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, 2019. 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 March 31, 2020 and December 31, 2019, we had an
accumulated deficit of $214.4 million and $208.8 million, respectively. We reported a net loss of $5.7 million for the three
months ended March 31, 2020 and 2019. 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.
On April 24, 2020, we
issued and sold 210.8 million shares of common stock (or pre-funded warrants to purchase shares of common stock in lieu
thereof). Gross proceeds from this offering to us were $31.6 million, before deducting underwriting discounts and commissions
and other offering expenses payable by us. On June 19, 2020, we issued and sold 55.7 million shares of common stock and 21.3
million pre-funded warrants to purchase shares of common stock. Gross proceeds from this offering to us were $25.0 million,
before deducting underwriting discounts and commissions and other offering expenses payable us. As of the date of filing this
report, we expect that our existing resources will be more than sufficient to fund our planned operations for more than 12
months following the date of this report.
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. Furthermore, the COVID-19 pandemic has created significant economic uncertainty and volatility
in the credit and capital markets. A continuation or worsening of the levels of market disruption and volatility seen in the recent
past could have an adverse effect on our ability to access capital. 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.
Our business could be adversely
affected by the effects of health epidemics, including the global COVID-19 pandemic.
In December 2019, a
novel strain of COVID-19 was reported in China. Since then, COVID-19 has spread globally. The spread of COVID-19 from China to other countries has resulted in the World Health Organization
(WHO) declaring the outbreak of COVID-19 as a “pandemic,” or a worldwide spread of a new disease, on March 11, 2020.
Many countries around the world have imposed quarantines and restrictions on travel and mass gatherings to slow the spread of the
virus and have closed non-essential businesses, and many local jurisdictions continue to have such restrictions
in place.
As many local jurisdictions
continue to have such restrictions in place, our ability to continue to operate our business may also be limited. Such events may
result in a period of business, supply and drug product manufacturing disruption, and in reduced operations, any of which could
materially affect our business, financial condition and results of operations. In response to COVID-19, we implemented remote working
and thus far have not experienced a significant disruption or delay in our operations as it relates to the clinical development
of our drug candidates
The spread of COVID-19,
which has caused a broad impact globally, may materially affect us economically. While the ultimate economic impact brought by,
and the duration of, the COVID-19 pandemic may be difficult to assess or predict, thepandemic has resulted in significant disruptions
in the general commercial activity and the global economy and caused financial market volatility and uncertainty in significant
and unforeseen ways in the recent months. A continuation or worsening of the levels of market disruption and volatility seen in
the recent past could have an adverse effect on our ability to access capital, which could in the future negatively affect our
liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business
and the value of our common stock.
Currently, the Phase
3 SIERRA trial for our lead program, Iomab-B, continues to remain active at a majority of our clinical trial sites, with investigators
providing feedback that recruitment and enrollment will remain active because of the acute nature of the disease, the high unmet
needs of patients with relapsed or refractory AML, the potentially curative nature of BMT and the differentiated profile of Iomab-B.
Certain sites that had not been actively enrolling due to COVID-19 have resumed recruitment and enrollment, and wecurrently anticipate
that other sites that have not been actively enrolling due to COVID-19 will likely resume recruitment and enrollment in the summer
timeframe. We also believe our earlier stage clinical trials for our CD33 program will also continue to recruit and enroll patients
given the acute nature of relapsed or refractory AML. The continuation of the pandemic globally could adversely affect our planned
clinical trial operations, including our ability to conduct the trials on the expected timelines and recruit and retain patients
and principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19 if their geography
is impacted by the pandemic. Further, the COVID-19 pandemic could result in delays in our clinical trials due to prioritization
of hospital resources toward the pandemic, restrictions in travel, potential unwillingness of patients to enroll in trials at
this time, or the inability of patients to comply with clinical trial protocols if quarantines or travel restrictions impede patient
movement or interrupt healthcare services. In addition, we rely on independent clinical investigators, contract research organizations
and other third-party service providers to assist us in managing, monitoring and otherwise carrying out our preclinical studies
and clinical trials, and the pandemic may affect their ability to devote sufficient time and resources to our programs or to travel
to sites to perform work for us.
