ITEM 1A. RISK FACTORS
In analyzing
our company, you should consider carefully the following risk factors, together with all of the other information included in this
Quarterly Report on Form 10-Q. Factors that could cause or contribute to differences in our actual results include those discussed
in the following subsection, as well as those discussed above in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and in our Annual Report filed on Form 10-K for the year ended December 31, 2018. Each
of the following risk factors, either alone or taken together, could adversely affect our business, operating results and financial
condition, as well as adversely affect the value of an investment in our company. The risks and uncertainties described below are
not the only ones we face. Additional risks not currently 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
We are a clinical-stage company and have generated
no revenue from commercial sales to date.
We are a clinical-stage biopharmaceutical
company with a limited operating history. We have no products approved for commercial sale and have not generated any revenue from
product sales to date. We will encounter risks and difficulties frequently experienced by early-stage companies in rapidly evolving
fields. If we do not address these risks successfully, our business will suffer.
We have incurred net losses in every year since
our inception and anticipate that we will continue to incur net losses in the future.
We are not
profitable and have incurred losses in each period since our inception. As of June 30, 2019 and December 31, 2018, we had an accumulated
deficit of $197.6 million and $186.9 million, respectively. We reported a net loss of $10.7 million and $11.2 million for the six
months ended June 30, 2019 and 2018, respectively. We expect to continue to operate at a net loss as we continue our research and
development efforts, continue to conduct clinical trials and develop manufacturing, sales, marketing and distribution capabilities.
There can be no assurance that the products under development by us will be approved for sale in the United States or elsewhere.
Furthermore, there can be no assurance that if such products are approved they will be successfully commercialized, which would
have an adverse effect on our business prospects, financial condition and results of operation.
If we fail to obtain additional
financing, we will be unable to continue or complete our product development and you will likely lose your entire investment.
We do not currently have
sufficient funding for the completion of development nor commercialization of our product candidates and we will need to continue
to seek capital from time to time to continue development of our product candidates and to acquire and develop other product candidates.
Our first product candidate is not expected to be commercialized, if approved, until at least 2021 and any partnering revenues
that it may generate may not be sufficient to fund our ongoing operations. Any partnering revenues generated by licensing activities
may not be sufficient to fund ongoing operations. Further, our product candidates are not expected to be approved for several years
and may not generate sufficient revenues from our commercialization efforts to fund operations.
As of June
30, 2019, our cash and cash equivalent balance was $19.5 million. In April 2019, we sold 42.9 million shares of common stock at
an offering price of $0.385 per share and warrants to purchase up to 42.9 million shares of common stock at an exercise price of
$0.50 per share and with a term of 5 years, resulting in gross proceeds of $16.5 million and net proceeds of $15.1 million after
deducting underwriting and other offering expenses.
Our business
or operations may change in a manner that would consume available funds more rapidly than anticipated and substantial additional
funding may be required to maintain operations, fund expansion, develop new or enhanced products, acquire complementary products,
business or technologies or otherwise respond to competitive pressures and opportunities, such as a change in the regulatory environment
or a change in preferred cancer treatment modalities. However, we may not be able to secure funding when we need it or on favorable
terms or indeed on any terms. In addition, from time to time, we may not be able to secure enough capital in a timely enough manner
which may cause the generation of a going-concern opinion from our auditors which can and may impair our stock market valuation
and also our ability to finance on favorable terms or indeed on any terms.
To raise additional
capital, we may in the future offer additional shares of our common stock or other securities convertible into or exchangeable
for our common stock. We cannot assure you that we will be able to sell shares or other securities in any other offering at a price
per share that is equal to or greater than the price per share paid by investors, and investors purchasing shares or other securities
in the future could have rights superior to existing stockholders.
If we cannot
raise adequate funds to satisfy our capital requirements, we will have to delay, scale back or eliminate our research and development
activities, clinical studies or future operations. We may also be required to obtain funds through arrangements with collaborators,
which arrangements may require us to relinquish rights to certain technologies or products that we otherwise would not consider
relinquishing, including rights to future product candidates or certain major geographic markets. We may further have to license
our technology to others. This could result in sharing revenues which we might otherwise have retained for ourselves. Any of these
actions may harm our business, financial condition and results of operations.
The amount
of funding we will need depends on many factors, including the progress, timing and scope of our product development programs;
the progress, timing and scope of our preclinical studies and clinical trials; the time and cost necessary to obtain regulatory
approvals; the time and cost necessary to further develop manufacturing processes and arrange for contract manufacturing; our ability
to enter into and maintain collaborative, licensing and other commercial relationships; and our partners’ commitment of time
and resources to the development and commercialization of our products.
We have limited access to
the capital markets and even if we can raise additional funding, we may be required to do so on terms that are dilutive to you.
We have limited
access to the capital markets to raise funds. The capital markets have been unpredictable in the recent past for radioisotope and
other oncology companies and unprofitable companies such as ours. In addition, it is generally difficult for development-stage
companies to raise capital under current market conditions. The amount of capital that a company such as ours is able to raise
often depends on variables that are beyond our control. As a result, we may not be able to secure financing on terms attractive
to us, or at all. If we are able to consummate a financing arrangement, the amount raised may not be sufficient to meet our future
needs. If adequate funds are not available on acceptable terms, or at all, our business, including our technology licenses, results
of operations, financial condition and our continued viability will be materially adversely affected.
We are highly dependent
on the success of Iomab-B and the SIERRA trial and we many not able to complete the necessary clinical development or our development
efforts may not result in the data necessary to receive regulatory approval
Iomab-B, which
we licensed from the Fred Hutchinson Cancer Research Center, in June 2012 is our lead program to which we allocate a significant
portion of our resources. We are currently enrolling patients in the pivotal Phase 3 SIERRA trial (Study of Iomab-B in Elderly
Relapsed or Refractory AML), a 150-patient multi-center randomized trial that will compare outcomes of patients who receive Iomab-B
and a BMT to those patients receiving physician’s choice of salvage chemotherapy, defined as conventional care, as no standard
of care exists for this patient population. The SIERRA trial may be unsuccessful and fail to demonstrate a safety and efficacy
profile that is necessary to receive favorable regulatory approval. The trials DMC or Data Monitoring Committee may recommend that
the trial be stopped early for safety or efficacy concerns, which could prevent us from completing the SIERRA trial. Even if Iomab-B
receives favorable regulatory approval, we may not be successful in securing adequate reimbursement or establishing successful
commercial operations. Any or all of these factors could have a material adverse impact on our business and ability to continue
operations.
We may be unable to establish
sales, marketing and commercial supply capabilities
We do not currently
have, nor have we ever had, commercial sales and marketing capabilities. If any of our product candidates become approved, we would
have to build and establish these capabilities in order to commercialize our approved product candidates. The process of establishing
commercial capabilities will be expensive and time consuming. Even if we are successful in building sales and marketing capabilities,
we may not be successful in commercializing any of our product candidates. Any delays in commercialization or failure to successfully
commercialize any product candidate may have material adverse impacts on our business and ability to continue operations.
Risks Related to Regulation
The FDA or comparable foreign
regulatory authorities may disagree with our regulatory plans and we may fail to obtain regulatory approval of our product candidates.
Our products
are subject to rigorous regulation by the FDA and numerous other federal, state and foreign governmental authorities. The process
of seeking regulatory approval to market an antibody radiation-conjugate product is expensive and time-consuming, and, notwithstanding
the effort and expense incurred, approval is never guaranteed. If we are not successful in obtaining timely approval of our products
from the FDA, we may never be able to generate significant revenue and may be forced to cease operations. In particular, the FDA
permits commercial distribution of a new antibody radiation-conjugate product only after a Biologics License Application (BLA)
for the product has received FDA approval. The BLA process is costly, lengthy and inherently uncertain. Any BLA filed by us will
have to be supported by extensive data, including, but not limited to, technical, preclinical, clinical trial, manufacturing and
labeling data, to demonstrate to the FDA’s satisfaction the safety and efficacy of the product for its intended use. The
lengthy approval process as well as the unpredictability of future clinical trial results may result in our failing to obtain regulatory
approval to market our product candidates, which would significantly harm our business, results of operations and prospects. In
addition, even if we were to obtain approval, regulatory authorities may approve any of our product candidates 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 the foregoing
scenarios could materially harm the commercial prospects for our product candidates.
