ABOUT THIS PROSPECTUS
This
prospectus is part of a registration statement on Form S-3 that we
filed with the Securities and Exchange Commission utilizing a
“shelf” registration process. Under this shelf
registration process, the selling stockholders may offer from time
to time up to an aggregate of 2,253,704 shares of common stock in
one or more offerings. The registration statement of which this
prospectus is a part is being filed in accordance with the
registration rights agreement, dated as of February 4, 2019, by and
among GT Biopharma, Inc. and the selling stockholders party
thereto. Pursuant to the registration rights agreement, we have
agreed to indemnify and hold harmless, to the extent permitted by
law, each of the selling stockholders party to the registration
rights agreement and each of such selling stockholder’s
directors, officers, partners, members, employees, agents,
representatives of and each other person, if any, who controls such
selling stockholder within the meaning of the Securities Act of
1933, as amended (the “Securities Act”), from and
against certain losses, claims, damages and liabilities, including
certain liabilities under the Securities Act.
You
should rely only on the information contained in this prospectus
and any free writing prospectus prepared by or on behalf of us that
we have referred you to. We take no responsibility for, and can
provide no assurance as to the reliability of, any other
information that others may give you. No person has been authorized
to give any information or make any representations in connection
with this offering other than those contained or incorporated by
reference in this prospectus, any accompanying prospectus
supplement and any related issuer free writing prospectus in
connection with the offering described herein and therein. Neither
this prospectus nor any prospectus supplement nor any related
issuer free writing prospectus shall constitute an offer to sell or
a solicitation of an offer to buy offered securities in any
jurisdiction in which it is unlawful for such person to make such
an offering or solicitation. This prospectus does not contain all
of the information included in the registration statement. For a
more complete understanding of the offering of the securities, you
should refer to the registration statement, including its
exhibits.
No
action is being taken in any jurisdiction outside the United States
to permit a public offering of common stock or possession or
distribution of this prospectus in that jurisdiction. Persons who
come into possession of this prospectus in jurisdictions outside
the United States are required to inform themselves about and to
observe any restriction as to this offering and the distribution of
this prospectus applicable to those jurisdictions.
Unless
otherwise indicated, information contained in this prospectus
concerning our industry and the markets in which we operate,
including our general expectations and market position, market
opportunity and market share, is based on information from our own
management estimates and research, as well as from industry and
general publications and research, surveys and studies conducted by
third parties. Management estimates are derived from publicly
available information, our knowledge of our industry and
assumptions based on such information and knowledge, which we
believe to be reasonable. In addition, assumptions and estimates of
our and our industry’s future performance are necessarily
subject to a high degree of uncertainty and risk due to a variety
of factors, including those described in “Risk
Factors.” These and other factors could cause our future
performance to differ materially from our assumptions and
estimates. See “Cautionary Note Regarding Forward-Looking
Statements.”
This
prospectus contains summaries of certain provisions contained in
some of the documents described herein, but reference is made to
the actual documents for complete information. All of the summaries
are qualified in their entirety by the actual documents. Copies of
some of the documents referred to herein have been filed, or will
be filed as exhibits to the registration statement of which this
prospectus is a part, and you may obtain copies of those documents
as described below under the heading “Where You Can Find
Additional Information.”
All
references to the number of shares issued or outstanding in this
prospectus, and all per share and other similar data, reflect a
1for 300 reverse stock split that we effected on August 21,
2017.
All
product and company names are trademarks of their respective
owners. Solely for convenience, trademarks and trade names referred
to in this prospectus, including logos, artwork and other visual
displays, may appear without the ® or TM symbols, but such
references are not intended to indicate, in any way, that their
respective owners will not assert, to the fullest extent under
applicable law, their rights thereto. We do not intend our use or
display of other companies’ trade names or trademarks to
imply a relationship with, or endorsement or sponsorship of us by,
any other companies.
Throughout
this prospectus, the terms “we,” “us,”
“our,” and “our company” refer to GT
Biopharma, Inc., a Delaware corporation and its related
subsidiaries.
PROSPECTUS SUMMARY
This summary highlights certain information about us, this offering
and selected information contained elsewhere in or incorporated by
reference in this prospectus. Because this is only a summary, it
does not contain all of the information that may be important to
you or that you should consider before investing in our common
stock. You should read the entire prospectus carefully, especially
“Risk Factors” beginning on page ____ of this
prospectus, and in the section titled “Risk Factors” in
the documents incorporated herein by reference, including our
Quarterly Report on Form 10-Q for the quarter ended September 30,
2018, the other information incorporated by reference in this
prospectus, and the information included in any free writing
prospectus that we have authorized for use in connection with this
offering. This prospectus contains forward-looking statements,
based on current expectations and related to future events and our
future financial performance, that involve risks and uncertainties.
Our actual results may vary materially from those discussed in the
forward-looking statements as a result of various factors,
including, without limitation, those set forth in “Risk
Factors” as well as other matters described in this
prospectus. See “Cautionary Note Regarding Forward-Looking
Statements.”
Overview
We are
a clinical stage biopharmaceutical company focused on the
development and commercialization of novel immuno-oncology products
based off our proprietary Tri-specific Killer Engager (TriKE),
Tetra-specific Killer Engager (TetraKE) and bi-specific Antibody
Drug Conjugate (ADC) technology platforms. Our TriKE and TetraKE
platforms generate proprietary moieties designed to harness and
enhance the cancer killing abilities of a patient’s own
natural killer, or NK, cells. Once bound to a NK cell, our moieties
are designed to enhance the NK cell and precisely direct it to one
or more specifically-targeted proteins (tumor antigens) expressed
on a specific type of cancer, ultimately resulting in the cancer
cell’s death. TriKEs and TetraKEs are made up of recombinant
fusion proteins, can be designed to target any number of tumor
antigens on hematologic malignancies, sarcomas or solid tumors and
do not require patient-specific customization. They are designed to
be dosed in a common outpatient setting similar to modern antibody
therapeutics and are expected to have reasonably low cost of goods.
Our ADC platform generates product candidates that are bi-specific,
ligand-directed single-chain fusion proteins that, we believe,
represent the next generation of ADCs.
Our
TriKE product candidates are single-chain, tri-specific scFv
recombinant fusion proteins composed of the variable regions of the
heavy and light chains (or heavy chain only) of anti-CD16
antibodies, wild-type or a modified form of IL-15 and the variable
regions of the heavy and light chains of an antibody that precisely
targets a specific tumor antigen. We utilize the NK stimulating
cytokine human IL-15 as a crosslinker between the two scFvs which
provides a self-sustaining signal that leads to the proliferation
and activation of NK cells thus enhancing their ability to kill
cancer cells mediated by antibody-dependent cell-mediated
cytotoxicity (ADCC) via the highly potent CD16 activating receptor
on our moieties. Our lead TriKE, GTB-3550, targeting CD33+
malignancies is expected to begin clinical testing in the first
half of 2019. Our second TriKE product candidate, GTB-C3550, is a
next-generation version of GTB-3550 containing a modified CD16
component.
Our
TetraKE product candidates are single-chain fusion proteins
composed of human single-domain anti-CD16 antibody, wild-type IL-15
and the variable regions of the heavy and light chains of two
antibodies that target two specific tumor antigens expressed on
specific types of cancer cells. An example of a TetraKE product
candidate is GTB-1615 which targets EpCAM and CD133 positive solid
tumors. EpCAM is found on many solid tumor cells of epithelial
origin and CD133 is a marker for cancer stem cells. GTB-1615 is
designed to enable a patient’s NK cells to kill not only the
heterogeneous population of cancer cells found in many solid tumors
but also kill the cancer stem cells that are typically responsible
for recurrences. We intend to initiate human clinical testing for
certain of our solid tumor product candidates in 2020.
Our
TriKEs and TetraKEs act by binding to a patient’s NK cell and
a specific tumor antigen enabling an immune synapse between the now
IL-15-enhanced NK cell and the targeted cancer cell. The formation
of this immune synapse induces NK cell activation leading to the
death of the cancer cell. The self-sustaining signal caused by our
IL-15 cross-linker enables prolonged and enhanced proliferation and
activation of NK cells similar to the increased proliferation of
T-cells caused by 41BB-L or CD28 intracellular domains in CAR-T
therapy but without the need to enhance the patient’s NK
cells ex vivo.
We are
using our TriKE and TetraKE platforms with the intent to bring to
market multiple immuno-oncology products that can treat a wide
range of hematologic malignancies, sarcoma and solid tumors. The
platforms are scalable and we are putting processes in place to be
able to produce IND-ready moieties in approximately 90-120 days
after a specific TriKE or TetraKE conceptual design. After
conducting market and competitive research, specific moieties can
then be rapidly advanced into the clinic on our own or through
potential collaborations with larger companies. We are currently
evaluating over a dozen moieties and intend to announce additional
clinical product candidates in the second half of 2019. We believe
our TriKEs and TetraKEs will have the ability, if approved for
marketing, to be used on a stand-alone basis, augment the current
monoclonal antibody therapeutics, be used in conjunction with more
traditional cancer therapy and potentially overcome certain
limitations of current chimeric antigen receptor, or CAR-T,
therapy.
We also
believe our bi-specific, ligand-directed single-chain fusion
proteins represents the next generation of ADCs. Our lead
bi-specific ADC, GTB-1550, which targets CD19+ and/or CD22+
hematological malignancies is currently in a Phase 2 trial being
conducted at the University of Minnesota Masonic Cancer Center in
patients with relapsed/refractory B-cell leukemias or lymphomas. We
believe GTB-1550 has certain properties that could result in
competitive advantages over recently approved ADC products
targeting leukemias and lymphomas. In a Phase 1 trial, of nine
patients that achieved adequate blood levels, we saw a durable
complete response, or CR, in two heavily pretreated patients. One
patient, who had failed multiple previous treatment regimens, has
been cancer free since early 2015.
Our
initial work has been conducted in collaboration with the Masonic
Cancer Center at the University of Minnesota under a program led by
Dr. Jeffrey Miller, the Deputy Director. Dr. Miller is a recognized
leader in the field of NK cell and IL-15 biology and their
therapeutic potential. We have exclusive rights to the TriKE and
TetraKE platforms and are generating additional intellectual
property around specific moieties.
Also,
in connection with the acquisition of Georgetown Translational
Pharmaceuticals on September 1, 2017, we acquired a portfolio of
in-process research and development central nervous system assets
consisting of innovative reformulations and/or repurposing of
existing therapies. These CNS assets address disease states such as
chronic neuropathic pain, myasthenia gravis and motion sickness. We
are currently pursuing out-licensing opportunities related to these
assets.