Additionally, COVID-19
may also result in delays in receiving approvals from local and foreign regulatory authorities, delays in necessary interactions
with IRB’s or Institutional Review Boards, local and foreign regulators, ethics committees and other important agencies and
contractors due to limitations in employee resources or forced furlough of government employees.
COVID-19 has caused severe disruptions in
transportation and limited access to our facility, resulting in limited support from our staff and professional advisors. The small
size of our accounting staff and the additional responsibilities emanating from COVID-19 have presented difficulties to our ability
to complete our Annual Report on Form 10-K and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, resulting
in its delay, and may continue to cause a delay in our ability to complete subsequent reports in a timely manner.
The ultimate impact
from COVID-19 on our business operations and financial results during 2020 will depend on, among other things, the ultimate severity
and scope of the pandemic, the pace at which governmental and private travel restrictions and public concerns about public gatherings
will ease, the rate at which historically large increases in unemployment rates will decrease, if at all, and whether, and the
speed with which the economy recovers. We are not able to fully quantify the impact that these factors will have on our financial
results during 2020 and beyond, but developments related to COVID-19 may materially affect us in 2020.
Our business is subject to cybersecurity risks.
Our operations are increasingly dependent
on information technologies and services. Threats to information technology systems associated with cybersecurity risks and cyber
incidents or attacks continue to grow, and include, among other things, storms and natural disasters, terrorist attacks, utility
outages, theft, viruses, phishing, malware, design defects, human error, and complications encountered as existing systems are
maintained, repaired, replaced, or upgraded. Risks associated with these threats include, among other things:
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theft or misappropriation of funds;
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loss, corruption, or misappropriation of intellectual property, or other proprietary, confidential or personally identifiable information (including supplier, clinical data or employee data);
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disruption or impairment of our and our business operations and safety procedures;
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damage to our reputation with our potential partners, patients and the market;
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exposure to litigation;
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increased costs to prevent, respond to or mitigate cybersecurity events.
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Although we utilize various procedures and
controls to mitigate our exposure to such risk, cybersecurity attacks and other cyber events are evolving and unpredictable. Moreover,
we have no control over the information technology systems of third parties conducting our clinical trials, our suppliers, and
others with which our systems may connect and communicate. As a result, the occurrence of a cyber incident could go unnoticed for
a period time.
We do not presently maintain insurance coverage
to protect against cybersecurity risks. If we procure such coverage in the future, we cannot ensure that it will be sufficient
to cover any particular losses we may experience as a result of such cyberattacks. Any cyber incident could have a material adverse
effect on our business, financial condition and results of 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 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 and will continue to expend substantial time and resources on clinical development before
any of our current or future product candidates will be eligible for FDA approval, if ever.
We expect that a substantial portion of
our efforts and expenditures over the next few years will be devoted to development of our existing and contemplated biological
product candidates. Accordingly, our business currently depends heavily on the successful development, FDA approval, and commercialization
of such candidates, which may never receive FDA approval or be successfully commercialized even if FDA approval is received. The
research, testing, manufacturing, labeling, approval, sale, marketing, and distribution of our biological product candidates are,
and will remain, subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries,
as applicable. We are currently not permitted to market any of our current or future product candidates in the United States until
we receive FDA approval (of each) via the BLA process. To date, we have two product candidates in clinical development and
have not-yet submitted a BLA for any of our candidates and, for many such candidates, do not expect to be in a position to do so
for the foreseeable future, as there are numerous developmental steps that must be completed before we can prepare and submit a
BLA.
