OVERVIEW
Mustang Bio, Inc. (“Mustang”,
“We”, “Us” or the “Company”) is a clinical-stage biopharmaceutical company focused on translating
today’s medical breakthroughs in cell and gene therapies into potential cures for hematologic cancers, solid tumors and rare
genetic diseases. We aim to acquire rights to these technologies by licensing or otherwise acquiring an ownership interest in the
technologies, funding their research and development and eventually either out-licensing or bringing the technologies to market.
Our pipeline is currently focused in three
core areas: gene therapy programs for rare genetic disorders, chimeric antigen receptor (“CAR”) engineered T cell (“CAR
T”) therapies for hematologic malignancies and CAR T therapies for solid tumors. For each therapy we have partnered with
world class research institutions. For our gene therapy programs, we have partnered with St. Jude Children’s Research Hospital
(“St. Jude”) in the development of a first-in-class
ex vivo
lentiviral treatment of X-linked severe combined
immunodeficiency (“XSCID”) and for our CAR T therapies we have partnered with the City of Hope National Medical Center
(“COH”), Fred Hutchinson Cancer Research Center (“Fred Hutch”) and Nationwide Children’s Hospital
(“Nationwide”).
Gene Therapy
In partnership with St. Jude, our gene
therapy program (MB-107) is being conducted under an exclusive license to develop a potentially curative treatment for XSCID, a
rare genetic immune system condition in which affected patients do not live beyond infancy without treatment. This first-in-class
ex vivo
lentiviral gene therapy is currently in two Phase 1/2 clinical trials sponsored by St. Jude and the National Institutes
of Health (“NIH”). Results in these two trials have been promising and we plan to transfer St. Jude’s Investigational
New Drug Application (“IND”) to Mustang in the second half of 2019 following completion of the technology transfer
process.
CAR T Therapies
Mustang’s pipeline of CAR T therapies
is being developed under exclusive licenses from several world class research institutions. Our strategy is to license these technologies,
support preclinical and clinical research activities by our partners and transfer the underlying technology to our cell processing
facility located in Worcester, Massachusetts to conduct Mustang sponsored clinical trials.
We are developing CAR T therapies for hematologic
malignancies in partnership with COH targeting CD123 (MB-102) and CS1 (MB-104) and with Fred Hutch targeting CD20 (MB-106). Phase
1 clinical trials sponsored by COH for MB-102 and by Fred Hutch for MB-106 are underway and a COH sponsored Phase 1 clinical trial
for MB-104 is scheduled to open during the first half of 2019. Mustang plans to file an IND for the MB-102 program in the first
half of 2019 and to initiate a Mustang sponsored Phase 1 clinical trial shortly thereafter for the treatment of patients with acute
myelogenous leukemia, blastic plasmacytoid dendritic cell neoplasm, and high-risk myelodysplastic syndrome. We expect to file an
IND for MB-104 in the second half of 2019 and to initiate a Mustang sponsored Phase 1 clinical trial shortly thereafter for the
treatment of patients with multiple myeloma. We also plan to file an IND and initiate a Mustang sponsored clinical trial for MB-106
for the treatment of patients with non-Hodgkin lymphoma and chronic lymphocytic leukemia.
We are also developing CAR T therapies for solid tumors in partnership with COH targeting IL13R
a
2
(MB-101), HER2 (MB-103) and PSCA (MB-105). In addition, we have partnered with Nationwide for C134 (MB-108) in order to enhance
the activity of MB-101 for the treatment of patients with glioblastoma multiforme (“GBM”). Phase 1 clinical trials
sponsored by COH for MB-101 and MB-103 are underway, and a COH sponsored Phase 1 clinical trial for MB-105 is scheduled to commence
during 2019. A Phase 1 clinical trial for MB-108 is scheduled to commence in the first half of 2019. We also plan to file INDs
and initiate Mustang sponsored clinical trials for MB-103 for the treatment of patients with metastatic breast cancer to brain
and for the combination of MB-101 and MB-108 for the treatment of patients with GBM. Finally, we plan to file an IND and initiate
a Mustang sponsored clinical trial for MB-105 for the treatment of patients with prostate cancer.
Additionally, we hold complementary patent
licenses relating to the use, delivery and possible enhancement of our proprietary CAR technologies. In particular, we licensed
intellectual property from Harvard University pertaining to CRISPR/Cas9 gene editing of CAR T cells, and we hope to use this technology
to enhance the activity of our CAR T cell therapies.
To date, we have not received approval
for the sale of our product candidates in any market and, therefore, have not generated any product sales from our product candidates.
In addition, we have incurred substantial operating losses since our inception, and expect to continue to incur significant operating
losses for the foreseeable future and may never become profitable. As of December 31, 2018, we have an accumulated deficit of $79.1
million.
We are a majority-controlled subsidiary
of Fortress Biotech, Inc. (“Fortress”).
CORPORATE INFORMATION
Mustang Bio, Inc. was incorporated in Delaware
on March 13, 2015. Our executive offices are located at 2 Gansevoort Street, New York, NY 10014. Our telephone number is (781)
652-4500, and our email address is
info@mustangbio.com
.
Our website address is www.mustangbio.com.
The information set forth on our website is not a part of this report. We will make available free of charge through our website
our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments
to these reports, as soon as reasonably practicable after we electronically file such material with, or furnish such material to,
the Securities and Exchange Commission, or SEC. We are not including the information on our website as a part of, nor incorporating
it by reference into, this report. You may read and copy any materials we file at the SEC’s Public Reference Room at
100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling
the SEC at 1-800-SEC-0330. Additionally, the SEC maintains a website that contains annual, quarterly, and current reports, proxy
statements, and other information that issuers (including us) file electronically with the SEC. The SEC’s website address
is http://www.sec.gov/.
PRODUCTS UNDER DEVELOPMENT
Gene Therapy for Rare Genetic Disorders
Ex vivo Lentiviral Therapy for X-linked
Severe Combined Immunodeficiency (MB-107)
X-linked Severe Combined Immunodeficiency
(“XSCID”) is a rare genetic immune system condition also known as bubble boy disease, in which affected patients do
not live beyond infancy without treatment.
This first-in-class
ex vivo
lentiviral
gene therapy has already been given to 13 patients in two early stage clinical trials, with highly encouraging results. Eight patients
under the age of two years were treated at St. Jude and UCSF Benioff Children’s Hospital San Francisco, with results presented
at the 21st Annual Meeting of the American Society of Gene & Cell Therapy in 2Q18, and five patients 10-23 years of age were
treated in an earlier NIH trial that was published in 2Q16 in
Science Translational Medicine.
The existing data from these 13 patients
is encouraging. In the initial Phase 1/2 NIH trial, the oldest two of the five patients – all of whom had haploidentical
hematopoietic stem cell transplantation (“HSCT”) in infancy – showed expansion of T, NK, and B cells at 2 to
3 years after treatment. These patients achieved sustained restoration of humoral responses to immunization and experienced clinical
improvement. Similar gene marking levels were achieved in the three youngest patients, albeit with only six to nine months of follow-up.
This is important because in prior gene therapy trials with murine gammaretroviral vectors without preconditioning, B cell reconstitution
did not occur, and patients therefore still required lifelong intravenous immunoglobulin. The low-dose, nonmyeloablative busulfan
pretreatment conditioning was well tolerated, and of a low enough intensity to avoid the need for transfusions of red blood cells
or platelets.
Subsequent to the initiation of the
NIH trial, eight patients under two years old who had not previously undergone HSCT were treated with the
ex-vivo
gene
therapy in a St. Jude/UCSF Phase 1/2 trial, resulting in highly encouraging results. Low-dose busulfan conditioning caused
adverse events in only two patients (mild mucositis; mucositis, hair loss), and no patients required blood product support.
Six of the eight patients achieved reconstituted T cells within the first half-year, and a seventh patient reconstituted T
cells within several months after a gene therapy “boost” that was administered after one year of follow-up. In
the final patient, the follow-up was only two months, though clearance of aphthous ulcers suggested early immune recovery.
Three of the patients were able to discontinue monthly infusions of intravenous immunoglobulin. In the five patients who had
infections at the time of therapy, all infections resolved completely.
CAR T Therapies for Hematologic Malignancies
CD123 CAR T cell Program for AML
(MB-102)
CD123 is a subunit of the heterodimeric
interleukin-3-receptor (“IL-3R”) which is widely expressed on human hematologic malignancies including acute myeloid
leukemia (“AML”). In addition, CD123 can be found on the surface of B cell acute lymphoblastic leukemia (“B-ALL”),
hairy cell leukemia, blastic plasmacytoid dendritic cell neoplasm (“BPDCN”), chronic myeloid leukemia (“CML”)
and Hodgkin’s lymphoma.
Of these malignancies, we are currently
investigating CD123 as a target for adoptive cellular immunotherapy in AML and BPDCN, since high CD123 expression is associated
with enhanced AML blast proliferation, increased resistance of blasts to apoptosis, and poor clinical prognosis. CD123 is overexpressed
in the vast majority of cases of AML and in essentially all cases of BPDCN.
Acute myeloid leukemia is a cancer of the
myeloid line of blood cells characterized by rapid growth of abnormal white blood cells that accumulate in the bone marrow. AML
is the most common form of acute leukemia. Although AML is a relatively rare disease, there are approximately 20,000 new cases
per year in the US and 10,000 deaths per year, accounting for approximately 1.8% of cancer deaths in the US [The Surveillance,
Epidemiology, and End Results (SEER) Program of the National Cancer Institute]. AML standard of care involves chemotherapy to induce
remission followed by additional chemotherapy or hematopoietic stem cell transplant. Allogeneic stem cell transplantation is the
preferred treatment route for AML following a second remission. It can lead to a 5-year disease-free survival in 26% of patients.
Unfortunately, however, currently only about half of relapsed patients are able to achieve a second remission with traditional
chemotherapy agents. Patients who do not achieve a second remission are much less likely to benefit from transplantation and face
a dismal outcome.
BPDCN is categorized by the World Health
Organization under AML. Most often, BPDCN presents with features of both lymphoma and leukemia. There are little data about BPDCN
and the only approved drug for this disease is tagraxofusp, which is indicated for the treatment of adult and pediatric patients
with both treatment-naïve and previously-treated BPDCN. The average age at diagnosis is 60 to 70 years. BPDCN is very often
misdiagnosed and under-reported. The skin is the most frequently involved site of disease (80 percent of cases). However, BPDCN
usually progresses with bone marrow involvement and a decrease in red blood cell, white blood cell and platelet counts. The lymph
nodes and spleen may also be involved. Common misdiagnoses for BPCDN include non-Hodgkin lymphoma (“NHL”), AML, leukemia
cutis [a nonspecific term used for cutaneous (skin) manifestation of any type of leukemia], melanoma (a type of skin cancer), and
lupus erythematosus (chronic inflammatory disease that occurs when the body's immune system attacks its own tissues and organs).
There are no data or clinical trials that can define the best first treatment for patients with BPDCN. In addition to the emerging
use of tagraxofusp, which was approved by the FDA in December 2018, treatment sometimes includes therapies that are used for AML,
ALL, or lymphoma. The time for which a patient responds to these treatments is usually short. After a relapse, second remissions
with conventional chemotherapy are difficult to achieve. Allogeneic hematopoietic stem cell transplant (“allo-SCT”),
especially if offered in first remission, may result in longer remissions. The current recommendation is for BPDCN patients to
be evaluated for an allo-SCT as soon as possible and to begin searching for a donor.
The use of CAR T immunotherapy in relapsed
AML and BPDCN patients may offer the potential to achieve a complete or longer lasting remission. We have developed CD123-targeted
CAR T cells designed both to be activated to proliferate and to kill CD123-expressing tumor cells [Mardiros A
et al
.
Blood
.
2013;122(18):3138-3148]. The therapy is designed to recognize and eliminate leukemic cells, leading to remission in patients with
relapsed or refractory AML, and could serve as a bridge to potentially curative allogeneic stem cell transplant. The manufacturing
process genetically modifies T cells isolated from peripheral blood mononuclear cells in order to express a CD123-specific, hinge-optimized,
CD28 co-stimulatory domain-expressing CAR.
CD20 CAR T cell Program for B cell
non-Hodgkin lymphoma (MB-106)
CD20 is a promising target for immunotherapy
of B-cell lymphomas. CD20 is a B-cell lineage-specific phosphoprotein that is expressed in high, homogeneous density on the surface
of more than 95% of B-cell non-Hodgkin lymphoma (“NHL”). CD20 is stable on the cell surface with minimal shedding or
internalization upon binding antibody and is present at only nanomolar levels as soluble antigen. It is well established as an
effective immunotherapy target, with extensive studies demonstrating improved tumor responses and survival of B-NHL patients treated
with rituximab and other anti-CD20 antibodies. Importantly, CD20 continues to be expressed on the lymphoma cells of most patients
with relapsed B-NHL despite repetitive rituximab treatments, and loss of CD20 expression is not a major contributor to treatment
resistance. Thus, there is strong rationale for testing CD20 CAR T cells as an immunotherapy for NHL.
More than 70,000 new cases of NHL are diagnosed
each year in the United States, and more than 19,000 patients die of this group of diseases annually. Most forms of NHL including
follicular lymphoma, mantle cell lymphoma, marginal zone lymphoma, lymphoplasmacytic lymphoma, and small lymphocytic lymphoma,
which account collectively for ~45% of all cases of NHL, are incurable with available therapies, except for allo-SCT. However,
many NHL patients are not suitable candidates for allo-SCT, and this treatment is also limited by significant rates of morbidity
and mortality due to graft versus host disease. Aggressive B-cell lymphomas such as diffuse large B-cell lymphoma account for 30-35%
of NHL. The majority of patients with aggressive B-NHL are successfully treated with combination chemotherapy, but a significant
proportion relapse or have refractory disease, and the outcome of these patients is poor. Innovative new treatments are therefore
urgently needed.
Fred Hutch has an open IND for a Phase
1 clinical study to assess the anti-tumor activity and safety of administering CD20-directed CAR T cells; as of December 31, 2018,
five patients have been treated. This IND was submitted on February 24, 2017, with Fred Hutch as the sponsor. The trial will also
assess the T cell persistence and determine the potential immunogenicity of the cells, and Mustang together with Fred Hutch will
determine a recommended Phase 2 dose.
CS1 CAR T for Multiple Myeloma and
Light Chain Amyloidosis (MB-104)
CS1 (also known as CD319, CRACC and SLAMF7)
was identified as an NK cell receptor regulating immune functions. It is also expressed on B cells, T cells, dendritic cells, NK-T
cells, and monocytes. CS1 is overexpressed in multiple myeloma (“MM”) and light chain amyloidosis (“AL”),
which makes it a good target for immunotherapy. A humanized anti-CS1 antibody, elotuzumab (Empliciti
Ô
),
has shown promising results in clinical studies. Despite great advances in treatment, MM remains an incurable malignancy of plasma
cells. AL is a protein deposition disorder that is a result of a plasma cell dysplasia, similar to MM. Immunotherapy is an attractive
approach for AL because of the low burden of disease. Our academic partners at COH have developed a novel second generation CS1-specific
CAR T cell therapy. In pre-clinical studies, they have demonstrated efficacy of these CAR T cells, both
in vitro
and
in
vivo
, within the context of clinically relevant models of MM and AL. COH will be evaluating the safety of this CS1-specific
CAR T cell therapy in a Phase 1/2 trial that is scheduled to commence in the first half of 2019.
CAR T Therapies for Solid Tumors
IL13R
a
2
CAR T Cell Program for Glioblastoma (MB-101)
Glioblastoma multiforme
(“GBM”) is the most common brain and central nervous system (“CNS”) cancer, accounting for 45.2% of
malignant primary brain and CNS tumors, 54% of all gliomas, and 16% of all primary brain and CNS tumors. An estimated 12,390
new glioblastoma cases were predicted in 2017 in the US. Malignant brain tumors are the most common cause of cancer-related
deaths in adolescents and young adults aged 15-39 and the most common cancer occurring among 15-19 year-olds in the US. While
GBM is a rare disease (2-3 cases per 100,000 persons per year in the US and EU), it is quite lethal, with five-year survival
rates historically under 10%. Standard of care therapy consists of maximal surgical resection, radiation and chemotherapy
with temozolomide, which, while rarely curative, is shown to extend median overall survival from 4.5 to 15 months. GBM
remains difficult to treat due to the inherent resistance of the tumor to conventional therapies.
Immunotherapy approaches targeting brain
tumors offer promise over conventional treatments. IL13R
a
2 is an attractive target for
CAR T therapy, as it has limited expression in normal tissue but is overexpressed on the surface of greater than 50% of GBMs. CAR
T cells are designed to express membrane-tethered IL-13 receptor ligand (“IL-13”) mutated at a single site (glutamic
acid at position 13 to a tyrosine; E13Y) with high affinity for IL13Rα2 and reduced binding to IL13R
a
1
in order to reduce healthy tissue targeting (Kahlon KS
et al. Cancer Research.
2004;64:9160-9166).
We are developing an optimized CAR T product
incorporating enhancements in CAR T design and T cell engineering to improve antitumor potency and T cell persistence. We include
a second-generation hinge-optimized CAR containing mutations in the IgG4 linker to reduce off-target Fc interactions (Jonnalagadda
M
et al. Molecular Therapy.
2015;23(4):757-768.). We also include the 4-1BB (CD137) co-stimulatory signaling domain for
improved survival and maintenance of CAR T cells. Finally, we incorporate the extracellular domain of CD19 as a selection/tracking
marker. In order to further improve persistence, either central memory T-cells (T
CM
; Arms 1 – 4) or enriched CD62L+
naïve and memory T cells (T
N/MEM
; Arm 5) are isolated and enriched. The manufacturing process limits
ex vivo
expansion, which is designed to reduce T cell exhaustion and maintain a T
CM
or T
N/MEM
phenotype. These CAR
modified T
CM
and T
N/MEM
cells are shown to be more potent and persistent than earlier generations of CAR
T cells, based on experiments with CAR Ts in mouse xenograft models of GBM.
Our academic partners at COH have an open
IND to assess the feasibility and safety of using T
CM
or T
N/MEM
enriched IL13R
a
2-specific
CAR engineered T cells for clinical study participants with recurrent/refractory malignant glioma. This IND was submitted in October
2014, with COH as the sponsor. COH has enrolled and treated 53 patients as of December 31, 2018. In the annual meeting of
the American Association for Cancer Research in April 2018, our collaborators at COH presented the preliminary data for patients
enrolled on Arm 2 of the protocol (the “Intracavitary Arm”). The investigators reported that the CAR T cells were well-tolerated,
meaning that no dose-limiting toxicities were seen to date. The investigators also reported on a patient that they determined had
a complete response to treatment based on the imaging and clinical features set forth by the Response Assessment in Neuro-Oncology
Criteria (RANO). This clinical response was sustained for 7.5 months after the initiation of CAR T-cell therapy; however, this
patient’s disease eventually recurred at four new locations that were distinct and non-adjacent to the original tumors. The
next step is to continue to enroll patients in this Phase 1 study to determine the maximum tolerated dose and a recommended Phase
2 dose. Additionally, in this Phase 1 study, we are exploring optimal modes of delivery for CAR T cells for the treatment of GBM
and optimal T cell selection.