Immuno-Oncology Product Candidates
GTB-1550
GTB-1550
is a bispecific scFv recombinant fusion protein-drug conjugate
composed of the variable regions of the heavy and light chains of
anti-CD19 and anti-CD22 antibodies and a modified form of
diphtheria toxin (DT390) as its cytotoxic drug payload. CD19 is a
membrane glycoprotein present on the surface of all stages of
B-lymphocyte development and is also expressed on most B-cell
mature lymphoma cells and leukemia cells. CD22 is a glycoprotein
expressed on B-lineage lymphoid precursors, including precursor
acute lymphoblastic leukemia, and often is co-expressed with CD19
on mature B-cell malignancies such as lymphoma.
GTB-1550
targets cancer cells expressing the CD19 receptor or CD22 receptor
or both receptors. When GTB-1550 binds to cancer cells, the cancer
cells internalize GTB-1550, and are killed due to the action of
drug’s cytotoxic diphtheria toxin payload. GTB-1550 has
completed a Phase 1 human clinical trial in patients with
relapsed/refractory B-cell lymphoma or leukemia.
The
initial Phase 1 study enrolled 25 patients with mature or precursor
B-cell lymphoid malignancies expressing the CD19 receptor or CD22
receptor or both receptors. All 25 patients received at least a
single course of therapy. The treatment at the higher doses
produced objective tumor responses with one patient in continuous
partial remission and the second in complete remission. A Phase 2
trial of GTB-1550 is underway in patients with ALL/NHL. The
FDA-approved clinical trial is being conducted at the University of
Minnesota's Masonic Cancer Center. There are currently 18 patients
enrolled in this clinical trial. Patients in this trial are given
an approved increased dosage and schedule of GTB-1550.
We
began enrolling patients in Phase 2 trial of GTB-1550 during the
first quarter of 2017 and the first patient began dosing in April
2017. We expect data from this Phase 2 trial to be available in the
first half 2019.
GTB-3550
GTB-3550
is our first TriKE product candidate. It is a single-chain,
tri-specific scFv recombinant fusion protein conjugate composed of
the variable regions of the heavy and light chains of anti-CD16 and
anti-CD33 antibodies and a modified form of IL-15. We intend to
study this anti-CD16-IL-15-anti-CD33 TriKE in CD33 positive
leukemias, a marker expressed on tumor cells in acute myelogenous
leukemia, or AML, myelodysplastic syndrome, or MDS, and other
hematopoietic malignancies. CD33 is primarily a myeloid
differentiation antigen with endocytic properties broadly expressed
on AML blasts and, possibly, some leukemic stem cells. CD33 or
Siglec-3 (sialic acid binding Ig-like lectin 3, SIGLEC3, SIGLEC3,
gp67, p67) is a transmembrane receptor expressed on cells of
myeloid lineage. It is usually considered myeloid-specific, but it
can also be found on some lymphoid cells. The anti-CD33 antibody
fragment that will be used for these studies was derived from the
M195 humanized anti-CD33 scFV and has been used in multiple human
clinical studies. It has been exploited as target for therapeutic
antibodies for many years. We believe the recent approval of the
antibody-drug conjugate gemtuzumab validates this targeted
approach.
The
GTB-3550 IND will focus on AML, the most common form of adult
leukemia with 21,000 new cases expected in 2018 alone (American
Cancer Society). These patients typically receive frontline
therapy, usually chemotherapy, including cytarabine and an
anthracycline, a therapy that has not changed in over 40 years.
About half will have relapses and require alternative therapies. In
addition, MDS incidence rates have dramatically increased in the
population of the United States from 3.3 per 100,000 individuals
from 2001-2004 to 70 per 100,000 annually, MDS is especially
prevalent in elderly patients that have a median age of 76 years at
diagnosis. The survival of patients with MDS is poor due to
decreased eligibility, as a result of advanced age, for allogeneic
hematopoietic cell transplantation (Allo- HSCT), the only curative
MDS treatment (Cogle CR. Incidence and Burden of the
Myelodysplastic Syndromes. Curr Hematol Malig Rep. 2015;
10(3):272-281). We believe GTB-3550 could serve as a relatively
safe, cost-effective, and easy-to-use therapy for
resistant/relapsing AML and could also be combined with
chemotherapy as frontline therapy thus targeting the larger
market.
The IND
for GTB-3550 was filed in June 2017 by the University of Minnesota.
FDA requested that additional preclinical toxicology be conducted
prior to initiating clinical trials. The FDA also requested some
additional information and clarifications on the manufacturing
(CMC) and clinical packages. The requested additional information
and clarifications were completed and incorporated by us into the
IND in eCTD format. We filed the IND amendment in June 2018 and
announced on November 1, 2018 that we had received notification
from the FDA that the IND was open and the Company was authorized
to initiate a first-in-human Phase 1 study with GTB-3550 in AML,
MDS and severe mastocytosis. We expect to be in a position to begin
the Phase 1 clinical trial in the first half of 2019.
GTB-C3550
GTB-C3550
is a next-generation, follow-on, to our lead TriKE, GTB-3550.
GTB-C3550 contains a modified CD16 moiety which has improved
binding characteristics and enhanced tumor cell killing based on
functional assays and animal models of AML. Using our platform
technology, we substituted the anti-CD16 scFv arm in GTB-3550 with
a novel humanized single-domain anti-CD16 antibody to create this
second-generation molecule which may have improved functionality.
Single-domain antibodies, such as GTB-C3550, typically have several
advantages, including better stability and solubility, more
resistance to pH changes, can better recognize hidden antigenic
sites, lack of a VL portion thus preventing VH/VL mispairing and
are suitable for construction of larger molecules. GTB-C3550
induced a potent increase in NK cell degranulation, measured by
CD107a expression against HL-60 AML tumor targets when compared to
our first- generation TriKE (70.75±3.65% vs.
30.75±5.05%). IFN production was similarly enhanced
(29.2±1.8% vs. 6.55±1.07%). GTB-C3550 also exhibited a
robust increase in NK cell proliferation (57.65±6.05% vs.
20.75±2.55%). GTB-3550 studies will help inform the
development of GTB-C3550 which we expect will de-risk the GTB-C3550
program as data will be generated to make an informed decision on
which, or both, will be brought into later phase
studies.
GTB-1615
GTB-1615
is an example of our first-generation TetraKEs designed for the
treatment of solid tumors. It is a single-chain fusion protein
composed of CD16-IL15-EpCAM-CD133. EpCAM is found on many solid
tumor cells of epithelial origin and CD133 is a marker for cancer
stem cells. This TetraKE is designed to target not only the
heterogeneous population of cancer cells found in solid tumors but
also the cancer stem cells that are typically responsible for
recurrences. We intend to initiate human clinical testing for
certain of our solid tumor product candidates in 2020.
Central Nervous System
Our CNS
portfolio consists of in-process R&D (“IPR&D”)
assets acquired in connection with the acquisition of Georgetown
Translational Pharmaceuticals (“GTP”) on September 1,
2017, consisting of innovative reformulations and/or repurposing of
existing therapies. These CNS assets address disease states such as
chronic neuropathic pain (product candidate PainBrake, utilizing
AccuBreak technology), myasthenia gravis (product candidate
GTP-004) and motion sickness (product candidate
GTP-011).
In the
3rd quarter of 2018, the Company experienced changes in key senior
management, led by the appointment of a CEO with extensive
experience in oncology drug development. These changes resulted in
the prioritization of immuno-oncology development candidates
relative to the CNS development candidates acquired from Georgetown
Translational Pharmaceuticals. In conjunction with these strategic
changes, limited internal resources have delayed the development of
the CNS IPR&D assets. The limited resources, changes in senior
leadership, and favorable market conditions for immuno-oncology
development candidates have resulted in the Company choosing to
focus on development of its immuno-oncology portfolio. We are
assessing our options to realize value from the CNS IPR&D
assets.
RISK FACTORS
Investment in our securities involves risks. Prior to making a
decision about investing in our securities, you should consider
carefully the risk factors, together with all of the other
information contained or incorporated by reference in this
prospectus and any prospectus supplement, including any additional
specific risks described in the section entitled “Risk
Factors” contained in any supplements to this prospectus, as
updated by annual, quarterly and other reports and documents we
file with the SEC after the date of this prospectus and that are
incorporated by reference herein or in the applicable prospectus
supplement. Each of these risk factors could have a material
adverse effect on our business, results of operations, financial
position or cash flows, which may result in the loss of all or part
of your investment.
Risks
Related to Our Business
Our business is at an early stage of development and we may not
develop therapeutic products that can be
commercialized.
Our
business is at an early stage of development. We do not have
immune-oncology products in late stage clinical trials. We are
still in the early stages of identifying and conducting research on
potential therapeutic products. Our potential therapeutic products
will require significant research and development and pre-clinical
and clinical testing prior to regulatory approval in the United
States and other countries. We may not be able to obtain regulatory
approvals, enter clinical trials for any of our product candidates,
or commercialize any products. Our product candidates may prove to
have undesirable and unintended side effects or other
characteristics adversely affecting their safety, efficacy or cost
effectiveness that could prevent or limit their use. Any product
using any of our technology may fail to provide the intended
therapeutic benefits or achieve therapeutic benefits equal to or
better than the standard of treatment at the time of testing or
production.
We have a history of operating losses and we expect to continue to
incur losses for the foreseeable future and we may never generate
revenue or achieve profitability.
As of September 30, 2018, we had an accumulated
deficit of $524,453,000
. We have not generated any
significant revenue to date and are not profitable, and have
incurred losses in each year since our inception. We do not expect
to generate any product sales or royalty revenues for at least four
years. We expect to incur significant additional operating losses
for the foreseeable future as we expand research and development
and clinical trial efforts.
Our
ability to achieve long-term profitability is dependent upon
obtaining regulatory approvals for our products and successfully
commercializing our products alone or with third parties. However,
our operations may not be profitable even if any of our products
under development are successfully developed and produced and
thereafter commercialized. Even if we achieve profitability in the
future, we may not be able to sustain profitability in subsequent
periods.
Even if
we succeed in commercializing one or more of our product
candidates, we expect to continue to incur substantial research and
development and other expenditures to develop and market additional
product candidates. The size of our future net losses will depend,
in part, on the rate of future growth of our expenses and our
ability to generate revenue. Our prior losses and expected future
losses have had and will continue to have an adverse effect on our
stockholders’ equity and working capital.
We will need additional capital to conduct our operations and
develop our products, and our ability to obtain the necessary
funding is uncertain.
We have
used a significant amount of cash since inception to finance the
continued development and testing of our product candidates, and we
expect to need substantial additional capital resources in order to
develop our product candidates going forward and launch and
commercialize any product candidates for which we receive
regulatory approval.
