As of September 24, 2021, the number
of shares outstanding of the registrant’s common stock, par value $0.0001 per share (the “Common Stock”) was
52,219,661.
Portions of the registrant’s Proxy
Statement for its 2021 Annual Meeting of stockholders are incorporated by reference into Part III of this Annual Report on Form
10-K or will be filed by amendment.
This Annual Report
on Form 10-K contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act
of 1995 regarding the plans and objectives of management for future operations and market trends and expectations. Forward-looking
statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements
are based upon our current assumptions, expectations and beliefs concerning future developments and their potential effect on our
business. In some cases, you can identify forward-looking statements by the following words: “may,” “could,”
“would,” “should,” “expect,” “intend,” “plan,” “anticipate,”
“believe,” “approximately,” “estimate,” “predict,” “project,” “potential”
or the negative of these terms or other comparable terminology, although the absence of these words does not necessarily mean that
a statement is not forward-looking.
Forward-looking
statements include, but are not limited to, statements concerning:
Such other factors
as discussed throughout Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
and in Part I, Item 1A. Risk Factors herein.
Information regarding
market and industry statistics contained in this report is included based on information available to us that we believe is accurate.
It is generally based on academic and other publications that are not produced for purposes of securities offerings or economic
analysis. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and
the additional uncertainties accompanying any estimates of future market size, revenue and market acceptance of products and services.
Except as required by U.S. federal securities laws, we have no obligation to update forward-looking information to reflect actual
results or changes in assumptions or other factors that could affect those statements.
PART I
Unless otherwise
indicated or the context otherwise requires, all references in this prospectus to “we,” “us,” “our”
or the “Company” are to Enochian BioSciences Inc., a Delaware corporation (“Registrant”), together with
its wholly owned subsidiaries, Enochian Biopharma, Inc., a Delaware corporation (“Enochian Biopharma”) Enochian Biosciences
Denmark ApS, a Danish limited company, organized under the Danish Act on Limited Companies of the Kingdom of Denmark (“DanDrit
Denmark”), and Enochian Technology, Inc., a Nevada corporation (“Enochian Technology”).
Our Business
We
are a pre-clinical stage biotechnology company committed to using our genetically modified cell, gene, and immune therapy technologies
to potentially prevent or cure HIV, HBV, influenza and coronavirus infections, as well as to provide potentially long-term or life-long
cancer remission in some of the deadliest cancers.
Over the past several
years, Enochian BioSciences has expanded the pipeline from a single potential cure for HIV (autologous transplantation with gene-modified
cells; ENOB-HV-01) to three additional potential cures for HIV, a potential cure for Hepatitis B Virus (HBV), potential inhaled
treatment and prophylaxis/prevention of all variants of SARS-CoV-1 and -2 (the cause of the COVID-19 pandemic), and potential cures
for many solid tumors, beginning with pancreatic cancer.
Our integrated platforms
encompass innovative interventions in gene and immune therapies that provide hope for cures or life-long remissions for devastating
diseases. Our platforms can potentially streamline and accelerate pre-clinical, regulatory, clinical, and production pathways.
Because of the relative ease of administration, our potentially groundbreaking interventions could be used throughout the world.
Platforms:
Hijack RNA
Our novel approach
tricks the virus into sending suicide signals to the infected cell instead of turning the cell into a virus factory. The technology
is delivered by vectors that would allow it to rapidly treat an infection, or to lay and wait in ambush until a cell becomes infected,
which would prevent (prophylaxis, similar to taking drugs to protect from becoming infected with malaria or HIV) future infections.
The delivery
mechanism can be adapted for aerosol (e.g., respiratory infections like the virus that causes COVID-19 and influenza), intravenous
or other delivery mechanisms (e.g. for Hepatitis B Virus and HIV).
Allogeneic
Cell Therapy
The human immune
system is designed to recognize “self” and destroy “otherness” or “non-self”, such as bacteria,
viruses and cancer cells.
Alloreactivity
(reacting against another person’s cells) is the most powerful response the immune system generates. Several of our technologies
take advantage of the alloreactivity to hyperstimulate a person’s immune response to better attack a chronic infection (e.g.
HIV) or solid tumors. In certain treatments (e.g. HIV and cancer), cells taken from healthy donors are sometimes genetically modified
to further boost the immune system to seek and kill diseases.
*********
In addition to
those platforms, Enochian BioSciences has an innovative approach to remove cells from a person living with HIV and genetically
modify them so they cannot be infected with HIV. The unique innovation is an additional genetic alteration to increase the ability
of those cells to survive and expand when they are given back to the same person (autologous transplantation).
To
date, our operations have been funded by sales of our securities and the issuance of debt. We have never generated any sales revenue,
and we expect this to continue until our therapies or products are approved for marketing in the United States and/or Europe. Even
if we are successful in having our therapies or products approved for sale in the United States and/or Europe, we cannot guarantee
that a market for the therapies or products will develop. We may never be profitable.
Respiratory Diseases
In
June 2021, Enochian BioSciences acquired the exclusive license to a potential pan-SARS-Cornavirus-1 and-2 (SARS-CoV) and pan-Influenza
inhaled treatment and prophylaxis.
SARS-CoV-2
has caused the most devastating global pandemic in a century – COVID-19. Using the Hijack RNA platform technology, in
vitro and in vivo results showing rapid killing of infected cells but not uninfected cells were presented at the important
Conference on Retroviruses and Opportunistic Infections in March 2021. Since that time, there has been substantial progress with
a Pre-IND (as defined below) submission expected in the near term.
Influenza
has caused dozens of major global pandemics; the most notable in 1918 that killed 50 to 100 million people. There was an H1N1 threat
as recently as 2009. The Hijack RNA also has shown promising in vitro results that were presented at the Annual Conference
of the American Society of Gene and Cell Therapy (ASGCT) in May 2020.
Two
leading scientists and public health experts were announced as members of our newly formed Scientific Advisory Board focused on
respiratory diseases on August 30, 2021.
Human Immunodeficiency
Virus (HIV), and Acquired Immunodeficiency Syndrome (AIDS)
HIV
attacks the human immune system, specifically killing off CD4+ cells, or T cells, which play a central, controlling role in the
immune system. Left untreated, HIV dramatically reduces the number of T cells in the body, devastates the immune system, leading
to AIDS, a condition where the immune system cannot fight off life-threatening infections and cancers.
Currently
there are over 30 antiretroviral drugs, or ART, approved by the U.S. Food and Drug Administration (“FDA”) to treat
HIV but these drugs are expensive, require daily adherence, and can have significant side effects over time. In addition, on a
global basis, as many as 1 million people, including persons in high-income countries, continue to die each year from HIV/AIDS
due to drug-resistant HIV or lack of access to treatment. To date, there are no treatments that can eliminate the reservoir of
immune cells that are infected with HIV from the body. Consequently, treatment for HIV is life-long.
There
have been several efforts to cure HIV by re-engineering a person’s own T-cells so that these cells no longer express a special
protein (C-C chemokine co-receptor type 5 or CCR5), which HIV uses to gain entry to them. A naturally occurring mutation that blocks
expression of CCR5 on T cells occurs in ~1% of persons living in or from Northern Europe with no known adverse effects. The “Berlin
patient”, and more recently the “London patient” were HIV-positive persons who developed cancer and were treated
with a bone marrow transplant with cells donated from persons with this naturally occurring mutation of CCR5. The Berlin and London
patients seem to have been effectively cured from HIV providing proof-of-concept that HIV can be cured. However, because the transplanted
cells come from another person, such transplants carry high risk and can result in death in a significant proportion of patients.
Given the success with these two patients, several researchers and companies have attempted to replicate this experience by genetically
modifying T cells of HIV-positive patients to render them unable to be infected by HIV and then returning them to the patient.
Because the transplanted cells are from the same person, the risks to the patient are much lower. The uptake, or engraftment of
the modified T cells, however, has not been optimal, leading to failure to achieve a cure. In addition, the transplant pre-treatment
that has been used is bone marrow-destroying chemotherapy, which wipes out the patient’s immune system and can have long-term
side effects including the risk of developing cancer.
ENOB-HV-01
is a novel, proprietary approach with the potential to overcome the failures of recent efforts to develop a cure for HIV. The intervention
provides gene-modified T cells with a competitive advantage over non-modified cells in the HIV-positive person, with the potential
to significantly increase engraftment; and avoids the need for chemotherapy that substantially depletes the bone marrow and could
potentially be given as an outpatient treatment. The Company met with the FDA INTERACT team on June 2, 2020. INTERACT is the first
available FDA interaction and is a key step in the process towards a potential Investigational New Drug Application (IND) to study
First-in-Human products potentially leading to marketing authorization via Biologics License Application (BLA). The FDA Center
for Biologics Evaluation and Research (CBER) has numerous INTERACT requests and grants meetings that are deemed appropriate for
this early FDA engagement. The Enochian management team considered the meeting to be successful with strong alignment between Enochian
BioSciences’s approach to developing ENOB-HV-01 and the comments of the FDA reviewers.
Initial
scientific findings from a mouse study on the ENOB-HV-01 approach were presented at the annual ASCGT conference in May 2020. Additional
in vitro and in vivo studies are ongoing and/or planned. We hope to make a Pre-IND submission to the US FDA by end
of 2021 or early 2022.
We
are also developing ENOB-HV-11 and ENOB-HV-12 that will utilize a novel cellular- and immunotherapy approach that could potentially
provide both preventative and therapeutic vaccines for HIV. A non-human primate study is in process and on schedule. Preliminary
results could potentially be available by the end of 2021 or early 2022.
Our co-founder and
inventor, Dr. Serhat Gumrukcu, who is also the Director of Seraph Research Institute (SRI), submitted Pre-IND for ENOB-HV-21 an
innovative treatment of Natural Killer (NK) and Gamma Delta T-Cells (GDT) collected from another person. It is believed that the
GDT cells, a small subset of immune cells that can be infected with HIV, could be a key factor in controlling the virus. The initial
scientific findings were presented during the ASCGT Conference this past May. Written comments on the submission are expected this
Fall. Enochian BioSciences has an exclusive license to use the underlying patent to develop HV-21 for the prevention, treatment,
and/or amelioration of and/or therapy exclusively for HIV in humans, and research and development exclusively relating to HIV in
humans.
We
are in the development phase of additional product candidates related to our HIV pipeline. ENOB-HV-31, which is an in vivo gene
therapy, and ENOB-HV-32, which is a peptide drug for packaging and distribution.
Hepatitis B (HBV)
Despite the availability
of an effective vaccine and treatment that can control infection if it is taken daily for life, hepatitis B virus (HBV) is the
world’s most common serious liver infection. While vaccines are increasingly required for children, many adults have not
been vaccinated. Life-long treatment can be difficult for certain people and access can be limited.
In that regard, HBV remains
the leading cause of liver cancer and the second leading cause of cancer deaths in the world. Two billion people have been infected
with HBV, approximately 350 million have chronic HBV infection, and nearly one million people die every year.
Current efforts to develop
novel treatment or cure largely focus on approaches to deplete the pool of a certain type of HBV DNA. Enochian BioSciences has
collaborated with SRI to develop an innovative approach to co-opt HBV polymerase, a key expanding factor that the virus needs to
reproduce itself, to induce the death of liver cells infected with the virus.
The initial in vitro
and in vivo work was presented at the biannual HEP DART meeting in December of 2019, where it was selected as one of
the best new therapies/novel strategies. Additional data was presented at the annual ASCGT conference in May 2020. A proof-of-concept,
in vivo cure study is in advanced stages. A Pre-IND request was accepted. FDA comments are expected in the near term.
On July 27, 2020, Enochian
BioSciences announced the creation of an HBV Scientific Advisory Board comprised of distinguished leaders in HBV disease, treatment
and cure. On August 23, 2021, we announced the addition of a third leading expert with substantial experience in HBV clinical trials.
Cancer
Based
on learning from peer-reviewed publications of Phase I/IIa trials, we have designed an innovative therapeutic vaccination platform
that could potentially be used to induce life-long remissions from some of the deadliest solid tumors. Initial preclinical in
vitro studies have been encouraging. We initially plan to target pancreatic cancer, triple-negative breast cancer, glioblastoma,
and renal cell carcinoma. The platform might also allow for non-specific immune enhancement that could have impact against a broad
array of solid tumors. As with HIV, our approach would potentially allow for outpatient therapy without ablating or significantly
impairing the patient’s immune system, as many current approaches require.
Through a collaboration
with a leader in the field of pancreatic cancer, our first cancer-related therapeutic target, we are developing the pipeline
with in vitro and in vivo proof-of-concept studies to evaluate the potential to induce long-term
remission or cure. Results are expected in late 2021or early 2022.
Our Product Candidates
ENOB-HV-01: Autologous Transplant with Genetically Modified
Cells:
FDA INTERACT Meeting Held February 2020 - Advanced Pre-Clinical
Stage
It has been proven
that gene editing to knock down the expression of CCR5 — a door HIV needs to enter and kill CD4+ T cells — in autologous
human stem cells (HSC) combined with transplantation can lead to a cure of HIV. However, the approaches currently available require
an expensive and risky ablation of the immune system. Even with that drastic intervention, an insufficient number of gene-modified
cells survive to achieve durable control of HIV.