HER2 CAR T for GBM & Metastatic
Breast Cancer to Brain (MB-103)
HER2/neu (often shortened to “HER2”)
is a growth-promoting protein on the outside of all breast cells. Breast cancer cells with higher than normal levels of HER2 are
called HER2-positive (“HER2+”). These cancers tend to grow and spread faster than other breast cancers. Breast cancer
is the most commonly diagnosed cancer in women, with over 40,000 women in the United States expected to die from advanced metastatic
disease in 2018. Approximately 20% to 25% of breast cancers overexpress HER2, which is an established therapeutic target of both
monoclonal antibodies (mAbs) and receptor tyrosine kinase inhibitors. With the advent of effective mAbs directed against HER2,
the median overall survival of patients with metastatic HER2+ breast cancer has improved. However, management of metastatic disease
in the brain and/or central nervous system (CNS), observed in up to 50% of HER2+ breast cancer patients, continues to be a clinical
challenge in large part due to the inability of mAbs to sufficiently cross the blood-brain barrier. Although small-molecule inhibitors
of HER2 exist and have been clinically approved, their single-agent efficacy in the context of metastatic disease to the brain
has been limited. While HER2-targeted therapy in combination with conventional agents has shown some promise for the treatment
of patients with metastatic breast cancer, control of brain metastases remains a significant unmet clinical need, as most patients
survive less than two years following CNS involvement. Recent advances in cellular immunotherapy approaches have underscored the
potential for potent antitumor immune responses and clinical benefit against solid cancers, and these approaches may be effective
in the treatment of HER2+ breast cancer that has metastasized to the brain. Likewise, HER2 has been suggested as a suitable target
for glioblastoma (GBM), wherein elevated HER2 protein levels have been correlated with impaired survival.
CAR-based T-cell immunotherapy is being
actively investigated for the treatment of solid tumors, including HER2+ cancers. Our academic partners at COH have developed a
second-generation HER2-specific CAR T-cell for the treatment of breast cancer that has metastasized to the brain, as well as for
the treatment of refractory/relapsed HER2+ GBM. COH’s preclinical data demonstrate effective targeting of breast cancer brain
metastases with intraventricular delivery of HER2-BB CAR T cells. COH will be evaluating the safety of this HER2-specific CAR T
cell therapy in two Phase 1/2 clinical trials that commenced in Q4 2018.
PSCA CAR T for Prostate & Pancreatic
Cancers (MB-105)
PSCA is a glycosylphosphatidylinositol-anchored
cell membrane glycoprotein. In addition to being highly expressed in the prostate it is also expressed in the bladder, placenta,
colon, kidney, and stomach. This gene is upregulated in a large proportion of prostate cancers and is also detected in cancers
of the bladder and pancreas. The gene includes a polymorphism that results in an upstream start codon in some individuals; this
polymorphism is thought to be associated with a risk for certain gastric and bladder cancers. Prostate cancer may be amenable to
T cell-based immunotherapy since several tumor antigens, including prostate stem-cell antigen (“PSCA”), are widely
over-expressed in metastatic disease. Our academic partners at COH have developed a second-generation PSCA specific CAR T cell
therapy that has demonstrated robust
in vitro
and
in vivo
anti-tumor activity in patient-derived, clinically relevant,
bone-metastatic prostate cancer xenograft models. COH will be evaluating the safety of this PSCA-specific CAR T cell therapy in
a Phase 1/2 trial that is scheduled to commence in the second half of 2019.
Technology to Convert GBM from an
Immunologically Cold Tumor to an Immunologically Hot Tumor
HSV-1 oncolytic virus C134 (MB-108)
C134 is a next-generation oncolytic herpes
simplex virus (“oHSV”) that is conditionally replication competent; that is, it can replicate in tumor cells, but not
in normal cells, thus killing the tumor cells directly through this process. Replication of C134 in the tumor itself not only kills
the infected tumor cells but causes the tumor cell to act as a factory to produce new virus. These virus particles are released
as the tumor cell dies and can then proceed to infect other tumor cells in the vicinity and continue the process of tumor kill.
In addition to this direct oncolytic activity, the virus promotes an immune response against surviving tumor cells, which increases
the antitumor effect of the therapy. The virus expresses a gene from another virus from the same overall virus family, human cytomegalovirus,
that allows it to replicate better in the tumor cells than its first-generation predecessors. However, the virus has also been
genetically engineered to minimize the production of any toxic effects for the patient receiving the therapy.
To improve this virus over its first-generation
predecessors, modifications have focused on improving viral replication, spread within the tumor bed, and enhancing bystander damage
to uninfected tumor cells. These effects cumulatively should result in converting an immunologically cold tumor to an immunologically
hot tumor, which Mustang anticipates will increase the efficacy of its IL13Rα2-direct CAR T for the treatment of GBM.
The University of Alabama at Birmingham
(“UAB”) is the clinical trial site for the Phase 1 trial of C134, and they have filed an IND for an investigator-initiated
Phase 1 trial that we expect will start enrolling patients in the first half of 2019. The primary objective of this study is to
determine the safety and tolerability of stereotactic intracerebral injections of escalating doses of C134 virus, and to determine
the maximally tolerated dose (MTD) of C134. Secondary objectives are to obtain preliminary information about the potential benefit
of C134 in the treatment of patients with recurrent malignant gliomas, including relevant data on markers of efficacy, including
time to tumor progression and patient survival.
INTELLECTUAL PROPERTY AND PATENTS
General
Our goal is to obtain, maintain and enforce
patent protection for our products, formulations, processes, methods and other proprietary technologies, preserve our trade secrets,
and operate without infringing on the proprietary rights of other parties, both in the US and in other countries. Our policy
is to actively seek to obtain, where appropriate, the broad intellectual property protection for our product candidates, proprietary
information and proprietary technology through a combination of contractual arrangements and patents, both in the US and elsewhere
in the world.
We also depend upon the skills, knowledge
and experience of our scientific and technical personnel, as well as that of our advisors, consultants and other contractors (“know-how”).
To help protect our proprietary know-how which is not patentable, and for inventions for which patents may be difficult to enforce,
we rely on trade secret protection and confidentiality agreements to protect our interests. To this end, we require all employees,
consultants, advisors and other contractors to enter into confidentiality agreements which prohibit the disclosure of confidential
information and, where applicable, require disclosure and assignment to us of the ideas, developments, discoveries and inventions
that they generate or make, and which are important to our business.
Patents and other proprietary rights are
crucial to the development of our business. We will be able to protect our proprietary technologies from unauthorized use by third
parties only to the extent that our proprietary rights are covered by valid and enforceable patents, supported by regulatory exclusivity
or are effectively maintained as trade secrets. We have a few patents and patent applications related to our compounds and other
technology, but we cannot guarantee the scope of protection of the issued patents, or that such patents will survive a validity
or enforceability challenge, or that any of the pending patent applications will issue as patents.
Generally, patent applications in the US
are maintained in secrecy for a period of 18 months or more. There is even an opportunity under specific circumstances to
keep the contents of patent applications hidden until the patent application matures to an issued patent. The patent positions
of biotechnology and pharmaceutical companies are highly uncertain and involve complex legal and factual questions. Therefore,
we cannot predict the breadth of claims allowed in biotechnology and pharmaceutical patents, or their enforceability. To date,
there has been no consistent policy regarding the breadth of claims allowed in biotechnology patents. Third parties or competitors
may challenge or circumvent our patents or patent applications, if issued. If our competitors prepare and file patent applications
in the US that claim technology also claimed by us, we may have to participate in interference or derivation proceedings declared
by the US Patent and Trademark Office (PTO) to determine priority of invention, which could result in substantial cost, even if
the eventual outcome is favorable to us. Because of the extensive time required for development, testing and regulatory review
of a potential product, it is possible that before we commercialize any of our products, any related patent may expire or remain
in existence for only a short period following commercialization, thus reducing any advantage of the patent. However, the life
of a patent covering a product that has been subject to regulatory approval may have the ability to be extended through the patent
restoration program, although any such extension could still be minimal. Additionally, statutory caps impose further limitation
on any such extensions.
If a patent is issued to a third party
containing one or more preclusive or conflicting claims, and those claims are ultimately determined to be valid and enforceable,
we may be required to obtain a license, if available, under such patent or to develop or obtain alternative technology. In the
event of litigation involving a third-party claim, an adverse outcome in the litigation could subject us to significant liabilities
to such third party, require us to seek a license for the disputed rights from such third party, and/or require us to cease use
of the technology. Further, our breach of an existing license or failure to obtain a license to technology required to commercialize
our products may seriously harm our business. We also may need to commence litigation to enforce any patents issued to us or to
determine the scope and validity of third-party proprietary rights. Litigation would not only involve substantial costs but would
also involve substantial time commitments on the part of our key executives and research and development personnel.
In March 2015, we licensed intellectual
property related to CAR T technology from COH. The intellectual property licensed thereunder includes two granted US patents and
pending patent applications in a number of countries, including the US and the EU, as well as pending patent applications in Japan,
China, South Korea, Australia and the developing world. These granted patents include claims directed to nucleic acids and expression
vectors encoding CARs targeting IL13Rα2 and CD123. The granted patents and any patents maturing from these pending applications
will expire no sooner than October 2033. The pending applications in these patent families also include various claims relating
to CARs, T cells that express the CARs, methods of treatment utilizing the CAR T cells and additional specific features to optimize
administration of CAR T cells, targeting, binding specificity, cell stimulation and persistence. Additional applications and pending
claims from COH that we have rights to include the use of optimized hinge region for many targeted CAR constructions such as CD19
along with compositions and methods to isolate and transfect T memory cells to improve cellular persistence, as well as applications
and claims related to CS1-, HER2-, and PSCA-targeted CARs.
Also in March 2015, we executed a sponsored
research agreement with COH, pursuant to which research is performed in the laboratory of Drs. Stephen Forman and Christine Brown.
The sponsored research agreement gives us the right to first negotiation under specified maximum terms regarding any future inventions
arising from the laboratory.
In May 2017, we licensed intellectual property
related to CAR T technology for targeting CD20 from Fred Hutch. The intellectual property includes an international application
under the Patent Cooperation Treaty (i.e., a PCT application), which has now entered the national stage of multiple countries including
the US, EU, Japan, China, and Canada, among others. These applications contain claims relating to various CD20-targeting CAR constructs
and CAR T cells, as well as methods of making and using the same. In May 2018, national stage applications claiming priority to
the PCT application were filed in several jurisdictions around the world, including the US and Europe, in order to begin substantive
examination of the claims. Patents maturing from these national stage applications will expire no sooner than March 2037.
In March 2017, we licensed intellectual
property related to antibodies and binding agents that specifically bind to PSCA from the University of California Los Angeles
(“UCLA”). The intellectual property includes multiple granted patents and pending applications from around the world
including the US, EU, Japan, China, and Canada. The granted patents and patents maturing from the pending applications will expire
no sooner than March 2027.
In November 2017, we licensed intellectual
property related to the use of CRISPR technology in preparing CAR T cells from Harvard. The intellectual property includes one
granted US patent and multiple pending US and foreign applications. The granted patent and patents maturing from the pending applications
will expire no sooner than April 2024.
In August 2018, we licensed from St. Jude
Children’s Research Hospital XSCID Technology related to an
ex vivo
lentiviral vector gene therapy program to provide
a normal copy of the
IL2RG
gene to patients born with XSCID.
In February 2019, we licensed Material
and Technical Information related to the HSV-1 oncolytic virus C134 from Nationwide Children’s Hospital in Columbus, Ohio.
In total, we have in-licensed six granted
patents and twelve pending applications in the US, with counterparts pending in foreign jurisdictions, for most of the patent
families, in Australia, Brazil, Canada, China, Europe, Korea, Russia, Japan, Hong Kong, Israel, and Mexico and New Zealand.
In
addition to the technology the company has in-licensed, Mustang has also developed its own proprietary intellectual property,
both alone and in conjunction with COH. In particular Mustang filed a US provisional application directed to optimized methods
for manufacturing cell-based therapeutics, and Mustang and COH, as co-applicants, filed a US provisional application directed
to methods of treating hematological cancers.
Other Intellectual Property Rights
We depend upon trademarks, trade secrets,
knowhow and continuing technological advances to develop and maintain our competitive position. To maintain the confidentiality
of trade secrets and proprietary information, we require our employees, scientific advisors, consultants and collaborators, upon
commencement of a relationship with us, to execute confidentiality agreements and, in the case of parties other than our research
and development collaborators, to agree to assign their inventions to us. These agreements are designed to protect our proprietary
information and to grant us ownership of technologies that are developed in connection with their relationship with us. These agreements
may not, however, provide protection for our trade secrets in the event of unauthorized disclosure of such information.
In addition to patent protection, we may
utilize orphan drug regulations or other provisions of the Food, Drug and Cosmetic Act of 1938, as amended, or FDCA, to provide
market exclusivity for certain of our product candidates. Orphan drug regulations provide incentives to pharmaceutical and biotechnology
companies to develop and manufacture drugs for the treatment of rare diseases, currently defined as diseases that exist in fewer
than 200,000 individuals in the US, or diseases that affect more than 200,000 individuals in the US but for which the sponsor does
not realistically anticipate will generate a net profit. Under these provisions, a manufacturer of a designated orphan drug can
seek tax benefits, and the holder of the first approval of a designated orphan product from the Food and Drug Administration (“FDA”),
will be granted a seven-year period of marketing exclusivity for such FDA approved orphan product.
LICENSE, CLINICAL TRIAL AND SPONSORED
RESEARCH AGREEMENTS
St. Jude Children’s Research
Hospital License
On August 2, 2018, the Company entered
into an exclusive worldwide license agreement with St. Jude Children’s Research Hospital (“St. Jude”) for the
development of a first-in-class
ex vivo
lentiviral gene therapy for the treatment of X-linked severe combined immunodeficiency
(“X-SCID”). The Company paid $1.0 million in consideration for the exclusive license in addition to an annual maintenance
fee of $0.1 million (beginning in 2019). St. Jude is eligible to receive payments totaling $13.5 million upon the achievement
of five development and commercialization milestones. Royalty payments in the mid-single digits are due on net sales of licensed
products.
City of Hope Licenses
In February 2017, the Company and COH
amended and restated their license agreement, dated March 17, 2015 (the “Original Agreement”), by entering into three
separate amended and restated exclusive license agreements, one relating to CD123, one relating to IL13Rα2 and one relating
to the Spacer technology (described below). The total potential consideration payable to COH by the Company, in equity or cash,
did not in the aggregate change materially from the Original Agreement. As of December 31, 2018, COH owns 1,000,000 shares of
Class A common stock and 293,588 shares of common stock, representing approximately 4.7% of ownership, and has the right to
appoint a director to the Board of Directors (the “Board”). The Company considers COH to be a related party, due to
the foregoing rights and ownership, as well as the high proportion of the Company’s assets that are licensed from COH.
In addition, the Company entered into a
sponsored research agreement with COH under which the Company has and will fund continued research in the amount of $2.0 million
per year, payable in four equal installments, until 2020. The research covered under this arrangement is for IL13Rα2, CD123
and the Spacer technology.
CD123 License
In February 2017, the Company entered into
an Amended and Restated Exclusive License Agreement with COH to acquire intellectual property rights pertaining to patent rights
related to CD123 (the “CD123 License”). Pursuant to the CD123 License, the Company and COH acknowledged that an upfront
fee had already been paid under the Original Agreement. In addition, COH is eligible to receive an annual maintenance fee of $25,000
and milestone payments totaling up to approximately $14.5 million, upon and subject to the achievement of certain milestones. Royalty
payments in the mid-single digits are due on net sales of licensed products. The Company is obligated to pay COH a percentage of
certain revenues received in connection with a sublicense ranging from the mid-teens to mid-thirties, depending on the timing of
the sublicense in the development of any product. In addition, equity grants made under the Original Agreement were acknowledged,
and the anti-dilution provisions of the Original Agreement were carried forward.
CD123 CRA
In February 2017, the Company entered into
a Clinical Research Support Agreement for CD123 (the “CD123 CRA”). Pursuant to the terms of the CD123 CRA, the Company
made an upfront payment of $19,450 and will contribute an additional $97,490 per patient in connection with the on-going investigator-initiated
study. Further, the Company agreed to fund approximately $76,000 annually pertaining to the clinical development of CD123.
IL13Rα2 License
In February 2017, the Company entered into
an Amended and Restated Exclusive License Agreement with COH to acquire intellectual property rights pertaining to patent rights
related to IL13Rα2 (the “IL13Rα2 License”). Pursuant to the IL13Rα2 License, the Company and COH
acknowledged that an upfront fee had already been paid under the Original Agreement. In addition, COH is eligible to receive an
annual maintenance fee of $25,000 and milestone payments totaling up to approximately $14.5 million, upon and subject to the achievement
of certain milestones. Royalty payments in the mid-single digits are due on net sales of licensed products. The Company is obligated
to pay COH a percentage of certain revenues received in connection with a sublicense ranging from the mid-teens to mid-thirties,
depending on the timing of the sublicense in the development of any product. In addition, equity grants made under the Original
Agreement were acknowledged, and the anti-dilution provisions of the Original Agreement were carried forward.
IL13Rα2
CRA
In February 2017, the Company entered into
a Clinical Research Support Agreement for IL13Rα2 (the “IL13Rα2 CRA”). Pursuant to the terms of the IL13Rα2
CRA, the Company made an upfront payment of approximately $9,300 and will contribute an additional $136,311 per patient in connection
with the on-going investigator-initiated study. Further, the Company agreed to fund approximately $66,000 annually pertaining to
the clinical development of IL13Rα2.
Spacer License
In February 2017, the Company entered into
an Amended and Restated Exclusive License Agreement with COH to acquire intellectual property rights pertaining to patent rights
related to Spacer (the “Spacer License”). Pursuant to the Spacer License, the Company and COH acknowledged that an
upfront fee had already been paid under the Original Agreement. In addition, COH will receive an annual maintenance fee of $10,000.
No royalties are due if the Spacer technology is used in conjunction with a CD123 CAR or an IL13Rα2 CAR, and royalty payments
in the low single digits are due on net sales of licensed products if the Spacer technology is used in conjunction with other intellectual
property. The Company is obligated to pay COH a percentage of certain revenues received in connection with a sublicense in the
mid-thirties, but no such payments are due in connection with sublicenses that are granted in conjunction with the sublicense other
CARs that are licensed from COH to the Company. In addition, equity grants made under the Original Agreement were acknowledged,
and the anti-dilution provisions of the Original Agreement were carried forward.
IV/ICV License
In February 2017, the Company entered into
an exclusive license agreement (the “IV/ICV License”) with COH to acquire intellectual property rights in patent applications
related to the intraventricular and intracerebroventricular methods of delivering T cells that express CARs. Pursuant to the IV/ICV
License, in March 2017, the Company paid COH an upfront fee of $0.1 million. COH is eligible to receive a milestone payment totaling
approximately $0.1 million, upon and subject to the achievement of a milestone, and an annual maintenance fee. Royalty payments
in the low single digits are due on net sales of licensed products. The Company is obligated to pay COH a percentage of certain
revenues received in connection with a sublicense in the mid-thirties, but no such payments are due in connection with sublicenses
that are granted in conjunction with the sublicense other CARs that are licensed from COH to the Company
HER2 Technology License
On May 31, 2017, the Company entered into
an exclusive license agreement (the “HER2 Agreement) with COH for the use of human epidermal growth factor receptor 2 (“HER2”)
CAR T technology (“HER2 Technology”), which will initially be applied in the treatment of glioblastoma multiforme.
