Item 1A. Risk Factors
Our business is subject to various risks, including those described in Item 1A “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 filed with the U.S. Securities and Exchange Commission on March 29, 2019, which we strongly encourage you to review with all other information contained or incorporated by reference in this report before you decide to invest in our common stock. In addition to those risk factors, we identified the following new risks or substantive changes from the risks described in our Annual Report on Form 10-K. If any of the risks described in our Annual Report on Form 10-K or discussed below actually occurs, our business, financial condition, results of operations and our future growth prospects could be materially and adversely affected. Under these circumstances, the trading price of our common stock could decline, and you may lose all or part of your investment.
Risks Related to our Financial Position and Capital Requirements
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We have incurred losses since inception, we expect to incur significant net losses in the foreseeable future and we may never become profitable.
We have almost always had negative cash flows from operations and have incurred net operating losses each year since we started business. For the six months ended June 30, 2019 and year ended December 31, 2018, we incurred net losses of $12.3 million and $12.6 million, respectively, and our net cash used in operating activities was $4.8 million and $12.0 million, respectively. As of December 31, 2018 and our accumulated deficit was $414.4 million. As of June 30, 2019, our accumulated deficit was $426.7 million. We expect to continue to incur net losses and negative cash flow from operating activities for at least the next year. As our focus on development of Nanomedicine and the development of therapeutic applications has increased, losses have resulted primarily from expenses associated with research and development and clinical trial-related activities, as well as general and administrative expenses. While we have implemented and continue to implement cost reduction measures where possible, we nonetheless expect to continue operating in a loss position on a consolidated basis and expect that recurring operating expenses will continue at similar levels as compared to the second quarter for the remainder of this year and are anticipated to be at higher levels next year as we prepare for and perform clinical trial and other development activities for our Nanomedicine product candidates.
Our ability to generate sufficient revenues from any of our product candidates or technologies to achieve profitability will depend on a number of factors including, but not limited to:
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our ability to manufacture, test and validate our product candidates in compliance with applicable laws and as required for submission to applicable regulatory bodies, including manufacturing, testing and validation of our DocePLUS and DoxoPLUS product candidates;
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our or our partners’ ability to successfully complete clinical trials of our product candidates;
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our ability to obtain necessary regulatory approvals for our product candidates;
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our or our partners’ ability to negotiate and receive favorable reimbursement for our product candidates, including for our product candidates that have been granted or may be granted orphan drug status or otherwise command currently anticipated pricing levels;
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our ability to negotiate favorable arrangements with third parties to help finance the development of, and market and distribute, our product candidates; and
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the degree to which our approved products, if any, are accepted in the marketplace.
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Because of the numerous risks and uncertainties associated with our commercialization and product development efforts, we are unable to predict the extent of our future losses or when or if we will become profitable and it is possible we will never become profitable. If we do not generate significant sales from any of our product candidates that may receive regulatory approval, there would be a material adverse effect on our business, results of operations, financial condition and prospects which could result in our inability to continue operations.
We will need substantial additional funding to develop our product candidates and for our future operations. If we are unable to obtain the funds necessary to do so, we will be required to delay, scale back or eliminate our product development activities or may be unable to continue our business.
We have had, and we will continue to have, an ongoing need to raise additional cash from outside sources to continue funding our operations, including our continuing substantial research and development expenses. We do not currently believe that our cash balance will be sufficient to fund the development and marketing efforts required to reach profitability without raising additional capital from accessible sources of financing in the near future. Although it is difficult to predict future liquidity requirements, we believe that our $4.5 million in cash and cash equivalents on hand as of June 30, 2019 will be insufficient to fund our currently contemplated operations. Our future capital requirements will depend on many factors, including:
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our ability to raise capital to fund our operations on terms acceptable to us, or at all;
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our perceived capital needs with respect to our development programs, and any delays in, adverse events of, and excessive costs of such programs beyond what we currently anticipate;
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our ability to establish and maintain collaborative and other arrangements with third parties to assist in bringing our products to market and the cost of such arrangements at the time;
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costs associated with the operations at our San Antonio, Texas facility;
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the cost of manufacturing our product candidates, including compliance with good manufacturing practices applicable to our product candidates;
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expenses related to the establishment of sales and marketing capabilities for product candidates awaiting approval or products that have been approved;
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the level of our sales and marketing expenses;
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competing technological and market develo
pments; and
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our ability to introduce and sell new products.
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We have secured capital historically from grant revenues, collaboration proceeds, and debt and equity offerings. We will need to secure substantial additional capital to fund our future operations. We cannot be certain that additional capital will be available on terms acceptable to us, or at all. If we are unsuccessful in our efforts to raise any such additional capital, we may be required to take actions that could materially and adversely harm our business, including a possible significant reduction in our research, development and administrative operations (including reduction of our employee base), surrendering of our rights to some technologies or product opportunities, delaying of our clinical trials or regulatory and reimbursement efforts, or curtailing of or even ceasing operations.
Our financing plans include pursuing additional cash through use of offering programs, strategic corporate partnerships, licensing and sales of assets and equity. In July 2018, we completed a public offering in which we distributed to holders of our common stock and Series B Convertible Preferred Stock, at no charge, non-transferable subscription rights to purchase up to an aggregate of 20,000 units each consisting of one share of Series C Preferred Stock and 1,050 warrants to purchase one share of our common stock at a subscription price of $1,000 per unit, or the 2018 Rights Offering. Each share of Series C Preferred Stock is convertible into 25 shares of our common stock subject to adjustment. We sold an aggregate of 6,723 units as part of the 2018 Rights Offering.
In addition, in September 2018, we entered into a purchase agreement, or the Lincoln Park Purchase Agreement, with Lincoln Park Capital Fund, LLC, or Lincoln Park, pursuant to which we may direct Lincoln Park to purchase up to $5.0 million in shares of our common stock from time to time over the 24-month period following October 15, 2018, subject to the satisfaction of certain conditions. There is no guarantee that adequate funds will be available when needed from additional debt or equity financing, development and commercialization partnerships or from other sources or on terms acceptable to us. Through December 31, 2018, the Company sold a total of 12,000 shares for proceeds of approximately $0.3 million through the Lincoln Park Purchase Agreement and 5,000 shares for proceeds of approximately $0.1 million were sold during the six months ended June 30, 2019. The Company believes there is less than $0.1 million remaining available under this financing facility.