We have pioneered
a novel approach that we believe will allow sufficient engraftment of the gene-modified HSC to eliminate the need for Antiretroviral
Treatment (ART.)
In a transgenic
mouse model, the technology increased engraftment in bone marrow by 163%. For context, a 10% increase is often thought to be successful.
Management considered
the FDA INTERACT Meeting to be successful and in alignment with Enochian’s experimental plan. Additional in vitro and in
vivo experiments are underway. Pre-IND submission is possible by the first part of 2022 with human studies potentially beginning
in 2022.
ENOB-HV-11 and 12: Preventive and Therapeutic Vaccines
Allogeneic Cell Therapy Platform
- Advanced Pre-Clinical Stage; Non-Human Primate Studies Begun
Boosting a person’s
immune system through vaccination can lead to protection from HIV infection in people who are not living with HIV. In persons living
with HIV who are controlling the spread of virus with antiretroviral (ARV) treatment, boosting the immune system in a different
way than the virus already has through infection, could allow control of HIV after stopping ARVs.
Enochian BioSciences’
technology uses the powerful induction of an immune response created by cells from another person potentially to induce such a
response. Based on promising in vitro results, a study in non-human primates was begun by the renowned HIV and cancer researcher
Dr. Hans Peter Kiem of the Fred Hutchinson Cancer Research Center, Seattle, Washington.
Preliminary results
are expected by the end of 2021 or early 2022. If successful, human studies could potentially begin in 2022.
ENOB-HV-21: Immunotherapy with Allogeneic NK/GDT Cells
Allogeneic Cell Therapy Platform -Pre-IND Scheduled -
Advanced Pre-Clinical with Human Data through a Collaboration
On June 14, Enochian
BioSciences announced that the FDA has accepted a Pre-IND request for a potential functional cure or treatment of HIV. Written
comments are expected this Fall.
Dr. Serhat Gumrukcu,
co-founder and inventor of Enochian BioSciences, and Director of SRI, submitted the Pre-IND. The request was based on the results
of a 54-year old man living with HIV who had failed to suppress the virus with antiviral therapy. The patient subsequently achieved
viral control for 360 days with an innovative treatment of Natural Killer (NK) and Gamma Delta T cells (GDT) collected from another
person. During the entire period, no antiviral drugs were given. It is believed that the GDT cells, a small subset of immune cells
that can be infected with HIV, could be a key factor in controlling the virus.
This innovative cellular therapy could
be an important approach to achieve a “functional cure” of HIV, potentially allowing persons with the virus to stop
antiviral treatment for extended periods. The Pre-IND submission requested that the novel strategy be extended to persons with
HIV who have achieved suppression of the virus with antiviral treatment. Enochian BioSciences has an exclusive license to use the
underlying patent to develop HV-21 for the prevention, treatment, and/or amelioration of and/or therapy exclusively for HIV in
humans, and research and development exclusively relating to HIV in humans.
ENOB-HV-31: In Vivo Gene Therapy
Hijack RNA Platform - Early Pre-Clinical
HIV is an RNA virus.
Based on the Hijack RNA Platform, an approach to “seek and kill” HIV-infected cells has been developed. In vivo
and in vitro studies should begin in the near term.
ENOB-HB-01: Potential Cure for HBV
Hijack RNA Platform - Advanced Pre-Clinical
Current efforts
to develop a novel treatment or cure largely focus on approaches to deplete the pool of a certain type of HBV DNA. Enochian has
collaborated with SRI to develop an innovative approach to co-opt HBV polymerase to induce the death of liver cells infected with
the virus.
ENOB-CV-01: Aerosol/Inhaled Treatment
Potentially for All Coronaviruses that Cause Human Disease
Hijack RNA Platform - Pre-IND Submission
Expected in Near-term - Advanced Pre-Clinical
The technology tricks
– or hijacks – the polymerase of Coronaviruses to trigger infected cells to commit suicide instead of becoming virus-producing
factories. The code recognized by the Hijack RNA is similar in SARS-CoV-1 and all variants of SARS-CoV-2 (that cause COVID-19)
as well as those known to cause 20 percent of common colds.
Modeled on the approach
taken by operation Warp Speed, production, distribution, and reimbursement potential partners have been identified. Based on promising
experiments in mice, a Pre-IND application is expected in the near term.
ENOB-CV-11: Aerosol/Inhaled Prophylaxis
Potentially for All Coronaviruses that Cause Human Disease
Hijack RNA Platform - Pre-IND Submission
Expected in Near-term - Advanced Pre-Clinical
The technology is
delivered by an AAV particle or nanoparticle, allowing it to wait in ambush for a cell to become infected or until the cells die
due to natural turnover. Because target cells of the Coronavirus – respiratory epithelial cells - live up to 6 to 20 months
in human airways, it is possible that a single inhalation could protect against infection for relatively long periods of time.
The code recognized
by the Hijack RNA is similar in SARS-CoV-1 and all variants of SARS-CoV-2 (that cause COVID-19) as well as those known to cause
20 percent of common colds. Therefore, a single inhaled dose every 6 to 20 months could potentially prevent all variants of Coronaviruses.
Based on promising experiments in mice, a Pre-IND application is expected in the near term.
ENOB-FL-01: Aerosol/Inhaled Treatment
Potentially for All Influenza Viruses
Hijack RNA Platform - Early Pre-Clinical
Influenza viruses
are also RNA viruses. Therefore, a similar approach to that for Coronaviruses has been developed. The code targeted by the Hijack
RNA is similar in all pandemic variants since 1918. In vitro experiments demonstrated rapid killing of infected cells without damage
to uninfected cells.
ENOB-FL-11: Aerosol/Inhaled Prophylaxis
Potentially for All Influenza Viruses
Hijack RNA Platform - Early Pre-Clinical
The approach taken
will be similar to that described for ENOB-CV-11 above.
ENOB-DC-11: Genetically modified
Allogeneic Dendritic Cells as Potential Cure
Allogeneic Cell Therapy Platform
- Moderately Advanced Pre-Clinical
As noted in the
Allogeneic Cell Therapy Platform Section, allogeneic cells are a potent stimulant to the immune system. Our technology genetically
modifies dendritic cells, the conductor of the immune system, to enhance their already powerful ability to activate and orchestrate
the immune response to tumors. Combined with fragments of, or fragments from, specific tumors, preliminary in vitro data
is promising.
Enochian BioSciences
has initiated a collaboration with Dr. Anahid Jewett from UCLA to study further the in vitro and in vivo effectiveness
of the approach in pancreatic cancer. The survival rate in pancreatic cancer is only 5 to 10 percent at 5 years. Dr. Jewett created
an innovative pancreatic cancer mouse model to study the impact of potential therapy. Results are expected by the end of 2021 with
potential Pre-IND submission by the end of the year. The technology is a platform in itself that could potentially be used for
other solid tumors.
Collaborations
We have established
strategic partnerships with leading scientists and centers, such as The Scripps Institute, Fred Hutchinson Cancer Research Center,
the Texas Biomedical Research Institute, the University of California, Los Angeles and The Hepatitis B Foundation and Baruch S.
Blumberg Institute, for several of our programs. We will continue to pursue partnerships when appropriate with selected philanthropic,
pharmaceutical and biotechnology companies to fund internal research and development activities, and to assist in product development
and commercialization. We are applying our technology platform to several commercial applications in which our products provide
us and our strategic partners and collaborators with potential technical, competitive and economic advantages.
Our Intellectual Property
Patents and licenses
are important to our business. Our strategy is to file license patent applications to protect technology, inventions and improvements
to inventions that we consider important for the development of our business. We rely on a combination of patent, copyright, trademark,
and trade secret laws, as well as continuing technological innovations, proprietary knowledge, and various third party agreements,
including, without limitation, confidentiality agreements, materials transfer agreements, research agreements and licensing agreements,
to establish and protect our proprietary rights. We aim to take advantage of all of the intellectual property rights that are available
to us and seek protection of those rights so that we can fully exploit our innovations.
We also protect
our proprietary information by requiring our employees, consultants, contractors and other advisors to execute nondisclosure and
assignment of invention agreements upon commencement of their respective employment or engagement. Our patent filings are discussed
briefly below.
Pharmaceutical composition for inducing an immune response
in a human or animal (2001 Denmark (DK), 2002 PCT)
This patent
family, owned by the Company, is directed to certain melanoma cell lines and the use of an allogenic melanoma cell lysate (MCL)-pulsed
autologous dendritic cell vaccine expressing at least one of six MAGE-A antigens to induce an immune response. This patent has
been granted in: Europe, USA, China, Australia, Singapore, Russia, and Hong Kong and is pending in Japan. The issued patents relating
to ENOB-DB-01 (previously known as “MCV”) begin to expire in November 2022, subject to any applicable patent term extension,
patent term adjustment, or supplementary protection certificates that may be available in a country or jurisdiction.
Protocol for generating dendritic cells (2005 DK, 2008
PCT)
This patent family
is directed to the generation of dendritic cells based on a blood sample by culturing monocytes at reduced temperatures. Dendritic
cells exposed to tumor antigens followed by treatment with T(h) 1-polarizing differentiation signals have paved the way for the
development of dendritic cell-based cancer vaccines. Issued claims are directed to a method of generating immature dendritic cells
under certain temperature settings, which by further activation has been shown to give a high yield of homogeneous and fully matured
dendritic cells. The patent expiration date is December 2026 subject to any applicable patent term extension, patent term adjustment,
or supplementary protection certificates that may be available in a country or jurisdiction. This patent has been issued in the
USA, Canada, China, Eurasia, Russia, Europe, Israel, Mexico, Malaysia, and New Zealand. This patent is owned by the Company and
was not licensed from third parties.
Trade Secrets and Proprietary
Know-How
In addition to intellectual
property protected by patents and copyrights, we have trade secrets and proprietary know-how relating to our products, production
processes, and future strategies.
In-Licensed Technology
On February 16,
2018, Enochian Biopharma, the Registrant’s wholly owned subsidiary, entered into a License Agreement (the “HIV License
Agreement”) with Weird Science, LLC (“Weird Science”). The License Agreement contains, among other things, the
following terms: (a) a perpetual, fully paid-up, royalty-free, sublicensable, and exclusive (including to the exclusion of Weird
Science) worldwide license from Weird Science to Enochian Biopharma to use Weird Science’s intellectual property and technology
for the prevention, treatment, and/or amelioration of and/or therapy for HIV in humans, and research and development exclusively
relating to HIV in humans (the “Field”) worldwide; (b) a nonexclusive, royalty-free, sublicensable license from Enochian
Biopharma to Weird Science to use the Enochian Technology to commercialize products outside of the Field worldwide; (c) a nonexclusive,
royalty-free license from Enochian Biopharma to Weird Science to use the results of a study with syngeneic and humanized mice models
outside the Field and, at Weird Science’s own expense, to prosecute patents relating to the results of the study, which Weird
Science will own, and (d) a perpetual, fully paid-up, royalty-free, sublicensable, and sole and exclusive (including to the exclusion
of Weird Science) worldwide license from Weird Science to Enochian Biopharma (which will be part of the license described in (a)
above) to use patent applications and patents related to the study results disclosed in (d) above solely in the Field, and to make,
have made, use, sell, offer to sell and import inventions claimed in such patent applications and patents solely in the Field.
Our current product candidates covered by this license include ENOB-HV-01: Autologous HIV Curative Treatment, ENOB-HV-11: Preventative
HIV Vaccine; ENOB-HV-12: Therapeutic HIV Vaccine, (See Note 8 in the Financial Statements)
On January 31, 2020,
the Company entered into a Statement of Work and License Agreement (the “HBV License Agreement”) by and among the Company,
G Tech Bio, LLC “(G-Tech”), and G Health Research Foundation, a not for profit entity organized under the laws of California
doing business as Seraph Research Institute (“SRI”), whereby the Company acquired a perpetual, sublicensable, exclusive
license (the “HBV License”) for a treatment under development (aimed to treat Hepatitis B Virus (HBV) infections in
accordance with its agreement in principle with G-Tech and SRI announced by the Company on November 25, 2019. The HBV License Agreement
states that in consideration for the HBV License, the Company shall provide cash funding for research costs and equipment and certain
other in-kind funding related to the Treatment over a 24-month period. The Company paid an upfront payment of $1.2 million on February
6, 2020. Our current product candidate under this license is ENOB-HB-01 Hijacking HBV Polymerase. (See Note 8 in the Financial
Statements)
On April 18, 2021, the
Company entered into a Statement of Work and License Agreement (the “Influenza and Coronavirus Indications Agreement”)
by and among G Tech and SRI, whereby the Company acquired a perpetual, sublicensable, exclusive license (the “Development
License”) to research, develop, and commercialize certain formulations which are aimed at preventing and treating pan-coronavirus
or the potential combination of the pan-coronavirus and pan-influenza, including the SARS-coronavirus that causes COVID-19 and
pan-influenza (the “Prevention and Treatment”). The Influenza and Coronavirus Indications License Agreement states
that in consideration for the Development License, the Company shall provide cash funding for research costs and equipment and
certain other in-kind funding related to the Prevention and Treatment over a 24-month period. The Company paid an upfront payment
of $10 million on June 18, 2021. Our current product candidates under this license are ENOB-CV-01: Coronavirus Treatment, ENOB-CV-11:
Coronavirus Prophylaxis, ENOB-FL-01: Influenza Treatment, and ENOB-FL-11: Influenza Prophylaxis. (See Note 8 in the Financial Statements)
On August 25, 2021, the
Company entered into an ALC Patent License and Research Funding Agreement in the HIV Field (the “ALC License Agreement”)
with Dr. Gumrukcu and SRI whereby Dr. Gumrukcu granted the Company an exclusive, worldwide, perpetual, fully paid-up, royalty-free
license, with the right to sublicense, his proprietary technology subject to a U.S. patent application, to make, use, offer to
sell, sell or import products for use solely for the prevention, treatment, amelioration of or therapy exclusively for HIV in humans,
and research and development exclusively relating to HIV in humans; provided Dr. Gumrukcu retained the right to conduct HIV research
in the field. Pursuant to the ALC License Agreement, the Company granted a non-exclusive license back to Dr. Gumrukcu and SRI,
under any patents or other intellectual property owned or controlled by the Company, to the extent arising from the ALC License,
to make, use offer to sell, sell or import products for use in the diagnosis, prevention, treatment, amelioration or therapy of
any (i) HIV Comorbidities and (ii) any other diseases or conditions outside the HIV Field. The Company made an initial payment
to SRI of $600,000 and agreed to fund future HIV research conducted by Dr. Gumrukcu and SRI, as mutually agreed to by the parties.