Pursuant to the HER2 Agreement, the Company paid an upfront fee of $0.6 million and will owe an annual maintenance fee of $50,000
(beginning in 2019). In addition, COH is eligible to receive milestone payments totaling up to $14.9 million, upon and subject
to the achievement of certain milestones. Royalty payments in the mid-single digits are due on net sales of licensed products.
The Company is obligated to pay COH a percentage of certain revenues received in connection with a sublicense ranging from the
mid-teens to mid-thirties, depending on the timing of the sublicense in the development of any product.
CS1 Technology License
On May 31, 2017, the Company entered into
an exclusive license agreement (the “CS1 Agreement”) with COH for the use of CS1-specific CAR T technology (“CS1
Technology”) to be directed against multiple myeloma. Pursuant to the CS1 Agreement, the Company paid an upfront fee of $0.6
million and will owe an annual maintenance fee of $50,000 (beginning in 2019). In addition, COH is eligible to receive milestone
payments totaling up to $14.9 million, upon and subject to the achievement of certain milestones. Royalty payments in the mid-single
digits are due on net sales of licensed products. The Company is obligated to pay COH a percentage of certain revenues received
in connection with a sublicense ranging from the mid-teens to mid-thirties, depending on the timing of the sublicense in the development
of any product.
PSCA Technology License
On May 31, 2017, the Company entered into
an exclusive license agreement (the “PSCA Agreement”) with COH for the use of prostate stem cell antigen (“PSCA”)
CAR T technology (“PSCA Technology”) to be used in the treatment of prostate cancer. Pursuant to the PSCA Agreement,
the Company paid an upfront fee of $0.3 million and will owe an annual maintenance fee of $50,000 (beginning in 2019). In addition,
COH is eligible to receive milestone payments totaling up to $14.9 million, upon and subject to the achievement of certain milestones.
Royalty payments in the mid-single digits are due on net sales of licensed products. The Company is obligated to pay COH a percentage
of certain revenues received in connection with a sublicense ranging from the mid-teens to mid-thirties, depending on the timing
of the sublicense in the development of any product.
Manufacturing License
On January 3, 2018, the Company entered
into a non-exclusive license agreement with COH to acquire patent and licensed know-how rights related to developing, manufacturing,
and commercializing licensed products. The Company paid $75,000 in consideration for the licenses to the patent rights and the
licensed know-how in addition to an annual maintenance fee. Royalty payments in the low-single digits are due on net sales of licensed
products.
City of Hope SRA
On January 3, 2018, the Company entered
into a Sponsored Research Agreement (“SRA”) with COH to optimize and develop CAR T cell processing procedures. Pursuant
to the SRA, the Company will fund continued research in the amount of $0.9 million for the program, which has an initial term of
two (2) years.
University of California License
On March 17, 2017, the Company entered
into an exclusive license agreement with the Regents of UCLA (the “UCLA License”) to acquire intellectual property
rights in patent applications related to the engineered anti-prostate stem cell antigen antibodies for cancer targeting and detection.
Pursuant to the UCLA License, the Company paid UCLA the upfront fee of $0.2 million and will owe an annual maintenance fee of $15,000
for the first two years, $25,000 for years three and four, and $50,000 per year thereafter. In addition, UCLA is eligible to receive
milestone payments totaling up to $14.3 million, upon and subject to the achievement of certain milestones. Royalty payments in
the mid-single digits are due on net sales of licensed products.
Fred Hutchinson Cancer Research Center
License
CD20 Technology License
Effective July 3, 2017, Mustang entered
into an exclusive, worldwide licensing agreement with Fred Hutch for the use of a CAR T therapy related to autologous T cells engineered
to express a CD20-specific chimeric antigen receptor (the “CD20 Technology License”). Pursuant to the CD 20 Technology
License, the Company paid Fred Hutch an upfront fee of $0.3 million and will owe an annual maintenance fee of $50,000 on each anniversary
of the license until the achievement by the Company of regulatory approval of a licensed product using CD20 Technology. Additional
payments are due for the achievement of eleven development milestones totaling $39.1 million. Royalty payments in the mid-single
digits are due on net sales of licensed products.
CD20 CTA
Also, on July 3, 2017, in conjunction with
the CD20 Technology License from Fred Hutch, Mustang entered into an investigator-initiated clinical trial agreement (the “CD20
CTA”) to provide partial funding for a Phase 1/2 clinical trial at Fred Hutch evaluating the safety and efficacy of the CD20
Technology in patients with relapsed or refractory B-cell non-Hodgkin lymphomas. In connection with the CD20 CTA, the Company agreed
to fund up to $5.3 million of costs associated with the clinical trial, which commenced during the fourth quarter of 2017.
Fred Hutchinson Cancer Research Center
SRA
On March 17, 2018, the Company entered
into an SRA with the Fred Hutchinson Cancer Research Center (“Fred Hutch”) related to developing and optimizing processes
and systems associated with CD20 cell processing. Pursuant to the SRA, the Company will fund continued research in the amount of
$0.6 million during the term of the SRA which expires one year from the effective date.
Harvard University License
On November 20, 2017, Mustang entered into
a license agreement with Harvard for intellectual property pertaining to CRISPR/Cas9-enhanced CAR T therapies for the treatment
of cancer (the “CRISPR License”). Under the licensing agreement with Harvard’s Office of Technology Development,
technologies related to the development of off-the-shelf CAR T, as well as CRISPR/Cas9 gene editing platforms, will be utilized
in conjunction with Mustang’s CAR T cell therapies for the development of treatments for hematologic malignancies and solid
tumors. The Harvard technologies were developed in the lab of Chad Cowan, Ph.D., Associate Professor in the Department of Stem
Cell and Regenerative Biology and a Principal Investigator at the Harvard Stem Cell Institute. Pursuant to the CRISPR License,
the Company paid Harvard University an upfront fee of $0.3 million and will owe an annual maintenance fee of $25,000 on the first
anniversary of the license, $50,000 on the second anniversary of the license and $0.1M for each subsequent anniversary of the license
during the term of the agreement. In addition, Harvard is eligible to receive milestone payments totaling up to $16.7 million,
upon and subject to the achievement of certain milestones. Royalty payments in the low single digits are due on net sales of licensed
products.
Nationwide Children’s
Hospital License
On February 20, 2019, the Company entered
into an exclusive worldwide license agreement with Nationwide Children’s Hospital (“Nationwide”) for the development
of an oncolytic virus (C134) for the treatment of glioblastoma multiforme. The Company paid $0.2 million in consideration for the
exclusive license. Nationwide is eligible to receive additional payments totaling $77.5 million upon the achievement of ten development
and commercialization milestones. Royalty payments in the low-single digits are due on net sales of licensed products.
COMPETITION
Competition in the pharmaceutical and biotechnology
industries is intense. Our competitors include pharmaceutical companies and biotechnology companies, as well as universities and
public and private research institutions. In addition, companies that are active in different but related fields represent substantial
competition for us. Many of our competitors have significantly greater capital resources, larger research and development staffs
and facilities and greater experience in drug development, regulation, manufacturing and marketing than we do. These organizations
also compete with us to recruit qualified personnel, attract partners for joint ventures or other collaborations, and license technologies
that are competitive with ours. To compete successfully in this industry, we must identify novel and unique drugs or methods of
treatment and then complete the development of those drugs as treatments in advance of our competitors.
The drugs that we are attempting to develop
will have to compete with existing therapies. In addition, a large number of companies are pursuing the development of pharmaceuticals
that target the same conditions that we are targeting. Other companies have products or product candidates in various stages of
pre-clinical or clinical development, or with marketing approvals, to treat conditions for which we are also seeking to discover
and develop product candidates. Some of these potential competing drugs are further advanced in development than our product candidates
and may be commercialized earlier.
The field of CAR T therapy is extremely
active. Companies and partnerships currently engaged in clinical trials with CAR T modalities include Celgene, Novartis/University
of Pennsylvania, Bluebird Bio, Celgene/Baylor College of Medicine, Allogene, Cellectis, Gilead, Bellicum, MD Anderson/Ziopharm,
Atara Biotherapeutics, Celyad, Autolus and Intrexon.
The gene therapy field is characterized
by rapidly changing technologies, significant competition and a strong emphasis on intellectual property. We are aware of companies
currently engaged in developing gene therapies in various indications, including Abeona Therapeutics, Adverum Biotechnologies,
Audentes Therapeutics, AVROBIO, Axovant Sciences, Bluebird Bio, BioMarin Pharmaceutical, Krystal Biotech, MeiraGTx, Nightstar Therapeutics,
Orchard Therapeutics, REGENXBIO, Rocket Pharmaceuticals, Sarepta Therapeutics, Solid Biosciences, Spark Therapeutics, Ultragenyx
Pharmaceuticals, uniQure and Voyager Therapeutics, as well as several companies addressing other methods for delivering or modifying
genes and regulating gene expression.
EMPLOYEES
As of December 31, 2018, we had thirty-eight
full-time employees. None of our employees are represented by a labor union or covered under a collective bargaining agreement
and we consider our employee relations to be good. Employees of Fortress also make valuable financial, legal, scientific and other
strategic contributions to Mustang on a regular basis.
SUPPLY AND MANUFACTURING
As an early stage development company,
we rely on our research partners to manufacture all materials currently used in the clinical development programs we are sponsoring
at COH, Fred Hutch, St. Jude, and the University of Alabama at Birmingham (“UAB”) under the IND applications filed
by these institutions. UAB is the clinical trial site for the Phase 1 trial of Nationwide’s C134 oncolytic virus. Pursuant
to the March 2015 Licensing Agreement with COH, we have the right to make and have made the products, and we have negotiated Investigator-Initiated
Clinical Research Support Agreements with COH and Fred Hutch which specify the manufacturing costs and numbers of patients
which will be supplied under filed protocols. Our research partners have extensive experience manufacturing clinical materials
for development studies, but we are currently dependent on both their capacity limitations and continued operating success.
We have limited experience in processing
cells for clinical or commercial purposes. In 2018 we opened our own cell processing facility in Worcester, Massachusetts, in order
to manufacture and supply product candidates for all clinical trials that will be conducted under IND applications to be filed
by us. We are preparing to file our first IND in the first half of 2019. As with any supply program, obtaining raw materials of
the correct quality cannot be guaranteed, and we cannot ensure that we will be successful in this endeavor.
We expect to rely on contract manufacturing
relationships for any non-CAR T products that we may in-license or acquire in the future for co-administration with our CAR T products.
However, there can be no assurance that we will be able to successfully contract with such manufacturers on terms acceptable to
us, or at all.
Contract manufacturers for these potential
future non-CAR T products would be subject to ongoing periodic and unannounced inspections by the FDA, the US Drug Enforcement
Administration (“DEA”) and corresponding state agencies to ensure strict compliance with cGMP and other state and federal
regulations. Our contractors, if any, in Europe would face similar challenges from the numerous EU and member state regulatory
agencies and authorized bodies. We do not have control over third-party manufacturers’ compliance with these regulations
and standards, other than through contractual obligations. If they are deemed out of compliance with cGMPs, product recalls could
result, inventory could be destroyed, production could be stopped, and supplies could be delayed or otherwise disrupted.
If we need to change manufacturers for
these potential future non-CAR T products after commercialization, the FDA and corresponding foreign regulatory agencies must approve
these new manufacturers in advance, which will involve testing and additional inspections to ensure compliance with FDA regulations
and standards and may require significant lead times and delay. Furthermore, switching manufacturers may be difficult because the
number of potential manufacturers is limited. It may be difficult or impossible for us to find a replacement manufacturer quickly
or on terms acceptable to us, or at all.
GOVERNMENT AND INDUSTRY REGULATIONS
Numerous governmental authorities, principally
the FDA and corresponding state and foreign regulatory agencies, impose substantial regulations upon the clinical development,
manufacture and marketing of our product candidates, as well as our ongoing research and development activities. None of our product
candidates has been approved for sale in any market in which we have marketing rights. Before marketing in the US, any drug that
we develop must undergo rigorous pre-clinical testing and clinical trials and an extensive regulatory approval process implemented
by the FDA under the FDCA. The FDA regulates, among other things, the pre-clinical and clinical testing, safety, efficacy, approval,
manufacturing, record keeping, adverse event reporting, packaging, labeling, storage, advertising, promotion, export, sale and
distribution of biopharmaceutical products.
The regulatory review and approval process
is lengthy, expensive and uncertain. We are required to submit extensive pre-clinical and clinical data and supporting information
to the FDA for each indication or use to establish a product candidate’s safety and efficacy before we can secure FDA approval
to market or sell a product in the US. The approval process takes many years, requires the expenditure of substantial resources
and may involve ongoing requirements for post-marketing studies or surveillance. Before commencing clinical trials in humans, we
must submit an IND to the FDA containing, among other things, pre-clinical data, chemistry, manufacturing and control information,
and an investigative plan. Our submission of an IND may not result in FDA authorization to commence a clinical trial.
The FDA may permit expedited development,
evaluation, and marketing of new therapies intended to treat persons with serious or life-threatening conditions for which there
is an unmet medical need under its fast track drug development programs. A sponsor can apply for fast track designation at the
time of submission of an IND, or at any time prior to receiving marketing approval of the new drug application (NDA). To receive
fast track designation, an applicant must demonstrate:
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that the drug is intended to treat a serious or life-threatening
condition;
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that the drug is intended to treat a serious aspect
of the condition; and
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that the drug has the potential to address unmet medical
needs, and this potential is being evaluated in the planned drug development program.
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The FDA must respond to a request for fast
track designation within 60 calendar days of receipt of the request. Over the course of drug development, a product in a fast track
development program must continue to meet the criteria for fast track designation. Sponsors of products in fast track drug development
programs must be in regular contact with the reviewing division of the FDA to ensure that the evidence necessary to support marketing
approval will be developed and presented in a format conducive to an efficient review. Sponsors of products in fast track drug
development programs ordinarily are eligible for priority review of a completed application in six months or less and also may
be permitted to submit portions of an NDA to the FDA for review before the complete application is submitted.
Sponsors of drugs designated as fast track
also may seek approval under the FDA’s accelerated approval regulations. Under this authority, the FDA may grant marketing
approval for a new drug product on the basis of adequate and well-controlled clinical trials establishing that the drug product
has an effect on a surrogate endpoint that is reasonably likely, based on epidemiologic, therapeutic, pathophysiologic, or other
evidence, to predict clinical benefit or on the basis of an effect on a clinical endpoint other than survival or irreversible morbidity.
Approval will be subject to the requirement that the applicant study the drug further to verify and describe its clinical
benefit where there is uncertainty as to the relation of the surrogate endpoint to clinical benefit or uncertainty as to the relation
of the observed clinical benefit to ultimate outcome. Post-marketing studies are usually underway at the time an applicant
files the NDA. When required to be conducted, such post-marketing studies must also be adequate and well-controlled.
The applicant must carry out any such post-marketing studies with due diligence. Many companies who have been granted the right
to utilize an accelerated approval approach have failed to obtain approval. Moreover, negative or inconclusive results from the
clinical trials we hope to conduct or adverse medical events could cause us to have to repeat or terminate the clinical trials.
Accordingly, we may not be able to complete the clinical trials within an acceptable time frame, if at all, and, therefore, could
not submit the NDA to the FDA or foreign regulatory authorities for marketing approval.
Clinical testing must meet requirements
for institutional review board oversight, informed consent and good clinical practices, and must be conducted pursuant to an IND,
unless exempted.
For purposes of NDA approval, clinical
trials are typically conducted in the following sequential phases:
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Phase 1
: The drug is administered to a small
group of humans, either healthy volunteers or patients, to test for safety, dosage tolerance, absorption, metabolism, excretion
and clinical pharmacology.
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Phase 2
: Studies are conducted on a larger
number of patients to assess the efficacy of the product, to ascertain dose tolerance and the optimal dose range, and to gather
additional data relating to safety and potential adverse events.
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Phase 3
: Studies establish safety and efficacy
in an expanded patient population.
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Phase 4
: The FDA may require Phase 4 post-marketing
studies to find out more about the drug’s long-term risks, benefits, and optimal use, or to test the drug in different populations.
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The length of time necessary to complete
clinical trials varies significantly and may be difficult to predict. Clinical results are frequently susceptible to varying interpretations
that may delay, limit or prevent regulatory approvals. Additional factors that can cause delay or termination of our clinical trials,
or that may increase the costs of these trials, include:
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slow patient enrollment due to the nature of the clinical
trial plan, the proximity of patients to clinical sites, the eligibility criteria for participation in the study or other factors;
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inadequately trained or insufficient personnel at
the study site to assist in overseeing and monitoring clinical trials or delays in approvals from a study site’s review
board;
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longer treatment time required to demonstrate efficacy
or determine the appropriate product dose;
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insufficient supply of the product candidates;
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adverse medical events or side effects in treated
patients; and
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ineffectiveness of the product candidates.
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In addition, the FDA, equivalent foreign
regulatory authority, or a data safety monitoring committee for a trial may place a clinical trial on hold or terminate it if it
concludes that subjects are being exposed to an unacceptable health risk, or for futility. Any drug is likely to produce some toxicity
or undesirable side effects in animals and in humans when administered at sufficiently high doses and/or for a sufficiently long
period of time. Unacceptable toxicity or side effects may occur at any dose level at any time in the course of studies in animals
designed to identify unacceptable effects of a product candidate, known as toxicological studies, or clinical trials of product
candidates. The appearance of any unacceptable toxicity or side effect could cause us or regulatory authorities to interrupt, limit,
delay or abort the development of any of our product candidates and could ultimately prevent approval by the FDA or foreign regulatory
authorities for any or all targeted indications.
Sponsors of drugs may apply for a special
protocol assessment (SPA) from the FDA. The SPA process is a procedure by which the FDA provides official evaluation and written
guidance on the design and size of proposed protocols that are intended to form the basis for an NDA. However, final marketing
approval depends on the results of efficacy, the adverse event profile and an evaluation of the benefit/risk of treatment demonstrated
in the Phase 3 trial. The SPA may only be changed through a written agreement between the sponsor and the FDA, or if the FDA becomes
aware of a substantial scientific issue essential to product safety or efficacy.
Before receiving FDA approval to market
a product, we must demonstrate that the product is safe and effective for its intended use by submitting to the FDA an NDA containing
the pre-clinical and clinical data that have been accumulated, together with chemistry and manufacturing and controls specifications
and information, and proposed labeling, among other things. The FDA may refuse to accept an NDA for filing if certain content criteria
are not met and, even after accepting an NDA, the FDA may often require additional information, including clinical data, before
approval of marketing a product.
It is also becoming more common for the
FDA to request a Risk Evaluation and Mitigation Strategy, or REMS, as part of an NDA. The REMS plan contains post-market obligations
of the sponsor to train prescribing physicians, monitor off-label drug use, and conduct sufficient Phase 4 follow-up studies and
registries to ensure the continued safe use of the drug.
As part of the approval process, the FDA
must inspect and approve each manufacturing facility. Among the conditions of approval is the requirement that a manufacturer’s
quality control and manufacturing procedures conform to cGMP. Manufacturers must expend significant time, money and effort to ensure
continued compliance, and the FDA conducts periodic inspections to certify compliance. It may be difficult for our manufacturers
or us to comply with the applicable cGMP, as interpreted by the FDA, and other FDA regulatory requirements. If we, or our contract
manufacturers, fail to comply, then the FDA may not allow us to market products that have been affected by the failure.
