Overview
We
are a clinical-stage pharmaceutical company developing and commercializing products for treating inflammatory and immune diseases
with a focus on the eye and nervous system.
In
the fourth quarter of 2020, we acquired Panoptes Ges.m.b.H. (“Panoptes”), transforming our pipeline with the addition
of PP-001, a clinical stage Dihydroorotate Dehydrogenase (“DHODH”) inhibitor. PP-001, is a next-generation, non-steroidal,
immuno-modulatory and small-molecule inhibitor of DHODH with what we believe to be best-in-class picomolar potency and a validated
immune modulating mechanism designed to overcome the off-target side effects and safety issues typically associated with DHODH
inhibitors. PP-001 has been developed in two clinical-stage ophthalmic formulations: PaniJect, an intravitreal injection for inflammatory
diseases of the eye including posterior uveitis, and PaniDrop, a novel nano carrier technology eye drop for ocular surface diseases
such as conjunctivitis, dry eye disease and others. Other administration routes are also in development and Investigational New
Drug (“IND”) enabling studies are underway for conditions outside the ocular space.
In
addition, we are developing Ocular Bandage Gel (“OBG”), a modified form of the natural polymer hyaluronic acid, designed
to protect the ocular surface to permit re-epithelialization of the cornea and improve ocular surface integrity. OBG, with unique
properties that help hydrate and protect the ocular surface, is in clinical evaluation for patients undergoing photorefractive
keratectomy (“PRK”) surgery for corneal wound repair after refractive surgery and patients with punctate epitheliopathies
(“PE”) as a result of dry eye. We are currently developing OBG as a device, but are evaluating the potential to reclassify
OBG as a drug. We attended a type-B meeting with the U.S. Food and Drug Administration’s (“FDA”) Center for
Drug Evaluation and Research (“CDER”) division during the first quarter of 2021 to discuss OBG’s path forward
as a drug and will continue to evaluate the feedback received as we move towards reaching a decision on the reclassification.
Our
Strategy
Our
goal is to continue developing products for treating disorders of the eye and to expand development to indications outside of
ophthalmology. The key elements of this strategy are to:
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Evaluate
the current clinical development programs in ophthalmology of the newly acquired small
molecule, PP-001. This includes PaniJect for retinal diseases and PaniDrop for diseases
of the ocular surface, which have completed dose-ascending human clinical safety studies
in Europe.
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Evaluate
the research and development programs for other routes of administration of PP-001, specifically
outside of ophthalmology. We are assessing a broad range of potential therapeutic areas
including oncology, autoimmune disease, and viral infection.
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Finalize
the evaluation to determine reclassification of OBG from a device to a drug. This includes
assessing the feedback from a type-B meeting with the FDA’s CDER division during
the first quarter of 2021.
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Continue
clinical development of OBG for the treatment of dry eye disease. In the first quarter
of 2020, we announced positive topline data in our follow-on pilot study, which evaluated
several different exploratory endpoints.
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We
completed clinical development as a device for the indication of wound healing in patients
who have undergone PRK surgery. We will assess the path forward for this indication if
OBG is reclassified as a drug.
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Pursue
strategic collaborations. We plan to evaluate opportunities to enter collaborations that
may contribute to our ability to advance our product candidates and to progress concurrently
a range of discovery and development programs. We also plan to evaluate opportunities
to in-license or acquire the rights to other products, product candidates, or technologies.
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Market
Opportunity
PP-001
Overview
PP-001
is a third-generation small molecule DHODH inhibitor. DHODH is extensively exploited as potential drug targets for immunological
disorders, oncology, and infectious diseases. DHODH is a key enzyme in the de novo pyrimidine synthesis pathway. This enzyme is
located in the mitochondria and catalyzes the conversion of dihydroorotate (“DHO”) to orotate as the fourth step in
the de novo synthesis of pyrimidines that are ultimately used in the production of nucleotides.