Our current product candidate under this license is ENOB-HV-21: HIV Natural Killer and Gamma Delta T Cell Treatment or Cure.
Competition
The biotechnology
and pharmaceutical industries, including in the field of gene therapy, are characterized by rapidly advancing technologies, intense
competition and a strong emphasis on intellectual property. While we believe that our technology platforms, strong intellectual
property portfolio and scientific expertise in the gene therapy field provide us with competitive advantages, we face potential
competition from many different sources, including larger and better-funded pharmaceutical and biotechnology companies, new market
entrants and new technologies.
We are aware
of several companies focused on other methods for editing genes and regulating gene expression, and a limited number of commercial
and academic groups pursuing the development of gene regulation and genome editing technology. The field of applied gene regulation
and genome editing is highly competitive, and we expect competition to persist and intensify in the future from several different
sources, including pharmaceutical and biotechnology companies; academic and research institutions; and government agencies.
Accordingly, our
competitors may succeed in obtaining patent protection, receiving FDA approval, or commercializing competitive products before
us. If we commence commercial product sales, we may be competing against companies with greater marketing and manufacturing capabilities,
areas in which we have limited or no experience. In addition, any product candidate that we successfully develop may compete with
existing products that have long histories of safe and effective use.
The competitive
landscape that we are facing is as follows:
Gene
therapy companies developing gene-based products in clinical trials. uniQure N.V.’s product for lipoprotein lipase
deficiency and GlaxoSmithKline plc’s, or GSK, product for severe combined immunodeficiency due to adenosine deaminase deficiency
are approved in Europe. No other gene therapy products have yet been approved. Our competitors in this category may include, but
not be limited to, Sangamo Therapeutics, Inc., uniQure N.V., bluebird bio, Inc., Regenxbio Inc., Shire, Pfizer Pharmaceutical,
and GlaxoSmithKline.
Cell therapy
companies developing cell-based products. Our competitors in this category may include Novartis AG, Adaptimmune Therapeutics
PLC, Atara Biotherapeutics, Inc., bluebird bio, Inc., Cellectis S.A., Juno Therapeutics, Inc., Kite Pharma, and Iovance Biotechnologies,
Inc.
For ENOB-HV-01,
we are aware of two companies developing a gene therapy for HIV/AIDS: Sangamo and American Gene Technology.
For ENOB-HV-11 and ENOB-HV-12,
we are aware of a few biotech companies developing an HIV vaccine such as Geovax, Biosantech SA, and FIT Biotech, among a few others.
For ENO-DC-11,
the competitive landscape is more complex.
Immunotherapy is
an active area of research and a number of immune-related products have been identified in recent years that are alleged to modulate
the immune system. Many of these products utilize dendritic cells, a form of immune cell that presents cancer target peptides to
T cells and that can in turn result in T cell activation. More recently, bi-specific antibodies and checkpoint inhibitors (for
instance PD-1/PD-L1 antibodies) have been identified as having utility in the treatment of cancer. Bi-specific antibodies commonly
target both the cancer peptide and the T cell receptors (“TCR”), thus bringing both cancer cells and T cells into close
proximity to maximize the chance of TCR binding and hence an immune response to the cancer cells. Checkpoint inhibitors on the
other hand work by targeting receptors that inhibit T cell effectiveness and proliferation and essentially activate T cells. Other
immunotherapies that are being actively investigated include antibody-drug complexes, TCR-mimic antibodies, oncolytic viruses,
and cancer vaccines. A variety of cell-based autologous and allogeneic approaches are also being researched and developed.
CAR-T in solid tumors
In addition to hematological
malignancies, there are a growing number of pharmaceutical, biotechnology, and academic institutions researching and developing
autologous and allogeneic chimeric antigen receptor T cell (“CAR-T”) therapies in the solid tumor setting. These CAR-T
cell therapies are at a variety of stages of preclinical and clinical development, as well as directed towards a broad target spectrum.
Two Car-T therapies have been approved for treatment of leukemia.
CARsand TCR-mimics targeting peptide-HLA
complexes
Most CAR-T therapies
in development are directed towards antigen targets. However, competitors are also developing a CAR-T that selectively binds to
the peptide-HLA (pHLA) complex (the natural binding site for endogenous TCR). Furthermore, competitors are also looking at pHLA
antibodies or TCR mimic antibodies that can either be engineered in T cells or developed as standalone antibody therapies in cancer
indications (including solid tumors).
TCR Tcells
Competitors are
developing TCR T cells (including affinity engineered T cells) that are directed towards a multitude of targets. Juno Therapeutics
has developed an engineered TCR therapeutic candidate where the end TCR is purported to have enhanced affinity through stem-cell
selection.
Other cell-based approaches
In addition to all
the adoptive cell therapy approaches above, our competitors are also investigating the potential of GammaDelta T cell, CAR-NK cell,
NK cell, NKT cell and CTLs either in a preclinical or clinical setting (both hematologic malignancies and solid tumors). In addition,
Bristol Myers Squibb’s Abraxane is used for pancreatic cancer.
For ENOB-CV-01 and -11; SARS-CoV:
Treatment: There
are currently several products with FDA EUA for treatment of COVID including, but not limited to Remdesivir (Gilead) and monoclonal
antibodies (Elly Lily and Regeneron). In addition, other system anti-virals are in advanced clinical trials. SaNOtize Research
and Development Corp. has reported data on an aerosolized therapy and its intention to seek EUA at least in Canada and Europe.
Virpax Pharmaceuticals, Inc. has announced the conclusion of a Pre-IND with the FDA for an aerosolized treatment.
Prevention:
Four vaccines have received FDA EUA (Pfizer, Moderna, Johnson and Johnson and Novavax). One, Pfizer has received full approval.
Several companies have announced plans for, and/or are conducting clinical trials of aerosolized vaccines.
For ENOB-FL-01 and -11; Influenza:
Treatment:
Current treatments are largely to manage symptoms. Tamiflu is approved for use within the first few days of symptoms.
Prevention:
Annual vaccines are approved for use. Several companies have announced plans to develop new vaccines, e.g. mRNA.
For ENOB-HBV-01:
There is an approved
vaccine to prevent HBV infection. In addition, several approved combination antivirals can suppress replication, but do not cure
HBV. Several companies are pursuing cures, mostly targeting the depletion of ccc-DNA.
Manufacturing
Our intent is to
rely on contract manufacturing organizations (CMOs) and contract development and manufacturing organizations (CDMOs), to help develop
and produce our preclinical and clinical product candidates in accordance with FDA and EMA mandated regulations, also known as
current good manufacturing practices, (“cGMPs”). We employ a technical operations staff in the areas of process development,
analytical development, quality control, quality assurance, project management, and manufacturing, which will facilitate appropriate
oversight of our CMOs, support of our regulatory filings and execution of clinical trials.
Government Regulation
FDA
Review and Approval
Government
authorities in the United States, at the federal, state and local level, and other countries extensively regulate, among other
things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping,
promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of products such
as those we are developing. Any products we develop will require regulatory review and allowance to proceed prior to conducting
clinical trials and additional regulatory approvals prior to commercialization. In the United States, the FDA regulates drugs under
the Federal Food, Drug and Cosmetic Act (FDCA) and the Public Health Service Act (PHSA) and their implementing regulations govern,
among other things, biopharmaceutical testing, manufacturing, safety, efficacy, labeling, storage, recordkeeping, advertising,
and other promotional practices.
Obtaining FDA approval
is a costly and time-consuming process. Generally, FDA approval requires that preclinical studies be conducted in the laboratory
and in animal model systems to gain preliminary information on efficacy and to identify any major safety concerns. The results
of these studies are then submitted as a part of an IND, which the FDA must review and allow before human clinical trials can start.
The IND includes a detailed description of the proposed clinical investigations. An independent Institutional Review Board (“IRB”)
must also review and approve the clinical protocol and each clinical site.
A company
must submit an IND for each investigational medical product and specific indication(s), and must conduct clinical studies to demonstrate
the safety and efficacy of the product necessary to obtain FDA approval. The FDA receives reports on the progress of each phase
of clinical testing and may require the modification, suspension, or termination of clinical trials if an unwarranted risk is presented
to patients.
Obtaining FDA approval
prior to marketing a biopharmaceutical product in the United States typically requires several phases of clinical trials to demonstrate
the safety and efficacy of the product candidate. Clinical trials are the means by which experimental treatments are tested in
humans and are conducted following preclinical testing. Clinical trials may be conducted within the United States or in foreign
countries. If clinical trials are conducted in foreign countries, the products under development as well as the trials are subject
to regulations of the FDA and/or its regulatory counterparts in the other countries. Upon successful completion of clinical trials,
approval to market the treatment for a particular patient population may be requested from the FDA in the United States and/or
its counterparts in other countries.
Clinical trials
for therapeutic products are normally conducted in three phases. Phase 1 clinical trials are typically conducted with a small number
of patients to evaluate safety, determine a safe dosage range, identify side effects, and, if possible, gain early evidence of
effectiveness. Phase 2 clinical trials are conducted with a larger group of patients to evaluate effectiveness of an investigational
product for a defined patient population, and to determine common short-term side effects and risks associated with the drug. Phase
3 clinical trials involve large scale, multi-center, comparative trials that are conducted to evaluate the overall benefit-risk
relationship of the investigational product and to provide an adequate basis for product labeling. In some special cases where
the efficacy testing of a product may present a special challenge to testing in humans, such as in the case of a vaccine to protect
healthy humans from a life-threatening disease that is not a naturally occurring threat, effectiveness testing may be required
in animals. For certain advanced therapies that meet eligibility criteria for expedited program Designations, clinical development
may be expedited.
Clinical trials
involve the administration of the biologic product candidate to healthy volunteers or patients under the supervision of qualified
investigators which generally are physicians not employed by, or under, the control of the trial sponsor. Clinical trials are conducted
under written study protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection
and exclusion criteria and the parameters to be used to monitor subject safety, including stopping rules that assure a clinical
trial will be stopped if certain adverse events should occur. Each protocol and any amendments to the protocol must be submitted
to the FDA as part of the IND. Clinical trials must be conducted and monitored in accordance with the FDA’s regulations comprising
the Good Clinical Practice (“GCP”) requirements, and any additional requirements for the protection of human research
subjects and their health information including the requirement that all research subjects provide informed consent.
Further, each clinical
trial must be reviewed and approved by an IRB at or servicing each institution at which the clinical trial will be conducted. An
IRB is charged with protecting the welfare and rights of trial participants and considers items such as whether the risks to individuals
participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves
the form and content of the informed consent that must be signed by each clinical trial subject, or their legal representative,
reviews and approves the study protocol, and must monitor the clinical trial until completed. Clinical trials involving recombinant
DNA also must be reviewed by an institutional biosafety committee, or IBC, a local institutional committee that reviews and oversees
basic and clinical research that utilizes recombinant DNA at that institution. The IBC assesses the safety of the research and
identifies any potential risk to public health or the environment.
After completion
of clinical trials of a new product, FDA marketing approval must be obtained. If the product is regulated as a biologic, a Biologics
License Application, or BLA, is required. If the product is classified as a new drug, a New Drug Application, or NDA is required.
The NDA or BLA must include results of product development activities, preclinical studies, and clinical trials in addition to
detailed chemistry, manufacturing and control information.
Applications submitted
to the FDA are subject to an unpredictable and potentially prolonged approval process. Despite good-faith communication and collaboration
between the applicant and the FDA during the development process, the FDA may ultimately decide, upon final review of the data,
that the application does not satisfy its criteria for approval or requires additional product development or further preclinical
or clinical studies. Even if FDA regulatory approval(s) are obtained, a marketed product is subject to continual review, and later
discovery of previously unknown problems or failure to comply with the applicable regulatory requirements may result in restrictions
on the marketing of a product or withdrawal of the product from the market as well as possible civil or criminal sanctions.