If the FDA grants approval, the approval
will be limited to those conditions and patient populations for which the product is safe and effective, as demonstrated through
clinical studies. Further, a product may be marketed only in those dosage forms and for those indications approved in the NDA.
Certain changes to an approved NDA, including, with certain exceptions, any significant changes to labeling, require approval of
a supplemental application before the drug may be marketed as changed. Any products that we manufacture or distribute pursuant
to FDA approvals are subject to continuing monitoring and regulation by the FDA, including compliance with cGMP and the reporting
of adverse experiences with the drugs. The nature of marketing claims that the FDA will permit us to make in the labeling and advertising
of our products will generally be limited to those specified in FDA approved labeling, and the advertising of our products will
be subject to comprehensive monitoring and regulation by the FDA. Drugs whose review was accelerated may carry additional restrictions
on marketing activities, including the requirement that all promotional materials are pre-submitted to the FDA. Claims exceeding
those contained in approved labeling will constitute a violation of the FDCA. Violations of the FDCA or regulatory requirements
at any time during the product development process, approval process, or marketing and sale following approval may result in agency
enforcement actions, including withdrawal of approval, recall, seizure of products, warning letters, injunctions, fines and/or
civil or criminal penalties. Any agency enforcement action could have a material adverse effect on our business.
Failure to comply with applicable federal,
state and foreign laws and regulations would likely have a material adverse effect on our business. In addition, federal, state
and foreign laws and regulations regarding the manufacture and sale of new drugs are subject to future changes.
Other Healthcare Laws and Compliance
Requirements
In the US, our activities are potentially
subject to regulation by various federal, state and local authorities in addition to the FDA, including the Centers for Medicare
and Medicaid Services (formerly the Health Care Financing Administration), other divisions of the United States Department of Health
and Human Services (e.g., the Office of Inspector General), the United States Department of Justice and individual United States
Attorney offices within the Department of Justice, and state and local governments.
Pharmaceutical Coverage, Pricing and
Reimbursement
In the US and markets in other countries,
sales of any products for which we receive regulatory approval for commercial sale will depend in part on the availability of reimbursement
from third-party payors, including government health administrative authorities, managed care providers, private health insurers
and other organizations. Third-party payors are increasingly examining the medical necessity and cost-effectiveness of medical
products and services, in addition to their safety and efficacy, and, accordingly, significant uncertainty exists as to the reimbursement
status of newly approved therapeutics. Adequate third-party reimbursement may not be available for our products to enable us to
realize an appropriate return on our investment in research and product development. We are unable to predict the future course
of federal or state health care legislation and regulations, including regulations that will be issued to implement provisions
of the health care reform legislation enacted in 2010, known as the Affordable Care Act. The Affordable Care Act and further changes
in the law or regulatory framework could have a material adverse effect on our business.
International Regulation
In addition to regulations in the US, there
are a variety of foreign regulations governing clinical trials and commercial sales and distribution of any product candidates.
The approval process varies from country to country, and the time may be longer or shorter than that required for FDA approval.
The following information sets forth
risk factors that could cause our actual results to differ materially from those contained in forward-looking statements we have
made in this
Form 10-K
and those we may make from time to time. You should carefully consider the risks described below,
in addition to the other information contained in this
Form 10-K
, before making an investment decision. Our business, financial
condition or results of operations could be harmed by any of these risks. The risks and uncertainties described below are not the
only ones we face. Additional risks not presently known to us or other factors not perceived by us to present significant risks
to our business at this time also may impair our business operations.
Risks Related to Our Business and Industry
We currently have no products for
sale. We are heavily dependent on the success of our product candidates, and we cannot give any assurances that any of our product
candidates will receive regulatory approval or be successfully commercialized.
To date, we have invested a significant
portion of our efforts and financial resources in the acquisition and development of our product candidates. We have not demonstrated
our ability to perform the functions necessary for the successful acquisition, development or commercialization of the technologies
we are seeking to develop. As an early stage company, we have limited experience and have not yet demonstrated an ability to successfully
overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields, particularly
in the biopharmaceutical area. Our future success is substantially dependent on our ability to successfully develop, obtain regulatory
approval for, and then successfully commercialize such product candidates. Our product candidates are currently in preclinical
development or in early stage clinical trials. Our business depends entirely on the successful development and commercialization
of our product candidates, which may never occur. We currently generate no revenues from sales of any products, and we may never
be able to develop or commercialize a marketable product.
The successful development, and any commercialization,
of our technologies and any product candidates would require us to successfully perform a variety of functions, including:
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developing our technology platform;
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identifying, developing, manufacturing and commercializing
product candidates;
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entering into successful licensing and other arrangements
with product development partners;
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participating in regulatory approval processes;
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formulating and manufacturing products;
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obtaining sufficient quantities of our product candidates
from our third-party manufacturers as required to meet clinical trial needs and commercial demand at launch and thereafter;
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establishing and maintaining agreements with wholesalers,
distributors and group purchasing organizations on commercially reasonable terms;
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conducting sales and marketing activities including
hiring, training, deploying and supporting our sales force and creating market demand for our product candidates through our own
marketing and sales activities, and any other arrangements to promote our product candidates that we may later establish; and
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maintaining patent protection and regulatory exclusivity
for our product candidates.
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Our operations have been limited to organizing
our company, acquiring, developing and securing our proprietary technology and identifying and obtaining preclinical data or clinical
data for various product candidates. These operations provide a limited basis for you to assess our ability to continue to develop
our technology, identify product candidates, develop and commercialize any product candidates we are able to identify and enter
into successful collaborative arrangements with other companies, as well as for you to assess the advisability of investing in
our securities. Each of these requirements will require substantial time, effort and financial resources.
Each of our product candidates will require
additional preclinical and clinical development, management of preclinical, clinical and manufacturing activities, regulatory approval
in multiple jurisdictions, obtaining manufacturing supply, building of a commercial organization, and significant marketing efforts
before we generate any revenues from product sales. We are not permitted to market or promote any of our product candidates before
we receive regulatory approval from the FDA or comparable foreign regulatory authorities, and we may never receive such regulatory
approval for any of our product candidates.
Preclinical development is highly
speculative and has a high risk of failure.
We currently have both preclinical and
clinical-stage product candidates. Our preclinical product candidates have never been used in humans. Preclinical development is
highly speculative and carries a high risk of failure. We can provide no assurances that preclinical toxicology and/or preclinical
activity of our product candidates will support moving any of these product candidates into clinical development. If we are unsuccessful
in our preclinical development efforts for any of these product candidates and they fail to reach clinical development, it would
have a material adverse effect on our business and financial condition.
Delays in clinical testing could
result in increased costs to us and delay our ability to generate revenue.
Although we are planning for certain clinical
trials relating to our product candidates, there can be no assurance that the FDA will accept our proposed trial designs. We may
experience delays in our clinical trials and we do not know whether planned clinical trials will begin on time, need to be redesigned,
enroll patients on time or be completed on schedule, if at all. Clinical trials can be delayed for a variety of reasons, including
delays related to:
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obtaining regulatory approval to commence a trial;
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reaching agreement on acceptable terms with prospective
contract research organizations, or CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation
and may vary significantly among different CROs and trial sites;
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obtaining institutional review board, or IRB, approval
at each site;
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recruiting suitable patients to participate in a trial;
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clinical sites deviating from trial protocol or dropping
out of a trial;
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having patients complete a trial or return for post-treatment
follow-up;
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developing and validating companion diagnostics on
a timely basis, if required;
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adding new clinical trial sites; or
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manufacturing sufficient quantities of product candidate
for use in clinical trials.
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Patient enrollment, a significant factor
in the timing of clinical trials, is affected by many factors including the size and nature of the patient population, the proximity
of patients to clinical sites, the eligibility criteria for the trial, the design of the clinical trial, competing clinical trials
and clinicians’ and patients’ perceptions as to the potential advantages of the drug being studied in relation to other
available therapies, including any new drugs that may be approved for the indications we are investigating. Furthermore, we intend
to rely on CROs and clinical trial sites to ensure the proper and timely conduct of our clinical trials and we intend to have agreements
governing their committed activities; however, we will have limited influence over their actual performance.
We could encounter delays if a clinical
trial is suspended or terminated by us, by the IRBs of the institutions in which such trials are being conducted, by the Data Safety
Monitoring Board, or DSMB, for such trial or by the FDA or other regulatory authorities. Such authorities may impose such a suspension
or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements
or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities
resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit
from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical
trial.
If we experience delays in the completion
of, or termination of, any clinical trial of our product candidates, the commercial prospects of our product candidates will be
harmed, and our ability to generate product revenues from any of these product candidates will be delayed. In addition, any delays
in completing our clinical trials will increase our costs, slow down our product candidate development and approval process and
jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may harm our business, financial
condition and prospects significantly. In addition, many of the factors that cause, or lead to, a delay in the commencement or
completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.
We may not receive regulatory approval
for our product candidates, or their approval may be further delayed, which would have a material adverse effect on our business
and financial condition.
Our product candidates and the activities
associated with their development and commercialization, including their design, testing, manufacture, safety, efficacy, recordkeeping,
labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDA
and other regulatory agencies in the US and by the European Medicines Agency and similar regulatory authorities outside the US.
Failure to obtain marketing approval for one or more of our product candidates or any future product candidate will prevent us
from commercializing the product candidate. We have not received approval to market any of our product candidates from regulatory
authorities in any jurisdiction. We have only limited experience in filing and supporting the applications necessary to gain marketing
approvals and expect to rely on third-party contract research organizations to assist us in this process. Securing marketing approval
requires the submission of extensive preclinical and clinical data and supporting information to regulatory authorities for each
therapeutic indication to establish the product candidate’s safety and efficacy. Securing marketing approval also requires
the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the regulatory
authorities. One or more of our product candidates or any future product candidate may not be effective, may be only moderately
effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our
obtaining marketing approval or prevent or limit commercial use. If any of our product candidates or any future product candidate
receives marketing approval, the accompanying label may limit the approved use of our drug in this way, which could limit sales
of the product.
The process of obtaining marketing approvals,
both in the United States and abroad, is expensive, may take many years if approval is obtained at all, and can vary substantially
based upon a variety of factors, including the type, complexity and novelty of the product candidates involved. Changes in marketing
approval policies during the development period, changes in or the enactment of additional statutes or regulations, or changes
in regulatory review for each submitted product application may cause delays in the approval or rejection of an application. Regulatory
authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that our
data is insufficient for approval and require additional preclinical studies or clinical trials. In addition, varying interpretations
of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of a product candidate.
Any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render
the approved product not commercially viable.
If we experience delays in obtaining approval
or if we fail to obtain approval of one or more of our product candidates or any future product candidate, the commercial prospects
for our product candidates may be harmed and our ability to generate revenue will be materially impaired.
In addition, even if we were to obtain
approval, regulatory authorities may approve any of our product candidates or any future product candidate for fewer or more limited
indications than we request, may not approve the price we intend to charge for our products, may grant approval contingent on the
performance of costly post-marketing clinical trials, or may approve a product candidate with a label that does not include the
labeling claims necessary or desirable for the successful commercialization of that product candidate. Any of these scenarios could
compromise the commercial prospects for one or more of our product candidates or any future product candidate.
Moreover, in all interactions with regulatory
authorities, we are exposed to liability risks under the Foreign Corrupt Practices Act or similar anti-bribery laws.
If any of our product candidates
is approved and we or our contract manufacturer(s) fail to produce the product in the volumes that we require on a timely basis,
or fail to comply with stringent regulations applicable to pharmaceutical drug manufacturers, we may face delays in the commercialization
of our product candidates or be unable to meet market demand, and may lose potential revenues.
The manufacture of pharmaceutical products
requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process
controls, and the use of specialized processing equipment. We may enter into development and supply agreements with contract manufacturers
for the completion of pre-commercialization manufacturing development activities and the manufacture of commercial supplies for
one or more of our product candidates. Any termination or disruption of our relationships with our contract manufacturers may materially
harm our business and financial condition and frustrate any commercialization efforts for each respective product candidate.
All of our contract manufacturers must
comply with strictly enforced federal, state and foreign regulations, including cGMP requirements enforced by the FDA through
its facilities inspection program, and we have little control over their compliance with these regulations. Any failure to comply
with applicable regulations may result in fines and civil penalties, suspension of production, suspension or delay in product approval,
product seizure or recall, or withdrawal of product approval, and would limit the availability of our product and customer confidence
in our product. Any manufacturing defect or error discovered after products have been produced and distributed could result in
even more significant consequences, including costly recall procedures, re-stocking costs, damage to our reputation and potential
for product liability claims.
If the commercial manufacturers upon whom
we may rely to manufacture one or more of our product candidates, and any future product candidate we may in-license, fail to deliver
the required commercial quantities on a timely basis at commercially reasonable prices, we would likely be unable to meet demand
for our products and we would lose potential revenues.
Our approach to the discovery and
development of our product candidates is unproven, and we do not know whether we will be able to develop any products of commercial
value.
Our products candidates are emerging technologies
and, consequently, it is conceivable that such technologies may ultimately fail to identify commercially viable drugs to treat
human patients with cancer or other diseases.
If serious adverse or unacceptable
side effects are identified during the development of one or more of our product candidates or any future product candidate, we
may need to abandon or limit our development of some of our product candidates.
If one or more of our product candidates
or any future product candidate are associated with undesirable side effects in clinical trials or have characteristics that are
unexpected, we may need to abandon their development or limit development to more narrow uses or subpopulations in which the undesirable
side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. In our
industry, many compounds that initially showed promise in early stage testing have later been found to cause serious side effects
that prevented further development of the compound. In the event that our clinical trials reveal a high or unacceptable severity
and prevalence of side effects, our trials could be suspended or terminated, and the FDA or comparable foreign regulatory authorities
could order us to cease further development or deny approval of one or more of our product candidates or any future product candidate
for any or all targeted indications. The FDA could also issue a letter requesting additional data or information prior to making
a final decision regarding whether or not to approve a product candidate. The number of requests for additional data or information
issued by the FDA in recent years has increased and has resulted in substantial delays in the approval of several new drugs. Undesirable
side effects caused by one or more of our product candidates or any future product candidate could also result in the inclusion
of unfavorable information in our product labeling, denial of regulatory approval by the FDA or other regulatory authorities for
any or all targeted indications, and in turn prevent us from commercializing and generating market acceptance and revenues from
the sale of that product candidate. Drug-related side effects could affect patient recruitment or the ability of enrolled patients
to complete the trial and could result in potential product liability claims.
Additionally, if one or more of our product
candidates or any future product candidate receives marketing approval and we or others later identify undesirable side effects
caused by this product, a number of potentially significant negative consequences could result, including:
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regulatory authorities may require the addition of
unfavorable labeling statements, specific warnings or a contraindication;
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regulatory authorities may suspend or withdraw their
approval of the product, or require it to be removed from the market;
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we may be required to change the way the product is
administered, conduct additional clinical trials or change the labeling of the product; or
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our reputation may suffer.
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Any of these events could prevent us from
achieving or maintaining market acceptance of any of our product candidates or any future product candidate or could substantially
increase our commercialization costs and expenses, which in turn could delay or prevent us from generating significant revenues
from its sale.
Even if one or more of our product
candidates receives regulatory approval, it and any other products we may market will remain subject to substantial regulatory
scrutiny.
One or more of our product candidates that
we may license or acquire will also be subject to ongoing requirements and review of the FDA and other regulatory authorities.
These requirements include labeling, packaging, storage, advertising, promotion, record-keeping and submission of safety and other
post-market information and reports, registration and listing requirements, cGMP requirements relating to manufacturing, quality
control, quality assurance and corresponding maintenance of records and documents, requirements regarding the distribution of samples
to physicians and recordkeeping of the drug, and requirements regarding our presentations to and interactions with health care
professionals.
The FDA may also impose requirements for
costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of the product. The FDA closely
regulates the post-approval marketing and promotion of drugs to ensure drugs are marketed only for the approved indications and
in accordance with the provisions of the approved labeling. The FDA imposes stringent restrictions on manufacturers’ communications
regarding off-label use and if we do not market our products for only their approved indications, we may be subject to enforcement
action for off-label marketing. Violations of the FDCA relating to the promotion of prescription drugs may lead to investigations
alleging violations of federal and state health care fraud and abuse laws, as well as state consumer protection laws.
In addition, later discovery of previously
unknown adverse events or other problems with our products, manufacturers or manufacturing processes, or failure to comply with
regulatory requirements, may yield various results, including:
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restrictions on such products, operations, manufacturers
or manufacturing processes;
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restrictions on the labeling or marketing of a product;
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restrictions on product distribution or use;
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requirements to conduct post-marketing studies or
clinical trials;
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withdrawal of the products from the market;
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refusal to approve pending applications or supplements
to approved applications that we submit;
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fines, restitution or disgorgement of profits;
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suspension or withdrawal of marketing or regulatory
approvals;
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suspension of any ongoing clinical trials;
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refusal to permit the import or export of our products;
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injunctions or the imposition of civil or criminal
penalties.
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The FDA’s policies may change, and
additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates.
If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we
are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained.
We will need to obtain FDA approval
of any proposed product brand names, and any failure or delay associated with such approval may adversely impact our business.
A pharmaceutical product cannot be marketed
in the US or other countries until we have completed a rigorous and extensive regulatory review processes, including approval of
a brand name. Any brand names we intend to use for our product candidates will require approval from the FDA regardless of whether
we have secured a formal trademark registration from the US Patent and Trademark Office (PTO). The FDA typically conducts a review
of proposed product brand names, including an evaluation of potential for confusion with other product names. The FDA may also
object to a product brand name if it believes the name inappropriately implies medical claims. If the FDA objects to any of our
proposed product brand names, we may be required to adopt an alternative brand name for our product candidates. If we adopt an
alternative brand name, we would lose the benefit of our existing trademark applications for such product candidate and may be
required to expend significant additional resources in an effort to identify a suitable product brand name that would qualify under
applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA. We may be unable to
build a successful brand identity for a new trademark in a timely manner or at all, which would limit our ability to commercialize
our product candidates.
Our current and future relationships
with customers and third-party payors in the United States and elsewhere may be subject, directly or indirectly, to applicable
anti-kickback, fraud and abuse, false claims, transparency, health information privacy and security and other healthcare laws and
regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm, administrative
burdens and diminished profits and future earnings.
