolizumab) for melanoma patients who are definitive
anti-PD-1 non-responders. The trial is referred to as the PISCES/KEYNOTE-695. In May 2017, we entered into a clinical trial collaboration
and supply agreement with a subsidiary of Merck & Co., Inc. (“Merck”) in connection with the PISCES/KEYNOTE-695
study. Pursuant to the terms of the agreement, both companies will bear their own costs related to manufacturing and supply of
their product, as well as be responsible for their own internal costs. We will sponsor the study and be responsible for external
costs. The PISCES/KEYNOTE-695 study is currently enrolling patients and we plan to provide a topline preliminary data update at
The Society for Immunotherapy of Cancer (“SITC”) 2018. This study is a registrational-directed, Phase 2b open-label,
single-arm, multicenter study in the United States, Canada and Australia.
We
are also pursing development in triple negative breast cancer (“TNBC”). On May 8, 2018, we entered into a second clinical
trial collaboration and supply agreement with Merck with respect to a Phase 2 study of TAVO in combination with KEYTRUDA®
to evaluate the safety and efficacy of the combination in patients with inoperable locally advanced or metastatic TNBC, who have
previously failed at least one systemic chemotherapy or immunotherapy. This study is referred to as KEYNOTE-890. Pursuant to the
terms of the agreement, both companies will bear their own costs related to manufacturing and supply of their product, as well
as be responsible for their own internal costs. We will sponsor the study and be responsible for external costs. The KEYNOTE-890
study is opened for enrollment. The study is a Phase 2 open-label, single-arm, multicenter study in the United States and
Australia.
We
intend to continue to pursue other ongoing or potential new trials and studies related to TAVO, in various tumor types including
melanoma, TNBC and head and neck cancers. In addition, we are also developing our next-generation electroporation device and applicator,
including advancements toward prototypes, pursuing discovery research to identify other product candidates that, in addition to
IL-12, can be encoded into propriety plasmid-DNA, delivered intratumorally using electroporation. Using our next-generation technology,
our goal is to reverse the immunosuppressive mechanisms of a tumor, as well as to expand our ImmunoPulse® pipeline. We believe
that the flexibility of our propriety plasmid-DNA technology allows us to deliver other immunologically relevant molecules into
the tumor microenvironment in addition to the delivery of plasmid-DNA encoding for IL-12. These other immunologically relevant
molecules may compliment IL-12’s activity by limiting or enhancing key pathways associated with tumor immune subversion.
Cancer
Immunotherapy Treatments: Background
Many
traditional modalities for treating cancer have limited clinical efficacy and are frequently associated with significant negative
side effects. Immunotherapy, a relatively new therapeutic modality that has received significant attention in recent years, focuses
on modulating the immune system to treat cancer rather than directly killing the cancer cells. Systemic delivery of immune-modulating
proteins, such as interleukin-2 and interleukin-10, or IL-2, and IL-10, has shown early indications of efficacy, but with significant
mechanism-based toxicity.
Recent
attention has also focused on the development of monoclonal antibody drugs, which target critical “immune checkpoint”
proteins and augment anti-tumor immunity. Therapies using monoclonal antibodies, such as anti-CTLA-4 (cytotoxic T-lymphocyte-associated
protein-4), anti-PD-1 (program cell-death-1) and anti-PD-L1 (programmed death-ligand-1), are being developed for the treatment
of several cancers and have been approved for the treatment of multiple sold tumor cancers. Although these new immuno-oncology
agents have shown clinical benefit for patients with late-stage cancer across multiple tumor types, only a small subset of the
overall patient population responds to these therapies. Certain tumors are able to evade the immune system. We believe that when
tumors do not have any immune cells inside (immune desert) or surrounding the tumor (immune excluded), immune checkpoint therapies
are less effective or ineffective. These tumors are sometimes referred to as “cold” tumors.
We
believe that if we can convert an inactive, or “cold,” tumor with a low frequency of tumor infiltrating lymphocytes,
or TILs, that limit the anti-tumor response and remove the interferon signature, into an active, or “hot,” tumor that
can activate the anti-PD-1 or anti-PD-L1 pathway, then we can potentially increase the number of patients who respond to these
therapies. We believe our TAVO platform addresses this objective, as it has the potential to reshape the tumor microenvironment
in patients with an immunologically cold tumor into a highly-inflamed tumor with a fully engaged PD-1 / PD-L1 axis. The immunological
components that enable this conversion relates to the intratumoral delivery of TAVO, which increases the density of TILs, and
in the presence of an anti-PD-1 antibody, adaptive resistance can be neutralized allowing for the maximal T cell cytotoxicity.
There
is a significant unmet medical need for patients who may not respond well to these therapies on their own. In particular, for
patients who have “cold” tumors and would be unlikely to respond to an immune checkpoint therapy alone, our focus
is to develop a therapeutic that has the ability to directly modulate the microenvironment of the tumor by stimulating a local
immune reaction through the intratumoral delivery of IL-12 or other immune-modulating molecules. This immune cascade allows anti-tumor
immune cells to infiltrate the lesion, turning the tumor “hot” and ultimately generates a productive systemic immune
response. In doing so, we believe intratumoral delivery of immune-modulating molecules, such as IL-12 provides a strong biological
rationale for treatment in combination with immune checkpoint inhibitors, such as anti-PD-1 or anti-CTLA-4.
CLINICAL
PROGRAMS
Our
Lead Product Candidate: TAVO
Our
lead product candidate, TAVO, is a drug-device combination. The drug consists of a plasmid construct called tavokinogene telseplasmid,
or TAVO, with plasmid DNA-encoded, IL-12, and is delivered into a tumor using our proprietary electroporation device. Our clinical
data indicates that the in vivo gene transfer of plasmid DNA-encoded IL-12 using electroporation is well-tolerated and anti-tumor
activity has been observed after a single cycle of treatment. Importantly, regression in distant, non-injected/non-electroporated
lesions has also been observed (“abscopal effect”) in different solid cancers.
Our
Clinical Pipeline
MELANOMA
Melanoma
is a deadly form of skin cancer with rapidly rising incidences both in the U.S. and internationally. The National Cancer Institute
(“NCI”) Surveillance, Epidemiology and End Results (“SEER”) Program estimates that 87,110 new melanoma
cases were diagnosed in 2017, representing 5.2% of all new cancer cases in the U.S. Overall, the five-year survival rate for melanoma,
regardless of disease stage, is high (91.7%); however, according to SEER 2017, for patients who present with metastatic disease
and receive systemic treatment, the five-year survival rate is considerably lower at less than 20%. Despite recent advances in
therapy, advanced metastatic melanoma continues to present a major and increasing burden with significant morbidity and mortality.
PISCES/KEYNOTE-695
Study (OMS-103) (ongoing)
The
PISCES/KEYNOTE-695 study is a Phase 2b, open-label, single-arm, multi-center study of TAVO in combination with an intravenous
anti-PD-1 antibody, Merck’s KEYTRUDA®, in patients with histological diagnosis of melanoma with progressive locally
advanced or metastatic disease defined as stage III/IV.
PISCES/KEYNOTE-695
study enrolled its first patient in December 2017 and is actively enrolling patients in the United States, Canada and Australia
across 19 sites.
PISCES/KEYNOTE-695
enrollment criteria with respect to anti-PD-1 checkpoint failure is highly restrictive. In order to be considered an anti-PD-1
checkpoint failure, all patients must have Stage III or Stage IV metastatic melanoma, be refractory to anti-PD-1 monoclonal antibodies,
namely KEYTRUDA® (pembrolizumab) or OPDIVO® (nivolumab), as either monotherapy or in combination with other approved checkpoint
inhibitors or targeted therapies according to their approved label, and must have relapsed as documented disease progression within
24 weeks of the last dose of anti-PD-1 monoclonal antibodies according to RECIST v1.1, measured by radiologic assessment, with
confirmation of progression by second assessment. Patients can have with no intervening therapies between failure of anti-PD-1
therapy and the TAVO / KEYTRUDA® combination treatment. Patients that are BRAF eligible must receive and progress following
BRAF treatment.
The primary endpoint of
the study, by blinded independent central review, is to assess the best overall response rate (BORR) during 24 weeks of TAVO in
combination with KEYTRUDA® in patients with unresectable or metastatic melanoma.
PISCES/KEYNOTE-695
is a registration enabled clinical trial. In order to be eligible for accelerated approval, the TAVO / KEYTRUDA® combination
must treat a serious condition and provide a meaningful advantage over available therapies. In early 2017, and prior to the commencement
of the study, the Company reviewed the patient inclusion criteria and other study requirements with FDA so that KEYNOTE-695 could
be submitted to FDA for accelerated approval. In light of this review, we strictly defined the patient population to be enrolled
in PISCES/KEYNOTE-695 to include only those patients who have definitively failed prior anti-PD-1 checkpoint therapy, as determined
by the above-described rigor, and who have exhausted all available treatment options.
We
plan to provide a topline preliminary data update at the Society for Immunotherapy of Cancer (“SITC”) 2018. Based
on the preliminary tumor response data and safety profile observed to date, we have eliminated the formal interim Simon stage
1 analysis. The distinguishing feature of the Simon 2-stage design is sample size minimization. Phase 2 clinical trials using
this design enroll a relatively small number of patients to allow a preliminary assessment of a new intervention before conducting
a larger trial. Since preliminary tumor responses and correlative immunological data have been observed, we believe that eliminating
the formal analysis and expanding the sample size is warranted. We believe that this may also accelerate the completion of the
study and avoid any unwarranted interruption in continuous enrollment which may occur. We are planning to increase the number
of patients to be enrolled from 48 to approximately 80 patients. We believe this will provide for a more robust data set and may
further enhance our ability to seek an accelerated approval, should the final data results support doing so. We continue planning
to complete enrollment of all patients by mid-2019.
Lastly, based on the
outcome of the study and feedback from FDA, we plan to file for accelerated approval with the FDA for this patient population
by the end of 2019 or early 2020.
OMS-102
(completed)
OMS-102
was an open-label, multi-center, Phase 2 trial of TAVO and KEYTRUDA® (pembrolizumab) in patients with advanced, metastatic
melanoma. In August 2015, we enrolled the first patient in our Phase 2 investigator-sponsored clinical trial led by the clinicians
at the University of California, San Francisco, or UCSF. Huntsman Cancer Institute in Utah was the second clinical site. The primary
endpoint of this study was to assess the anti-tumor efficacy of the combination of TAVO and KEYTRUDA® in patients with stage
III/IV metastatic melanoma whose tumors are characterized by low frequency of CD8
+
/PD-1
+
/CTLA-4
+
TILs (tumor infiltrating lymphocytes). The primary endpoint of the study was best overall response rate by RECIST of the combination
regimen. Recent data suggests that patients whose tumors are lacking TILs or CD8
+
T-cells at the tumor margin or generally
have a low frequency of CD8
+
/PD-L1
+
/CTLA-4
+
TILs are unlikely to respond to anti-PD-1 therapies
such as KEYTRUDA®, while tumors with a frequency of CTLA-4
+
/PD-L1
+
/CD8
+
>20% in the tumor
are likely to have a clinical benefit. Therapies, such as TAVO, that promote TIL generation and PD-L1 positivity play an important
role in augmenting the clinical efficacy of the anti-PD1/PD-L1 agents.
Initial
data were presented in February 2017 at ASCO-SITC and the trial stopped enrolling patients in September 2017, allowing the Company
to progress on PICSES/KEYNOTE-695. The final data was selected for prominence at SITC 2017 and was presented during the oral poster
session. The overall response rate in the 22-patient population was 43% by RECIST v1.1. at week 24 (best overall response rate
was 50% by clinical assessment), with one Grade-3 adverse event of cellulitis that resolved with antibiotics. Based on these results,
we believe the combination of TAVO and KEYTRUDA® demonstrated efficacy in this low TIL metastatic melanoma patient population
and was well-tolerated. Further, long-term follow up has shown responses with significant durability, with all patients who experienced
a response remaining in responding status. To date only one patient has required additional surgery to maintain remission.
OMS-100
(completed)
OMS-100
was an open-label Phase 2 trial of TAVO monotherapy in patients with metastatic melanoma. On December 5, 2014, we released top-line
six-month data from a Phase 2 repeat dose trial of TAVO in patients with stage III/IV metastatic melanoma. We will present final
data at the Melanoma Bridge Conference in 2018. This study is now locked with the data collected at 6 clinical centers. Thirty
(30) patients with stage III/IV melanoma received up to four cycles of TAVO delivered by electroporation on days one, five and
eight of each 12-week cycle. Of the 28 patients in the study who were evaluable, an objective response rate of 35.7% (10/28 patients)
was observed. Five patients (17.9%) had a CR, 5 patients (17.9%) had a PR, 12 patients (42.9%) had SD. Of the distant untreated
and assessed lesions that decreased in longest dimension by ≥ 30%, 17.4% (20/115) were assessed. Of the 26 patients with ≥
1 assessed lesion, 12 patients (46.2%) had ≥ 1 assessed distant lesion with major regression (≥ 30%). Two patients were
not evaluated due to not having evaluable distant untreated lesions. Other clinical endpoints included objective response rate,
local and distant lesion regression, duration of response, overall survival and safety. The results of this study demonstrated
that multiple treatment cycles of TAVO were well-tolerated, with no treatment-limiting toxicities. The majority of adverse events
were localized to the treatment site and were Grade-1 or -2 in severity.
In
order to continue to acquire clinical and immune correlational data on melanoma patients treated with TAVO, the protocol of the
OMS-I100 study was amended in February 2014 to enroll up to an additional 30 patients. Enrollment in OMS-I100 Addendum was completed
in March 2016. The study is now completed and the Company plans to present final data at the Melanoma Bridge Conference being
held on November 29 – December 1, 2018. These data were selected for an oral presentation and will include new data demonstrating
that local treatment with TAVO alone led to whole-body immune responses associated with regression of untreated lesions in almost
half of the 50 patients treated on the study.
Following
this trial, a retrospective analysis of the patients who went on to receive an anti-PD-1/PD-L1 therapy was conducted. Results
from this retrospective analysis suggested that TAVO primes and enhances response rates to PD-1/PD-L1 blockade. Specifically,
of the 29 patients who completed TAVO, 14 subsequently received an anti-PD-1/PD-L1 treatment. Overall, five of these 14 patients
(36%) experienced a complete response and four patients experienced a partial response (29%), for an overall response rate of
65% (75% without intervening therapies). Two patients experienced stable disease (14%) and three patients experienced progressive
disease (21%). We believe this retrospective sequential data could suggest combinatorial potential of an immune-priming effect
with TAVO prior to anti-PD-1/PD-L1 therapy. Data from this retrospective analysis formed the clinical rationale for conducting
OMS-I102.
OMS-104
(planned)
The
Company plans to initiate a Phase 2 neoadjuvant clinical trial of TAVO in combination with an anti-PD-1 in surgically resectable
melanoma in 2019.
TRIPLE
NEGATIVE BREAST CANCER (TNBC)
Breast
cancer is the most common cancer diagnosed among U.S. women and is the second leading cause of cancer-related deaths. Worldwide,
approximately 170,000 new cases of TNBC are diagnosed each year, with TNBC representing one of the four main molecular subtypes
of invasive breast cancer, accounting for approximately 10 -20% of all breast cancer.
TNBC
frequently affects younger women (less than 40 years old) and is characterized by higher relapse rates than estrogen receptor
positive breast cancers. TNBC is also associated with an increased risk of recurrence, both locally and in distant sites including
the lungs and brain. Advanced TNBC remains a significant area of unmet medical need and there is no established standard-of-care.
Chemotherapy is the current standard-of-care treatment in the adjuvant, neoadjuvant, and metastatic settings. Due to the loss
of the tumor cell receptors, patients with TNBC do not benefit from hormonal therapy or treatments targeting the oncogenic HER2
pathway. The standard of care for patients with recurrent and/or metastatic disease is cytotoxic chemotherapy, leading to a median
survival of approximately 13 months from the time of recurrence or diagnosis of distant metastases. Importantly, for patients
with metastatic TNBC, the traditional chemotherapeutic treatment approach has undergone limited advance in the last decades, and
no regimen is specifically indicated in this unique patient population.
