Item 1A. Risk Factors
As a smaller reporting company, we are
not required to provide the information required by this item. However, the risk factors included in the Risk Factors section in
our Annual Report on Form 10-K for the year ended January 31, 2020, filed with the Securities and Exchange Commission
on March 23, 2020, as amended and supplemented in our definitive proxy statement/prospectus/information statement filed
with the Securities and Exchange Commission on April 1, 2020 under Rule 424 of the Securities Act of 1933, as further
supplemented on April 27, 2020, contain risks associated with the historic BioPharmX business and the risks of the Merger
occurring, which are no longer relevant, so that we are repeating from our definitive proxy statement/prospectus/information statement
and updating, where appropriate, the risk factors relevant to our current business.
Risks Related to Timber’s Business,
Financial Position and Capital Requirements
Timber has a limited operating history
and has never generated any product revenue.
Timber is a clinical-stage biopharmaceutical company with a
limited operating history. Timber was formed in February 2019, and since inception, it has incurred significant net losses. As
of June 30, 2020, Timber had an accumulated deficit of approximately $21.9 million. Since inception, Timber has financed its operations
with $1.7 million through capital contributions.
Timber’s ability to generate product revenue
and become profitable depends upon its ability to successfully complete the development of, and obtain the necessary regulatory
approvals for, its product candidates in development, including TMB-001, TMB-002 and TMB-003. Timber has never been profitable,
has no products approved for commercial sale, and has not generated any product revenue.
Even if Timber receives regulatory approval
for any of its product candidates, it does not know when or if such product candidate will generate product revenue. Timber’s ability
to generate product revenue depends on a number of factors, including, but not limited to, its ability to:
·
successfully complete pre-clinical studies and clinical trials and obtain and maintain regulatory approval for the marketing
of its product candidates;
·
add operational, financial and management information systems personnel, including personnel to support its clinical, manufacturing
and planned future commercialization efforts and operations as a public company;
·
establish or maintain collaborations, licensing or other arrangements;
·
initiate and continue relationships with third-party suppliers and manufacturers and have commercial quantities of our
product candidates manufactured at acceptable cost and quality levels and in compliance with the FDA and other regulatory requirements;
·
launch commercial sales of its products, whether alone or in collaboration with others, including establishing sales, marketing
and distribution systems for its product candidates;
·
set an acceptable price for any approved product candidates and obtain coverage and adequate reimbursement from third-party
payors;
·
achieve market acceptance of its products in the medical community and with third-party payors and consumers; and
·
maintain, expand and protect its intellectual property portfolio.
Because of the numerous risks and uncertainties
associated with product development, Timber is unable to predict the timing or amount of increased expenses, or when or if, it
will be able to achieve or maintain profitability. Timber’s expenses could increase beyond expectations if it is required by the
FDA or comparable non-U.S. regulatory authorities to perform studies or clinical trials in addition to those that it currently
anticipates. Even if any of Timber’s product candidates is approved for commercial sale, Timber anticipates incurring significant
costs associated with their commercial launch. If Timber cannot successfully execute any one of the foregoing, its business may
not succeed and your investment will be negatively impacted.
Timber expects to incur significant
losses for the foreseeable future and may never achieve or maintain profitability. Timber’s independent registered public accounting
firm has expressed substantial doubt about its ability to continue as a going concern.
Investment in biopharmaceutical product
development is highly speculative because it entails substantial upfront capital expenditures and significant risk that a product
candidate will fail to gain regulatory approval or fail to become commercially viable. Timber has never generated any product revenue,
and it cannot estimate with precision the extent of its future losses. Timber does not currently have any products that are available
for commercial sale and it may never generate product revenue or achieve profitability. Timber’s net loss was approximately $3.1
million for the period from February 26, 2019 (inception) to December 31, 2019. As of June 30, 2020, Timber had
an accumulated deficit of approximately $21.9 million.
Timber expects to continue to incur substantial
and increasing losses through the commercialization of any of its product candidates, if approved. None of Timber’s product candidates
have been approved for marketing anywhere in the world, and it may never receive such approval. As a result, Timber is uncertain
when or if it will achieve profitability and, if so, whether it will be able to sustain it. Timber’s ability to generate product
revenue and achieve profitability is dependent on its ability to complete the development of its product candidates, obtain necessary
regulatory approvals for such product candidates, and manufacture and successfully market its product candidates alone or in collaboration
with others. There can be no assurance that Timber will be profitable even if it successfully commercializes any of its product
candidates. If Timber does successfully obtain regulatory approval to market any of its product candidates, its revenue will be
dependent upon, in part and among other things, the size of the markets in the territories for which it gains regulatory approval,
the number of competitors in such markets, the accepted price for any such product candidate and whether it owns the commercial
rights for those territories. If the indication approved by regulatory authorities is narrower than Timber expects, or the treatment
population is narrowed by competition, physician choice or treatment guidelines, it may not generate significant revenue from sales
of any of our product candidates, even if approved. Even if Timber does achieve profitability, it may not be able to sustain or
increase profitability on a quarterly or annual basis. Failure to become and remain profitable may adversely impact the market
price of the common stock and its ability to raise capital and continue operations.
Timber expects that its research and development
expenses in connection with its development programs for its various product candidates will continue to be significant. In addition,
as Timber prepares for and if it obtains regulatory approval for any of its product candidates, it expects to incur increased sales,
marketing and manufacturing expenses. As a result, Timber expects to continue to incur significant and increasing operating losses
and negative cash flows for the foreseeable future. These losses have harmed and will continue to harm Timber’s results of operations,
financial position and working capital.
Timber’s independent registered public
accounting firm has issued a going concern opinion on its consolidated financial statements as of December 31, 2019, expressing
substantial doubt that Timber can continue as an ongoing business due to insufficient capital for us to fund its operations. Timber’s
consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty.
Timber will require substantial additional
capital to fund its operations, and if it fails to obtain necessary financing, it may not be able to complete the development and
commercialization of any of its product candidates.
Timber expects to spend substantial capital
to complete the development of, seek regulatory approvals for and commercialize our lead product candidates TMB-001 and TMB-002
as well as any of its other product candidates. Timber will require additional capital to complete the development and potential
commercialization of its product candidates. Because the length of time and activities associated with successful development of
Timber’s product candidates are highly uncertain, Timber is unable to estimate with certainty the actual funds we will require
for development and any approved marketing and commercialization activities. Timber’s future funding requirements, both near-and
long-term, will depend on many factors, including, but not limited to:
· the timing,
progress, costs and results of its Phase 2b clinical trial of TMB-001 for the treatment of congenital ichthyosis as well as its
ongoing Phase 2b clinical trial of TMB-002 for the treatment of facial angiofibromas in tuberous sclerosis complex;
· the outcome,
timing and cost of meeting regulatory requirements established by the FDA and other comparable foreign regulatory authorities;
· the cost
of filing, prosecuting, defending and enforcing its patent claims and other intellectual property rights;
· the cost
of defending potential intellectual property disputes, including patent infringement actions brought by third parties against
it or any of its current or future product candidates;
· the effect
of competing market developments;
· the cost
and timing of completion of commercial-scale manufacturing activities;
· the cost
of establishing sales, marketing and distribution capabilities for its products in regions where it chooses to commercialize its
products on its own; and
· the initiation,
progress, timing and results of the commercialization of its product candidates, if approved for commercial sale.
Timber believes that its existing cash,
inclusive of the Timber Funding, will be sufficient for them to fund its operating expenses and capital expenditure requirements
into at least the third quarter of calendar year 2021. This estimate is based on assumptions that may prove to be wrong, and Timber
could use its available capital resources sooner than it currently expects. Timber cannot be certain that additional capital will
be available on acceptable terms, or at all. If Timber is unable to raise additional capital in sufficient amounts or on terms
acceptable to Timber, it may have to significantly delay, scale back or discontinue the development or commercialization of any
product candidate, or potentially discontinue operations altogether. In addition, attempting to secure additional capital may divert
the time and attention of Timber’s management from day-to-day activities and harm its product candidate development efforts. Because
of the numerous risks and uncertainties associated with the development and potential commercialization of its product candidates,
Timber is unable to estimate the amounts of increased capital outlays, operating expenditures and capital requirements associated
with its current product development programs.
Raising additional funds by issuing
equity securities may cause dilution to existing equity holders, raising additional funds through debt financings may involve restrictive
covenants, and raising funds through lending and licensing arrangements may restrict our operations or require Timber to relinquish
proprietary rights.
Timber expects that significant additional
capital will be needed in the future to continue its planned operations. Until such time, if ever, that Timber can generate substantial
product revenue, it expects to finance its cash needs through a combination of equity offerings, debt financings, strategic alliances
and license and development agreements or other collaborations. To the extent that Timber raises additional capital by issuing
equity securities, existing equity ownership may experience substantial dilution, and the securities may include preferred shares
with liquidation or other preferences that could harm the rights of a common equity holders.
If Timber raises additional funds through
collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, it may have to relinquish
valuable rights to its technologies, future revenue streams, research programs or product candidates, or grant licenses on terms
that may not be favorable to them. If Timber is unable to raise additional funds when needed, it may be required to delay, limit,
reduce or terminate its product development or future commercialization efforts, or grant rights to develop and market product
candidates that we would otherwise develop and market themselves.
On July 17, 2020, Timber entered into an Amended and Restated
Registration Rights Agreement with the Investors. Pursuant to the Registration Rights Agreement, Timber agreed to provide certain
demand registration rights to the Investors relating to the registration of the Investor Warrants and the Bridge Warrants. In connection
with the entry into the Registration Rights Agreement and pursuant to the Securities Purchase Agreement, Timber is restricted from
various financing activities until August 16, 2022. Timber will need to negotiate with the Investors with respect to future financing
in order to continue as a going concern.
Stockholders may experience substantial
dilution of their ownership interests as a result of certain anti-dilution provisions of the Series A and Series B Warrants.
Timber’s outstanding warrants and
warrants that may be issued in the future may result in substantial additional issuances and resales of common stock. In certain
instances, the timing and number of additional warrants that may be issued is unknown and dependent upon future events and circumstances,
some of which are outside of Timber’s control. Additional issuances of common stock, and/or sales of common stock, would
have the effect of diluting its earnings per share as well as its existing shareholders’ individual ownership percentages
and could lead to volatility in its common stock price. Sales of a substantial number of shares of Timber’s common stock
could depress the market price of the common stock and impair our ability to raise capital through the sale of additional equity
or equity-linked securities.
As of June 30, 2020, Timber had Series A warrants to purchase
8,384,764 shares of common stock (the “Series A Warrants”) and Series B warrants to purchase 7,042,175 shares of common
stock (the “Series B Warrants” and, together with the Series A Warrants, the “Investor Warrants”). The
Investor Warrants contain certain reset provisions.
Such that for example, if the maximum number of warrants issuable
in connection with the Securities Purchase Agreement were to be issued, the result would be the issuance of an additional 14,890,245
Series A Warrants for 23,275,009 Series A Warrants in the aggregate, and an additional 19,853,090 Series B Warrants for 26,895,265
Series B Warrants in the aggregate. In addition, the exercise price of the Series A Warrants issued since May 18, 2020 would be
reset to $1.01.
Timber’s business is heavily dependent
on the successful development, regulatory approval and commercialization of its product candidates.
Timber currently has no products that are
approved for commercial sale and may never be able to develop marketable products. Timber expects that a substantial portion of
its efforts and expenditures will be devoted to the continued clinical evaluation of its lead product candidates TMB-001, TMB-002
and TMB-003 and the commercialization of such product candidates following regulatory approval, if received, as well as the continued
clinical and preclinical evaluation of any of its other product candidates. Accordingly, Timber’s business currently depends heavily
on the successful completion of its clinical trials for its product candidates and subsequent regulatory approval and commercialization
of such product candidates.