Healthcare providers, physicians and third-party
payors in the US and elsewhere will play a primary role in the recommendation and prescription of any product candidates for which
we obtain marketing approval. Our future arrangements with third-party payors and customers may expose us to broadly applicable
fraud and abuse and other healthcare laws and regulations, including, without limitation, the federal Anti-Kickback Statute and
the federal False Claims Act, which may constrain the business or financial arrangements and relationships through which we sell,
market and distribute any product candidates for which we obtain marketing approval. In addition, we may be subject to transparency
laws and patient privacy regulation by the federal and state governments and by governments in foreign jurisdictions in which we
conduct our business. The applicable federal, state and foreign healthcare laws and regulations that may affect our ability to
operate include, but are not necessarily limited to:
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the federal Anti-Kickback Statute, which prohibits,
among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or
indirectly, in cash or in kind, to induce or reward, or in return for, 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 and state healthcare programs, such
as Medicare and Medicaid;
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federal civil and criminal false claims laws and civil
monetary penalty laws, including the federal False Claims Act, which impose criminal and civil penalties, including civil whistleblower
or
qui tam
actions, against individuals or entities for knowingly presenting,
or causing to be presented, to the federal government, including the Medicare and Medicaid programs, claims for payment that are
false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;
the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes criminal and civil liability
for executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;
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HIPAA, as amended by the Health Information Technology
for Economic and Clinical Health Act of 2009, or HITECH, and their respective implementing regulations, which impose obligations
on covered healthcare providers, health plans, and healthcare clearinghouses, as well as their business associates that create,
receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity, with respect
to safeguarding the privacy, security and transmission of individually identifiable health information;
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the federal Open Payments program, which requires
manufacturers of certain approved drugs, devices, biologics and medical supplies for which payment is available under Medicare,
Medicaid or the Children’s Health Insurance Program, with specific exceptions, to report annually to the Centers for Medicare &
Medicaid Services, or CMS, information related to “payments or other transfers of value” made to physicians, which
is defined to include doctors, dentists, optometrists, podiatrists and chiropractors, and teaching hospitals and applicable manufacturers
and applicable group purchasing organizations to report annually to CMS ownership and investment interests held by the physicians
and their immediate family members. Data collection began on August 1, 2013 with requirements for manufacturers to submit
reports to CMS by March 31, 2014 and 90 days after the end each subsequent calendar year. Disclosure of such information
was made by CMS on a publicly available website beginning in September 2014 and is annually updated; and
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analogous state and foreign laws and regulations,
such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare
items or services reimbursed by non-governmental third-party payors, including private insurers; state and foreign laws that require
pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance
guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers; state
and foreign laws that require drug manufacturers to report information related to payments and other transfers of value to physicians
and other healthcare providers or marketing expenditures; and state and foreign laws governing the privacy and security of health
information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by
HIPAA, thus complicating compliance efforts.
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Efforts to ensure that our business arrangements
with third parties will comply with applicable healthcare laws and regulations may involve substantial costs. It is possible that
governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations
or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in
violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil,
criminal and administrative penalties, including, without limitation, damages, fines, imprisonment, exclusion from participation
in government healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations, which
could have a material adverse effect on our business. If any of the physicians or other healthcare providers or entities with whom
we expect to do business, including our collaborators, is found not to be in compliance with applicable laws, it may be subject
to criminal, civil or administrative sanctions, including exclusions from participation in government healthcare programs, which
could also materially affect our business.
Regulatory approval for any approved
product is limited by the FDA to those specific indications and conditions for which clinical safety and efficacy have been demonstrated.
Any regulatory approval is limited to those
specific diseases and indications for which a product is deemed to be safe and effective by the FDA. In addition to the FDA approval
required for new formulations, any new indication for an approved product also requires FDA approval. If we are not able to obtain
FDA approval for any desired future indications for our products, our ability to effectively market and sell our products may be
reduced and our business may be adversely affected.
While physicians may choose to prescribe
drugs for uses that are not described in the product’s labeling and for uses that differ from those tested in clinical studies
and approved by the regulatory authorities, our ability to promote the products is limited to those indications that are specifically
approved by the FDA. These “off-label” uses are common across medical specialties and may constitute an appropriate
treatment for some patients in varied circumstances. Regulatory authorities in the US generally do not regulate the behavior
of physicians in their choice of treatments. Regulatory authorities do, however, restrict communications by pharmaceutical companies
on the subject of off-label use. If our promotional activities fail to comply with these regulations or guidelines, we may be subject
to warnings from, or enforcement action by, these authorities. In addition, our failure to follow FDA rules and guidelines relating
to promotion and advertising may cause the FDA to suspend or withdraw an approved product from the market, require a
recall or institute fines, or could result in disgorgement of money, operating restrictions, corrective advertising, injunctions
or criminal prosecution, any of which could harm our business.
We are subject to new legislation,
regulatory proposals and managed care initiatives that may increase our costs of compliance and adversely affect our ability to
market our products, obtain collaborators and raise capital.
In the US and some foreign jurisdictions,
there have been a number of proposed and enacted legislative and regulatory changes regarding the healthcare system that could
prevent or delay marketing approval of one or more of our product candidates, restrict or regulate post-approval activities and
affect our ability to profitably sell any of our product candidates for which we obtain marketing approval.
Among policy makers and payors in the US
and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare
costs, improving quality and expanding access. In the US, the pharmaceutical industry has been a particular focus of these efforts
and has been significantly affected by major legislative initiatives.
In March 2010, President Obama signed into
law the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act,
or collectively the ACA, a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare
spending, enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries,
impose new taxes and fees on the health industry and impose additional health policy reforms.
Among the provisions of the ACA of importance
to our potential product candidates are:
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an annual, nondeductible fee on any entity that manufactures, or imports specified branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs;
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an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13.0% of the average manufacturer price for branded and generic drugs, respectively;
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expansion of healthcare fraud and abuse laws, including
the federal False Claims Act and the federal Anti-Kickback Statute, new government investigative powers and enhanced penalties
for non-compliance;
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a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for a manufacturer’s outpatient drugs to be covered under Medicare Part D;
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extension of a manufacturer’s Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;
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expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for certain individuals with income at or below 138% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability;
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expansion of the entities eligible for discounts under the 340B Drug Pricing Program;
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the new requirements under the federal Open Payments program and its implementing regulations;
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a new requirement to annually report drug samples that manufacturers and distributors provide to physicians;
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a new regulatory pathway for the approval of biosimilar biological products, all of which will impact existing government healthcare programs and will result in the development of new programs; and
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a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.
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The Supreme Court upheld the ACA in the
main challenge to the constitutionality of the law in 2012. Specifically, the Supreme Court held that the individual mandate and
corresponding penalty was constitutional because it would be considered a tax by the federal government. The Supreme Court also
upheld federal subsidies for purchasers of insurance through federally facilitated exchanges in a decision released in June 2015.
President Trump ran for office on
a platform that supported the repeal of the ACA, and one of his first actions after his inauguration was to sign an Executive Order
instructing federal agencies to waive or delay requirements of the ACA that impose economic or regulatory burdens on states, families,
the health-care industry and others. Modifications to or repeal of all or certain provisions of the ACA have been attempted in
Congress as a result of the outcome of the recent presidential and congressional elections, consistent with statements made by
the incoming administration and members of Congress during the presidential and congressional campaigns and following the election.
In January 2017, Congress voted to
adopt a budget resolution for fiscal year 2017, or the Budget Resolution, that authorizes the implementation of legislation that
would repeal portions of the ACA. The Budget Resolution is not a law. However, it is widely viewed as the first step toward the
passage of legislation that would repeal certain aspects of the ACA. In March 2017, following the passage of the budget resolution
for fiscal year 2017, the U.S. House of Representatives passed legislation known as the American Health Care Act of 2017, which,
if enacted, would amend or repeal significant portions of the ACA. Attempts in the Senate to pass ACA repeal legislation, including
the Better Care Reconciliation Act of 2017, so far have been unsuccessful. At the end of 2017, Congress passed the Tax Cuts and
Jobs Act, which repealed the penalty for individuals who fail to maintain minimum essential health coverage as required by the
ACA. Following this legislation, Texas and 19 other states filed a lawsuit alleging that the ACA is unconstitutional as the individual
mandate was repealed, undermining the legal basis for the Supreme Court’s prior decision. On December 14, Texas federal district
court judge Reed O’Connor issued a ruling declaring that the ACA in it is entirety is unconstitutional. While this decision
has no immediate legal effect on the ACA and its provisions, this lawsuit is ongoing and the outcome through the appeals process
may have a significant impact on our business.
The Trump Administration has also taken
several regulatory steps to redirect ACA implementation. The Department of Health and Human Services (“HHS”) finalized
Medicare fee-for-service hospital payment reductions for Part B drugs acquired through the 340B Drug Pricing Program, which has
been overturned by the courts. HHS also has signaled its intent to pursue reimbursement policy changes for Medicare Part B drugs
as a whole that likely would reduce hospital and physician reimbursement for these drugs.
HHS has made numerous other proposals aimed
at lowering drug prices for Medicare beneficiaries and increasing price transparency. These proposals include giving Medicare Advantage
and Part D plans flexibility in the availability of drugs in “protected classes,” more transparency in the cost of
drugs, including the beneficiary’s financial liability, and less costly alternatives and permitting the use of step therapy
as a means of prior authorization. HHS has also proposed requiring pharmaceutical manufacturers disclose the prices of certain
drugs in direct-to-consumer television advertisements.
HHS also has taken steps to increase the availability of cheaper health insurance options, typically with
fewer benefits and less generous coverage. The Administration has also signaled its intention to address drug prices and to increase
competition, including by increasing the availability of biosimilars and generic drugs. As these are regulatory actions, a new
administration could undo or modify these efforts.
We expect that the ACA, as well as other
healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward
pressure on the price that we receive for any approved drug. Any reduction in reimbursement from Medicare or other government healthcare
programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or
other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our drugs.
Legislative proposals such as expanding
the Medicaid drug rebate program to the Medicare Part D program, providing authority for the government to negotiate drug
prices under the Medicare Part D program and lowering reimbursement for drugs covered under the Medicare Part B program
have been raised in Congress, but have been met with opposition and have not been enacted so far.
The administration can rely on its existing
statutory authority to make policy changes that could have an impact on the drug industry. For example, the Medicare program
has in the past proposed to test alternative payment methodologies for drugs covered under the Part B program and currently
is proposing to pay hospitals less for Part B-covered drugs purchased through the 340B Drug Pricing Program.
Legislative and regulatory proposals have
been made to expand post-approval requirements and restrict sales and promotional activities for drugs. We cannot be sure whether
additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or
what the impact of such changes on the marketing approvals of our product candidates, if any, may be. In addition, increased scrutiny
by the US Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject
us to more stringent product labeling and post-marketing testing and other requirements.
Public concern regarding the safety
of drug products could delay or limit our ability to obtain regulatory approval, result in the inclusion of unfavorable information
in our labeling, or require us to undertake other activities that may entail additional costs.
In light of widely publicized events concerning
the safety risk of certain drug products, the FDA, members of the US Congress, the Government Accountability Office, medical
professionals and the general public have raised concerns about potential drug safety issues. These events have resulted in the
withdrawal of drug products, revisions to drug labeling that further limit use of the drug products and the establishment of risk
management programs. The Food and Drug Administration Amendments Act of 2007, or FDAAA, grants significant expanded authority to
the FDA, much of which is aimed at improving the safety of drug products before and after approval. In particular, the new law
authorizes the FDA to, among other things, require post-approval studies and clinical trials, mandate changes to drug labeling
to reflect new safety information and require risk evaluation and mitigation strategies for certain drugs, including certain currently
approved drugs. It also significantly expands the federal government’s clinical trial registry and results databank, which
we expect will result in significantly increased government oversight of clinical trials. Under the FDAAA, companies that violate
these and other provisions of the new law are subject to substantial civil monetary penalties, among other regulatory, civil and
criminal penalties. The increased attention to drug safety issues may result in a more cautious approach by the FDA in its review
of data from our clinical trials. Data from clinical trials may receive greater scrutiny, particularly with respect to safety,
which may make the FDA or other regulatory authorities more likely to require additional preclinical studies or clinical trials.
If the FDA requires us to conduct additional preclinical studies or clinical trials prior to approving any of our product candidates,
our ability to obtain approval of this product candidate will be delayed. If the FDA requires us to provide additional clinical
or preclinical data following the approval of any of our product candidates, the indications for which this product candidate is
approved may be limited or there may be specific warnings or limitations on dosing, and our efforts to commercialize our product
candidates may be otherwise adversely impacted.
If we experience delays or difficulties
in the enrollment of patients in clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.
We may not be able to initiate or continue
clinical trials for one or more of 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 the FDA or similar regulatory authorities outside the United States. 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. Available therapies for the indications we are pursuing can also affect enrollment in our clinical trials.
Patient enrollment is affected by other factors including, but not necessarily limited to:
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the severity of the disease under investigation;
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the eligibility criteria for the study in question;
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the perceived risks and benefits of the product candidate
under study;
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the efforts to facilitate timely enrollment in clinical
trials;
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the patient referral practices of physicians;
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the number of clinical trials sponsored by other companies
for the same patient population;
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the ability to monitor patients adequately during
and after treatment; and
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the proximity and availability of clinical trial sites
for prospective patients.
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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 candidate or future
product candidates, which would cause the value of our company to decline and limit our ability to obtain additional financing.
Our product candidates are in scientific
areas of intense competition from many large pharmaceutical and biotechnology companies, many of which are significantly further
along in development or are already on the market with competing products. We expect competition for our product candidates will
intensify, and new products may emerge that provide different or better therapeutic alternatives for our targeted indications.
The biotechnology and pharmaceutical industries
are subject to rapid and intense technological change. We face, and will continue to face, competition in the development and marketing
of our product candidates from academic institutions, government agencies, research institutions and biotechnology and pharmaceutical
companies. There can be no assurance that developments by others will not render one or more of our product candidates obsolete
or noncompetitive. Furthermore, new developments, including the development of other drug technologies and methods of preventing
the incidence of disease, occur in the pharmaceutical industry at a rapid pace. These developments may render one or more of our
product candidates obsolete or noncompetitive.
Competitors may seek to develop alternative
formulations that do not directly infringe on our in-licensed patent rights. The commercial opportunity for one or more of our
product candidates could be significantly harmed if competitors are able to develop alternative formulations outside the scope
of our in-licensed patents. Compared to us, many of our potential competitors have substantially greater:
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development resources, including personnel and technology;
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clinical trial experience;
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expertise in prosecution of intellectual property
rights; and
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manufacturing, distribution and sales and marketing
experience.
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As a result of these factors, our competitors
may obtain regulatory approval of their products more rapidly than we are able to or may obtain patent protection or other intellectual
property rights that limit our ability to develop or commercialize one or more of our product candidates. Our competitors may also
develop drugs that are more effective, safe, useful and less costly than ours and may be more successful than us in manufacturing
and marketing their products.
Our commercial success depends upon
us attaining significant market acceptance of our product candidates, if approved for sale, among physicians, patients, healthcare
payors and major operators of cancer and other clinics.
Even if we obtain regulatory approval for
one or more of our product candidates, the product may not gain market acceptance among physicians, health care payors, patients
and the medical community, which are critical to commercial success. Market acceptance of any product candidate for which we receive
approval depends on a number of factors, including, but not necessarily limited to:
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the efficacy and safety as demonstrated in clinical
trials;
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the timing of market introduction of such product
candidate as well as competitive products;
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the clinical indications for which the drug is approved;
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acceptance by physicians, major operators of cancer
clinics and patients of the drug as a safe and effective treatment;
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the safety of such product candidate seen in a broader
patient group, including its use outside the approved indications;
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the availability, cost and potential advantages of
alternative treatments, including less expensive generic drugs;
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the availability of adequate reimbursement and pricing
by third-party payors and government authorities;
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changes in regulatory requirements by government authorities
for our product candidates;
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the relative convenience and ease of administration
of the product candidate for clinical practices;
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the product labeling or product insert required by
the FDA or regulatory authority in other countries;
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the approval, availability, market acceptance and
reimbursement for a companion diagnostic, if any;
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the prevalence and severity of adverse side effects; and
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the effectiveness of our sales and marketing efforts.
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If any product candidate that we develop
does not provide a treatment regimen that is as beneficial as, or is not perceived as being as beneficial as, the current standard
of care or otherwise does not provide patient benefit, that product candidate, if approved for commercial sale by the FDA or other
regulatory authorities, likely will not achieve market acceptance. Our ability to effectively promote and sell any approved products
will also depend on pricing and cost-effectiveness, including our ability to produce a product at a competitive price and our
ability to obtain sufficient third-party coverage or reimbursement. If any product candidate is approved but does not achieve
an adequate level of acceptance by physicians, patients and third-party payors, our ability to generate revenues from that product
would be substantially reduced. In addition, our efforts to educate the medical community and third-party payors on the benefits
of our product candidates may require significant resources, may be constrained by FDA rules and policies on product promotion,
and may never be successful.
I
f
approved, our product candidates will face competition from less expensive generic products of competitors, and, if we are unable
to differentiate the benefits of our product candidates over these less expensive alternatives, we may never generate meaningful
product revenues.
Generic therapies are typically sold at
lower prices than branded therapies and are generally preferred by hospital formularies and managed care providers of health services.
We anticipate that, if approved, our product candidates will face increasing competition in the form of generic versions of branded
products of competitors that have lost or will lose their patent exclusivity. In the future, we may face additional competition
from a generic form when the patents covering it begin to expire, or earlier if the patents are successfully challenged. If we
are unable to demonstrate to physicians and payers that the key differentiating features of our product candidates translate to
overall clinical benefit or lower cost of care, we may not be able to compete with generic alternatives.
Reimbursement may be limited or unavailable
in certain market segments for our product candidates, which could make it difficult for us to sell our products profitably.
There is significant uncertainty related
to the third-party coverage and reimbursement of newly approved drugs. Such third-party payors include government health programs
such as Medicare, managed care providers, private health insurers and other organizations. We intend to seek approval to market
our product candidates in the US, the EU and other selected foreign jurisdictions. Market acceptance and sales of our product candidates
in both domestic and international markets will depend significantly on the availability of adequate coverage and reimbursement
from third-party payors for any of our product candidates and may be affected by existing and future health care reform measures.
Government and other third-party payors are increasingly attempting to contain healthcare costs by limiting both coverage and the
level of reimbursement for new drugs and, as a result, they may not cover or provide adequate payment for our product candidates.
These payors may conclude that our product candidates are less safe, less effective or less cost-effective than existing or future
introduced products, and third-party payors may not approve our product candidates for coverage and reimbursement or may cease
providing coverage and reimbursement for these product candidates.
Obtaining coverage and reimbursement approval
for a product from a government or other third-party payor is a time consuming and costly process that could require us to provide
to the payor supporting scientific, clinical and cost-effectiveness data for the use of our products. We may not be able to provide
data sufficient to gain acceptance with respect to coverage and reimbursement. If reimbursement of our future products is unavailable
or limited in scope or amount, or if pricing is set at unsatisfactory levels, we may be unable to achieve or sustain profitability.
In some foreign countries, particularly
in the EU, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations
with governmental authorities can take considerable time after the receipt of marketing approval for a product candidate. To obtain
reimbursement or pricing approval in some countries, we may be required to conduct additional clinical trials that compare the
cost-effectiveness of our product candidates to other available therapies. If reimbursement of our product candidates is unavailable
or limited in scope or amount in a particular country, or if pricing is set at unsatisfactory levels, we may be unable to achieve
or sustain profitability of our products in such country.
If we are unable to establish sales,
marketing and distribution capabilities or to enter into agreements with third parties to market and sell our product candidates,
we may not be successful in commercializing our product candidates if and when they are approved.
We currently do not have a marketing or
sales organization for the marketing, sales and distribution of pharmaceutical products. In order to commercialize any product
candidate that receives marketing approval, we would need to build 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. In the
event of successful development and regulatory approval of one or more of our product candidates or any future product candidate,
we expect to build a targeted specialist sales force to market or co-promote the product. There are risks involved with establishing
our own sales, marketing and distribution capabilities. For example, recruiting and training a sales force is expensive and time
consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force
and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred
these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales
and marketing personnel.