OMS-141/KEYNOTE-890
(ongoing)
OMS-141/KEYNOTE-890
is a Phase 2, open-label, single-arm, multi-center study in the United States and Australia of TAVO in combination with an intravenous
anti-PD-1 antibody, Merck’s KEYTRUDA®, in patients with histologically confirmed diagnosis of inoperable locally advanced
or metastatic TNBC who have received at least one prior line of approved systemic chemotherapy or immunotherapy.
In
collaboration with Merck, OMS-141/KEYNOTE-890 is opened for enrollment. Based on the outcome of the study and feedback from FDA,
we may choose to expand the study and seek accelerated approval with the FDA for this patient population.
OMS-140
(ongoing)
OMS-140
is a Phase 2, monotherapy biomarker study in patients with advanced or metastatic TNBC. The study is being conducted at Stanford
University and is designed to assess whether TAVO increases TNBC tumor immunogenicity by driving a pro-inflammatory cascade that
leads to increases in cytotoxic TILs. The presence and number of TILs is thought to be a key requirement for promoting the anti-tumor
activity of anti-PD-1. By driving cytotoxic immune cells into the tumor, TAVO could be used in combination with checkpoint blockade
therapies, which have reported some, but limited, activity in TNBC.
The
primary objective of the study is to evaluate the potential of TAVO to promote a pro-inflammatory molecular and histological signature,
and the secondary objectives include the evaluation of safety and tolerability; evaluation of local ablation effect (% of necrosis)
and description of other evidence of anti-tumor activity. The study has been subsequently amended to capture the post TAVO treatments
and outcomes.
Preliminary
data was presented at the American Association of Cancer Research (“AACR”) annual meeting 2018 relating to the first
five patients enrolled in the study. Unrelated to the protocol, two of these five patients were subsequently treated with single
agent Opdivo® (nivolumab) as their immediate next therapy. Both of these patients, who were heavily pretreated metastatic
TNBC patients with chemotherapy refractory disease, were empirically observed to have experienced robust objective responses in
both TAVO treated and untreated lesions. Enrollment in this trial (n=10) is now complete and the Company plans to provide a preliminary
immunological data update by the end of this calendar year.
These
clinical observations prompted the Company to conduct OMS-I141/KEYNOTE-890.
Other
Trials and Studies
In
addition to the trials and studies described above, we have also pursued and closed Phase 2 clinical trials in patients with Merkel
cell carcinoma, head and neck cancer and cutaneous T-cell lymphoma, although we do not have any active clinical programs related
to these indicators at this time.
Our
ImmunoPulse® Platform
The
effectiveness of many drugs and DNA-based therapeutics is dependent upon their crossing the cell membrane. In the 1970s, it was
discovered that the brief application of high-intensity, pulsed electric fields to the cell resulted in a temporary and reversible
increase in the permeability of the cell membrane, a mechanism known as “electroporation.”
The
transient, reversible nature of the electrical permeabilization of cell membranes and the resulting increase in intracellular
delivery of therapeutic agents is the underlying basis of our ImmunoPulse® therapeutic approach. Our electroporation delivery
system consists of an electrical generator, a reusable applicator handle and disposable tips. While the extent of membrane permeabilization
depends on various electrical, physical, chemical, and biological parameters, research with electroporation delivery has demonstrated
an improvement in cellular uptake of chemical molecules such as chemotherapeutic agents (e.g., bleomycin and cisplatin), and nucleic
acids (e.g., DNA and RNA).
Multiple
viral and non-viral delivery modalities have been developed to deliver nucleic acids into cells, however, many of these methods
have faced challenges related to the safe and efficient expression of the DNA-encoded biologic into the intended target cells.
For example, viral mediated delivery technologies appear to be efficient at transfecting cells, but they have suffered from significant
safety issues related to the immunogenicity of the viral vector, shedding of the virus, and potential integration of the viral
DNA into the host genome. Other non-viral delivery methods have employed the use of nanotechnology to coat the DNA with fat molecules,
called lipids. Although these lipid nanoparticle technologies have been used extensively in the clinic to deliver DNA-encoded
biologic agents, few particles have been developed with the ability to specifically target cancer cells; instead, many of these
particles naturally target the liver, which can lead to potential liver toxicities.
Like
viral vectors and lipid nanoparticle technologies, electroporation has been used extensively in the clinic to deliver multiple
therapeutic agents, including DNA. However, unlike these other technologies, electroporation has not seen the same safety concerns.
In fact, the use of electroporation to deliver bleomycin intratumorally has been approved for use in Europe for cancers, such
as basal cell carcinoma, and has been accepted across many European countries, including the United Kingdom.
Our
ImmunoPulse® platform employs an electroporation system designed to create favorable conditions to deliver plasmid DNA encoding
immunotherapeutic cytokines directly into cells of the tumor microenvironment. The cytokine-encoding plasmid is first injected
into the tumor. A needle-electrode array then delivers the electrical pulses produced in the pulse generator.
Our
lead product candidate, TAVO, consists of a plasmid construct encoding the proinflammatory cytokine IL-12 that is injected into
the tumor and delivered into the tumor cells through in vivo electroporation using our ImmunoPulse® technology. We are also
researching other DNA-encoded, immunologically-active molecules, with an aim of developing additional immunotherapeutic drugs
that, when delivered through electroporation using our ImmunoPulse® platform, may be capable of breaking the immune system’s
tolerance to cancer.
Commercialization
Strategy
Our
primary focus is to continue our clinical development strategy for TAVO, including our planned and ongoing clinical trials discussed
under “Clinical Programs” above and potentially other trials we may pursue in the future.
As
a part of our commercialization strategy, we also regularly investigate and evaluate potential collaboration opportunities, to
identify rational combinations with existing and emerging monoclonal antibody therapies and other drugs. For instance, we may
seek to collaborate with pharmaceutical or biotechnology companies to provide us with access to complementary technologies and/or
greater resources. In addition, we may seek to expand the applications of our technologies through strategic collaborations or
other opportunities, such as in-licensing or strategic acquisitions, and we may seek to out-license our intellectual property
to other companies to leverage our technologies for applications that we may not choose to internally and independently develop.
Manufacturing
and Supply
Currently,
we assemble and store certain components of our electroporation system, which is our proprietary delivery mechanism for our TAVO
product candidate, and we utilize the services of qualified contract manufacturers to make the remaining components of these systems
and for the manufacture, testing, packaging and storage of our plasmid product candidate for clinical trials or other studies.
The manufacture of our systems and product supplies requires significant expertise and capital investment, including the use of
advanced manufacturing techniques and process controls. We do not own and have no plans to build our own clinical or commercial
Good Manufacturing Practices (“GMP”) manufacturing capabilities for device or drug substance or product. We expect
to increase our reliance on third-party manufacturers if and when we commercialize any of our product candidates and systems.
We
rely upon a small number of suppliers and manufacturers for our clinical activities. For manufacturing and distributing we use
Cryosite, Sherpa, Richter Helm, VGXI, Baxter Oncology GmbH, SGS, Minnetronix and EG Medacys, which collectively account for approximately
90% of clinical materials and electroporation systems support and materials. We believe there are alternate sources of raw material
supply and finished goods manufacturing to satisfy our requirements, although transitioning to other vendors, if necessary, could
result in significant delay or material additional costs. In addition, for combination trials, we typically rely exclusively on
one supplier of the non-company-owned product used in the trial, such as our reliance upon Merck for the supply of KEYTRUDA®
in the PISCES/KEYNOTE-695 and OMS-141/KEYNOTE-890 studies.
We
are ISO 134852016 certified and comply to all appropriate standards and authorities for the assembly, manufacturing and activities
we conduct, and we have established an audited quality management system for these activities. In addition, all contract manufacturers
that we use must comply with various requirements enforced by the FDA through its facilities inspection programs. See “Regulation”
below for more information.
Competition
The
biotechnology industry is intensely competitive. This competitive environment stimulates an ongoing and extensive search for technological
innovation and necessitates effective and targeted marketing strategies to communicate the effectiveness, safety and value of
products to healthcare professionals in private practice and group practices and payors in managed care organizations, group purchasing
organizations, and Medicare and Medicaid services.
We
face competition from a number of sources, including large pharmaceutical companies, biotechnology companies, academic institutions,
government agencies and private and public research institutions. We compete against all other developers of cancer treatments,
including other immunotherapy treatments as well as other types of treatments for the cancer indications on which we are focused.
In particular, a number of companies, some of which are large, well-established pharmaceutical companies, have development strategies
similar to our current focus. These companies include, among others, Bristol Myers-Squibb, Iovance Therapeutics, Syndax, Dynavax
Technologies, Checkmate and Idera Pharmaceuticals. In addition, we also compete with other clinical-stage biotechnology companies
for funding and support from healthcare and other investors and potential collaboration relationships with larger pharmaceutical
or other companies, as well as for personnel with expertise in our industry. We are smaller and less well-funded than many of
our competitors, and we have a shorter and less proven operating history and a less recognizable and established brand name than
many of our competitors. In addition, some of our competitors have commercially available products, which provide them with operating
revenue and other competitive advantages.
Our
competitors may obtain regulatory approval of their product candidates more rapidly than we can or may obtain more robust patent
protection or other intellectual property rights to protect their product candidates and technologies, which could limit or prevent
us from developing or commercializing our product candidates. If we are able to obtain regulatory approval of one or more of our
product candidates, we will face competition from approved products or products under development by larger companies that may
address our targeted indications. If we directly compete with these very large entities for the same markets and/or customers,
their greater resources, brand recognition, sales and marketing experience and financial strength could prevent us from capturing
a share of these markets or customers. Our competitors may also develop products that are more effective, more useful, better
tolerated, subject to fewer or less severe side effects, more widely prescribed, less costly or more widely accepted for other
reasons than any of our products that obtain regulatory approvals, and our competitors may also be more successful than us in
manufacturing, distributing and otherwise marketing their products.
We
expect our product candidates, if approved and commercialized, to compete on the basis of, among other things, product efficacy
and safety, time to market, price, coverage and reimbursement by third-party payors, extent of adverse side effects and convenience
of treatment procedures. We may not be able to effectively compete in any of these areas. Presently, we compete with other biotechnology
companies for funding and support on the basis of our technology platforms and the potential value of our product candidates based
on the factors described above.
Intellectual
Property
We
believe our success and ability to compete depends in large part on our ability to protect our proprietary rights and technologies,
including obtaining and maintaining patent, trademark and trade secret protection of our product candidates and their respective
components and underlying technologies, including devices, formulations, manufacturing methods and methods of treatment, and appropriately
safeguarding unpatented proprietary rights, including trade secrets and know-how. As of October 2018, we owned 13 issued
patents (7 U.S. and 6 foreign) and 42 pending patent applications (11 U.S. and 31 foreign). We are currently
prosecuting pending patent applications in various jurisdictions. In addition, we have licensed intellectual property rights that
allow us to use certain electroporation technology to deliver DNA-based cytokines as an immunotherapy, as well as catheter-based
delivery devices. From these in-licensed portfolios, we have access to 50 issued U.S. and foreign issued patents (3 from USF
and 47 from Inovio) and 24 U.S. and foreign pending patent applications (24 from Inovio). We expect to continue to file additional
patent applications, if and when appropriate, as our research and development efforts continue. The majority of the patents in
our portfolio, including owned and in-licensed patents and fundamental patents directed toward our proprietary technology, expire
between 2019 and 2038. We have previously obtained patent protection through an asset purchase agreement with
Inovio covering our original clinical electroporation device. The primary patents providing protection of this original
device have expired or will expire in 2019. However, the company has filed and will continue to file patent applications this
year, on its next generation electroporation devices and applicator handles.
In
addition, we have entered into a cross-license agreement for certain electroporation technology with Inovio, including patent
protection for some of our clinical electroporation devices (some of which, as noted above, have recently
expired or will soon expire). Under the terms of the agreement, Inovio has granted us a non-exclusive, worldwide license
under certain of its electroporation patents, and in exchange, we have granted to Inovio an exclusive license to certain of our
purchased technology in a limited field of use.
Regulation
Commercialization
Approval for our Product Candidates
Biotechnology
companies are subject to extensive, complex, costly and evolving government regulation relating to the ability to market and sell
any therapeutic or medical device. In the United States, these regulations are principally enforced by the FDA and state government
agencies. Outside the United States, these regulations are typically administered by various health authorities comparable to
the FDA in countries where products or product candidates are researched, tested, manufactured and/or marketed.
United
States
General
In
the United States, the federal Food, Drug and Cosmetic Act, or FDCA, other state statutes and regulations, many of which are administered
and enforced by the FDA, govern or influence, among other things, the research, development, testing, manufacture, storage, record-keeping,
approval, labeling, promotion, marketing, distribution, post-approval monitoring and reporting, sampling, import and export of
product candidates such as ours. Under these regulations, we and our contract manufacturers may be subject to periodic inspection
of our facilities, quality control and other procedures, and operations and/or the testing of our product candidates during and
after the approval process for a product candidate, to confirm compliance with all applicable regulations, including current good
manufacturing practices and other applicable requirements.
Possible
penalties or other consequences for failure to comply with these regulatory requirements include, among others, observations,
notices, citations and/or warning letters that could force us to modify our clinical programs or other activities; clinical holds
on our ongoing clinical programs; adverse publicity from the FDA or others; the FDA’s suspension of its review of pending
applications; fines; product recalls or seizures; total or partial suspension of production and/or distribution; labeling changes;
withdrawal of previously granted product approvals; enforcement actions; injunctions and civil or criminal prosecution. Any such
sanctions, if imposed, could have a material adverse effect on our business, operating results and financial condition.
Approval
Process
Before
any new drug, device or dosage form, including a new use of a previously approved drug or biologic, can be marketed in the United
States, FDA approval is required. The process required by the FDA before a product may be marketed in the United States generally
involves, among other things:
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completion
of non-clinical testing;
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completion
of chemistry, manufacturing, and control testing, commonly known as CMC;
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submission
to the FDA of an investigational new drug application (IND) for human clinical testing,
which must be accepted and effective before human clinical trials may begin in the United
States;
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performance
of adequate human clinical trials in accordance with good clinical practices to establish
the safety and efficacy of the proposed product for each intended use;
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for
a stand-alone medical device, submission to the FDA of a premarket approval application(PMA)
or 510(k) premarket notification, which the FDA must review and approve; and
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for
a therapeutic, submission to the FDA of a new drug application(NDA), or biologic license
application (BLA), which the FDA must review and approve.
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The
pre-clinical and clinical testing and approval process can take many years and requires substantial company time, effort and financial
resources. The receipt and timing of approval, if any, is uncertain. The results of pre-clinical tests, together with certain
manufacturing information, analytical data and a proposed clinical trial protocol and other information, are submitted as part
of an IND to the FDA. Once an IND is in effect, the protocol for each clinical trial to be conducted under the IND must be submitted
to the FDA, which may or may not allow the trial to proceed. A separate submission to an existing IND must also be made for each
successive clinical trial conducted during product development.
Clinical
trials involve the administration of the investigational new drugs or biologics to human subjects under the supervision of qualified
investigators in accordance with good clinical practice requirements. For purposes of an NDA or BLA submission and approval, human
clinical trials are typically conducted in the following sequential phases, which may overlap or be combined:
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Phase
1
: The product candidate is initially introduced to healthy human subjects or patients
and tested for safety, dose tolerance, absorption, metabolism, distribution and excretion
and, if possible, to gain an early indication of its safety, tolerability and effectiveness.
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Phase
2
: The product candidate is administered to a limited patient population to identify
possible adverse effects and safety risks, to preliminarily evaluate the efficacy of
the product for specific targeted indications, and to determine dose tolerance and optimal
dosage. Multiple Phase 2 clinical trials may be conducted.