Timber cannot be certain that any of its
product candidates will receive regulatory approval, or be successfully commercialized even if it receive regulatory approval.
The research, testing, manufacturing, labeling, approval, sale, marketing and distribution of products are, and will remain, subject
to extensive regulation by the FDA and other regulatory authorities in the United States and other countries that each have differing
regulations. Timber is not permitted to market any of its product candidates in the United States until it receives approval of
a NDA or in any foreign country until it receives the requisite approvals from the appropriate authorities in such countries for
marketing authorization. In addition, Timber has not yet demonstrated its ability to complete later-stage or pivotal clinical trials
for any of its product candidates.
Timber has not submitted an NDA for any
of its product candidates to the FDA or any comparable application to any other regulatory authority. Obtaining approval of an
NDA or similar regulatory approval is an extensive, lengthy, expensive and inherently uncertain process, and the FDA or other foreign
regulatory authorities may delay, limit or deny approval of any of Timber’s product candidates for many reasons, including:
·
Timber may not be able to demonstrate that any of its product candidates are safe or effective as a treatment for any of
its currently targeted indications to the satisfaction of the FDA or other relevant regulatory authorities;
·
the relevant regulatory authorities may require additional pre-approval studies or clinical trials which would increase
Timber’s costs and prolong its development timelines;
·
the results of Timber’s clinical trials may not meet the level of statistical or clinical significance required by the
FDA or other relevant regulatory authorities for marketing approval;
·
the FDA or other relevant regulatory authorities may disagree with the number, design, size, conduct or implementation
of Timber’s clinical trials, including the design of its future pivotal Phase 3 clinical trials.
·
the CROs that Timber may retain to conduct clinical trials may take actions outside of its control, or otherwise commit
errors or breaches of protocols, that adversely impact its clinical trials and ability to obtain market approvals;
·
the FDA or other relevant regulatory authorities may not find the data from nonclinical studies or clinical trials sufficient
to demonstrate that the clinical and other benefits of these products outweigh their safety risks;
·
the FDA or other relevant regulatory authorities may disagree with Timber’s interpretation of data or significance of results
from the nonclinical studies and clinical trials of any product candidate, or may require that it conduct additional studies;
·
the FDA or other relevant regulatory authorities may not accept data generated from Timber’s clinical trial sites;
·
if Timber’s NDA or other foreign application is reviewed by an advisory committee, the FDA or other relevant regulatory
authority, as the case may be, may have difficulties scheduling an advisory committee meeting in a timely manner or the advisory
committee may recommend against approval of such application or may recommend that the FDA or other relevant regulatory authority,
as the case may be, require, as a condition of approval, additional nonclinical studies or clinical trials, limitations on approved
labeling or distribution and use restrictions;
·
the FDA or other relevant regulatory authorities may require development of a REMS, or its equivalent, as a condition of
approval;
·
the FDA or other relevant regulatory authorities may require additional post-marketing studies and/or a patient registry,
which would be costly;
·
the FDA or other relevant regulatory authorities may find the chemistry, manufacturing and controls data insufficient to
support the quality of Timber’s product candidates;
·
the FDA or other relevant regulatory authorities may identify deficiencies in the manufacturing processes or facilities
of Timber’s third-party manufacturers; or
·
the FDA or other relevant regulatory authorities may change their approval policies or adopt new regulations.
Even if Timber does receive regulatory
approval to market any product candidate, any such approval may be subject to limitations on the indicated uses or patient populations
for which it may market the product. Accordingly, even if Timber is able to obtain the requisite financing to continue to fund
its development programs, it cannot assure you that any of its product candidates will be successfully developed or commercialized.
In addition, because each of Timber’s product
candidates targets one or more indications in the medical dermatology field, if any of Timber’s product candidates encounter safety
or efficacy problems, developmental delays, regulatory issues, supply issues, or other problems, its development plans for the
affected product candidate and some or all of its other product candidates could be significantly harmed, which would harm its
business. Further, competitors who are developing products in the dermatology field or that target the same indications as Timber
with products that have a similar mechanism of action may experience problems with its products that could identify problems that
would potentially harm Timber’s business.
Clinical studies required for Timber’s
product candidates are expensive and time-consuming, and their outcome is uncertain.
In order to obtain FDA approval to market
a new pharmaceutical product, Timber must demonstrate proof of safety and efficacy in humans. To meet these requirements, Timber
must conduct “adequate and well controlled” clinical studies. Conducting clinical studies is a lengthy, time-consuming,
and expensive process. The length of time may vary substantially according to the type, complexity, novelty, and intended use of
the product candidate, and often can be several years or more per study. Delays associated with products for which Timber is directly
conducting clinical studies may cause them to incur additional operating expenses. The commencement and rate of completion of clinical
studies may be delayed by many factors, including, for example: inability to manufacture sufficient quantities of stable and qualified
materials under cGMP, for use in clinical studies; slower than expected rates of patient recruitment; failure to recruit a sufficient
number of patients; modification of clinical study protocols; changes in regulatory requirements for clinical studies; the lack
of effectiveness during clinical studies; the emergence of unforeseen safety issues; delays, suspension, or termination of the
clinical studies due to the institutional review board (“IRB”) responsible for overseeing the study at a particular study
site; and government or regulatory delays or “clinical holds” requiring suspension or termination of the studies.
The results from early clinical studies
are not necessarily predictive of results obtained in later clinical studies. Accordingly, even if Timber obtains positive results
from early clinical studies, it may not be able to confirm the results in future clinical studies. Clinical studies may not demonstrate
sufficient safety and effectiveness to obtain the requisite regulatory approvals for product candidates.
In some cases, Timber’s product candidates
may be expected to be used in combination with approved therapies that may have significant adverse event profiles. During the
course of treatment, these patients could suffer adverse medical events or die for reasons that may or may not be related to Timber’s
product candidates. Timber cannot ensure that safety issues will not arise with respect to its product candidates in clinical development.
The failure of clinical studies to demonstrate
safety and effectiveness for the desired indications could harm the development of that product candidate and other product candidates.
This failure could cause Timber to abandon a product candidate and could delay development of other product candidates. Any delay
in, or termination of, Timber’s clinical studies would delay the filing of its NDAs with the FDA and, ultimately, Timber’s ability
to commercialize its product candidates and generate product revenues. Any change in, or termination of, Timber’s clinical studies
could materially harm its business, financial condition, and results of operations.
Timber is subject to extensive and
costly government regulation.
Product candidates employing Timber’s technology
are subject to extensive and rigorous domestic government regulation including regulation by the FDA, the Centers for Medicare
and Medicaid Services, other divisions of the United States Department of Health and Human Services, the United States Department
of Justice, state and local governments, and their respective foreign equivalents. The FDA regulates the research, development,
preclinical and nonclinical testing and clinical studies, manufacture, safety, effectiveness, record-keeping, reporting, labeling,
storage, approval, advertising, promotion, sale, distribution, import, and export of biopharmaceutical products. The FDA regulates
small molecule chemical entities as drugs, subject to an NDA under the FDCA. The FDA applies the same standards for biologics,
requiring an investigational new drug (“IND”) application, followed by a Biologic License Application, or BLA, prior
to licensure. Other products, such as vaccines, are also regulated under the Public Health Service Act. FDA has conflated the standards
for approval of NDAs and BLAs so that it requires the same types of information on safety, effectiveness, and CMCs. If products
employing our technologies are marketed abroad, they will also be subject to extensive regulation by foreign governments, whether
or not they have obtained FDA approval for a given product and its uses. Such foreign regulation may be equally or more demanding
than corresponding United States regulation.
Government regulation substantially increases
the cost and risk of researching, developing, manufacturing, and selling Timber’s products. The regulatory review and approval
process, which includes preclinical and nonclinical testing and clinical studies of each product candidate, is lengthy, expensive,
and uncertain. Timber or its collaborators must obtain and maintain regulatory authorization to conduct clinical studies. Timber
or its collaborators must obtain regulatory approval for each product it intends to market, and the manufacturing facilities used
for the products must be inspected and meet legal requirements. Securing regulatory approval requires the submission of extensive
preclinical, nonclinical and clinical data and other supporting information for each proposed therapeutic indication in order to
establish the product’s safety and efficacy, and in the case of biologics also potency and purity, for each intended use. The development
and approval process takes many years, requires substantial resources, and may never lead to the approval of a product.
Even if Timber is able to obtain regulatory
approval for a particular product, the approval may limit the indicated medical uses for the product, may otherwise limit their
ability to promote, sell, and distribute the product, may require that it conduct costly post-marketing surveillance, and/or may
require that it conduct ongoing post-marketing studies. Material changes to an approved product, such as, for example, manufacturing
changes or revised labeling, may require further regulatory review and approval. Once obtained, any approvals may be withdrawn,
including, for example, if there is a later discovery of previously unknown problems with the product, such as a previously unknown
safety issue.
If Timber, its collaborators, or its contract
manufacturing organizations (“CMOs”) fail to comply with applicable regulatory requirements at any stage during the regulatory
process, such noncompliance could result in, among other things delays in the approval of applications or supplements to approved
applications; refusal of a regulatory authority, including the FDA, to review pending market approval applications or supplements
to approved applications; warning letters; fines; import and/or export restrictions; product recalls or seizures; injunctions;
total or partial suspension of production; civil penalties; withdrawals of previously approved marketing applications or licenses;
recommendations by the FDA or other regulatory authorities against governmental contracts; and/or criminal prosecutions.
Timber does not have, and may never
obtain, the regulatory approvals it needs to market its product candidates.
Following completion of clinical studies,
the results are evaluated and, depending on the outcome, submitted to the FDA in the form of an NDA or BLA in order to obtain FDA
approval of the product and authorization to commence commercial marketing. In responding to an NDA, the FDA may require additional
testing or information, may require that the product labeling be modified, may impose post-approval study and other commitments
or reporting requirements or other restrictions on product distribution, or may deny the application. The FDA has established performance
goals for review of NDAs or BLAs: six months for priority applications and ten months for standard applications. However, the FDA
is not required to complete its review within these time periods. The timing of final FDA review and action varies greatly but
can take years in some cases and may involve the input of an FDA advisory committee of outside experts. Product sales in the United
States may commence only when an NDA or BLA is approved.
It is possible that none of Timber’s product
candidates will be approved for marketing. Failure to obtain regulatory approvals, or delays in obtaining regulatory approvals,
may adversely affect the successful commercialization of any drugs or biologics that Timber or its partners develop, may impose
additional costs on Timber or its collaborators, may diminish any competitive advantages that Timber or its partners may attain,
and/or may adversely affect Timber’s receipt of revenues or royalties.
If Timber is unable to file for approval
of TMB-001 or TMB-002 under Section 505(b)(2) of the FDCA or if Timber is required to generate additional data related
to safety and efficacy in order to obtain approval under Section 505(b)(2), Timber may be unable to meet its anticipated development
and commercialization timelines.
Timber’s current plans for filing NDAs
for its product candidates include efforts to minimize the data it will be required to generate in order to obtain marketing approval
for its product candidates and therefore reduce the development time. Timber has had held pre-IND meetings with the FDA to discuss,
among other things, the regulatory pathways for TMB-001 and TMB-002. The timelines for filing and review of Timber’s NDAs for TMB-001
and TMB-002 are based on its plan to submit such NDAs under Section 505(b)(2) of the FDCA, which would enable Timber
to rely in part on data in the public domain or elsewhere. Timber has not yet filed an NDA under Section 505(b)(2) for
any of its product candidates. Depending on the data that may be required by the FDA for approval, some of the data may be related
to products already approved by the FDA. If the data relied upon is related to products already approved by the FDA and covered
by third-party patents, Timber would be required to certify that it does not infringe the listed patents or that such patents are
invalid or unenforceable. As a result of the certification, the third-party would have 45 days from notification of our certification
to initiate an action against Timber.