Further, the Loan and Security Agreement, as amended, with Oxford Finance, LLC, or Oxford, requires maintaining a minimum of $2.0 million in unrestricted cash and cash equivalents on hand to avoid an event of default under the Loan and Security Agreement. Based on our cash and cash equivalents on hand of approximately $4.5 million at June 30, 2019, we estimate that we will need to raise additional capital and/or obtain a waiver or restructure the Loan and Security Agreement in the near term to avoid defaulting under our $2.0 million minimum cash/cash equivalents covenant. If we are unable to avoid an event of default under the Loan and Security Agreement, our business could be severely harmed.
In addition to the funding sources previously mentioned, we continue to seek additional capital through product revenues and state and federal development programs.
Our level of indebtedness, and covenant restrictions under such indebtedness, could adversely affect our operations and liquidity.
Under our Loan and Security Agreement with Oxford, as collateral agent and lender, Oxford made a term loan to us in an aggregate principal amount of $17,700,000, or the Term Loan, subject to the terms and conditions set forth in the Loan and Security Agreement. The outstanding principal balance of the Term Loan is $9.3 million as of June 30, 2019.
The Term Loan accrues interest at a floating rate equal to the three-month LIBOR rate (with a floor of 1.00%) plus 7.95% per annum. On April 29, 2019, we and Oxford amended the Loan and Security Agreement to extend the interest-only period. Beginning May 2020, we will be required to make payments of principal (in the amount of approximately $0.7 million per month) and accrued interest in equal monthly installments of approximately $1.3 million to amortize the Term Loan through June 1, 2021, the maturity date.
As security for our obligations under the Loan and Security Agreement, we granted a security interest in substantially all of our existing and after-acquired assets, excluding our intellectual property assets, subject to certain exceptions set forth in the Loan and Security Agreement. If we are unable to discharge these obligations, Oxford could foreclose on these assets, which would, at a minimum, have a severe material adverse effect on our ability to operate our business.
Our indebtedness to Oxford could adversely affect our operations and liquidity, by, among other things:
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causing us to use a larger portion of our cash flow to fund interest and principal payments, reducing the availability of cash to fund working capital and capital expenditures and other business activities;
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making it more difficult for us to take advantage of significant business opportunities, such as acquisition opportunities, and to react to changes in market or industry conditions; and
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limiting our ability to borrow additional monies in the future to fund working capital and capital expenditures and for other general corporate purposes.
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The Loan and Security Agreement, as amended, requires us to maintain at least $2.0 million in unrestricted cash and/or cash equivalents and includes certain reporting and other covenants, that, among other things, restrict our ability to (i) dispose of assets, (ii) change the business we conduct, (iii) make acquisitions, (iv) engage in mergers or consolidations, (v) incur additional indebtedness, (vi) create liens on assets, (vii) maintain any collateral account, (viii) pay dividends, (ix) make investments, loans or advances, (x) engage in certain transactions with affiliates, and (xi) prepay certain other indebtedness or amend other financing arrangements. If we fail to comply with any of these covenants or restrictions, such failure may result in an event of default, which if not cured or waived, could result in Oxford causing the outstanding loan amount ($9.3 million as of June 30, 2019) to become immediately due and payable. If the maturity of our indebtedness is accelerated, we may not have, or be able to timely procure, sufficient cash resources to satisfy our debt obligations, and such acceleration would adversely affect our business and financial condition.
We may not be able to correctly estimate or control our future operating expenses, which could lead to cash shortfalls.
Our budgeted expense levels are based in part on our expectations concerning future research and development activities. We may be unable to reduce our expenditures in a timely manner to compensate for any unexpected events. Accordingly, unexpected events could have an immediate and material impact on our business and financial condition.
Risks Related to Our Business and Industry
Our future success is in large part dependent upon our ability to successfully integrate and develop our Nanomedicine platform and commercialize our DoxoPLUS and DocePLUS Nanomedicine product candidates, and any failure to do so could significantly harm our business and prospects.
In February 2017, we acquired substantially all of the assets of Azaya Therapeutics Inc., or Azaya, including Azaya’s two
product
candidates, DoxoPLUS and DocePLUS, and related manufacturing equipment and inventory. Our ability to successfully integrate, develop and commercialize these assets is subject to a number of risks, including the following:
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We do not have substantive drug development, manufacturing, and commercialization experience, and thus we may be required to hire and rely on significant numbers of scientific, quality, regulatory and other technical personnel with the experience and expertise necessary to develop, manufacture, and commercialize our Plus Therapeutics Nanomedicine product candidates. We may be unable to identify, hire and retain personnel with the requisite experience to conduct the operations necessary to obtain regulatory approval and commercialize our DoxoPLUS and DocePLUS product candidates, in which case our business would be materially harmed;
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We intend to find a commercialization partner to share or assume responsibility for marketing, sales, and distribution activities and related costs and expenses for our DocePLUS product candidate. There can be no assurance that we would obtain sufficient capital to fund the development, manufacturing, and commercialization of our Nanomedicine program ourselves, or if we do obtain such capital, that our development, manufacturing, and commercialization efforts would be successful;
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Conduct of this acquired business will require significant capital, and to the extent that we incur unanticipated expenses in our business, are unable to timely obtain sufficient additional capital on terms acceptable to us (or at all) to fund this business, our ability to develop our DocePLUS product candidate could be materially and adversely impacted;
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We have discontinued development activities for DoxoPlus and are actively seeking to monetize this asset. New competitive products become commercially available before we launch DocePLUS;
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We are not experienced in acquiring and integrating new businesses.
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If we are unable to successfully partner with other companies to commercialize our product candidates, our business could materially suffer.
A key part of our business strategy is to leverage strategic partnerships/collaborations to commercialize our product candidates. We do not have the financial, human or other resources necessary to develop, commercialize, launch or sell our therapeutic offerings in all of the geographies that we are targeting, and thus it is important that we identify and partner with third parties who possess the necessary resources to bring our products to market. We expect that any such partners will provide regulatory and reimbursement/pricing expertise, sales and marketing resources, and other expertise and resources vital to the success of our product offerings in their territories. We further expect, but cannot guarantee, that any such partnering arrangements will include upfront cash payments to us in return for the rights to develop, manufacture, and/or sell our products in specified territories, as well as downstream revenues in the form of milestone payments and royalties.