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Phase
3
: The product candidate is administered in an expanded patient population at multiple,
geographically-dispersed clinical trial sites, to obtain additional evidence of clinical
efficacy and safety and to establish the overall risk-benefit relationship of the product
candidate.
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Phase
4
: In some cases, the FDA may condition approval of an NDA or BLA for a product candidate
on the sponsor’s agreement to conduct additional post-approval clinical trials
to further assess the safety and efficacy of the drug or biologic.
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The
results of product development, pre-clinical studies and clinical trials are submitted to the FDA as part of an NDA or BLA requesting
approval to market the product. NDAs or BLAs must also contain extensive information relating to the product’s pharmacology,
chemistry, manufacture, controls, and proposed labeling, among other things.
Once
the NDA or BLA submission has been accepted, the FDA begins an in-depth substantive review. Pursuant to the FDA’s performance
goals, NDA and BLA standard reviews are to be completed within 10 months, subject to extensions by the FDA. Before approving an
NDA or BLA, the FDA often inspects the facility or facilities where the product is manufactured and will not approve an application
unless it determines that the manufacturing processes and facilities are in compliance with good manufacturing practices. Additionally,
the FDA will typically inspect one or more clinical sites to assure compliance with good clinical practices before approving an
NDA or BLA. If the FDA determines that an NDA or BLA is not approvable, then the FDA may outline the deficiencies and often will
request that additional information be provided or additional clinical trials be completed. Notwithstanding the submission of
any requested additional testing or information, the FDA ultimately may decide that the application does not satisfy the regulatory
criteria for approval.
Further,
even if regulatory approval of a product candidate is obtained, such approval would specify the indicated uses for which the product
may be marketed. Additionally, we would be subject to pervasive and continuing regulation by the FDA with respect to any approved
product, including requirements related to, among other things, drug or device listing, record-keeping, periodic reporting, product
sampling and distribution, manufacturing practices, labeling, advertising, promotion, and reporting of adverse events associated
with any approved products. Moreover, we could be required to conduct post-approval studies, such as Phase 4 clinical trials,
or surveillance programs to monitor the safety of any approved products. FDA has the authority to stop or limit further marketing
of a product or impose more stringent labeling restrictions based on the results of these post-approval programs or in the event
of any unexpected or serious health or safety concern regarding any approved product.
Non-U.S.
Regulation
If
we pursue research and/or commercialization activities for our product candidates outside the United States, we would need to
obtain necessary approvals from the regulatory authorities comparable to the FDA in applicable jurisdictions before we could commence
clinical trials or marketing of our product candidates in these jurisdictions. In addition, we would become subject to a variety
of foreign regulations regarding safety and efficacy of our product candidates and governing, among other things, clinical trials,
commercial activities, manufacture and distribution of our product candidates. The requirements to obtain product approvals vary
widely from country to country, and the FDA’s approval requirements, review procedures and timelines may not be the same
as or even similar to the requirements or a comparable foreign regulator. As a result, even if we obtain regulatory approval for
a product candidate in one country, we may be required to undertake additional clinical trials or studies, submit additional information,
wait for longer review periods or make other efforts in order to obtain regulatory approvals in other desirable geographic markets.
Healthcare
Laws and Regulations
The
healthcare industry is heavily regulated, constantly evolving and subject to significant change and fluctuation. The U.S. federal
and state healthcare laws and regulations that currently impact our business include, among others:
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the
laws and regulations administered and enforced by the FDA, including the FDCA, and other
federal statutes and regulations, discussed above;
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the
federal Patient Protection and Affordable Care Act as amended by the Health Care and
Education Reconciliation Act, referred to collectively as the Affordable Care Act, which,
in general and among other things, expands the government’s investigative and enforcement
authority, including requiring pharmaceutical companies to record and disclose to government
agencies any transfers of value to doctors and teaching hospitals, and increases the
penalties for fraud and abuse, including amendments to the federal False Claims Act and
the Anti-Kickback Statute to make it easier to bring suits under these statutes;
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the
federal Anti-Kickback Statute, which generally prohibits, among other things, soliciting,
receiving or providing remuneration to induce the referral of an individual for an item
or service or the purchasing or ordering of an item or service for which payment may
be made under federal healthcare programs, such as the Medicare and Medicaid programs;
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the
federal false claims laws, which generally prohibit, among other things, knowingly presenting
or causing to be presented claims for payment from Medicare, Medicaid or other third-party
payors that are false or fraudulent;
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the
federal Health Insurance Portability and Accountability Act of 1986, or HIPAA, as amended
by the federal Health Information Technology for Economic and Clinical Health Act, or
HITECH, which, in general and among other things, establish comprehensive federal standards
with respect to the privacy, security and transmission of individually identifiable health
information and impose requirements for the use of standardized electronic transactions
with respect to transmission of such information;
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analogous
state and foreign laws and regulations, such as anti-kickback and false claims laws that
may apply to items or services reimbursed by any third-party payor, including commercial
insurers, and state laws governing the privacy and security of health information in
certain circumstances, many of which differ from each other in significant ways and may
not be preempted by applicable federal laws, thus complicating compliance efforts.
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Additionally,
the healthcare compliance environment is continuously changing, with proposed revisions to or replacement of the Affordable Care
Act at the federal level and with some states mandating implementation of compliance programs, compliance with industry ethics
codes, spending limits and reporting to state governments of gifts, compensation and other remuneration to physicians. Further,
to the extent we continue to pursue operations in foreign countries, such as our clinical activities in Australia, or in Canada,
or if we seek to sell any product that obtains regulatory approval in a foreign country, we would be subject to different reporting
and other compliance requirements in multiple jurisdictions, including foreign laws and regulations comparable to the U.S. laws
and regulations described above.
All
of these laws impose penalties for non-compliance, some of which may be severe. If we or our operations are found to be in violation
of any of these laws or any other governmental regulations that apply to us, we may be subject to civil or criminal penalties,
fines or other monetary damages or orders forcing us to curtail or restructure our operations.
Other
Regulatory Requirements and Environmental Matters
We
are or may become subject to various laws and regulations regarding laboratory practices and the experimental use of animals,
as well as environmental laws and regulations governing, among other things, any use and disposal by us of hazardous or potentially
hazardous substances in connection with our research. In each of these areas, the FDA and other government agencies have broad
regulatory and enforcement powers, including, among other things, the ability to levy fines and civil penalties, suspend or delay
issuance of approvals, seize or recall products and withdraw approvals.
In
addition, to the extent we continue to pursue operations in foreign jurisdictions, we will be subject to anti-bribery laws in
the United States and applicable foreign jurisdictions, including the U.S. Foreign Corrupt Practices Act, or FCPA, and comparable
foreign laws. Further, we are subject to a variety of laws and regulations relating to other matters, including workplace health
and safety, labor and employment, public reporting and taxation, among others, and our failure to comply with these laws and regulations
may result in a variety of administrative, civil and criminal enforcement measures, including monetary penalties or imposition
of sanctions or other corrective requirements.
Our
Team
Our
senior management team and board of directors have decades of experience, each demonstrating a strong track record of success
in the biotechnology and pharmaceutical industries, including in research and development, commercialization and financing activities.
In addition, we have assembled a clinical and regulatory team experienced in developing and advancing novel therapeutic approaches
through clinical testing and regulatory approvals, including extensive technical, manufacturing, analytical and quality experience
to oversee our clinical, manufacturing and testing activities. Our team consists of a relatively small number of employees, as
well as consultants and advisors regarding research and development, regulatory, compliance, healthcare and investor and public
relations matters. We also expect to engage experts in healthcare and in general business to advise us in various capacities.
For instance, we have in the past consulted with various oncology researchers and clinicians to provide counsel as part of our
advisory panels for our clinical programs, and we expect to continue to establish consulting and advisory relationships with scientific,
clinical and medical experts in academia and industry to assist us with FDA submissions, clinical testing and identification and
development of new product candidates.
As
of July 31, 2018, we had a total of 34 employees, including 33 full-time employees and one part-time employee. None of our employees
is represented by a labor union or covered by a collective bargaining agreement, and we believe that our relations with our employees
are good.
Corporate
Information
We
were incorporated under the laws of the State of Nevada in February 2008 under the name Netventory Solutions Inc. to pursue the
business of inventory management solutions. In March 2011, we completed a merger with our subsidiary to change our name to “OncoSec
Medical Incorporated,” and we commenced operations as a biotechnology company upon our acquisition of assets from Inovio
related to the use of drug-medical device combination products for the treatment of various cancers. Our principal executive offices
are located at 24 North Main Street, Pennington, NJ 08534 and 3565 General Atomics Court, Suite 100, San Diego, California 92121.
The telephone number for our principal executive offices is (855) 662-6732. Our website address is www.oncosec.com. Information
contained on our website is not, and should not be considered, part of this report. We will make available free of charge through
our website our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments
to these reports, as soon as reasonably practicable after we electronically file such material with, or furnish such material
to, the Securities and Exchange Commission, or SEC. We are not including the information on our website as a part of, nor incorporating
it by reference into, this report. You may read and copy any materials we file at the SEC’s Public Reference Room at 100
F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. Additionally, the SEC maintains a website that contains annual, quarterly, and current reports, proxy statements,
and other information that issuers (including us) file electronically with the SEC. The SEC’s website address is http://www.sec.gov/.
In
addition, we intend to use our media and investor relations website, SEC filings press releases, public conference calls and webcasts
as wells as social media to communicate with our subscribers and the public about the Company, its services and other issues.
It is possible that the information we post on social media could be deemed to be material information. Therefore, in light
of the SEC’s guidance, we encourage investors, the media and others interested in the Company to review the information
we post on the U.S. social media channels listed on our website.
ITEM
1A. RISK FACTORS
Investing
in our securities involves a high degree of risk. You should carefully consider each of the following risks and all of the other
information contained in this report and the other documents we file with the SEC before making any investment decision with respect
to our securities. If any of the risks described below materialize, our business, financial condition, results of operations,
prospects or stock price could be materially and adversely affected. The risks described below are not the only risks we face.
Additional risks and uncertainties not currently known to us may also materially and adversely affect our business operations
and financial condition or the price of our common stock.
Risks
Related to Our Business
We
have never generated, and may never generate, revenue from our operations.
We
have not generated any revenue from our operations since our inception, and we do not anticipate generating meaningful, or any,
revenue in the near term. During our fiscal year ended July 31, 2018, we incurred a net loss of approximately $39.1 million, and
from inception through July 31, 2018, we have incurred an aggregate net loss of approximately $134.1 million. We will need significant
additional funding to continue our operations and pursue our strategic plans, including continued development of ImmunoPulse®
IL-12. Although we have been and expect to continue to tightly manage our operating expenses, we expect our operating expenses
will continue to increase as we further our development activities and pursue FDA approval for one or more of our product candidates.
Because
of the numerous risks and uncertainties associated with our product development and planned commercialization efforts, many of
which are discussed in these risk factors, we are unable to predict the extent of our future losses or when or if we will generate
meaningful revenue or become profitable, and it is possible we will never achieve these goals. Our failure to develop our investments
in our proprietary technologies and product candidates into revenue-generating operations would have a material adverse effect
on our business, results of operations, financial condition, and prospects and could result in our inability to continue operations.
We
have limited working capital and a history of losses, which raises substantial doubt as to whether we will be able to continue
as a going concern.
We
anticipate that, based on the amount of cash we have on hand (taking into account the net proceeds from our February 2018 and
October 2018 equity offerings) and our current rate of cash consumption, we believe that our current cash resources are sufficient
to meet our anticipated needs for more than 12 months following the issuance of this report without a significant change in our
business plan or reduction in spending. However, we will need additional capital after that time to maintain our current level
of operations or before that time to ramp up development or other efforts. As a result, our ability to continue as a going concern
will depend upon the availability and terms of future funding.
Our
ability to obtain additional financing will depend on a number of factors, including, among others, our ability to generate positive
data from our clinical and pre-clinical studies, the condition of the capital markets and the other risks described in these risk
factors. If any one of these factors is unfavorable, we may not be able to obtain additional funding, in which case, our business
could be jeopardized and we may not be able to continue our operations or pursue our strategic plans. If we are forced to scale
down, limit or cease operations, our stockholders could lose all of their investment in our Company.
We
will need to raise additional capital to continue operating our business, and additional funds may not be available when needed,
on acceptable terms or at all.
As
of July 31, 2018, we had cash, cash equivalents, and investment securities of approximately $27.0 million and, as of that date,
we estimated our cash requirements for the following 12 months to be approximately $25.0 million. We do not generate any cash
from our operations.
Historically,
we have raised the majority of the funding for our business through offerings of our common stock and warrants to purchase our
common stock, including our February 2018 and October 2018 equity offerings. We are exploring other ways of funding our operations
that involve less dilution to our existing stockholders, including, among others, technology licensing or other collaboration
arrangements, debt financings or grants. We may need to continue to seek funding for our operations through additional dilutive
public or private equity financings.
If
we issue equity or convertible debt securities to raise additional funds, our existing stockholders would experience further dilution,
and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing stockholders.
If we incur debt, our fixed payment obligations, liabilities and leverage relative to our equity capitalization would increase,
which could increase the cost of future capital. Further, the terms of any debt securities we issue or borrowings we incur, if
available, could impose significant restrictions on our operations, such as limitations on our ability to incur additional debt
or issue additional equity or other operating restrictions that could adversely affect our ability to conduct our business, and
any such debt could be secured by any or all of our assets pledged as collateral. Additionally, we may incur substantial costs
in pursuing future capital, including investment banking, legal and accounting fees, printing and distribution expenses and other
costs.
Moreover,
equity or debt financings or any other source of capital may not be available to us when needed or at all, or, if available, may
not be available on commercially reasonable terms. Weak economic and capital market conditions generally or uncertain conditions
in our industry could increase the challenges we face in raising capital for our operations. In recent periods, the capital and
financial markets for early and development-stage biotechnology and life science company stocks have been volatile and uncertain.
If we cannot raise the funds that we need, we could be forced to delay or scale down some or all of our development activities
or cease all operations, and our stockholders could lose all of their investment in our Company.
We
are a clinical-stage, pre-commercial company with a limited operating history and no commercially available or approved products,
which makes assessment of our future viability difficult and which may hinder our ability to generate revenue and meet our other
objectives.
We
are a clinical-stage, pre-commercial company with only a limited operating history upon which to base an evaluation of our current
business and future prospects and how we will respond to competitive, financial or technological challenges. None of our product
candidates are commercially available. Additionally, although we are investigating licensing and partnering opportunities,
no such opportunities have been finalized and, even if completed, we do not expect that these potential opportunities would generate
any significant near-term revenue. Our operations to date have been limited to organizing, staffing and financing, applying for
patent rights, undertaking clinical trials of ImmunoPulse® IL-12 and engaging in other research and development activities,
including pre-clinical and other studies of our other product candidates. We have not demonstrated an ability to obtain regulatory
approval of a product candidate, manufacture commercial-scale products, or conduct the sales and marketing activities necessary
for successful product commercialization. Consequently, the revenue-generating potential of our business is unproven and uncertain.
In
addition, we have limited insight into trends that may emerge and affect our business or our industry. We will be subject to the
risks, uncertainties and difficulties frequently encountered by clinical-stage companies in evolving markets, and we may not be
able to successfully address any or all of these risks and uncertainties. Further, errors may be made in predicting and reacting
to relevant business or industry trends. The occurrence of any of these risks could cause our business, results of operations,
and financial condition to suffer or fail.
We
are significantly dependent on the success of our ImmunoPulse® technology platform and our product candidates based on this
platform, including our lead product candidate ImmunoPulse® IL-12.
We
have invested, and we expect to continue to invest, significant efforts and financial resources in the development of product
candidates based on our ImmunoPulse® technology, including primarily our lead product candidate ImmunoPulse® IL-12. Our
ability to generate revenue, which may not occur for the foreseeable future, if ever, will depend heavily on the successful development,
regulatory approval and commercialization of one or more of these product candidates, and such regulatory approval and commercialization
may never occur.