The approval
process in the United States and in other countries could result in unexpected and significant costs for us and consume management’s
time and other resources. The FDA and other foreign regulatory agencies could ask us to supplement our submissions, collect non-clinical
data, conduct additional clinical trials or engage in other time-consuming actions, or it could simply deny our applications. In
addition, even if we obtain approval to market our products in the United States or in other countries, the approval could be revoked,
or other restrictions imposed if post-market data demonstrates safety issues or lack of effectiveness. We cannot predict with certainty
how, or when, the FDA or other regulatory authorities will act. If we are unable to obtain the necessary regulatory approvals,
our financial condition and cash flow may be materially adversely affected, and our ability to grow domestically and internationally
may be limited. Additionally, even if we obtain approval, regulatory authorities may approve any of our product candidates for
fewer or more limited indications that we request. The Company’s products may not be approved for the specific indications
that are most necessary or desirable for successful commercialization or profitability.
We have not demonstrated
that any of our products are safe and effective for any indication.
We currently
have two product candidates in clinical development. In December 2015, the FDA cleared our IND filing for Iomab-B, and we are currently
enrolling patients in a randomized, controlled, pivotal, Phase 3 clinical trial. Assuming the trial meets its endpoints, it will
form the basis for a BLA. Additionally, there are physician IND trials at the FHCRC that have been conducted or are currently ongoing
at FHCRC with Iomab-B and the BC8 antibody we licensed. We have multiple clinical trials ongoing for our drug candidates under
our own sponsorship and multiple investigator-initiated trials ongoing.
We may encounter substantial
delays in our clinical trials or may not be able to conduct our trials on the timelines we expect.
We cannot predict
whether we will encounter problems with any of our ongoing or planned clinical trials that will cause us or regulatory authorities
to delay, suspend, or discontinue clinical trials or to delay the analysis of data from ongoing clinical trials. Any of the following
could delay or disrupt the clinical development of our product candidates and potentially cause our product candidates to fail
to receive regulatory approval:
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conditions
imposed on us by the FDA or comparable foreign authorities regarding the scope or design of our clinical trials;
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delays in receiving, or the inability to obtain, required approvals from institutional review boards (IRBs) or other reviewing entities at clinical sites selected for participation in our clinical trials;
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delays in enrolling patients into clinical trials;
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a lower than anticipated retention rate of patients in clinical trials;
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the need to repeat or discontinue clinical trials as a result of inconclusive or negative results or unforeseen complications in testing or because the results of later trials may not confirm positive results from earlier preclinical studies or clinical trials;
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inadequate supply, delays in distribution, deficient quality of, or inability to purchase or manufacture drug product, comparator drugs or other materials necessary to conduct our clinical trials;
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unfavorable FDA or other foreign regulatory inspection and review of a clinical trial site or records of any clinical or preclinical investigation;
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serious and unexpected drug-related side effects experienced by participants in our clinical trials, which may occur even if they were not observed in earlier trials or only observed in a limited number of participants;
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a finding that the trial participants are being exposed to unacceptable health risks;
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the placement by the FDA or a foreign regulatory authority of a clinical hold on a trial; or
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delays in obtaining regulatory agency authorization for the conduct of our clinical trials.
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We may suspend,
or the FDA or other applicable regulatory authorities may require us to suspend, clinical trials of a product candidate at any
time if we or they believe the patients participating in such clinical trials, or in independent third-party clinical trials for
drugs based on similar technologies, are being exposed to unacceptable health risks or for other reasons.
Further, individuals
involved with our clinical trials may serve as consultants to us from time to time and receive stock options or cash compensation
in connection with such services. If these relationships and any related compensation to the clinical investigator carrying out
the study result in perceived or actual conflicts of interest, or the FDA concludes that the financial relationship may have affected
interpretation of the study, the integrity of the data generated at the applicable clinical trial site may be questioned and the
utility of the clinical trial itself may be jeopardized. The delay, suspension or discontinuation of any of our clinical trials,
or a delay in the analysis of clinical data for our product candidates, for any of the foregoing reasons, could adversely affect
our efforts to obtain regulatory approval for and to commercialize our product candidates, increase our operating expenses and
have a material adverse effect on our financial results.
Clinical trials
may also be delayed or terminated as a result of ambiguous or negative interim results. In addition, a clinical trial may be suspended
or terminated by us, the FDA, the IRBs at the sites where the IRBs are overseeing a trial, or a data safety monitoring board, or
DSMB (Data Safety Monitoring Board)/DMC (Data Monitoring Committee), overseeing the clinical trial at issue, or other regulatory
authorities due to a number of factors, including:
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failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols;
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inspection of the clinical trial operations or trial sites by the FDA or other regulatory authorities resulting in the imposition of a clinical hold;
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varying interpretation of data by the FDA or similar foreign regulatory authorities;
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failure to achieve primary or secondary endpoints or other failure to demonstrate efficacy;
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unforeseen safety issues; or
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lack of adequate funding to continue the clinical trial.
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Modifications to our product candidates may require
federal approvals.
The BLA application
is the vehicle through which the company may formally propose that the FDA approve a new pharmaceutical for sale and marketing
in the United States. Once a particular product candidate receives FDA approval, expanded uses or uses in new indications of our
products may require additional human clinical trials and new regulatory approvals, including additional IND and BLA submissions
and premarket approvals before we can begin clinical development, and/or prior to marketing and sales. If the FDA requires new
approvals for a particular use or indication, we may be required to conduct additional clinical studies, which would require additional
expenditures and harm our operating results. If the products are already being used for these new indications, we may also be subject
to significant enforcement actions.
Conducting
clinical trials and obtaining approvals is a time-consuming process, and delays in obtaining required future approvals could adversely
affect our ability to introduce new or enhanced products in a timely manner, which in turn would have an adverse effect on our
business prospects, financial condition and results of operation.
The FDA or comparable foreign
regulatory authorities may disagree with our regulatory plans, and we may fail to obtain regulatory approval of our product candidates.
In June 2012,
we acquired rights to BC8 (Iomab), a clinical stage monoclonal antibody with safety and efficacy data in more than 300 patients
in need of a BMT. Iomab-B is our product candidate that links I-131 to the BC8 antibody that is being studied in an ongoing Phase
3 pivotal trial. Product candidates utilizing this antibody would require BLA approval before they can be marketed in the United
States. We are also evaluating a lower dose of the BC8 antibody and I-131 for lymphodepletion prior to CAR-T or adoptive cell therapy.
We are currently evaluating clinical trials that would use our construct for lymphodepletion. Our lintuzumab-Ac-225 product candidate
is also being studied in several Phase 1 trials under our sponsorship and investigator-initiated trials in patients with AML, myelodysplastic
syndrome and multiple myeloma. Product candidates utilizing the lintuzumab antibody would require BLA approval before they can
be marketed in the United States. We are in the early stages of evaluating other product candidates consisting of conjugates of
Ac-225 with human or humanized antibodies for pre-clinical and clinical development in other types of cancer. The FDA may not approve
these products for the indications that are necessary or desirable for successful commercialization. The FDA may fail to approve
any BLA we submit for new product candidates or for new intended uses or indications for approved products or future product candidates.
Failure to obtain FDA approval for our products in the proposed indications would have a material adverse effect on our business
prospects, financial condition and results of operations.
Clinical trials necessary
to support approval of our product candidates are time-consuming and expensive.
Initiating
and completing clinical trials necessary to support FDA approval of a BLA for Iomab-B, CD33 program candidates, and other product
candidates, is a time-consuming and expensive process, and the outcome is inherently uncertain. Moreover, the results of early
clinical trials are not necessarily predictive of future results, and any product candidate we advance into clinical trials may
not have favorable results in later clinical trials. We have worked with the FDA to develop a clinical trial designed to test the
safety and efficacy of Iomab-B in patients with relapsed or refractory AML who are age 55 and above prior to a BMT. This trial
is designed to support a BLA filing for marketing approval by the FDA, pending results from the trial. We have also worked with
the FDA to develop a regulatory pathway for our Actimab-MDS trial that consists of a dose-confirming Phase 1 trial that can be
followed by a randomized, controlled pivotal trial that could support a BLA filing. In addition, there can be no assurance that
the data generated during the trial will meet our chosen safety and effectiveness endpoints or otherwise produce results that will
eventually support the filing or approval of a BLA. Even if the data from this trial are favorable, these data may not be predictive
of the results of any future clinical trials.