Nucleotides
are required for cell growth and replication. Nucleotides are the activated precursors of nucleic acids and are necessary for
the replication of the genome and the transcription of the genetic information into RNA. Nucleotides also serve as an energy source
for a more select group of biological processes (ATP and GTP). They also play a role in the formation of glycogen, signal-transduction
pathways, and as components of co-enzymes (NAD and FAD). An ample supply of nucleotides in the cell is essential for all cellular
processes.
There
are two pathways for the biosynthesis of nucleotides: salvage and de novo. The main difference is where the nucleotide bases come
from. In the salvage pathway, the bases are recovered (salvaged) from RNA and DNA degradation. In the de novo pathway, the bases
are assembled from simple precursor molecules (made from scratch).
One
critical requirement of fast-growing or proliferating cells, such as the expansion of activated B and T-cells, cancer cells, and
pathogen infected host cells, is the requirement of an abundance of nucleotide bases. These metabolic activities will predominately
utilize the de novo pathway for nucleotide biosynthesis. A key advantage of DHODH inhibition is the selectivity towards metabolically
activated cells (with a high need for RNA and DNA production), which should mitigate any negative impact on normal cells. Depletion
of cellular pyrimidine pools through the selective inhibition of DHODH has been shown to be a successful approach for therapeutic
development.
Currently,
two first generation DHODH inhibitors have been approved in the U.S. and abroad and are marketed by Sanofi as leflunomide (Arava®)
and the active metabolite teriflunomide (Aubagio®). These oral tablets are approved for the treatment of rheumatoid and psoriatic
arthritis and multiple sclerosis (“MS”), respectively. Both diseases are autoimmune disorders. One potential explanation
for the therapeutic effects of Arava® in arthritis is the reduction in the numbers or reactivity of activated T-cells, which
are involved in the pathogenesis of arthritis. The generally accepted view of human MS pathogenesis implicates peripheral activation
of myelin-specific autoreactive T-cells that lead to inflammatory disease in the central nervous system (“CNS”). By
blocking the de novo pyrimidine synthesis pathway via DHODH inhibition, it is suggested that Aubagio® reduces T-cell proliferation
in the periphery. Arava® and Aubagio® are formulated as oral drugs and it is established that leflunomide will be metabolized
in the liver to the active metabolite teriflunomide. Hepatotoxicity was reported as a major side effect after oral administration,
possibly as a result of extensive liver metabolization. Moreover, it was shown that apart from DHOHD, a series of protein kinases
are inhibited by Arava® and Aubagio®.
PP-001
was identified as a promising novel third generation DHODH inhibitor, with a half-maximal inhibitory concentration IC50-value
of 0.3 nM. Based on internal work completed, we believe that this is more than 1,000-fold more potent than teriflunomide (IC50
DHODH 415 nM). Furthermore, PP-001 represses the expression of key pro-inflammatory cytokines such as IL-17, IFN-g,VEGF
and others, potentially as a consequence of inhibiting DHODH. IL-17 and IFN-g are the hallmark cytokines expressed by Th1 and
Th17 T-cells, respectively, and play a crucial role in initiating the inflammatory processes in several ocular diseases, including
non-noninfectious uveitis and dry eye disease. PP-001 is structurally and mechanistically different from Arava®. The IC50
of PP-001 on selected tyrosine kinases, such as PI3K, AKT and JAK, is more than 10,000-fold above the IC50 of
PP-001 for DHODH. In general, side effects are not expected and have not been observed to date in animal and human studies after
PP-001 administration.
Despite
the fact that the DHODH protein is ubiquitously expressed in most cells, malignant cells seem to be more metabolically dependent
on de novo pyrimidine production, forming the potential basis of a therapeutic window. Inhibiting DHODH alone or in combination
with standard-of-care has been shown to be very active in a series of different in vivo cancer models for AML, breast,
lung, and others.
Additionally,
viral replication and viral cell metabolism is dependent on a large nucleotide pool. Therefore, PP-001 demonstrates antiviral
efficacy, which is likely due to pyrimidine depletion caused by DHODH inhibition. The postulated DHODH directed mode of action
of PP-001 is underlined by reversibility of the antiviral activity by co-application of uridine or other pyrimidine precursors.