In the event that an action is brought
in response to such a certification, the approval of Timber’s NDA could be subject to a stay of up to 30 months or more while it
defends against such a suit. Approval of Timber’s product candidates under Section 505(b)(2) may therefore be delayed
until patent exclusivity expires or until it successfully challenges the applicability of those patents to such product candidates.
Alternatively, Timber may elect to generate sufficient additional clinical data so that it no longer relies on data which triggers
a potential stay of the approval of its product candidates. Even if no exclusivity periods apply to Timber’s applications under
Section 505(b)(2), the FDA has broad discretion to require Timber to generate additional data on the safety and efficacy of
its product candidates to supplement third-party data on which it may be permitted to rely. In either event, Timber could be required,
before obtaining marketing approval for any of its product candidates, to conduct substantial new research and development activities
beyond those it currently plans to engage in order to obtain approval of its product candidates. Such additional new research and
development activities would be costly and time consuming.
Timber may not be able to realize a shortened
development timeline for its product candidates, and the FDA may not approve an NDA based on its review of the submitted data.
If products containing isotretinoin or rapamycin are withdrawn from the market by the FDA for any safety reason, Timber may not
be able to reference such products to support a 505(b)(2) NDA for TMB-001 or TMB-002, respectively, and it may need to fulfill
the more extensive requirements of Section 505(b)(1). If Timber is required to generate additional data to support approval,
it may be unable to meet its anticipated development and commercialization timelines, may be unable to generate the additional
data at a reasonable cost, or at all, and may be unable to obtain marketing approval of its lead product candidate.
Any fast track designation or grant
of priority review status by the FDA may not actually lead to a faster development or regulatory review or approval process, nor
will it assure FDA approval of our product candidates. Additionally, our product candidates may treat indications that do not qualify
for priority review vouchers.
Timber may seek fast track designation
for its product candidates or priority review of applications for approval of its product candidates for certain indications. If
a drug is intended for the treatment of a serious or life-threatening condition and the drug demonstrates the potential to address
unmet medical needs for this condition, the drug sponsor may apply for FDA fast track designation. If a product candidate offers
major advances in treatment, the FDA may designate it eligible for priority review. The FDA has broad discretion whether or not
to grant these designations, so even if Timber believes a particular product candidate is eligible for these designations, it cannot
assure you that the FDA would decide to grant them. Even if Timber does receive fast track designation or priority review, it may
not experience a faster development process, review or approval compared to conventional FDA procedures. The FDA may withdraw fast
track designation if it believes that the designation is no longer supported by data from Timber’s clinical development program.
Timber may seek rare pediatric disease
designation for TMB-003 for the treatment of moderate to severe localized scleroderma; however, an NDA for TMB-003, if approved,
may not meet the eligibility criteria for a priority review voucher.
Timber may seek rare pediatric disease
designation for TMB-003 for the treatment of localized scleroderma. Designation of a drug as a drug for a rare pediatric disease
does not guarantee that an NDA for such drug will meet the eligibility criteria for a rare pediatric disease priority review voucher
at the time the application is approved. Under the FDCA, Timber will need to request a rare pediatric disease priority review voucher
in its NDA for TMB-003. The FDA may determine that an NDA for TMB-003, if approved, does not meet the eligibility criteria for
a priority review voucher, including for the following reasons:
• moderate to severe scleroderma no
longer meets the definition of a rare pediatric disease;
• the NDA contains an active ingredient
(including any ester or salt of the active ingredient) that has been previously approved in an NDA;
• the NDA is not deemed eligible for
priority review;
• the NDA does not rely on clinical
data derived from studies examining a pediatric population and dosages of the drug intended for that population (that is, if the
NDA does not contain sufficient clinical data to allow for adequate labeling for use by the full range of affected pediatric patients);
or
• the NDA is approved for a different
adult indication than the rare pediatric disease for which TMB-003 is designated.
The authority for the FDA to award rare
pediatric disease priority review vouchers for drugs that have received rare pediatric disease designation prior to September 30,
2020 currently expires on September 30, 2022. If an NDA for TMB-003 is not be approved prior to September 30, 2022, regardless
of whether it meets the criteria for a rare pediatric disease priority review voucher, it will not be eligible for a priority review
voucher. However, it is also possible the authority for FDA to award rare pediatric disease priority review vouchers will be further
extended through Federal lawmaking.
Even if Timber is able to commercialize
any product candidate that it may develop, the product may become subject to unfavorable pricing regulations, third-party payor
reimbursement practices or healthcare reform initiatives that could harm Timber’s business.
The commercial success of Timber’s current
or future product candidates will depend substantially, both domestically and abroad, on the extent to which the costs of its product
candidates will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations,
or reimbursed by government health administration authorities (such as Medicare and Medicaid), private health coverage insurers
and other third-party payors. If reimbursement is not available, or is available only to limited levels, Timber may not be able
to successfully commercialize its products. Even if coverage is provided, the approved reimbursement amount may not be high enough
to allow Timber to establish and maintain pricing sufficient to realize a meaningful return on its investment.
There is significant uncertainty related
to third-party payor coverage and reimbursement of newly approved drugs. Marketing approvals, pricing and reimbursement for new
drug products vary widely from country to country. Some countries require approval of the sale price of a drug before it can be
marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some
non-U.S. markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval
is granted. As a result, Timber might obtain marketing approval for a product in a particular country, but then be subject to price
regulations that delay commercial launch of the product, possibly for lengthy time periods, which may negatively impact the revenues
it is able to generate from the sale of the product in that country. Adverse pricing limitations may hinder Timber’s ability to
recoup its investment in one or more product candidates, even if its product candidates obtain marketing approval.
Timber’s ability to commercialize its product
candidates will depend in part on the extent to which coverage and reimbursement for these products and related treatments will
be available from government health administration authorities, private health insurers and other organizations. Government authorities
and third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will
cover and establish reimbursement levels. The healthcare industry is acutely focused on cost containment, both in the United States
and elsewhere. Government authorities and third-party payors have attempted to control costs by limiting coverage and the amount
of reimbursement for particular medications, which could affect our ability to sell our product candidates profitably. These payors
may not view our products, if any, as cost-effective, and coverage and reimbursement may not be available to our customers, or
may not be sufficient to allow our products, if any, to be marketed on a competitive basis. Cost-control initiatives could cause
us to decrease the price we might establish for products, which could result in lower than anticipated product revenues. If the
prices for our products, if any, decrease or if governmental and other third-party payors do not provide adequate coverage or reimbursement,
our prospects for revenue and profitability will suffer.
There may also be delays in obtaining coverage
and reimbursement for newly approved drugs, and coverage may be more limited than the indications for which the drug is approved
by the FDA or comparable non-U.S. regulatory authorities. Moreover, eligibility for reimbursement does not imply that any drug
will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution.
Reimbursement rates may vary, by way of example, according to the use of the drug and the clinical setting in which it is used.
Reimbursement rates may also be based on reimbursement levels already set for lower cost drugs or may be incorporated into existing
payments for other services.
In addition, increasingly, third-party
payors are requiring higher levels of evidence of the benefits and clinical outcomes of new technologies and are challenging the
prices charged. We cannot be sure that coverage will be available for any product candidate that Timber may commercialize and,
if available, that the reimbursement rates will be adequate. Further, the net reimbursement for drug products may be subject to
additional reductions if there are changes to laws that presently restrict imports of drugs from countries where they may be sold
at lower prices than in the United States. An inability to promptly obtain coverage and adequate payment rates from both government-funded
and private payors for any of our product candidates for which we obtain marketing approval could have a material adverse effect
on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.
Timber relies on its license agreement
and acquisition agreements to provide rights to certain intellectual property relating to certain of its product candidates. Any
termination or loss of significant rights under any such agreements would adversely impact Timber’s development or commercialization
of such product candidates.
Timber has licensed certain intellectual
property relating to certain of its product candidates from AFT Pharmaceuticals Limited, or AFT, through a license agreement. Timber
has acquired the rights to certain intellectual property relating to certain of its product candidates from Patagonia Pharmaceuticals
LLC, or Patagonia, through two acquisition agreements. If, for any reason, Timber’s license agreement or acquisition agreements
are terminated or it otherwise loses those rights, it would harm its business. Timber’s license agreement imposes on them obligations
relating to exclusivity, territorial rights, development, commercialization, funding, payment, diligence, sublicensing, insurance,
intellectual property protection and other matters. Timber’s acquisition agreements imposes on them obligations and restrictions
relating to development, non-competition, intellectual property protection, payment and royalties. If Timber breaches any material
obligations, or uses the intellectual property licensed to or acquired by them in an unauthorized manner, it may be required to
pay damages to its collaborators and such collaborators may have the right to terminate the applicable licenses or rights, as applicable,
which would result in Timber being unable to develop, manufacture and sell one or more of its product candidates, if approved.
In addition, under the license agreement, the licensor has the first right to file, prosecute (including any post-grant proceeding)
and maintain all licensed patents, and Timber may not have any control over such actions unless such licensor elects not to exercise
its rights.
Timber’s license agreement and acquisition
agreements, some with related parties, obligate them to make certain milestone payments.
Timber is obligated to pay certain milestone
payments to AFT and Patagonia pursuant to their license agreement and acquisition agreements. AFT is entitled to up to $25.5 million
of cash milestone payments relating to certain regulatory and commercial achievements of TMB-002. Patagonia is entitled to up to
$27.0 million of cash milestone payments relating to certain regulatory and commercial achievements of TMB-001, with the first
being initiation of a Phase 3 pivotal trial, as agreed with the FDA. Patagonia is also entitled to up to $10.25 million of cash
milestone payments relating to certain regulatory and commercial achievements of TMB-003, with the first being a one-time payment
of $250,000 upon the opening of an IND with the FDA.
Because certain of the milestone payments
payable by Timber to AFT and Patagonia are due upon certain events related to the development and regulatory approval of its product
candidates, Timber may be required to make such payments prior to the time at which it is able to generate revenue, if any, from
sales any of its product candidates, if approved. There can be no assurance that Timber will have the funds necessary to make such
payments, or be able to raise such funds when needed, on terms acceptable to Timber, or at all. Furthermore, if Timber is forced
to raise additional funds, it may be required to delay, limit, reduce or terminate its product development or future commercialization
efforts, or grant rights to develop and market product candidates that it would otherwise develop and market themselves. If Timber
is unable to raise additional funds or maintain sufficient liquidity to make its payment obligations if and when they become due,
it may be in material breach of its license and acquisition agreements and its counterparties may seek legal action or remedies
against Timber, which would harm its business, financial condition, results of operations and prospects.
If Timber is not successful in attracting
and retaining highly qualified personnel, it may not be able to successfully implement its business strategy.
Timber’s ability to compete in the highly
competitive pharmaceuticals industry depends in large part upon its ability to attract highly qualified managerial, scientific
and medical personnel. In order to induce valuable employees to remain with Timber, it intends to provide employees with stock
options that vest over time. The value to employees of stock options that vest over time will be significantly affected by movements
in the price of the common stock that it will not be able to control and may at any time be insufficient to counteract more lucrative
offers from other companies.
Timber’s management team has expertise
in many different aspects of drug development and commercialization. However, Timber will need to hire additional personnel as
it further develops its drug candidates. Competition for skilled personnel in the pharmaceutical industry is intense and competition
for experienced scientists may limit Timber’s ability to hire and retain highly qualified personnel on acceptable terms. Despite
Timber’s efforts to retain valuable employees, members of its management, scientific and medical teams may terminate their employment
with Timber on short notice. Timber’s success also depends on its ability to continue to attract, retain and motivate highly skilled
junior, mid-level, and senior managers as well as junior, mid-level, and senior scientific and medical personnel.