Our clinical trials may
fail to demonstrate adequately the efficacy and safety of our product candidates, which would prevent or delay regulatory approval
and commercialization.
Even if our
clinical trials are completed as planned, we cannot be certain that their results will support our product candidate claims or
that the FDA or foreign authorities will agree with our conclusions regarding them. Success in pre-clinical studies and early clinical
trials does not ensure that later clinical trials will be successful, and we cannot be sure that the later trials will replicate
the results of prior trials and pre-clinical studies. The clinical trial process may fail to demonstrate that our product candidates
are safe and effective for the proposed indicated uses. If FDA concludes that the clinical trials for Iomab-B, lintzumab-Ac-225,
or any other product candidate for which we might seek approval, have failed to demonstrate safety and effectiveness, we would
not receive FDA approval to market that product candidate in the United States for the indications sought. In addition, such an
outcome could cause us to abandon the product candidate and might delay development of others. Any delay or termination of our
clinical trials will delay or preclude the filing of any submissions with the FDA and, ultimately, our ability to commercialize
our product candidates and generate revenues. It is also possible that patients enrolled in clinical trials will experience adverse
side effects that are not currently part of a product candidate’s profile.
The intellectual property
related to antibodies we have licensed has expired or likely expired
The key patents
related to the humanized antibody, lintuzumab, which we use in our CD33 program product candidates have expired. It is generally
possible that others may be eventually able to use an antibody with the same sequence, and we will then need to rely on additional
patent protection covering alpha particle drug products comprising Ac-225. Our final drug construct consists of the lintuzumab
antibody labeled with the isotope Ac-225. We have licensed issued patents that relate to the linker technology we use to conjugate
the isotope to the antibody and own issued and pending patents related to isotope production methods and drug preparation methods.
In addition, we possess trade secrets and know how related to the manufacturing and use of isotopes. Any competing product based
on the lintuzumab antibody is likely to require several years of development before achieving our product candidate’s current
status and may be subject to significant regulatory hurdles but is nevertheless a possibility that could negatively impact our
business in the future. Neither the antibody portion nor the composition of matter as a whole for the conjugated Iomab-B product
candidate is covered by the claims of any issued patent. Accordingly, there are no patents that would prevent others from using
an antibody with the same antibody sequence in any drug product. We have dedicated research and development activities towards
improving the product’s stability to enhance commercial usefulness of the product and now have a proprietary formulation
for which IP is pending. We have and may continue to file patents related to Iomab-B that can provide barriers to entry but there
is no certainty that these patents will be granted or such granting thereof will adequately prevent others from seeking to replicate
and use the BC8 antibody or the construct. We have pending patents related to radioimmunoconjugate composition, formulation administration,
and methods of use in solid or liquid cancers. This matter includes composition, administration, and methods of treatment for our
products Actimab-A and Iomab-B. Any competing product based on the antibody used in Iomab-B is likely to require several years
of development before achieving our product candidate’s current status and may be subject to significant regulatory hurdles
but is nevertheless a possibility that could negatively impact our business in the future.
The indications for which we are developing our product candidates for are orphan drug designations, which
are disease indications that affect fewer than 200,000 patients in the United States and less than 5 in 10,000 patients in the
European Union (“EU”). We have received orphan drug designation for Iomab-B and our lintuzumab-CD33 ARC for patients
with AML in both the United States and the EU. As a result, if our products are to be approved, they may receive 7 years and 10
years of market exclusivity in the US and EU, respectively. In addition, our product candidates are biologics combined with radioisotopes.
The Hatch-Waxman Act requires that a manufacturer of generic drugs, which for a biologic drug is called a biosimilar, requires
that the manufacturer demonstrate bioequivalence. We believe that due to the nature of radioisotopes having half-lives combined
with the complexities of biologic drugs it would be difficult for a manufacturer to demonstrate bioequivalence of our product candidates.
Our CD33 program clinical
trials are testing the same drug construct
Our CD33 program
is comprised of several clinical trials including several investigator-initiated trials including AML, MDS and Multiple Myeloma
that are studying the same drug construct consisting of lintuzumab-Ac-225. Negative results from any of these trials could negatively
impact our ability to enroll or complete our other trials studying lintzumab-Ac-225. Additionally, negative outcomes including
safety concerns, may result in the FDA discontinuing other trials utilizing lintuzumab-Ac-225.
We may be unable to obtain
a sufficient supply of isotopes to support clinical development or at commercial scale.
Iodine-131
is a key component of our Iomab-B drug candidate. We source medical grade I-131 from multiple suppliers including two leading global
manufacturers. Currently, there is sufficient supply of I-131 to advance our ongoing SIERRA clinical trial, support additional
trials we may undertake utilizing I-131 and for commercialization of Iomab-B. We continually evaluate I-131 manufacturers and suppliers
and intend to have at a minimum of three qualified suppliers prior to the commercial launch of Iomab-B. While we consider I-131
to be commoditized and obtainable through several suppliers, there can be no guarantee that we will be able to secure a third I-131
supplier or obtain on terms that are acceptable to us.
Actinium-225
is a key component of our CD33 ARC program, AWE platform and other drug candidates that we might consider for development with
the Ac-225 payload. There are adequate quantities of Ac-225 available today to meet our current needs via our present supplier,
the Department of Energy, or DOE. The current Ac-225 currently supplied to Actinium’s clinical trials from the DOE is derived
from the natural decay of thorium-229 from so-called ‘thorium-cows’ and is able to produce sufficient quantities that
are several multiples of the amount of Ac-225 we require to supply our clinical programs through to early commercialization phase.
The DOE is also producing Ac-225 from a recently developed alternative route for Ac-225 production via a linear accelerator that
is currently being evaluated by Actinium. Initial preclinical and modelling results have indicated that the linear accelerator
sourced Ac-225 does not impact labelling efficiency and expected distribution. Per representations made by the Department of Energy,
the capacity of Ac-225 from this route is expected to be sufficient to supply all of Actinium’s pipeline and commercial Ac-225
needs and support new program expansion by not just Actinium but also other companies that are developing Ac-225 based products.
Additional routes of Ac-225 production are being pursued by the DOE including the generation of new thorium cows and production
via a cyclotron. The cyclotron production method for Ac-225 production leverages Actinium’s proprietary technology and know-how
and presents an additional path towards production of high-quality Ac-225 that would be able to satisfy commercial needs. In addition,
we are aware of at least six other government and non-government entities globally including the U.S., Canada, Russia, Belgium,
France and Japan that have, or expect to have ability to supply Ac-225 or equipment for its production within the timeframes relevant
to first commercial approval of our Ac-225 ARC.
Our contract
for supply of this isotope from the DOE must be renewed yearly, and the current contract extends through the end of 2019. While
we expect this contract will be renewed at the end of its term as it has since 2009, there can be no assurance that the DOE will
renew the contract or that change its policies that allow for the sale of isotope to us. Failure to acquire sufficient quantities
of medical grade Ac-225 would make it impossible to effectively complete clinical trials and to commercialize any Ac-225 based
drug candidates that we may develop and would materially harm our business.
Our ability to conduct clinical trials to advance our ARC drug candidates is dependent on our ability
to obtain the radioisotopes I-131, Ac-225 and other isotopes we may choose to utilize in the future. Currently, we are dependent
on third party manufacturers and suppliers for our isotopes. These suppliers may not perform their contracted services or may breach
or terminate their agreements with us. Our suppliers are subject to regulations and standards that are overseen by regulatory and
government agencies and we have no control over our suppliers’ compliance to these standards. Failure to comply with regulations
and standards may result in their inability to supply isotope could result in delays in our clinical trials, which could have a
negative impact on our business. We have developed intellectual property, know-how and trade secrets related to the manufacturing
process of Ac-225. While we have manufactured medical grade Ac-225 of a purity compared to the cyclotron sourced material in the
past, this activity was terminated due to operating cost reasons and we currently do not have experience in manufacturing medical
grade Ac-225 and may not obtain the resources necessary to establish our own manufacturing capabilities in future. Our inability
to build out and establish our own manufacturing facilities would require us to continue to rely on third party suppliers as we
currently do. However, based on our current third-party suppliers and potential future suppliers of Ac-225 we expect to have adequate
isotope supply to support our current ongoing clinical trials, current AWE program activities and commercialization should our
drug candidates receive approval.