We may
not be successful in generating and/or maintaining operating cash
flow, and the timing of our capital expenditures and other
expenditures may not result in cash sufficient to sustain our
operations through the next 12 months. If financing is not
sufficient and additional financing is not available or available
only on terms that are detrimental to our long-term survival, it
could have a material adverse effect on our ability to continue to
function. The timing and degree of any future capital requirements
will depend on many factors, including:
●
the accuracy of the
assumptions underlying our estimates for capital needs in 2019 and
beyond;
●
scientific and
clinical progress in our research and development
programs;
●
the magnitude and
scope of our research and development programs and our ability to
establish, enforce and maintain strategic arrangements for
research, development, clinical testing, manufacturing and
marketing;
●
our progress with
pre-clinical development and clinical trials;
●
the time and costs
involved in obtaining regulatory approvals;
●
the costs involved
in preparing, filing, prosecuting, maintaining, defending and
enforcing patent claims; and
●
the number and type
of product candidates that we pursue.
Additional
financing through strategic collaborations, public or private
equity or debt financings or other financing sources may not be
available on acceptable terms, or at all. Additional equity
financing could result in significant dilution to our stockholders,
and any debt financings will likely involve covenants restricting
our business activities. Additional financing may not be available
on acceptable terms, or at all. Further, if we obtain additional
funds through arrangements with collaborative partners, these
arrangements may require us to relinquish rights to some of our
technologies, product candidates or products that we would
otherwise seek to develop and commercialize on our
own.
If
sufficient capital is not available, we may be required to delay,
reduce the scope of or eliminate one or more of our research or
product development initiatives, any of which could have a material
adverse effect on our financial condition or business
prospects.
We have identified material weaknesses in our internal control over
financial reporting have not remedied these weaknesses. If we fail
to maintain an effective system of internal control over financial
reporting, we may not be able to accurately report our financial
results or prevent fraud. As a result, stockholders could lose
confidence in our financial and other public reporting, which would
harm our business and the trading price of our common
stock.
Effective internal
control over financial reporting is necessary for us to provide
reliable financial reports and, together with adequate disclosure
controls and procedures, are designed to prevent fraud. Any failure
to implement required new or improved controls, or difficulties
encountered in their implementation, could cause us to fail to meet
our reporting obligations. Ineffective internal control could also
cause investors to lose confidence in our reported financial
information, which could have a negative effect on the trading
price of our common stock.
We have
identified material weaknesses in our internal control over
financial reporting as a company. As defined in Regulation 12b-2
under the Securities Exchange Act of 1934, or the Exchange Act, a
“material weakness” is a deficiency, or combination of
deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement
of our annual or interim consolidated financial statements will not
be prevented, or detected on a timely basis. Specifically, we
determined that we had the following material weaknesses in our
internal control over financial reporting: (i) inadequate
segregation of duties; (ii) risks of executive override; and (iii)
insufficient written policies and procedures for accounting and
financial reporting with respect to the requirements and
application of both generally accepted accounting principles in the
United States of America, or GAAP, and the U.S. Securities and
Exchange Commission, or the SEC, guidelines.
As of
the date of this report, we have not remediated these material
weaknesses. The company intends to take measures to mitigate the
issues identified and implement a functional system of internal
controls over financial reporting. Such measures will include, but
not be limited to hiring of additional employees in its finance and
accounting department, although the timing of such hires is largely
dependent on our securing additional financing to cover such costs;
preparation of risk-control matrices to identify key risks and
develop and document policies to mitigate those risks; and
identification and documentation of standard operating procedures
for key financial activities. The implementation of these
initiatives may not fully address any material weakness or other
deficiencies that we may have in our internal control over
financial reporting.
Even if
we develop effective internal control over financial reporting,
such controls may become inadequate due to changes in conditions or
the degree of compliance with such policies or procedures may
deteriorate, which could result in the discovery of additional
material weaknesses and deficiencies. In any event, the process of
determining whether our existing internal control over financial
reporting is compliant with Section 404 of the Sarbanes-Oxley Act,
or Section 404, and sufficiently effective requires the investment
of substantial time and resources, including by certain members of
our senior management. As a result, this process may divert
internal resources and take a significant amount of time and effort
to complete. In addition, we cannot predict the outcome of this
process and whether we will need to implement remedial actions in
order to establish effective controls over financial reporting. The
determination of whether or not our internal controls are
sufficient and any remedial actions required could result in us
incurring additional costs that we did not anticipate, including
the hiring of outside consultants. We may also fail to timely
complete our evaluation, testing and any remediation required to
comply with Section 404.
We are
required, pursuant to Section 404, to furnish a report by
management on, among other things, the effectiveness of our
internal control over financial reporting. However, for as long as
we are a “smaller reporting company,” our independent
registered public accounting firm will not be required to attest to
the effectiveness of our internal control over financial reporting
pursuant to Section 404. While we could be a smaller reporting
company for an indefinite amount of time, and thus relieved of the
above-mentioned attestation requirement, an independent assessment
of the effectiveness of our internal control over financial
reporting could detect problems that our management's assessment
might not. Such undetected material weaknesses in our internal
control over financial reporting could lead to financial statement
restatements and require us to incur the expense of
remediation.
Our intellectual property may be compromised.
Part of
our value going forward depends on the intellectual property rights
that we have been and are acquiring. There may have been many
persons involved in the development of our intellectual property,
and we may not be successful in obtaining the necessary rights from
all of them. It is possible that in the future, third parties may
challenge our intellectual property rights. We may not be
successful in protecting our intellectual property rights. In
either event, we may lose the value of our intellectual property,
and if so, our business prospects may suffer.
If our efforts to protect the proprietary nature of the
intellectual property related to our technologies are not adequate,
we may not be able to compete effectively in our market and our
business would be harmed.
We rely
upon a combination of patents, trade secret protection and
confidentiality agreements to protect the intellectual property
related to our technologies. Any disclosure to or misappropriation
by third parties of our trade secret or other confidential
information could enable competitors to quickly duplicate or
surpass our technological achievements, thus eroding any
competitive advantage we may derive from this
information.
The
strength of patents in the biotechnology and pharmaceutical field
involves complex legal and scientific questions and can be
uncertain. The patent applications we own or license may fail to
result in issued patents in the United States or in foreign
countries. Third parties may challenge the validity, enforceability
or scope of any issued patents we own or license or any
applications that may issue as patents in the future, which may
result in those patents being narrowed, invalidated or held
unenforceable. Even if they are unchallenged, our patents and
patent applications may not adequately protect our intellectual
property or prevent others from developing similar products that do
not fall within the scope of our patents. If the breadth or
strength of protection provided by the patents we hold or pursue is
threatened, our ability to commercialize any product candidates
with technology protected by those patents could be threatened.
Further, if we encounter delays in our clinical trials, the period
of time during which we would have patent protection for any
covered product candidates that obtain regulatory approval would be
reduced. Since patent applications in the United States and most
other countries are confidential for a period of time after filing,
we cannot be certain at the time of filing that we are the first to
file any patent application related to our product
candidates.
In
addition to the protection afforded by patents, we seek to rely on
trade secret protection and confidentiality agreements to protect
proprietary know-how that is not patentable, processes for which
patents are difficult to enforce and any other elements of our
discovery platform and drug development processes that involve
proprietary know-how, information or technology that is not covered
by patents or not amenable to patent protection. Although we
require all of our employees and certain consultants and advisors
to assign inventions to us, and all of our employees, consultants,
advisors and any third parties who have access to our proprietary
know-how, information or technology to enter into confidentiality
agreements, our trade secrets and other proprietary information may
be disclosed or competitors may otherwise gain access to such
information or independently develop substantially equivalent
information. Further, the laws of some foreign countries do not
protect proprietary rights to the same extent or in the same manner
as the laws of the United States. As a result, we may encounter
significant difficulty in protecting and defending our intellectual
property both in the United States and abroad. If we are unable to
prevent material disclosure of the trade secret intellectual
property related to our technologies to third parties, we may not
be able to establish or maintain the competitive advantage that we
believe is provided by such intellectual property, which could
materially adversely affect our market position and business and
operational results.
Claims that we infringe the intellectual property rights of others
may prevent or delay our drug discovery and development
efforts.
Our
research, development and commercialization activities, as well as
any product candidates or products resulting from those activities,
may infringe or be accused of infringing a patent or other form of
intellectual property under which we do not hold a license or other
rights. Third parties may assert that we are employing their
proprietary technology without authorization. There may be
third-party patents of which we are currently unaware, with claims
that cover the use or manufacture of our product candidates or the
practice of our related methods. Because patent applications can
take many years to issue, there may be currently pending patent
applications that may later result in issued patents that our
product candidates may infringe. In addition, third parties may
obtain patents in the future and claim that use of our technologies
infringes one or more claims of these patents. If our activities or
product candidates infringe the patents or other intellectual
property rights of third parties, the holders of such intellectual
property rights may be able to block our ability to commercialize
such product candidates or practice our methods unless we obtain a
license under the intellectual property rights or until any
applicable patents expire or are determined to be invalid or
unenforceable.
Defense
of any intellectual property infringement claims against us,
regardless of their merit, would involve substantial litigation
expense and would be a significant diversion of employee resources
from our business. In the event of a successful claim of
infringement against us, we may have to pay substantial damages,
obtain one or more licenses from third parties, limit our business
to avoid the infringing activities, pay royalties and/or redesign
our infringing product candidates or methods, any or all of which
may be impossible or require substantial time and monetary
expenditure. Further, if we were to seek a license from the third
party holder of any applicable intellectual property rights, we may
not be able to obtain the applicable license rights when needed or
on commercially reasonable terms, or at all. The occurrence of any
of the above events could prevent us from continuing to develop and
commercialize one or more of our product candidates and our
business could materially suffer.
We may desire, or be forced, to seek additional licenses to use
intellectual property owned by third parties, and such licenses may
not be available on commercially reasonable terms or at
all.
A third
party may hold intellectual property, including patent rights, that
are important or necessary to the development of our product
candidates, in which case we would need to obtain a license from
that third party or develop a different formulation of the product
that does not infringe upon the applicable intellectual property,
which may not be possible. Additionally, we may identify product
candidates that we believe are promising and whose development and
other intellectual property rights are held by third parties. In
such a case, we may desire to seek a license to pursue the
development of those product candidates. Any license that we may
desire to obtain or that we may be forced to pursue may not be
available when needed on commercially reasonable terms or at all.
Any inability to secure a license that we need or desire could have
a material adverse effect on our business, financial condition and
prospects.
The patent protection covering some of our product candidates may
be dependent on third parties, who may not effectively maintain
that protection.