Other pharmaceutical companies with which
Timber competes for qualified personnel have greater financial and other resources, different risk profiles, and a longer history
in the industry than Timber does. Other pharmaceutical companies also may provide more diverse opportunities and better chances
for career advancement. Some of these characteristics may be more appealing to high-quality candidates than what Timber has to
offer. If Timber is unable to continue to attract and retain high-quality personnel, the rate and success at which Timber can develop
and commercialize product candidates would be limited.
Timber will need to grow the size
of its organization, and it may experience difficulties in managing this growth.
As of June 30, 2020, Timber had 6
employees. As Timber’s development and commercialization plans and strategies develop, including as a result of the Merger, it
will need to expand the size of its employee base for managerial, operational, sales, marketing, financial and other resources.
Future growth would impose significant added responsibilities on members of management, including the need to identify, recruit,
maintain, motivate and integrate additional employees. In addition, Timber’s management may have to divert a disproportionate amount
of its attention away from its day-to-day activities, including the additional requirements on management as a public company,
and devote a substantial amount of time to managing these growth activities. Timber’s future financial performance and our ability
to commercialize its drug candidates and its ability to compete effectively will depend, in part, on its ability to effectively
manage its future growth.
Timber or its affiliates’ employees,
independent contractors, principal investigators, consultants, commercial collaborators, service providers and other vendors or
potential collaborators may engage in misconduct or other improper activities, including noncompliance with regulatory standards
and requirements, which could harm Timber’s results of operations.
Timber is exposed to the risk that its
or its affiliates’ employees and contractors, including any prospective or current principal investigators, CROs, consultants,
commercial collaborators, service providers and other vendors may engage in misconduct or other illegal activity. Misconduct by
these parties could include intentional, reckless or negligent conduct or other unauthorized activities that violate the laws and
regulations of the FDA or other similar regulatory bodies, including those laws that require the reporting of true, complete and
accurate information to such regulatory bodies; manufacturing and the FDA’s cGMP, standards; federal, state and foreign healthcare
fraud and abuse laws and data privacy; or laws that require the true, complete and accurate reporting of financial information
or data. In particular, sales, marketing and other business arrangements in the healthcare industry are subject to extensive laws
intended to prevent fraud, kickbacks, self-dealing, bribery, corruption, antitrust violations and other abusive practices. These
laws may restrict or prohibit a wide range of business activities, including research, manufacturing, distribution, pricing, discounting,
marketing and promotion, sales commission, customer incentive programs and other business arrangements. Activities subject to these
laws also involve the improper use or misrepresentation of information obtained in the course of clinical trials, creating fraudulent
data in our nonclinical studies or clinical trials or illegal misappropriation of drug product, which could result in regulatory
sanctions and serious harm to Timber’s reputation. It is not always possible to identify and deter employee or third-party misconduct,
and the precautions Timber takes to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks
or losses or in protecting them from governmental investigations or other actions or lawsuits stemming from a failure to comply
with such laws or regulations. Additionally, Timber is subject to the risk that a person, including any person who may have engaged
in any fraud or misconduct, or government agency could allege such fraud or other misconduct, even if none occurred. Furthermore,
Timber relies on its CROs and clinical trial sites to adequately report data from its ongoing clinical trials. For example, any
failure by such parties to adequately report safety signals to Timber in a timely manner from any such trials may also affect the
approvability of Timber’s product candidates or cause delays and disruptions for the approval of any of Timber’s product candidates,
if at all. If Timber or its affiliates’ employees, independent contractors, principal investigators, consultants, commercial collaborators,
service providers or other vendors are alleged or found to be in violation of any such regulatory standards or requirements, or
become subject to a corporate integrity agreement or similar agreement and curtailment of our operations, it could have a significant
impact on Timber’s business and financial results, including the imposition of significant civil, criminal and administrative penalties,
damages, monetary fines, suspension or delay in Timber’s clinical trials, possible exclusion from participation in Medicare, Medicaid
and other federal healthcare programs, FDA debarment, contractual damages, reputational harm, diminished profits and future earnings,
and additional reporting requirements and oversight, any of which could harm Timber’s ability to operate its business and its results
of operations.
Timber may not be successful in its
efforts to identify and acquire or in-license additional product candidates, or to enter into collaborations or strategic alliances
for the development and commercialization of any such future product candidates.
Timber may seek to identify and acquire
or in-license novel product candidates in the medical dermatology field. The process by which Timber identifies product candidates
may fail to yield product candidates for clinical development for a number of reasons, including those discussed in these risk
factors and also:
• potential product candidates may,
upon further study, be shown to have harmful side effects or other characteristics that indicate that they are unlikely to be products
that will receive marketing approval and achieve market acceptance;
• potential product candidates may
not be effective in treating their targeted diseases; or
• the acquisition or in-licensing
transactions can entail numerous operational and functional risks, including exposure to unknown liabilities, disruption of our
business, or incurrence of substantial debt or dilutive issuances of equity securities to pay transaction consideration or costs,
higher than expected acquisition or integration costs.
Timber may choose to focus its efforts
and resources on a potential product candidate that ultimately proves to be unsuccessful. Timber also cannot be certain that, following
an acquisition or in-licensing transaction, it will achieve the revenue or specific net income that justifies such transaction.
Further, time and resources spent identifying, acquiring and developing potential product candidates may distract management’s
attention from Timber’s primary business or other development programs. If Timber is unable to identify and acquire suitable product
candidates for clinical development, this would adversely impact Timber’s business strategy, its financial position and share price.
In the future, aside from the Merger, Timber
may also decide to collaborate with other pharmaceutical companies for the development and potential commercialization of our product
candidates in the United States or other countries or territories of the world. Timber will face significant competition in seeking
appropriate collaborators. Timber may not be successful in its efforts to establish a strategic partnership or other alternative
arrangements for its product candidates because such product candidates may be deemed to be at too early of a stage of development
for collaborative effort and third parties may not view Timber’s product candidates as having the requisite potential to demonstrate
safety and efficacy. If and when Timber collaborates with a third party for development and commercialization of a product candidate,
it can expect to relinquish some or all of the control over the future success of that product candidate to the third party. Timber’s
ability to reach a definitive agreement for a collaboration will depend, among other things, upon its assessment of the collaborator’s
resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a
number of factors.
International expansion of our business
exposes Timber to business, legal, regulatory, political, operational, financial and economic risks associated with conducting
business outside of the United States.
Part of Timber’s business strategy
involves potential expansion internationally with third-party collaborators to seek regulatory approval for its product candidates
outside the United States. Doing business internationally involves a number of risks, including but not limited to:
• multiple conflicting and changing
laws and regulations such as tax laws, export and import restrictions, employment laws, anti-bribery and anti-corruption laws,
regulatory requirements and other governmental approvals, permits and licenses;
• failure by Timber or its collaborators
to obtain appropriate licenses or regulatory approvals for the sale or use of our product candidates, if approved, in various countries;
• difficulties in managing foreign
operations;
• complexities associated with managing
multiple payor-reimbursement regimes or self-pay systems;
• financial risks, such as longer
payment cycles, difficulty enforcing contracts and collecting accounts receivable and exposure to foreign currency exchange rate
fluctuations;
• reduced protection for intellectual
property rights;
• natural disasters, political and
economic instability, including wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade and other
business restrictions; and
• failure to comply with the United
States Foreign Corrupt Practices Act, or FCPA, including its books and records provisions and its anti-bribery provisions, the
United Kingdom Bribery Act 2010, or U.K. Bribery Act, and similar anti-bribery and anti-corruption laws in other jurisdictions,
for example by failing to maintain accurate information and control over sales or distributors’ activities.
Any of these risks, if encountered, could
significantly harm Timber’s future international expansion and operations and, consequently, negatively impact its financial condition,
results of operations and cash flows.
Timber’s business and operations
would suffer in the event of system failures, cyber-attacks or a deficiency in our cyber-security.
Timber’s computer systems, as well as those
of various third parties on which it relies, may sustain damage from computer viruses, unauthorized access, data breaches, phishing
attacks, cybercriminals, natural disasters (including hurricanes and earthquakes), terrorism, war and telecommunication and electrical
failures. Timber relies on its third-party providers to implement effective security measures and identify and correct for any
such failures, deficiencies or breaches. The risk of a security breach or disruption, particularly through cyber-attacks or cyber
intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity
and sophistication of attempted attacks and intrusions from around the world have increased. If such an event were to occur and
cause interruptions in Timber’s operations, it could result in a material disruption of its drug development programs. For example,
the loss of nonclinical or clinical trial data from completed, ongoing or planned trials could result in delays in our regulatory
approval efforts and significantly increase Timber’s costs to recover or reproduce the data. To the extent that any disruption
or security breach were to result in a loss of or damage to Timber’s data or applications, or inappropriate disclosure of personal,
confidential or proprietary information, it could incur liability and the further development of any product candidate could be
delayed.
If product liability lawsuits are
brought against Timber, it may incur substantial liabilities and may be required to limit commercialization of its drug candidates.
Timber faces a potential risk of product
liability as a result of the clinical testing of it drug candidates and will face an even greater risk if it commercializes its
drug candidates. For example, Timber may be sued if any product it develops or any materials that it uses in its products allegedly
causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product
liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent
in the product, negligence, strict liability and a breach of warranties. Claims could also be asserted under state consumer protection
acts. If Timber cannot successfully defend itself against product liability claims, it may incur substantial liabilities or be
required to limit commercialization of its drug candidates. Even a successful defense would require significant financial and management
resources.
Regardless of the merits or eventual outcome,
liability claims may result in:
• decreased demand for Timber’s drug
candidates;
• injury to its reputation;
• withdrawal of clinical trial participants;
• costs to defend the related litigation;
• a diversion of management’s time
and its resources;
• substantial monetary awards to trial
participants or patients;
• product recalls, withdrawals or
labeling, marketing or promotional restrictions;
• the inability to commercialize its
drug candidates; and
• a decline in the value of the common
stock.
Timber’s inability to obtain and retain
sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent
or inhibit the commercialization of products it develops. Timber intends to obtain product liability insurance covering its clinical
trials. Although Timber will maintain such insurance, any claim that may be brought against it could result in a court judgment
or settlement in an amount that is not covered, in whole or in part, by its insurance or that is in excess of the limits of its
insurance coverage. Timber’s insurance policies also have various exclusions, and it may be subject to a product liability claim
for which it has no coverage. Timber may have to pay any amounts awarded by a court or negotiated in a settlement that exceed its
coverage limitations or that are not covered by its insurance, and it may not have, or be able to obtain, sufficient capital to
pay such amounts.
Timber may acquire businesses, assets
or products, or form strategic alliances, in the future, and it may not realize the benefits of such acquisitions.
Timber may acquire additional businesses,
assets or products, form strategic alliances or create joint ventures with third parties that it believes will complement or augment
its existing business. If Timber acquires businesses with promising markets or technologies, it may not be able to realize the
benefit of acquiring such businesses if it is unable to successfully integrate them with its existing operations and company culture.
Timber may encounter numerous difficulties in developing, manufacturing and marketing any new delay or prevent it from realizing
its expected benefits or enhancing its business. Timber cannot assure you that, following any such acquisition, it will achieve
the expected synergies to justify the transaction.
Risks
Related to Development, Regulatory Approval and Commercialization
If Timber’s studies fail to demonstrate
safety and efficacy to the satisfaction of the FDA and comparable non-U.S. regulators, it may incur additional costs or experience
delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.
Timber is not permitted to commercialize,
market, promote or sell any product candidate in the United States without obtaining marketing approval from the FDA. Comparable
non-U.S. regulatory authorities impose similar restrictions. Timber may never receive such approvals. Timber must complete extensive
preclinical development and clinical studies to demonstrate the safety and efficacy of its product candidates in humans before
it will be able to obtain these approvals.