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Our current business strategy is high-risk.
Our current business strategy is to aggressively develop our Nanomedicine platforms, while simultaneously controlling expenses, which is a high-risk strategy for a number of reasons including the following:
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we do not have an operating history as a drug company, or prior experience with obtaining regulatory, reimbursement or other approvals for product candidates such as DocePLUS;
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our Nanomedicine product candidates, if commercialized, will compete against established competitive drugs that are marketed and sold by large companies with significant human, technical and financial resources;
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we are not experienced in acquiring and integrating new assets, such as those acquired from Azaya;
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there is an intense and rapidly evolving competitive landscape for our Nanomedicine product candidates, including chemotherapies, targeted therapies and immuno-oncology therapies, and as such key assumptions regarding market entry, pricing, and revenue/unit share may not be realized;
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our product candidates may never become commercially viable; and
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we may not be able to prevent other companies from depriving us of market share and profit margins by selling products based on our intellectual property and developments.
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We face intense competition, and if our competitors market and/or develop products that are marketed more effectively, approved more quickly than our product candidates or demonstrated to be safer or more effective than our products, our commercial opportunities could be reduced or eliminated
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The life science industry is characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary therapeutics. We face competition from a number of sources, some of which may target the same indications as our products or product candidates, including small and large, domestic and multinational, medical device, biotechnology and pharmaceutical companies, academic institutions, government agencies and private and public research institutions, many of which have greater financial resources, sales and marketing capabilities, including larger, well-established sales forces, manufacturing capabilities, experience in obtaining regulatory approvals for product candidates and other resources than we do.
We expect that product candidates in our pipeline, if approved, to compete on the basis of, among other things, product efficacy and safety, time to market, price, coverage and reimbursement by third-party payers, extent of adverse side effects and convenience of treatment procedures. One or more of our competitors may develop other products that compete with ours, obtain necessary approvals for such products from the FDA, EMA, Ministry of Health, Labour and Welfare or other agencies, if required, more rapidly than we do or develop alternative products or therapies that are safer, more effective and/or more cost effective than any products developed by us. The competition that we encounter with respect to any of our product candidates that receive the requisite regulatory approval and classification and are marketed may have an effect on our product prices, market share and results of operations. We may not be able to differentiate any products that we are able to market from those of our competitors, successfully develop or introduce new products that are less costly or offer better results than those of our competitors, or offer purchasers of our products payment and other commercial terms as favorable as those offered by our competitors. In addition, competitors may seek to develop alternative formulations of or technological approaches to our product candidates and/or drug delivery technologies that address our targeted indications.
We may face competition for our DocePLUS product candidate (which is intended for the treatment of small cell lung cancer) from multiple drug classes.
Companies that are developing or have commercialized nanoparticle-docetaxel products, including both oral and intravenous formulations, and may be future competitors for our DocePLUS product candidate include, but are not limited to, Adocia, Athenex, Bind Therapeutics, Cerulean, Cristal Therapeutics, Intas, LIDDS, Merrimack, Modra, NanOlogy, Oasmia, and Starpharma.
Competitors may have greater experience in developing drugs, conducting clinical trials, obtaining regulatory clearances or approvals, manufacturing and commercialization. It is possible that competitors may obtain patent protection, approval, or clearance from the FDA or achieve commercialization earlier than we can, any of which could have a substantial negative effect on our business.
Compared to us, many of our potential competitors have substantially greater:
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research and development resources and experience, including personnel and experience;
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product development, clinical trial and regulatory resources and experience;
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sales and marketing resources and experience;
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manufacturing and distribution resources and experience;
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name, brand and product recognition; and
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resources, experience and expertise in prosecution and enforcement of intellectual property rights.
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As a result of these factors, our competitors may obtain regulatory approval of their products more quickly than we are able to or may obtain patent pro
tection or other intellectual property rights that limit or block us from developing or commercializing our product candidates. Our competitors may also develop products that are more effective, more useful, better tolerated, subject to fewer or less sever
e side effects, more widely prescribed or accepted or less costly than ours and may also be more successful than we are in manufacturing and marketing their products. If we are unable to compete effectively with the marketed therapeutics of our competitors
or if such competitors are successful in developing products that compete with any of our product candidates that are approved, our business, results of operations, financial condition and prospects may be materially adversely affected.
Our clinical trials may fail to demonstrate acceptable levels of safety and efficacy for any of our product candidates, which could prevent or significantly delay their regulatory approval and commercialization,
which would have a material and adverse impact on our business.
Clinical testing of our product candidates is a long, expensive and uncertain process, and the failure or delay of a clinical trial can occur at any stage. Many factors, currently known and unknown, can adversely affect clinical trials and the ability to evaluate a product candidate’s efficacy. During the course of treatment, patients can die or suffer other adverse events for reasons that may or may not be related to the proposed product being tested. Even if initial results of preclinical and nonclinical studies or clinical trial results are promising, we may obtain different results in subsequent trials or studies that fail to show the desired levels of safety and efficacy, or we may not obtain applicable regulatory approval for a variety of other reasons.
Further, with respect to the conduct and results of clinical trials generally, in the United States, Europe, Japan and other jurisdictions, the conduct and results of clinical trials can be delayed, limited suspended, or otherwise adversely affected for many reasons, including, among others:
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clinical results may not meet prescribed endpoints for the studies or otherwise provide sufficient data to support the efficacy of our product candidates;
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clinical and nonclinical test results may reveal side effects, adverse events or unexpected safety issues associated with the use of our product candidates;
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lack of adequate funding to continue the clinical trial, including the incurrence of unforeseen costs due to enrollment delays, requirements to conduct additional trials and studies and increased expenses associated with the services of our contract research organizations, or CROs, and other third parties;
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inability to design appropriate clinical trial protocols;
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slower than expected rates of subject recruitment and enrollment rates in clinical trials;
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regulatory review may not find a product safe or effective enough to merit either continued testing or final approval;
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regulatory review may not find that the data from preclinical testing and clinical trials justifies approval;
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regulatory authorities may require that we change our studies or conduct additional studies which may significantly delay or make continued pursuit of approval commercially unattractive;
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a regulatory agency may reject our trial data or disagree with our interpretations of either clinical trial data or applicable regulations;
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the cost of clinical trials required for product approval may be greater than what we originally anticipate, and we may decide to not pursue regulatory approval for such a product;
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a regulatory agency may identify problems or other deficiencies in our existing manufacturing processes or facilities or the existing processes or facilities of our collaborators, our contract manufacturers or our raw material suppliers;
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a regulatory agency may change its formal or informal approval requirements and policies, act contrary to previous guidance, adopt new regulations or raise new issues or concerns late in the approval process;
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a product candidate may be approved only for indications that are narrow or under conditions that place the product at a competitive disadvantage, which may limit the sales and marketing activities for such products or otherwise adversely impact the commercial potential of a product; and
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a regulatory agency may ask us to put a clinical study on hold pending additional safety data; (and there can be no assurance that we will be able to satisfy the regulator agencies’ requests in a timely manner, which can lead to significant uncertainty in the completion of a clinical study).