Before marketing
approval can be secured for a product, the facility in which the product is manufactured must be inspected by the FDA and must
comply with the FDA’s current Good Manufacturing Practices, (“cGMP”) regulations. In addition, after marketing
approval is secured, the manufacturing facility must be inspected periodically for cGMP compliance by FDA inspectors, and, if the
facility is located in California, by inspectors from the Food and Drug Branch of the California Department of Health Services.
Sponsors of clinical
trials are required to register, and report results for, all controlled, clinical investigations, other than Phase 1 investigations,
of a product subject to FDA regulation. Trial registration may require public disclosure of certain confidential commercial development
data.
The process of obtaining
regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations
require the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at
any time during the product development process, approval process or after approval, may subject an applicant to administrative
or judicial sanctions. FDA sanctions could include, among other actions, refusal to approve pending applications, withdrawal of
an approval, a clinical he hold, warning letters, product recalls or withdrawals from the market, product seizures, total or partial
suspension of production or distribution injunctions, fines, refusals of government contracts, restitution, disgorgement or civil
or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on our business, financial
condition, results of operations and cash flows
Orphan Drug Designation
Under the Orphan
Drug Act, the FDA may grant orphan designation to a product intended to treat a rare disease or condition, which is generally a
disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the
United States and for which there is no reasonable expectation that the cost of developing and making a product available for this
type of disease or condition will be recovered from sales of the product. Orphan designation must be requested before submitting
an NDA or BLA. Orphan designation does not convey any advantage in or shorten the duration of the regulatory review and approval
process. If a product that has orphan designation subsequently receives the first FDA approval for such product for the disease
or condition for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA
may not approve any other applications to market a product containing the same active moiety for the same use or indication for
seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan exclusivity.
A product is clinically superior if it is safer, more effective or makes a major contribution to patient care. Any claims of clinical
superiority could require a head-to-head clinical trial between such drugs. Competitors may receive approval of different products
for the indication for which the orphan product has exclusivity or obtain approval for the same product but for a different indication
for which the orphan product has exclusivity. If a product designated as an orphan product receives marketing approval for an indication
broader than what is designated, it may not be entitled to orphan product exclusivity.
Other Healthcare Laws and
Compliance Regulations
Although we currently
do not have any products on the market, we may also be subject to additional healthcare regulation and enforcement by the federal
government and by authorities in the states and foreign jurisdictions in which we conduct our business. In the United States, among
other things, the research, manufacturing, distribution, sale and promotion of pharmaceutical and biological products are potentially
subject to regulation and enforcement by various federal, state and local authorities in addition to the FDA, including the Centers
for Medicare and Medicaid Services (“CMS”), other divisions of the United States Department of Health and Human Services
(e.g., the Office of Inspector General), the Drug Enforcement Administration, the Consumer Product Safety Commission, the Federal
Trade Commission, the Occupational Safety and Health Administration, the Environmental Protection Agency, state Attorneys General
and other state and local government agencies. Our current and future business activities, including for example, sales, marketing
and scientific/educational grant programs, must comply with health care regulatory laws, as applicable, including, without limitation:
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the federal anti-kickback statute, which
is a criminal statute that makes it a felony for individuals or entities to knowingly and willfully offer or pay, or to solicit
or receive, direct or indirect remuneration, in order to induce the purchase, order, lease, or recommending of items or services,
or the referral of patients for services, that are reimbursed under a federal health care program, including Medicare and Medicaid;
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the federal False Claims Act, which prohibits,
among other things, individuals and entities from knowingly submitting, or causing to be submitted, false or fraudulent claims
for payment of government funds, with penalties that include three times the government’s damages plus civil penalties for
each false claim; in addition, the False Claims Act permits a person with knowledge of fraud, referred to as a qui tam plaintiff,
to file a lawsuit on behalf of the government against the person or business that committed the fraud, and, if the action is successful,
the qui tam plaintiff is rewarded with a percentage of the recovery;
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federal criminal laws that prohibit executing
a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;
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the Health Insurance Portability and Accountability
Act of 1996, or HIPAA, which governs the conduct of certain electronic healthcare transactions and protects the security and privacy
of protected health information;
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the federal Physician Payment Sunshine
Act, which requires certain manufacturers of drugs, devices, biologics and medical suppliers to report annually to CMS information
related to payments and other transfers of value to physicians, other healthcare professionals and teaching hospitals, and ownership
and investment interests held by physicians and other healthcare professionals and their immediate family members; and
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state and foreign law equivalents of each
of the above federal laws, such as state anti-kickback and false claims laws which may impose more strict requirements than federal
law and may apply to items or services reimbursed by any payor (including commercial insurers and cash-paying patients); state
laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines
and the relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to
healthcare professionals and other potential referral sources; state laws that require drug manufacturers to report information
related to payments and other transfers of value to physicians and other healthcare professionals or marketing expenditures; and
state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other
in significant ways and may not have the same effect, thus complicating compliance efforts.
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If our operations
are found to be in violation of any of such laws or any other governmental laws or regulations that apply, they may be subject
to penalties, including, without limitation, civil and criminal penalties, damages, fines, disgorgement, the curtailment or restructuring
of operations, exclusion from participation in federal and state healthcare programs, additional program integrity obligations,
individual imprisonment, injunctions, recall or seizure of products, total or partial suspension of production, denial or withdrawal
of product approvals, refusal to permit us to enter into supply contracts, including government contracts, contractual damages,
reputational harm, administrative burdens, diminished profits, and future earnings, any of which could have a material adverse
effect on our business, financial condition, result of operations, and cash flows. These additional healthcare regulations could
affect our current and future arrangements with healthcare professionals, principal investigators, consultants, customers and third-party
payors.
Moreover, the introduction
of legislation, implementation of new regulations, or enforcement of existing regulations that have a negative impact on the commercial
prospects for the types of products we are developing could negatively impact our share price and our ability to raise capital.
Coverage and Reimbursement
Significant uncertainty
exists as to the coverage and reimbursement status of any product candidate that receives regulatory approval. In the United States
and markets in other countries, sales of our product candidates, if approved, will depend, in part, on the extent to which third-party
payors provide coverage and establish adequate reimbursement levels.
In the United States,
third-party payors include federal and state healthcare programs, government authorities, private managed care providers, private
health insurers and other organizations. Third-party payors are increasingly challenging the price, examining the medical necessity
and reviewing the cost-effectiveness of medical drug products and medical services, in addition to questioning their safety and
efficacy. Such payors may limit coverage to specific drug products on an approved list, also known as a formulary, which might
not include all the FDA-approved drugs for a particular indication. Third-party payor coverage may be more limited than the purposes
for which the product is approved by the FDA or foreign regulatory authorities. Further, one payor’s determination to provide
coverage for a drug product does not assure that other payors will also provide coverage for the drug product.
Moreover, the process
for determining whether a third-party payor will provide coverage for a drug product may be separate from the process for setting
the price of a drug product or for establishing the reimbursement rate that such a payor will pay for the drug product. A payor’s
decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved or that the
product will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale, and
distribution. There may be significant delays in obtaining reimbursement for approved products, and reimbursement rates may fluctuate
over time or vary according to the use of the product or clinical setting in which a product is used. Net prices for products may
be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation
of laws that presently restrict imports of products from countries where they may be sold at lower prices than in the United States.
Further, third-party
payers are increasingly challenging the price of medical products and services, and there is increasing pressure on biotechnology
companies to reduce healthcare costs. If purchasers or users of our products are not able to obtain adequate reimbursement for
the cost of using our products, they may forego or reduce their use. Significant uncertainty exists as to the reimbursement status
of newly approved healthcare products, and whether adequate third-party coverage will be available. Our inability to promptly obtain
coverage and profitable payment rates from both government funded and private payors for future products we develop could have
a material adverse effect on our operating results, our ability to raise capital needed to commercialize potential products, and
our overall financial condition.
Healthcare Reform
In March 2010, former
President Obama Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act of
2010 (collectively, the “Affordable Care Act”),, which substantially changed the way healthcare is financed by both
governmental and private insurers in the United States, and significantly affected the pharmaceutical industry. The Affordable
Care Act contains a number of provisions, including those governing enrollments in federal healthcare programs, reimbursement adjustments
and fraud and abuse changes. Additionally, the Affordable Care Act increases the minimum level of Medicaid rebates payable by manufacturers
of brand name drugs; requires collection of rebates for drugs paid by Medicaid managed care organizations; requires manufacturers
to participate in a coverage gap discount program, under which they must agree to offer point-of-sale discounts off negotiated
prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s
outpatient drugs to be covered under Medicare Part D; and imposes a non-deductible annual fee on pharmaceutical manufacturers
or importers who sell “branded prescription drugs” to specified federal government programs.
Since its enactment,
there have been judicial and Congressional challenges to certain aspects of the Affordable Care Act, and we expect there will be
additional challenges and amendments to the Affordable Care Act in the future. Other legislative changes have been proposed and
adopted since the Affordable Care Act was enacted, including aggregate reductions of Medicare payments to providers and reduced
payments to several types of Medicare providers. Moreover, there has recently been heightened governmental scrutiny over the manner
in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed
bills designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and
manufacturer patient programs, and reform government program reimbursement methodologies for drug products. Individual states in
the United States have also become increasingly active in implementing regulations designed to control pharmaceutical product pricing,
including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost
disclosure and transparency measures, and, in some cases, proposing to encourage importation from other countries and bulk purchasing. We
cannot predict what healthcare reform initiatives may be adopted in the future.
We also are subject
to various federal, state and local laws, regulations, and recommendations relating to safe working conditions, laboratory and
manufacturing practices, the experimental use of animals, and the use and disposal of hazardous or potentially hazardous substances,
including radioactive compounds and infectious disease agents, used in connection with our research. The extent of government regulation
that might result from any future legislation or administrative action cannot be accurately predicted.
Foreign Corrupt Practices
Act
Our business activities
may be subject to the Foreign Corrupt Practices Act, or FCPA, and similar anti-bribery or anti-corruption laws, regulations or
rules of other countries in which we operate. The FCPA generally prohibits offering, promising, giving, or authorizing others to
give anything of value, either directly or indirectly, to a non-U.S. government official in order to influence official action,
or otherwise obtain or retain business. The FCPA also requires public companies to make and keep books and records that accurately
and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls.
Our business is heavily regulated and therefore involves significant interaction with public officials, including officials of
non-U.S. governments. Additionally, in many other countries, the health care providers who prescribe pharmaceuticals are employed
by their government, and the purchasers of pharmaceuticals are government entities; therefore, our dealings with these prescribers
and purchasers are subject to regulation under the FCPA. There is no certainty that all of our employees, agents, suppliers, manufacturers,
contractors, or collaborators, or those of our affiliates, will comply with all applicable laws and regulations, particularly given
the high level of complexity of these laws. Violations of these laws and regulations could result in fines, criminal sanctions
against us, our officers, or our employees, the closing down of facilities, including those of our suppliers and manufacturers,
requirements to obtain export licenses, cessation of business activities in sanctioned countries, implementation of compliance
programs, and prohibitions on the conduct of our business. Any such violations could include prohibitions on our ability to offer
our products in one or more countries as well as difficulties in manufacturing or continuing to develop our products, and could
materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain employees,
and our business, prospects, operating results, and financial condition.
Employees
As of June 30, 2021,
we had 11 full-time employees. We believe that we have good relations with our employees.
Corporate Information
On February 16,
2018, we completed our acquisition of Enochian Biopharma pursuant to an acquisition agreement, dated January 12, 2018, by and among
the Registrant, its wholly owned subsidiary DanDrit Acquisition Sub, Inc., Enochian Biopharma and Weird Science (the “Acquisition
Agreement”), with Enochian Biopharma surviving as a wholly owned subsidiary of the Registrant. As consideration for the acquisition,
the stockholders of Enochian Biopharma received (i) 18,081,962 shares of Common Stock and (ii) the right to receive Contingent
Shares pro rata upon the exercise or conversion of warrants, which were outstanding at closing (See Note 1 to the Financial Statements).
We trade on the
NASDAQ Capital Market under the ticker “ENOB.”
Our website is http://www.enochianbio.com.
We make available free of charge, on or through our internet site, our annual, quarterly, and current reports and any amendments
to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act as soon as reasonably practicable after we electronically
file such material with, or furnish it to, the SEC. Information contained in our website is not part of, nor incorporated by reference
into, this report.
Item 1A. Risk Factors
RISK FACTORS
Investing in our common stock involves
a high degree of risks. Investors should carefully consider all of the risk factors and uncertainties described below, in addition
to the other information contained in this Annual Report on Form 10-K, including the section of this report titled “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related
notes, before investing in our common stock.
The risks described below may not
be the only ones relating to our Company and additional risks that we currently believe are immaterial may also affect us. If any
of these risks, including those described below, materialize, our business, competitive position, reputation, financial condition,
results of operations, cash flows and future prospects could be seriously harmed. In these circumstances, the market price of our
common stock could decline, and investors may lose all or a part of their investment.