In the United States, the FDA regulates
pharmaceutical and biological product candidates under the Federal Food, Drug and Cosmetic Act (“FDCA”) and the Public
Health Service Act (“PHSA”), as well as their respective implementing regulations. Such products and product candidates
are also subject to other federal, state, and local statutes and regulations. The process of obtaining regulatory approvals and
the subsequent compliance with appropriate federal, state, local, and foreign statutes and regulations requires the expenditure
of substantial time and financial resources. The process required by the FDA before a drug or biological product may be marketed
in the United States generally involves the following:
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completion of preclinical laboratory tests and animal studies in accordance with FDA’s good laboratory practices (“GLPs”) and applicable requirements for the humane use of laboratory animals or other applicable regulations;
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submission to the FDA of an IND, which must become effective before human clinical trials in the United States may begin;
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performance of adequate and well-controlled human clinical trials in accordance with FDA’s IND regulations, good clinical practices (“GCPs”), and any additional requirements for the protection of human research subjects and their health information, to establish the safety and efficacy of the proposed biological product for its intended use;
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submission to the FDA of a BLA for marketing approval that meets applicable requirements to ensure the continued safety, purity, and potency of the product that is the subject of the BLA based on results of preclinical testing and clinical trials;
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satisfactory completion of an FDA inspection of the manufacturing facility or facilities where the biological product is produced, to assess compliance with current good manufacturing processes (“cGMPs”) and assure that the facilities, methods and controls are adequate to preserve the biological product’s identity, strength, quality and purity;
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potential FDA audit of the nonclinical study and clinical trial sites that generated the data in support of the BLA; and
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FDA review and approval, or denial, of the BLA.
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Before testing any biological product candidate
in humans, the product candidate enters the preclinical testing stage. Preclinical tests include laboratory evaluations of product
chemistry, toxicity and formulation, as well as animal studies to assess the potential safety and activity of the product candidate.
The conduct of the preclinical tests must comply with federal regulations and requirements including GLPs. The clinical trial sponsor
must submit the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical
data or literature and a proposed clinical protocol, to the FDA as part of the IND. Some preclinical testing may continue even
after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA raises concerns
or questions regarding the proposed clinical trials and places the trial on a clinical hold within that 30-day time period. In
such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. The FDA may
also impose clinical holds on a biological product candidate at any time before or during clinical trials due to safety concerns
or non-compliance. If the FDA imposes a clinical hold, trials may not recommence without FDA authorization and then only under
terms authorized by the FDA. Accordingly, we cannot be sure that submission of an IND will result in the FDA allowing clinical
trials to begin or that, for those that have already commenced under an active IND, that issues will not arise that suspend or
terminate such trials.
Clinical trials involve the administration
of the biological product candidate to healthy volunteers or patients under the supervision of qualified investigators, generally
physicians not employed by or under the trial sponsor’s control. Clinical trials are conducted under protocols detailing,
among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria, and the
parameters to be used to monitor subject safety, including stopping rules that assure a clinical trial will be stopped if certain
adverse events should occur. Each protocol and any amendments to the protocol must be submitted to the FDA as part of the IND.
Clinical trials must be conducted and monitored in accordance with the FDA’s regulations composing the GCP requirements,
including the requirement that all research subjects provide informed consent. Further, each clinical trial must be reviewed and
approved by an independent institutional review board, or IRB, at or servicing each institution at which the clinical trial will
be conducted. An IRB is charged with protecting the welfare and rights of trial participants and considers such items as whether
the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits.
The IRB also approves the form and content of the informed consent that must be signed by each clinical trial subject or his or
her legal representative and must monitor the clinical trial until completed. Human clinical trials are typically conducted in
three sequential phases that may overlap or be combined:
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Phase 1. The biological product is initially introduced into healthy human subjects and tested for safety. In the case of some products for severe or life-threatening diseases, especially when the product may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing is often conducted in subjects.
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Phase 2. The biological product is evaluated in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance, optimal dosage and dosing schedule.
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Phase 3. Clinical trials are undertaken to further evaluate dosage, clinical efficacy, potency, and safety in an expanded patient population at geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk to benefit ratio of the product and provide an adequate basis for product labeling.
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Post-approval clinical trials, sometimes
referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These clinical trials are used to gain
additional experience from the treatment of patients in the intended therapeutic indication, particularly for long-term safety
follow-up.
After the completion of clinical trials
of a biological product, FDA approval of a BLA must be obtained before commercial marketing of the biological product. The BLA
must include results of product development, laboratory and animal studies, human trials, information on the manufacture and composition
of the product, proposed labeling and other relevant information. The FDA may grant deferrals for submission of data, or full or
partial waivers. The testing and approval processes require substantial time and effort and there can be no assurance that the
FDA will accept the BLA for filing and, even if filed, that any approval will be granted on a timely basis, if at all. Before approving
a BLA, the FDA will inspect the facilities at which the product is manufactured. The FDA will not approve the product unless it
determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent
production of the product within required specifications. Additionally, before approving a BLA, the FDA will typically inspect
one or more clinical sites to assure that the clinical trials were conducted in compliance with IND trial requirements and GCP
requirements. To assure cGMP and GCP compliance, an applicant must incur significant expenditure of time, money and effort in the
areas of training, record keeping, production, and quality control.