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We also face clinical trial-related risks with regard to our reliance on other third parties in the performance of many of the clinical trial functions, including CROs, that help execute our clinical trials, the hospitals and clinics at which our t
rials are conducted, the clinical investigators at the trial sites, and other third-party service providers. Failure of any third-party service provider to adhere to applicable trial protocols, laws and regulations in the conduct of one of our clinical tri
als could adversely affect the conduct and results of such trial (including possible data integrity issues), which could seriously harm our business.
Our success depends in substantial part on our ability to obtain regulatory approvals for our DocePLUS product candidate. However, we cannot be certain that we will receive regulatory approval for this product candidate or our other product candidates.
We have only a limited number of product candidates in development, and our business depends substantially on their successful development and commercialization. Our product candidates will require development, regulatory review and approval in multiple jurisdictions, substantial investment, access to sufficient commercial manufacturing capacity and significant marketing efforts before we can generate any revenues from sales of our product candidates. The research, testing, manufacturing, labeling, approval, sale, marketing and distribution of products are subject to extensive regulation by the FDA and other regulatory
authorities in the United States and other countries, whose regulations differ from country to country.
We are not permitted to market our product candidates in the United States until we receive approval from the FDA, or in any foreign countries until we receive the requisite approval from the regulatory authorities of such countries (including centralized marketing authorization from the European Medicines Agency), and we may never receive such regulatory approvals. Obtaining regulatory approval for a product candidate is a lengthy, expensive and uncertain process, and may not be obtained. Any failure to obtain regulatory approval of any of our product candidates would limit our ability to generate future revenues (and any failure to obtain such approval for all of the indications and labeling claims we deem desirable could reduce our potential revenue), would potentially harm the development prospects of our product candidates and would have a material and adverse impact on our business.
Even if we successfully obtain regulatory approvals to market our product candidates, our revenues will be dependent, in part, on our ability to commercialize such products as well as the size of the markets in the territories for which we gain regulatory approval. If the markets for our product candidates are not as significant as we estimate, our business and prospects will be harmed.
If a product candidate is not approved in a timely fashion on commercially viable terms, or if development of any product candidate is terminated due to difficulties or delays encountered in the regulatory approval process, it could have a material adverse effect on our business, and we may become more dependent on the development of other proprietary products and/or our ability to successfully acquire other products and technologies. There can be no assurance that any product candidate will receive regulatory approval in a timely manner, or at all.
If our product candidates and technologies receive regulatory approval but do not achieve broad market acceptance, especially by physicians, the revenues that we generate will be limited.
The commercial success of any of our approved products or technologies will depend upon the acceptance of these products and technologies by physicians, patients and the medical community. The degree of market acceptance of these products and technologies will depend on a number of factors, including, among others:
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acceptance by physicians and patients of the product as a safe and effective treatment;
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any negative publicity or political action related to our or our competitors’ products or technologies;
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the relative convenience and ease of administration;
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the prevalence and severity of adverse side effects;
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demonstration to authorities of the pharmacoeconomic benefits;
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demonstration to authorities of the improvement in burden of illness;
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limitations or warnings contained in a product’s approved labeling;
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payers’ level of restrictions and/or barriers to coverage;
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the clinical indications for which a product is approved;
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availability and perceived advantages of alternative treatments;
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the effectiveness of our or any current or future collaborators’ sales, marketing and distribution strategies; and
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pricing and cost effectiveness.
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Our DocePLUS product candidate, if developed and commercialized, would compete against a number of established drugs, including Taxotere® (Sanofi S.A.) and Hycamtin® (Novartis), as well as other products being developed and commercialized by competitors for the same target clinical indication.
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We expect physicians’ inertia and skepticism to also be a significant barrier as we attempt to gain market penetration with our future products. We believe we will continue to need to finance lengthy time-consuming clinical studies to provide evidence of t
he medical benefit of our products and resulting therapies in order to overcome this inertia and skepticism.
Overall, our efforts to educate the medical community on the benefits of any of our products or technologies for which we obtain marketing approval from the FDA or other regulatory authorities and gain broad market acceptance may require significant resources and may never be successful. If our products and technologies do not achieve an adequate level of acceptance by physicians, pharmacists and patients, we may not generate sufficient revenue from these products to become or remain profitable.
Many potential applications of our product candidates are pre-commercial, which subjects us to development and marketing risks.
Our product candidates are at various stages of development. Successful development and market acceptance of our products is subject to developmental risks, including risk of negative clinical data from current and anticipated trials, failure of inventive imagination, ineffectiveness, lack of safety, unreliability, manufacturing hurdles, failure to receive necessary regulatory clearances or approvals, high commercial cost, preclusion or obsolescence resulting from third parties’ proprietary rights or superior or equivalent products, competition from copycat products and general economic conditions affecting purchasing patterns. There can be no assurance that we or our partners will successfully develop and commercialize our product candidates, or that our competitors will not develop competing technologies that are less expensive or superior. Failure to successfully develop and market our product candidates would have a substantial negative effect on our results of operations and financial condition.
If we or any party to a key collaboration, licensing, development, acquisition or similar arrangement fails to perform material obligations under such arrangement, or any arrangement is terminated for any reason, there could be an adverse effect on our business
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We are currently party to certain licensing, collaboration and acquisition agreements under which we may make or receive future payments in the form of milestone payments, maintenance fees, royalties and/or minimum product purchases. Our collaborators may not devote the attention and resources to such efforts to be successful. The termination of a key collaboration agreement by one of our collaborators could materially impact our ability to enter into additional collaboration agreements with new collaborators on favorable terms.