Risks Related to Our Financial Results
and Capital Needs
We have incurred
substantial losses since our inception and anticipate that we will continue to incur substantial and increasing losses for the
foreseeable future.
We are a pre-clinical-stage
biotechnology company. Investment in biotechnology related to genetically modified cells is highly speculative because it entails
substantial upfront capital expenditures and significant risk that a product candidate will fail to prove effective, gain regulatory
approval or become commercially viable. We do not have any products approved by regulatory authorities and have not generated any
revenues from product sales or otherwise to date, and have incurred significant research, development and other expenses related
to our ongoing operations and expect to continue to incur such expenses. As a result, we have not been profitable and have incurred
significant operating losses in every reporting period since our inception. For the years ended June 30, 2021 and 2020, respectively,
we reported a net loss of $26.7 million and $11.4 million. We had an accumulated deficit of $90.9 million and $64.2 million as
of June 30, 2021 and 2020, respectively.
We do not expect
to generate revenues for the foreseeable future. We expect to continue to incur significant expenses and operating losses for the
foreseeable future. We anticipate these losses to increase as we continue to research, develop and seek regulatory approvals for
our product candidates and any additional product candidates we may acquire, in-license or develop, and potentially begin to commercialize
product candidates that may achieve regulatory approval. We may encounter unforeseen expenses, difficulties, complications, delays
and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the
rate of future growth of our expenses and our ability to generate revenues. If any of our product candidates fails in clinical
studies or does not gain regulatory approval, or if approved, fails to achieve market acceptance, we may never become profitable.
Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. We anticipate
that our expenses will increase in the future as we continue to invest in research and development of our existing product candidates,
investigate and potentially acquire new product candidates and expand our manufacturing and commercialization activities.
We are a pre-clinical
biotechnology company and may never be able to successfully develop marketable products or generate any revenue. We have a very
limited relevant operating history upon which an evaluation of our performance and prospects can be made. There is no assurance
that our future operations will result in profits. If we cannot generate sufficient revenues, we may suspend or cease operations.
We are an early
stage biotechnology company and have not generated any revenues to date. All of our product candidates are in the discovery stage
or pre-clinical development stage. Moreover, we cannot be certain that our research and development efforts will be successful
or, if successful, that our potential treatments will ever be approved for sales to generate commercial revenues. Our pipeline
includes cell, gene and immunotherapy involving genetically modified cells targeted to treat HIV, Hepatitis B, pan-coronavirus
and influenza, and cancer, and we rely on third parties under contract in the development of product candidates in our pipeline.
There is no guarantee that we will be able to manage and fund the development of a pipeline with multiple target conditions, nor
that third parties will meet their obligations to us in connection with our research and development. We and certain third parties,
on which we rely, have no relevant operating history upon which an evaluation of our performance and prospects can be made. We
are subject to all of the business risks associated with a new enterprise, including, but not limited to, risks of unforeseen capital
requirements, failure of treatments either in non-clinical testing or in clinical trials, failure to establish business relationships,
failure of our third parties to meet their obligations to us and competitive disadvantages against larger and more established
companies. If we fail to become profitable, we may suspend or cease operations.
We will require
substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us
to delay, limit, reduce or terminate our product development or commercialization efforts.
We expect to expend
substantial resources for the foreseeable future to continue the pre-clinical development of our cell, gene and immunotherapy product
candidates, and the advancement and potential expansion of our pre-clinical research pipeline. We also expect to continue to expend
resources for the development and manufacturing of product candidates and the technology we have licensed or have a right to license
from our licensors. These expenditures will include costs associated with research and development, potentially acquiring
or licensing new product candidates or technologies, conducting pre-clinical and clinical studies and potentially obtaining regulatory
approvals and manufacturing products, as well as marketing and selling products approved for sale, if any. Under the terms of certain
of our license agreements, we are obligated to make payments upon the achievement of certain development, regulatory and commercial
milestones. We will also need to make significant expenditures to develop a commercial organization capable of sales, marketing
and distribution for any products, if any that we intend to sell ourselves in the markets in which we choose to commercialize on
our own. In addition, other unanticipated costs may arise. Because the design and outcome of our ongoing, planned and anticipated
pre-clinical and clinical studies is highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully
complete the development and commercialization of our product candidates.
Our future capital
requirements depend on many factors, including:
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the costs and payments
associated with license agreements for our product and technologies;
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the costs of conducting
pre-clinical and clinical studies and the cost of manufacturing our product candidates
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the timing of, and the
costs involved in, obtaining regulatory approvals for our product candidates, if clinical studies are successful, including any
costs from post-market requirements;
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the cost of commercialization
activities for our product candidates, if any of these product candidates is approved for sale, including marketing, sales and
distribution costs;
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our ability to establish
and maintain strategic licensing or other arrangements and the financial terms of such agreements;
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the costs involved in
preparing, filing, prosecuting, maintaining, expanding, defending and enforcing patent claims, including litigation costs and
the outcome of such litigation; and
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the timing, receipt
and amount of sales of, or royalties on, our future products, if any.
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Additional funds
may not be available when we need them on terms that are acceptable to us, or at all. If adequate funds are not available to us
on a timely basis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical studies or other development
activities for one or more of our product candidates or delay, limit, reduce or terminate our establishment of sales, marketing
and distribution capabilities or other activities that may be necessary to commercialize our product candidates.
Raising additional
capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies.
Until such time
as we can generate substantial product revenues, we may attempt to finance our cash needs through equity offerings, debt financings,
government and/or other third-party grants or other third-party funding, marketing and distribution arrangements and other collaborations,
strategic alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible
debt securities, our investors’ ownership interest will be diluted. Debt financing, if available, may involve agreements
that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making
capital expenditures or declaring dividends. If we are unable to obtain funding on a timely basis, we may be required to significantly
curtail one or more clinical research or development programs, which would adversely impact our potential revenues, results of
operations and financial condition.
Risks Related to the Development of Our Product Candidates
We are highly
dependent on the services of third parties to conduct research and development of our pipeline, and our failure to maintain the
services of such third parties could harm our business
We are highly dependent
on third parties working in conjunction with our officers, employees, scientific advisory board and research institutions in the
research and development of product candidates in our pipeline. Many of the techniques utilized in the development of our product
candidates have been developed by Dr. Serhat Gumrukcu, and we rely on the services of Dr. Gumrukcu, and of G-Tech Bio LLC and SRI,
in the continued development of our pipeline. Our future performance will depend on our ability to retain the services of Dr. Gumrukcu,
G-Tech Bio LLC and SRI. The loss of the services of any of the foregoing, or of any of our key employees or scientific advisory
board members could impede the achievement of our research, development, regulatory approvals and commercialization objectives.
The results
of pre-clinical studies or earlier clinical studies are not necessarily predictive of future results, and if we fail to demonstrate
efficacy in our pre-clinical studies and/or clinical trials in the future our future business prospects, financial condition and
operating results will be materially adversely affected.
The success of our
research and development efforts will depend upon our ability to demonstrate the efficacy of the treatments in our pipeline in
pre-clinical studies, as well as in clinical trials following IND approval by the FDA. Pre-clinical studies involve testing potential
product candidates in appropriate non-human disease models to demonstrate efficacy and safety.
Success in pre-clinical
studies does not ensure that later clinical studies will generate adequate data to demonstrate the efficacy and safety of an investigational
drug. Currently, several of our product candidates, including ENOB-HV-01, our autologous HIV curative treatment, ENOB-HV-11, our
preventative HIV vaccine, ENOB-HV-12, our therapeutic HIV vaccine and ENOB-HB-01, our coopting HBV polymerase, our co-opting of
virus machinery for SARS-Coronaviruses, including the cause of COVID-19, and Influenza viruses are all currently in various stages
of pre-clinical development with ongoing and planned pre-clinical studies in conjunction with research institutions and third parties.
We presented pre-clinical data on ENOB-HV-01 in May 2020 at the annual conference of the American Society of Gene and Cell Therapy,
and participated in an INTERACT meeting with the FDA related to ENOB-HB-01 in June 2020. Additionally, we presented results on
ENOB-HB-01 and ENOB-FL-01 in May 2020 at the annual conference of the American Society of Gene and Cell Therapy, and SARS-Coronavirus
at the Conference on Retroviruses and Opportunistic Infections in March 2021. Despite preliminary data we believe is positive,
this does not guarantee that any of these products will proceed to the clinical stage or to approval for commercial use. A number
of companies in the pharmaceutical and biotechnology industries, including those with greater resources and experience than us,
have suffered significant setbacks in clinical studies, even after seeing promising results in earlier preclinical studies or clinical
studies.
Regulatory agencies
evaluate these data carefully before they will approve clinical testing in humans. If certain non-clinical data reveals potential
safety issues or the results are inconsistent with an expectation of the potential product candidates’ efficacy in humans,
the regulatory agencies may require additional more rigorous testing before allowing human clinical trials. This additional testing
will increase program expenses and extend timelines. We may decide to suspend further testing on our product if, in the judgment
of our management and advisors, the pre-clinical test results do not support further development.
Our novel
gene, cell and immunotherapy product candidates and new therapeutic approaches could result in heightened regulatory scrutiny,
delays in clinical development or delays in or our inability to achieve regulatory approval or commercialization of our product
candidates.
Our future success
is dependent on the successful development of novel gene, cell and immunotherapy product candidates. Because these programs, particularly
our pipeline of allogeneic T-cell product candidates that are bioengineered from sick patients, represent a new approach to immunotherapy
for the treatment of cancer and other diseases, developing and commercializing our product candidates subject us to a number of
challenges.
Moreover, actual
or perceived safety issues, including adoption of new therapeutics or novel approaches to treatment, may adversely influence the
willingness of subjects to participate in clinical studies, or if approved by applicable regulatory authorities, of physicians
to subscribe to the novel treatment mechanics. The FDA or other applicable regulatory authorities may ask for specific post-market
requirements, and additional information informing benefits or risks of our products may emerge at any time prior to or after regulatory
approval.
We face significant
competition in an environment of rapid technological change and the possibility that our competitors may achieve regulatory approval
before us or develop therapies that are more advanced or effective than ours, which may adversely affect our financial condition
and our ability to successfully market or commercialize our product candidates.
The development
of treatments in the fields of HIV, Hepatitis B, COVID-19 and Influenza prevention and treatment and cancer is highly competitive
and many pharmaceutical and biotechnology companies, academic institutions, governmental agencies and other public and private
research organizations may pursue the research and development of technologies, drugs or other therapeutic products for the treatment
of some or all of the diseases we are targeting. Nearly all of our competitors have greater capital resources, larger overall research
and development staffs and facilities, and a longer history in drug discovery and development, obtaining regulatory approval and
pharmaceutical product manufacturing and marketing than we do. Techniques in gene, cell and immunotherapy are subject to rapid
technological change and development and is significantly affected by existing rival products and medical procedures, new product
introductions and the market activities of other participants. With additional resources, our competitors may be able to respond
to the rapid and significant technological changes faster than we can. Our future success will depend in large part on our ability
to maintain a competitive position with respect to these technologies. We may also face competition from products, which have already
been approved and accepted by the medical community for the treatment of these same indications. If we are unable to compete effectively
with any existing products, new treatment methods and new technologies, we may be unable to commercialize therapeutic products
that we may develop in the future, which could adversely impact potential revenues, results of operations and financial condition
or lead to abandonment of product candidates in our pipeline.
Our reliance
on third parties, such as university laboratories, contract manufacturing organizations and contract or clinical research organizations,
may result in delays in completing, or a failure to complete, non-clinical testing or clinical trials if they fail to perform under
our agreements with them.
In the course of
the development of our pipeline, we have and expect to continue to engage university laboratories, non-profit organizations, independent
contractors, other biotechnology companies or contract or clinical manufacturing organizations to conduct and manage research and
development, pre-clinical and clinical studies and to manufacture materials for us to be used in pre-clinical and clinical testing.
Due to engagements with these organizations, many important aspects of our research have been and will be out of our direct control.
If any of these organizations we may engage in the future, fail to perform their obligations under our agreements with them or
fail to perform non-clinical testing and/or clinical trials in a satisfactory manner, we may face delays in completing our clinical
trials, as well as commercialization of any of our product candidates. Furthermore, any loss or delay in obtaining contracts with
such entities may also delay the completion of our clinical trials, regulatory filings and the potential market approval of our
product candidates.
Business interruptions
resulting from the coronavirus disease 2019 (COVID-19) outbreak or similar public health crises could cause a disruption of the
development of our product candidates and adversely impact our business.
Public health crises
such as pandemics or similar outbreaks could adversely impact our business. In December 2019, a new strain of coronavirus surfaced
in Wuhan, China and has reached multiple other regions and countries, including Los Angeles where our primary office and laboratory
facilities are located. The COVID-19 pandemic continues to evolve, and to date has led to the implementation of various mitigation
responses, including government-imposed quarantines, travel restrictions and other public health safety measures, as well as leading
to reported adverse impacts on healthcare resources, facilities and providers across the United States and in other countries.