Notwithstanding the submission of relevant
data and information, the FDA may ultimately decide that the BLA does not satisfy its regulatory criteria for approval and deny
approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than we interpret
the same data. Our product candidates are in the earliest stages of clinical development and, therefore, a long way from BLA submission.
We cannot predict with any certainty if or when we might submit a BLA for regulatory approval for our product candidates or whether
any such BLA will be approved by the FDA. Human clinical trials are very expensive and difficult to design and implement, in part
because they are subject to rigorous regulatory requirements. For example, the FDA may not agree with our proposed endpoints for
any clinical trial we propose, which may delay the commencement of our clinical trials. The clinical trial process is also lengthy
and requires substantial time and effort.
In December 2015, the FDA cleared our IND
filing for Iomab-B (for acute myeloid leukemia or AML), and we are currently enrolling patients in a randomized, controlled, pivotal
Phase 3 clinical trial under such IND to study Iomab-B in patients 55 years of age or older with relapsed or refractory AML. Assuming
the Phase 3 trial meets its endpoints and there are no unexpected issues or delays, it will form the basis for a BLA in the reasonably
near future for Iomab-B for use in preparing and conditioning AML patients for bone marrow transplants (BMTs). Additionally, there
are physician IND trials at the Fred Hutchinson Cancer Research Center (FHCRC) that have been conducted or are currently ongoing
at FHCRC with Iomab-B (for other target indications) and the BC8 antibody we licensed. And, we have multiple Phase 1 and Phase
2 clinical trials ongoing and others that we have planned but not-yet commenced, for our other drug candidates under our own sponsorship
and multiple investigator-initiated trials ongoing. Except for Iomab-B (for patients with AML), we expect that the clinical trials
we need to conduct to be in a position to submit BLAs for our product candidates currently in-development will take, at least,
several years to complete. Moreover, failure can occur at any stage of the trials, and we could encounter problems that cause us
to abandon or repeat clinical trials. Also, the results of early preclinical and clinical testing may not be predictive of the
results of subsequent clinical trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks
in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier studies.
And, preclinical and clinical data are often susceptible to multiple interpretations and analyses. Many companies that have believed
their product candidates performed satisfactorily in preclinical studies and clinical trials have, nonetheless, failed to obtain
marketing approval of their products. Success in preclinical testing and early clinical trials does not ensure that later clinical
trials, which involve many more subjects, and the results of later clinical trials may not replicate the results of prior clinical
trials and preclinical testing. Any failure or substantial delay in our product development plans may have a material adverse effect
on our business.
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. 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, the 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. Further, we own issued and pending patents related to methods for drug conjugation and isotope labeling
and for methods of isotope production. 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. We own an issued patent in the US relating to composition of the Iomab-B
product candidate. Five related patents are also pending in the US and internationally. 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.
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 currently source medical grade I-131 from three 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 multiple 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 I-131 or obtain I-131 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 2020. 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 Iomab-B clinical trials would adversely affect our business and prospects
and could cause us to cease operations.
We have obtained orphan drug designation from FDA for
two of our current product candidates and intend to pursue such designation for other candidates and indications in the future,
but we may be unable to obtain such designations or to maintain the benefits associated with any orphan drug designations we have
received or may receive in the future.
We have received orphan drug designation
for Iomab-B and lintuzumab-CD33 ARC for treatment of AML in both the United States and the EU. Under the Orphan Drug Act, the FDA
may grant orphan designation to a drug or biologic intended to treat a rare disease or condition, which is a disease or condition
that affects fewer than 200,000 individuals in the United States, or if it affects more than 200,000 individuals in the United
States, there is no reasonable expectation that the cost of developing and making available a drug or biologic for this type of
disease or condition will be recovered from sales in the United States for that drug or biologic. Similarly, the EMA grants orphan
drug designation to promote the development of products that are intended for the diagnosis, prevention, or treatment of a life-threatening
or chronically debilitating condition affecting not more than five in 10,000 persons in the EU.