Risks relating to our current material collaborations (excluding our BARDA partnership, which is discussed below in these “Risk Factors”) include the following:
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Under our asset purchase agreement with Azaya, we are required to use commercial reasonable efforts to develop our DoxoPLUS and DocePLUS product candidates, and we have future milestone, earn-out and other payments to Azaya tied to our commercialization and sale activities for these product candidates. If we are unsuccessful in our efforts to develop our DoxoPLUS and DocePLUS drug assets, or if Azaya and we were to enter into a dispute over the terms of our agreement, then our business could be seriously harmed.
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If we or collaborators fail to comply with regulatory requirements applicable to the development, manufacturing, and marketing of our products, regulatory agencies may take action against us or them, which could significantly harm our business.
Our product candidates, along with the clinical development process, the manufacturing processes, post-approval clinical data, labeling, advertising and promotional activities for these products, are subject to continual requirements and review by the FDA and state and foreign regulatory bodies. Regulatory authorities subject a marketed product, its manufacturer and the manufacturing facilities to continual review and periodic inspections. We, our collaborators, and our and their respective contractors, suppliers and vendors, will be subject to ongoing regulatory requirements, including complying with regulations and laws regarding advertising, promotion and sales of products, required submissions of safety and other post-market information and reports, registration requirements, Clinical Good Manufacturing Practices (cGMP) regulations (including requirements relating to quality control and quality assurance, as well as the corresponding maintenance of records and documentation), and the requirements regarding the distribution of samples to physicians and recordkeeping requirements. Regulatory agencies may change existing requirements or adopt new requirements or policies. We, our collaborators, and our and their respective contractors, suppliers and vendors, may be slow to adapt or may not be able to adapt to these changes or new requirements.
Failure to comply with regulatory requirements may result in any of the following:
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restrictions on our products or manufacturing processes;
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withdrawal of the products from the market;
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voluntary or mandatory recall;
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suspension or withdrawal
of regulatory approvals;
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suspension or termination of any of our ongoing clinical trials;
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refusal to permit the import or export of our products;
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refusal to approve pending applications or supplements to approved applications that we submit;
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imposition of civil or criminal penalties.
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We and our product candidates are subject to extensive regulation, and the requirements to obtain regulatory approvals in the United States and other jurisdictions can be costly, time-consuming and unpredictable. If we or our partners are unable to obtain timely regulatory approval for our product candidates, our business may be substantially harmed.
The worldwide regulatory process for our Nanomedicine
product
candidates can be lengthy and expensive, with no guarantee of approval.
Before any new drugs may be introduced to the U.S. market, the manufacturer generally must obtain FDA approval through either an abbreviated new drug application, or ANDA, process for generic drugs off patent that allow for bioequivalence to an existing reference listed drug, or RLD, or the lengthier new drug approval, or NDA, process, which typically requires multiple successful and successive clinical trials to generate clinical data supportive of safety and efficacy along with extensive pharmacodynamic and pharmacokinetic preclinical testing to demonstrate safety. Our lead product candidate under development (DocePLUS) is subject to the FDA’s 505(b)(2) NDA process. NDA drugs can take significant time due to the preclinical and clinical trial requirements.
There are numerous risks arising out of the regulation of our Nanomedicine product candidates include the following:
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We can provide no assurances that our current and future oncology drugs will meet all of the stringent government regulation in the United States, by the FDA under the Federal Food, Drug and Cosmetic Act, and/or in international markets such as Europe, by the EMA under its Medicinal Products Directive.
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Our Nanomedicine product candidates, if approved, will still be subject to post-market reporting requirements for deaths or serious injuries when the drug may have caused or contributed to the death or serious injury, or serious adverse events. There are no assurances that our product candidates will not have safety or effectiveness problems occurring after the drugs reach the market. There are no assurances that regulatory authorities will not take steps to prevent or limit further marketing of the drug due to safety concerns.
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It is possible that the new legislation in our priority markets, such as the 21st Century Cures Act in the United States, will yield additional regulatory requirements for therapeutic drugs for our Nanomedicine product candidates (the FDA’s interpretation and implementation of the 21st Century Cures Act has yet to be published).
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Changing, new and/or emerging government regulations may adversely affect us.
Any regulatory review committees and advisory groups and any contemplated new guidelines may lengthen the regulatory review process, require us to perform additional studies, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of our product candidates or lead to significant post-approval limitations or restrictions. As we advance our product candidates, we may be required to consult with these regulatory and advisory groups and comply with applicable guidelines. If we fail to do so, we may be required to delay or discontinue development of our product candidates. Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a product candidate to market could decrease our ability to generate sufficient revenue to maintain our business. Divergence in regulatory criteria for different regulatory agencies around the globe could result in the repeat of clinical studies and/or preclinical studies to satisfy local territory requirements, resulting in the repeating of studies and/or delays in the regulatory process. Some territories may require clinical data in their indigenous population, resulting in the repeat of clinical studies in whole or in part. Some territories may object to the formulation ingredients in the final finished product and may require reformulation to modify or remove objectionable components; resulting in delays in regulatory approvals. Such objectionable reformulations include, but are not limited to, human or animal components, BSE/TSE risks, banned packaging components, prohibited chemicals, banned substances, etc. There can be no assurances that the FDA or foreign regulatory authorities will accept our pre-clinical and/or clinical data.
Anticipated or unanticipated changes in the way or manner in which the FDA or other regulators regulate products or classes/groups of products can delay, further burden, or alleviate regulatory pathways that were once available to other products. There are no guarantees that such changes in the FDA’s or other regulators’ approach to the regulatory process will not deleteriously affect some or all of our products or product applications.
Our nanoparticle technology is subject to government regulations that are subject to change.
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Our pipeline oncology products, such as DocePLUS, are being developed under existing government criteria, which are subject to change in the future. Clinical and/or pre-clinical criteria in addition to cGMP manufacturing requirements may change and impose
additional regulatory burdens. Clinical requirements are subject to change which may result in delays in completing the regulatory process. Divergence in regulatory criteria for different regulatory agencies around the globe could result in the repeat of c
linical studies and/or preclinical studies to satisfy local jurisdictional requirements, which would significantly lengthen the regulatory process and increase uncertainty of outcome. Some jurisdictions may require clinical data in their indigenous popula
tion, resulting in the repeat of clinical studies in whole or in part. Some jurisdictions may object to the formulation ingredients in the final finished product and may require reformulation to modify or remove objectionable components; resulting in delay
s in regulatory approvals. Such objectionable reformulations include, but are not limited to, human or animal components, bovine spongiform encephalopathy/ transmissible spongiform encephalopathy risks, banned packaging components, prohibited chemicals, b
anned substances, etc. There can be no assurance that the FDA or foreign regulatory authorities will accept our pre-clinical and/or clinical data.