The
success of ImmunoPulse® IL-12 or any other product candidates based on our ImmunoPulse® technology will depend on a number
of factors, including, among others:
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our
ability to conduct and complete pre-clinical and clinical studies and trials, including
the time, costs and uncertainties associated with all aspects of these trials;
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the
data we obtain from pre-clinical and clinical testing of the product candidates, including
data demonstrating the required level of safety and efficacy of the product candidates
(for example, a key factor in determining whether we are able to successfully develop
and commercialize our ImmunoPulse® IL-2 platform in melanoma will be the data we
obtain from our PISCES/KEYNOTE-695 study, which is our ongoing study of ImmunoPulse®
IL-12 in combination with Merck’s approved therapy for melanoma in patients who
have shown resistance to or relapse from certain other cancer therapies);
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the
regulatory approval pathway we choose to pursue for our product candidates in the United
States or any other jurisdiction;
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our
ability to obtain required regulatory approvals for one or more of our product candidates
in the United States and in other jurisdictions, and the time required to obtain these
approvals, if they are ever obtained;
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the
manufacturing arrangements we are able to establish with third-party manufacturers, both
for the manufacture of the product candidates for clinical trial use and for the potential
commercial manufacture of products, if and when approved;
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our
ability to build an infrastructure capable of supporting product sales, marketing and
distribution of any approved products in territories where we pursue commercialization
directly;
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our
ability to establish commercial distribution agreements with third-party distributors
for any approved products in territories where we do not pursue commercialization directly;
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the
labeling requirements for any product candidates that are approved, including obtaining
sufficiently broad labels that would not unduly restrict our ability to market the product;
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acceptance
of our products, if and when approved, by patients and the medical community;
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the
ability of our products, if and when approved, to effectively compete with other cancer
treatments;
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a
continued acceptable safety profile of any product candidates that are approved following
such approval;
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our
level of success in obtaining and maintaining patent and trade secret protection and
otherwise protecting our rights in our intellectual property portfolio;
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the
levels of coverage and reimbursement we are able to secure for any product candidates
that receive regulatory approval;
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our
ability to establish a commercially viable price for our products, if and when approved;
and
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delays
or unanticipated costs, including those related to any of the foregoing.
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If
one or more of these factors is unfavorable, we could experience significant delays or we may not be able to successfully commercialize
ImmunoPulse® IL-12 or any of our other product candidates, which would materially harm our business.
We
may not be successful in our efforts to identify or discover additional product candidates and may fail to capitalize on programs
or product candidates that may present a greater commercial opportunity or for which there is a greater likelihood of success.
The
success of our business depends upon our ability to identify, develop and commercialize product candidates based on our programs.
If we do not successfully develop and eventually commercialize products, we will face difficulty in obtaining product revenue
in future periods, resulting in significant harm to our financial position and adversely affecting our share price. Research programs
to identify new product candidates require substantial technical, financial and human resources.
Additionally,
because we have limited resources, we may forego or delay pursuit of opportunities with certain programs or product candidates
or for indications that later prove to have greater commercial potential. Our estimates regarding the potential market for a product
candidate could be inaccurate, and our spending on current and future research and development programs may not yield any commercially
viable products. If we do not accurately evaluate the commercial potential for a particular product candidate, we may relinquish
valuable rights to that product candidate through strategic collaboration, licensing or other arrangements in cases in which it
would have been more advantageous for us to retain sole development and commercialization rights to such product candidate. Alternatively,
we may allocate internal resources to a product candidate in a therapeutic area in which it would have been more advantageous
to enter into a partnering arrangement.
If
any of these events occur, we may be forced to abandon or delay our development efforts with respect to a particular product candidate
or fail to develop a potentially successful product candidate, which could have a material adverse effect on our business, financial
condition, results of operations and prospects.
It
may be difficult to identify and enroll patients due to clinical trial inclusion-exclusion criteria or other factors, which has
in the past, and may in the future, lead to delays in enrollment and in generating clinical data for our trials.
Our
clinical trials may have strict inclusion criteria for patient enrollment. These criteria could present significant obstacles
to the timely recruitment and enrollment of a sufficient number of eligible patients into our trials. We may experience slower
than expected patient enrollment in our existing or future clinical trials. Any inability to successfully enroll the number of
patients meeting the criteria for any of our clinical trials could cause significant delays in the trial and increase the costs
associated with the trial, which could materially harm our business and prospects.
Patient
enrollment in a clinical trial may be affected by many factors, including:
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the
severity of the disease under investigation;
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the
design of the study protocol;
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the
eligibility criteria for the study;
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the
perceived risks, benefits and convenience of administration of the product candidate
being studied;
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the
competitive disease space with many trials for patients to select from; and
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the
proximity and availability of clinical trial sites to prospective patients.
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Certain
characteristics of our ImmunoPulse® platform may negatively impact market acceptance of the platform.
Physicians,
patients, and third-party payors may be less accepting of product candidates based on our ImmunoPulse® technology platform
due to certain characteristics of this platform. For example, these parties may have concerns about the complexity inherent in
a combination therapy approach or the clinical application of electroporation technology, which is less prevalent in the United
States than in certain foreign markets. Moreover, our efforts to educate the medical community and third-party payors about the
benefits of any of our technologies and product candidates may require significant resources and may never be successful. As a
result, even if any of our product candidates achieve regulatory approval, a lack of acceptance by physicians, third-party payors
and patients of the products or underlying technologies could prevent their successful commercialization and could materially
limit our revenue potential.
If
the commencement or completion of clinical testing for our product candidates is delayed or prevented, we could experience significantly
increased costs and our ability to pursue regulatory approval or generate revenue could be delayed or limited.
Clinical
trials are very expensive, time-consuming, unpredictable and difficult to design and implement. Even if we are able to complete
our ongoing and currently proposed clinical trials and assuming the results are favorable, clinical trials for product candidates
based on our technology are planned to continue for several years and may take significantly longer than expected to complete.
Even with the Fast Track designation we received from the FDA for TAVO in metastatic melanoma in February 2017, additional clinical
trials, which can take many years to complete, are still required.
Delays
in the commencement or completion of clinical testing could significantly affect our product development costs and business plan.
We do not know and cannot predict whether any of our ongoing or planned trials or studies will be completed on schedule or at
all. We also do not know and cannot predict whether any other pre-clinical or clinical trials, including Phase 3 clinical trials
to follow completion of our ongoing or any other Phase 2 clinical trials, will be planned or will begin, and in many cases such
future trials would be dependent on obtaining favorable results from preceding studies.
The
commencement and completion of clinical trials can be delayed or prevented for many reasons, including due to delays or issues
related to:
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obtaining
clearance or approval from the FDA or a comparable international regulatory body and
other applicable agencies, including the U.S. National Institutes of Health, to commence
a clinical trial;
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reaching
agreement on acceptable terms with prospective clinical research organizations, or CROs,
clinical investigators and trial sites;
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obtaining
institutional review board, or IRB, and institutional biological committee, or IBC, approval
to initiate and conduct a clinical trial at a prospective site;
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identifying,
recruiting and training suitable clinical investigators;
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identifying,
recruiting and enrolling subjects to participate in clinical trials, which can pose challenges
for a variety of reasons, including competition from other clinical trial programs for
similar indications, requirements for larger than anticipated patient populations, slower
than expected enrollment, or higher than predicted rates of patient drop-out or withdrawal;
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retaining
patients who have initiated a clinical trial but who may be prone to withdraw due to
side effects from the therapy, lack of efficacy, personal issues, death or for any other
reason, or who are lost to further follow-up; and
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identifying
and maintaining a sufficient supply of necessary products or product candidates, including
those produced by third parties, on commercially reasonable terms.
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With
respect to any clinical trial we plan, the FDA could determine it is not satisfied with our plan or the details of our clinical
trial protocols and designs and could put a clinical hold on the proposed trials, or issue a clinical holder after a trial has
commenced. Any such determination could delay the commencement or completion of the trials and would be a setback for the
commercialization strategy for the product candidate that is the subject of the trial. Additionally, changes in applicable regulatory
requirements and guidance may occur, in which case clinical trial protocols may need to be amended to reflect these changes. Any
such amendments could require us to resubmit our clinical trial protocols to IRBs or IBCs for reexamination, which could impact
the costs, timing and successful completion of a clinical trial. If we experience delays in completion of, or if we terminate,
any of our ongoing, planned or future clinical trials, the commercial prospects for our product candidates could be harmed, which
could have a material adverse effect on our business, results of operations, financial condition and prospects.
To
the extent we conduct clinical trials of our product candidates in combination with third parties’ products, we will face
additional risks relating to these products.
To
the extent our commercialization strategy includes the combination of our product candidates with third parties’ products
or product candidates, we will likely be required to conduct clinical studies to evaluate the combinations. We have several ongoing
and planned combination trials, and these combination studies involve additional risks due to their reliance on circumstances
outside our control, such as those relating to the availability and marketability of the third-party product involved in the study.
If the marketability of third-party products such as KEYTRUDA® is impacted, or if we are unable to secure and maintain a sufficient
supply of such third-party products when needed on commercially reasonable terms, our clinical studies could be delayed or we
could be forced to terminate these studies. Such a delay or termination could have a material negative impact on our development
strategy, business, results of operations, financial condition, and prospects.
If
serious adverse or unacceptable side effects are identified during the development of one or more of our product candidates or
any future product candidate, we may need to abandon or limit our development of some of our product candidates.
If
one or more of our product candidates or any future product candidate are associated with undesirable side effects in clinical
trials or have characteristics that are unexpected, we may need to abandon their development or limit development to more narrow
uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more
acceptable from a risk-benefit perspective. In our industry, many compounds that initially showed promise in early stage testing
have later been found to cause serious side effects that prevented further development of the compound. In the event that our
clinical trials reveal a high or unacceptable severity and prevalence of side effects, our trials could be suspended or terminated,
and the FDA or comparable foreign regulatory authorities could order us to cease further development or deny approval of one or
more of our product candidates or any future product candidate for any or all targeted indications. The FDA could also issue a
letter requesting additional data or information prior to making a final decision regarding whether or not to approve a product
candidate. The number of requests for additional data or information issued by the FDA in recent years has increased and has resulted
in substantial delays in the approval of several new drugs. Undesirable side effects caused by one or more of our product candidates
or any future product candidate could also result in the inclusion of unfavorable information in our product labeling, denial
of regulatory approval by the FDA or other regulatory authorities for any or all targeted indications, and in turn prevent us
from commercializing and generating market acceptance and revenues from the sale of that product candidate. Drug-related side
effects could affect patient recruitment or the ability of enrolled patients to complete the trial and could result in potential
product liability claims.
Additionally,
if one or more of our product candidates or any future product candidate receives marketing approval and we or others later identify
undesirable side effects caused by this product, a number of potentially significant negative consequences could result, including:
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regulatory
authorities may require the addition of unfavorable labeling statements, specific warnings
or a contraindication;
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regulatory
authorities may suspend or withdraw their approval of the product, or require it to be
removed from the market;
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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; or
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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 any of our product candidates or any future
product candidate or could substantially increase our commercialization costs and expenses, which in turn could delay or prevent
us from generating significant revenues from its sale.
We
rely on third parties to conduct our clinical trials and other studies, and if these third parties do not successfully carry out
their duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our product candidates
and our business could be substantially harmed.
We
have entered into, and expect to continue to enter into, agreements with third-party CROs to help us manage critical aspects of
the clinical trials we sponsor. We rely on these third parties for the execution of certain of our clinical and pre-clinical studies,
and we only control certain aspects of their activities. We and our CROs are required to comply with the FDA’s regulations
for conducting clinical trials and good clinical practice, as well as the guidelines of the International Conference on Harmonization
of Technical Requirements for Registration of Pharmaceuticals for Human Use. We are also required to harmonize standard operating
procedures between companies and conduct periodic internal and vendor audits to ensure compliance. Additionally, the FDA and comparable
foreign regulators enforce these good clinical practice regulations through periodic inspections of trial sponsors, principal
investigators, trial sites, laboratories and other entities involved in the completion of the study protocol and processing of
data.
If
we or our CROs fail to comply with applicable good clinical practice or other regulations, the data generated in our clinical
trials may be deemed unreliable and/or the FDA or comparable foreign regulators may refuse to accept the data, and these regulators
may require us to perform additional or repeat clinical trials, which could significantly increase costs and delay the regulatory
approval process. Additionally, repeated compliance failures could prompt the FDA or other regulatory authority to suspend or
terminate a clinical trial, which could cause significant approval delays and increased costs. Further, if CROs do not otherwise
successfully carry out their contractual duties or obligations or meet expected deadlines or if the quality or accuracy of the
clinical data they obtain is compromised for any reason, our clinical trials may need to be extended, delayed or terminated or
we may not be able to rely on the data produced by the trials. Moreover, if any of our relationships with third-party CROs terminate
before completion of a clinical trial, we may not be able to establish arrangements with alternative CROs on commercially reasonable
terms, on a timely basis or at all, which could materially delay or jeopardize the trial. Any such occurrence could delay or prevent
us from obtaining regulatory approval for our product candidates or successfully commercializing our product candidates, which
could increase our costs, delay or eliminated our prospects for generating revenue, and otherwise materially harm the results
of our operations, financial condition and prospects.
We
rely on clinical data and results obtained by third parties that could ultimately prove to be inaccurate or unreliable.
As
part of the strategy implemented to mitigate development risk, we seek to develop product candidates with validated mechanisms
of action and we utilize biomarkers to assess potential clinical efficacy early in the development process. This strategy necessarily
relies upon clinical data and other results produced or obtained by third parties, which may ultimately prove to be inaccurate
or unreliable. If the third party data and results we rely upon prove to be inaccurate, unreliable or not applicable to our product
candidates, we could make inaccurate assumptions and conclusions about the product candidates, and our research and development
efforts could be compromised and called into question during the review or any marketing applications we submit.
We
may be subject to claims that our consultants or independent contractors have wrongfully used or disclosed to us alleged trade
secrets of their other clients or former employers.
As
is common in the biopharmaceutical industry, we engage the services of consultants to assist in the development of product candidates.
Many of these consultants were previously employed at or may have previously been or are currently providing consulting services
to, other pharmaceutical companies, including our competitors or potential competitors. We may become subject to claims related
to whether these consultants have inadvertently or otherwise used or disclosed trade secrets or other proprietary information
of their former employers or their former or current customers. Litigation may be necessary to defend against these claims. Even
if we are successful in defending these claims, litigation could result in substantial costs and be a distraction to management.
We
have participated in, and continue to participate in, clinical trials conducted under an approved investigator-sponsored investigational
new drug application, and we have little or no control over the conduct or timing of, or FDA communications regarding, these trials.
We
have participated in, continue to participate in, and plan to participate in clinical trials conducted under an approved investigator-sponsored
investigational new drug, or IND, application. In investigator-initiated trials, the investigator typically designs and implements
the study and the investigator or its institution acts as the sponsor of the trial. This trial sponsor has control over the design,
conduct and timing of the trial, and as a result, we have limited or no control over the commencement, conduct and completion
of these investigator-initiated trials. In addition, regulations and guidelines imposed by the FDA with respect to IND applications
include a requirement that the sponsor of a clinical trial provide ongoing communication with the FDA as it pertains to the safety
of the treatment being tested. It is the responsibility of the investigator, as the sponsor of the trial, to be the sole point
of contact with the FDA for these communications and to exercise all decision-making authority regarding these or other submissions
to the FDA about the trial. Consequently, we have little or no control over the content or timing of these communications, including
whether they are timely, accurate or complete. Any failures by the investigator sponsoring these trials could result in reviews,
audits, delays or clinical holds by the FDA that could negatively affect the timelines for these trials or jeopardize their completion.