If we encounter difficulties
enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.
The timely
completion of clinical trials in accordance with their protocols depends on our ability to enroll a sufficient number of patients
who remain in the trial until its conclusion. We may experience difficulties in patient enrollment in our clinical trials for a
variety of reasons, including:
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the
size and nature of the patient population;
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the patient eligibility criteria defined in the protocol;
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the size of the study population required for analysis of the trial’s primary endpoints;
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the proximity of patients to trial sites;
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the design of the trial;
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our ability to recruit clinical trial investigators with the appropriate competencies and expertise;
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competing clinical trials for similar or alternate therapeutic treatments;
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clinician’s and patients’ perceptions as to the potential advantages and side effects of the product candidate being studied in relation to other available therapies;
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our ability to obtain and maintain patient consents; and
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the risk that patients enrolled in clinical trials will not complete a clinical trial.
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In addition,
refractory patients, which several of our trials are enrolling, participating in clinical trials are seriously and often terminally
ill and therefore may not complete the clinical trial due to reasons including comorbid conditions or occurrence of adverse medical
events related or unrelated to the investigational products, or death. Even if we are able to enroll a sufficient number of patients
in our clinical trials, delays in patient enrollment will result in increased costs or affect the timing of our planned trials,
which could adversely affect our ability to advance the development of our product candidates.
FDA may take actions that
would prolong, delay, suspend, or terminate clinical trials of our product candidates, which may delay or prevent us from commercializing
our product candidates on a timely basis.
There can be
no assurance that the data generated in our clinical trials will be acceptable to FDA or that if future modifications during the
trial are necessary, that any such modifications will be acceptable to FDA. Certain modifications to a clinical trial protocol
made during the course of the clinical trial have to be submitted to the FDA. This could result in the delay or halt of a clinical
trial while the modification is evaluated. In addition, depending on the quantity and nature of the changes made, FDA could take
the position that some or all of the data generated by the clinical trial is not usable because the same protocol was not used
throughout the trial. This might require the enrollment of additional subjects, which could result in the extension of the clinical
trial and the FDA delaying approval of a product candidate. If the FDA believes that its prior approval is required for a particular
modification, it can delay or halt a clinical trial while it evaluates additional information regarding the change.
Any delay or
termination of our current or future clinical trials as a result of the risks summarized above, including delays in obtaining or
maintaining required approvals from IRBs, delays in patient enrollment, the failure of patients to continue to participate in a
clinical trial, and delays or termination of clinical trials as a result of protocol modifications or adverse events during the
trials, may cause an increase in costs and delays in the filing of any submissions with the FDA, delay the approval and commercialization
of our product candidates or result in the failure of the clinical trial, which could adversely affect our business, operating
results and prospects. Lengthy delays in the completion of our Actimab-A clinical trials would adversely affect our business and
prospects and could cause us to cease operations.
Risks Related to Third Parties
We rely on third parties
to conduct our clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected
deadlines or comply with regulatory requirements, we may not be able to obtain regulatory approval for or commercialize our product
candidates.
We do not have
the ability to independently conduct our pre-clinical and clinical trials for our product candidates and we must rely on third
parties, such as contract research organizations, medical institutions, clinical investigators and contract laboratories to conduct
such trials. Our reliance on these third parties for clinical development activities results in reduced control over these activities.
Moreover, the FDA requires us to comply with regulations and standards, commonly referred to as GCPs (good clinical practices),
for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and
accurate and that the trial participants are adequately protected. Our reliance on third parties does not relieve us of these responsibilities
and requirements. If we or any of our third-party contractors 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 current good manufacturing practice, or cGMP, regulations. Our
failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process.
If our consultants,
contract research organizations and other similar entities with which we are working do not successfully carry out their contractual
duties, meet expected deadlines, or comply with applicable regulations, we may be required to replace them. Although we believe
that there are a number of other third-party contractors, we could engage to continue these activities, we may not be able to enter
into arrangements with alternative third-party contractors or to do so on commercially reasonable terms, which may result in a
delay of our planned clinical trials and delayed development of our product candidates.
In addition,
our third-party contractors are not our employees, and except for remedies available to us under our agreements with such third-party
contractors, we cannot control whether or not they devote sufficient time and resources to our programs. If these third parties
do not successfully carry out their contractual duties or regulatory obligations or meet expected deadlines, or if the quality
or accuracy of the data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements
or for other reasons, our pre-clinical development activities or clinical trials may be extended, delayed, suspended or terminated,
and we may not be able to obtain regulatory approval for, or successfully commercialize, our product candidates on a timely basis,
if at all, and our business, operating results and prospects would be adversely affected.
Our product candidates for
which we intend to seek approval as biologic products may face competition sooner than anticipated.
Our product
candidates are regulated by the FDA as biologic products and we intend to seek approval for these products pursuant to the BLA
pathway. The Biologics Price Competition and Innovation Act of 2009, or BPCIA, created an abbreviated pathway for the approval
of biosimilar and interchangeable biologic products. The abbreviated regulatory pathway establishes legal authority for the FDA
to review and approve biosimilar biologics, including the possible designation of a biosimilar as “interchangeable”
based on its similarity to an existing brand product. Under the BPCIA, an application for a biosimilar product cannot be approved
by the FDA until 12 years after the original branded product was approved under a BLA. The law is complex and is still being interpreted
and implemented by the FDA. As a result, its ultimate impact, implementation, and meaning are subject to uncertainty. While it
is uncertain when such processes intended to implement BPCIA may be fully adopted by the FDA, any such processes could have a material
adverse effect on the future commercial prospects for our biologic products.
Our product candidates may
never achieve market acceptance.
Iomab-B, CD33
ARC program candidates and future product candidates that we may develop may never gain market acceptance among physicians, patients
and the medical community. The degree of market acceptance of any of our products will depend on a number of factors, including
the actual and perceived effectiveness and reliability of the product; the results of any long-term clinical trials relating to
use of the product; the availability, relative cost and perceived advantages and disadvantages of alternative technologies; the
degree to which treatments using the product are approved for reimbursement by public and private insurers; the strength of our
marketing and distribution infrastructure; and the level of education and awareness among physicians and hospitals concerning the
product.
We believe
that oncologists and other physicians will not widely adopt a product candidate unless they determine, based on experience, clinical
data, and published peer-reviewed journal articles, that the use of that product candidate provides an effective alternative to
other means of treating specific cancers. Patient studies or clinical experience may indicate that treatment with our product candidates
does not provide patients with sufficient benefits in extension of life or quality of life. We believe that recommendations and
support for the use of each product candidate from influential physicians will be essential for widespread market acceptance. Our
product candidates are still in the development stage and it is premature to attempt to gain support from physicians at this time.
We can provide no assurance that such support will ever be obtained. If our product candidates do not receive such support from
these physicians and from long-term data, physicians may not use or continue to use, and hospitals may not purchase or continue
to purchase, them.
Failure of
Iomab-B, CD33 ARC program candidates or any of our other product candidates to significantly penetrate current or new markets would
negatively impact our business financial condition and results of operations
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Even if we receive regulatory
approval of our product candidates, we will be subject to ongoing regulatory obligations and continued regulatory review.
Any regulatory
approvals that we receive for our product candidates will require surveillance to monitor the safety and efficacy of the product
candidate. The FDA may also require a risk evaluation and mitigation strategy in order to approve our product candidates, which
could entail requirements for a medication guide, physician communication plans or additional elements to ensure safe use, such
as restricted distribution methods, patient registries and other risk minimization tools. In addition, if the FDA or a comparable
foreign regulatory authority approves our product candidates, the manufacturing processes, labeling, packaging, distribution, adverse
event reporting, storage, advertising, promotion, import, export and recordkeeping for our product candidates will be subject to
extensive and ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing information
and reports, registration, as well as continued compliance with cGMPs and cGCPs for any clinical trials that we conduct post-approval.