Factors that may inhibit our efforts to
commercialize our products on our own include, but are not necessarily limited to:
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our inability to recruit, train and retain adequate
numbers of effective sales and marketing personnel;
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the inability of sales personnel to obtain access
to physicians or persuade adequate numbers of physicians to prescribe any future products;
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the lack of complementary or other products to be
offered by sales personnel, which may put us at a competitive disadvantage from the perspective of sales efficiency relative to
companies with more extensive product lines; and
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unforeseen costs and expenses associated with creating
an independent sales and marketing organization.
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As an alternative to establishing our own
sales force, we may choose to partner with third parties that have well-established direct sales forces to sell, market and distribute
our products.
We rely, and expect to continue to
rely, on third parties to conduct our preclinical studies and clinical trials, and those third parties may not perform satisfactorily,
including failing to meet deadlines for the completion of such trials or complying with applicable regulatory requirements.
We rely on third-party contract research
organizations and site management organizations to conduct some of our preclinical studies and all of our clinical trials for our
product candidates and for any future product candidate. We expect to continue to rely on third parties, such as contract research
organizations, site management organizations, clinical data management organizations, medical institutions and clinical investigators,
to conduct some of our preclinical studies and all of our clinical trials. The agreements with these third parties might terminate
for a variety of reasons, including a failure to perform by the third parties. If we need to enter into alternative arrangements,
that could delay our product development activities.
Our reliance on these third parties for
research and development activities will reduce our control over these activities but will not relieve us of our responsibilities.
For example, we will remain responsible for ensuring that each of our preclinical studies and clinical trials are conducted in
accordance with the general investigational plan and protocols for the trial and for ensuring that our preclinical studies are
conducted in accordance with good laboratory practice (GLP) as appropriate. Moreover, the FDA requires us to comply with standards,
commonly referred to as good clinical practices (GCPs) for conducting, recording and reporting the results of clinical trials to
assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants
are protected. Regulatory authorities enforce these requirements through periodic inspections of trial sponsors, clinical investigators
and trial sites. If we or any of our clinical research organizations fail to comply with applicable GCPs, the clinical data generated
in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform
additional clinical trials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory
authority, such regulatory authority will determine that any of our clinical trials complies with GCP regulations. In addition,
our clinical trials must be conducted with product produced under cGMP regulations. Our failure to comply with these regulations
may require us to repeat clinical trials, which would delay the regulatory approval process. We also are required to register ongoing
clinical trials and post the results of completed clinical trials on a government-sponsored database, ClinicalTrials.gov, within
specified timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.
The third parties with whom we have contracted
to help perform our preclinical studies or clinical trials may also have relationships with other entities, some of which may be
our competitors. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct
our preclinical studies or clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able
to obtain, or may be delayed in obtaining, marketing approvals for our product candidates and will not be able to, or may be delayed
in our efforts to, successfully commercialize our product candidates.
If any of our relationships with these
third-party contract research organizations or site management organizations terminates, we may not be able to enter into arrangements
with alternative contract research organizations or site management organizations or to do so on commercially reasonable terms.
Switching or adding additional contract research organizations or site management organizations involves additional cost and requires
management time and focus. In addition, there is a natural transition period when a new contract research organization or site
management organization commences work. As a result, delays could occur, which could compromise our ability to meet our desired
development timelines. Though we carefully manage our relationships with our contract research organizations or site management
organizations, there can be no assurance that we will not encounter similar challenges or delays in the future.
We contract with third parties for
the manufacture of our product candidates for preclinical and clinical testing and may also do so for commercialization. This reliance
on third parties increases the risk that we will not have sufficient quantities of our product candidates or any future product
candidate or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.
While we have opened our own cell processing
facility in Worcester, Massachusetts, in order to supply product candidates for all clinical trials that will be conducted under
IND applications to be filed by us (See Note 6 to Audited Financial Statements), currently we rely on third parties for the manufacture
of our product candidates for preclinical and clinical testing. This reliance on third parties increases the risk that we will
not have sufficient quantities of our product candidates or any future product candidate or such quantities at an acceptable cost
or quality, which could delay, prevent or impair our development or commercialization efforts.
We may also rely on third-party manufacturers
or third-party collaborators for the manufacture of commercial supply of one or more product candidates for which our collaborators
or we obtain marketing approval. We may be unable to establish any agreements with third-party manufacturers or to do so on acceptable
terms. Even if we are able to establish agreements with third-party manufacturers, reliance on third-party manufacturers entails
additional risks, including, but not necessarily limited to:
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reliance on the third party for regulatory compliance
and quality assurance;
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the possible breach of the manufacturing agreement
by the third party;
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manufacturing delays if our third-party manufacturers
give greater priority to the supply of other products over our product candidates or otherwise do not satisfactorily perform according
to the terms of the agreement between us;
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the possible misappropriation of our proprietary information,
including our trade secrets and know-how; and
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the possible termination or nonrenewal of the agreement
by the third party at a time that is costly or inconvenient for us.
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We rely on our third-party manufacturers
to produce or purchase from third-party suppliers the materials and equipment necessary to produce our product candidates for our
preclinical and clinical trials. There are a limited number of suppliers for raw materials and equipment that we use (or that are
used on our behalf) to manufacture our drugs, and there may be a need to assess alternate suppliers to prevent a possible disruption
of the manufacture of the materials and equipment necessary to produce our product candidates for our preclinical and clinical
trials, and if approved, ultimately for commercial sale. We do not have any control over the process or timing of the acquisition
of these raw materials or equipment by our third-party manufacturers. Any significant delay in the supply of a product candidate,
or the raw material components thereof, for an ongoing preclinical or clinical trial due to the need to replace a third-party manufacturer
could considerably delay completion of our preclinical or clinical trials, product testing and potential regulatory approval of
our product candidates. If our manufacturers or we are unable to purchase these raw materials or equipment after regulatory approval
has been obtained for our product candidates, the commercial launch of our product candidates would be delayed or there would be
a shortage in supply, which would impair our ability to generate revenues from the sale of our product candidates.
The facilities used by our contract manufacturers
to manufacture our product candidates must be approved by the FDA pursuant to inspections that will be conducted after we submit
an NDA to the FDA. We do not control the manufacturing process of, and are completely dependent on, our contract manufacturers
for compliance with cGMP regulations for manufacture of our product candidates. Third-party manufacturers may not be able to comply
with the cGMP regulations or similar regulatory requirements outside the United States. Our failure, or the failure of our third-party
manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines,
injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product
candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect
supplies of our products.
One or more of the product candidates that
we may develop may compete with other product candidates and products for access to manufacturing facilities. There are a limited
number of manufacturers that operate under cGMP regulations and that might be capable of manufacturing for us. Any performance
failure on the part of our existing or future manufacturers could delay clinical development or marketing approval. We do not currently
have arrangements in place for redundant supply. If our current contract manufacturers cannot perform as agreed, we may be required
to replace such manufacturers. We may incur added costs and delays in identifying and qualifying any replacement manufacturers.
The DEA restricts the importation of a controlled substance finished drug product when the same substance is commercially available
in the United States, which could reduce the number of potential alternative manufacturers for one or more of our product candidates.
Our current and anticipated future dependence
upon others for the manufacture of our product candidates or products may adversely affect our future profit margins and our ability
to commercialize any products that receive marketing approval on a timely and competitive basis.
We also expect to rely on other third parties
to distribute drug supplies for our clinical trials. Any performance failure on the part of our distributors could delay clinical
development or marketing approval of our product candidates or commercialization of our products, producing additional losses and
depriving us of potential product revenue.
We rely on clinical data and results
obtained by third parties that could ultimately prove to be inaccurate or unreliable.
As part of our strategy to mitigate development
risk, we seek to develop product candidates with validated mechanisms of action and we utilize biomarkers to assess potential clinical
efficacy early in the development process. This strategy necessarily relies upon clinical data and other results obtained by third
parties that may ultimately prove to be inaccurate or unreliable. Further, such clinical data and results may be based on products
or product candidates that are significantly different from our product candidates or any future product candidate. If the third-party
data and results we rely upon prove to be inaccurate, unreliable or not applicable to our product candidates or future product
candidate, we could make inaccurate assumptions and conclusions about our product candidates and our research and development efforts
could be compromised.
If we breach any of the agreements
under which we license rights to one or more of product candidates from others, we could lose the ability to continue to develop
and commercialize such product candidate.
Because we have in-licensed the rights
to all of our product candidates from COH, Fred Hutch, St. Jude and Nationwide, and in the future will continue to in-license from
additional third parties, if there is any dispute between us and our licensor regarding our rights under our license agreement,
our ability to develop and commercialize these product candidates may be adversely affected. Any uncured, material breach under
our license agreement could result in our loss of exclusive rights to our product candidate and may lead to a complete termination
of our related product development efforts.
We may not be able to manage our
business effectively if we are unable to attract and retain key personnel.
We may not be able to attract or retain
qualified management and commercial, scientific and clinical personnel in the future due to the intense competition for qualified
personnel among biotechnology, pharmaceutical and other businesses. If we are not able to attract and retain necessary personnel
to accomplish our business objectives, we may experience constraints that will significantly impede the achievement of our development
objectives, our ability to raise additional capital and our ability to implement our business strategy.
Our employees may engage in misconduct
or other improper activities, including noncompliance with regulatory standards and requirements, which could have a material adverse
effect on our business.
We are exposed to the risk of employee
fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDA regulations, provide accurate
information to the FDA, comply with manufacturing standards we have established, comply with federal and state health-care fraud
and abuse laws and regulations, report financial information or data accurately or disclose unauthorized activities to us. In particular,
sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to
prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide
range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements.
Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result
in regulatory sanctions and serious harm to our reputation. The precautions we take to detect and prevent this activity may not
be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other
actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted
against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact
on our business and results of operations, including the imposition of significant fines or other sanctions.
We face potential product liability
exposure, and if successful claims are brought against us, we may incur substantial liability for one or more of our product candidates
or a future product candidate we may license or acquire and may have to limit their commercialization.
The use of one or more of our product candidates
and any future product candidate we may license or acquire in clinical trials and the sale of any products for which we obtain
marketing approval expose us to the risk of product liability claims. For example, we may be sued if any product we develop allegedly
causes injury or is found to be otherwise unsuitable during clinical 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 or a breach of warranties. Product liability claims might be brought against us by
consumers, health care providers or others using, administering or selling our products. If we cannot successfully defend ourselves
against these claims, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result
in:
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withdrawal of clinical trial participants;
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suspension or termination of clinical trial sites
or entire trial programs;
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decreased demand for any product candidates or products
that we may develop;
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initiation of investigations by regulators;
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impairment of our business reputation;
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costs of related litigation;
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substantial monetary awards to patients or other claimants;
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reduced resources of our management to pursue our
business strategy; and
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the inability to commercialize our product candidate
or future product candidates.
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We will obtain limited product liability
insurance coverage for any and all of our upcoming clinical trials. However, our insurance coverage may not reimburse us or may
not be sufficient to reimburse us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly
expensive, and, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts
to protect us against losses due to liability. When needed we intend to expand our insurance coverage to include the sale of commercial
products if we obtain marketing approval for one or more of our product candidates in development, but we may be unable to obtain
commercially reasonable product liability insurance for any products approved for marketing. On occasion, large judgments have
been awarded in class action lawsuits based on drugs that had unanticipated side effects. A successful product liability claim
or series of claims brought against us could cause our stock price to fall and, if judgments exceed our insurance coverage, could
decrease our cash and adversely affect our business.
Our future growth depends on our
ability to identify and acquire or in-license products and if we do not successfully identify and acquire or in-license related
product candidates or integrate them into our operations, we may have limited growth opportunities.
An important part of our business strategy
is to continue to develop a pipeline of product candidates by acquiring or in-licensing products, businesses or technologies that
we believe are a strategic fit with our focus on
ex vivo
lentiviral gene therapy for rare genetic diseases and on novel
combinations of CAR T cells with immuno-oncology antibodies, other biologics, and small molecule kinase inhibitors. Future in-licenses
or acquisitions, however, may entail numerous operational and financial risks, including, but not necessarily limited to:
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exposure to unknown liabilities;
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disruption of our business and diversion of our management’s
time and attention to develop acquired products or technologies;
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difficulty or inability to secure financing to fund
development activities for such acquired or in-licensed technologies in the current economic environment;
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incurrence of substantial debt or dilutive issuances
of securities to pay for acquisitions;
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higher than expected acquisition and integration costs;
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increased amortization expenses;
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difficulty and cost in combining the operations and
personnel of any acquired businesses with our operations and personnel;
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impairment of relationships with key suppliers or
customers of any acquired businesses due to changes in management and ownership; and
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inability to retain key employees of any acquired
businesses.
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We have limited resources to identify and
execute the acquisition or in-licensing of third-party products, businesses and technologies and integrate them into our current
infrastructure. In particular, we may compete with larger pharmaceutical companies and other competitors in our efforts to establish
new collaborations and in-licensing opportunities. These competitors likely will have access to greater financial resources than
us and may have greater expertise in identifying and evaluating new opportunities. Moreover, we may devote resources to potential
acquisitions or in-licensing opportunities that are never completed, or we may fail to realize the anticipated benefits of such
efforts.
We may expend our limited resources
to pursue a particular product candidate or indication and 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 focus on research programs and product candidates that we identify 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. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable
market opportunities. Our spending on current and future research and development programs and product candidates for specific
indications 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.
If we fail to comply with environmental,
health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business.
We are subject to numerous environmental,
health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment
and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including
chemicals and biological materials. Our operations also produce hazardous waste products. We generally contract with third parties
for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. Although
we believe that the safety procedures for handling and disposing of these materials comply with the standards prescribed by these
laws and regulations, we cannot eliminate the risk of accidental contamination or injury from these materials. In the event of
contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any
liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties
for failure to comply with such laws and regulations.
Although we maintain workers’ compensation
insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous
materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental
liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous
or radioactive materials.
In addition, we may incur substantial costs
in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and
regulations may impair our research, development or production efforts. Our failure to comply with these laws and regulations also
may result in substantial fines, penalties or other sanctions.
Our
business and operations would suffer in the event of system failures.
Despite the implementation of security
measures, our internal computer systems are vulnerable to damage from computer viruses, unauthorized access, natural disasters,
terrorism, war and telecommunication and electrical failures. Any system failure, accident or security breach that causes interruptions
in our operations could result in a material disruption of our drug development programs. For example, the loss of clinical trial
data from completed clinical trials for one or more of our product conducts could result in delays in our regulatory approval
efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach
results in a loss or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information,
we may incur liability and the further development of one or more of our product candidates may be delayed.
We are currently reliant on the City
of Hope National Medical Center, the Fred Hutchinson Cancer Research Center, St. Jude Children’s Research Hospital, and the
University of Alabama at Birmingham for a substantial portion of our research and development efforts and the early clinical testing
of our product candidates.
A substantial portion of our research and
development has been and will continue to be conducted by COH, Fred Hutch, St. Jude, and UAB pursuant to a sponsored research agreement
and/or clinical trial agreements with each of those parties. As a result, our future success is heavily dependent on the results
of research and development efforts of Dr. Stephen Forman and his laboratory team at COH, of Dr. Brian Till and his laboratory
team at Fred Hutch, of Drs. Stephen Gottschalk and Ewelina Mamcarz at St. Jude, and of Dr. James M. Markert at UAB. We have limited
control over the nature or timing of their research and limited visibility into their day-to-day activities, and as a result can
provide little assurance that their efforts will be successful.
CAR T is a new approach to cancer
treatment that presents significant challenges.
We have concentrated our research and development
efforts on CAR T technology, and our future success is highly dependent on the successful development of T cell immunotherapies
in general and our CAR T technology and product candidates in particular. Because CAR T is a new approach to cancer immunotherapy
and cancer treatment generally, developing and commercializing our product candidates subjects us to a number of challenges, including,
but not necessarily limited to:
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obtaining regulatory approval from the FDA and other
regulatory authorities that may have very limited experience with the commercial development of genetically modified T cell therapies
for cancer;
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developing and deploying consistent and reliable processes
for engineering a patient’s T cells ex vivo and infusing the engineered T cells back into the patient;
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conditioning patients with chemotherapy in conjunction
with delivering each of our products, which may increase the risk of adverse side effects of our products;
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educating medical personnel regarding the potential
side effect profile of each of our products;
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developing processes for the safe administration of
these products, including long-term follow-up for all patients who receive our product candidates;
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sourcing clinical and, if approved, commercial supplies
for the materials used to manufacture and process our product candidates;
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developing a manufacturing process and distribution
network with a cost of goods that allows for an attractive return on investment;
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establishing sales and marketing capabilities after
obtaining any regulatory approval to gain market acceptance, and obtaining adequate coverage, reimbursement and pricing by third-party
payors and government authorities; and
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developing therapies for types of cancers beyond those
addressed by our current product candidates.
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Product candidates, even if successfully
developed and commercialized, may be effective only in combating certain specific types of cancer, and the market for drugs designed
to combat such cancer type(s) may be small and unprofitable.
There are many different types of cancer,
and a treatment that is effective against one type of cancer may not be effective against another. CAR T or other technologies
we pursue may only be effective in combating specific types of cancer but not others. Even if one or more of our products proves
to be an effective treatment against a given type of cancer, the number of patients suffering from such cancer may be small, in
which case potential sales from a drug designed to combat such cancer would be limited.
Our gene therapy product candidates
are based on a novel technology, which makes it difficult to predict the time and cost of product candidate development and subsequently
obtaining regulatory approval.
We have concentrated a portion of our therapeutic
product research and development efforts on our gene therapy platform, and our future success depends, in part, on the successful
development of this therapeutic approach. There can be no assurance that any development problems we experience in the future related
to our gene therapy platform will not cause significant delays or unanticipated costs, or that such development problems can be
solved. We may also experience delays in developing a sustainable, reproducible and commercial-scale manufacturing process or transferring
that process to commercial partners, which may prevent us from completing our clinical studies or commercializing our products
on a timely or profitable basis, if at all.
In addition, the clinical study requirements
of the FDA, the European Medicines Agency, or EMA, and other regulatory agencies and the criteria these regulators use to determine
the safety and efficacy of a product candidate vary substantially according to the type, complexity, novelty and intended use and
market of the potential products. The regulatory approval process for novel product candidates such as ours can be more expensive
and take longer than for other, better known or more extensively studied pharmaceutical or other product candidates. Currently,
a limited number of gene therapy products, including CAR T therapies, have been approved by the FDA, the EMA and the European Commission.
Given the few precedents of approved gene therapy products, it is difficult to determine how long it will take or how much it will
cost to obtain regulatory approvals for our product candidates in the United States, the EU or other jurisdictions. Approvals by
the EMA and the European Commission may not be indicative of what the FDA may require for approval.
Regulatory requirements governing the development
of gene therapy products have changed frequently and may continue to change in the future. The FDA has established the Office of
Tissues and Advanced Therapies within the Center for Biologics Evaluation and Research, or CBER, to consolidate the review of gene
therapy and related products, and to advise the CBER on its review. The FDA can put an investigational new drug application, or
IND, on clinical hold if the information in an IND is not sufficient to assess the risks in pediatric patients. Before a clinical
study can begin at any institution, that institution’s IRB and its Institutional Biosafety Committee will have to review
the proposed clinical study to assess the safety of the study. Moreover, serious adverse events or developments in clinical trials
of gene therapy product candidates conducted by others may cause the FDA or other regulatory bodies to initiate a clinical hold
on our clinical trials or otherwise change the requirements for approval of any of our product candidates.