Orphan drug designation may not ensure that we will enjoy market exclusivity in a particular market, and if we fail to obtain or maintain orphan drug designation or other regulatory exclusivity for some of our product candidates, our competitive position would be harmed.
A product candidate that receives orphan drug designation can benefit from potential commercial benefits following approval. Under the U.S. Orphan Drug Act, the FDA may designate a product candidate as an orphan drug if it is intended to treat a rare disease or condition, defined as affecting a patient population of fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the United States. In the European Union, or EU, the EMA’s Committee for Orphan Medicinal Products, or COMP, grants orphan drug designation to promote the development of products that are intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition affecting not more than 10,000 persons in the EU. Currently, this designation provides market exclusivity in the U.S. and the European Union for seven years and ten years, respectively, if a product is the first such product approved for such orphan indication. This market exclusivity does not, however, pertain to indications other than those for which the drug was specifically designated in the approval, nor does it prevent other types of drugs from receiving orphan designations or approvals in these same indications. Further, even after an orphan drug is approved, the FDA can subsequently approve a drug with similar chemical structure for the same condition if the FDA concludes that the new drug is clinically superior to the orphan product or a market shortage occurs. In the EU, orphan exclusivity may be reduced to six years if the drug no longer satisfies the original designation criteria or can be lost altogether if the marketing authorization holder consents to a second orphan drug application or cannot supply enough drug, or when a second applicant demonstrates its drug is “clinically superior” to the original orphan drug.
If we experience an interruption in supply from a material sole source supplier, our business may be harmed
We acquire some our components and other raw materials from sole source suppliers. If there is an interruption in supply of our raw materials from a sole source supplier, there can be no assurance that we will be able to obtain adequate quantities of the raw materials within a reasonable time or at commercially reasonable prices. Interruptions in supplies due to pricing, timing, availability or other issues with our sole source suppliers could have a negative impact on our ability to manufacture products and product candidates, which in turn could adversely affect the development and commercialization of our Nanomedicine product candidates and cause us to potentially breach our supply or other obligations under our agreements with certain other counterparties.
We are dependent on sole source suppliers to manufacture the API (active pharmaceutical ingredient) and certain other components of our Nanomedicine
product
candidates. There are no assurances that these sole source suppliers will enter into supply agreements with us to provide contractual assurance to us around supply and pricing. Regardless whether a sole source supplier enters into a written supply arrangement with us, such supplier could still delay, suspend or terminate supply of raw materials to us for a number of reasons, including manufacturing or quality issues, payment disputes with us, bankruptcy or insolvency, or other occurrences.
If a sole source supplier ceases supply of raw materials necessary there is no guarantee that we will find an alternative supplier for the necessary raw materials on terms acceptable to us, or at all. Further the qualification process for a new vendor could take months or even years, and any such day in qualification could significantly harm our business.
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If
we are unable to identify, hire and/or retain key personnel, we may not be able to sustain or grow our business.
Our ability to operate successfully and manage our potential future growth depends significantly upon our ability to attract, retain, and motivate highly skilled and qualified research, technical, clinical, regulatory, sales, marketing, managerial and financial personnel. We compete for talent with numerous companies, as well as universities and non-profit research organizations. In the future, we may hire a significant number of scientists, quality and regulatory personnel, and other technical staff with the requisite expertise to support and expand our Nanomedicine business. The manufacturing of our oncology drug assets is a highly complex process that requires significant experience and know-how. If we are unable to attract personnel with the necessary skills and experience to reestablish and expand our Nanomedicine business, which is currently conducted out of our San Antonio, Texas facility, our business could be harmed.
Our future success also depends on the personal efforts and abilities of the principal members of our senior management and scientific staff to provide strategic direction, manage our operations, and maintain a cohesive and stable environment. In particular,
we are highly dependent on our executive officers, especially Marc Hedrick, M.D., our Chief Executive Officer. Given his leadership, extensive technical, scientific and financial expertise and management and operational experience, Dr. Hedrick would be difficult to replace. Consequently, the loss of services of Dr. Hedrick or any other executive officer could result in product development delays or the failure of our collaborations with current and future collaborators, which, in turn, may hurt our ability to develop and commercialize products and generate revenues.
We have not entered into any employment agreements with our executive officers or key personnel, nor do we maintain key man life insurance on the lives of any of the members of our senior management. The loss of key personnel for any reason or our inability to hire, retain, and motivate additional qualified personnel in the future could prevent us from sustaining or growing our business.
Our restructuring activities may not be successful, and our restructuring activities may cause uncertainty regarding the future of our business and may adversely impact employee hiring and retention, our stock price and our results of operations and financial condition.
On July 1, 2019, we announced a corporate restructuring, including reducing combined staffing in our Texas and California facilities by 46% overall, reducing our office space in San Diego, California and streamlining and outsourcing our operations to better focus on our drug pipeline, and in particular DocePLUS, in order to extend our cash resources. As a result, we expect to incur a restructuring charge of approximately $0.1 million in connection with one-time employee termination costs, including severance and other benefits, which costs are expected to be incurred primarily in the third quarter of 2019. We are not yet able to make a determination of each other major type of cost associated with the restructuring. The estimates of costs that we expect to incur and the timing thereof are subject to a number of assumptions and actual results may differ from initial estimates.
Our ability to achieve the anticipated benefits, including the anticipated cost savings, of our restructuring activities within expected timeframes is subject to many estimates, assumptions and uncertainties. Additional restructuring or reorganization activities may also be required in the future, which could further increase the risks associated with these activities. There is no assurance that we will successfully implement, or fully realize the anticipated impact of, our restructuring or execute successfully on our restructuring plan, in the timeframes we desire or at all. If we fail to realize the anticipated benefits from these measures, or if we incur charges or costs in amounts that are greater than anticipated, our financial condition and operating results may be adversely affected. Additionally,
our restructuring efforts, including a significant reduction in our employee headcount, may disrupt our staff and our business, and we may not be successful, or as successful, in advancing our existing Nanomedicine candidates, or in discovering or developing new Nanomedicine candidates as a result of lower staffing levels and potential reductions in our spending on these programs due to the restructuring.