While
we expect that we will generally seek to gain the right to fully
prosecute any patents covering product candidates we may in-license
from third-party owners, there may be instances when platform
technology patents that cover our product candidates remain
controlled by our licensors. If any of our current or future
licensing partners that retain the right to prosecute patents
covering the product candidates we license from them fail to
appropriately maintain that patent protection, we may not be able
to prevent competitors from developing and selling competing
products or practicing competing methods and our ability to
generate revenue from any commercialization of the affected product
candidates may suffer.
We may be involved in lawsuits to protect or enforce our patents or
the patents of our licensors, which could be expensive, time-
consuming and unsuccessful.
Competitors may
infringe our patents or the patents of our current or potential
licensors. To attempt to stop infringement or unauthorized use, we
may need to enforce one or more of our patents, which can be
expensive and time-consuming and distract management. If we pursue
any litigation, a court may decide that a patent of ours or our
licensor’s is not valid or is unenforceable, or may refuse to
stop the other party from using the relevant technology on the
grounds that our patents do not cover the technology in question.
Further, the legal systems of certain countries, particularly
certain developing countries, do not favor the enforcement of
patents, which could reduce the likelihood of success of any
infringement proceeding we pursue in any such jurisdiction. An
adverse result in any infringement litigation or defense
proceedings could put one or more of our patents at risk of being
invalidated, held unenforceable, or interpreted narrowly and could
put our patent applications at risk of not issuing, which could
limit our ability to exclude competitors from directly competing
with us in the applicable jurisdictions.
Interference
proceedings provoked by third parties or brought by the U.S. PTO
may be necessary to determine the priority of inventions with
respect to our patents or patent applications or those of our
licensors. An unfavorable outcome could require us to cease using
the related technology or to attempt to license rights to use it
from the prevailing party. Our business could be harmed if the
prevailing party does not offer us a license on commercially
reasonable terms, or at all. Litigation or interference proceedings
may fail and, even if successful, may result in substantial costs
and distract our management and other employees.
If we are unsuccessful in obtaining or maintaining patent
protection for intellectual property in development, our business
and competitive position would be harmed.
We are
seeking patent protection for some of our technology and product
candidates. Patent prosecution is a challenging process and is not
assured of success. If we are unable to secure patent protection
for our technology and product candidates, our business may be
adversely impacted.
In
addition, issued patents and pending international applications
require regular maintenance. Failure to maintain our portfolio may
result in loss of rights that may adversely impact our intellectual
property rights, for example by rendering issued patents
unenforceable or by prematurely terminating pending international
applications.
If we are unable to protect the confidentiality of our trade
secrets, our business and competitive position would be
harmed.
In
addition to seeking patents for some of our technology and product
candidates, we also rely on trade secrets, including unpatented
know- how, technology and other proprietary information, to
maintain our competitive position. We currently, and expect in the
future to continue to, seek to protect these trade secrets, in
part, by entering into confidentiality agreements with parties who
have access to them, such as our employees, collaborators, contract
manufacturers, consultants, advisors and other third parties. We
also enter into confidentiality and invention or patent assignment
agreements with our employees and consultants. Despite these
efforts, any of these parties may breach the agreements and
disclose our proprietary information, including our trade secrets,
and we may not be able to obtain adequate remedies for any such
disclosure. 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 United States are less willing or
unwilling to protect trade secrets. 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 disclose the trade secrets, 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 fail to meet our obligations under our license agreements, we
may lose our rights to key technologies on which our business
depends.
Our
business depends in part on licenses from third parties. These
third-party license agreements impose obligations on us, such as
payment obligations and obligations to diligently pursue
development of commercial products under the licensed patents. If a
licensor believes that we have failed to meet our obligations under
a license agreement, the licensor could seek to limit or terminate
our license rights, which could lead to costly and time-consuming
litigation and, potentially, a loss of the licensed rights. During
the period of any such litigation, our ability to carry out the
development and commercialization of potential products could be
significantly and negatively affected. If our license rights were
restricted or ultimately lost, our ability to continue our business
based on the affected technology platform could be severely
adversely affected.
We will have to hire additional executive officers and employees to
operate our business. If we are unable to hire qualified personnel,
we may not be able to implement our business strategy.
We
currently have only three fulltime employees. The loss of the
services of any of our employees could delay our product
development programs and our research and development efforts. We
do not maintain key person life insurance on any of our officers,
employees or consultants. In order to develop our business in
accordance with our business strategy, we will have to hire
additional qualified personnel, including in the areas of
manufacturing, clinical trials management, regulatory affairs,
finance, and business development. We will need to raise sufficient
funds to hire the necessary employees and have commenced our search
for additional key employees.
Moreover, there is
intense competition for a limited number of qualified personnel
among biopharmaceutical, biotechnology, pharmaceutical and other
businesses. Many of the other pharmaceutical companies against
which we compete for qualified personnel have greater financial and
other resources, different risk profiles, longer histories in the
industry and greater ability to provide valuable cash or stock
incentives to potential recruits than we do. They also may provide
more diverse opportunities and better chances for career
advancement. Some of these characteristics may be more appealing to
high quality candidates than what we are able to offer as an early-
stage company. If we are unable to continue to attract and retain
high quality personnel, the rate and success at which we can
develop and commercialize product candidates will be
limited.
We depend on key personnel for our continued operations and future
success, and a loss of certain key personnel could significantly
hinder our ability to move forward with our business
plan.
Because
of the specialized nature of our business, we are highly dependent
on our ability to identify, hire, train and retain highly qualified
scientific and technical personnel for the research and development
activities we conduct or sponsor. The loss of one or more key
executive officers, or scientific officers, would be significantly
detrimental to us. In addition, recruiting and retaining qualified
scientific personnel to perform research and development work is
critical to our success. Our anticipated growth and expansion into
areas and activities requiring additional expertise, such as
clinical testing, regulatory compliance, manufacturing and
marketing, will require the addition of new management personnel
and the development of additional expertise by existing management
personnel. There is intense competition for qualified personnel in
the areas of our present and planned activities. Accordingly, we
may not be able to continue to attract and retain the qualified
personnel, which would adversely affect the development of our
business.
We may be subject to claims by third parties asserting that our
employees or we have misappropriated their intellectual property,
or claiming ownership of what we regard as our own intellectual
property.
Many of
our employees were previously employed at universities or other
biotechnology or pharmaceutical companies, including our
competitors or potential competitors. Although we try to ensure
that our employees do not use the proprietary information or
know-how of others in their work for us, with contractual
provisions and other procedures, we may be subject to claims that
these employees or we have used or disclosed intellectual property,
including trade secrets or other proprietary information, of any
such employee’s former employers. Litigation may be necessary
to defend against any such claims.
In
addition, while it is our policy to require our employees and
contractors who may be involved in the development of intellectual
property to execute agreements assigning such intellectual property
to us, we may be unsuccessful in executing such an agreement with
each party who in fact contributes to the development of
intellectual property that we regard as our own. Further, the terms
of such assignment agreements may be breached and we may not be
able to successfully enforce their terms, which may force us to
bring claims against third parties, or defend claims they may bring
against us, to determine the ownership of intellectual property
rights we may regard and treat as our own.
Our employees may engage in misconduct or other improper
activities, including noncompliance with regulatory standards and
requirements, which could cause our business to
suffer.
We are
exposed to the risk of employee fraud or other misconduct.
Misconduct by employees could include intentional failures to
comply with regulations of governmental authorities, such as the
FDA or the European Medicines Agency, or EMA, to provide accurate
information to the FDA or EMA, to comply with manufacturing
standards we have established, to comply with federal, state and
international healthcare fraud and abuse laws and regulations as
they may become applicable to our operations, to report financial
information or data accurately or to disclose unauthorized
activities to us. Employee 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. It is not always possible to identify and deter
employee misconduct, and the precautions we currently take and the
procedures we may establish in the future as our operations and
employee base expand to detect and prevent this type of 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 by our employees
to comply 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.
Our
reliance on the activities of our non-employee consultants,
research institutions and scientific contractors, whose activities
are not wholly within our control, may lead to delays in
development of our proposed products.
We rely
extensively upon and have relationships with scientific consultants
at academic and other institutions, some of whom conduct research
at our request, and other consultants with expertise in clinical
development strategy or other matters. These consultants are not
our employees and may have commitments to, or consulting or
advisory contracts with, other entities that may limit their
availability to us. We have limited control over the activities of
these consultants and, except as otherwise required by our
collaboration and consulting agreements to the extent they exist,
can expect only limited amounts of their time to be dedicated to
our activities. These research facilities may have commitments to
other commercial and non-commercial entities. We have limited
control over the operations of these laboratories and can expect
only limited amounts of time to be dedicated to our research
goals.
It may take longer to complete our clinical trials than we project,
or we may not be able to complete them at all.
For
budgeting and planning purposes, we have projected the date for the
commencement, continuation and completion of our various clinical
trials. However, a number of factors, including scheduling
conflicts with participating clinicians and clinical institutions,
and difficulties in identifying and enrolling patients who meet
trial eligibility criteria, may cause significant delays. We may
not commence or complete clinical trials involving any of our
products as projected or may not conduct them
successfully.
We
expect to rely on medical institutions, academic institutions or
clinical research organizations to conduct, supervise or monitor
some or all aspects of clinical trials involving our products. We
will have less control over the timing and other aspects of these
clinical trials than if we conducted them entirely on our own. If
we fail to commence or complete, or experience delays in, any of
our planned clinical trials, our stock price and our ability to
conduct our business as currently planned could be
harmed.
Clinical drug development is costly, time-consuming and uncertain,
and we may suffer setbacks in our clinical development program that
could harm our business.
Clinical drug
development for our product candidates is costly, time-consuming
and uncertain. Our product candidates are in various stages of
development and while we expect that clinical trials for these
product candidates will continue for several years, such trials may
take significantly longer than expected to complete. In addition,
we, the FDA, an institutional review board, or IRB, or other
regulatory authorities, including state and local agencies and
counterpart agencies in foreign countries, may suspend, delay,
require modifications to or terminate our clinical trials at any
time, for various reasons, including:
●
discovery of safety
or tolerability concerns, such as serious or unexpected toxicities
or side effects or exposure to otherwise unacceptable health risks,
with respect to study participants;
●
lack of
effectiveness of any product candidate during clinical trials or
the failure of our product candidates to meet specified
endpoints;
●
delays in subject
recruitment and enrollment in clinical trials or inability to
enroll a sufficient number of patients in clinical trials to ensure
adequate statistical ability to detect statistically significant
treatment effects;
●
difficulty in
retaining subjects and volunteers in clinical trials;
●
difficulty in
obtaining IRB approval for studies to be conducted at each clinical
trial site;
●
delays in
manufacturing or obtaining, or inability to manufacture or obtain,
sufficient quantities of materials for use in clinical
trials;
●
inadequacy of or
changes in our manufacturing process or the product formulation or
method of delivery;
●
delays or failure
in reaching agreement on acceptable terms in clinical trial
contracts or protocols with prospective contract research
organizations, or CROs, clinical trial sites and other third-party
contractors;
●
inability to add a
sufficient number of clinical trial sites;
●
uncertainty
regarding proper formulation and dosing;
●
failure by us, our
employees, our CROs or their employees or other third-party
contractors to comply with contractual and applicable regulatory
requirements or to perform their services in a timely or acceptable
manner;
●
scheduling
conflicts with participating clinicians and clinical
institutions;
●
failure to design
appropriate clinical trial protocols;
●
inability or
unwillingness of medical investigators to follow our clinical
protocols;
●
difficulty in
maintaining contact with subjects during or after treatment, which
may result in incomplete data; or
●
changes in
applicable laws, regulations and regulatory policies.