Orphan drug designation neither shortens
the development time or regulatory review time of a drug or biologic nor gives the drug or biologic any advantage in the regulatory
review or approval process. In the United States, orphan drug designation entitles a party to financial incentives, such as opportunities
for grant funding towards clinical trial costs, tax advantages, and application fee waivers. In addition, if a product candidate
receives the first FDA approval for the indication for which it has orphan designation, such product is entitled, upon approval,
to seven years of orphan-drug exclusivity, during which the FDA may not approve any other application to market the same drug for
the same indication, unless a subsequently approved product is clinically superior to orphan drug or where the manufacturer is
unable to assure sufficient product quantity in the applicable patient population. In the EU, orphan drug designation entitles
a party to financial incentives such as reduction of fees or fee waivers and ten years of market exclusivity following drug or
biological product approval. This period may be reduced to six years if the orphan drug designation criteria are no longer met,
including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity.
Even if we obtain (or have obtained) orphan
drug designation for certain product candidates, we may not be the first to obtain marketing approval for such candidates for the
applicable indications due to the uncertainties inherent in the development of novel biologic products. And, an orphan drug candidate
may not receive orphan-drug exclusivity upon approval if such candidate is approved for a use that is broader than the indication
for which it received orphan designation. In addition, exclusive marketing rights in the United States may be lost if the FDA later
determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantities
of the product to meet the needs of patients with the rare disease or condition.
Finally, even if we successfully obtain
orphan-drug exclusivity for an orphan drug candidate upon approval, such exclusivity may not effectively protect the product from
competition because (i) different drugs with different active moieties can be approved for the same condition; and (ii) the FDA
or EMA can also subsequently approve a subsequent product with the same active moiety and for the same indication as the orphan
drug if the later-approved drug if deemed clinically superior to the orphan drug.
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 GCPs 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.
Healthcare legislative reform measures intended to increase
pressure to reduce prices of pharmaceutical products paid for by Medicare or, otherwise, affect the federal regulation of the U.S.
healthcare system could have a material adverse effect our business, future revenue, if any, and 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.
On March 23, 2010, President Obama signed
the “Patient Protection and Affordable Care Act” (P.L. 111-148) and on March 30, 2010, the signed the “Health
Care and Education Reconciliation Act” (P.L. 111-152) (collectively, the “Healthcare Reform Law”). The Healthcare
Reform Law included a number of new rules regarding health insurance, the provision of healthcare, conditions to reimbursement
for healthcare services provided to Medicare and Medicaid patients, and other healthcare policy reforms. Through the law-making
process, substantial changes have been and continue to be made to the current system for paying for healthcare in the U.S., including
changes made to extend medical benefits to certain Americans who lacked insurance coverage and to contain or reduce healthcare
costs (such as by reducing or conditioning reimbursement amounts for healthcare services and drugs, and imposing additional taxes,
fees, and rebate obligations on pharmaceutical and medical device companies). This legislation was one of the most comprehensive
and significant reforms ever experienced by the U.S. in the healthcare industry and has significantly changed the way healthcare
is financed by both governmental and private insurers. This legislation has impacted the scope of healthcare insurance and incentives
for consumers and insurance companies, among others. Additionally, the Healthcare Reform Law’s provisions were designed
to encourage providers to find cost savings in their clinical operations. Pharmaceuticals represent a significant portion of the
cost of providing care. This environment has caused changes in the purchasing habits of consumers and providers and resulted in
specific attention to the pricing negotiation, product selection and utilization review surrounding pharmaceuticals. This attention
may result in our current commercial products, products we may commercialize or promote in the future, and our therapeutic candidates,
being chosen less frequently or the pricing being substantially lowered. At this stage, it is difficult to estimate the full
extent of the direct or indirect impact of the Healthcare Reform Law on us.