In addition, the FDA could require us to conduct another study to obtain additional safety or biomarker information. Later discovery
of previously unknown problems with our product candidates, including adverse events of unanticipated severity or frequency, or
with our third-party suppliers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among
other things:
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restrictions on the marketing or manufacturing of our product candidates, withdrawal of the product from the market, or voluntary or mandatory product recalls;
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fines, warning letters or holds on clinical trials;
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refusal by the FDA to approve pending applications or supplements to approved applications filed by us or suspension or revocation of license approvals;
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product seizure or detention, or refusal to permit the import or export of our product candidates; and
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injunctions or the imposition of civil or criminal penalties.
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The FDA’s
and other regulatory authorities’ policies may change, and additional government regulations may be enacted that could prevent,
limit or delay regulatory approval of our product candidates. We cannot predict the likelihood, nature or extent of government
regulation that may arise from future legislation or administrative action, either in the United States or abroad. 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, and we may not achieve or sustain
profitability.
Coverage and reimbursement
may be limited or unavailable in certain market segments for our product candidates which could limit our sales of our product
candidates, if approved.
The commercial
success of our product candidates in both domestic and international markets will be substantially dependent on whether third-party
coverage and reimbursement is available for patients that use our products. However, the availability of insurance coverage and
reimbursement for newly approved cancer therapies is uncertain, and therefore, third-party coverage may be particularly difficult
to obtain even if our products are approved by the FDA as safe and efficacious. Patients using existing approved therapies are
generally reimbursed all or part of the product cost by Medicare or other third-party payors. Medicare, Medicaid, health maintenance
organizations and other third-party payors are increasingly attempting to contain healthcare costs by limiting both coverage and
the level of reimbursement of new drugs, and, as a result, they may not cover or provide adequate payment for these products. Submission
of applications for reimbursement approval generally does not occur prior to the filing of a BLA for that product and may not be
granted until many months after BLA approval. In order to obtain coverage and reimbursement for these products, we or our commercialization
partners may have to agree to a net sales price lower than the net sales price we might charge in other sales channels. The continuing
efforts of government and third-party payors to contain or reduce the costs of healthcare may limit our revenue. Initial dependence
on the commercial success of our products may make our revenues particularly susceptible to any cost containment or reduction efforts.
We may be subject to claims
that our third-party service providers, consultants or current or former employees have wrongfully used or disclosed confidential
information of third parties.
We have received
confidential and proprietary information from third parties. In addition, we employ individuals who were previously employed at
other biotechnology or pharmaceutical companies. We may be subject to claims that we or our employees, consultants or independent
contractors have inadvertently or otherwise used or disclosed confidential information of these third parties or our employees’
former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these
claims, litigation could result in substantial cost and be a distraction to our management and employees.
We depend on third-party manufacturers to produce
our pre-clinical and clinical trial drug supplies.
We do not currently
operate manufacturing facilities for pre-clinical or clinical production of any of our product candidates. We rely on third-party
manufacturers to supply, store, and distribute pre-clinical and clinical supply of our product candidates, and plan to continue
to do so for the foreseeable future. Any performance failure on the part of our existing or future manufacturers could delay clinical
development or regulatory approval of our product candidates or commercialization of any approved products.
Our product
candidates require precise, high-quality manufacturing. Failure by our contract manufacturer to achieve and maintain high manufacturing
standards could result in patient injury or death, product recalls or withdrawals, delays or failures in testing or delivery, cost
overruns, or other problems that could seriously hurt our business. Contract manufacturers may encounter difficulties involving
production yields, quality control, and quality assurance. These manufacturers are subject to ongoing periodic and unannounced
inspections by the FDA and corresponding state and foreign agencies to ensure strict compliance with cGMPs and other applicable
government regulations and corresponding foreign standards; we do not have control over third-party manufacturers’ compliance
with these regulations and standards.
Furthermore,
these third-party contractors, whether foreign or domestic, may experience regulatory compliance difficulty, mechanical shut downs,
employee strikes, or any other unforeseeable acts that may delay or limit production. Our inability to adequately establish, supervise
and conduct (either ourselves or through third parties) all aspects of the formulation and manufacturing processes, and the inability
of third-party manufacturers to consistently supply quality product when required would have a material adverse effect on our ability
to commercialize our products. We have faced delays and risks associated with reliance on key third party manufacturers in the
past and may be faced with such delays and risks in the future. Any future manufacturing interruptions or related supply issues
could have an adverse effect on our company, including delays in clinical trials.
If we are successful in
obtaining marketing approval from the FDA and/or other regulatory agencies for any of our product candidates, we anticipate continued
reliance on third-party manufacturers.
To date, our
product candidates have been manufactured in small quantities for preclinical and clinical testing by third-party manufacturers.
If the FDA or other regulatory agencies approve any of our product candidates for commercial sale, we expect that we would continue
to rely, at least initially, on third-party specialized manufacturers to produce commercial quantities of approved products. These
manufacturers may not be able to successfully increase the manufacturing capacity for any approved product in a timely or economic
manner, or at all. Significant scale-up of manufacturing may require additional validation studies, which the FDA must review and
approve. If third party manufacturers are unable to successfully increase the manufacturing capacity for a product candidate, or
we are unable to establish our own manufacturing capabilities, the commercial launch of any approved products may be delayed or
there may be a shortage in supply, which in turn could have a material adverse effect on our business.
In addition,
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 a BLA to the FDA. We do not control the manufacturing process of, and are completely
dependent on, our contract manufacturing partners for compliance with cGMPs. If our contract manufacturers cannot successfully
manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or other regulatory
authorities, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. If the FDA
or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our product candidates or
if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly
impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved.
We may have conflicts with
our partners that could delay or prevent the development or commercialization of our product candidates.
We may have
conflicts with our partners, such as conflicts concerning the interpretation of preclinical or clinical data, the achievement of
milestones, the interpretation of contractual obligations, payments for services, development obligations or the ownership of intellectual
property developed during our collaboration. If any conflicts arise with any of our partners, such partner may act in a manner
that is averse to our best interests. Any such disagreement could result in one or more of the following, each of which could delay
or prevent the development or commercialization of our product candidates, and in turn prevent us from generating revenues: unwillingness
on the part of a partner to pay us milestone payments or royalties we believe are due under a collaboration; uncertainty regarding
ownership of intellectual property rights arising from our collaborative activities, which could prevent us from entering into
additional collaborations; unwillingness by the partner to cooperate in the development or manufacture of the product, including
providing us with product data or materials; unwillingness on the part of a partner to keep us informed regarding the progress
of its development and commercialization activities or to permit public disclosure of the results of those activities; initiating
litigation or alternative dispute resolution options by either party to resolve the dispute; or attempts by either party to terminate
the agreement.
We face significant competition
from other biotechnology and pharmaceutical companies.
Our product
candidates face, and will continue to face, intense competition from large pharmaceutical companies, as well as academic and research
institutions. We compete in an industry that is characterized by (i) rapid technological change, (ii) evolving industry standards,
(iii) emerging competition and (iv) new product introductions. Our competitors have existing products and technologies that will
compete with our product candidates and technologies and may develop and commercialize additional products and technologies that
will compete with our product candidates and technologies. Because several competing companies and institutions have greater financial
resources than us, they may be able to (i) provide broader services and product lines, (ii) make greater investments in research
and development, or R&D, and (iii) carry on broader R&D initiatives. Our competitors also have greater development capabilities
than we do and have substantially greater experience in undertaking preclinical and clinical testing of product candidates, obtaining
regulatory approvals, and manufacturing and marketing pharmaceutical products. They also have greater name recognition and better
access to customers than us.
Our product candidates may
cause undesirable side effects or have other properties that could halt their clinical development, prevent their regulatory approval,
limit their commercial potential, or result in significant negative consequences
Undesirable
side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials
and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign
authorities. The drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete the
trial or result in potential product liability claims. Any of these occurrences may harm our business, financial condition and
prospects significantly. Even if any of our product candidates receives marketing approval, as greater numbers of patients use
a product following its approval, an increase in the incidence of side effects or the incidence of other post-approval problems
that were not seen or anticipated during pre-approval clinical trials could result in a number of potentially significant negative
consequences, including:
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regulatory authorities may withdraw their approval of the product;
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regulatory authorities may require the addition of labeling statements, such as warnings or contraindications;
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we may be required to change the way the product is administered, conduct additional clinical trials or change the labeling of the product;
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we may elect, or we may be required, to recall or withdraw product from the market;
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we could be sued and held liable for harm caused to patients; and
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our reputation may suffer.