If we experience delays or difficulties in the enrollment of
patients in clinical trials, those clinical trials could take
longer than expected to complete and our receipt of necessary
regulatory approvals could be delayed or prevented.
We may
not be able to initiate or continue clinical trials for our product
candidates if we are unable to locate and enroll a sufficient
number of eligible patients to participate in these trials as
required by U.S. Food and Drug Administration, or the FDA, or
similar regulatory authorities outside the United States. In
particular, because we are focused on patients with molecularly
defined cancers, our pool of suitable patients may be smaller and
more selective and our ability to enroll a sufficient number of
suitable patients may be limited or take longer than anticipated.
In addition, some of our competitors have ongoing clinical trials
for product candidates that treat the same indications as our
product candidates, and patients who would otherwise be eligible
for our clinical trials may instead enroll in clinical trials of
our competitors’ product candidates.
Patient
enrollment for any of our clinical trials may also be affected by
other factors, including without limitation:
●
the severity of the
disease under investigation;
●
the frequency of
the molecular alteration we are seeking to target in the applicable
trial;
●
the eligibility
criteria for the study in question;
●
the perceived risks
and benefits of the product candidate under study;
●
the extent of the
efforts to facilitate timely enrollment in clinical
trials;
●
the patient
referral practices of physicians;
●
the ability to
monitor patients adequately during and after treatment;
and
●
the proximity and
availability of clinical trial sites for prospective
patients.
Our
inability to enroll a sufficient number of patients for our
clinical trials would result in significant delays and could
require us to abandon one or more clinical trials altogether.
Enrollment delays in our clinical trials may result in increased
development costs for our product candidates, and we may not have
or be able to obtain sufficient cash to fund such increased costs
when needed, which could result in the further delay or termination
of the trial.
Consistent with our
general product development strategy, we intend to design future
trials for our product candidates to include some patients with the
applicable clinical characteristics, stage of therapy, molecular
alterations, biomarkers, and/or cell surface antigens that
determine therapeutic options, or are indicators of the disease,
with a view to assessing possible early evidence of potential
therapeutic effect. If we are unable to locate and include such
patients in those trials, then our ability to make those early
assessments and to seek participation in FDA expedited review and
approval programs, including breakthrough therapy and fast track
designation, or otherwise to seek to accelerate clinical
development and regulatory timelines, could be
compromised.
We have limited clinical testing and regulatory capabilities, and
human clinical trials are subject to extensive regulatory
requirements, very expensive, time-consuming and difficult to
design and implement. Our products may fail to achieve necessary
safety and efficacy endpoints during clinical trials, which may
limit our ability to generate revenues from therapeutic
products.
We
cannot assure you that we will be able to invest or develop
resources for clinical trials successfully or as expediently as
necessary. In particular, human clinical trials can be very
expensive and difficult to design and implement, in part because
they are subject to rigorous regulatory requirements. The clinical
trial process is time consuming. We estimate that clinical trials
of our product candidates will take at least several years to
complete. Furthermore, failure can occur at any stage of the
trials, and we could encounter problems that cause us to abandon or
repeat clinical trials. The commencement and completion of clinical
trials may be affected by several factors, including:
●
unforeseen safety
issues;
●
determination of
dosing issues;
●
inability to
demonstrate effectiveness during clinical trials;
●
slower than
expected rates of patient recruitment;
●
inability to
monitor patients adequately during or after treatment;
and
●
inability or
unwillingness of medical investigators to follow our clinical
protocols.
In
addition, we or the FDA, may suspend our clinical trials at any
time if it appears that we are exposing participants to
unacceptable health risks or if the FDA finds deficiencies in our
investigational new drug application, or IND, submissions or the
conduct of these trials.
We are subject to extensive regulation, which can be costly and
time consuming and can subject us to unanticipated delays. even if
we obtain regulatory approval for some of our products, those
products may still face regulatory difficulties.
All of
our potential products, processing and manufacturing activities,
are subject to comprehensive regulation by the FDA in the United
States and by comparable authorities in other countries. The
process of obtaining FDA and other required regulatory approvals,
including foreign approvals, is expensive and often takes many
years and can vary substantially based upon the type, complexity
and novelty of the products involved. In addition, regulatory
agencies may lack experience with our technologies and products,
which may lengthen the regulatory review process, increase our
development costs and delay or prevent their
commercialization.
If we
violate regulatory requirements at any stage, whether before or
after we obtain marketing approval, the FDA may take enforcement
action(s) against us, which could include issuing a warning or
untitled letter, placing a clinical hold on an ongoing clinical
trial, product seizure, enjoining our operations, refusal to
consider our applications for pre-market approval, refusal of an
investigational new drug application, fines, or even civil or
criminal liability, any of which could materially harm our
reputation and financial results. Additionally, we may not be able
to obtain the labeling claims necessary or desirable for the
promotion of our products. We may also be required to undertake
postmarketing trials to provide additional evidence of safety and
effectiveness. In addition, if we or others identify side effects
after any of our adoptive therapies are on the market, or if
manufacturing problems occur, regulators may withdraw their
approval and reformulations, additional clinical trials, changes in
labeling of our products, and additional marketing applications may
be required.
Any of
the following factors, among others, could cause regulatory
approval for our product candidates to be delayed, limited or
denied:
●
the product
candidates require significant clinical testing to demonstrate
safety and effectiveness before applications for marketing approval
can be filed with the FDA and other regulatory
authorities;
●
data obtained from
pre-clinical and nonclinical animal testing and clinical trials can
be interpreted in different ways, and regulatory authorities may
not agree with our respective interpretations or may require us to
conduct additional testing;
●
negative or
inconclusive results or the occurrence of serious or unexpected
adverse events during a clinical trial could cause us to delay or
terminate development efforts for a product candidate;
and/or
●
FDA and other
regulatory authorities may require expansion of the size and scope
of the clinical trials.
Any
difficulties or failures that we encounter in securing regulatory
approval for our product candidates would likely have a substantial
adverse impact on our ability to generate product sales, and could
make any search for a collaborative partner more
difficult.
Obtaining regulatory approval even after clinical trials that are
believed to be successful is an uncertain process.
Even if
we complete our planned clinical trials and believe the results
were successful, obtaining regulatory approval is a lengthy,
expensive and uncertain process, and the FDA or other regulatory
agencies may delay, limit or deny approval of any of our
applications for pre-market approval for many reasons,
including:
●
we may not be able
to demonstrate to the FDA’s satisfaction that our product
candidates are safe and effective for any indication;
●
the results of
clinical trials may not meet the level of statistical significance
or clinical significance required by the FDA for
approval;
●
the FDA may
disagree with the number, design, size, conduct or implementation
of our clinical trials;
●
the FDA may not
find the data from pre-clinical studies and clinical trials
sufficient to demonstrate that the clinical and other benefits of
our product candidates outweigh their safety risks;
●
the FDA may
disagree with our interpretation of data from pre-clinical studies
or clinical trials, or may not accept data generated at our
clinical trial sites;
●
the data collected
from pre-clinical studies and clinical trials of our product
candidates may not be sufficient to support the submission of
applications for regulatory approval;
●
the FDA may have
difficulties scheduling an advisory committee meeting in a timely
manner, or the advisory committee may recommend against approval of
our application or may recommend that the FDA require, as a
condition of approval, additional pre-clinical studies or clinical
trials, limitations on approved labeling, or distribution and use
restrictions;
●
the FDA may require
development of a risk evaluation and mitigation strategy as a
condition of approval;
●
the FDA may
identify deficiencies in the manufacturing processes or facilities
of third-party manufacturers with which we enter into agreements
for clinical and commercial supplies;
●
the FDA may change
their approval policies or adopt new regulations that adversely
affect our applications for pre-market approval; and
●
the FDA may require
simultaneous approval for both adults and for children and
adolescents delaying needed approvals, or we may have successful
clinical trial results for adults but not children and adolescents,
or vice versa.
Before
we can submit an application for regulatory approval in the United
States, we must conduct a pivotal, Phase 3 trial. We will also need
to agree on a protocol with the FDA for a clinical trial before
commencing the trial. Phase 3 clinical trials frequently produce
unsatisfactory results even though prior clinical trials were
successful. Therefore, even if the results of our Phase 2 trials
are successful, the results of the additional trials that we
conduct may or may not be successful. Further, our product
candidates may not be approved even if they achieve their primary
endpoints in Phase 3 clinical trials. The FDA or other foreign
regulatory authorities may disagree with our trial design and our
interpretation of data from preclinical studies and clinical
trials. Any of these regulatory authorities may change requirements
for the approval of a product candidate even after reviewing and
providing comments or advice on a protocol for a clinical trial.
The FDA or other regulatory agencies may require that we conduct
additional clinical, nonclinical, manufacturing validation or drug
product quality studies and submit those data before considering or
reconsidering the application. Depending on the extent of these or
any other studies, approval of any applications that we submit may
be delayed by several years, or may require us to expend more
resources than we have available. It is also possible that
additional studies, if performed and completed, may not be
considered sufficient by the FDA or other regulatory
agencies.
In
addition, the FDA or other regulatory agencies may also approve a
product candidate for fewer or more limited indications than we
request, may impose significant limitations related to use
restrictions for certain age groups, warnings, precautions or
contraindications or may grant approval contingent on the
performance of costly post-marketing clinical trials or risk
mitigation requirements.
We will continue to be subject to extensive FDA regulation
following any product approvals, and if we fail to comply with
these regulations, we may suffer a significant setback in our
business.