The changes and potential changes to our operations and the workforce reduction measures as a result of the restructuring, may introduce uncertainty regarding our prospects and may result in disruption of our business. As a result of these actions, we incurred significant expenses and charges, including the approximately $570,000 charge incurred as a result of restructuring and cancelation of our San Diego headquarters lease announced on February 2018, and we may incur additional expenses and charges related to these actions. In addition, these changes and measures could distract our employees, decrease employee morale and make it more difficult to retain and hire new talent, and harm our reputation. These changes and activities caused our stock price to decline and may cause it to further decline in the future. As a result of these or other similar risks, our business, results of operations and financial condition may be adversely affected.
We face potential product liability exposure, and if successful claims are brought against us, we may incur substantial liability if our insurance coverage for those claims is inadequate.
The clinical use of our product candidates exposes us to the risk of product liability claims. This risk exists even if a product or product candidate is approved for commercial sale by applicable regulatory authorities and manufactured in facilities regulated by such authorities. Our product candidates are designed to affect important bodily functions and processes. Any side effects, manufacturing defects, misuse or abuse associated with our product candidates could result in injury to a patient or even death. For example, DoxoPLUS is cytotoxic, or toxic to living cells, and, if incorrectly or defectively manufactured or labeled, or incorrectly dosed or otherwise used in a manner not contemplated by its label, could result in patient harm and even death. In addition, a liability claim may be brought against us even if our product candidates merely appear to have caused an injury.
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Product liability claims may be brought against us by consumers, health care providers, pharmaceutical companies or others selling or otherwise coming into contact with our products or product candidates,
if approved, among others. If we cannot successfully defend ourselves against product liability claims, we will incur substantial liabilities. In addition, regardless of merit or eventual outcome, product liability claims may result in:
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the inability to commercialize our product candidates;
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decreased demand for our product candidates, if approved;
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impairment of our business reputation;
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product recall or withdrawal from the market;
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withdrawal of clinical trial participants;
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costs of related litigation;
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distraction of management’s attention from our primary business;
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substantial monetary awards to patients or other claimants; or
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We have obtained product liability insurance coverage for clinical trials with a $10 million per occurrence and annual aggregate coverage limit. Our insurance coverage may not be sufficient to cover all of our product liability related expenses or losses and may not cover us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive, and, in the future, we may not be able to maintain insurance coverage at a reasonable cost, in sufficient amounts or upon adequate terms to protect us against losses due to product liability. If we determine that it is prudent to increase our product liability coverage, we may be unable to obtain this increased product liability insurance on commercially reasonable terms or at all. Large judgments have been awarded in class action or individual lawsuits based on drugs that had unanticipated side effects. A successful product liability claim or series of claims brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could decrease our cash and have a material adverse effect on our business, results of operations, financial condition and prospects.
Risks Relating to Our Intellectual Property
Our success depends in part on our ability to protect our intellectual property. It is difficult and costly to protect our proprietary rights and technology, and we may not be able to ensure their protection.
Our success depends in part on our ability to obtain and maintain patent, trademark and trade secret protection of our platform technology and current product candidates, including but not limited to our Nanomedicine product candidates, including DoxoPLUS and DocePLUS, as well as successfully defending our intellectual property against third-party challenges. Our ability to stop unauthorized third parties from making using selling, offering to sell or importing our platform technology and/or our product candidates is dependent upon the extent to which we have rights under valid and enforceable patents or trade secrets that cover these activities.
The degree of future protection for our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage. For example:
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we, or Azaya, as the case may be, might not have been the first to file patent applications for the covered inventions;
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it is possible that our pending patent applications will not result in issued patents;
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it is possible that there are dominating patents to our products of which we are not aware;
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it is possible that there are prior public disclosures that could invalidate our patents, of which we are not aware;
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it is possible that others may circumvent our patents;
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it is possible that there are unpublished applications or patent applications maintained in secrecy that may later issue with claims covering our products or technology similar to ours;
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the claims of our patents or patent applications, if and when issued, may not cover our system or products, or our system or product candidates;
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our owned or in-licensed issued patents may not provide us with any competitive advantages, or may be narrowed in scope, be held invalid or unenforceable as a result of legal administrative challenges by third parties;
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others may be able to make or use compounds that are the same or similar to the DocePLUS product but that are not covered by the claims of our patents;
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we may not be able to detect infringement against our patents, which may be especially difficult for manufacturing processes or formulation patents, such as the patents/applications related to DocePLUS;
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the API in DoxoPLUS and DocePLUS are commercially available in generic drug products;
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we may not develop additional proprietary technologies for which we can obtain patent protection; or
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the patents of others may have an adverse effect on our business.
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The patent positions of pharmaceutical, biopharmaceutical and medical device companies can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. No consistent policy regarding the breadth of claims allowed in patents in these fields has emerged to date in the United States. There have been recent changes regarding how patent laws are interpreted, and both the U.S. Patent and Trademark Office, or the USPTO, and Congress have recently made significant changes to the patent system. There have been three U.S. Supreme Court decisions that now show a trend of the Supreme Court which is distinctly negative on patents. The trend of these decisions along with resulting changes in patentability requirements being implemented by the USPTO could make it increasingly difficult for us to obtain and maintain patents on our products. We cannot accurately predict future changes in the interpretation of patent laws or changes to patent laws which might be enacted into law. Those changes may materially affect our patents, our ability to obtain patents and/or the patents and applications of our collaborators and licensors. The patent situation in these fields outside the United States is even more uncertain. Changes in either the patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property or narrow the scope of our patent protection. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in the patents we own or to which we have a license or third-party patents.
Intellectual property law outside the United States is uncertain and in many countries is currently undergoing review and revisions. The laws of some countries do not protect our patent and other intellectual property rights to the same extent as United States laws. Third parties may attempt to oppose the issuance of patents to us in foreign countries by initiating opposition proceedings. Opposition proceedings against any of our patent filings in a foreign country could have an adverse effect on our corresponding patents that are issued or pending in the United States. It may be necessary or useful for us to participate in proceedings to determine the validity of our patents or our competitors’ patents that have been issued in countries other than the United States. This could result in substantial costs, divert our efforts and attention from other aspects of our business, and could have a material adverse effect on our results of operations and financial condition. We currently have pending patent applications in Europe, Australia, Japan, Canada, China, South Korea, Brazil, South Africa, among other jurisdictions.