Clinical testing is expensive, difficult
to design and implement, can take many years to complete and is inherently uncertain as to outcome. Timber has not previously submitted
an NDA to the FDA or similar drug approval filings to comparable non-U.S. regulatory authorities for any product candidates.
Any inability to successfully complete
preclinical and clinical development could result in additional costs to Timber and impair its ability to generate revenues from
product sales, regulatory and commercialization milestones and royalties. In addition, if (1) Timber is required to conduct
additional clinical studies or other testing of its product candidates beyond the studies and testing that we contemplate, (2) it
is unable to successfully complete clinical studies of its product candidates or other testing, (3) the results of these studies
or tests are unfavorable, uncertain or are only modestly favorable, or (4) there are unacceptable safety concerns associated
with its product candidates, Timber, in addition to incurring additional costs, may:
• be delayed in obtaining marketing
approval for its product candidates;
• not obtain marketing approval at
all;
• obtain approval for indications
or patient populations that are not as broad as it intended or desired;
• obtain approval with labeling that
includes significant use or distribution restrictions or significant safety warnings, including boxed warnings;
• be subject to additional post-marketing testing or other requirements; or
• be required to remove the product
from the market after obtaining marketing approval.
If Timber experiences any of a number
of possible unforeseen events in connection with clinical studies of its product candidates, potential marketing approval or commercialization
of its product candidates could be delayed or prevented.
Timber may experience numerous unforeseen
events during, or as a result of, clinical studies that could delay or prevent marketing approval of its product candidates, including:
• clinical studies of its product
candidates may produce unfavorable or inconclusive results;
• it may decide, or regulators may
require it, to conduct additional clinical studies or abandon product development programs;
• the number of patients required
for clinical studies of its product candidates may be larger than it anticipates, patient enrollment in these clinical studies
may be slower than it anticipates or participants may drop out of these clinical studies at a higher rate than it anticipates;
• data safety monitoring committees
may recommend suspension, termination or a clinical hold for various reasons, including concerns about patient safety;
• regulators or IRBs may suspend or
terminate the study or impose a clinical hold for various reasons, including noncompliance with regulatory requirements or concerns
about patient safety;
• patients with serious, life-threatening
diseases included in its clinical studies may die or suffer other adverse medical events for reasons that may not be related to
its product candidate;
• participating patients may be subject
to unacceptable health risks;
• patients may not complete clinical
studies due to safety issues, side effects, or other reasons;
• changes in regulatory requirements
and guidance may occur, which may require it to amend clinical study protocols to reflect these changes;
• its third-party contractors, including
those manufacturing our product candidates or components or ingredients thereof or conducting clinical studies on its behalf, may
fail to comply with regulatory requirements or meet their contractual obligations to it in a timely manner or at all;
• regulators or IRBs may not authorize
us or its investigators to commence a clinical study or conduct a clinical study at a prospective study site;
• it may experience delays in reaching
or fail to reach agreement on acceptable clinical study contracts or clinical study protocols with prospective study sites;
• patients who enroll in a clinical
study may misrepresent their eligibility to do so or may otherwise not comply with the clinical study protocol, resulting in the
need to drop the patients from the clinical study, increase the needed enrollment size for the clinical study or extend the clinical
study’s duration;
• it may have to suspend or terminate
clinical studies of its product candidates for various reasons, including a finding that the participants are being exposed to
unacceptable health risks, undesirable side effects or other unexpected characteristics of a product candidate;
• regulators or IRBs may require that
it or its investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements
or their respective standards of conduct, a finding that the participants are being exposed to unacceptable health risks, undesirable
side effects or other unexpected characteristics of the product candidates or findings of undesirable effects caused by a chemically
or mechanistically similar drug or drug candidate;
• the FDA or comparable non-U.S. regulatory
authorities may fail to approve or subsequently find fault with the manufacturing processes or facilities of third-party manufacturers
with which it enters into agreements for clinical and commercial supplies;
• the FDA or comparable non-U.S. regulatory
authorities may disagree with its clinical study design or our interpretation of data from preclinical studies and clinical studies;
• the supply or quality of raw materials
or manufactured product candidates or other materials necessary to conduct clinical studies of its product candidates may be insufficient,
inadequate, delayed, or not available at an acceptable cost, or we may experience interruptions in supply; and
• the approval policies or regulations
of the FDA or comparable non-U.S. regulatory authorities may significantly change in a manner rendering its clinical data insufficient
to obtain marketing approval.
Product development costs for Timber will
increase if it experiences delays in testing or pursuing marketing approvals and it may be required to obtain additional funds
to complete clinical studies and prepare for possible commercialization of our product candidates. Timber do not know whether any
preclinical tests or clinical studies will begin as planned, will need to be restructured or will be completed on schedule, or
at all. Significant preclinical or clinical study delays also could shorten any periods during which Timber may have the exclusive
right to commercialize its product candidates or allow its competitors to bring products to market before it does and may impair
its ability to successfully commercialize our product candidates and may harm our business and results of operations. In addition,
many of the factors that cause, or lead to, clinical study delays may ultimately lead to the denial of marketing approval of Timber’s
product candidates.
Business or economic disruptions
or global health concerns could seriously harm Timber’s development efforts and increase its costs and expenses.
Broad-based business or economic disruptions
could adversely affect Timber’s ongoing or planned research and development activities. For example, in December 2019 an outbreak
of a novel strain of coronavirus originated in Wuhan, China and has since spread to a number of other countries, including the
United States. To date, this outbreak has already resulted in extended shutdowns of certain businesses in the United States and
around the world. Global health concerns, such as coronavirus, could result sourcing difficulties for the active ingredients in
our products, delays in clinical trials and instability in the countries in which it or the third parties with whom it engages
operate. Timber cannot presently predict the scope and severity of any potential business shutdowns or disruptions, but if it or
any of the third parties with whom it engages, including the suppliers, clinical trial sites, regulators and other third parties
with whom it conducts business, were to experience shutdowns or other business disruptions, Timber’s ability to conduct its business
in the manner and on the timelines presently planned could be materially and negatively impacted. It is also possible that global
health concerns such as this one could disproportionately impact the hospitals and clinical sites in which Timber conducts any
of its clinical trials, which could have a material adverse effect on its business and its results of operation and financial condition.
Enrollment and retention of patients
in clinical trials is an expensive and time-consuming process and could be made more difficult or rendered impossible by multiple
factors outside Timber’s control.
Timber may encounter delays or difficulties
in enrolling, or be unable to enroll, a sufficient number of patients to complete any of its clinical trials on its current timelines,
or at all, and even once enrolled it may be unable to retain a sufficient number of patients to complete any of its trials. Enrollment
in Timber’s clinical trials may be slower than it anticipates, leading to delays in its development timelines. For example, Timber
may face difficulty enrolling or maintaining a sufficient number of patients in its clinical trials due to the existing alternative
treatments approved for the treatment of any of its targeted indications, such as topical corticosteroids or topical steroid-free
therapies for atopic dermatitis or psoriasis, as patients may decline to enroll or decide to withdraw from its clinical trials
due to the risk of receiving placebo. Patient enrollment and retention in clinical trials depends on many factors, including the
size of the patient population, the nature of the trial protocol, Timber’s ability to recruit clinical trial investigators with
the appropriate competencies and experience, the existing body of safety and efficacy data with respect to the study drug, the
number and nature of competing treatments and ongoing clinical trials of competing drugs for the same indication, the proximity
of patients to clinical sites, the eligibility criteria for the trial and the proportion of patients screened that meets those
criteria, its ability to obtain and maintain patient consents, and its ability to successfully complete prerequisite studies before
enrolling certain patient populations.
Furthermore, any negative results or new
safety signals Timber may report in clinical trials of its product candidates may make it difficult or impossible to recruit and
retain patients in other clinical trials. Similarly, negative results reported by Timber’s competitors about their drug candidates
may negatively affect patient recruitment in its clinical trials. Also, marketing authorization of competitors in this same class
of drugs may impair Timber’s ability to enroll patients into our clinical trials, delaying or potentially preventing it from completing
recruitment of one or more of its trials.
Delays or failures in planned patient enrollment
or retention may result in increased costs, program delays or both, which could have a harmful effect on Timber’s ability to develop
TMB-001 or any of its other product candidates (or any of BioPharmX’s current product candidates) or could render further development
impossible. In addition, Timber expects to rely on CROs and clinical trial sites to ensure proper and timely conduct of its future
clinical trials, and, while it intends to enter into agreements governing their services, it will be limited in its ability to
compel their actual performance.
Timber faces significant competition
from other biotechnology and pharmaceutical companies targeting medical dermatological indications, and its operating results will
suffer if it fails to compete effectively.
The markets for dermatological therapies
are competitive and are characterized by significant technological development and new product introduction. For example, there
are several large and small pharmaceutical companies focused on delivering therapeutics for our targeted inflammatory and medical
dermatological indications. Timber anticipates that, if it obtains regulatory approval of its product candidates, it will face
significant competition from other approved therapies or drugs that become available in the future for the treatment of its target
indications. If approved, Timber’s product candidates may also compete with unregulated, unapproved and off-label treatments. Even
if another branded or generic product or an over-the-counter, or OTC, product is less effective than Timber’s product candidates,
a less effective branded, generic or OTC product may be more quickly adopted by physicians and patients than its competing product
candidates based upon cost or convenience. Certain of Timber’s product candidates, if approved, will present novel therapeutic
approaches for the approved indications and will have to compete with existing therapies, some of which are widely known and accepted
by physicians and patients. To compete successfully in this market, Timber will have to demonstrate that the relative cost, safety
and efficacy of its approved products, if any, provide an attractive alternative to existing and other new therapies to gain a
share of some patients’ discretionary budgets and for physicians’ attention within their clinical practices. Some of the companies
that offer competing products also have a broad range of other product offerings, large direct sales forces and long-term customer
relationships with Timber’s target physicians, which could inhibit its market penetration efforts. Such competition could lead
to reduced market share for Timber’s product candidates and contribute to downward pressure on the pricing of its product candidates,
which could harm its business, financial condition, operating results and prospects.
Timber is aware of several companies that
are working to develop drugs that would compete against its product candidates, such as Mayne Pharma Group Limited, which is developing
trifarotene for lamellar ichthyosis, Krystal Biotech, Inc., which is developing KB105 for transglutaminase-1 deficient autosomal
recessive congenital ichthyosis, and Nobelpharma Co., Ltd. and Aucta Pharmaceuticals, Inc., which are developing topical
rapamycin for facial angiofibromas in tuberous sclerosis complex.
Many of Timber’s existing or potential
competitors have substantially greater financial, technical and human resources than it does and significantly greater experience
in the discovery and development of product candidates, as well as in obtaining regulatory approvals of those product candidates
in the United States and in foreign countries. Many of Timber’s current and potential future competitors also have significantly
more experience commercializing drugs that have been approved for marketing. Mergers and acquisitions in the pharmaceutical and
biotechnology industries could result in even more resources being concentrated among a smaller number of our competitors. Competition
may reduce the number and types of patients available to Timber to participate in clinical trials, because some patients who might
have opted to enroll in its trials may instead opt to enroll in a trial being conducted by one of its competitors.
Due to less stringent regulatory requirements
in certain foreign countries, there are many more dermatological products and procedures available for use in those international
markets than are approved for use in the United States. In certain international markets, there are also fewer limitations on the
claims that Timber’s competitors can make about the effectiveness of their products and the manner in which they can market their
products. As a result, Timber expects to face more competition in these markets than in the United States.