Even if
we are successful in obtaining regulatory approval of our product
candidates, we will continue to be subject to the requirements of
and review by, the FDA and comparable regulatory authorities in the
areas of manufacturing processes, post-approval clinical data,
adverse event reporting, labeling, advertising and promotional
activities, among other things. In addition, any marketing approval
we receive may be limited in terms of the approved product
indication or require costly post-marketing testing and
surveillance. Discovery after approval of previously unknown
problems with a product, manufacturer or manufacturing process, or
a failure to comply with regulatory requirements, may result in
enforcement actions such as:
●
warning letters or
other actions requiring changes in product manufacturing processes
or restrictions on product marketing or distribution;
●
product recalls or
seizures or the temporary or permanent withdrawal of a product from
the market;
●
suspending any
ongoing clinical trials;
●
temporary or
permanent injunctions against our production
operations;
●
refusal of our
applications for pre-market approval or an investigational new drug
application; and
●
fines, restitution
or disgorgement of profits or revenue, the imposition of civil
penalties or criminal prosecution.
The
occurrence of any of these actions would likely cause a material
adverse effect on our business, financial condition and results of
operations.
Many of our business practices are subject to scrutiny and
potential investigation by regulatory and government enforcement
authorities, as well as to lawsuits brought by private citizens
under federal and state laws. We could become subject to
investigations, and our failure to comply with applicable law or an
adverse decision in lawsuits may result in adverse consequences to
us. If we fail to comply with U.S. healthcare laws, we could face
substantial penalties and financial exposure, and our business,
operations and financial condition could be adversely
affected.
While
payment is not yet available from third-party payors (government or
commercial) for our product, our goal is to obtain such coverage as
soon as possible after product approval and commercial launch in
the U.S. If this occurs, the availability of such payment would
mean that many healthcare laws would place limitations and
requirements on the manner in which we conduct our business
(including our sales and promotional activities and interactions
with healthcare professionals and facilities) and could result in
liability and exposure to us. In some instances, our interactions
with healthcare professionals and facilities that occurred prior to
commercialization could have implications at a later date. The laws
that may affect our ability to operate include, among others: (i)
the federal healthcare programs Anti- Kickback Statute, which
prohibits, among other things, persons from knowingly and willfully
soliciting, receiving, offering or paying remuneration, directly or
indirectly, in exchange for or to induce either the referral of an
individual for, or the purchase, order or recommendation of, any
good or service for which payment may be made under federal
healthcare programs such as Medicare or Medicaid; (ii) federal
false claims laws which prohibit, among other things, individuals
or entities from knowingly presenting, or causing to be presented,
claims for payment from Medicare, Medicaid, or other third-party
payors that are false or fraudulent, and which may apply to
entities like us under theories of “implied
certification” where the government and qui tam relators may
allege that device companies are liable where a product that was
paid for by the government in whole or in part was promoted
“off-label,” lacked necessary approval, or failed to
comply with good manufacturing practices or other laws; (iii)
transparency laws and related reporting and/or disclosures such as
the Sunshine Act; and/or (iv) state law equivalents of each of the
above federal laws, such as anti-kickback and false claims laws
which may apply to items or services reimbursed by any third-party
payor, including commercial insurers, many of which differ from
their federal counterparts in significant ways, thus complicating
compliance efforts.
If our
operations are found to be in violation of any of the laws
described above or any other governmental regulations that apply to
us, we may be subject to penalties, including civil and criminal
penalties, exclusion from participation in government healthcare
programs, damages, fines and the curtailment or restructuring of
our operations. Any penalties, damages, fines, curtailment or
restructuring of our operations could adversely affect our ability
to operate our business and our financial results. The risk of our
being found in violation of these laws is increased by the fact
that their provisions are open to a variety of evolving
interpretations and enforcement discretion. 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
our management’s attention from the operation of our
business.
Both
federal and state government agencies have heightened civil and
criminal enforcement efforts. There are numerous ongoing
investigations of healthcare pharmaceutical companies and others in
the healthcare space, as well as their executives and managers. In
addition, amendments to the Federal False Claims Act, have made it
easier for private parties to bring qui tam (whistleblower)
lawsuits against companies under which the whistleblower may be
entitled to receive a percentage of any money paid to the
government. In addition, the Affordable Care Act amended the
federal civil False Claims Act to provide that a claim that
includes items or services resulting from a violation of the
federal anti-kickback statute constitutes a false or fraudulent
claim for purposes of the federal civil False Claims Act. Penalties
include substantial fines for each false claim, plus three times
the amount of damages that the federal government sustained because
of the act of that person or entity and/or exclusion from the
Medicare program. In addition, a majority of states have adopted
similar state whistleblower and false-claims provision. There can
be no assurance that our activities will not come under the
scrutiny of regulators and other government authorities or that our
practices will not be found to violate applicable laws, rules and
regulations or prompt lawsuits by private citizen "relators" under
federal or state false claims laws. Any future investigations of
our business or executives, or enforcement action or prosecution,
could cause us to incur substantial costs, and result in
significant liabilities or penalties, as well as damage to our
reputation.
Laws
impacting the U.S. healthcare system are subject to a great deal of
uncertainty, which may result in adverse consequences to our
business.
There
have been a number of legislative and regulatory proposals to
change the healthcare system, reduce the costs of healthcare and
change medical reimbursement policies. Doctors, clinics, hospitals
and other users of our products may decline to purchase our
products to the extent there is uncertainty regarding coverage from
government or commercial payors. Further proposed legislation,
regulation and policy changes affecting third-party reimbursement
are likely. Among other things, Congress has in the past proposed
changes to and the repeal of the Patient Protection and Affordable
Care and Health Care and Education Affordability Reconciliation Act
of 2010 (collectively, the “Affordable Care Act”), and
lawsuits have been brought challenging aspects of the law at
various points. There have been repeated recent attempts by
Congress to repeal or replace the Affordable Care Act. At this
time, it remains unclear whether there will be any changes made to
or any repeal or replacement of the Affordable Care Act, with
respect to certain of its provisions or in its entirety. We are
unable to predict what legislation or regulation, if any, relating
to the health care industry or third-party coverage and
reimbursement may be enacted in the future at the state or federal
level, or what effect such legislation or regulation may have on
us. Denial of coverage and reimbursement of our products, or the
revocation or changes to coverage and reimbursement policies, could
have a material adverse effect on our business, results of
operations and financial condition.
We may not be successful in our efforts to build a pipeline of
product candidates.
A key
element of our strategy is to use and expand our product platform
to build a pipeline of product candidates, and progress those
product candidates through clinical development for the treatment
of a variety of different types of cancer. Even if we are
successful in building a product pipeline, the potential product
candidates that we identify may not be suitable for clinical
development for a number of reasons, including causing harmful side
effects or demonstrating other characteristics that indicate a low
likelihood of receiving marketing approval or achieving market
acceptance. If our methods of identifying potential product
candidates fail to produce a pipeline of potentially viable product
candidates, then our success as a business will be dependent on the
success of fewer potential product candidates, which introduces
risks to our business model and potential limitations to any
success we may achieve.
Our product candidates may cause undesirable side effects or have
other properties that could delay or prevent their regulatory
approval, limit the commercial profile of an approved label, or
result in significant negative consequences following marketing
approval, if any.
Additionally, if
one or more of our product candidates receives marketing approval,
and we or others later identify undesirable side effects caused by
such products, a number of potentially significant negative
consequences could result, including:
●
regulatory
authorities may withdraw approvals of such product;
●
regulatory
authorities may require additional warnings on the product’s
label;
●
we may be required
to create a medication guide for distribution to patients that
outlines the risks of such side effects;
●
we could be sued
and held liable for harm caused to patients; and
●
our reputation may
suffer.
Any of
these events could prevent us from achieving or maintaining market
acceptance of the particular product candidate, if approved, and
could significantly harm our business, results of operations and
prospects.
We may expend our limited resources to pursue a particular product
candidate or indication that does not produce any commercially
viable products and may fail to capitalize on product candidates or
indications that may be more profitable or for which there is a
greater likelihood of success.
Because
we have limited financial and managerial resources, we must focus
our efforts on particular research programs and product candidates
for specific indications. As a result, we may forego or delay
pursuit of opportunities with other product candidates or for other
indications that later prove to have greater commercial potential.
Further, our resource allocation decisions may result in our use of
funds for research and development programs and product candidates
for specific indications that may not yield any commercially viable
products. If we do not accurately evaluate the commercial potential
or target market for a particular product candidate, we may
relinquish valuable rights to that product candidate through
collaboration, licensing or other royalty arrangements in cases in
which it would have been more advantageous for us to retain sole
development and commercialization rights to such product candidate.
Any such failure to improperly assess potential product candidates
could result in missed opportunities and/or our focus on product
candidates with low market potential, which would harm our business
and financial condition.
Our products may be expensive to manufacture, and they may not be
profitable if we are unable to control the costs to manufacture
them.
Our
products may be significantly more expensive to manufacture than we
expect or than other therapeutic products currently on the market
today. We hope to substantially reduce manufacturing costs through
process improvements, development of new methods, increases in
manufacturing scale and outsourcing to experienced manufacturers.
If we are not able to make these, or other improvements, and
depending on the pricing of the product, our profit margins may be
significantly less than that of other therapeutic products on the
market today. In addition, we may not be able to charge a high
enough price for any product we develop, even if they are safe and
effective, to make a profit. If we are unable to realize
significant profits from our potential product candidates, our
business would be materially harmed.
For some of our products, we currently lack sufficient
manufacturing capabilities to produce our therapeutic product
candidates at commercial-scale quantities and do not have an
alternate manufacturing supply, which could negatively impact our
ability to meet any future demand for the product.
We
expect that we would need to significantly expand our manufacturing
capabilities to meet potential demand for our therapeutic product
candidates, if approved. Such expansion would require additional
regulatory approvals. Even if we increase our manufacturing
capabilities, it is possible that we may still lack sufficient
capacity to meet demand.
We do
not currently have any alternate supply for our products. If our
facilities where our products are currently being manufactured or
equipment were significantly damaged or destroyed, or if there were
other disruptions, delays or difficulties affecting manufacturing
capacity or availability of drug supply, including, but not limited
to, if such facilities are deemed not in compliance with current
Good Manufacturing Practice, or GMP, requirements, future clinical
studies and commercial production for our products would likely be
significantly disrupted and delayed. It would be both time-
consuming and expensive to replace this capacity with third
parties, particularly since any new facility would need to comply
with the regulatory requirements.
Ultimately, if we
are unable to supply our products to meet commercial demand,
whether because of processing constraints or other disruptions,
delays or difficulties that we experience, our production costs
could dramatically increase and sales of our products and their
long-term commercial prospects could be significantly
damaged.
To be successful, our proposed products must be accepted by the
healthcare community, which can be very slow to adopt or
unreceptive to new technologies and products.