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Any of these
events could substantially increase the costs and expenses of developing, commercializing and marketing any such product candidates
or could harm or prevent sales of any approved products.
Risks Related to Our Intellectual Property
We depend upon securing and protecting critical
intellectual property.
We are dependent
on obtaining and maintaining patents, trade secrets, copyright and trademark protection of our technologies in the United States
and other jurisdictions, as well as successfully enforcing this intellectual property and defending this intellectual property
against third-party challenges. The degree of future protection of our proprietary rights is uncertain for product candidates that
are currently in the early stages of development because we cannot predict which of these product candidates will ultimately reach
the commercial market or whether the commercial versions of these product candidates will incorporate proprietary technologies.
Our patent position is highly
uncertain and involves complex legal and factual questions.
Accordingly,
we cannot predict the breadth of claims that may be allowed or enforced under our patents or in third-party patents. For example,
we or our licensors might not have been the first to make the inventions covered by each of our pending patent applications and
issued patents; we or our licensors might not have been the first to file patent applications for these inventions; others may
independently develop similar or alternative technologies or duplicate any of our technologies; it is possible that none of our
pending patent applications or the pending patent applications of our licensors will result in issued patents; our issued patents
and issued patents of our licensors may not provide a basis for commercially viable technologies, or may not provide us with any
competitive advantages, or may be challenged and invalidated by third parties; and, we may not develop additional proprietary technologies
that are patentable.
As a result,
our owned and licensed patents may not be valid, and we may not be able to obtain and enforce patents and to maintain trade secret
protection for the full commercial extent of our technology. The extent to which we are unable to do so could materially harm our
business.
We or our licensors
have applied for and will continue to apply for patents for certain products. Such applications may not result in the issuance
of any patents, and any patents now held or that may be issued may not provide us with adequate protection from competition. Furthermore,
it is possible that patents issued or licensed to us may be challenged successfully. In that event, if we have a preferred competitive
position because of such patents, such preferred position would be lost. If we are unable to secure or to continue to maintain
a preferred position, we could become subject to competition from the sale of generic products. Failure to receive, inability to
protect, or expiration of our patents for medical use, manufacture, conjugation and labeling of Ac-225, the antibodies that we
license from third parties, or subsequent related filings, would adversely affect our business and operations.
Patents issued
or licensed to us may be infringed by the products or processes of others. The cost of enforcing our patent rights against infringers,
if such enforcement is required, could be significant, and we do not currently have the financial resources to fund such litigation.
Further, such litigation can go on for years and the time demands could interfere with our normal operations. There has been substantial
litigation and other proceedings regarding patent and other intellectual property rights in the pharmaceutical industry. We may
become a party to patent litigation and other proceedings. The cost to us of any patent litigation, even if resolved in our favor,
could be substantial. Some of our competitors may be able to sustain the costs of such litigation more effectively than we can
because of their substantially greater financial resources. Litigation may also absorb significant management time.
Unpatented
trade secrets, improvements, confidential know-how and continuing technological innovation are important to our scientific and
commercial success. Although we attempt to and will continue to attempt to protect our proprietary information through reliance
on trade secret laws and the use of confidentiality agreements with our partners, collaborators, employees and consultants and
other appropriate means, these measures may not effectively prevent disclosure of our proprietary information, and, in any event,
others may develop independently, or obtain access to, the same or similar information.
Certain of
our patent rights are licensed to us by third parties. If we fail to comply with the terms of these license agreements, our rights
to those patents may be terminated, and we will be unable to conduct our business.
If we are found to be infringing
on patents or trade secrets owned by others, we may be forced to cease or alter our product development efforts, obtain a license
to continue the development or sale of our products, and/or pay damages.
Our manufacturing
processes and potential products may violate proprietary rights of patents that have been or may be granted to competitors, universities
or others, or the trade secrets of those persons and entities. As the pharmaceutical industry expands and more patents are issued,
the risk increases that our processes and potential products may give rise to claims that they infringe the patents or trade secrets
of others. These other persons could bring legal actions against us claiming damages and seeking to enjoin clinical testing, manufacturing
and marketing of the affected product or process. If any of these actions are successful, in addition to any potential liability
for damages, we could be required to obtain a license in order to continue to conduct clinical tests, manufacture or market the
affected product or use the affected process. Required licenses may not be available on acceptable terms, if at all, and the results
of litigation are uncertain. If we become involved in litigation or other proceedings, it could consume a substantial portion of
our financial resources and the efforts of our personnel.
Our ability to protect and
enforce our patents does not guarantee that we will secure the right to commercialize our patents.
A patent is
a limited monopoly right conferred upon an inventor, and his successors in title, in return for the making and disclosing of a
new and non-obvious invention. This monopoly is of limited duration but, while in force, allows the patent holder to prevent others
from making and/or using its invention. While a patent gives the holder this right to exclude others, it is not a license to commercialize
the invention where other permissions may be required for commercialization to occur. For example, a drug cannot be marketed without
the appropriate authorization from the FDA, regardless of the existence of a patent covering the product. Further, the invention,
even if patented itself, cannot be commercialized if it infringes the valid patent rights of another party.
We rely on confidentiality
agreements to protect our trade secrets. If these agreements are breached by our employees or other parties, our trade secrets
may become known to our competitors.
We rely on
trade secrets that we seek to protect through confidentiality agreements with our employees and other parties. If these agreements
are breached, our competitors may obtain and use our trade secrets to gain a competitive advantage over us. We may not have any
remedies against our competitors and any remedies that may be available to us may not be adequate to protect our business or compensate
us for the damaging disclosure. In addition, we may have to expend resources to protect our interests from possible infringement
by others.
The use of hazardous materials,
including radioactive and biological materials, in our research and development efforts imposes certain compliance costs on us
and may subject us to liability for claims arising from the use or misuse of these materials.
Our research,
development and manufacturing activities involve the controlled use of hazardous materials, including chemicals, radioactive and
biological materials, such as radioactive isotopes. We are subject to federal, state, local and foreign environmental laws and
regulations governing, among other matters, the handling, storage, use and disposal of these materials and some waste products.
We cannot completely eliminate the risk of contamination or injury from these materials and we could be held liable for any damages
that result, which could exceed our financial resources. We currently maintain insurance coverage for injuries resulting from the
hazardous materials we use; however, future claims may exceed the amount of our coverage. Also, we do not have insurance coverage
for pollution cleanup and removal. Currently the costs of complying with such federal, state, local and foreign environmental regulations
are not significant, and consist primarily of waste disposal expenses. However, they could become expensive, and current or future
environmental laws or regulations may impair our research, development, production and commercialization efforts.
We may undertake international
operations, which will subject us to risks inherent with operations outside of the United States.
Although
we do not have any international operations at this time, we intend to seek market clearances in foreign markets that we believe
will generate significant opportunities. However, even with the cooperating of a commercialization partner, conducting drug development
in foreign countries involves inherent risks, including, but not limited to difficulties in staffing, funding and managing foreign
operations; unexpected changes in regulatory requirements; export restrictions; tariffs and other trade barriers; difficulties
in protecting, acquiring, enforcing and litigating intellectual property rights; fluctuations in currency exchange rates; and potentially
adverse tax consequences.
If we were
to experience any of the difficulties listed above, or any other difficulties, any international development activities and our
overall financial condition may suffer and cause us to reduce or discontinue our international development and registration efforts.
We are highly dependent
on our key personnel, and if we are not successful in attracting and retaining highly qualified personnel, we may not be able to
successfully implement our business strategy.
Our future
operations and successes depend in large part upon the continued service of key members of our senior management team whom we are
highly dependent upon to manage our business. If any member of our current senior management terminates his employment with us
and we are unable to find a suitable replacement quickly, the departure could have a material adverse effect on our business.