These regulatory review agencies, committees
and advisory groups and the new requirements and guidelines they promulgate may lengthen the regulatory review process, require
us to perform additional or larger studies, increase our development costs, lead to changes in regulatory positions and interpretations,
delay or prevent approval and commercialization of these treatment candidates or lead to significant post-approval studies, limitations
or restrictions. As we advance our product candidates, we will be required to consult with these regulatory and advisory groups
and comply with applicable requirements and guidelines. If we fail to do so, we may be required to delay or discontinue development
of our product candidates. Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring
a potential product to market could decrease our ability to generate sufficient product revenue to maintain our business.
Negative public opinion and increased
regulatory scrutiny of gene therapy and genetic research may damage public perception of our product candidates or adversely affect
our ability to conduct our business or obtain regulatory approvals for our product candidates.
Public perception may be influenced by claims that gene therapy is unsafe, and gene therapy may not gain
the acceptance of the public or the medical community. In particular, the success of our gene therapy platform will depend upon
physicians specializing in the treatment of those diseases that our product candidates target prescribing treatments that involve
the use of our product candidates in lieu of, or in addition to, existing treatments with which they are already familiar with
and for which greater clinical data may be available. More restrictive government regulations or negative public opinion would
have a negative effect on our business or financial condition and may delay or impair the development and commercialization of
our product candidates or demand for any products we may develop. Adverse events in our clinical trials, even if not ultimately
attributable to our product candidates, and the resulting publicity could lead to increased governmental regulation, unfavorable
public perception, potential regulatory delays in the testing or approval of our potential product candidates, stricter labeling
requirements for those product candidates that are approved and a decrease in demand for any such product candidates. Concern about
environmental spread of our product, whether real or anticipated, may hinder the commercialization of our products.
Collaborative relationships with
third parties could cause us to expend significant resources and incur substantial business risk with no assurance of financial
return.
Establishing strategic collaborations is
difficult and time-consuming. Our discussions with potential collaborators may not lead to the establishment of collaborations
on favorable terms, if at all. Potential collaborators may reject collaborations based upon their assessment of our financial,
regulatory or intellectual property position. In addition, there has been a significant number of recent business combinations
among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators. Even if we successfully
establish new collaborations, these relationships may never result in the successful development or commercialization of product
candidates or the generation of sales revenue. To the extent that we enter into collaborative arrangements, the related product
revenues are likely to be lower than if we directly marketed and sold products. Such collaborators may also consider alternative
product candidates or technologies for similar indications that may be available to collaborate on and whether such a collaboration
could be more attractive than the one with us for any future product candidate.
Risks Related to Intellectual Property
If we are unable to obtain and maintain
patent protection for our technology and products or if the scope of the patent protection obtained is not sufficiently broad,
our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully
commercialize our technology and products may be impaired.
Our commercial success will depend in part
on obtaining and maintaining patent protection and trade secret protection in the US and other countries with respect to our
product candidates or any future product candidate that we may license or acquire and the methods we use to manufacture them, as
well as successfully defending these patents and trade secrets against third-party challenges. We seek to protect our proprietary
position by filing patent applications in the United States and abroad related to our novel technologies and product candidates,
and by maintenance of our trade secrets through proper procedures. We will only be able to protect our technologies from unauthorized
use by third parties to the extent that valid and enforceable patents or trade secrets cover them in the market they are being
used or developed.
The patent prosecution process is expensive
and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable
cost or in a timely manner. It is also possible that we will fail to identify any patentable aspects of our research and development
output and methodology, and, even if we do, an opportunity to obtain patent protection may have passed. Given the uncertain and
time-consuming process of filing patent applications and prosecuting them, it is possible that our product(s) or process(es) originally
covered by the scope of the patent application may have changed or been modified, leaving our product(s) or process(es) without
patent protection. If our licensors or we fail to obtain or maintain patent protection or trade secret protection for one
or more product candidates or any future product candidate we may license or acquire, third parties may be able to leverage our
proprietary information and products without risk of infringement, which could impair our ability to compete in the market and
adversely affect our ability to generate revenues and achieve profitability. Moreover, should we enter into other collaborations
we may be required to consult with or cede control to collaborators regarding the prosecution, maintenance and enforcement of licensed
patents. Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests
of our business.
The patent position of biotechnology and
pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been
the subject of much litigation. In addition, no consistent policy regarding the breadth of claims allowed in pharmaceutical or
biotechnology patents has emerged to date in the US. The patent situation outside the US is even more uncertain. The laws of foreign
countries may not protect our rights to the same extent as the laws of the US, and we may fail to seek or obtain patent protection
in all major markets. For example, European patent law restricts the patentability of methods of treatment of the human body more
than US law does. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent
applications in the US and other jurisdictions are typically not published until 18 months after a first filing, or in some
cases not at all. Therefore, we cannot know with certainty whether we or our licensors were the first to make the inventions claimed
in patents or pending patent applications that we own or licensed, or that we or our licensors were the first to file for patent
protection of such inventions. In the event that a third party has also filed a US patent application relating to our product
candidates or a similar invention, depending upon the priority dates claimed by the competing parties, we may have to participate
in interference proceedings declared by the PTO to determine priority of invention in the US. We might also become involved in
derivation proceedings in an event that a third party misappropriates one or more of our inventions and files their own patent
application directed to such one or more inventions. The costs of these proceedings could be substantial and it is possible that
our efforts to establish priority of invention (or that a third party derived an invention from us) would be unsuccessful, resulting
in a material adverse effect on our US patent position. As a result, the issuance, scope, validity, enforceability and commercial
value of our patent rights are highly uncertain. Our pending and future patent applications may not result in patents being issued
which protect our technology or products, in whole or in part, or which effectively prevent others from commercializing competitive
technologies and products. Changes in either the patent laws or interpretation of the patent laws in the US and other countries
may diminish the value of our patents or narrow the scope of our patent protection. For example, the federal courts of the US have
taken an increasingly dim view of the patent eligibility of certain subject matter, such as naturally occurring nucleic acid sequences,
amino acid sequences and certain methods of utilizing same, which include their detection in a biological sample and diagnostic
conclusions arising from their detection. Such subject matter, which had long been a staple of the biotechnology and biopharmaceutical
industry to protect their discoveries, is now considered, with few exceptions, ineligible in the first instance for protection
under the patent laws of the US. Accordingly, we cannot predict the breadth of claims that may be allowed and remain enforceable
in our patents or in those licensed from a third party.
Recent patent reform legislation could
increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our
issued patents. On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The
Leahy-Smith Act includes a number of significant changes to United States patent law. These include changes to transition from
a “first-to-invent” system to a “first inventor-to-file” system and to the way issued patents are challenged.
The formation of the Patent Trial and Appeal Board now provides a less burdensome, quicker and less expensive process for challenging
issued patents. The PTO recently developed new regulations and procedures to govern administration of the Leahy-Smith Act, and
many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first inventor-to-file
provisions, only became effective on March 16, 2013. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act
will have on the operation of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties
and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which
could have a material adverse effect on our business and financial condition.
Moreover, we may be subject to a third-party
preissuance submission of prior art to the PTO, or become involved in opposition, derivation, reexamination,
inter partes
review, post-grant review or interference proceedings challenging our patent rights or the patent rights of others. The costs of
these proceedings could be substantial and it is possible that our efforts to establish priority of invention (or that another
derived an invention from us or one of our licensors) would be unsuccessful, resulting in a material adverse effect on our US patent
position. An adverse determination in any such submission, patent office trial, proceeding or litigation could reduce the scope
of, render unenforceable, or invalidate, our patent rights, allow third parties to commercialize our technology or products and
compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing
third-party patent rights. In addition, if the breadth or strength of protection provided by our patents and patent applications
is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product
candidates.
Even if our patent applications issue as
patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors from competing with
us or otherwise provide us with any competitive advantage. Our competitors may be able to circumvent our owned or licensed patents
by developing similar or alternative technologies or products in a non-infringing manner.
The issuance of a patent does not foreclose
challenges to its inventorship, scope, validity or enforceability. Therefore, our owned and licensed patents may be challenged
in the courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or in patent
claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from
using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology
and products. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents
protecting such product candidates might expire before or shortly after such product candidates are commercialized. As a result,
our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products
similar or identical to ours.
We depend on our licensors for the
maintenance and enforcement of intellectual property covering certain of our product candidates and have limited control, if any,
over the amount or timing of resources that our licensors devote on our behalf, or whether any financial difficulties experienced
by our licensors could result in their unwillingness or inability to secure, maintain and enforce patents protecting certain of
our product candidates.
We depend on our licensors to protect the
proprietary rights covering our product candidates and we have limited, if any, control over the amount or timing of resources
that they devote on our behalf, or the priority they place on, maintaining patent rights and prosecuting patent applications to
our advantage. Moreover, we have limited, if any, control over the strategies and arguments employed in the maintenance of patent
rights and the prosecution of patent applications to our advantage. Our licensors might become involved in disputes with one of
their other licensees, and we or a portion of our licensed patent rights might become embroiled in such disputes.
Our licensors, depending on the patent
or application, are responsible for maintaining issued patents and prosecuting patent applications. We cannot be sure that they
will perform as required. Should they decide they no longer want to maintain any of the patents licensed to us, they are required
to afford us the opportunity to do so at our expense. If our licensors do not perform, and if we do not assume the maintenance
of the licensed patents in sufficient time to make required payments or filings with the appropriate governmental agencies, we
risk losing the benefit of all or some of those patent rights. Moreover, and possibly unbeknownst to us, our licensors may experience
serious difficulties related to their overall business or financial stability, and they may be unwilling or unable to continue
to expend the financial resources required to maintain and prosecute these patents and patent applications. While we intend to
take actions reasonably necessary to enforce our patent rights, we depend, in part, on our licensors to protect a substantial portion
of our proprietary rights and to inform us of the status of those protections and efforts thereto.
Our licensors may also be notified of alleged
infringement and be sued for infringement of third-party patents or other proprietary rights. We may have limited, if any, control
or involvement over the defense of these claims, and our licensors could be subject to injunctions and temporary or permanent exclusionary
orders in the US or other countries. Our licensors are not obligated to defend or assist in our defense against third-party claims
of infringement. We have limited, if any, control over the amount or timing of resources, if any, that our licensors devote on
our behalf or the priority they place on defense of such third-party claims of infringement.
Because of the uncertainty inherent in
any patent or other litigation involving proprietary rights, we or our licensors may not be successful in defending claims of intellectual
property infringement alleged by third parties, which could have a material adverse effect on our results of operations. Regardless
of the outcome of any litigation, defending the litigation may be expensive, time-consuming and distracting to management.
Because it is difficult and costly
to protect our proprietary rights, we may not be able to ensure their protection.
The degree of future protection for our
proprietary rights is uncertain, because legal means afford only limited protection and may not adequately protect our rights or
permit us to gain or keep our competitive advantage, in addition to being costly and time consuming to undertake. For example:
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our licensors might not have been the first to make
the inventions covered by each of our pending patent applications and issued patents;
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our licensors might not have been the first to file
patent applications for these inventions;
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others may independently develop similar or alternative
technologies or duplicate our product candidates or any future product candidate technologies;
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it is possible that none of the pending patent applications
licensed to us will result in issued patents;
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the scope of our issued patents may not extend to
competitive products developed or produced by others;
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the issued patents covering our product candidates
or any future product candidate may not provide a basis for market exclusivity for active products, may not provide us with any
competitive advantages, or may be challenged by third parties;
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we may not develop additional proprietary technologies
that are patentable; or
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intellectual property rights of others may have an
adverse effect on our business.
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We may become involved in lawsuits
to protect or enforce our patents or other intellectual property, which could be expensive, time consuming and unsuccessful.
Competitors may infringe our issued patents
or other intellectual property. To counter infringement or unauthorized use, we may be required to file one or more actions for
patent infringement, which can be expensive and time consuming. Any claims we assert against accused infringers could provoke these
parties to assert counterclaims against us alleging that we infringe their patents; or provoke those parties to petition the PTO
to institute
inter partes
review against the asserted patents, which may lead to a finding that all or some of the claims
of the patent are invalid. In addition, in a patent infringement proceeding, a court may decide that a patent of ours is invalid
or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using
the technology at issue on the grounds that our patents do not cover the technology in question or as a matter of public policy.
An adverse result in any litigation proceeding could put one or more of our patents at risk of being invalidated, rendered unenforceable,
or interpreted narrowly. Furthermore, adverse results on US patents may affect related patents in our global portfolio.
If we are sued for infringing intellectual property rights
of third parties, it will be costly and time consuming, and an unfavorable outcome in any litigation would harm our business.
Our ability to develop, manufacture, market
and sell one or more of our product candidates or any future product candidate that we may license or acquire depends upon our
ability to avoid infringing the proprietary rights of third parties. Numerous US and foreign issued patents and pending patent
applications, which are owned by third parties, exist in the general fields of fully human immuno-oncology targeted antibodies
and cover the use of numerous compounds and formulations in our targeted markets. Because of the uncertainty inherent in any patent
or other litigation involving proprietary rights, we and our licensors may not be successful in defending intellectual property
claims asserted by third parties, which could have a material adverse effect on our results or operations. Regardless of the outcome
of any litigation, defending the litigation may be expensive, time-consuming and distracting to management. In addition, because
patent applications can take many years to issue, there may be currently pending applications that are unknown to us, which may
later result in issued patents that one or more of our product candidates may infringe. There could also be existing patents of
which we are not aware that one or more of our product candidates may infringe, even if only inadvertently.
There is a substantial amount of litigation
involving patent and other intellectual property rights in the biotechnology and biopharmaceutical industries generally. If a third-party
claims that we infringe their patents or misappropriated their technology, we could face a number of issues, including:
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infringement and other intellectual property claims
which, with or without merit, can be expensive and time consuming to litigate and can divert management’s attention from
our core business;
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substantial damages for past infringement which we
may have to pay if a court decides that our product infringes a competitor’s patent;
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a court prohibiting us from selling or licensing our
product unless the patent holder licenses the patent to us, which it would not be required to do;
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if a license is available from a patent holder, we
may have to pay substantial royalties or grant cross licenses to our patents; and
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redesigning our processes so they do not infringe,
which may not be possible or could require substantial funds, time, and may result in an inferior or less-desirable process or
product.
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Intellectual property litigation
could cause us to spend substantial resources and distract our personnel from their normal responsibilities.
Even if resolved in our favor, litigation
or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract
our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of
the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive
these results to be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings
could substantially increase our operating losses and reduce the resources available for development activities or any future sales,
marketing or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings
adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we
can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation
or other proceedings could compromise our ability to compete in the marketplace.
We may need to license certain intellectual
property from third parties, and such licenses may not be available or may not be available on commercially reasonable terms.
A third party may hold intellectual property,
including patent rights that are important or necessary to the development and commercialization of our products. It may be necessary
for us to use the patented or proprietary technology of third parties, who may or may not be interested in granting such a license,
to commercialize our products, in which case we would be required to obtain a license from these third parties on commercially
reasonable terms, or our business could be harmed, possibly materially.
If we fail to comply with our obligations
in our intellectual property licenses and funding arrangements with third parties, we could lose rights that are important to our
business.
We are currently a party to license agreements
with St. Jude, the City of Hope, the Fred Hutchinson Cancer Research Center, the Regents of the University of California, Nationwide
and other institutions. In the future, we may become party to licenses that are important for product development and commercialization.
If we fail to comply with our obligations under current or future license and funding agreements, our counterparties may have the
right to terminate these agreements, in which event we might not be able to develop, manufacture or market any product or utilize
any technology that is covered by these agreements or may face other penalties under the agreements. Such an occurrence could materially
and adversely affect the value of a product candidate being developed under any such agreement or could restrict our drug discovery
activities. Termination of these agreements or reduction or elimination of our rights under these agreements may result in our
having to negotiate new or reinstated agreements with less favorable terms, or cause us to lose our rights under these agreements,
including our rights to important intellectual property or technology.
We may be subject to claims that
our employees have wrongfully used or disclosed alleged trade secrets of their former employers.
As is common in the biotechnology and pharmaceutical
industry, we employ individuals who were previously employed at other biotechnology or pharmaceutical companies, including our
competitors or potential competitors. Although no claims against us are currently pending, we may be subject to claims that we
or these employees have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former
employers. Even if frivolous or unsubstantiated in nature, litigation may be necessary to defend against these claims. Even if
we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management
and the implicated employee(s).
If we are unable to protect the confidentiality
of our trade secrets, our business and competitive position would be harmed.
In addition to seeking patent protection
for our product candidates or any future product candidate, we also rely on trade secrets, including unpatented know-how, technology
and other proprietary information, to maintain our competitive position, particularly where we do not believe patent protection
is appropriate or obtainable. However, trade secrets are difficult to protect. We limit disclosure of such trade secrets where
possible but we also seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements
with parties who do have access to them, such as our employees, our licensors, corporate collaborators, outside scientific 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 may unintentionally or willfully disclose our proprietary information, including our trade secrets, and we may not be able
to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret
is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United
States are less willing or unwilling to protect trade secrets. Moreover, if any of our trade secrets were to be lawfully obtained
or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate it, from
using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed
by a competitor, our competitive position would be harmed.
Because we in-license intellectual
property pertaining to certain product candidates from third parties, any dispute with the licensors or the non-performance of
such license agreements may adversely affect our ability to develop and commercialize the applicable product candidates.
The types of disputes which may arise between
us and the third parties from whom we license intellectual property include, but are not limited to:
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the scope of rights granted under such license agreements
and other interpretation-related issues;
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the extent to which our technology and processes infringe
on intellectual property of the licensor that is not subject to such license agreements;
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the sublicensing of patent and other rights under
our license agreements and/or collaborative development relationships, and the rights and obligations associated with such sublicensing;
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the diligence and development obligations under license
agreements (which may include specific diligence milestones) and what activities or achievements satisfy those diligence obligations;
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whether or not the milestones associated with certain
milestone payment obligations have been achieved or satisfied;
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the applicability or scope of indemnification claims
or obligations under such license agreements;
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the permissibility and advisability of, and strategy
regarding, the pursuit of potential third-party infringers of the intellectual property that is the subject of such license agreements;
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the calculation of royalty, sublicense revenue and
other payment obligations under such license agreements;
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the extent to which license rights, if any, are retained
by licensors under such license agreements;
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whether or not a material breach has occurred under
such license agreements and the extent to which such breach, if deemed to have occurred, is or can be cured within applicable
cure periods, if any;
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disputes regarding patent filing and prosecution decisions,
as well as payment obligations regarding past and ongoing patent expenses;
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the inventorship and ownership of inventions and know-how
resulting from the joint creation or use of intellectual property by our licensors and us and our partners; and
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the priority of invention of patented technology.