COVID-19 may cause delays in our research activities. COVID-19 has not materially affected our operations to date, it has caused
delays in the conduct of experiments due to limitations of various organizations, in particular those conducting experiments related
to COVID-19. There have also been increases in the cost to conduct animal studies due to staffing and other limitations. The full
extent to which COVID-19 may impact our operations or those of our third-party partners, including research organizations and suppliers
will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration
of the outbreak, effectiveness of vaccines, additional or modified government actions, new information that will emerge concerning
the severity and impact of COVID-19 and the actions to contain COVID-19 or address its impact in the short and long term, among
others.
Additionally, timely
initiation and completion of planned preclinical studies is dependent upon the availability of, for example, preclinical study
sites, university researchers and investigators, regulatory agency personnel, and materials, which may be adversely affected by
global health matters, such as pandemics. We plan to conduct preclinical studies in geographies that are currently being affected
by COVID-19.
Further, in the event
that governmental authorities were to further modify current restrictions, our employees conducting research and development activities
may not be able to access our laboratory offices, and our core activities may be significantly limited or curtailed, possibly for
an extended period of time.
Changes in
healthcare law and implementing regulations, including government restrictions on pricing and reimbursement, as well as healthcare
policy, may negatively impact our ability to generate revenues.
In
the United States and some foreign jurisdictions, there have been a number of proposed legislative and regulatory changes related
to the healthcare system that could affect our ability to profitably sell or commercialize our product candidates for which we
obtain marketing approval in the future. The potential pricing and reimbursement environment for our product candidates may change
in the future and become more challenging due to, among other reasons, policies advanced by the current or any new presidential
administration, federal agencies, healthcare legislation passed by Congress, or fiscal challenges faced by all levels of government
health administration authorities, or by similar changes in foreign countries. The implementation of any such changes could
have a material adverse effect on our competitive position, business, financial condition, results of operations, and prospects,
including our share price and ability to raise capital.
We have limited
experience in drug development and may not be able to successfully develop any drugs, which would cause us to cease operations.
We have never successfully
developed a new drug and brought it to market. Our management and clinical teams have experience in drug development but they may
not be able to successfully develop any drugs. Our ability to achieve revenues and profitability in our business will depend on,
among other things, our ability to develop products internally or to obtain rights to them from others on favorable terms; complete
laboratory testing and human studies; obtain and maintain necessary intellectual property rights to our products; successfully
complete regulatory review to obtain requisite governmental agency approvals; enter into arrangements with third parties to manufacture
our products on our behalf; and enter into arrangements with third parties to provide sales and marketing functions. If we are
unable to achieve these objectives we will be forced to cease operations and you will lose all of your investment.
Disruptions
at the FDA and other government agencies caused by funding shortages or global health concerns could hinder their ability to hire,
retain or deploy key leadership and other personnel, or otherwise prevent new or modified products from being developed, approved
or commercialized in a timely manner or at all, which could negatively impact our business.
The ability of the
FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels,
ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes. Average
review times at the agency have fluctuated in recent years as a result. In addition, government funding of other government agencies
that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.
Disruptions at the
FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies,
which would harm our business. For example, over the last several years, including for 35 days beginning on December 22, 2018,
the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical
FDA employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability
of the FDA to timely review and process our regulatory submissions, which could harm our business.
The COVID-19 pandemic
has also resulted in the FDA imposing preventive measures, including postponements of non-U.S. manufacturing and product inspections.
If global health concerns continue to prevent the FDA or other regulatory authorities from conducting their regular inspections,
reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to
timely review and process our regulatory submissions, which could have a material adverse effect on our business.
Our gene therapy
product candidates are still in development and will require extensive clinical testing before we are prepared to submit an application
for marketing approval to regulatory authorities. We cannot predict with any certainty if or when we might submit any such application
for regulatory approval for our product candidates or whether any such application will be approved by the applicable regulatory
authority in our target markets. Human clinical trials are expensive and difficult to design and implement, in part because they
are subject to rigorous regulatory requirements. For instance, regulatory authorities may not agree with our proposed endpoints
for any clinical trials of our gene therapy product candidates, which may delay the commencement of our clinical trials. The clinical
trial process is also time-consuming. We estimate that clinical trials of our product candidates will take at least several years
to complete.
Clinical trials
are expensive, time-consuming, difficult to design and implement, and involve an uncertain outcome.
Our product candidates
are still in development and will require extensive clinical testing before we are prepared to submit an application for marketing
approval to regulatory authorities. We cannot predict with any certainty if or when we might submit any such application for regulatory
approval for our product candidates or whether any such application will be approved by the applicable regulatory authority in
our target markets. Human clinical trials are expensive and difficult to design and implement, in part because they are subject
to rigorous regulatory requirements. For instance, regulatory authorities may not agree with our proposed endpoints for any clinical
trials of our product candidates, which may delay the commencement of our clinical trials. The clinical trial process is also time-consuming.
We estimate that clinical trials of our product candidates will take at least several years to complete.
A number of companies
in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse
safety profiles, notwithstanding promising results in earlier trials, and in the regulatory approval process. In addition, the
design of a clinical trial, such as endpoints, inclusion and exclusion criteria, statistical analysis plans, data access protocols
and trial sizing, can determine whether its results will support approval of a product and flaws in the design of a clinical trial
may not become apparent until the clinical trial is well advanced. If we experience delays in the commencement or completion of
our clinical trials, or if we terminate a clinical trial prior to completion, the commercial prospects of our product candidates
could be harmed, and our ability to generate revenues may be delayed. In addition, any delays in our clinical trials could increase
our costs, cause a drop in our stock price, slow down the approval process and jeopardize our ability to commence product sales
and generate revenues. Further, disruptions caused by the COVID-19 pandemic may increase the likelihood that we encounter such
difficulties or delays in commencing or completing clinical trials. Any of these occurrences may harm our business, financial condition
and results of operations.
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 our control.
We may encounter
delays in enrolling, or be unable to enroll, a sufficient number of patients to complete any of our clinical trials, and even once
enrolled we may be unable to retain a sufficient number of patients to complete any of our trials. Patient enrollment and retention
in clinical trials depends on many factors, including the size of the patient population, the nature of the trial protocol, the
effectiveness of our patient recruitment efforts, delays in enrollment due to travel or quarantine policies, or other factors,
related to COVID-19, the existing body of safety and efficacy data with respect to the study candidate, the perceived risks and
benefits of gene therapy approaches for the treatment of certain diseases, the number and nature of competing existing treatments
for our target indications, the number and nature of ongoing trials for other product candidates in development for our target
indications, perceived risk of the delivery procedure, patients with pre-existing conditions that preclude their participation
in any trial, the proximity of patients to clinical sites and the eligibility criteria for the study. Furthermore, the results
we have reported in clinical trials to date and any other results we may report in clinical trials of any of our gene therapy product
candidates in the future may make it difficult or impossible to recruit and retain patients in other clinical trials of those gene
therapy product candidates. Similarly, negative results reported by our competitors about their product candidates may negatively
affect patient recruitment in our clinical 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 our ability to develop our gene therapy product candidates
or could render further development impossible. In addition, we expect to rely on clinical trial sites to ensure proper and timely
conduct of our future clinical trials and, while we intend to enter into agreements governing their services, we will be limited
in our ability to control their actual performance.
Risks Related to Our Intellectual
Property
We have licensed
a significant portion of our intellectual property from our licensors. If we breach any of our license agreements with these licensors,
or otherwise experience disruptions to our business relationships with our licensors, we could lose intellectual property rights
that are important to our business.
We hold rights under
license agreements with our licensors, including Weird Science and G-Tech, , SRI and Dr. Serhat Gumrukcu that are important to
our business. Our research and development platform is built, in part, around patent rights licensed from such licensors. Under
our existing license agreements, we are subject to various obligations, including diligence obligations with respect to development
and commercialization activities, provision of support with respect to development of licensed intellectual property, prosecution
of intellectual property protection, payment obligations upon achievement of certain milestones and royalties on product sales.
In spite of our efforts, our licensors might conclude that we have materially breached our obligations under such license agreements
and might therefore terminate the license agreements, thereby removing or limiting our ability to develop and commercialize products
and technology covered by these license agreements. If any of these licenses are terminated, or if the underlying patents fail
to provide the intended exclusivity, competitors or other third parties would have the freedom to seek regulatory approval of,
and to market, products identical to ours and we may be required to cease our development and commercialization of product candidates
covered by any such licenses. Any of the foregoing could have a material adverse effect on our competitive position, business,
financial condition, results of operations, and prospects.
Moreover, disputes
may arise regarding intellectual property subject to a licensing agreement, including:
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the
scope of rights granted under license agreements and other interpretation-related issues;
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payment obligations due to licensors
under license agreements and other disputes related to the obligations for payment related to intellectual property protection;
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the extent to which our product candidates, technology and processes infringe on intellectual property of a licensor that is not subject to a licensing agreement;
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the sublicensing of patent and other rights under our collaborative development relationships;
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our diligence obligations under license agreements and what activities satisfy those diligence obligations;
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the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us; and
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the priority of invention of patented technology.
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In addition, the
agreements under which we currently license intellectual property or technology from third parties are complex, and certain provisions
in such agreements may be susceptible to multiple interpretations.
The resolution of
any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant
intellectual property or technology, or increase what we believe to be our financial or other obligations under the relevant agreement,
either of which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
Moreover, if disputes over intellectual property that we have licensed prevent or impair our ability to maintain our licensing
arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected product
candidates, which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
If we do not obtain
required intellectual property licenses or rights, we could encounter delays in our product development efforts while we attempt
to design around other patents or even be prohibited from developing, manufacturing or selling products requiring these rights
or licenses. There is also a risk that legal disputes may arise as to the rights to technology developed in collaboration with
other parties, all with attendant risk, distraction, expense, and lack of predictability.
If we are
unable to obtain and maintain sufficient intellectual property protection for our product candidates, or if the scope of the intellectual
property protection is not sufficiently broad, our ability to commercialize our product candidates successfully and to compete
effectively may be adversely affected.
We rely upon a combination
of patents, trademarks, trade secrets and confidentiality agreements – either that we own or possess or that are owned or
possessed by our licensors that are licensed to us – to protect the intellectual property related to our technology and product
candidates. When we refer to “our” technologies, inventions, patents, provisional patents, patent applications or other
intellectual property rights, we are referring to both the rights that we own or possess as well as those that we license, many
of which are critical to our intellectual property protection and our business. For example, the product candidates and platform
technology we have licensed from our licensors are protected primarily by patent or patent applications of our licensors that we
have licensed and as confidential know-how and trade secrets. If the intellectual property that we rely on is not adequately protected,
competitors may be able to use our technologies and erode or negate any competitive advantage we may have.
The patentability
of inventions and the validity, enforceability and scope of patents in the biotechnology field is uncertain because it involves
complex legal, scientific and factual considerations, and it has in recent years been the subject of significant litigation. Moreover,
the standards applied by the U.S. Patent and Trademark Office, or USPTO, and non-U.S. patent offices in granting patents are not
always applied uniformly or predictably. For example, there is no uniform worldwide policy regarding patentable subject matter
or the scope of claims allowable in biotechnology patents.
There is no assurance
that all potentially relevant prior art relating to our patents and patent applications is known to us or has been found in the
instances where searching was done. We may be unaware of prior art that could be used to invalidate an issued patent or prevent
a pending patent application from issuing as a patent. There also may be prior art of which we are aware, but which we do not believe
affects the validity or enforceability of a claim of one of our patents or patent applications, which may, nonetheless, ultimately
be found to affect the validity or enforceability of such claim. We also may not be able to obtain full patent protection from
provisional patents for which we have sought or will seek further patent protection. As a consequence of these and other factors,
our patent applications may fail to result in issued patents with claims that cover our product candidates in the U.S. or in other
countries.
Even if patents
have issued or do successfully issue from patent applications, and even if these patents cover our product candidates, third parties
may challenge the validity, enforceability or scope thereof, which may result in these patents being narrowed, invalidated or held
to be unenforceable. No assurance can be given that if challenged, our patents would be declared by a court to be valid or enforceable.
Even if unchallenged,
our patents and patent applications or other intellectual property rights may not adequately protect our intellectual property,
provide exclusivity for our product candidates or prevent others from designing around our claims. The possibility exists that
others will develop products on an independent basis which have the same effect as our product candidates and which do not infringe
our patents or other intellectual property rights, or that others will design around the claims of patents that we have had issued
that cover our product candidates. If the breadth or strength of protection provided by our patents and patent applications with
respect to our product candidates is threatened, it could jeopardize our ability to commercialize our product candidates and dissuade
companies from collaborating with us.
We may also desire
to seek a license from a third party who owns intellectual property that may be useful for providing exclusivity for our product
candidates, or for providing the ability to develop and commercialize a product candidate in an unrestricted manner. There is no
guarantee that we will be able to obtain a license from such a third party on commercially reasonable terms, or at all.
In addition, the
United States Patent and Trademark Office (USPTO) and various foreign governmental patent agencies require compliance with a number
of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent
lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are
situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial
or complete loss of patent rights in the relevant jurisdiction.