These structural changes could entail further
modifications to the existing system of private payors and government programs (such as Medicare, Medicaid, and the State Children’s
Health Insurance Program), creation of government-sponsored healthcare insurance sources, or some combination of both, as well
as other changes. Restructuring the coverage of medical care in the U.S. could impact the reimbursement for prescribed drugs and
pharmaceuticals, including our current commercial products, those we and our development or commercialization partners are currently
developing or those that we may commercialize or promote in the future. If reimbursement for the products we currently commercialize
or promote, any product we may commercialize or promote, or approved therapeutic candidates is substantially reduced or otherwise
adversely affected in the future, or rebate obligations associated with them are substantially increased, it could have a material
adverse effect on our reputation, business, financial condition or results of operations.
Extending medical benefits to those who
currently lack coverage will likely result in substantial costs to the U.S. federal government, which may force significant additional
changes to the healthcare system in the U.S. Much of the funding for expanded healthcare coverage may be sought through cost savings.
While some of these savings may come from realizing greater efficiencies in delivering care, improving the effectiveness of preventive
care and enhancing the overall quality of care, much of the cost savings may come from reducing the cost of care and increased
enforcement activities. Cost of care could be reduced further by decreasing the level of reimbursement for medical services or
products (including our current commercial products, our development or commercialization partners or any product we may commercialize
or promote, or those therapeutic candidates currently being developed by us), or by restricting coverage (and, thereby, utilization)
of medical services or products. In either case, a reduction in the utilization of, or reimbursement for our current commercial
products, any product we may commercialize or promote, or any therapeutic candidate, or for which we receive marketing approval
in the future, could have a material adverse effect on our reputation, business, financial condition or results of operations.
Several states and private entities initially
mounted legal challenges to the Healthcare Reform Law, and they continue to litigate various aspects of the legislation. On July
26, 2012, the U.S. Supreme Court generally upheld the provisions of the Healthcare Reform Law at issue as constitutional. However,
the U.S. Supreme Court held that the legislation improperly required the states to expand their Medicaid programs to cover more
individuals. As a result, the states have a choice as to whether they will expand the number of individuals covered by their respective
state Medicaid programs. Some states have not expanded their Medicaid programs and have chosen to develop other cost-saving and
coverage measures to provide care to currently uninsured individuals. Many of these efforts to date have included the institution
of Medicaid-managed care programs. The manner in which these cost-saving and coverage measures are implemented could have a material
adverse effect on our reputation, business, financial condition or results of operations.
Further, the healthcare regulatory environment
has seen significant changes in recent years and is still in flux. Legislative initiatives to modify, limit, replace, or repeal
the Healthcare Reform Law and judicial challenges continue, and may increase in light of the current administration and legislative
environment. We cannot predict the impact on our business of future legislative and legal challenges to the Healthcare Reform
Law or other changes to the current laws and regulations. The financial impact of U.S. healthcare reform legislation over the next
few years will depend on a number of factors, including the policies reflected in implementing regulations and guidance and changes
in sales volumes for therapeutics affected by the legislation. From time to time, legislation is drafted, introduced and passed
in the U.S. Congress that could significantly change the statutory provisions governing coverage, reimbursement, and marketing
of pharmaceutical products. In addition, third-party payor coverage and reimbursement policies are often revised or interpreted
in ways that may significantly affect our business and our products.
Since taking office, President Trump has
continued to support the repeal of all or portions of the Healthcare Reform Law. President Trump has also issued an executive order
in which he stated that it is his administration’s policy to seek the prompt repeal of the Healthcare Reform Law and in which
he directed executive departments and federal agencies to waive, defer, grant exemptions from, or delay the implementation of the
provisions of the Healthcare Reform Law to the maximum extent permitted by law. Congress has enacted legislation that repeals certain
portions of the Healthcare Reform Law, including but not limited to the Tax Cuts and Jobs Act, passed in December 2017, which included
a provision that eliminates the penalty under the Healthcare Reform Law’s individual mandate, effective January 1, 2019,
as well as the Bipartisan Budget Act of 2018, passed in February 2018, which, among other things, repealed the Independent Payment
Advisory Board (which was established by the Healthcare Reform Law and was intended to reduce the rate of growth in Medicare spending).