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In addition, the agreements under which
we currently license intellectual property or technology from third parties are complex, and certain provisions in such agreements
may be susceptible to multiple interpretations or may conflict in such a way that puts us in breach of one or more agreements,
which would make us susceptible to lengthy and expensive disputes with one or more of such third-party licensing partners. The
resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights
to the relevant intellectual property or technology, or increase what we believe to be our financial or other obligations under
the relevant agreements, either of which could have a material adverse effect on our business, financial condition, results of
operations and prospects. Moreover, if disputes over intellectual property that we have licensed prevent or impair our ability
to maintain our current licensing arrangements on commercially acceptable terms, we may be unable to successfully develop and
commercialize the affected product candidates, which could have a material adverse effect on our business, financial conditions,
results of operations and prospects.
Risks Related to Our Finances and Capital
Requirements
We have incurred significant losses
since our inception. We expect to incur losses for the foreseeable future and may never achieve or maintain profitability.
We are an emerging growth company with
a limited operating history. We have focused primarily on in-licensing and developing our product candidates, with the goal of
supporting regulatory approval for these product candidates. We have incurred losses since our inception in March 2015 and have
an accumulated deficit of $79.1 million as of December 31, 2018. We expect to continue to incur significant operating losses for
the foreseeable future. We also do not anticipate that we will achieve profitability for a period of time after generating material
revenues, if ever. If we are unable to generate revenues, we will not become profitable and may be unable to continue operations
without continued funding.
Because of the numerous risks and uncertainties
associated with developing pharmaceutical products, we are unable to predict the timing or amount of increased expenses or when
or if, we will be able to achieve profitability. Our net losses may fluctuate significantly from quarter to quarter and year to
year. We anticipate that our expenses will increase substantially if:
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one or more of our product candidates are approved
for commercial sale, due to our ability to establish the necessary commercial infrastructure to launch this product candidate
without substantial delays, including hiring sales and marketing personnel and contracting with third parties for warehousing,
distribution, cash collection and related commercial activities;
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we are required by the FDA or foreign regulatory authorities,
to perform studies in addition to those currently expected;
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there are any delays in completing our clinical trials
or the development of any of our product candidates;
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we execute other collaborative, licensing or similar
arrangements and the timing of payments we may make or receive under these arrangements;
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there are variations in the level of expenses related
to our future development programs;
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there are any product liability or intellectual property
infringement lawsuits in which we may become involved;
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there are any regulatory developments affecting product
candidates of our competitors; and
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one or more of our product candidates receives regulatory
approval.
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Our ability to become profitable depends
upon our ability to generate revenue. To date, we have not generated any revenue from our development stage products, and we do
not know when, or if, we will generate any revenue. Our ability to generate revenue depends on a number of factors, including,
but not limited to, our ability to:
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obtain regulatory approval for one or more of our
product candidates, or any future product candidate that we may license or acquire;
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manufacture commercial quantities of one or more of
our product candidates or any future product candidate, if approved, at acceptable cost levels; and
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develop a commercial organization and the supporting
infrastructure required to successfully market and sell one or more of our product candidates or any future product candidate,
if approved.
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Even if we do achieve profitability, we
may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable
would depress the value of our company and could impair our ability to raise capital, expand our business, maintain our research
and development efforts, diversify our product offerings or even continue our operations. A decline in the value of our company
could also cause you to lose all or part of your investment.
Our
short operating history makes it difficult to evaluate our business and prospects.
We have only been conducting operations
since our incorporation in March 2015. Our operations to date have been limited to preclinical operations and the in-licensing
of our product candidates. We have not yet demonstrated an ability to successfully complete clinical trials, obtain regulatory
approvals, manufacture a clinical scale or commercial scale product, or arrange for a third party to do so on our behalf, or conduct
sales and marketing activities necessary for successful product commercialization. Consequently, any predictions about our future
performance may not be as accurate as they could be if we had a history of successfully developing and commercializing pharmaceutical
products.
In addition, as a young business, we may
encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. We will need to expand
our capabilities to support commercial activities. We may not be successful in adding such capabilities.
We expect our financial condition and operating
results to continue to fluctuate significantly from quarter to quarter and year to year due to a variety of factors, many of which
are beyond our control. Accordingly, you should not rely upon the results of any past quarterly period as an indication of future
operating performance.
We do not have any products that
are approved for commercial sale and therefore do not expect to generate any revenues from product sales in the foreseeable future,
if ever.
We have not generated any product related
revenues to date, and do not expect to generate any such revenues for at least the next several years, if at all. To obtain revenues
from sales of our product candidates, we must succeed, either alone or with third parties, in developing, obtaining regulatory
approval for, manufacturing and marketing products with commercial potential. We may never succeed in these activities, and we
may not generate sufficient revenues to continue our business operations or achieve profitability.
We will require substantial additional
funding which may not be available to us on acceptable terms, or at all. If we fail to raise the necessary additional capital,
we may be unable to complete the development and commercialization of our product candidates, or continue our development programs.
Our operations have consumed substantial
amounts of cash since inception. We expect to significantly increase our spending to advance the preclinical and clinical development
of our product candidates and launch and commercialize any product candidates for which we receive regulatory approval, including
building our own commercial organizations to address certain markets. We will require additional capital for the further development
and commercialization of our product candidates, as well as to fund our other operating expenses and capital expenditures. As of
December 31, 2018, we had $34.6 million in cash and short-term investments (certificates of deposit) and restricted cash. We cannot
provide any assurance that we will be able to raise funds to complete the development of our product candidates. Additionally,
we may have to delay or terminate the development of certain product candidates if we are unable to secure additional funding;
any such delay or termination, or the announcement of any such delay or termination, may impact our potential growth and have a
material adverse effect on the value of our debt and equity securities.
We cannot be certain that additional funding
will be available on acceptable terms, or at all. If we are unable to raise additional capital in sufficient amounts or on terms
acceptable to us we may have to significantly delay, scale back or discontinue the development or commercialization of one or more
of our product candidates. We may also seek collaborators for one or more of our current or future product candidates at an earlier
stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available. Any of these events
could significantly harm our business, financial condition and prospects.
Our future funding requirements will depend
on many factors, including, but not limited to:
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the timing, design and conduct of, and results from,
preclinical and clinical trials for our product candidates;
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the potential for delays in our efforts to seek regulatory
approval for our product candidates, and any costs associated with such delays;
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the costs of establishing a commercial organization
to sell, market and distribute our product candidates;
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the rate of progress and costs of our efforts to prepare
for the submission of an NDA for any product candidates that we may in-license or acquire in the future, and the potential that
we may need to conduct additional clinical trials to support applications for regulatory approval;
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the costs of filing, prosecuting, defending and enforcing
any patent claims and other intellectual property rights associated with our product candidates, including any such costs we may
be required to expend if our licensors are unwilling or unable to do so;
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the cost and timing of securing sufficient supplies
of our product candidates from our contract manufacturers for clinical trials and in preparation for commercialization;
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the effect of competing technological and market developments;
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the terms and timing of any collaborative, licensing,
co-promotion or other arrangements that we may establish;
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if one or more of our product candidates are approved,
the potential that we may be required to file a lawsuit to defend our patent rights or regulatory exclusivities from challenges
by companies seeking to market generic versions of one or more of our product candidates; and
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the success of the commercialization of one or more
of our product candidates.
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Future capital requirements will also depend
on the extent to which we acquire or invest in additional complementary businesses, products and technologies, but we currently
have no commitments or agreements relating to any of these types of transactions.
In order to carry out our business plan
and implement our strategy, we anticipate that we will need to obtain additional financing from time to time and may choose to
raise additional funds through strategic collaborations, licensing arrangements, public or private equity or debt financing, bank
lines of credit, asset sales, government grants, or other arrangements. We cannot be sure that any additional funding, if needed,
will be available on terms favorable to us or at all. Furthermore, any additional equity or equity-related financing may be dilutive
to our stockholders, and debt or equity financing, if available, may subject us to restrictive covenants and significant interest
costs. If we obtain funding through a strategic collaboration or licensing arrangement, we may be required to relinquish our rights
to certain of our product candidates or marketing territories.
Our inability to raise capital when needed
would harm our business, financial condition and results of operations, and could cause our stock value to decline or require that
we wind down our operations altogether.
Raising additional capital may cause
dilution to our existing stockholders, restrict our operations or require us to relinquish proprietary rights.
Until such time, if ever, as we can generate
substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings, grants
and license and development agreements in connection with any collaborations. To the extent that we raise additional capital through
the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may
include liquidation or other preferences that adversely affect your rights as a stockholder. Debt financing and preferred equity
financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions,
such as incurring additional debt, making capital expenditures or declaring dividends.
If we raise additional funds through collaborations,
strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable
rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may
not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required
to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and
market product candidates that we would otherwise prefer to develop and market ourselves.
We will continue to incur significant
increased costs as a result of operating as a public company, and our management will be required to devote substantial time to
new compliance initiatives.
On August 22, 2017, we became a listed
and traded public company. As a public company, we incur significant legal, accounting and other expenses under the Sarbanes-Oxley
Act of 2002, or the Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC, and the rules of the Nasdaq Stock
Exchange. These rules impose various requirements on public companies, including requiring establishment and maintenance of effective
disclosure and financial controls and appropriate corporate governance practices. Our management and other personnel have devoted
and will continue to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations
increase our legal and financial compliance costs and make some activities more time-consuming and costly. For example, these rules
and regulations make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may
be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.
As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors, our board
committees or as executive officers.
The Sarbanes-Oxley Act requires, among
other things, that we maintain effective internal controls for financial reporting and disclosure controls and procedures. As a
result, we are required to periodically perform an evaluation of our internal controls over financial reporting to allow management
to report on the effectiveness of those controls, as required by Section 404 of the Sarbanes-Oxley Act. Additionally, our
independent auditors are required to perform a similar evaluation and report on the effectiveness of our internal controls over
financial reporting. These efforts to comply with Section 404 and related regulations have required, and continue to require,
the commitment of significant financial and managerial resources. While we anticipate maintaining the integrity of our internal
controls over financial reporting and all other aspects of Section 404, we cannot be certain that a material weakness will
not be identified when we test the effectiveness of our control systems in the future. If a material weakness is identified, we
could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial
and management resources, costly litigation or a loss of public confidence in our internal controls, which could have an adverse
effect on the market price of our stock.
Compliance with the Sarbanes-Oxley
Act of 2002 will require substantial financial and management resources and may increase the time and costs of completing an acquisition.
A business that we identify as a potential
acquisition target may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding the adequacy of internal controls.
The development of the internal controls of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the
time and costs necessary to complete any such acquisition. Furthermore, any failure to implement required new or improved controls,
or difficulties encountered in the implementation of adequate controls over our financial processes and reporting in the future,
could harm our operating results or cause us to fail to meet our reporting obligations. Inferior internal controls could also cause
investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of
our securities.
We are an “emerging growth
company” and a "smaller reporting company," and the reduced disclosure requirements applicable to emerging growth
companies and smaller reporting companies may make our common stock less attractive to investors.
We are an “emerging growth company”
as that term is used in the JOBS Act, and may remain an emerging growth company until the earlier of (1) the last day of the fiscal
year (a) following the fifth anniversary of the completion of the initial public offering of our common stock, (b) in which we
have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which
means the market value of our outstanding common stock that are held by non-affiliates exceeds $700 million as of the prior June
30, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three year period.
For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from certain disclosure
requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include:
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being permitted to provide only two years of audited
financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” disclosure in this Annual Report on Form 10-K;
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not being required to comply with any requirement that may be adopted by the Public Company Accounting
Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information
about the audit and the financial statements;
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disclosure obligations regarding executive compensation; and
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exemptions from the requirements of holding a nonbinding advisory vote on executive compensation
and shareholder approval of any golden parachute payments not previously approved.
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Further, Section 102(b)(1) of the JOBS
Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private
companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of
securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The
JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply
to non-emerging growth companies but any such an election to opt out is irrevocable. We have elected to opt out of such extended
transition period which means that when a standard is issued or revised, and it has different application dates for public or private
companies, we, as an emerging growth company, will adopt the new or revised standard. This may make comparison of our financial
statements with another public company which has opted into using the extended transition period difficult or impossible because
of the potential differences in accountant standards used.
We are also a smaller reporting company,
and we will remain a smaller reporting company until the fiscal year following the determination that our voting and non-voting
common shares held by non-affiliates is more than $250 million measured on the last business day of our second fiscal quarter,
or our annual revenues are more than $100 million during the most recently completed fiscal year and our voting and non-voting
common shares held by non-affiliates is more than $700 million measured on the last business day of our second fiscal quarter.
Similar to emerging growth companies, smaller reporting companies are able to provide simplified executive compensation disclosure,
are exempt from the auditor attestation requirements of Section 404, and have certain other reduced disclosure obligations, including,
among other things, being required to provide only two years of audited financial statements and not being required to provide
selected financial data, supplemental financial information or risk factors.
We have elected to take advantage of certain
of the reduced reporting obligations available to us. We cannot predict whether investors will find our common stock less attractive
if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active
trading market for our common stock and our stock price may be reduced or more volatile.
Our ability to use our pre-change
NOLs and other pre-change tax attributes to offset post-change taxable income or taxes may be subject to limitation.
We may, from time to time, carry net operating
loss carryforwards (“NOLs”) as deferred tax assets on our balance sheet. Under Sections 382 and 383 of the Internal
Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change” (generally defined as a greater
than 50-percentage- point cumulative change (by value) in the equity ownership of certain stockholders over a rolling three-year
period), the corporation’s ability to use its pre-change NOLs and other pre-change tax attributes to offset its post-change
taxable income or taxes may be limited. We may experience ownership changes in the future as a result of shifts in our stock ownership,
some of which changes are outside our control. As a result, our ability to use our pre-change NOLs and other pre-change tax attributes
to offset post-change taxable income or taxes may be subject to limitation.
Risks Relating to Securities Markets
and Investment in Our Stock
Our stock may be subject to substantial
price and volume fluctuations due to a number of factors, many of which are beyond our control and may prevent our stockholders
from reselling our common stock at a profit.
The market prices for securities of biotechnology
and pharmaceutical companies have historically been highly volatile, and the market has from time to time experienced significant
price and volume fluctuations that are unrelated to the operating performance of particular companies.
The market price of our common stock is
likely to be highly volatile and may fluctuate substantially due to many factors, including:
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announcements concerning the progress of our efforts
to obtain regulatory approval for and commercialize our product candidates or any future product candidate, including any requests
we receive from the FDA for additional studies or data that result in delays in obtaining regulatory approval or launching these
product candidates, if approved;
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market conditions in the pharmaceutical and biotechnology
sectors or the economy as a whole;
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price and volume fluctuations in the overall stock
market;
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the failure of one or more of our product candidates
or any future product candidate, if approved, to achieve commercial success;
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announcements of the introduction of new products
by us or our competitors;
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developments concerning product development results
or intellectual property rights of others;
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litigation or public concern about the safety of our
potential products;
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actual fluctuations in our quarterly operating results,
and concerns by investors that such fluctuations may occur in the future;
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deviations in our operating results from the estimates
of securities analysts or other analyst comments;
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additions or departures of key personnel;
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health care reform legislation, including measures
directed at controlling the pricing of pharmaceutical products, and third-party coverage and reimbursement policies;
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developments concerning current or future strategic
collaborations; and
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discussion of us or our stock price by the financial
and scientific press and in online investor communities.
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Fortress controls a voting majority
of our common stock.
Pursuant to the terms of the Class A Preferred
Stock held by Fortress, Fortress is entitled to cast, for each share of Class A Preferred held by Fortress, the number of votes
that is equal to one and one-tenth (1.1) times a fraction, the numerator of which is the sum of (A) the shares of outstanding common
stock and (B) the whole shares of common stock into which the shares of outstanding Class A common shares and the Class A Preferred
Stock are convertible and the denominator of which is the number of shares of outstanding Class A Preferred Stock. Accordingly,
Fortress is able to control or significantly influence all matters requiring approval by our stockholders, including the election
of directors and the approval of mergers or other business combination transactions. The interests of Fortress may not always coincide
with the interests of other stockholders, and Fortress may take actions that advance its own interests and are contrary to the
desires of our other stockholders. Moreover, this concentration of voting power may delay, prevent or deter a change in control
of us even when such a change may be in the best interests of all stockholders, could deprive our stockholders of an opportunity
to receive a premium for their common stock as part of a sale of Mustang or our assets, and might affect the prevailing market
price of our common stock.
Fortress has the right to receive
a significant grant of shares of our common stock annually which will result in the dilution of your holdings of common stock upon
each grant, which could reduce their value.
Under the terms of the Second Amended and
Restated Founders Agreement, which became effective July 22, 2016, Fortress will receive a grant of shares of our common stock
equal to two and one-half percent (2.5%) of the gross amount of any equity or debt financing. Additionally, the Class A Preferred
Stock, as a class, will receive an annual dividend on January 1st, payable in shares of common stock in an amount equal to two
and one-half percent (2.5%) of our fully-diluted outstanding capital stock as of the business day immediately prior to January
1st of such year. Fortress currently owns all outstanding shares of Class A Preferred Stock. These share issuances to Fortress
and any other holder of Class A Preferred Stock will dilute your holdings in our common stock and, if the value of Mustang has
not grown proportionately over the prior year, would result in a reduction in the value of your shares. The Second Amended and
Restated Founders Agreement has a term of 15 years and renews automatically for subsequent one-year periods unless terminated by
Fortress or upon a Change in Control (as defined in the Second Amended and Restated Founders Agreement).
We might have received better terms
from unaffiliated third parties than the terms we receive in our agreements with Fortress.
The agreements we have entered into with
Fortress include a Management Services Agreement and the Founders Agreement. While we believe the terms of these agreements are
reasonable, they might not reflect terms that would have resulted from arm’s-length negotiations between unaffiliated third
parties. The terms of the agreements relate to, among other things, payment of a royalty on product sales and the provision of
employment and transition services. We might have received better terms from third parties because, among other things, third parties
might have competed with each other to win our business.
The dual roles of our officers and
directors who also serve in similar roles with Fortress could create a conflict of interest and will require careful monitoring
by our independent directors.
We share some directors with Fortress,
and in addition, under the Management Services Agreement, we will also share some officers with Fortress. This could create
conflicts of interest between the two companies in the future. While we believe that the Founders Agreement and the Management
Services Agreement were negotiated by independent parties on both sides on arm’s length terms, and the fiduciary duties of
both parties were thereby satisfied, in the future situations may arise under the operation of both agreements that may create
a conflict of interest. We will have to be diligent to ensure that any such situation is resolved by independent parties.
In particular, under the Management Services Agreement, Fortress and its affiliates are free to pursue opportunities which could
potentially be of interest to Mustang, and they are not required to notify Mustang prior to pursuing such opportunities. Any such
conflict of interest or pursuit by Fortress of a corporate opportunity independent of Mustang could expose us to claims by our
investors and creditors and could harm our results of operations.
We may become involved in securities
class action litigation that could divert management’s attention and harm our business.
The stock markets have from time to time
experienced significant price and volume fluctuations that have affected the market prices for the common stock of biotechnology
and pharmaceutical companies. These broad market fluctuations may cause the market price of our stock to decline. In the past,
securities class action litigation has often been brought against a company following a decline in the market price of its securities.
This risk is especially relevant for us because biotechnology and biopharmaceutical companies have experienced significant stock
price volatility in recent years. We may become involved in this type of litigation in the future. Litigation often is expensive
and diverts management’s attention and resources, which could adversely affect our business.