Our intellectual property related to Nanomedicine was acquired from Azaya. As DoxoPLUS is a generic drug, we did not acquire any patents related to DoxoPLUS. We acquired two issued patents and one patent application related to DocePLUS from Azaya, and intend to file additional patent applications around our DocePLUS product candidate. There is no guaranty that any patent applications we file on DocePLUS will issue, or if issued, that we will be to use and enforce these patents as an effective component of our intellectual property strategy.
Failure to obtain or maintain patent protection or protect trade secrets, for any reason (or third-party claims against our patents, trade secrets, or proprietary rights, or our involvement in disputes over our patents, trade secrets, or proprietary rights, including involvement in litigation), could have a substantial negative effect on our results of operations and financial condition.
Risks Relating to the Securities Markets and an Investment in Our Stock
We could be delisted from Nasdaq, which could seriously harm the liquidity of our stock and our ability to raise capital.
Following notice from Nasdaq staff in June 2015 and December 2015, we had a hearing in January 2016 relating to our noncompliance with the $1.00 minimum bid price per share requirement. The Nasdaq Hearing Panel granted us until May 31, 2016 to come into compliance with the minimum bid price requirement, including requirements relating to obtaining stockholders approval of a reverse stock split that would bring our stock price above $1.00 per share for a minimum of 10 consecutive trading days. We transferred the listing of our common stock from the Nasdaq Global Market to the Nasdaq Capital Market in February 2016. In May 2016, we consummated a 1-for-15 reverse stock split pursuant to which the minimum bid price per share of our common stock rose above $1.00. Pursuant to a letter dated May 26, 2016, the Nasdaq staff delivered notice to us that we had regained compliance with Nasdaq’s minimum bid price rule.
On September 5, 2017, we received a written notice from Nasdaq staff indicating that, based upon the closing bid price of our common stock for the prior 30 consecutive business days, we no longer met the requirement to maintain a minimum bid price of $1.00 per share, as set forth in Nasdaq Listing Rule 5550(a)(2). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we were provided a period of 180 calendar days, or until March 5, 2018, in which to regain compliance. We were granted an additional compliance period of 180 calendar days, or until September 4, 2018, in which to regain compliance after meeting the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, with the exception of the bid price requirement, and providing notice to Nasdaq staff of our intent to cure the deficiency during this second compliance period, by
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effecting a reverse stock split, if necessary. In May 2018, we consummated a 1-for-10 reverse stock split pursuant
to which the minimum bid price of our common stock rose above $1.00. On June 8, 2018, we received written notice from Nasdaq that we had regained compliance with the Nasdaq Stock Market Listing Rule 5500(a)(2) concerning our minimum bid price per share of
our common stock.
On August 28, 2018, we received a written notice from Nasdaq staff indicating that, based upon the closing bid price of our common stock for the prior 30 consecutive business days, we no longer meet the requirement to maintain a minimum bid price of $1.00 per share, as set forth in Nasdaq Listing Rule 5550(a)(2). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we were provided an initial period of 180 calendar days, or until February 25, 2019, in which to regain compliance. We were also granted an additional compliance period of 180 calendar days, or until August 26, 2019, in which to regain compliance after meeting the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, with the exception of the bid price requirement, and providing notice to Nasdaq staff of our intent to cure the deficiency during this second compliance period, by effecting a reverse stock split, if necessary. In order to regain compliance with the minimum bid price requirement, the closing bid price of our common stock must have been at least $1.00 per share for a minimum of 10 consecutive business days during the 180-day period. In August 2019, we consummated a 1-for-50 reverse stock split pursuant to which the minimum bid price of our common stock rose above $1.00. If the closing bid price of our common stock remains above $1.00 per share, we expect to regain compliance with the minimum bid price requirement on August 19, 2019. However, based on our stockholders’ deficit of $6.3 million as of June 30, 2019, we will not meet the minimum stockholders’ equity requirement for continued listing on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(b)(1), which requires listed companies to maintain stockholders’ equity of at least $2.5 million, and we expect to receive written notice from Nasdaq staff to that effect following the filing of this Quarterly Report on Form 10-Q. In addition, as of June 30, 2019, we do not meet the alternative compliance standards relating to the market value of listed securities or net income from continuing operations. We intend to evaluate various courses of action to regain compliance with Nasdaq Listing Rule 5550(b)(1) within the compliance period specified by Nasdaq. However, there can be no assurance that we will be able to regain compliance within such compliance period.
If we cease to be eligible to trade on Nasdaq:
• We may have to pursue trading on a less recognized or accepted market, such as the OTC Bulletin Board or the “pink sheets.”
• Shares of our common stock could be less liquid and marketable, thereby reducing the ability of stockholders to purchase or sell our shares as quickly and as inexpensively as they have done historically. If our stock is traded as a “penny stock,” transactions in our stock would be more difficult and cumbersome.
• We may be unable to access capital on favorable terms or at all, as companies trading on alternative markets may be viewed as less attractive investments with higher associated risks, such that existing or prospective institutional investors may be less interested in, or prohibited from, investing in our common stock. This may also cause the market price of our common stock to decline.
Absence of a public trading market for our Series S warrants may limit the ability to resell the Series S warrants.
Our Series S warrants, or PSTVZ Warrants, are listed for trading on Nasdaq under the symbol “PSTVZ,” but there can be no assurance that a robust market will exist for the PSTVZ Warrants. Even if a market for the PSTVZ Warrants does develop, the price of the PSTVZ Warrants may fluctuate and liquidity may be limited. If the PSTVZ Warrants cease to be eligible for continued listing on Nasdaq, or if the market for the PSTVZ Warrants does not fully develop (or subsequently weakens), then holders of the PSTVZ Warrants may be unable to resell the PSTVZ Warrants or sell them only at an unfavorable price for an extended period of time, if at all. Future trading prices of the PSTVZ Warrants will depend on many factors, including:
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our operating performance and financial condition;
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our ability to continue the effectiveness of the registration statement covering the PSTVZ Warrants and the common stock issuable upon exercise of the PSTVZ Warrants;
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the interest of securities dealers in making and maintaining a market; and
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the market for similar securities.
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