Timber’s ability to compete successfully
will depend largely on its ability to:
• develop and commercialize therapies
that are competitive with other products in the market;
• demonstrate through its clinical
trials that its product candidates are differentiated from existing and future therapies;
• attract qualified scientific, product
development and commercial personnel;
• obtain patent or other proprietary
protection for our technologies and product;
• obtain required regulatory approvals,
including approvals to market our product candidates in ways that are differentiated from existing and future therapies and OTC
products and treatments;
• successfully commercialize its product candidates, if
approved;
• obtain coverage and adequate reimbursement from, and
negotiate competitive pricing with, third-party payors; and
• successfully collaborate with pharmaceutical companies
in the discovery, development and commercialization of new therapies.
The availability of Timber’s competitors’ products could limit
the demand and the price it is able to charge for any product candidate it develops. The inability to compete with existing or
subsequently introduced drugs or OTC treatments would have an adverse impact on Timber’s business, financial condition and prospects.
If the market opportunities for Timber’s
product candidates are smaller than it believes they are, its revenues may be adversely affected and its business may suffer. Because
the target patient populations of its product candidates are small, Timber must be able to successfully identify patients and capture
a significant market share to achieve and maintain profitability.
Timber focuses its research and product
development on treatments for orphan dermatology indications. Its projections of both the number of people who have failed other
therapies or have limited medical options, are based on estimates. These estimates may prove to be incorrect and new studies may
change the estimated incidence or prevalence. The number of patients in the United States and elsewhere may turn out to be lower
than expected or may not be otherwise amenable to treatment with its products, or new patients may become increasingly difficult
to identify or gain access to, all of which would adversely affect its results of operations and its business. Additionally, because
Timber’s target patient populations are small, it will be required to capture a significant market share to achieve and maintain
profitability.
Timber may be required to suspend
or discontinue clinical studies due to unexpected side effects or other safety risks that could preclude approval of its products.
Timber’s clinical studies may be suspended
at any time for a number of reasons. For example, it may voluntarily suspend or terminate our clinical studies if at any time it
believes that they present an unacceptable risk to the clinical study patients. In addition, the FDA or other regulatory agencies
may order the temporary or permanent discontinuation of Timber’s clinical studies at any time if they believe that the clinical
studies are not being conducted in accordance with applicable regulatory requirements or that they present an unacceptable safety
risk to the clinical study patients.
Administering any product candidate to
humans may produce undesirable side effects. These side effects could interrupt, delay or halt clinical studies of Timber’s product
candidates and could result in the FDA or other regulatory authorities denying further development or approval of its product candidates
for any or all targeted indications. Ultimately, some or all of Timber’s product candidates may prove to be unsafe for human use.
Moreover, Timber could be subject to significant liability if any volunteer or patient suffers, or appears to suffer, adverse health
effects or even death as a result of participating in our clinical studies.
The regulatory approval processes
of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable. Even if Timber obtains
approval for a product candidate in one country or jurisdiction, it may never obtain approval for or commercialize it in any other
jurisdiction, which would limit its ability to realize our full market potential.
Prior to obtaining approval to commercialize
any of Timber’s product candidates in any jurisdiction, it or its collaborators must demonstrate with substantial evidence from
well controlled clinical trials, and to the satisfaction of the FDA or comparable foreign regulatory agencies, that such product
candidates are safe and effective for their intended uses. Results from nonclinical studies and clinical trials can be interpreted
in different ways. Even if Timber believes the nonclinical or clinical data for a product candidate are promising, such data may
not be sufficient to support approval by the FDA and other regulatory authorities. In order to market any products in any particular
jurisdiction, Timber must establish and comply with numerous and varying regulatory requirements on a country-by-country basis
regarding safety and efficacy. Approval by the FDA does not ensure approval by regulatory authorities in any other country or jurisdiction
outside the United States. In addition, clinical trials conducted in one country may not be accepted by regulatory authorities
in other countries, and regulatory approval in one country does not guarantee regulatory approval in any other country. Approval
processes vary among countries and can involve additional product testing and validation, as well as additional administrative
review periods. Seeking regulatory approval could result in difficulties and costs for us and require additional nonclinical studies
or clinical trials, which could be costly and time consuming. Regulatory requirements can vary widely from country to country and
could delay or prevent the introduction of Timber’s products in those countries. Timber does not have any product candidates approved
for sale in any jurisdiction, including in international markets, and it does not have experience in obtaining regulatory approval.
If Timber fails to comply with regulatory requirements in international markets or to obtain and maintain required approvals, or
if regulatory approvals in international markets are delayed, its target market will be reduced and our ability to realize the
full market potential of any product it develops will be unrealized.
Any product candidate for which Timber
obtains marketing approval, along with the manufacturing processes, qualification testing, post-approval clinical data, labeling
and promotional activities for such product, will be subject to continual and additional requirements of the FDA and other regulatory
authorities.
These requirements include submissions
of safety and other post-marketing information, reports, registration and listing requirements, good manufacturing practices, or
GMP requirements relating to quality control, quality assurance and corresponding maintenance of records and documents, and recordkeeping.
Even if marketing approval of Timber’s product candidates is granted, the approval may be subject to limitations on the indicated
uses for which the product may be marketed or to conditions of approval, or contain requirements for costly post-marketing testing
and surveillance to monitor the safety or efficacy of the product. The FDA closely regulates the post-approval marketing and promotion
of pharmaceutical products to ensure such products are marketed only for the approved indications and in accordance with the provisions
of the approved labeling.
In addition, later discovery of previously
unknown problems with our products, manufacturing processes, or failure to comply with regulatory requirements, may lead to various
adverse results, including:
• restrictions on such products, manufacturers
or manufacturing processes;
• restrictions on the labeling or
marketing of a product;
• restrictions on product distribution
or use;
• requirements to conduct post-marketing
clinical studies;
• requirements to institute a REMS
to monitor safety of the product post-approval;
• warning letters issued by the FDA
or other regulatory authorities;
• withdrawal of the products from
the market;
• refusal to approve pending applications
or supplements to approved applications that Timber submits;
• recall of products, fines, restitution
or disgorgement of profits or revenue;
• suspension, revocation or withdrawal
of marketing approvals;
• refusal to permit the import or
export of its products; and
• injunctions or the imposition of
civil or criminal penalties.
If any of Timber’s product candidates
receive marketing approval and it, or others, later discover that the drug is less effective than previously believed or causes
undesirable side effects that were not previously identified, its ability to market such drug could be compromised.
Clinical studies of Timber’s product candidates
are conducted in carefully defined subsets of patients who have agreed to enter into clinical studies. Consequently, it is possible
that its clinical studies may indicate an apparent positive effect of a product candidate that is greater than the actual positive
effect, if any, or alternatively fail to identify undesirable side effects. If, following approval of any of Timber’s product candidates,
it, or others, discover that the drug is less effective than previously believed or causes undesirable side effects that were not
previously identified, any of the following adverse events could occur:
• regulatory authorities may withdraw
their approval of the drug or seize the drug;
• Timber may be required to recall
the drug or change the way the drug is administered;
• additional restrictions may be imposed
on the marketing of, or the manufacturing processes for, the particular drug;
• it may be subject to fines, injunctions
or the imposition of civil or criminal penalties;
• regulatory authorities may require
the addition of labeling statements, such as a “black box” warning or a contraindication;
• it may be required to create a Medication
Guide outlining the risks of the previously unidentified side effects for distribution to patients;
• it could be sued and held liable
for harm caused to patients;
• the drug may become less competitive;
and
• its reputation may suffer.
Any of these events could have a material
and adverse effect on Timber’s operations and business and could adversely impact the price of the common stock.
The FDA and other regulatory agencies
actively enforce the laws and regulations prohibiting the promotion of off-label uses. If Timber is found or alleged to have improperly
promoted off-label uses, it may become subject to significant liability.
The FDA and other regulatory agencies strictly
regulate the promotional claims that may be made about prescription products, as our product candidates would be, if approved.
In particular, a product may not be promoted for uses that are not approved by the FDA or such other regulatory agencies as reflected
in the product’s approved labeling. If Timber is found to have promoted such off-label uses, it may become subject to significant
liability. The federal government has levied large civil and criminal fines against companies for alleged improper promotion and
has enjoined several companies from engaging in off-label promotion. The FDA has also requested that companies enter into consent
decrees or permanent injunctions under which specified promotional conduct is changed or curtailed. If Timber cannot successfully
manage the promotion of its product candidates, if approved, it could become subject to significant liability, which would harm
our business and financial condition.
If Timber obtains approval to commercialize
any of its products outside of the United States, a variety of risks associated with international operations could harm its business.
If any of Timber’s product candidates is
approved for commercialization outside of the United States, it expects that it will be subject to additional risks related to
entering into international business relationships, including:
• different regulatory requirements
for drug approvals and rules governing drug commercialization and manufacturing in foreign countries;
• reduced or no protection of intellectual
property rights;
• unexpected changes in tariffs, trade
barriers and regulatory requirements;
• economic weakness, including inflation,
or political instability in particular foreign economies and markets;
• compliance with tax, employment,
immigration and labor laws for employees living or traveling abroad;
• foreign reimbursement, pricing and
insurance regimes;
• foreign taxes;
• any foreign partners or collaborators
not fulfilling their respective regulatory reporting requirements and any foreign regulatory authorities taking actions with respect
to such failures, which would be reportable to the FDA;
• any foreign partners or collaborators
not informing us of any new post-marketing safety signals in a timely manner;
• foreign currency fluctuations, which
could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country;
• workforce uncertainty in countries
where labor unrest is more common than in the United States;
• potential noncompliance with the
FCPA, the U.K. Bribery Act or similar anti-bribery and anticorruption laws in other jurisdictions;
• production shortages resulting from
any events affecting raw material supply or manufacturing capabilities abroad; and
• business interruptions resulting
from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods and fires.
Recently enacted and future legislation
may increase the difficulty and cost for Timber to obtain marketing approval of and commercialize our drug candidates and affect
the prices it may obtain.
In the United States and some foreign jurisdictions,
there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could
prevent or delay marketing approval for our drug candidates, restrict or regulate post-approval activities and affect our ability
to profitably sell our drug candidates. Legislative and regulatory proposals have been made to expand post-approval requirements
and restrict sales and promotional activities for pharmaceutical products. We do not know whether additional legislative changes
will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes
on the marketing approvals of our drug candidates, if any, may be. In addition, increased scrutiny by the U.S. Congress of the
FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling
and post-marketing testing and other requirements.
In the United States, under the Medicare
Modernization Act (“MMA”), Medicare Part D provides coverage to the elderly and disabled for outpatient prescription
drugs by approving and subsidizing prescription drug plans offered by private insurers. The MMA also authorizes Medicare Part D
prescription drug plans to use formularies where they can limit the number of drugs that will be covered in any therapeutic class.
The Part D plans use their formulary leverage to negotiate rebates and other price concessions from drug manufacturers. Also
under the MMA, Medicare Part B provides coverage to the elderly and disabled for physician-administered drugs on the basis
of the drug’s average sales price, a price that is calculated according to regulatory requirements and that the manufacturer reports
to Medicare quarterly.
Both Congress and the Centers for Medicare &
Medicaid Services (“CMS”), the agency that administers the Medicare program, from time to time consider legislation,
regulations, or other initiatives to reduce drug costs under Medicare Parts B and D. For example, under the 2010 Affordable Care
Act (the “ACA”), drug manufacturers are required to provide a significant discount on prescriptions for branded drugs
filled while the beneficiary is in the Medicare Part D coverage gap, also known as the “donut hole.” There have
been legislative proposals to repeal the ‘non-interference” provision of the MMA to allow CMS to leverage the Medicare market
share to negotiate larger Part D rebates. Further cost reduction efforts could decrease the coverage and price that we receive
for our drug candidates and could seriously harm our business. Private payors often follow Medicare coverage policy and payment
limitations in setting their own reimbursement rates, and any reduction in reimbursement under the Medicare program may result
in a similar reduction in payments from private payors.