Our future
success also depends on our ability to identify, attract, hire or engage, retain and motivate other well-qualified managerial,
technical, clinical and regulatory personnel. There can be no assurance that such professionals will be available in the market,
or that we will be able to retain existing professionals or meet or continue to meet their compensation requirements. Furthermore,
the cost base in relation to such compensation, which may include equity compensation, may increase significantly, which could
have a material adverse effect on us. Failure to establish and maintain an effective management team and workforce could adversely
affect our ability to operate, grow and manage our business.
We may be subject, directly
or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws, and health information privacy and security
laws. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.
If we obtain
FDA approval for any of our product candidates and begin commercializing those products in the United States, our operations may
be directly, or indirectly through our customers, subject to various federal and state fraud and abuse laws, including, without
limitation, the federal Anti-Kickback Statute, the federal False Claims Act, and physician sunshine laws and regulations. These
laws may impact, among other things, our proposed sales, marketing, and education programs. In addition, we may be subject to patient
privacy regulation by both the federal government and the states in which we conduct our business. The laws that may affect our
ability to operate include:
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the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, to induce, or in return for, the purchase or recommendation of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs;
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federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payors that are false or fraudulent;
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the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created federal criminal statutes that prohibit executing a scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters;
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HIPAA, as amended by the Health Information Technology and Clinical Health Act, or HITECH, and its implementing regulations, which imposes certain requirements relating to the privacy, security, and transmission of individually identifiable health information;
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the federal physician sunshine requirements under PPACA, which require certain manufacturers of drugs, devices, biologics, and medical supplies to report annually to the U.S. Department of Health and Human Services information related to payments and other transfers of value to physicians, other healthcare providers, and teaching hospitals, and ownership and investment interests held by physicians and other healthcare providers and their immediate family members and applicable group purchasing organizations;
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state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws that may apply to items or services reimbursed by any third-party payor, including commercial insurers; state laws that require pharmaceutical companies to comply with the 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 and other potential referral sources; state 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 laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways, thus complicating compliance efforts.
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Because of
the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of
our business activities could be subject to challenge under one or more of such laws. In addition, recent health care reform legislation
has strengthened these laws. For example, the PPACA, among other things, amends the intent requirement of the federal anti-kickback
and criminal healthcare fraud statutes. A person or entity no longer needs to have actual knowledge of this statute or specific
intent to violate it to have committed a violation. Moreover, the PPACA provides that the government may assert that a claim including
items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes
of the False Claims Act.
If our operations
are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may
be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from participation in government health
care programs, such as Medicare and Medicaid, imprisonment, and the curtailment or restructuring of our operations, any of which
could adversely affect our ability to operate our business and our results of operations.
Recent federal legislation
will increase pressure to reduce prices of pharmaceutical products paid for by Medicare, which could materially adversely affect
our revenue, if any, and our results of operations.
In the United
States, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, also called the MMA, changed the way Medicare
covers and pays for pharmaceutical products. The legislation expanded Medicare coverage for drug purchases by the elderly and introduced
a new reimbursement methodology based on average sales prices for physician-administered drugs. In addition, this legislation provided
authority for limiting the number of drugs that will be covered in any therapeutic class. As a result of this legislation and the
expansion of federal coverage of drug products, we expect that there will be additional pressure to reduce costs. These cost reduction
initiatives and other provisions of this legislation could decrease the scope of coverage and the price that we receive for any
approved products and could harm our business. While the MMA applies only to drug benefits for Medicare beneficiaries, private
payors often follow Medicare coverage policies and payment limitations in setting their own reimbursement rates, and any reduction
in reimbursement that results from the MMA may cause a similar reduction in payments from private payors. This legislation may
pose an even greater risk to our drug candidates as a significant portion of the target patient population for our drug candidates
would likely be over 65 years of age and, therefore, many such patients will be covered by Medicare.
In March 2010,
the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, or
collectively, the PPACA, became law in the United States. The goal of the PPACA is to reduce the cost of healthcare and substantially
change the way healthcare is financed by both governmental and private insurers. While we cannot predict what impact on federal
reimbursement policies this legislation will have in general or on our business specifically, the PPACA may result in downward
pressure on pharmaceutical reimbursement, which could negatively affect market acceptance of our drug candidates, if approved,
or any of our future products. In 2012, members of the U.S. Congress and some state legislatures sought to overturn certain provisions
of the PPACA including those concerning the mandatory purchase of insurance. However, on June 28, 2012, the United States Supreme
Court upheld the constitutionality of these provisions. Members of the U.S. Congress have since proposed a number of legislative
initiatives, including possible repeal of the PPACA. We cannot predict the outcome or impact of current proposals or whether new
proposals will be made or adopted, when they may be adopted or what impact they may have on us if they are adopted. These challenges
add to the uncertainty of the legislative changes as part of ACA. Changes that may affect our business include those governing
enrollment in federal healthcare programs, reimbursement changes, fraud and abuse and enforcement. These changes will impact existing
government healthcare programs and will result in the development of new programs, including Medicare payment for performance initiatives
and improvements to the physician quality reporting system and feedback program.
Managing our growth as we
expand operations may strain our resources.
We expect to
need to grow rapidly in order to support additional, larger, and potentially international, pivotal clinical trials of our product
candidates, which will place a significant strain on our financial, managerial and operational resources. In order to achieve and
manage growth effectively, we must continue to improve and expand our operational and financial management capabilities. Moreover,
we will need to increase staffing and to train, motivate and manage our employees. All of these activities will increase our expenses
and may require us to raise additional capital sooner than expected. Failure to manage growth effectively could materially harm
our business, financial condition or results of operations.
We may expand our business
through the acquisition of rights to new product candidates that could disrupt our business, harm our financial condition and may
also dilute current stockholders’ ownership interests in our company.
Our business
strategy includes expanding our products and capabilities, and we may seek acquisitions of product candidates, antibodies or technologies
to do so. Acquisitions involve numerous risks, including substantial cash expenditures; potentially dilutive issuance of equity
securities; incurrence of debt and contingent liabilities, some of which may be difficult or impossible to identify at the time
of acquisition; difficulties in assimilating acquired technologies or the operations of the acquired companies; diverting our management’s
attention away from other business concerns; risks of entering markets in which we have limited or no direct experience; and the
potential loss of our key employees or key employees of the acquired companies.
We can make
no assurances that any acquisition will result in short-term or long-term benefits to us. We may incorrectly judge the value or
worth of an acquired product, company or business. In addition, our future success would depend in part on our ability to manage
the rapid growth associated with some of these acquisitions. We cannot assure that we will be able to make the combination of our
business with that of acquired products, businesses or companies work or be successful. Furthermore, the development or expansion
of our business or any acquired products, business or companies may require a substantial capital investment by us. We may not
have these necessary funds, or they might not be available to us on acceptable terms or at all. We may also seek to raise funds
by selling shares of our preferred or common stock, which could dilute each current stockholder’s ownership interest in the
Company.
Risks Related to Ownership
of Our Common Stock
The sale of securities by
us in any equity or debt financing could result in dilution to our existing stockholders and have a material adverse effect on
our earnings.
We have financed
our operations primarily through sales of stock and warrants. It is likely that during the next twelve months we will seek to raise
additional capital through the sales of stock and warrants in order to expand our level of operations to continue our research
and development efforts.
Any sale of
common stock by us in a future offering could result in dilution to our existing stockholders as a direct result of our issuance
of additional shares of our capital stock. In addition, our business strategy may include expansion through internal growth or
by establishing strategic relationships with targeted customers and vendors. In order to do so, or to finance the cost of our other
activities, we may issue additional equity securities that could dilute our stockholders’ stock ownership. We may also assume
additional debt and incur impairment losses related to goodwill and other tangible assets if we acquire another company and this
could negatively impact our earnings and results of operations.
Our Common Stock is considered a Penny
Stock.
During the first six months
of 2019, and for the years of 2018, 2017 and 2016, the price of our common stock has traded below $5.00 per share, and therefore
is treated as a penny stock. Penny stocks generally are equity securities with a price of less than $5.00. Penny stock rules require
a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure
document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide
the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson
in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account.