As a result, our lack of control over the conduct and timing of, and communications with the FDA regarding, these investigator-sponsored
trials expose us to additional risks, many of which are outside our control and the occurrence of which could severely harm our
performance and the commercial prospects for our product candidates.
Regulatory
authorities may not approve our product candidates, or any approvals we achieve may be too limited or too late for us to earn
meaningful, or any, revenue.
The
research, testing, and possible eventual manufacturing, labeling, approval, selling, marketing and distribution of our product
candidates are subject to extensive regulation by the FDA and other regulatory authorities in the United States, as well as comparable
regulatory bodies in other countries. These regulatory agencies have the authority to delay approval of or refuse to approve our
product candidates for a variety of reasons, including, among others, the occurrence of adverse reactions or a failure to meet
safety and efficacy endpoints in our clinical trials or otherwise to the satisfaction of the regulator, disapproval of our or
our partners’ trial design, or disagreement with our interpretation of data from pre-clinical studies or clinical trials.
As a result, even if our product candidates achieve their endpoints in clinical trials, they still may not be approved by any
of these regulatory agencies. Moreover, the requirements to obtain product approvals vary widely from country to country, and
the FDA’s approval requirements, review procedures and timelines may not be the same as or even similar to the requirements
of a comparable foreign regulator. As a result, even if we obtain regulatory approval for a product candidate in one country,
we may be required to undertake additional clinical trials or studies, submit additional information, wait for longer review periods
or make other efforts in order to obtain regulatory approvals in other desirable geographic markets, or may not be able to achieve
approval in those other desirable geographic markets.
Although
we have seen no systemic drug-related adverse events in our trials and studies to date, if we cannot adequately demonstrate through
the clinical trial process that a product candidate we are developing is safe and effective, regulatory approval of that product
candidate may never be achieved, which could impair our reputation, increase our costs and delay or prevent us from generating
revenue. Importantly, success in pre-clinical testing and early clinical studies does not ensure that later clinical trials will
generate adequate data to demonstrate the required level of efficacy and safety of an investigational drug. A number of companies
in the pharmaceutical and biotechnology industries, including many with greater resources and experience than we have, have suffered
significant setbacks in clinical trials, even after obtaining promising results in Phase 2, and earlier studies. Further, even
if a product candidate is approved, it may be approved for fewer or more limited indications than requested, may include substantial
safety warnings or the approval may be subject to the performance of significant post-marketing studies. In addition, regulatory
agencies may not approve the labeling claims that are necessary or desirable for the successful commercialization of our product
candidates. Any limitation, condition or denial of approval could have an adverse effect on our business, reputation and results
of operations.
Furthermore,
because of the substantial competition we face, even if we are ultimately able to achieve regulatory approval for one or more
of our product candidates, delays in such regulatory approval could delay, limit or prevent our ability to successfully commercialize
our product candidates if competing products obtain approvals before ours and gain market traction against which we are not able
to complete. Moreover, we may be forced to reevaluate our development strategies and plans in the face of setbacks or other delays
that could jeopardize the value of any regulatory approval that is obtained, which could include abandoning planned clinical trial
efforts for a product candidate that we no longer believe has promising value as a commercial product. If we are not able to obtain
or maintain required regulatory approvals for our product candidates or if we decide or are forced to abandon our efforts to obtain
or maintain these approvals, we would have expended significant costs on assets that may never generate any return. Such an outcome
would have a material adverse effect on our business, results of operations and financial condition, as well as on our continued
viability as a company.
We
will need to obtain FDA approval of any proposed product brand names, and any failure or delay associated with such approval may
adversely impact our business.
A
pharmaceutical product cannot be marketed in the US or other countries until we have completed a rigorous and extensive regulatory
review processes, including approval of a brand name. Any brand names we intend to use for our product candidates will require
approval from the FDA regardless of whether we have secured a formal trademark registration from the US Patent and Trademark Office
(PTO). The FDA typically conducts a review of proposed product brand names, including an evaluation of potential for confusion
with other product names. The FDA may also object to a product brand name if it believes the name inappropriately implies medical
claims. If the FDA objects to any of our proposed product brand names, we may be required to adopt an alternative brand name for
our product candidates. If we adopt an alternative brand name, we would lose the benefit of our existing trademark applications
for such product candidate and may be required to expend significant additional resources in an effort to identify a suitable
product brand name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be
acceptable to the FDA. We may be unable to build a successful brand identity for a new trademark in a timely manner or at all,
which would limit our ability to commercialize our product candidates.
Our
in-licensed intellectual property may not provide us with sufficient rights and may not prevent competitors from pursuing similar
technology.
In
addition to our owned proprietary rights, we have also exclusively licensed certain patents that cover our ImmunoPulse® clinical
methods. These patents will expire between 2025 and 2027. These method patents protect the use of a product for a specified method
under certain defined parameters. This type of patent does not prevent a competitor from making and marketing a product that is
identical or similar to the protected product under parameters that are outside the scope of the patented method claims. Moreover,
even if competitors do not actively promote such a product for the indications protected by the method patent, physicians could
prescribe the products for these methods on an off-label basis. Although such off-label prescriptions may infringe or contribute
to the infringement of method-of-use patents, the practice is common and such infringement is difficult to detect, prevent or
prosecute.
We
entered into a cross-license agreement in 2011 for certain electroporation technology with Inovio, which includes some of our
patents protecting our ImmunoPulse® clinical device (and some of which have recently expired or will expire in 2019). Under
the terms of the agreement, Inovio has granted us a non-exclusive, worldwide license under certain of its electroporation patents,
and in exchange, we have granted to Inovio an exclusive license to certain aspects of our technology in a limited field of use.
Although we do not currently rely on the intellectual property we have licensed from Inovio, our product candidates could in the
future utilize this intellectual property. This license is non-exclusive and Inovio could use the technology to compete with us
or could license the technology to others, including our competitors. Additionally, the license we have granted to Inovio could
enable it to develop products that compete against ours, directly or indirectly, in the specific field of use subject to the license.
In the future, if we raise additional funds through licensing or sublicensing arrangements, it may be necessary to relinquish
potentially valuable rights to our product candidates, or grant licenses on terms that are not favorable to us.
We
have also exclusively licensed certain other patents that cover our ImmunoPulse® clinical methods. These patents will expire
between 2025 and 2027. These method patents protect the use of a product for a specified method under certain defined parameters.
This type of patent does not prevent a competitor from making and marketing a product that is identical or similar to the protected
product under parameters that are outside the scope of the patented method claims. Moreover, even if competitors do not actively
promote such a product for the indications protected by the method patent, physicians could prescribe the products for these methods
on an off-label basis. Although such off-label prescriptions may infringe or contribute to the infringement of method-of-use patents,
the practice is common and such infringement is difficult to detect, prevent or prosecute.
If
we are not able to maintain our existing in-licenses or if we are not able to establish new in-licenses for any other third-party
rights we need, we could become subject to significant costs or royalty or other fees to establish alternative license arrangements,
if such licenses are available when needed, on acceptable terms or at all, or we could be forced to develop modifications to the
affected product candidates or technologies to avoid reliance on the third-party rights, if such modifications are possible. If
there is any conflict, dispute, disagreement or issue of non-performance between us and the respective licensing partner regarding
the rights or obligations under the license agreements, including any conflict, dispute or disagreement arising from a failure
to satisfy payment obligations under such agreements, the ability to develop and commercialize the affected product candidate
may be adversely affected. Any inability to secure and maintain adequate rights to any third-party technologies necessary for
the development of our product candidates could severely limit our continued research and development activities, our efforts
to obtain product approvals and, if such approvals are obtained, our ability to commercialize the approved products, any of which
would materially adversely impact our business and prospects.
We
may become involved in litigation or other proceedings in our efforts to protect our patent and other intellectual property rights,
which could require significant time and costs and would be subject to unpredictable outcomes.
We
may become aware of activities by third parties, including our competitors, that infringe our issued patents or other intellectual
property rights. If we choose to file a lawsuit against a potentially infringing third party to try to enforce our patents or
other intellectual property rights, the third party may seek a ruling that the patents are invalid and/or should not be enforced.
Such a ruling could severely limit our ability to protect our rights from use by third parties. The U.S. Supreme Court has recently
revised certain tests regarding assessing the validity of patents, which could result in the invalidation of issued patents and/or
their claims based on the application of the new patent validity standards. As a result, in the event of any patent infringement
litigation or other proceedings involving our patents, our patents could be subject to challenge and subsequent invalidation or
significant narrowing of claim scope under the revised standards. Moreover, even if the validity of our patents is upheld in a
patent infringement lawsuit, a court could refuse to stop a third party’s activities on the grounds that the activities
do not infringe the specific claims of our patents. Further, even if we were successful in stopping the infringing activity, patent
infringement lawsuits are expensive and could consume significant time, management attention, capital and other resources. Any
claims we assert against accused infringers could provoke these parties to assert counterclaims against us alleging that we infringe
their patents; or provoke those parties to petition the United States Patent and Trademark Office, or PTO, to institute inter
partes review against the asserted patents, which may lead to a finding that all or some of the claims of the patent are invalid.
These
risks of third parties’ infringement of our intellectual property rights may increase if we engage in discussions, collaborations
or other strategic arrangements with third parties. Also, new challenges could arise if and to the extent we pursue engagements
with third parties located outside the United States. These factors could increase the risks and costs associated with building
and protecting our intellectual property portfolio and could adversely affect our performance and our business prospects. Despite
efforts to protect our proprietary information during such discussions, third parties may unintentionally or willfully disclose
or convert our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such
breaches.
Third
parties may claim that we infringe their proprietary rights, which could prevent us from pursuing our clinical and other studies
and other research and development activities.
The
validity and infringement of patents or proprietary rights of third parties has been the subject of substantial litigation in
the biotechnology industry. In the course of our research and development activities, we could become subject to legal claims
that we, our activities or our product candidates or technologies infringe the rights of others. This type of patent infringement
litigation is costly and time-consuming and diverts the attention of management and technical personnel. In addition, if we or
our product candidates or technologies are found to infringe the rights of others, we could lose our ability to continue our development
programs or could be forced to pay monetary damages. Although the parties to patent and intellectual property disputes in the
biotechnology industry have often settled their disputes by establishing licenses or similar arrangements, the costs associated
with these arrangements may be substantial and could include ongoing royalties. Furthermore, any such licenses may not be available
when needed, on commercially reasonable terms or at all. These risks may be amplified due to our small size and limited experience
and resources relative to many of our competitors. As a result, any claims of infringement against us, adverse determination in
a judicial or administrative proceeding or failure to obtain necessary licenses could materially delay, hinder or restrict our
development efforts or prevent us from continuing to pursue our operational and strategic plans, which could have a material adverse
effect on our business, prospects and results of operations.
Publications
of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the U.S. and other
jurisdictions are typically not published until 18 months after a first filing, or in some cases not at all. Therefore, we cannot
know with certainty whether we or our licensors were the first to make the inventions claimed in patents or pending patent applications
that we own or licensed, or that we or our licensors were the first to file for patent protection of such inventions. In the event
that a third party has also filed a U.S. patent application relating to our product candidates or a similar invention, depending
upon the priority dates claimed by the competing parties, we may have to participate in interference proceedings declared by the
PTO to determine priority of invention in the U.S. The costs of these proceedings could be substantial and it is possible that
our efforts to establish priority of invention would be unsuccessful, resulting in a material adverse effect on our U.S. patent
position. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain.
If
we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or
incur costs that could harm our business; even if we comply with such laws and regulations, they may result in higher costs for
us in the form of higher raw material, energy, freight and compliance costs.
We
are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures
and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous
and flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste products. We
generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination
or injury from these materials. Although we believe that the safety procedures for handling and disposing of these materials comply
with the standards prescribed by these laws and regulations, we cannot eliminate the risk of accidental contamination or injury
from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held
liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated
with civil or criminal fines and penalties for failure to comply with such laws and regulations.
Although
we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees
resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities.
We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with
our storage or disposal of biological, hazardous or radioactive materials.
In
addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations.
These current or future laws and regulations may impair our research, development or production efforts. Our failure to comply
with these laws and regulations also may result in substantial fines, penalties or other sanctions. Increased environmental legislation
or regulation could also result in higher costs for us in the form of higher raw materials, as well as energy and freight costs.
It is possible that certain materials might cease to be permitted to be used in our processes. We could also incur additional
compliance costs for monitoring and reporting emissions and for maintaining permits.
The
biotechnology industry is highly competitive, and many of our competitors are significantly larger and more experienced than we
are.
The
biotechnology industry is intensely competitive. This competitive environment stimulates an ongoing and extensive search for technological
innovation and necessitates effective and targeted marketing strategies to communicate the effectiveness, safety and value of
products to healthcare professionals in private practice and group practices and payors in managed care organizations, group purchasing
organizations, and Medicare and Medicaid services.
We
face competition from a number of sources, including large pharmaceutical companies, biotechnology companies, academic institutions,
government agencies and private and public research institutions. We compete against all other developers of cancer treatments,
including other immunotherapy treatments as well as other types of treatments for the cancer indications on which we are focused.
In particular, a number of companies, some of which are large, well-established pharmaceutical companies, have development strategies
similar to our current focus. These companies include, among others, Bristol Myers-Squibb, Iovance Therapeutics, Syndax, Dynavax
Technologies, Checkmate and Idera Pharmaceuticals. In addition, we also compete with other clinical-stage biotechnology companies
for funding and support from healthcare and other investors and potential collaboration relationships with larger pharmaceutical
or other companies, as well as for personnel with expertise in our industry. We are smaller, less experienced and less well-funded
than many of our competitors, and we have a shorter and less proven operating history and a less recognizable and established
brand name than many of our competitors. In addition, some of our competitors have commercially available products, which provide
them with operating revenue and other competitive advantages. Furthermore, recent trends in the biotechnology industry are for
large drug companies to acquire smaller outfits and consolidate into a smaller number of very large entities, which further concentrates
financial, technical, and market strength and increases competitive pressure in the industry.
Our
competitors may obtain regulatory approval of their product candidates more rapidly than we can or may obtain more robust patent
protection or other intellectual property rights to protect their product candidates and technologies, which could limit or prevent
us from developing or commercializing our product candidates. If we are able to obtain regulatory approval of one or more of our
product candidates, we would face competition from approved products or products under development by larger companies that may
address our targeted indications. If we directly compete with these very large entities for the same markets and/or customers,
their greater resources, brand recognition, sales and marketing experience and financial strength could prevent us from capturing
a share of these markets or customers. Our competitors may also develop products that are more effective, more useful, better
tolerated, subject to fewer or less severe side effects, more widely prescribed, less costly or more widely accepted for other
reasons than any of our products that might obtain regulatory approvals, and our competitors may also be more successful than
us in manufacturing, distributing and otherwise marketing their products.
We
expect our product candidates, if approved and commercialized, to compete on the basis of, among other things, product efficacy
and safety, time to market, price, coverage and reimbursement by third-party payors, extent of adverse side effects and convenience
of treatment procedures. We may not be able to effectively compete in any of these areas, or we may be prevented from being able
to compete at all in these areas due to the performance of our products during clinical trials and/or the circumstances of an
approval. Presently, we compete with other biotechnology companies for funding and support on the basis of our technology platforms
and the potential value of our product candidates based on the factors described above.
If
we are unable to compete effectively, our business, results of operations, financial condition, and prospects may be materially
adversely affected.
We
may incur liability if our presentations of information regarding our product candidates are determined, or are perceived, to
be inconsistent with regulatory requirements or guidelines.
The
FDA provides guidelines regarding appropriate presentation of product information and continuing medical and health education
activities. Even though we do not have any FDA approved products, these guidelines apply to our current activities with respect
to disclosures, presentations or other communications about our product candidates and technologies at healthcare conferences
or in other forums. Although we endeavor to follow these guidelines, the FDA, the Office of the Inspector General of the U.S.
Department of Health and Human Services, or the Department of Justice could disagree, in which case we could be subject to significant
liability, including civil and administrative remedies as well as criminal sanctions. In addition, management’s attention
could be diverted and our reputation could be damaged, any of which could materially harm our business and prospects.