The
postulated mode of action of PP-001 is depicted below.
OBG
Overview
OBG
is a synthetic modified hyaluronic acid (“HA”) capable of coating the ocular surface and designed to resist degradation
under conditions present in the eye. This prolongs residence time of the bandage on the ocular surface, thereby addressing the
limitations of current non-cross-linked hyaluronic acid formulations. Additionally, cross-linking allows the product’s viscosity
to be modified to meet optimum ocular needs. The increased viscosity and non-covalent muco-adhesive interfacial forces improve
residence time in the tear film, thus providing a coating that aids and promotes re-epithelization of the ocular surface via physical
protection. If OBG is approved by the FDA, we expect that it will be the only prescription eye drop available in the U.S. based
on HA.
OBG
exhibits significant shear thinning properties. This feature allows the modified HA to act as a more concentrated, viscous barrier
at low shear rates in a resting tear film, but also as a lower resistance fluid (therefore thinned) during high shear events such
as blinking. This property enables better residence time and a more favorable ocular surface coating with less optical blur. We
have demonstrated in animal studies that OBG remains on the ocular surface for up to two hours and further demonstrated in a human
clinical study that OBG does not cause blurriness while on the ocular surface. This enhances ocular surface protection and patient
comfort.
OBG
has been shown to provide a mechanical barrier that aids in the management of corneal epithelial defects and re-epithelization
in both preclinical studies and in clinical ophthalmic veterinary use. As such, PRK surgery was chosen as the subject population
which is best suited to demonstrate this effect. PRK is an efficacious alternative to patients seeking surgical correction of
refractive errors who are not suitable candidates for laser in situ keratomileusis (“LASIK”) due to inadequate corneal
thickness, larger pupil size, history of keratoconjunctivitis sicca (“KCS”), or anterior basement membrane disease.
OBG has demonstrated statistical significance in a pivotal clinical study for its ability to accelerate wound healing against
the current standard-of-care, a bandage contact lens.
We
believe that OBG can be used for the management of a variety of large and small corneal epithelial defects including PE, which
also includes dry eye. PE is an early sign of epithelial compromise and is associated with a variety of pathologic ocular inflammatory
conditions including ocular causes, as well as systemic diseases. This ocular surface condition is common and may represent areas
of epithelial cell damage and loss and therefore stain positively with fluorescein. Causes can include dry eye, acute and chronic
bacterial and viral conjunctivitis, trauma, contact lens wear (tight lens syndrome), chemical irritation and burns, diabetic and
infectious neuropathies, chemotherapy, and corneal abrasion. OBG demonstrated its ability to reduce corneal staining, which occurs
when the compromised corneal epithelial defects heal, in a pilot study in dry eye patients when compared against Refresh®
lubricating eye drops.
Potential
Targeted Indications
We
are undergoing an assessment of routes of administration for PP-001 and which diseases to focus our resources on. This will include
a review of existing routes of delivery, specifically PaniJect and PaniDrop, and may determine that it is not in our best interest
to continue with both ophthalmic routes of administration.
PaniJect
PaniJect
is being considered for multiple diseases that affect the posterior region of the eye (the retina), including Non-Infectious Posterior
Uveitis (“NIPU”) and Diabetic Macular Edema (“DME”).
PaniDrop
PaniDrop
is being considered for multiple diseases that affect the ocular surface and anterior region of the eye, including Allergic Conjunctivitis,
Viral Conjunctivitis and Dry Eye Disease (“DED”).
OBG
Punctate
Epitheliopathies due to Dry Eye
PE
is an early sign of epithelial compromise and is associated with a variety of pathologic ocular inflammatory conditions including
ocular causes, as well as systemic diseases. This ocular surface condition is common and may represent areas of epithelial cell
damage and loss and therefore stain positively with fluorescein. PE is characterized by a breakdown or damage of the epithelium
of the cornea in a pinpoint pattern, which can be seen by examination with a slit lamp. Patients may present with non-specific
symptoms such as red eye, tearing, foreign body sensation, photophobia, and burning. Causes can include dry eye, acute and chronic
bacterial and viral conjunctivitis, trauma, contact lens wear (tight lens syndrome), chemical irritation and burns, diabetic and
infectious neuropathies, chemotherapy, and corneal abrasion.