Our
proposed products and those developed by our collaborative
partners, if approved for marketing, may not achieve market
acceptance since hospitals, physicians, patients or the medical
community in general may decide not to accept and use these
products. The products that we are attempting to develop represent
substantial departures from established treatment methods and will
compete with a number of more conventional therapies manufactured
and marketed by major pharmaceutical companies. The degree of
market acceptance of any of our developed products will depend on a
number of factors, including:
●
our establishment
and demonstration to the medical community of the clinical efficacy
and safety of our proposed products;
●
our ability to
create products that are superior to alternatives currently on the
market;
●
our ability to
establish in the medical community the potential advantage of our
treatments over alternative treatment methods; and
●
reimbursement
policies of government and third-party payers.
If the
healthcare community does not accept our products for any of these
reasons, or for any other reason, our business would be materially
harmed.
Our business is based on novel technologies that are inherently
expensive and risky and may not be understood by or accepted in the
marketplace, which could adversely affect our future
value.
The
clinical development, commercialization and marketing of
immuno-oncology therapies are at an early-stage, substantially
research- oriented, and financially speculative. To date, very few
companies have been successful in their efforts to develop and
commercialize an immuno-oncology therapeutic product. In general,
such products may be susceptible to various risks, including
undesirable and unintended side effects, unintended immune system
responses, inadequate therapeutic efficacy, or other
characteristics that may prevent or limit their approval or
commercial use. Furthermore, the number of people who may use such
therapies is difficult to forecast with accuracy. Our future
success is dependent on the establishment of a significant market
for such therapies and our ability to capture a share of this
market with our product candidates.
Our
development efforts with our therapeutic product candidates are
susceptible to the same risks of failure inherent in the
development and commercialization of therapeutic products based on
new technologies. The novel nature of immuno-oncology therapeutics
creates significant challenges in the areas of product development
and optimization, manufacturing, government regulation, third-party
reimbursement and market acceptance. For example, the FDA has
relatively limited experience regulating such therapies, and there
are few approved treatments using such therapy.
Our competition includes fully integrated biotechnology and
pharmaceutical companies that have significant advantages over
us.
The
market for therapeutic immuno-oncology products is highly
competitive. We expect that our most significant competitors will
be fully integrated and more established pharmaceutical and
biotechnology companies or institutions, including major
multinational pharmaceutical companies, biotechnology companies and
universities and other research institutions. These companies are
developing similar products, and they have significantly greater
capital resources and research and development, manufacturing,
testing, regulatory compliance, and marketing capabilities. Many of
these potential competitors may be further along in the process of
product development and also operate large, company-funded research
and development programs. As a result, our competitors may develop
more competitive or affordable products, or achieve earlier patent
protection or product commercialization than we are able to
achieve. Competitive products may render any products or product
candidates that we develop obsolete.
Many of
our competitors have substantially greater financial, technical and
other resources than we do, such as larger research and development
staff and experienced marketing and manufacturing organizations.
Additional mergers and acquisitions in the biotechnology and
pharmaceutical industries may result in even more resources being
concentrated in certain of our competitors. As a result, these
companies may be able to obtain regulatory approval more rapidly
than we can and may be more effective in selling and marketing
their products. Smaller or early-stage companies may also prove to
be significant competitors, particularly through collaborative
arrangements with large, established companies. Competition may
increase further as a result of advances in the commercial
applicability of technologies and greater availability of capital
for investment in these industries. Our competitors may succeed in
developing, acquiring or licensing drug products that are more
effective or less costly to produce or purchase on the market than
any product candidate we are currently developing or that we may
seek to develop in the future. If approved, our product candidates
will face competition from commercially available drugs as well as
drugs that are in the development pipelines of our
competitors.
Established
pharmaceutical companies may invest heavily to accelerate discovery
and development of or in-license novel compounds that could make
our product candidates less competitive. In addition, any new
product that competes with an approved product must demonstrate
compelling advantages in efficacy, convenience, tolerability and
safety in order to overcome price competition and to be
commercially successful. Accordingly, our competitors may succeed
in obtaining patent protection, receiving FDA, EMA or other
regulatory approval, or discovering, developing and commercializing
medicines before we do, which would have a material adverse impact
on our business and ability to achieve profitability from future
sales of our approved product candidates, if any.
If competitors develop and market products that are more effective,
safer or less expensive than our product candidates or offer other
advantages, our commercial prospects will be limited.
Our
therapeutic immuno-oncology development programs face, and will
continue to face, intense competition from pharmaceutical,
biopharmaceutical and biotechnology companies, as well as numerous
academic and research institutions and governmental agencies
engaged in drug discovery activities or funding, both in the United
States and abroad. Some of these competitors are pursuing the
development of drugs and other therapies that target the same
diseases and conditions that we are targeting with our product
candidates.
As a
general matter, we also face competition from many companies that
are researching and developing cell therapies. Many of these
companies have financial and other resources substantially greater
than ours. In addition, many of these competitors have
significantly greater experience in testing pharmaceutical and
other therapeutic products, obtaining FDA and other regulatory
approvals, and marketing and selling. If we ultimately obtain
regulatory approval for any of our product candidates, we also will
be competing with respect to manufacturing efficiency and marketing
capabilities, areas in which we have limited or no commercial-scale
experience. Mergers and acquisitions in the pharmaceutical and
biotechnology industries may result in even more resources’
being concentrated by our competitors. Competition may increase
further as a result of advances made in the commercial
applicability of our technologies and greater availability of
capital for investment in these fields.
If we are unable to keep up with rapid technological changes in our
field or compete effectively, we will be unable to operate
profitably.
We are
engaged in activities in the biotechnology field, which is
characterized by extensive research efforts and rapid technological
progress. If we fail to anticipate or respond adequately to
technological developments, our ability to operate profitably could
suffer. Research and discoveries by other biotechnology,
agricultural, pharmaceutical or other companies may render our
technologies or potential products or services uneconomical or
result in products superior to those we develop. Similarly, any
technologies, products or services we develop may not be preferred
to any existing or newly developed technologies, products or
services.
We may not be able to obtain third-party patient reimbursement or
favorable product pricing, which would reduce our ability to
operate profitably.
Our
ability to successfully commercialize certain of our proposed
products in the human therapeutic field may depend to a significant
degree on patient reimbursement of the costs of such products and
related treatments at acceptable levels from government
authorities, private health insurers and other organizations, such
as health maintenance organizations. Reimbursement in the United
States or foreign countries may not be available for any products
we may develop, and, if available, may be decreased in the future.
Also, reimbursement amounts may reduce the demand for, or the price
of, our products with a consequent harm to our business. We cannot
predict what additional regulation or legislation relating to the
healthcare industry or third-party coverage and reimbursement may
be enacted in the future or what effect such regulation or
legislation may have on our business. If additional regulations are
overly onerous or expensive, or if healthcare-related legislation
makes our business more expensive or burdensome than originally
anticipated, we may be forced to significantly downsize our
business plans or completely abandon our business
model.
We may be subject to litigation that will be costly to defend or
pursue and uncertain in its outcome
.
Our
business may bring us into conflict with our licensees, licensors
or others with whom we have contractual or other business
relationships, or with our competitors or others whose interests
differ from ours. If we are unable to resolve those conflicts on
terms that are satisfactory to all parties, we may become involved
in litigation brought by or against us. That litigation is likely
to be expensive and may require a significant amount of
management’s time and attention, at the expense of other
aspects of our business. The outcome of litigation is always
uncertain, and in some cases could include judgments against us
that require us to pay damages, enjoin us from certain activities,
or otherwise affect our legal or contractual rights, which could
have a significant adverse effect on our business.
We are exposed to the risk of liability claims, for which we may
not have adequate insurance.
Since
we participate in the pharmaceutical industry, we may be subject to
liability claims by employees, customers, end users and third
parties. We intend to obtain proper insurance, however, there can
be no assurance that any liability insurance we purchase will be
adequate to cover claims asserted against us or that we will be
able to maintain such insurance in the future. We intend to adopt
prudent risk-management programs to reduce these risks and
potential liabilities, however, we have not taken any steps to
create these programs and have no estimate as to the cost or time
required to do so and there can be no assurance that such programs,
if and when adopted, will fully protect us. We may not be able to
put risk management programs in place, or obtain insurance, if we
are unable to retain the necessary expertise and/or are
unsuccessful in raising necessary capital in the future. Our
failure to obtain appropriate insurance, or to adopt and implement
effective risk-management programs, as well as any adverse rulings
in any legal matters, proceedings and other matters could have a
material adverse effect on our business.
Preclinical and
clinical trials are conducted during the development of potential
products and other treatments to determine their safety and
efficacy for use by humans. Notwithstanding these efforts, when our
treatments are introduced into the marketplace, unanticipated side
effects may become evident. Manufacturing, marketing, selling and
testing our product candidates under development or to be acquired
or licensed, entails a risk of product liability claims. We could
be subject to product liability claims in the event that our
product candidates, processes, or products under development fail
to perform as intended. Even unsuccessful claims could result in
the expenditure of funds in litigation and the diversion of
management time and resources, and could damage our reputation and
impair the marketability of our product candidates and processes.
While we plan to maintain liability insurance for product liability
claims, we may not be able to obtain or maintain such insurance at
a commercially reasonable cost. If a successful claim were made
against us, and we lacked insurance or the amount of insurance were
inadequate to cover the costs of defending against or paying such a
claim or the damages payable by us, we would experience a material
adverse effect on our business, financial condition and results of
operations.
We could be subject to product liability lawsuits based on the use
of our product candidates in clinical testing or, if obtained,
following marketing approval and commercialization. If product
liability lawsuits are brought against us, we may incur substantial
liabilities and may be required to cease clinical testing or limit
commercialization of our product candidates.
We
could be subject to product liability lawsuits if any product
candidate we develop allegedly causes injury or is found to be
otherwise unsuitable for human use during product testing,
manufacturing, marketing or sale. Any such product liability claims
may include allegations of defects in manufacturing, defects in
design, a failure to warn of dangers inherent in the product,
negligence, strict liability and a breach of warranties. Claims
could also be asserted under state consumer protection acts. If we
cannot successfully defend ourselves against product liability
claims, we may incur substantial liabilities or be required to
limit commercialization of our product candidates, if approved.
Even successful defense would require significant financial and
management resources. Regardless of the merits or eventual outcome,
liability claims may result in:
●
decreased demand
for our product candidates;
●
withdrawal of
clinical trial participants;
●
initiation of
investigations by regulators;
●
costs to defend the
related litigation;
●
a diversion of
management’s time and our resources;
●
substantial
monetary awards to trial participants or patients;
●
product recalls,
withdrawals or labeling, marketing or promotional
restrictions;
●
loss of revenues
from product sales; and
●
the inability to
commercialize our product candidates.