If
we and our contract manufacturers fail to produce our systems and product candidates in the volumes and within the timelines we
require, or if they fail to comply with applicable regulations, we could face delays in the development and commercialization
of our equipment and product candidates.
Currently,
we assemble certain components of our electroporation system, which is our proprietary delivery mechanism for our TAVO product
candidate, and we utilize the services of contract manufacturers to manufacture the remaining components of these systems and
for the manufacture, testing and storage of all of our supply of our plasmid product candidate for clinical trials or other studies.
Except for the facility used to assemble certain components of our electroporation system, we do not own and have no plans to
build our own clinical or commercial manufacturing capabilities, and we expect to increase our reliance on third-party manufacturers
if and when we commercialize any of our product candidates and systems.
The
manufacture of our systems and product supplies requires significant expertise and capital investment, including the use of advanced
manufacturing techniques and process controls. Manufacturers often encounter difficulties in production, particularly in scaling
up for commercial production if regulatory approvals are obtained. These difficulties include, among others: problems with production
costs and yields; quality control issues, including qualification of the equipment, stability of product candidates and compliance
with testing requirements; shortages of qualified personnel; and compliance with strictly enforced federal, state and foreign
regulations. If we or our manufacturers were to encounter any of these difficulties or our manufacturers otherwise fail to comply
with their contractual obligations to us, our ability to provide our electroporation equipment to our partners and product candidates
to patients enrolled in our clinical trials, or to commercially launch a product if regulatory approvals are obtained, would be
jeopardized. Any delay or interruption in the supply of clinical trial supplies could delay the completion of our clinical trials,
increase the costs associated with maintaining our clinical trial programs, and, depending upon the period of delay, require us
to commence new trials at significant additional expense or terminate the development program completely.
In
addition, all manufacturers of our products must comply with current good manufacturing practices, which are regulated by the
FDA through its facilities inspection programs. These practices include requirements regarding, among other things, quality control,
quality assurance and the generation and maintenance of records and documentation. We are required by law to establish adequate
oversight and control over raw materials, components and finished products furnished by our third-party manufacturers, we have
limited direct control over our manufacturers’ compliance with these regulations and standards. Any failure by our manufacturers,
including our non-U.S. contract manufacturers, to comply with these requirements could potentially result in fines and civil penalties,
suspension of production, suspension or delay in product approval, product seizure or recall or withdrawal of product approval.
Additionally, if the safety of any product candidate or approved product is compromised due to our or our manufacturers’
failure to adhere to applicable regulatory requirements or for other reasons, we may not be able to obtain or maintain regulatory
approval for or successfully commercialize our products, and we may be held liable for any injuries sustained as a result of the
failure. Any of these factors could cause delays in clinical trials, regulatory submissions or approvals, entail significant costs
or hinder our ability to effectively commercialize our product candidates. Furthermore, assuming we are successful in receiving
approval for and commercializing one or more of our product candidates, if our manufacturers fail to deliver the required commercial
quantities on a timely basis, pursuant to provided specifications and at commercially reasonable prices, we may be unable to meet
demand for our products and we could lose potential revenue.
Our
business and operations could suffer in the event of cyber-attacks or system failures.
Despite
the implementation of security measures, our internal computer systems and those of our current and any future partners, contractors
and consultants 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 material disruptions
to our commercialization activities, clinical and other development programs, financial and disclosure controls and other reporting
functions and the administrative aspects of our business, in addition to possibly requiring substantial expenditures of capital
and other resources to remedy. Further, any loss of clinical trial data from completed or future clinical trials as a result of
such a disruption could result in delays in our regulatory approval efforts and significantly increase our costs to recover or
reproduce the lost data. Moreover, to the extent any such disruption results in the loss of or damage to our data or applications
or inappropriate disclosure of confidential or proprietary information, we could incur significant liabilities. The occurrence
of any of these circumstances could cause our operations and our performance to suffer.
We
may be unable to acquire or develop new product candidates or technologies, or we may never be able to commercialize any product
candidates or technologies we do successfully acquire or develop.
As
part of our business strategy, we plan to expand our clinical pipeline and build our portfolio of product candidates through the
development, acquisition or licensing of assets or businesses, product candidates or approved products. The process of identifying,
planning, negotiating, implementing and integrating an acquisition or license of a new business, product candidate or approved
product can be lengthy and complex and can involve numerous difficulties, including difficulties related to:
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identifying new
potential product candidates or promising technologies;
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competing
with other companies for the acquisition or license, including many of our competitors with substantially greater financial,
marketing and sales resources;
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negotiating
the terms of the acquisition or license, at which we have relatively little experience;
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accurately
judging the value or worth of a potential acquisition or in-license candidate;
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paying
for an acquisition or license, including the consideration to acquire or license a business, technology or asset (which could
include cash and/or issuance of equity or debt securities);
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acquisition
and integration efforts could disrupt our business and divert the time and attention of management and other internal personnel
from existing operations;
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any
integration failures could result in the loss or impairment of relationships with employees, consultants, suppliers and other
vendors and partners;
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exposure
to unknown or contingent liabilities based on an acquired company’s operations or assets;
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acquisition
and integration efforts and costs could reduce available liquidity and other resources to pursue other acquisitions or strategic
transactions;
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challenges
establishing appropriate controls and procedures for any acquisition by us of a private company;
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failing
to recoup our investment of time, capital and other resources into a proposed acquisition or license, as a result of failing
to complete the transaction or, for transactions that are completed, failing to realize the anticipated benefits of acquired
or licensed business or asset;
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challenges
developing and commercializing any product candidates or technologies that we are successful in acquiring or licensing, which
is subject to all of the risks described throughout these risk factors regarding the development of our current product candidates.
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As
a result of these and other difficulties, any efforts to acquire or develop new product candidates, technologies or businesses
may not produce commercially successful products or otherwise result in meaningful revenue or profitability for our business.
As a result, the pursuit of these activities could have a material adverse effect on our business, results of operations, financial
condition and prospects.
Any
collaboration arrangements we may establish may not be successful, which could adversely affect our ability to develop and commercialize
our product candidates.
We
may seek collaboration arrangements with pharmaceutical or biotechnology companies for the development or commercialization of
our current and any future product candidates. To the extent we pursue collaboration arrangements, we would face significant risks
in connection with establishing and maintaining the arrangements, including, among others:
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we
could be subject to intense competition in seeking appropriate collaborators;
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collaboration
arrangements are complex, costly and time-consuming to negotiate, document and implement, and they could require our payment
to the collaborator of cash or other consideration, including issuances of equity or debt securities, in order to establish
the relationship;
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we
may be unsuccessful in establishing and implementing any collaboration we desire to pursue, or the terms of the arrangement
may not be favorable to us;
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collaborations
often would require that we relinquish some or all of the control over the future success of the product candidate to the
third-party collaborator;
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the
success of any collaboration arrangements we may establish would depend heavily on the efforts and activities of our collaborators,
who would likely have significant discretion in determining the efforts and resources they would apply to these collaborations;
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disagreements
between collaborators regarding clinical development and commercialization matters can be difficult to resolve and can lead
to delays in the development process or commercialization of the applicable product candidate and, in some cases, termination
of the arrangement; and
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any
termination of a collaboration arrangement that we are able to establish could adversely affect our performance, particularly
to the extent we become reliant upon the collaboration for revenue or important commercialization processes or efforts.
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In
addition, collaboration arrangements may also include our pursuit of combination trials to develop and commercialize our product
candidates as combination products, such as our PISCES/KEYNOTE-695 and OMS-141/KEYNOTE-890 studies with Merck’s KEYTRUDA®.
To the extent we continue to pursue these or any other similar collaborative arrangement, we will face certain additional risks
and uncertainties in development, as drug/device combination products are particularly complex, expensive and time-consuming to
develop due to the number of variables involved in the final product design, including ease of patient and doctor use, establishing
clinical efficacy, reliability and cost of manufacturing, regulatory approval requirements and standards and other important factors.
Additionally, combination products face continued risk and uncertainty post-development in connection with manufacturing and supply
regarding the establishment of a reliable commercial supply chain.
The
occurrence of any of these risks with respect to any collaboration arrangements we pursue or establish could materially adversely
affect our performance, financial condition and reputation.
Our
results of operations and liquidity needs could be materially negatively affected by market fluctuations and economic downturn.
Our
results of operations could be materially negatively affected by economic conditions generally, both in the US and elsewhere around
the world. Continuing concerns over inflation, energy costs, geopolitical issues, the availability and cost of credit, the US
mortgage market and residential real estate market in the US have contributed to increased volatility and diminished expectations
for the economy and the markets going forward. These factors, combined with volatile oil prices, declining business and consumer
confidence and increased unemployment, have precipitated an economic recession and fears of a possible depression. Domestic and
international equity markets continue to experience heightened volatility and turmoil. These events and the continuing market
upheavals may have an adverse effect on us. In the event of a continuing market downturn, our results of operations could be adversely
affected by those factors in many ways, including making it more difficult for us to raise funds if necessary, and our stock price
may further decline.
The
United Kingdom’s announced withdrawal from the EU could have a negative effect on global economic conditions and financial
markets, EU regulatory procedures and our business.
In
June 2016, a majority of voters in the United Kingdom, or the UK, elected in a national referendum to withdraw from the EU. In
March 2017, the UK government formally initiated the withdrawal process. That pending withdrawal, currently scheduled to occur
in or before March 2019, has created significant uncertainty about the future relationship between the UK and the EU, including
with respect to the laws and regulations that will apply as the UK determines which EU laws to replace or replicate upon withdrawal.
The pending withdrawal has also given rise to calls for the governments of other EU member states to consider withdrawal. These
developments, or the perception that any of them could occur, have had and may continue to have a material adverse effect on global
economic conditions and the stability of global financial markets, and may significantly reduce global market liquidity and restrict
the ability of key market participants to operate in certain financial markets. Any of these factors could depress economic activity
and restrict access to capital, which could have a material adverse effect on our business, financial condition, results of operations
and growth prospects.
The
UK’s withdrawal from the EU also means that the EMA, from which we must obtain approval to sell any product in the EU, must
relocate from its current headquarters in the UK to a new location within the EU. This relocation of the EMA could significantly
disrupt its operations, which could cause delays in the EMA’s review and approval of marketing authorization applications.
Such a disruption could impact any future applications for EMA approval of our drug candidates, which could have a material adverse
effect on our business, financial condition and results of operations and growth prospects.
We
may not be successful in executing our sales and marketing strategy for the commercialization of any of our product candidates,
should they be approved, in which case we may not be able to generate significant, or any, revenue.
If
one or more of our product candidates are approved, our commercialization strategy may include the establishment of our own sales,
marketing and distribution capabilities to market products to our target markets. Developing these capabilities would require
significant expenditures on personnel and infrastructure. Moreover, we have no experience with these activities. While we currently
expect that any approved products would be marketed for a relatively small patient population, we might not be able to create
an effective sales force to address even a niche market. In addition, some of our product candidates could require, if approved,
a large sales force to call on and educate physicians and patients. We could decide in the future to pursue collaborations with
one or more pharmaceutical companies to sell, market and distribute any approved products, but we may not be able to establish
any such arrangement when desired, on acceptable terms or at all. Further, any such collaboration we do establish may not be effective
in generating meaningful revenue to us.
We
may be unsuccessful in implementing the commercialization strategies we have planned. Further, we have not proven our ability
to succeed in the biotechnology industry and are not certain that our commercialization strategies, even if implemented as we
envision, would lead to significant revenue. If we are unable to successfully implement our commercialization plans and drive
adoption by patients and physicians of any product candidates that obtain regulatory approval, then we will not generate meaningful,
or any, revenue, which would have a material adverse effect on our business, results of operations, financial condition and prospects.
If
any product candidate that receives regulatory approval does not achieve broad market acceptance, our revenue potential may be
limited.
The
commercial success of any product candidate that obtains marketing approval from the FDA or comparable foreign regulatory authorities
will depend on the acceptance of these products by physicians, patients, third-party payors and the medical community. The degree
of market acceptance of any product candidate that receives regulatory approval will depend on a number of factors, including:
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our
ability to provide acceptable evidence of safety and efficacy;
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acceptance
by physicians and patients of the product as a safe and effective treatment;
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the
prevalence and severity of adverse effects;
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limitations
or warnings contained in a product’s FDA-approved or other regulator-approved labeling;
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the
clinical indications for which the product is approved;
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the
availability and perceived advantages of alternative treatments;
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any
negative publicity related to the product or any competing product;
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the
effectiveness of our or any current or future collaborators’ sales, marketing and distribution strategies;
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pricing
and cost effectiveness;
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our
ability to obtain adequate third-party payor coverage or reimbursement; and
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the
willingness of patients to pay out-of-pocket in the absence of adequate third-party payor coverage and reimbursement.
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Failures
with respect to any one of these factors could severely limit the commercial potential of any product candidate that obtains regulatory
approval, which could materially adversely affect our performance and prospects.
We
may not be able to establish adequate coverage and reimbursement by third-party payors for any product candidate that achieves
regulatory approvals, which could severely limit our market potential, performance and prospects.
Cost
containment has become a significant trend in the U.S. healthcare industry. Third-party payors have attempted to control costs
by limiting coverage and the amount of reimbursement for certain products and procedures. Increasingly, third-party payors are
requiring that companies provide them with predetermined discounts from list prices and are challenging the prices charged for
medical products and treatments. In addition, recent trends in U.S. politics suggest that the U.S. healthcare insurance framework
may experience significant changes in the near term. For all of these and other reasons, coverage and reimbursement at adequate
or any levels may not be available for any product candidate that achieves regulatory approval. If coverage and reimbursement
is not available or is not available at an adequate level for any approved product, the demand for or price of the product could
be materially negatively affected, which could severely limit our revenue potential and prospects.
In
addition, the regulations that govern marketing approvals, pricing, coverage and reimbursement for new therapeutic products vary
widely from country to country. Some countries require approval of the sale price of a product 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 government control even after initial approval is granted. As
a result, even if we obtain regulatory approval for a product candidate in a particular country, we could be subject to continuing
pricing regulations that could delay our commercial launch of the product or negatively impact the revenue potential for the product
in that country.
Future
growth, including growth in international operations, could strain our resources, and if we are unable to manage any growth we
may experience, we may not be able to successfully implement our business plans.
In
late 2016, we established a subsidiary corporation in Australia in preparation for planned clinical trials in that country. In
addition, our business plan includes continued growth of our operations, including, among other things, growth in our workforce,
expansion of our clinical trial efforts within and outside of the United States, and expansion of our portfolio of product candidates.
This growth could place an additional strain on our management, administrative, operational and financial infrastructure, and
will require that we incur significant additional costs and hire and train additional personnel to support our expanding operations.
Further, we must maintain and continue to improve our operational, financial and management controls and reporting systems and
procedures, which can be more challenging during periods of expansion. As a result, our future success will depend in part on
the ability of management to effectively manage any of this growth we may experience. If we fail to successfully manage any growth
we may experience, we may be unable to execute on our business plan.
In
connection with any geographic expansion we may pursue, international operations would involve substantial additional risks, including,
among others:
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difficulties
complying with the U.S. Foreign Corrupt Practices Act and other applicable anti-bribery laws;
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difficulties
maintaining compliance with the varied laws and regulations of multiple jurisdictions that may be applicable to our business,
many of which may be unfamiliar to us;
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more
complexity in our regulatory and accounting compliance;
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differing
or changing obligations regarding taxes, duties or other fees;
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limited
intellectual property protection in some jurisdictions;
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risks
associated with currency exchange and convertibility, including vulnerability to appreciation and depreciation of foreign
currencies against the U.S. dollar;
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uncertainty
related to developing legal and regulatory systems and standards for economic and business activities in some jurisdictions;
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trade
restrictions or barriers, including tariffs or other charges and import-export regulations, which are subject to increased
uncertainty following the results of the 2016 U.S. presidential election and the trade policies of the current administration
regarding existing and proposed trade agreements and the ability to import goods into the United States;
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changes
in applicable laws or policies;
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the
impact of and response to natural disasters; and
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potential
for war, civil or political unrest and economic and financial instability.