The broker-dealer must also make a special written determination that the penny stock is a suitable investment for the purchaser
and receive the purchaser’s written agreement to the transaction. These requirements may have the effect of reducing the
level of trading activity, if any, in the secondary market for a security that becomes subject to the penny stock rules. The additional
burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our securities,
which could severely limit their market price and liquidity of our securities. These requirements may restrict the ability of broker-dealers
to sell our common stock and may affect your ability to resell our common stock.
We may be required to effectuate a reverse
stock split to be able to maintain compliance with applicable listing requirements or standards of the NYSE AMERICAN exchange or
our common stock could get delisted.
If our stock trades at
a depressed valuation for an extended period of time, we may be required to effectuate a reverse stock split to maintain compliance
with NYSE American listing requirements, or we could be delisted from the exchange. In addition, we may elect to seek approval
for and if authorized, effectuate a reverse stock split to increase the price of our common stock so that our stock is no longer
considered a penny stock and to make our stock more marketable to institutional investors that cannot buy stocks below certain
prices.
In order to effectuate
a reverse split, we would be required to obtain shareholder approval at a meeting of shareholders. We would also need the approval
of the Financial Regulatory Authority (FINRA) to effectuate a stock split. There is no guarantee that we would be successful in
obtaining the necessary approval from FINRA or the votes required to reach a quorum to hold a meeting or to authorize our Board
of Directors to approve a reverse stock split. To conduct a meeting of shareholders we would have to file and issue the required
proxy information and materials, which could take a significant amount of time. It is possible that during the proxy solicitation
process our stock would be delisted before we could obtain the necessary authorization for our Board of Directors to approve a
reverse split to regain compliance with NYSE AMERICAN listing requirement.
If we fail to maintain
compliance with NYSE American listing requirements and our stock is delisted, the market price and liquidity of our common stock
could be adversely impacted. This may also reduce our ability to raise additional capital. Even if we are successful in obtaining
authorization and our Board of Directors approves a reverse stock split, there can be no assurance that intuitional investors will
buy shares of our common stock. There can be no assurance that our common stock can maintain its post-reverse split price and it
may be treated as a penny stock. In the event, that our common stock is delisted from the NYSE AMERICAN or another national securities
exchange, trading of our common stock could occur in the over-the-counter market or on an electronic bulletin board established
for unlisted securities such as the OTC Bulletin Board or Pink Sheets. This could result in adverse impact on the market price
and liquidity of our common stock, a reduction in coverage by security analysts and impair our ability to raise additional capital,
all of which could cause the price of our common stock to decline.
Our common stock is subject
to price volatility which could lead to losses by stockholders and potential costly security litigation.
The trading
volume of our common stock has been and may continue to be extremely limited and sporadic. We expect the market price of our common
stock to fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned
growth, quarterly operating results of other companies in the same industry, trading volume in our common stock, changes in general
conditions in the economy and the financial markets or other developments affecting our competitors or us. This volatility has
had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance
and could have the same effect on our common stock.
The trading
price of our Common Stock may be highly volatile and could fluctuate in response to factors such as:
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actual or anticipated variations in our operating results;
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announcements of developments by us or our competitors;
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the timing of IND and/or BLA approval, the completion and/or results of our clinical trials;
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regulatory actions regarding our products;
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announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
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adoption of new accounting standards affecting our industry;
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additions or departures of key personnel;
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introduction of new products by us or our competitors;
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sales of our Common Stock or other securities in the open market; and
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other events or factors, many of which are beyond our control.
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The stock market
is subject to significant price and volume fluctuations. In the past, following periods of volatility in the market price of a
company’s securities, securities class action litigation has often been initiated against such a company. Litigation initiated
against us, whether or not successful, could result in substantial costs and diversion of our management’s attention and
our resources, which could harm our business and financial condition.
We do not intend to pay
dividends on our common stock, so any returns will be determined by the value of our common stock.
We have never
declared or paid any cash dividends on our common stock. For the foreseeable future, it is expected that earnings, if any, generated
from our operations will be used to finance the growth of our business, and that no dividends will be paid to holders of our common
stock. As a result, the success of an investment in our common stock will depend upon any future appreciation in its value. There
is no guarantee that our common stock will appreciate in value.
Certain provisions of our
Certificate of Incorporation and Bylaws and Delaware law make it more difficult for a third party to acquire us and make a takeover
more difficult to complete, even if such a transaction were in our stockholders’ interest.
Provisions
of our certificate of incorporation and bylaws may delay or discourage transactions involving an actual or potential change in
our control or change in our management, including transactions in which stockholders might otherwise receive a premium for their
shares, or transactions that our stockholders might otherwise deem to be in their best interests. Therefore, these provisions could
adversely affect the price of our stock. Among other things, the certificate of incorporation and bylaws:
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provide that the authorized number of directors may be changed by resolution of the board of directors;
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provide that all vacancies, including newly-created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum;
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divide the board of directors into three classes;
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provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide notice in writing in a timely manner, and meet specific requirements as to the form and content of a stockholder’s notice;
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In addition,
we are governed by Section 203 of the Delaware General Corporation Law. In general, Section 203 prohibits a public Delaware corporation
from engaging in a “business combination” with an “interested stockholder” for a period of three years
after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved
in a prescribed manner. A “business combination” includes mergers, asset sales or other transactions resulting in a
financial benefit to the stockholder. An “interested stockholder” is a person who, together with affiliates and associates,
owns, or within three years, did own, 15% or more of the corporation’s outstanding voting stock. These provisions may have
the effect of delaying, deferring or preventing a change in our control.
Compliance with the reporting
requirements of federal securities laws can be expensive.
We are subject
to the information and reporting requirements of the Exchange Act and other federal securities laws, and the compliance obligations
of the Sarbanes-Oxley Act. The costs of preparing and filing annual and quarterly reports and other information with the Securities
and Exchange Commission and furnishing audited reports to stockholders are substantial. In addition, we will incur substantial
expenses in connection with the preparation of registration statements and related documents with respect any offerings of our
common stock.
Our ability to utilize our
net operating loss carryforwards and certain other tax attributes may be limited.
Our ability
to utilize our federal net operating loss and tax credit carryforwards may be limited under Sections 382 and 383 of the Internal
Revenue Code of 1986, as amended, or the Code. The limitations apply if we experience an “ownership change”,
generally defined as a greater than 50 percentage point change in the ownership of our equity by certain stockholders over a rolling
three-year period. Similar provisions of state tax law may also apply. We have not assessed whether such an ownership change
has previously occurred. If we have experienced an ownership change at any time since our formation, we may already be subject
to limitations on our ability to utilize our existing net operating losses and other tax attributes to offset taxable income. In
addition, future changes in our stock ownership, which may be outside of our control, may trigger an ownership change and, consequently,
the limitations under Sections 382 and 383 of the Code. As a result, if or when we earn net taxable income, our ability to
use our pre-change net operating loss carryforwards and other tax attributes to offset such taxable income may be subject to limitations,
which could adversely affect our future cash flows.
Failure to establish and
maintain adequate finance infrastructure and accounting systems and controls could impair our ability to comply with the financial
reporting and internal controls requirements for publicly traded companies.
As a public
company, we operate in an increasingly demanding regulatory environment, including with respect to more complex accounting rules.
Company responsibilities required by the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, include establishing
and maintaining corporate oversight and adequate internal control over financial reporting and disclosure controls and procedures.
Effective internal controls are necessary for us to produce reliable financial reports and are important to help prevent financial
fraud.
Our compliance
with Section 404 of the Sarbanes-Oxley Act requires that we incur substantial accounting expense and expend significant management
efforts. We complied with Section 404 at December 31, 2018 and 2017 and while our testing did not reveal any material weaknesses
in our internal controls, subsequent testing by our independent registered public accounting firm may reveal material weaknesses
in our internal controls that we would be required to remediate in a timely manner so as to be able to comply with the requirements
of Section 404 of the Sarbanes-Oxley Act each year. If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley
Act in a timely manner each year, we could be subject to sanctions or investigations by the SEC, NYSE American or other regulatory
authorities which would require additional financial and management resources and could adversely affect the market price of our
common stock. Furthermore, if we cannot provide reliable financial reports or prevent fraud, our business and results of operations
could be harmed, and investors could lose confidence in our reported financial information.