The ACA is intended to broaden access to
health insurance and reduce or constrain the growth of healthcare spending. Further, the ACA imposes a significant annual fee on
companies that manufacture or import branded prescription drug products. It also increased the amount of the rebates drug manufacturers
must pay to state Medicaid programs, required that Medicaid rebates be paid on managed Medicaid utilization, and increased the
additional rebate on “line extensions” (such as extended release formulations) of solid oral dosage forms of branded
products. The law also contains substantial provisions affecting fraud and abuse compliance and transparency, which may require
us to modify our business practices with healthcare practitioners, and incur substantial costs to ensure compliance.
The President and the majority party in
the Senate of the U.S. Congress have indicated their desire to repeal the ACA. It is unclear whether, when and how that repeal
will be effectuated and what the effect on the healthcare sector will be. In addition to the potential repeal of the ACA, there
are indications that the Medicaid program may be restructured, which could lead to revisions in Medicaid coverage for prescription
drugs. While we are unable to predict what legislation, if any, may potentially be enacted, to the extent that future changes affect
how our product candidates could be paid for and/or reimbursed by the government and private payers, our business could be adversely
affected.
In addition, other legislative changes
have been proposed and adopted in the United States since the ACA was enacted. Several states have adopted or are considering adopting
laws that require pharmaceutical companies to provide notice prior to raising prices and to justify price increases. We expect
that additional healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and
state governments will pay for healthcare products and services, and in turn could significantly reduce the projected value of
certain development projects and reduce its profitability.
Risks
Related to Timber’s Dependence on Third Parties
Timber relies, and expects to continue
to rely, on third parties to conduct its clinical studies, and those third parties may not perform satisfactorily, including failing
to meet deadlines for the completion of such studies.
Timber currently relies on CROs to conduct
its clinical studies. Timber expects to continue to rely on third parties, such as CROs, clinical data management organizations,
medical institutions and clinical investigators, to conduct its clinical studies. Timber’s agreements with these third parties
generally allow the third-party to terminate the agreement at any time. If Timber is required to enter into alternative arrangements
because of any such termination the introduction of its product candidates to market could be delayed.
Timber’s reliance on these third parties
for research and development activities will reduce its control over these activities but will not relieve us of its responsibilities.
For example, Timber designs its clinical studies and will remain responsible for ensuring that each of its clinical studies are
conducted in accordance with the general investigational plan and protocols for the study. Moreover, the FDA requires Timber to
comply with cGCPs for conducting, recording and reporting the results of clinical studies to assure that data and reported results
are credible and accurate and that the rights, integrity and confidentiality of study participants are protected. Timber’s reliance
on third parties that it does not control does not relieve it of these responsibilities and requirements. Timber also is required
to register ongoing clinical studies and post the results of completed clinical studies on a government-sponsored database, Clinicaltrials.gov,
within specified timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.
Furthermore, these third parties may also
have relationships with other entities, some of which may be Timber’s competitors. If these third parties do not successfully carry
out their contractual duties, meet expected deadlines or conduct our clinical studies in accordance with regulatory requirements
or Timber’s stated protocols, it will not be able to obtain, or may be delayed in obtaining, marketing approvals for its product
candidates and will not be able to, or may be delayed in its efforts to, successfully commercialize its product candidates.
Timber also expects to rely on other third parties to store
and distribute drug supplies for its clinical studies. Any performance failure on the part of our distributors could delay clinical
development or marketing approval of our product candidates or commercialization of its products, producing additional losses and
depriving it of potential product revenue.
Timber may seek to enter into collaborations
with third parties for the development and commercialization of its product candidates. If it fails to enter into such collaborations,
or such collaborations are not successful, it may not be able to capitalize on the market potential of its product candidates.
Timber may seek third-party collaborators
for development and commercialization of its product candidates. Timber’s likely collaborators for any marketing, distribution,
development, licensing or broader collaboration arrangements include large and mid-size pharmaceutical companies, regional and
national pharmaceutical companies, non-profit organizations, government agencies, and biotechnology companies. Timber is currently
party to a limited number of such arrangements and have limited control over the amount and timing of resources that our collaborators
dedicate to the development or commercialization of our product candidates. Timber’s ability to generate revenues from these arrangements
will depend on its collaborators’ abilities to successfully perform the functions assigned to them in these arrangements.
Collaborations involving its product candidates
currently pose, and will continue to pose, the following risks to it:
• collaborators have significant discretion
in determining the efforts and resources that they will apply to these collaborations;
• collaborators may not pursue development
and commercialization of our product candidates or may elect not to continue or renew development or commercialization programs
based on preclinical or clinical study results, changes in the collaborators’ strategic focus or available funding, or external
factors such as an acquisition that diverts resources or creates competing priorities;
• collaborators may delay clinical
studies, provide insufficient funding for a clinical study program, stop a clinical study or abandon a product candidate, repeat
or conduct new clinical studies or require a new formulation of a product candidate for clinical testing;
• collaborators could independently
develop, or develop with third parties, products that compete directly or indirectly with Timber’s product candidates if the collaborators
believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more
economically attractive than Timber’s;
• collaborators with marketing and
distribution rights to one or more products may not commit sufficient resources to the marketing and distribution of such product
or products;
• collaborators may not properly maintain
or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could
jeopardize or invalidate its intellectual property or proprietary information or expose it to potential litigation;
• collaborators may infringe the intellectual
property rights of third parties, which may expose it to litigation and potential liability;
• disputes may arise between the collaborators
and it that result in the delay or termination of the research, development or commercialization of its product candidates or that
result in costly litigation or arbitration that diverts management attention and resources; and
• collaborations may be terminated
and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable
product candidates.
Collaboration agreements may not lead to
development or commercialization of Timber’s product candidates in the most efficient manner or at all. If a collaborator of Timber’s
were to be involved in a business combination, the continued pursuit and emphasis on its product development or commercialization
program could be delayed, diminished or terminated.
If Timber is not able to establish
collaborations, it may have to alter its development and commercialization plans.
Timber’s drug development programs and
the potential commercialization of its product candidates will require substantial additional cash to fund expenses. Timber may
decide to collaborate with pharmaceutical and biotechnology companies for the development and potential commercialization of its
product candidates.
Timber faces significant competition in
seeking appropriate collaborators. Whether it reaches a definitive agreement for a collaboration will depend, among other things,
upon its assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the
proposed collaborator’s evaluation of a number of factors. Those factors may include the design or results of preclinical studies
or clinical studies, the likelihood of approval by the FDA or similar regulatory authorities outside the United States, the potential
market for the subject product candidates, the costs and complexities of manufacturing and delivering such product candidate to
patients, the potential of competing products, the existence of uncertainty with respect to its ownership of technology, which
can exist if there is a challenge to such ownership without regard to the merits of the challenge and industry and market conditions
generally. The collaborator may also consider alternative product candidates or technologies for similar indications that may be
available to collaborate on and whether such a collaboration could be more attractive than the one with us for our product candidates.
Timber may also be restricted under future license agreements from entering into agreements on certain terms with potential collaborators.
Collaborations are complex and time-consuming to negotiate and document. In addition, there have been a significant number of recent
business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators.
Timber may not be able to negotiate collaborations
on a timely basis, on acceptable terms, or at all. If Timber is unable to do so, it may have to curtail the development of its
product candidates, reduce or delay its development programs, delay its potential commercialization or reduce the scope of any
sales or marketing activities, or increase its expenditures and undertake development or commercialization activities at its own
expense. If Timber elects to increase its expenditures to fund development or commercialization activities on its own, it may need
to obtain additional capital, which may not be available to us on acceptable terms or at all. If Timber does not have sufficient
funds, it may not be able to further develop its product candidates or bring it to market and generate product revenue.
Risks
Relating to Timber’s Intellectual Property
It is difficult and costly to protect
Timber’s intellectual property rights, and it cannot ensure the protection of these rights.
Timber’s commercial success will depend,
in part, on obtaining and maintaining additional patent protection for our technologies, products and processes, successfully defending
these patents against third-party challenges and successfully enforcing these patents against third party competitors. The patent
positions of pharmaceutical companies can be highly uncertain and involve complex legal, scientific and factual questions for which
important legal principles remain unresolved. Changes in either the patent laws or in interpretations of patent laws may diminish
the value of our intellectual property. Accordingly, Timber cannot predict the breadth of claims that may be allowable in its pending
applications or, the enforceability of its existing and future patents.
The degree of Timber’s current and future
protection for our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect
its rights, permit it to gain or keep our competitive advantage, or provide us with any competitive advantage at all. For example,
others have filed, and in the future are likely to file, patent applications covering products and technologies, such as trifarotene
and KB105 as described above, that are similar or competitive to Timber’s product candidates, or important to its business. Timber
cannot be certain that any patents or patent application owned by a third party will not have priority over patents and patent
applications filed by it, or that it will not be involved in interference, opposition or invalidity proceedings before United States
or foreign patent offices.
Timber also relies on trade secrets to
protect technology, especially in cases when it believes patent protection is not appropriate or obtainable. However, trade secrets
are difficult to protect. While Timber requires employees, academic collaborators, consultants and other contractors to enter into
confidentiality agreements, it may not be able to adequately protect its trade secrets or other proprietary or licensed information.
Typically, research collaborators and scientific advisors have rights to publish data and information in which Timber may have
rights. If Timber cannot maintain the confidentiality of its proprietary technology and other confidential information, its ability
to receive patent protection and its ability to protect valuable information owned by us may be imperiled. Enforcing a claim that
a third-party entity illegally obtained and is using any of Timber’s trade secrets is expensive and time consuming, and the outcome
is unpredictable. In addition, courts are sometimes less willing to protect trade secrets than patents. Moreover, our competitors
may independently develop equivalent knowledge, methods and know-how.
If Timber fails to maintain or obtain additional
patent protection or trade secret protection for its technologies, third parties could use its proprietary information, which could
impair its ability to compete in the market and adversely affect our ability to generate revenues and attain profitability.
If Timber fails to obtain or maintain
patent protection or trade secret protection for its technologies, third parties could use its proprietary information, which could
impair its ability to compete in the market and adversely affect its ability to generate revenues and attain profitability.
Timber may also develop trademarks to distinguish
its products from the products of its competitors. Timber cannot guarantee that any trademark applications filed by it or its business
partners will be approved. Third parties may also oppose such trademark applications, or otherwise challenge Timber’s use of the
trademarks. In the event that the trademarks Timber uses are successfully challenged, it could be forced to rebrand its products,
which could result in loss of brand recognition, and could require it to devote resources to advertising and marketing new brands.
Further, Timber cannot provide assurance that competitors will not infringe the trademarks it uses, or that we will have adequate
resources to enforce these trademarks.
Timber has in-licensed and acquired
portions of its intellectual property, and if it fails to comply with its obligations under these arrangements, it could lose such
intellectual property rights or owe damages to the licensor and/or seller of such intellectual property.
Timber is a party to a license agreement
with AFT pursuant to which it licensed certain exclusive and co-exclusive rights to develop, manufacture and market drug candidates
from AFT in certain territories. Timber has also entered into two acquisition agreements with Patagonia pursuant to which it acquired
rights to certain intellectual property worldwide. These agreements are important to Timber’s business, and it may enter into additional
license and acquisition agreements in the future. Certain of Timber’s in-licensed and acquired intellectual property covers, or
may cover, other potential developmental candidates. Timber’s existing license agreement and acquisition agreements impose, and
it expects that future agreements will impose, various milestone payment, royalty and other obligations on it. If there is any
conflict, dispute, disagreement or issue of non-performance between Timber and its collaborators regarding its rights or obligations
under such agreements, including any such conflict, dispute or disagreement arising from our failure to satisfy payment obligations
under any such agreement, it may owe damages, its collaborators may have a right to terminate the affected license or rights, and
its ability to utilize the affected intellectual property in its product discovery and development efforts and its ability to enter
into collaboration or marketing agreements for an affected product candidate may be adversely affected.