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The
occurrence of any of these risks could limit our ability to pursue international expansion, increase our costs or expose us to
fines or other legal sanctions, any of which could negatively impact our business, reputation and financial condition.
If
we are unable to successfully recruit and retain qualified personnel, we may not be able to maintain or grow our business.
In
order to successfully implement and manage our business plans, we depend on, among other things, successfully recruiting and retaining
qualified executives, managers, scientists and other employees with relevant experience in life sciences and the biotechnology
industry. Competition for qualified individuals is intense, particularly in our industry, due to the many larger and more established
life science and biotechnology companies that compete with us for talent. We also experience competition for the hiring of scientific
and clinical personnel from universities and research institutions. In addition, we heavily rely on consultants and advisors,
including scientific, clinical and regulatory advisors, to assist us in formulating our research and development and commercialization
strategies. Our consultants and advisors may be employed by others or may have commitments under consulting or advisory contracts
with other entities that may limit their availability to support us. If we are not able to retain existing personnel, consultants
and/or advisors, and find, attract and retain new qualified personnel, consultants and/or advisors on acceptable terms and in
a timely manner to coincide with our needs, we may not be able to successfully maintain or grow our operations and our business
and prospects could suffer.
Additionally,
although we have employment agreements with each of our executive officers, these agreements are terminable by them at will. The
loss of the services of any one or more members of our current senior management team could, among other things, disrupt or divert
our focus from pursuing our business plans while we seek to recruit other executives, impact the perceptions of our existing and
prospective employees, partners and investors regarding our business and prospects, cause us to incur substantial costs in connection
with managing transitions and recruiting suitable replacements and, if the departing personnel are crucial to any of our clinical
or other development programs, delay or prevent the development and commercialization of the affected product candidates. These
risks would be amplified if we are not able to recruit suitable replacements for any departing personnel on acceptable terms and
in a timely manner. The occurrence of any of these or other potential consequences could cause significant harm to our business.
Extensive
industry regulation has had, and will continue to have, a significant impact on our business, especially our product development,
manufacturing and distribution capabilities.
Biotechnology
companies are subject to extensive, complex, costly and evolving government regulation relating to the ability to market and sell
any drug or medical device. In the United States, these regulations are principally administered and enforced by the FDA and,
to a lesser extent, by the U.S. Drug Enforcement Agency, or DEA, and comparable state government agencies, and outside the United
States, these types of regulations are typically administered by various regulatory agencies comparable to the FDA in foreign
countries where products or product candidates are researched, tested, manufactured and/or marketed.
The
U.S. Federal Food, Drug and Cosmetic Act, or FDCA, the Controlled Substances Act, and other federal statutes and regulations,
as well as similar state and foreign statutes and regulations, govern or influence, among other things, the research, development,
testing, manufacture, storage, record-keeping, approval, labeling, promotion, marketing, distribution, post-approval monitoring
and reporting, sampling, import and export of product candidates such as ours. Under these regulations, we and our contract manufacturers
may become subject to periodic inspection of our facilities, quality control and other procedures, and operations and/or product
candidate testing by the FDA, DEA and other authorities during and after the approval process for a product candidate, to confirm
compliance with all applicable regulations, including current good manufacturing practices and other applicable requirements.
Further, even if regulatory approval of a product candidate is obtained, such approval would, in the U.S. at least, impose limitations
on the indicated uses for which the product may be marketed, and these limitations could materially limit a product’s market
and revenue potential. Additionally, we would be subject to pervasive and continuing regulation by the FDA and/or comparable foreign
regulators with respect to any approved product. Moreover, we could be required to conduct potentially costly post-approval studies
or surveillance programs to monitor the effect of any approved products, and the FDA and comparable foreign regulators have the
authority to stop or limit further marketing of a product or impose more stringent labeling restrictions based on the results
of these post-approval tests and programs or in the event of any unexpected or serious health or safety concern regarding any
approved product.
Possible
penalties or other consequences for failure to comply with these regulatory requirements include, among others, observations,
notices, citations and/or warning letters that could force us to modify our clinical programs or other activities; clinical holds
on our ongoing clinical programs; adverse publicity from the FDA or others; the FDA’s suspension of its review of pending
applications; fines; product recalls or seizures; total or partial suspension of production and/or distribution; labeling changes;
withdrawal of previously granted product approvals; enforcement actions; restrictions on imports and exports; injunctions and
civil or criminal prosecution. Any such sanctions, if imposed, could have a material adverse effect on our business, operating
results and financial condition.
Moreover,
the regulations, policies and guidance of the FDA or other regulatory agencies could change and new or additional statutes or
regulations could be enacted or promulgated. If changes or new laws are more stringent or impose additional or more challenging
requirements, our costs of compliance could increase, regulatory approval of our product candidates could be delayed or jeopardized,
or post-approval activities for any product candidates that obtain regulatory approval could be further restricted or regulated.
If we are not able to achieve and maintain regulatory compliance, we may not be permitted to market any of our product candidates,
which would materially adversely affect our prospects to generate revenue.
If
we fail to comply with applicable healthcare laws and regulations, we could face substantial penalties and our business, operations,
prospects and financial condition could be adversely affected.
The
healthcare industry is heavily regulated, constantly evolving and subject to significant change and fluctuation. The U.S. federal
and state healthcare laws and regulations that impact our business include, among others:
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the
laws and regulations administered and enforced by the FDA, including the FDCA, Controlled Substances Act and other federal
statutes and regulations, discussed above;
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the
federal Anti-Kickback Statute, which generally prohibits, among other things, soliciting, receiving or providing remuneration
to induce the referral of an individual for an item or service or the purchasing or ordering of an item or service for which
payment may be made under federal healthcare programs, such as the Medicare and Medicaid programs;
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the
federal false claims laws, which generally prohibit, among other things, knowingly presenting or causing to be presented claims
for payment from Medicare, Medicaid or other third-party payors that are false or fraudulent;
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the
Affordable Care Act, which, in general and among other things, expands the government’s investigative and enforcement
authority, including requiring pharmaceutical companies to record and disclose to government agencies any transfers of value
to doctors and teaching hospitals, and increases the penalties for fraud and abuse, including amendments to the federal False
Claims Act and the Anti-Kickback Statute to make it easier to file lawsuits under these statutes;
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HIPAA
and HITECH, which, in general and among other things, establish comprehensive federal standards with respect to the privacy,
security and transmission of individually identifiable health information and impose requirements for the use of standardized
electronic transactions with respect to transmission of such information;
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the
FCPA and other applicable anti-bribery laws;
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state
law equivalents of each of these federal laws, such as anti-kickback and false claims laws that may apply to items or services
reimbursed by any third-party payor, including commercial insurers, and state laws governing the privacy and security of health
information in certain circumstances, many of which differ from each other in significant ways and may not be preempted by
applicable federal laws, thus complicating compliance efforts.
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Additionally,
the healthcare compliance environment is continuously changing, with proposed revisions to or replacement of the Affordable Care
Act at the federal level and with some states mandating implementation of compliance programs, compliance with industry ethics
codes, registration requirements for sales personnel, spending limits and reporting to state governments of gifts, compensation
and other remuneration to physicians. This shifting regulatory environment, as well as our obligation to comply with different
reporting and other compliance requirements, in multiple jurisdictions, including foreign laws and regulations comparable to the
U.S. laws and regulations described above, to the extent we continue to pursue operations in foreign countries, such as our clinical
activities in Australia, or if we seek to sell any product that obtains regulatory approval in a foreign country, increases the
possibility that we may violate one or more of these laws. In addition, these conditions may also adversely affect our ability
to obtain regulatory approval for any of our product candidates, the availability of capital, our ability to generate meaningful
or any revenue and, if any of our product candidates achieve regulatory approval, our ability to establish a price we believe
is fair for the approved product. Further, even though we do not and will not control referrals of healthcare services or bill
directly to third-party payors, certain federal and state healthcare laws and regulations pertaining to fraud and abuse and patients’
rights would be applicable to our business, if any of our product candidates obtain regulatory approval and become commercially
available.
All
of these laws impose penalties or other consequences for non-compliance, some of which may be severe. If we or our operations
are found to be in violation of any of these laws or any other governmental regulations that apply to us, the consequences could
include, but are not limited to, fines or other monetary damages, orders forcing us to curtail or restructure our operations,
injunctions and civil or criminal prosecution. Any such penalties could adversely affect our ability to operate our business and
pursue our strategic plans. Additionally, any action against us for violation of these laws, even if we successfully defend against
it, could cause us to incur significant legal expenses and divert management’s attention from the operation of our business.
Moreover, achieving and sustaining compliance with the various U.S. federal and state and foreign laws and regulations that apply
to our business could prove costly. The occurrence of any of these risks could cause our performance and financial condition to
materially suffer.
Any
product for which we obtain marketing approval could be subject to restrictions or withdrawal from the market and we may be subject
to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with products, when
and if any of them is approved.
Any
product for which we obtain marketing approval, along with the manufacturing processes and facilities, post-approval clinical
data, labeling, advertising and promotional activities for such product, will be subject to continual requirements of and review
by the FDA and comparable regulatory authorities. These requirements include submissions of safety and other post-marketing information
and reports, registration requirements, cGMP requirements relating to quality control, quality assurance and corresponding maintenance
of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping, and requirements
regarding company presentations and interactions with healthcare professionals. Even if we obtain regulatory approval of a product,
the approval may be subject to limitations on the indicated uses for which the product may be marketed or to the conditions of
approval, or contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the
product. We also may be subject to state laws and registration requirements covering the distribution of products. Later discovery
of previously unknown problems with products, manufacturers or manufacturing processes, or failure to comply with regulatory requirements,
may result in actions such as:
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restrictions on
product manufacturing, distribution or use;
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restrictions
on the labeling or marketing of a product;
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requirements
to conduct post-marketing studies or clinical trials;
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warning
letters;
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withdrawal
of the products from the market;
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refusal
to approve pending applications or supplements to approved applications that we submit;
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voluntary
or mandatory recall;
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fines;
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suspension
or withdrawal of marketing or regulatory approvals;
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refusal
to permit the import or export of products;
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product
seizure or detentions;
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injunctions
or the imposition of civil or criminal penalties; and
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adverse
publicity.
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If
we or our respective suppliers, third-party contractors, clinical investigators or collaborators are slow to adapt, or are unable
to adapt, to changes in existing regulatory requirements or adoption of new regulatory requirements or policies, we or our respective
collaborators may lose marketing approval for products when and if any of them are approved, resulting in decreased revenue from
milestones, product sales or royalties.
Our
employees, consultants, or third-party partners may engage in misconduct or other improper activities, including but not necessarily
limited to noncompliance with regulatory standards and requirements or internal procedures, policies or agreements to which such
employees, consultants and partners are subject, any of which could have a material adverse effect on our business.
We
are exposed to the risk of employee fraud or other misconduct. Misconduct by employees, consultants, or third party partners could
include intentional failures to comply with FDA regulations, provide accurate information to the FDA, comply with manufacturing
standards we have established, comply with federal and state healthcare fraud and abuse laws and regulations, report financial
information or data accurately, comply with internal procedures, policies or agreements to which such employees, consultants or
partners are subject, or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in
the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other
abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion,
sales commission, customer incentive programs and other business arrangements. Employee, consultant, or third-party misconduct
could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory
sanctions and serious harm to our reputation. The precautions we take to detect and prevent this activity may not be effective
in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits
stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and
we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business
and results of operations, including the imposition of significant fines or other sanctions.
We
receive a large amount of proprietary information from potential or existing licensors of intellectual property and potential
acquisition target companies, all pursuant to confidentiality agreements. The confidentiality and proprietary invention assignment
agreements that we have in place with each of our employees and consultants prohibit the unauthorized disclosure of such information,
but such employees or consultants may nonetheless disclose such information through negligence or willful misconduct. Any such
unauthorized disclosures could subject us to monetary damages and/or injunctive or equitable relief. The notes, analyses and memoranda
that we have generated based off such information are also valuable to our businesses, and the unauthorized disclosure or misappropriation
of such materials by our employees and consultants could significantly harm our strategic initiatives — especially if such
disclosures are made to our competitor companies.
We
may use biological materials and hazardous materials, and any claims relating to improper handling, storage or disposal of these
materials could be time consuming and costly.
We
may use hazardous materials, including chemicals and biological agents and compounds that could be dangerous to human health and
safety or the environment. Our operations may also produce hazardous waste products. Federal, state and local laws and regulations
govern the use, generation, manufacture, storage, handling and disposal of these materials and wastes. Compliance with applicable
environmental laws and regulations may be expensive, and current or future environmental laws and regulations may impair our product
development efforts. In addition, we cannot entirely eliminate the risk of accidental injury or contamination from these materials
or wastes. We do not carry specific biological or hazardous waste insurance coverage, and our property and casualty and general
liability insurance policies specifically exclude coverage for damages and fines arising from biological or hazardous waste exposure
or contamination. Accordingly, in the event of contamination or injury, we could be held liable for damages or penalized with
fines in an amount exceeding our respective resources, and clinical trials or regulatory approvals could be suspended.
Although
we maintain workers’ compensation insurance to cover costs and expenses incurred due to injuries to our employees resulting
from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not
have insurance for environmental liability or toxic tort claims that may be asserted in connection with the storage or disposal
of biological or hazardous materials.
In
addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations.
These current or future laws and regulations may impair our research, development or production efforts. Failure to comply with
these laws and regulations also may result in substantial fines, penalties or other sanctions.
We
face potential product liability exposure, and if successful claims are brought against us, we could incur substantial liability.
The
clinical use of our product candidates and, if any of our product candidates achieves regulatory approval, any future commercial
use of the approved products, exposes us to the risk of product liability claims. Any side effects, manufacturing defects, misuse,
or abuse associated with our product candidates or any approved products could result in injury to a patient or even death. In
addition, a liability claim could be brought against us even if our product candidates or any approved products merely appear
to have caused an injury. These product liability claims could be brought against us by consumers, healthcare providers, pharmaceutical
companies or others that come into contact with our product candidates or any approved products.
Regardless
of merit or potential outcome, product liability claims against us could result in, among other effects, the inability to continue
clinical testing of our product candidates or, for any approved products, commercialization of the products, impairment of our
business reputation, withdrawal of clinical trial participants and distraction of management’s attention from our primary
business activities. In addition, if we cannot successfully defend against product liability claims, we could incur substantial
liabilities, including liabilities that may be beyond the scope or limits of any applicable insurance policies we may have in
place. Any of these outcomes could severely harm our business, financial condition and prospects.
Our
business depends in large part on our ability to protect our proprietary rights and technologies, and we may be unsuccessful in
these efforts.
We
believe our success and ability to compete depends in large part on obtaining and maintaining patent, trademark and trade secret
protection of our product candidates and their respective components and underlying technologies, including devices, formulations,
manufacturing methods and methods of treatment, as well as successfully defending our intellectual property rights against third-party
challenges. Our ability to stop third parties from making, using or selling products that infringe on our intellectual property
rights depends on the extent to which we have secured and properly safeguarded these rights under valid and enforceable patents
or trade secrets.