Additionally, in December 2018, a district
court in Texas held that the individual mandate is unconstitutional and that the rest of the Affordable Care Act is, therefore,
invalid. On appeal, the Fifth Circuit Court of Appeals affirmed the holding on the individual mandate but remanded the case back
to the lower court to reassess whether and how such holding affects the validity of the rest of the Affordable Care Act. Substantial
uncertainty remains as to the future of the Affordable Care Act after the U.S. Supreme Court declined to expedite its review of
the Fifth Circuit’s holding on January 21, 2020. It is, thus, unlikely that these issues will be resolved before the next
presidential election in November 2020. The current administration may seek to pass additional reform measures before the upcoming
election. We cannot predict the outcome of the election, nor can we predict the healthcare-reform-related initiatives that the
newly elected (or re-elected, as applicable) administration will put forth thereafter. There is no way to know whether, and to
what extent, if any, the Affordable Care Act will remain in-effect in the future, and it is unclear how judicial decisions, subsequent
appeals, election-related measures, or other efforts to repeal and replace or, possibly, to restore the Affordable Care Act will
impact the U.S. healthcare industry or our business.
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.
The antibodies we use in our antibody
radiation-conjugate product candidates may be subject to generic competition.
We are not aware of
any existing or pending regulations or legislation that pertains to generic radiopharmaceutical products such as our antibody radiation-conjugate
product candidates. 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. Even if a
biosimilar gets approved for one of the antibodies that we use, the final constructs of our drug candidates consist of an antibody,
radioisotope and in some cases a linker. Therefore, we do not believe that the final drug product of our candidates can be subject
to competition from a biosimilar as outlined in BPCIA.
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.
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 currently depend on a single third-party manufacturer
to produce our pre-clinical and clinical trial drug supplies. Any disruption in the operations of our current third-party manufacturer,
or other third-party manufacturers we may engage in the future, could adversely affect our business and results of operations.
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 the components of our drug product candidates including monoclonal antibodies,
linkers and radioisotopes, as well as the final construct which comprises our drug product candidates. We expect to continue to
depend on third-party manufacturers for the foreseeable future. Any performance failure on the part of our existing or future manufacturers
could delay clinical development, cause us to suspend or terminate development or delay or prohibit regulatory approval of our
product candidates or commercialization of any approved products. Further avenues of disruption to our clinical or eventual commercial
supply may also occur due to the sale, acquisition, business reprioritization, bankruptcy or other unforeseen circumstances that
might occur at any of our suppliers or contract manufacturing partners including an inability to come to terms on renewal of existing
contracts or new contracts.
We currently rely on single manufacturers
to manufacture our pre-clinical and clinical trial drug supplies. With a view to maintaining business continuity we are evaluating
alternatives and second and even third sources of supply or manufacturing for our core suppliers and manufacturing partners, however
there can be no assurances that we will be able to identify such suppliers or partners and assuming we did, that we would be able
to enter into contracts that are on favorable terms or on terms that will enable sufficient supply to ensure business continuity
and support our growth plans.
Our product candidates require precise,
high-quality manufacturing. Failure by our current contract manufacturer or other third-party manufacturers we may engage in the
future 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.
We depend on vendors with specialized operations,
equipment and know-how to manufacture the respective components of our drug candidates. We have entered into manufacturing and
supply agreements with these third-parties, and in some instances, we have agreed that such vendor be the exclusive manufacturer
and supplier. If any of the third-parties we depend on encounter difficulties in their operations, fail to comply with required
regulations or breach their contractual obligations it may be difficult, or we may be unable to identify suitable alternative third-party
manufacturers. While we identify and evaluate third-party manufacturers from time to time, even if we do identify suitable alternative
third-parties, we may fail to reach agreement on contractual terms, it may be prohibitively expensive and there can be no assurance
that we can successfully complete technology transfer and development work necessary or complete the necessary work in a timely
manner. Any of which could prevent us from commencing manufacturing with third-parties. which could cause delays or suspension
of our clinical trials and pre-clinical work that may have a negative impact on our business.
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 develop or 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.
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.
We received a deficiency notice from NYSE American. 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. If we are unable to cure this deficiency and meet the NYSE American continued listing requirements, we could
be delisted from NYSE American, which would negatively impact the trading of our common stock.
On April 29, 2020, we received a deficiency
letter from the NYSE American, indicating that we are not in compliance with certain NYSE American continued listing standards.