We and our licensors
have filed a number of patent applications covering our product candidates or methods of using or making those product candidates.
We cannot offer any assurances about which, if any, patents will be issued with respect to these pending patent applications, the
breadth of any such patents that are ultimately issued or whether any issued patents will be found invalid and unenforceable or
will be threatened by third parties. Because patent applications in the U.S. and most other countries are confidential for a period
of time after filing, and some remain so until issued, we cannot be certain that we or our licensors were the first to file any
patent application related to a product candidate. We or our licensors may also become involved in proceedings regarding our patents,
including patent infringement lawsuits, interference or derivation proceedings, oppositions, and inter partes and post-grant
review proceedings before the USPTO, the European Patent Office and other non-U.S. patent offices.
If we are
unable to protect the confidentiality of our trade secrets, the value of our technology could be negatively impacted and our business
would be harmed.
In addition to the
protection afforded by patents we hold rights to, we also rely on trade secret protection for certain aspects of our intellectual
property. However, trade secrets are difficult to protect. We seek to protect these trade secrets, in part, by entering into non-disclosure
and confidentiality agreements with parties who have access to them, such as our employees, consultants, independent contractors,
advisors, contract manufacturers, suppliers and other third parties. We also enter into confidentiality and invention or patent
assignment agreements with employees and certain consultants. Any party with whom we have executed such an agreement may breach
that agreement and disclose our proprietary information, including our trade secrets, and we might not be able to obtain adequate
remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult,
expensive and time-consuming, and the outcome is unpredictable. Additionally, if the steps taken to maintain our trade secrets
are deemed inadequate, we may have insufficient recourse against third parties for misappropriating the trade secret. Further,
if any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to
prevent such third party, or those to whom they communicate such technology or information, from using that technology or information
to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, it could have
a material adverse effect on our business, financial condition, results of operations, and prospects.
Third-party
claims of intellectual property infringement may prevent or delay our development and commercialization efforts.
Our success will
depend in part on our ability to commercialize our product candidates without infringing the proprietary rights of others. Much
of the intellectual property utilized in our product candidates is licensed from our licensors, who hold patents and provisional
patents in their names. We have not conducted extensive freedom of use patent searches and no assurance can be given that patents
do not exist or could be issued which would have an adverse effect on our ability to market our technology or maintain our competitive
position with respect to our technology. We also cannot be sure that patents or provisional patents filed by others are valid or
will be upheld if challenged. It is possible that there are additional patents that may cover certain other aspects of technology
used in our product candidates that is not covered by our licensed intellectual property. If our licensed technology or other subject
matter are claimed under other United States patents or other international patents or are otherwise protected by third party proprietary
rights, we or our licensors may be subject to infringement actions. In such event, we may challenge the validity of such patents
or other proprietary rights or we may be required to obtain licenses from such companies in order to develop, manufacture or market
our technology. There can be no assurances that we would be successful in a challenge or be able to obtain such licenses or that
such licenses, if available, could be obtained on commercially reasonable terms. Furthermore, the failure to succeed in a challenge,
develop a commercially viable alternative or obtain needed licenses could have significant adverse consequences to the development
of our pipeline. Adverse consequences include delays in marketing some or all of our product candidates based on our technology
or the inability to proceed with the development, manufacture or sale of products requiring such licenses. If we defend ourselves
against charges of patent infringement or to protect our proprietary rights against third parties, substantial costs will be incurred
regardless of whether we are successful. Such proceedings are typically protracted with no certainty of success. An adverse outcome
could subject us to significant liabilities to third parties and force us to curtail or cease the research and development of our
technology.
Parties making claims
against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize
our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would
be a substantial diversion of resources from our business. In the event of a successful claim of infringement against us, we may
have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign
our infringing products or obtain one or more licenses from third parties, which may be impossible or require substantial time
and monetary expenditure. Additionally, parties making claims against us may be able to sustain the costs of complex patent litigation
more effectively than we can because they have substantially greater resources. Furthermore, because of the substantial amount
of discovery required in connection with intellectual property litigation or administrative proceedings, there is a risk that some
of our confidential information could be compromised by disclosure. In addition, any uncertainties resulting from the initiation
and continuation of any litigation could have a material adverse effect on our ability to raise additional funds or otherwise have
a material adverse effect on our business, results of operations, financial condition and prospects.
We may not
be able to protect our intellectual property rights throughout the world.
Filing, prosecuting
and defending patents on our product candidates in all countries throughout the world would be prohibitively expensive, and our
intellectual property rights in some countries outside the United States can be less extensive than those in the United States.
In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state
laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries
outside the United States, or from selling or importing products made using our inventions in and into the United States or other
jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their
own products and may also export infringing products to territories where we have patent protection, but enforcement is not as
strong as that in the United States. These products may compete with our products and our patents or other intellectual property
rights may not be effective or sufficient to prevent them from competing.
Risks Related
to our Common Stock
Our stock price has been and will likely continue to
be volatile and may decline regardless of our operating performance.
Our stock price
has fluctuated in the past and can be expected to be volatile in the future. From July 1, 2020 through June 30, 2021, the reported
sale price of our Common Stock has fluctuated between $6.79 and $2.82 per share. The stock market in general and the market for
biotechnology companies in particular have experienced extreme volatility that has often been unrelated to the operating performance
of particular companies. As a result of this volatility, investors may experience losses on their investment in our Common Stock.
The market price of our Common Stock may be influenced by many factors, including the following:
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the success of competitive
products or technologies;
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regulatory actions with
respect to our product candidates or products or our competitors’ product candidates or products;
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actual or anticipated
changes in our growth rate relative to our competitors;
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announcements by us
or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations or capital commitments;
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results
of clinical studies of our product candidates or those of our competitors;
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regulatory
or legal developments in the U.S. and other countries;
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developments
or disputes concerning patent applications, issued patents or other proprietary rights;
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the
recruitment or departure of key personnel;
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the level of expenses
related to any of our product candidates or clinical development programs;
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the results of our efforts
to in-license or acquire additional product candidates or products;
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actual or anticipated
changes in estimates as to financial results, development timelines or recommendations by securities analysts;
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variations in our financial
results or those of companies that are perceived to be similar to us;
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fluctuations in the
valuation of companies perceived by investors to be comparable to us;
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inconsistent trading
volume levels of our shares;
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announcement or expectation
of additional financing efforts;
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sales of our Common
Stock by us, our insiders or our other stockholders;
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market conditions in
the pharmaceutical and biotechnology sectors;
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general economic, industry
and market conditions; and
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the other risks described
in this “Risk Factors” section.
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In addition, the
stock markets in general, and the markets for biotechnology and pharmaceutical stocks in particular, have experienced significant
volatility that has often been unrelated to the operating performance of particular companies.
Our principal stockholders
and management own a significant percentage of our stock and could exert significant control over matters subject to stockholder
approval.
Our executive officers,
directors, affiliates, and entities they control own approximately 62.9% of our outstanding Common Stock and voting power. These
stockholders, should they act in concert, could determine the outcome of all matters requiring stockholder approval. For example,
these stockholders may be able to control elections of directors, amendments of our organizational documents, or approval of any
merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals
or offers for our Common Stock. The interests of our significant stockholders who are also affiliates may not always coincide with
the interests of other stockholders and they may act in a manner that advances their best interests and not necessarily those of
other stockholders, including seeking a premium value for their Common Stock, and might affect the market price for our Common
Stock.
Sales of a substantial number of
shares of our Common Stock in the public market could cause our stock price to fall.
A significant portion
of our Common Stock is held in restricted form, and consequentially a minority of our outstanding Common Stock actively trades
in the public markets. Sales of a substantial number of such shares of our Common Stock in the public market could occur at any
time. While a large majority of such shares are unregistered and subject to volume restrictions on sale pursuant to Rule 144 under
the Securities Act, these restrictions could be lifted if any of our stockholders ceased to be bound by such restrictions. These
sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market
price of our Common Stock.
Trading of
our Common Stock may be volatile and sporadic, which could depress the market price of our Common Stock and make it difficult for
our stockholders to resell their shares.
There is currently
a limited market for our Common Stock and the volume of our Common Stock traded on any day may vary significantly from one period
to another. Trading in our stock is often thin and characterized by wide fluctuations in trading prices, due to many factors that
may have little to do with our operations or business prospects. The availability of buyers and sellers represented by this volatility
could lead to a market price for our Common Stock that is unrelated to operating performance. There is no assurance that a sufficient
market will develop in the stock, in which case it could be difficult for our stockholders to resell their stock.
We have incurred
and will continue to incur increased costs as a result of being a public company and our management expects to devote substantial
time to public company compliance programs.
As a public company,
we have incurred and will continue to incur significant legal, accounting and other expenses. We are subject to the reporting requirements
of the Exchange Act, which require, among other things, that we file with the SEC annual, quarterly and current reports with respect
to our business and financial condition. In addition, the Sarbanes-Oxley Act, as well as rules subsequently adopted by the SEC
and The NASDAQ Stock Market to implement provisions of the Sarbanes-Oxley Act, impose significant requirements on public companies,
including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance
practices. As a Smaller Reporting Company and Non-accelerated Filer, we are able to take advantage of certain accommodations afforded
to such companies, including being exempt from the requirement to conduct an audit of our internal controls. In the event we no
longer qualify as a Smaller Reporting Company and Non-accelerated Filer, we will lose such accommodations, which could involve
significant costs that could affect our operations. Changes in reporting requirements, the current political environment and the
potential for future regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional
compliance costs and impact the manner in which we operate our business in ways we cannot currently anticipate.
The rules and regulations
applicable to public companies have substantially increased our legal and financial compliance costs and make some activities more
time-consuming and costly. To the extent these requirements divert the attention of our management and personnel from other business
concerns, they could have a material adverse effect on our business, financial condition and results of operations.
Because we
do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will
be the sole source of potential gain for our stockholders.
We have never declared
or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth
and development of our business. As a result, capital appreciation, if any, of our Common Stock will be the sole source of gain
for our stockholders for the foreseeable future.
Future sales
and issuances of our Common Stock or rights to purchase Common Stock, including pursuant to our equity incentive plans, could result
in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.
We expect that significant
additional capital will be needed in the future to continue our planned operations. To raise capital, we may sell substantial amounts
of Common Stock or securities convertible into or exchangeable for Common Stock in one or more transactions at prices and in a
manner we determine from time to time. These future issuances of Common Stock or Common Stock-related securities, together with
the exercise of outstanding options or warrants, and any additional shares that may be issued in connection with acquisitions or
licenses, if any, may result in material dilution to our investors. Such sales may also result in material dilution to our existing
stockholders, and new investors could gain rights, preferences and privileges senior to those of holders of our Common Stock. Pursuant
to our equity incentive plans, our compensation committee is authorized to grant equity-based incentive awards to our employees,
non-employee directors and consultants. Future grants of RSUs, options and other equity awards and issuances of Common Stock under
our equity incentive plans will result in dilution and may have an adverse effect on the market price of our Common Stock.
Some terms
of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others,
even if an acquisition would be beneficial to our stockholders and may prevent attempts by our stockholders to replace or remove
our current management.
Our Certificate
of Incorporation, and our Bylaws, as well as Delaware law, could make it more difficult for a third party to acquire us or increase
the cost of acquiring us, even if doing so would benefit our stockholders, or remove our current management. These include terms
that:
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permit our board of directors to issue up to 10,000,000 shares of preferred stock, with any rights, preferences and privileges as they may designate;
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provide that all
vacancies on our board of directors, including as a result of newly created directorships, may, except as otherwise required
by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum;
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provide that stockholders
seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting
of stockholders must provide advance notice in writing, and also specify requirements as to the form and content of a stockholder’s
notice; and
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not provide for
cumulative voting rights, thereby allowing the holders of a majority of the shares of Common Stock entitled to vote in any
election of directors to elect all of the directors standing for election.
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Any of the factors
listed above may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it
more difficult for stockholders to replace members of our board of directors, who are responsible for appointing the members of
our management.
In addition, because
we are incorporated in Delaware, we are governed by Section 203 of the Delaware General Corporation Law, which may discourage,
delay or prevent someone from acquiring us or merging with us whether or not it is desired by or beneficial to our stockholders.
Under Delaware law, a corporation may not, in general, engage in a business combination with any holder of 15% or more of its capital
stock unless the holder has held the stock for three years or, among other things, the board of directors has approved the transaction.
Any term of our Certificate of Incorporation or Bylaws or Delaware law that has the effect of delaying or deterring a change in
control could limit the opportunity for our stockholders to receive a premium for their shares of our Common Stock and could also
affect the price that some investors are willing to pay for our Common Stock.
Risks Related To Our Business Operations
and Managing Growth
If our operations
require a full time Chief Medical Officer, and we are not able to hire a full time Chief Medical Officer to manage our clinical
operations or if our current Chief Executive Officer, Chief Financial Officer or key scientific personnel cease to serve, our business
will be harmed.
Currently, our management
team is led by Dr. Mark Dybul, the Chief Executive Officer and Luisa Puche, our Chief Financial Officer. If Dr. Dybul or Ms. Puche
should cease to serve, our business operations may suffer. Additionally, we may in the future require a Chief Medical Officer,
and if we are unable to hire a Chief Medical Officer, our business operations and the continued development of our product candidates
may suffer.