Although
we previously owned patents protecting our ImmunoPulse® clinical device, our primary U.S. patents providing such protection
expired in 2017, the majority of our foreign patents expired in July 2018, and the final foreign patent expires in 2019. As a
result, we may have limited ability to enforce these rights against third parties to prevent them from making or selling competing
products that rely upon the protected technology, which could harm our competitive position and prospects. In addition to these
proprietary rights that are expired or are expiring between 2017 and 2019, we have also exclusively licensed certain patents that
cover our ImmunoPulse® clinical methods. These patents will expire between 2025 and 2027. These method patents protect the
use of a product for a specified method under certain defined parameters. This type of patent does not prevent a competitor from
making and marketing a product that is identical or similar to the protected product under parameters that are outside the scope
of the patented method claims. Moreover, even if competitors do not actively promote such a product for the indications protected
by the method patent, physicians could prescribe the products for these methods on an off-label basis. Although such off-label
prescriptions may infringe or contribute to the infringement of method-of-use patents, the practice is common and such infringement
is difficult to detect, prevent or prosecute. Furthermore, our licensed patents expiring between 2025 and 2027 may not have as
broad a scope as our patents that are expiring or expired between 2017 and 2019, which in turn may limit our remedies against
competitors making and marketing a product that is identical or similar to ours.
To
the extent our existing patents or pending or planned patent applications expire before we are able to commercialize product depending
on the technology or do not otherwise provide sufficient protection, we could be subject to substantially increased competition
and our business and ability to commercialize or license our technology or product candidates could be materially adversely affected.
Even
if we secure patents that cover our proprietary technology, our efforts to protect our intellectual property rights with patents
may prove inadequate. For instance, the breadth of claims in a patent application is often restricted during patent prosecution,
resulting in granted claims with a more limited scope than the claims in the original application. Additionally, pending or future
patent applications may not result in issued patents. Laws and regulations for the prosecution of patents are continuously evolving,
and the U.S. Supreme Court has recently revised certain tests regarding both the grant and review of patents that could make it
more difficult to obtain issued patents. Also, any patents that are granted could be subject to post-grant proceedings that could
limit their scope or enforceability, and claims that are amended during post-grant proceedings may not be broad enough to provide
meaningful protection. Moreover, any patents that are issued to us or any future collaborators may be circumvented or invalidated
by third-party efforts, may expire before or shortly after obtaining necessary regulatory approvals, or may not provide sufficient
proprietary protection or competitive advantage for other reasons. Such challenges could include third-party pre-issuance submissions
of prior art to the PTO, or opposition, derivation, reexamination, inter parties review, or post-grant review or interference
proceedings challenging our patent rights or the patent rights of others. The cost of these proceedings could be substantial and
it is possible that our efforts to establish priority or validity of the invention would be unsuccessful, resulting in a material
adverse effect on our U.S. patent position. An adverse determination in any such submission, patent office trial, proceeding or
litigation could reduce the scope of, render unenforceable, or invalidate, our patent rights, allow third parties to commercialize
our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize
products without infringing third-party patent rights. In addition, if the breadth or strength of protection provided by our patents
and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize
current or future product candidates. Further, obtaining and maintaining patent protection depends on compliance with various
procedural, document submission, fee payment, and other requirements imposed by government patent agencies, and our patent protection
could be reduced or eliminated for non-compliance with these requirements. These risks may be amplified in some foreign jurisdictions,
where patent protection may not be as strong or as effective as it is in the United States.
Our
reliance on unpatented proprietary rights, including trade secrets and know-how, may also pose significant risks. For instance,
it can be difficult to protect these rights and they may lose their value if they are independently developed by a third party
or if their secrecy is lost. Although we have taken measures to protect these rights, including establishing confidentiality agreements
with employees, consultants and other third parties, these measures may not sufficiently safeguard our unpatented proprietary
rights and may not provide adequate remedies in the event of unauthorized use or disclosure of the confidential information. Despite
these efforts, any of these parties may breach the agreements and may unintentionally or willfully 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 inside and outside the U.S. are less willing or unwilling to protect trade secrets. Moreover, if any
of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent
them, or those to whom they communicate it, from using that technology or information to compete with us. If any of our trade
secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed.
If
we are unable to secure patent protection for our patentable technologies, if any of our issued patents are limited or found to
be invalid or unenforceable, or if we are otherwise unable to adequately protect our patented or unpatented proprietary rights,
our business and prospects could be materially negatively affected.
If
we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results and
stockholders and the investment community could lose confidence in our financial reporting, which could harm our business.
Our
management is responsible for establishing and maintaining adequate internal control over financial reporting. Although management
has determined that our internal control over financial reporting was effective as of July 31, 2018, our controls over financial
processes and reporting may not continue to be effective, or we may identify significant deficiencies or material weaknesses in
our internal controls in the future. Any failure to maintain effective internal control over financial reporting, including failures
to implement new or improved controls as needed in a timely and effective manner or remediate any significant deficiency or material
weakness that is identified in the future, could cause noncompliance with our public reporting obligations, an inability to produce
reliable financial reports or material misstatements in our financial statements or other public disclosures. If any of these
circumstances were to occur, investors could lose confidence in our financial and other reported information, our reputation could
otherwise be harmed, the investment of our stockholders in our company could be negatively affected and the costs to us of raising
additional capital could materially increase, any of which could harm our business and prospects.
Maintaining
compliance with our reporting and other obligations as a public company could strain our resources and distract management.
As
a public company, we experience significant demands that are not applicable to private companies. For example, the Sarbanes-Oxley
Act of 2002 and related and other rules implemented by the SEC and the Nasdaq Capital Market, which maintains the securities exchange
on which our common stock is listed for trading, impose a number of requirements on public companies, including with respect to
corporate governance practices, periodic reporting and other disclosure requirements and financial and disclosure controls and
procedures. Further, the SEC and other regulators have continued to adopt new rules and make changes to existing regulations that
require our compliance, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the corporate governance
and executive compensation-related disclosure requirements of this legislation.
Maintaining
compliance with the rules and regulations applicable to public companies involves significant legal, accounting and financial
costs. Additionally, if we grow as anticipated, we may need to hire additional personnel and implement new and more sophisticated
financial and accounting systems and procedures to continue to meet our public company obligations. Our management and other personnel
devote substantial attention to maintaining our compliance with these obligations, which diverts attention from other aspects
of our business. Any failure to comply with these public company requirements could have a material adverse effect on our business
and prospects and could materially harm our stockholders’ investment in our Company.
We
may not be able to realize value from, or otherwise preserve and utilize, our net operating loss carryforwards and certain other
tax attributes.
If
a corporation undergoes an “ownership change” within the meaning of Section 382 of the Internal Revenue Code of 1986,
as amended, the corporation’s net operating loss carryforwards and certain other tax attributes arising prior to the ownership
change are subject to limitations on use after the ownership change. In general, an ownership change occurs if there is a cumulative
change in the corporation’s equity ownership by certain stockholders that exceeds 50% over a rolling three-year period.
Similar rules may apply under state tax laws. If we experience such an ownership change, our net operating loss carryforwards
generated prior to the ownership change would be subject to annual limitations that could reduce, eliminate or defer the utilization
of these losses.
Moreover,
the recognition and measurement of net operating loss carryforwards may include estimates and judgments by management, and the
Internal Revenue Service could, upon audit or other investigation, disagree with the amount of net operating loss carryforwards
or the determination of whether an ownership change has occurred. Additionally, legislative or regulatory changes or judicial
decisions could further negatively impact the ability to use any tax benefits associated with net operating loss carryforwards.
Any inability to use net operating loss carryforwards to reduce our U.S. federal or state income tax liability could materially
harm our financial condition and results of operations.
Our
tax position could be affected by recent changes in United States federal income tax laws.
On
December 22, 2017, legislation commonly referred to as the “Tax Cuts and Jobs Act” was signed into law and is generally
effective after December 31, 2017. The Tax Cuts and Jobs Act makes significant changes to the United States federal income tax
rules for taxation of individuals and business entities. Most of the changes applicable to individuals are temporary and apply
only to taxable years beginning after December 31, 2017 and before January 1, 2026. For corporations, the Tax Cuts and Jobs Act
reduces the top corporate income tax rate to 21% and repeals the corporate alternative minimum tax, limits the deduction for net
interest expense, limits the deduction for net operating losses and eliminates net operating loss carrybacks, modifies or repeals
many business deductions and credits, shifts the United States toward a more territorial tax system, and imposes new taxes to
combat erosion of the United States federal income tax base. The Tax Cuts and Jobs Act makes numerous other large and small changes
to the federal income tax rules that may affect potential investors and may directly or indirectly affect us. We continue to examine
the impact this tax reform legislation may have on our business. However, the effect of the Tax Cuts and Jobs Act on us and our
affiliates, whether adverse or favorable, is uncertain, and may not become evident for some period of time. This document does
not discuss such legislation or the manner in which it might affect us or purchasers of our common stock. Prospective investors
are urged to consult with their legal and tax advisors with respect to the Tax Cuts and Jobs Act and any other regulatory or administrative
developments and proposals, and their potential effects on them based on their unique circumstances.
Risks
Related to our Growth Strategy
If
we acquire, enter into joint ventures with or obtain a controlling interest in companies in the future, it could adversely affect
our operating results and the value of our Common Stock thereby diluting stockholder value and disrupting our business.
As
part of our growth strategy, we might acquire, enter into joint ventures with, or obtain a significant ownership stake in other
companies. Acquisitions of, joint ventures with and investments in other companies involve numerous risks, including, but not
necessarily limited to:
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risk
of entering new markets in which we have little to no experience;
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diversion
of financial and managerial resources from existing operations;
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successfully
negotiating a proposed acquisition or investment timely and at a price or on terms and conditions favorable to us;
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the
impact of regulatory reviews on a proposed acquisition or investment;
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the
outcome of any legal proceedings that may be instituted with respect to the proposed acquisitions or investment;
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with
respect to an acquisition, difficulties in integrating operations, technologies, services and personnel; and
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potential
inability to maintain relationships with customers of the companies we may acquire or invest in.
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If
we fail to properly evaluate potential acquisitions, joint ventures or investments, we might not achieve the anticipated benefits
of any such transaction, we might incur costs in excess of what we anticipate, and management resources and attention might be
diverted from other necessary or valuable activities.
If
we cannot continue to fund our research and development programs, we may be required to reduce product development, which will
adversely impact our growth strategy.
Our
research and development (“R&D”) programs will require substantial additional capital to conduct research, preclinical
testing and human studies, establish pilot scale and commercial scale manufacturing processes and facilities, and establish and
develop quality control, regulatory, marketing, sales and administrative capabilities to support these programs. We expect to
fund our R&D activities from a combination of cash generated from royalties and milestones from our partners in various past,
ongoing and future collaborations and additional equity or debt financings from third parties. These financings could depress
our stock price. If additional funds are required to support our operations and such funds cannot be obtained on favorable terms,
we may not be able to develop products, which will adversely impact our growth strategy.
Risks
Related to Our Common Stock
The
price and trading volume of our common stock may be subject to extreme volatility, and stockholders could lose all or part of
their investment in our company.
The
trading volume and market price of our common stock has experienced, and is likely to continue to experience, significant volatility.
This volatility could negatively impact our ability to raise additional capital or utilize equity as consideration in any acquisition
transactions we may seek to pursue, and could make it more difficult for existing stockholders to sell their shares of our common
stock at a price they consider acceptable or at all. This volatility is caused by a variety of factors, including, among the other
risks described in these risk factors:
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adverse
research and development or clinical trial results;
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our
liquidity and ability to obtain additional capital, including the market’s reaction to any capital-raising transaction
we may pursue;
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declining
working capital to fund operations, or other signs of financial uncertainty;
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any
negative announcement by the FDA or comparable regulatory bodies outside the United States, including that it has denied any
request to approve any of our product candidates for commercialization;
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conducting
open-ended clinical trials, which could lead to results (either positive or negative) being available to the public prior
to a formal announcement;
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market
assessments of any strategic transaction or collaboration arrangement we may pursue;
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potential
negative market reaction to the terms or volume of any issuance of shares of our common stock or other securities to new investors
pursuant to strategic or capital-raising transactions or to employees, directors or other service providers;
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sales
of substantial amounts of our common stock, or the perception that substantial amounts of our common stock may be sold, by
stockholders in the public market;
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issuance
of new or updated research or reports by securities analysts or changed recommendations for our common stock;
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significant
advances made by competitors that adversely affect our competitive position;
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the
loss of key personnel and the inability to attract and retain additional highly-skilled personnel; and
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general
market and economic conditions, including factors not directly related to our operating performance or the operating performance
of our competitors, such as increased uncertainty in the U.S. healthcare regulatory environment following the results of the
2016 U.S. presidential election.
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addition, the stock market in general, and the market for stock of companies in the life sciences and biotechnology industries
in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the
operating performance of specific companies. In addition, in the past, following periods of volatility in the overall market and
the market price of a particular company’s securities, securities class action litigation has often been instituted against
the company. This type of litigation, if instituted against us, could result in substantial costs and a diversion of our management’s
attention and resources.
If
our common stock is delisted from the Nasdaq Capital Market or we are found to be noncompliant with Nasdaq rules, the market price
and liquidity of our common stock could be materially negatively impacted.
The
listing of our common stock on the Nasdaq Capital Market, or Nasdaq, is contingent upon our compliance with all of Nasdaq’s
continued listing requirements. If we are found to be noncompliant with these requirements, our common stock could be subject
to delisting from Nasdaq. In such event, the market price of our common stock could be negatively impacted, the liquidity of our
common stock could be reduced and our ability to complete equity financings in the future may be limited or prevented.
If
we issue additional equity securities in the future, our existing stockholders would be diluted.
Our
articles of incorporation authorize the issuance of up to 160,000,000 shares of our common stock. In addition to capital-raising
activities, on which we have historically relied for cash to fund our operations, including with our recent October 2017 offerings,
November 2017 warrant exercise inducement offering, February 2018 offering and October 2018 offering, other possible business
and financial uses for our authorized common stock include, among others, stock splits, acquiring other businesses or assets in
exchange for shares of our common stock, issuing shares of our common stock to collaborators in connection with strategic alliances,
issuing common stock to vendors for services performed, attracting and retaining employees with equity compensation or other transactions
and corporate purposes that our Board of Directors deems to be in the best interest of our Company. Additionally, issuances of
common stock could be used for anti-takeover purposes or to delay or prevent changes in control or management of our Company.
Any future issuances of our common stock may be consummated on terms that are not favorable, may not enhance stockholder value
and may adversely affect the trading price of our common stock. Further, any such issuance will reduce the book value per share
of our common stock and reduce the proportionate ownership and voting power of our existing stockholders.
We
have not paid dividends in the past and do not expect to pay dividends in the future, and any return on investment may be limited
to the value of your stock.
We
have never paid dividends on our common stock and do not anticipate paying any dividends for the foreseeable future. You should
not rely on an investment in our stock if you require dividend income. Further, you will only realize income on an investment
in our stock in the event you sell or otherwise dispose of your shares at a price higher than the price you paid for your shares.
Such a gain would result only from an increase in the market price of our common stock, which is uncertain and unpredictable.
If
outstanding options or warrants to purchase shares of our common stock are exercised or outstanding restricted stock units vest
and settle, our existing stockholders would be diluted.
As
of July 31, 2018, we had outstanding (i) options to purchase 8.9 million shares of our common stock, (ii) warrants to purchase
9.0 million shares of our common stock, and (iii) 0.6 million restricted stock units. In addition, as of July 31, 2018, there
were 1.2 million shares reserved for future issuance under our stock incentive and stock purchase plans. The exercise of
options and warrants, the vesting and settlement of restricted stock units or the issuance of additional equity awards under our
stock incentive and stock purchase plans could have an adverse effect on the market for our common stock, including the price
that any stockholder could obtain for its shares. Further, our existing stockholders could experience significant dilution in
the net tangible book value of their investment upon the issuance of additional shares of our common stock through the exercise
of derivative securities that are currently outstanding or that we may issue in the future.
Sales
of common stock by our stockholders, or the perception that such sales may occur, could depress the market price of our common
stock.
The
market price of our common stock could decline as a result of sales by, or the perceived possibility of sales by, our existing
stockholders. Since March 2011, we have completed a number of offerings of our common stock and warrants. Future sales of common
stock by significant stockholders, including by those who acquired their shares in our prior equity offerings, or the perception
that such sales may occur, could depress the price of our common stock.