The deficiency letter states that our shares of common stock have been selling for a low price per share for a substantial period
of time. Pursuant to Section 1003(f)(v) of the Company Guide, the NYSE American staff determined that our continued listing is
predicated on us effecting a reverse stock split of our common stock or otherwise demonstrating sustained price improvement within
a reasonable period of time, which the staff determined to be until October 29, 2020. In addition, the NYSE American has advised
us that its policy is to immediately suspend trading in shares of, and commence delisting procedures with respect to, a listed
company if the market price of its shares falls below $0.06 per share at any time during the trading day.
We may be required to effect a reverse split
to maintain compliance with NYSE American listing standards. On October 18, 2019, our board of directors unanimously approved,
subject to stockholder approval, an amendment to our certificate of incorporation to effect a reverse stock split of our outstanding
common stock by combining outstanding shares of common stock into a lesser number of outstanding shares of common stock by a ratio
of not more than 1-for-75 prior to December 18, 2020, with the exact ratio to be set within this range by our board of directors
at its sole discretion. On December 18, 2019, at our 2019 Annual Meeting of Stockholders, our stockholders approved such proposed
amendment to our certificate of incorporation. The primary intent of effecting the reverse stock split, if our board of directors
determines to do so, would be to ensure that we are able to maintain compliance with the listing standards of the NYSE American.
If we implement a reverse stock split, although
we expect that a reverse stock split will result in an increase in the market price of our common stock, such reverse stock split
may not result in a permanent increase in the market price of our common stock, which is dependent on many factors, including general
economic, market and industry conditions and other factors detailed from time to time in the reports we file with the Securities
and Exchange Commission. There can be no assurance that the market price per new share of our common stock after the reverse stock
split will remain unchanged or increase in proportion to the reduction in the number of old shares of our common stock outstanding
before the reverse stock split.
If our common stock is delisted by NYSE
American, our common stock may be eligible for quotation on an over-the-counter quotation system or on the pink sheets. Upon any
such delisting, our common stock would become subject to the regulations of the Securities and Exchange Commission relating to
the market for penny stocks. The regulations applicable to penny stocks may severely affect the market liquidity for our common
stock and could limit the ability of stockholders to sell securities in the secondary market. In such a case, an investor may find
it more difficult to dispose of or obtain accurate quotations as to the market value of our common stock, and there can be no assurance
that our common stock will be eligible for trading or quotation on any alternative exchanges or markets.
Delisting from NYSE American could adversely
affect our ability to raise additional financing through public or private sales of equity securities, would significantly affect
the ability of investors to trade our securities and would negatively affect the value and liquidity of our common stock. Delisting
could also have other negative results, including the potential loss of confidence by employees, the loss of institutional investor
interest and fewer business development opportunities.
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. Moreover, the COVID-19 pandemic has resulted in significant
financial market volatility and uncertainty in recent months. 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, 2019 and 2018 and while our testing did not reveal any material weaknesses
in our internal controls, any material weaknesses in our internal controls in the future would be required us to remediate in
a timely manner so as to be able to comply with the requirements of Section 404 each year. If we are not able to comply with the
requirements of Section 404 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.
If securities or industry analysts do not publish research
or publish inaccurate or unfavorable research about our business, the price of our common stock and trading volume could decline.
The trading market for our common stock
will depend in part on the research and reports that securities or industry analysts publish about us or our business. Multiple
securities and industry analysts currently cover us. If one or more of the analysts downgrade our common stock or publish inaccurate
or unfavorable research about our business, the price of our common stock would likely decline. If one or more of these analysts
cease coverage of us or fail to publish reports on us regularly, demand for our common stock could decrease, which could cause
the price of our common stock and trading volume to decline.
Our amended and restated bylaws, as amended, designate
the U.S. federal district courts as the exclusive forum for the resolution of any complaint asserting a cause
of action arising under the Securities Act of 1933, as amended.
Our amended and restated bylaws, as
amended, provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts
of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under
the Securities Act of 1933, as amended. In addition, our amended and restated bylaws, as amended, state that any person purchasing
or otherwise acquiring any interest in our security shall be deemed to have notice of and to have consented to such provision.
Such choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable
for disputes with us or our directors, officers or other employees, which may discourage such lawsuits, if successful, might benefit
our stockholders. Stockholders who do bring a claim in the federal district courts of the United States of America could face additional
litigation costs in pursuing any such claim.