In addition, we
are dependent on our continued ability to attract, retain and motivate highly qualified additional management and scientific personnel.
If we are not able to retain our management and to attract, on acceptable terms, additional qualified personnel necessary for the
continued development of our business, we might not be able to sustain our operations or grow.
We have limited
corporate infrastructure and may experience difficulties in managing growth.
As of June 30, 2021,
we had only 11 full time employees and we rely on third-party contractors for the provision of professional, scientific, regulatory
and other services. As our development and commercialization plans and strategies develop, we may need additional managerial, scientific,
operational, financial, and other resources. Our management may need to divert a disproportionate amount of its attention away
from our day-to-day operations and devote a substantial amount of time to managing these growth activities. We might not be able
to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure, operational inefficiencies,
loss of business opportunities, loss of employees and reduced productivity among remaining employees. Our expected growth could
require significant capital expenditures and may divert financial resources from other projects, such as the development of our
current and potential future product candidates. If our management is unable to effectively manage our growth, our expenses may
increase more than expected, our ability to generate and grow revenue could be reduced and we might not be able to implement our
business strategy. Our future financial performance, our ability to commercialize product candidates, develop a scalable infrastructure
and compete effectively will depend, in part, on our ability to effectively manage any future growth.
If we, our
service providers, or third parties fail to comply with environmental and health and safety laws and regulations, we could become
subject to fines or penalties or incur costs that could harm our business.
If we, our service
providers, or any third parties engaged in development of our product candidates fail to comply with laws regulating the protection
of the environment, health and animal and human safety, we could be subject to enforcement actions and our business prospects could
be adversely affected.
Our research and
development activities, and the research and development activities of our service providers and any third parties engaged in development
of our product candidates, may involve the use of hazardous materials and chemicals or other regulated activities. In conjunction
with our service providers and other third parties, we are also engaged in pre-clinical studies using live animals and samples
of infectious diseases. Failure to adequately handle and dispose of hazardous materials or to meet various standards imposed by
federal, state, local or foreign regulators could lead to liabilities for resulting damages, which could be substantial. We also
may be subject to numerous environmental, health and workplace safety laws and regulations, including those governing laboratory
procedures, exposure to blood-borne pathogens and the handling of bio-hazardous materials.
If we, our service
providers, or any third parties engaged in development of our product candidates fail to comply with applicable federal, state,
local or foreign laws or regulations, we could be subject to enforcement actions, which could adversely affect our ability to develop,
market and sell our product candidates successfully and could harm our reputation and lead to reduced acceptance of our product
candidates. These enforcement actions may include:
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restrictions on, or prohibitions against,
marketing our product candidates;
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restrictions on importation of our product candidates;
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suspension of review or refusal to approve new or pending applications;
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suspension or withdrawal of product approvals;
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civil and criminal penalties and fines.
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We rely upon
information technology and any failure, inadequacy, interruption or security lapse of that technology, including any cyber security
incidents, could harm our ability to operate our business effectively.
Our business operations
could suffer in the event of system failure. Despite the implementation of security measures, our internal computer systems and
those of our contract research organizations, and other contractors and consultants are vulnerable to damage from computer viruses,
unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. If such an event were to
occur and cause interruptions in our operations, it could result in a material disruption of our product development programs.
For example, the loss of formulas or data from completed or ongoing or planned pre-clinical studies could result in delays in our
regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption
or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential
or proprietary information, we could incur liability and further development of our product candidates could be delayed.
Our business
plan may lead to the initiation of one or more product development programs, the discontinuation of one or more development programs,
or the execution of one or more transactions that you do not agree with or that you do not perceive as favorable to your investment.
We are pursuing
a strategy to leverage our clinical experience and expertise for the clinical development and regulatory approval of our gene therapy
product candidates. As part of our ongoing business strategy, we continue to explore potential opportunities to acquire or license
new product candidates and to collaborate on our existing products in development. We cannot be certain that our product candidates
will be successfully developed, or that the early clinical trial results of these product candidates will be predictive of future
clinical trial results. We may determine at any time that one or more of our in-licensed product candidates is not suitable for
continued development due to cost, feasibility of obtaining regulatory approvals or any other reason, and may terminate the related
license.
This business plan
requires us to be successful in a number of challenging, uncertain and risky activities, including pursuing development of our
gene therapy product candidates in indications for which we have limited or no human clinical data, designing and executing a nonclinical
and/or clinical development program for our product candidates, building internal or outsourced gene therapy capabilities, converting
early stage gene therapy research efforts into clinical development opportunities, identifying additional promising new assets
for development that are available for acquisition or in-license and that fit our strategic focus and identifying potential partners
to collaborate on our products. We may not be successful at one or more of the activities required for us to execute this business
plan. In addition, we may consider other strategic alternatives, such as mergers, acquisitions, divestitures, joint ventures, partnerships
and collaborations. We cannot be sure when or if any type of transaction will result. Even if we pursue a transaction, such transaction
may not be consistent with our stockholders’ expectations or may not ultimately be favorable for our stockholders, either
in the shorter or longer term.
Our growth prospects
and the future value of our Company are primarily dependent on the progress of our ongoing and planned development programs for
our product candidates as well as the outcome of our ongoing business development efforts and pipeline [expansion activities/progression],
together with the amount of our remaining available cash. The development of our product candidates and the outcome of our ongoing
business development efforts and pipeline [expansion activities/progression] are highly uncertain. We expect to continue to reassess
and make changes to our existing development programs and pipeline strategy. Our plans for our development programs may be affected
by the results of competitors’ clinical trials of product candidates addressing our current target indications, and our business
development efforts and pipeline [expansion activities/progression] may also be affected by the results of competitors’ ongoing
research and development efforts. We may modify, expand or terminate some or all of our development programs, clinical trials or
collaborative research programs at any time as a result of new competitive information or as the result of changes to our product
pipeline or business development strategy.
If serious
adverse events or other undesirable side effects or safety concerns attributable to our product candidates occur, they may adversely
affect or delay our clinical development and commercialization of some or all of our product candidates.
Undesirable side
effects or safety concerns caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt
our clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval. Although no treatment-related
serious adverse events (“SAEs”) were observed in any clinical trials of any of our product candidates to date, if treatment-related
SAEs or other undesirable side effects or safety concerns, or unexpected characteristics attributable to our product candidates
are observed in any future clinical trials, they may adversely affect or delay our clinical development and commercialization of
the effected product candidate, and the occurrence of these events could have a material adverse effect on our business and financial
prospects. Results of our future clinical trials could reveal a high and unacceptable severity and prevalence of adverse side effects.
In such an event, our trials could be suspended or terminated and the FDA or other regulatory agency could order us to cease further
development of or deny approval of our product candidates for any or all targeted indications. The drug-related side effects could
affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims.
Additionally, if
any of our product candidates receives marketing approval and we or others later identify undesirable or unacceptable side effects
or safety concerns caused by these product candidates, a number of potentially significant negative consequences could result,
including:
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regulatory authorities may withdraw, suspend, or limit approvals of
such product and require us to take them off the market;
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regulatory authorities may require the addition of labeling statements,
specific warnings, a contraindication or field alerts to physicians and pharmacies;
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regulatory authorities may require a medication guide outlining the
risks of such side effects for distribution to patients, or that we implement a REMS or REMS-like plan to ensure that the benefits
of the product outweigh its risks;
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we may be required to change the way a product is distributed or administered,
conduct additional clinical trials or change the labeling of a product;
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we may be required to conduct additional post-marketing studies or
surveillance;
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we may be subject to limitations on how we may promote the product;
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sales of the product may decrease significantly;
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we may be subject to regulatory investigations,
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government enforcement actions, litigation or product liability claims;
and
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our products may become less competitive or our reputation may suffer.
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Any of these events
could prevent us or any collaborators from achieving or maintaining market acceptance of our product candidates or could substantially
increase commercialization costs and expenses, which in turn could delay or prevent us from generating revenue from the sale of
our product candidates.
We have no
manufacturing experience, and the failure to comply with all applicable manufacturing regulations and requirements could have a
materially adverse effect on our business.
We have never manufactured
products in the highly regulated environment of pharmaceutical manufacturing, and our team has limited experience in the manufacture
of drug therapies. There are numerous regulations and requirements that must be maintained to obtain licensure and permitting required
prior to the commencement of manufacturing, as well as additional requirements to continue manufacturing pharmaceutical products.
In addition, we do not have the resources at this time to acquire or lease suitable facilities. If we or our CMO fail to comply
with regulations, to obtain the necessary licenses and knowhow or to obtain the requisite financing in order to comply with all
applicable regulations and to own or lease the required facilities in order to manufacture our products, we could be forced to
cease operations, which would cause you to lose all of your investment.
In addition, the
FDA and other regulatory authorities require that product candidates and drug products be manufactured according to cGMP. Any failure
by our third-party manufacturers to comply with cGMP could lead to a shortage of our product candidates. In addition, such failure
could be the basis for action by the FDA to withdraw approval, if granted to us, and for other regulatory enforcement action, including
Warning Letters, product seizure, injunction or other civil or criminal penalties.
Product candidates
that we develop may have to compete with other products and product candidates for access to manufacturing facilities. There are
a limited number of manufacturers that operate under cGMP regulations and that are both capable of manufacturing for us and willing
to do so. If we need to find another source of drug substance or drug product manufacturing for our product candidates, we may
not be able to identify, or reach agreement with, commercial-scale manufacturers on commercially reasonably terms, or at all. If
third parties that we engage in the future to manufacture a product for commercial sale or for our clinical trials, should cease
to continue to do so for any reason, we likely would experience significant delays in obtaining sufficient quantities of product
for us to meet commercial demand or to advance our clinical trials while we identify and qualify replacement suppliers. If for
any reason we are unable to obtain adequate supplies of any product candidate that we develop, or the drug substances used to manufacture
it, it will be more difficult for us to compete effectively, generate revenue, and further develop our products. In addition, if
we are unable to assure a sufficient quantity of the drug for patients with rare diseases or conditions, we may lose any Orphan
Drug exclusivity to which the product otherwise would be entitled.
We may, in
the future, choose to seek FDA Orphan Drug designation for one or more of our current or future CNS product candidates. Even if
we obtain Orphan Drug designation from the FDA for a product candidate, there are limitations to the exclusivity afforded by such
designation.
In the U.S., the
company that first obtains FDA approval for a designated orphan drug for the specified rare disease or condition receives orphan
drug marketing exclusivity for that drug for a period of seven years. This orphan drug exclusivity prevents the FDA from approving
another application, including a full NDA to market the same drug for the same orphan indication, except in very limited circumstances,
including when the FDA concludes that the later drug is safer, more effective or makes a major contribution to patient care. For
purposes of small molecule drugs, the FDA defines “same drug” as a drug that contains the same active moiety and is
intended for the same use as the drug in question. To obtain Orphan Drug status for a drug that shares the same active moiety as
an already approved drug, it must be demonstrated to the FDA that the drug is safer or more effective than the approved orphan
designated drug, or that it makes a major contribution to patient care. In addition, a designated orphan drug may not receive orphan
drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition,
orphan drug exclusive marketing rights in the U.S. may be lost if the FDA later determines that the request for designation was
materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with
the rare disease or condition or if another drug with the same active moiety is determined to be safer, more effective, or represents
a major contribution to patient care.
1B. Unresolved Staff Comments
There are no unresolved SEC staff comments.
Item 2. Properties
The Company currently leases the following properties:
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5901 W. Olympic
Blvd, Suite 419
Los Angeles, CA 90036
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Physical
office space
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On
November 13, 2017, the Company entered into a Lease Agreement for a term of five years and two months from November 1, 2017. The
Leased Premises consist of approximately 2,325 rentable square feet. The base rent for such leased premises increases by 3% each
year over the term, and ranges from approximately $8,719 per month for the first year to $10,107 per month for the two months
of the sixth year. The Company was entitled to $70,800 in tenant improvement allowance in the form of free rent applied over 10
months in equal installments from January 2018.
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2080 Century
Park East, Suite 906
Los Angeles, CA 90067
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Headquarters
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The
Company entered into a Lease Agreement on June 19, 2018 for our corporate headquarters located at Century City Medical Plaza.
We have a ten-year lease that was for approximately 2,453 square feet at this location. In February 2019, we extended our corporate
headquarters to encompass the adjoining suite for approximately 1,101 square feet, bringing the total workspace to 3,554 square
feet. The new base rent for this leased premises increases by 3% each year over the term, and ranges from $17,770 per month as
of the date of the amendment until the end of the first year to $ 23,186 per month for the tenth year. The additional suite was
in the form of an amendment to the original lease and will expire on the same date as the original lease. The Company was entitled
to a total of $148,168 in contributions toward tenant improvements for both spaces.
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Item 3. Legal Proceedings
From time to time,
we may be involved in litigation relating to claims arising out of our operations in the normal course of business. We are not
currently a party to any legal proceeding that we believe would have a material adverse effect on our business, financial condition
or operating results.
Item 4. Mine Safety Disclosures.
Not applicable.