Timber’s product candidates may infringe
the intellectual property rights of others, which could increase its costs and delay or prevent its development and commercialization
efforts.
Timber’s success depends in part on avoiding
infringement of the proprietary technologies of others. The pharmaceutical industry has been characterized by frequent litigation
regarding patent and other intellectual property rights. Identification of third-party patent rights that may be relevant to Timber’s
proprietary technology is difficult because patent searching is imperfect due to differences in terminology among patents, incomplete
databases and the difficulty in assessing the meaning of patent claims. Additionally, because patent applications are maintained
in secrecy until the application is published, Timber may be unaware of third-party patents that may be infringed by commercialization
of our product candidates. There may be certain issued patents and patent applications claiming subject matter that Timber may
be required to license in order to research, develop or commercialize its product candidates, and it do not know if such patents
and patent applications would be available to license on commercially reasonable terms, or at all. Any claims of patent infringement
asserted by third parties would be time-consuming and may:
• result in costly litigation;
• divert the time and attention of
Timber’s technical personnel and management;
• prevent it from commercializing
a product until the asserted patent expires or is held finally invalid or not infringed in a court of law;
• require it to cease or modify our
use of the technology and/or develop non-infringing technology; or
• require it to enter into royalty
or licensing agreements.
Although no third party has asserted a
claim of infringement against Timber, others may hold proprietary rights that could prevent its product candidates from being marketed.
Any patent-related legal action against Timber claiming damages and seeking to enjoin commercial activities relating to its product
candidates or its processes could subject it to potential liability for damages and require it to obtain a license to continue
to manufacture or market our product candidates. Timber cannot predict whether it would prevail in any such actions or that any
license required under any of these patents would be made available on commercially acceptable terms, if at all. In addition, Timber
cannot be sure that it could redesign any of its product candidates or processes to avoid infringement, if necessary. Accordingly,
an adverse determination in a judicial or administrative proceeding, or the failure to obtain necessary licenses, could prevent
Timber from developing and commercializing any of its product candidates, which could harm its business, financial condition and
operating results.
A number of companies have conducted research
on dermatological therapies which resulted in the filing of many patent applications related to this research. If Timber were to
challenge the validity of these or any issued United States patent in court, it would need to overcome a statutory presumption
of validity that attaches to every issued United States patent. This means that, in order to prevail, Timber would have to present
clear and convincing evidence as to the invalidity of the patent’s claims.
If Timber were to challenge the validity
of these or any issued United States patent in an administrative trial before the Patent Trial and Appeal Board in the USPTO, it
would have to prove that the claims are unpatentable by a preponderance of the evidence. There is no assurance that a jury and/or
court would find in Timber’s favor on questions of infringement, validity or enforceability.
Timber may be subject to claims that
we have wrongfully hired an employee from a competitor or that it or its employees have wrongfully used or disclosed alleged confidential
information or trade secrets of their former employers.
As is commonplace in its industry, Timber
employs individuals who were previously employed at other pharmaceutical companies, including its competitors or potential competitors.
Although no claims against Timber are currently pending, it may be subject in the future to claims that our employees or prospective
employees are subject to a continuing obligation to their former employers (such as non-competition or non-solicitation obligations)
or claims that its employees or it has inadvertently or otherwise used or disclosed trade secrets or other proprietary information
of their former employers. Litigation may be necessary to defend against these claims. Even if Timber is successful in defending
against these claims, litigation could result in substantial costs and be a distraction to management.
Timber may be subject to claims challenging
the inventorship of its patents and other intellectual property.
Although Timber is not aware of any asserted
third-party claims challenging inventorship on its patents or ownership of its intellectual property, it may in the future be subject
to claims that former employees, strategic partners, commercial counterparties or other third parties associated with it or one
of its predecessors in ownership of its product candidates have an interest in its patents or other intellectual property as an
inventor or co-inventor. While it is its policy to require our employees and contractors who may be involved in the conception
or development of intellectual property to execute agreements assigning such intellectual property to it, it cannot fully control
the enforcement of these policies by third parties with which we contract, nor can it be certain that assignment agreements between
it and its employees, between it and its counterparties, or between its counterparties and their employees or between its predecessors
of ownership and their employees and counterparties, will effectively protect its interests as to any party who conceives or develops
intellectual property that it regard as its own. Among other issues, the assignment of intellectual property rights may not be
self-executing, the assignment agreements may be breached, or Timber may have disputes arise from conflicting obligations of consultants
or others who are involved in developing its product candidates. As Timber approaches potential commercialization of our product
candidates, it is more closely analyzing all facts that it believes might be used to assert an inventorship claim against it. Determinations
like these involve complex sets of fact and applications of sometimes-unsettled patent law, resulting in inherent uncertainties
regarding ownership rights. Determining the history of development of certain of Timber’s intellectual property is made more difficult
by the fact that certain of its intellectual property was developed by other companies for other indications before being acquired
by it. Consequently, Timber cannot be sure that it has all of the documentary records relevant to such an analysis.
If claims challenging inventorship are
made against Timber, it may need to resort to litigation to resolve those claims. If it fails in defending against any such claims,
in addition to paying monetary damages, Timber may lose valuable intellectual property rights, such as exclusive ownership of valuable
intellectual property rights or the right to assert those rights against third-parties marketing competing products. Even if Timber
is successful in defending against such claims, litigation could result in substantial costs and be a distraction to management
and other employees.
Timber may need to license intellectual
property from third parties, and such licenses may not be available or may not be available on commercially reasonable terms.
A third party may hold intellectual property,
including patent rights, that are important or necessary to the development of Timber’s product candidates. It may be necessary
for Timber to use the patented or proprietary technology of third parties to commercialize its drug candidates, in which case it
would be required to obtain a license from these third parties on commercially reasonable terms. Such a license may not be available,
or it may not be available on commercially reasonable terms, in which case Timber’s business would be harmed.
The risks described elsewhere pertaining
to Timber’s intellectual property rights also apply to the intellectual property rights that it in-licenses, and any failure by
it or its licensors to obtain, maintain, defend and enforce these rights could harm its business. In some cases Timber may not
have control over the prosecution, maintenance or enforcement of the patents that it licenses, and may not have sufficient ability
to provide input into the patent prosecution, maintenance and defense process with respect to such patents, and its licensors may
fail to take the steps that it believes are necessary or desirable in order to obtain, maintain, defend and enforce the licensed
patents.
Changes in U.S. patent law or the
patent law of other countries or jurisdictions could diminish the value of patents in general, thereby impairing Timber’s ability
to protect its products.
The United States has recently enacted
and implemented wide-ranging patent reform legislation. In addition, patent reform legislation may pass in the future that could
lead to additional uncertainties and increased costs surrounding the prosecution, enforcement and defense of our patents and pending
patent applications. The United States Supreme Court has ruled on several patent cases in recent years, either narrowing the scope
of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition
to increasing uncertainty with regard to Timber’s ability to obtain patents in the future, this combination of events has created
uncertainty with respect to the value of patents, once obtained. Depending on actions by the United States Congress, the federal
courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability
to obtain new patents or to enforce patents that we have licensed or that we might obtain in the future. Similarly, changes in
patent law and regulations in other countries or jurisdictions or changes in the governmental bodies that enforce them or changes
in how the relevant governmental authority enforces patent laws or regulations may weaken our ability to obtain new patents or
to enforce patents that we have licensed or that we may obtain in the future. We cannot predict future changes in the interpretation
of patent laws or changes to patent laws that might be enacted into law by United States and foreign legislative bodies. Those
changes may materially affect our patents or patent applications and our ability to obtain additional patent protection in the
future. The United States federal government retains certain rights in inventions produced with its financial assistance under
the Bayh-Dole Act. The federal government retains a “nonexclusive, nontransferable, irrevocable, paid-up license” for
its own benefit. The Bayh-Dole Act also provides federal agencies with “march-in rights.” March-in rights allow the government,
in specified circumstances, to require the contractor or successors in title to the patent to grant a “nonexclusive, partially
exclusive, or exclusive license” to a “responsible applicant or applicants.” If the patent owner refuses to do so,
the government may grant the license itself.
Timber’s intellectual property agreements
with third parties may be subject to disagreements over contract interpretation, which could narrow the scope of its rights to
the relevant intellectual property or technology.
Certain provisions in Timber’s intellectual
property agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement
that may arise could affect the scope of Timber’s rights to the relevant intellectual property or technology, or affect financial
or other obligations under the relevant agreement, either of which could harm our business, financial condition, results of operations
and prospects.
Timber may not be able to obtain
or maintain orphan drug designation or exclusivity for its product candidates.
Timber has obtained orphan drug designation
for TMB-001 and TMB-002, it is seeking orphan drug designation for TMB-003 and may seek additional orphan drug designation for
other product candidates. Regulatory authorities in some jurisdictions, including the United States and Europe, may designate drugs
for relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the FDA may designate a product as an orphan
drug if it is a drug intended to treat a rare disease or condition, which is generally defined as a patient population of fewer
than 200,000 individuals in the United States. Generally, if a product with an orphan drug designation subsequently receives the
first marketing approval for the indication for which it has such designation, the product is entitled to a period of marketing
exclusivity, which precludes the FDA or the European Medicines Agency (“EMA”) from approving another marketing application
for the same indication for that drug during that time period. For a product that obtains orphan drug designation on the basis
of a plausible hypothesis that it is clinically superior to the same drug that is already approved for the same indication, in
order to obtain orphan drug exclusivity upon approval, clinical superiority of such product to this same drug that is already approved
for the same orphan indication must be demonstrated. The exclusivity period is seven years in the United States and ten years in
Europe. The European exclusivity period can be reduced to six years if a drug no longer meets the criteria for orphan drug designation
or if the drug is sufficiently profitable so that market exclusivity is no longer justified. Orphan drug exclusivity may be lost
if the FDA or the EMA determines that the request for designation was materially defective or if the manufacturer is unable to
assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.
Timber cannot assure you that the application
for orphan drug designation of TMB-003, or any future application with respect to any other product candidate, will be granted.
If Timber is unable to obtain orphan drug designation in the United States, it will not be eligible to obtain the period of market
exclusivity that could result from orphan drug designation or be afforded the financial incentives associated with orphan drug
designation. Even if Timber obtains orphan drug exclusivity for a product, that exclusivity may not effectively protect
the product
from competition because different drugs can be approved for the same condition. Even after an orphan drug is approved, the FDA
can subsequently approve the same drug for the same condition if the FDA concludes that the later drug is clinically superior in
that it is shown to be safer, more effective or makes a major contribution to patient care.
There are risks to Timber’s Intellectual
Property based on its international business operations.
There are risks to technology and intellectual
property that may result from Timber’s conducting business outside the United States, particularly in jurisdictions that do not
have comparable levels of protection of corporate proprietary information and assets such as intellectual property, trademarks,
trade secrets, know-how and customer information and records. For instance, Timber may be exposed to material risks of theft of
proprietary technology and other intellectual property, including technical data, business processes, data sets or other sensitive
information. While these risks are common to many companies, conducting business in certain foreign jurisdictions, housing technology,
data and intellectual property abroad, or licensing technology to joint ventures with foreign partners may have more significant
exposure. The risk can be by direct intrusion wherein technology and intellectual property is stolen or compromised through direct
intrusion including cyber intrusions and physical theft through corporate espionage, including with the assistance of insiders.
In addition, Timber’s technology and intellectual property may be subject to theft or compromise via more indirect routes. For
example, Timber’s products or components may be reverse engineered by joint venture partners or other parties, which could result
in Timber’s patents being infringed or its know-how or trade secrets stolen.