Our
inability to retain sufficient product liability insurance at an
acceptable cost to protect against potential product liability
claims could prevent or inhibit the clinical testing and
commercialization of products we develop. We may wish to obtain
additional such insurance covering studies or trials in other
countries should we seek to expand those clinical trials or
commence new clinical trials in other jurisdictions or increase the
number of patients in any clinical trials we may pursue. We also
may determine that additional types and amounts of coverage would
be desirable at later stages of clinical development of our product
candidates or upon commencing commercialization of any product
candidate that obtains required approvals. However, we may not be
able to obtain any such additional insurance coverage when needed
on acceptable terms or at all. If we do not obtain or retain
sufficient product liability insurance, we could be responsible for
some or all of the financial costs associated with a product
liability claim relating to our preclinical and clinical
development activities, in the event that any such claim results in
a court judgment or settlement in an amount or of a type that is
not covered, in whole or in part, by any insurance policies we may
have or that is in excess of the limits of our insurance coverage.
We may not have, or be able to obtain, sufficient capital to pay
any such amounts that may not be covered by our insurance
policies.
We rely on third parties to conduct preclinical and clinical trials
of our product candidates. If these third parties do not
successfully carry out their contractual 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
rely, and expect to continue to rely, upon third-party CROs to
execute our preclinical and clinical trials and to monitor and
manage data produced by and relating to those trials. However, we
may not be able to establish arrangements with CROs when needed or
on terms that are acceptable to us, or at all, which could
negatively affect our development efforts with respect to our drug
product candidates and materially harm our business, operations and
prospects.
We will
have only limited control over the activities of the CRO we will
engaged to continue conduct our clinical trials including the
University of Minnesota for our phase 2 clinical trial for GTB-1550
and phase 1 clinical trial for GTB-3550. Nevertheless, we are
responsible for ensuring that each of our studies is conducted in
accordance with the applicable protocol, legal, regulatory and
scientific standards, and our reliance on any CRO does not relieve
us of our regulatory responsibilities. Based on our present
expectations, we, our CROs and our clinical trial sites are
required to comply with good clinical practices, or GCPs, for all
of our product candidates in clinical development. Regulatory
authorities enforce GCPs through periodic inspections of trial
sponsors, principal investigators and trial sites. If we or any of
our CROs fail to comply with applicable GCPs, the clinical data
generated in the applicable trial may be deemed unreliable and the
FDA, EMA or comparable foreign regulatory authorities may require
us to perform additional clinical trials before approving a product
candidate for marketing, which we may not have sufficient cash or
other resources to support and which would delay our ability to
generate revenue from any sales of such product candidate. In
addition, our clinical trials are required to be conducted with
product produced in compliance with current good manufacturing
practice requirements, or cGMPs. Our or our CROs’ failure to
comply with those regulations may require us to repeat clinical
trials, which would also require significant cash expenditures and
delay the regulatory approval process.
Agreements
governing relationships with CROs generally provide those CROs with
certain rights to terminate a clinical trial under specified
circumstances. If a CRO that we have engaged terminates its
relationship with us during the performance of a clinical trial, we
would be forced to seek an engagement with a substitute CRO, which
we may not be able to do on a timely basis or on commercially
reasonable terms, if at all, and the applicable trial would
experience delays or may not be completed. In addition, our CROs
are not our employees, and except for remedies available to us
under any agreements we enter with them, we are unable to control
whether or not they devote sufficient time and resources to our
clinical, nonclinical and preclinical programs. If CROs do not
successfully carry out their contractual duties or obligations or
meet expected deadlines, if they need to be replaced or if the
quality or accuracy of the clinical data they obtain is compromised
due to a failure to adhere to our clinical protocols, regulatory
requirements or for other reasons, our clinical trials may be
extended, delayed or terminated and we may not be able to obtain
regulatory approval for, or successfully commercialize, the
affected product candidates. As a result, our operations and the
commercial prospects for the effected product candidates would be
harmed, our costs could increase and our ability to generate
revenues could be delayed.
We contract with third parties for the supply of product candidates
for clinical testing and expect to contract with third parties for
the manufacturing of our product candidates for large-scale testing
and commercial supply. This reliance on third parties increases the
risk that we will not have sufficient quantities of our product
candidates or products or such quantities at an acceptable cost,
which could delay, prevent or impair our development or
commercialization efforts.
We
anticipate continuing our engagement of third parties to provide
our clinical supply as we advance our product candidates into and
through clinical development. We expect in the future to use third
parties for the manufacture of our product candidates for clinical
testing, as well as for commercial manufacture. We plan to enter
into long-term supply agreements with several manufacturers for
commercial supplies. We may be unable to reach agreement on
satisfactory terms with contract manufacturers to manufacture our
product candidates. Additionally, the facilities to manufacture our
product candidates must be the subject of a satisfactory inspection
before the FDA or other regulatory authorities approve a marketing
authorization for the product candidate manufactured at that
facility. We will depend on these third-party manufacturers for
compliance with the FDA’s and international regulatory
authority requirements for the manufacture of our finished
products. We do not control the manufacturing process of, and are
completely dependent on, our contract manufacturers for compliance
with cGMPs. If our manufacturers cannot successfully manufacture
material that conforms to our specifications and the FDA and other
regulatory authorities’ cGMP requirements, they will not be
able to secure and/or maintain regulatory approval for their
manufacturing facilities. In addition, we have no control over the
ability of our contract manufacturers to maintain adequate quality
control, quality assurance and qualified personnel. If the FDA or a
comparable foreign regulatory authority does not approve these
facilities for the manufacture of our product candidates or if it
withdraws any such approval in the future, we may need to find
alternative manufacturing facilities, which would significantly
impact our ability to develop, obtain regulatory approval for or
market our product candidates, if approved, and may subject us to
recalls or enforcement action for products already on the
market.
If any
of our product candidates are approved and contract manufacturers
fail to deliver the required commercial quantities of finished
product on a timely basis and at commercially reasonable prices,
and we are unable to find one or more replacement manufacturers
capable of production at a substantially equivalent cost, in
substantially equivalent volumes and quality and on a timely basis,
we would likely be unable to meet demand for our products and could
lose potential revenue. It may take several years to establish an
alternative source of supply for our product candidates and to have
any such new source approved by the FDA or any other relevant
regulatory authorities.
We currently have no marketing and sales force. If we are unable to
establish effective marketing and sales capabilities or enter into
agreements with third parties to market and sell our product
candidates, we may not be able to effectively market and sell our
product candidates, if approved, or generate product
revenues.
We
currently do not have a marketing or sales team for the marketing,
sales and distribution of any of our product candidates that are
able to obtain regulatory approval. In order to commercialize any
product candidates, we must build on a territory-by-territory basis
marketing, sales, distribution, managerial and other non-technical
capabilities or make arrangements with third parties to perform
these services, and we may not be successful in doing so. If our
product candidates receive regulatory approval, we intend to
establish an internal sales and marketing team with technical
expertise and supporting distribution capabilities to commercialize
our product candidates, which will be expensive and time consuming
and will require significant attention of our executive officers to
manage. Any failure or delay in the development of our internal
sales, marketing and distribution capabilities would adversely
impact the commercialization of any of our products that we obtain
approval to market. With respect to the commercialization of all or
certain of our product candidates, we may choose to collaborate,
either globally or on a territory-by-territory basis, with third
parties that have direct sales forces and established distribution
systems, either to augment our own sales force and distribution
systems or in lieu of our own sales force and distribution systems.
If we are unable to enter into such arrangements when needed on
acceptable terms or at all, we may not be able to successfully
commercialize any of our product candidates that receive regulatory
approval or any such commercialization may experience delays or
limitations. If we are not successful in commercializing our
product candidates, either on our own or through collaborations
with one or more third parties, our future product revenue will
suffer and we may incur significant additional losses.
Our business and operations would suffer in the event of system
failures.
Despite
the implementation of security measures, our internal computer
systems and those of our contractors and consultants are vulnerable
to damage from computer viruses, unauthorized access, natural
disasters, terrorism, war and telecommunication and electrical
failures. While we have not experienced any such system failure,
accident or security breach to date, if such an event were to occur
and cause interruptions in our operations, it could result in a
material disruption of our drug development programs. For example,
the loss of clinical trial data from completed or ongoing or
planned clinical trials could result in delays in our regulatory
approval efforts and we may incur substantial costs to attempt to
recover or reproduce the data. If any disruption or security breach
resulted in a loss of or damage to our data or applications, or
inappropriate disclosure of confidential or proprietary
information, we could incur liability and/or the further
development of our product candidates could be
delayed.
Our operations are vulnerable to interruption by natural disasters,
power loss, terrorist activity and other events beyond our control,
the occurrence of which could materially harm our
business.
Businesses located
in California have, in the past, been subject to electrical
blackouts as a result of a shortage of available electrical power,
and any future blackouts could disrupt our operations. We are
vulnerable to a major earthquake, wildfire and other natural
disasters, and we have not undertaken a systematic analysis of the
potential consequences to our business as a result of any such
natural disaster and do not have an applicable recovery plan in
place. We do not carry any business interruption insurance that
would compensate us for actual losses from interruption of our
business that may occur, and any losses or damages incurred by us
could cause our business to materially suffer.
We have not held regular annual meetings in the past, and if we are
required by the Delaware Court of Chancery to hold an annual
meeting pursuant to Section 211(c) of the Delaware General
Corporation Law, or the DGCL, it could result in the unanticipated
expenditure of funds, time and other Company
resources.
Section
2.2 of our bylaws provides that an annual meeting shall be held
each year on a date and at a time designated by our board of
directors, and Section 211(b) of the DGCL provides for an annual
meeting of stockholders to be held for the election of directors.
Section 211(c) of the DGCL provides that if there is a failure to
hold the annual meeting for a period of 13 months after the latest
to occur of the organization of the corporation, its last annual
meeting or last action by written consent to elect directors in
lieu of an annual meeting, the Delaware Court of Chancery may order
a meeting to be held upon the application of any stockholder or
director. Section 211(c) also provides that the failure to hold an
annual meeting shall not affect otherwise valid corporate acts or
result in a forfeiture or dissolution of the
corporation.
We have
not held regular annual meetings in the past because a substantial
majority of our stock is owned by a small number of stockholders,
making it easy to obtain written consent in lieu of a meeting when
necessary. In light of our historical liquidity constraints,
handling matters by written consent has allowed our Company to save
on the financial and administrative resources required to prepare
for and hold such annual meetings. To our knowledge, no stockholder
or director has requested our Company’s management to hold
such an annual meeting and no stockholder or director has applied
to the Delaware Court of Chancery seeking an order directing our
company to hold a meeting. However, if one or more stockholders or
directors were to apply to the Delaware Court of Chancery seeking
such an order, and if the Delaware Court of Chancery were to order
an annual meeting before we are prepared to hold one, the
preparation for the annual meeting and the meeting itself could
result in the unanticipated expenditure of funds, time, and other
Company resources.