Standard-of-care
treatments are aimed at attempting to heal these punctate micro defects and/or epitheliopathies and can include increasing humidity,
artificial tears, lubricants, and ointments and in severe cases can even utilize bandage contact lens, antibiotics and amniotic
membrane graphs, as well as treating the underlying cause with topical anti-inflammatory and T-cell modulators. Often these current
treatments fall short, as they are ineffective in protecting and enabling corneal re-epithelization. The artificial tears have
limited residence time and often do nothing to mechanically protect the cornea and create an environment that can manage corneal
re-epithelization. Furthermore, many of the ointments and gels, although offering better residence time, are thicker and blur
vision, thus making them less attractive for daytime use.
OBG,
once applied to the eye, forms a thin layer that protects and lubricates the eye to promote re-epithelization in the management
of a variety of large and small corneal epithelial defects including PE.
Corneal
Wound Repair
OBG
has been shown to provide a mechanical barrier that aids in the management of corneal epithelial defects and re-epithelization
in both preclinical studies and in clinical ophthalmic veterinary use. PRK surgery was chosen as the subject population that is
best suited to demonstrate this effect. PRK is an efficacious alternative to patients seeking surgical correction of refractive
errors who are not suitable candidates for LASIK due to inadequate corneal thickness, larger pupil size, history of KCS, or anterior
basement membrane disease. PRK involves controlled mechanical removal of corneal epithelium with subsequent excimer laser photoablation
of the underlying Bowman’s layer and anterior stroma, including the subepithelial nerve plexus.
The
military prefers PRK as a refractive surgery due to the stability of the PRK incision and the absence of risk for flap dislocation
during military active duty. Although this procedure yields desirable visual acuity results, common complications of the procedure
include post-operative pain secondary to the epithelial defects, risk of corneal infection prior to re-epithelization of the large
epithelial defect, corneal haze formation, decreased contrast sensitivity, and slower visual recovery.
OBG
provides a thin coating to the surface of the eye, serving as a protectant and lubricant to facilitate and manage corneal re-epithelization.
Clinical
Trial Results
PaniJect:
Non-Infectious Posterior Uveitis
Phase
1a/2b Safety Study
A
first in human clinical study to evaluate the safety of intravitreally applied PP-001 in patients with chronic, non-infectious
uveitis has been completed. PP-001 was applied as a single, intravitreal injection of 300, 600 and 1,200 ng per eye. The primary
objective of the study was to assess the safety and tolerability of ascending doses of PP-001 in patients. The secondary objectives
were to assess improvement of intraocular inflammation and to evaluate the pharmacokinetics of PP-001 in patients. For this study,
PP-001 was formulated as a sterile, aqueous solution for intravitreal injection.
The
purpose of this study was to assess safety, pharmacokinetic (“PK”), and efficacy data of 12 treated patients.
PP-001 showed an excellent safety profile and promising efficacy signals in improvement of inflammatory parameters and visual
acuity in uveitis patients.
Assessment
of the evaluated efficacy parameters shows a clear dose dependent treatment effect in improvement of visual acuity at day 14 post
dosing. Figure 1 shows the mean change in letters read from baseline for patients treated in cohorts 1, 2, and 3 (300, 600, and
1,200 ng per eye).
Figure
1: Improvement of visual acuity in cohorts 1, 2, and 3 at day 14 post dose
Analyzing
only the highest dose group (1200 ng per eye, cohort 3), a fundamental mean improvement of visual acuity is seen in the patients,
which started within the first week post injection (day 7) and lasted beyond the last study visit (day 28). Figure 2 shows the
mean letters read change from baseline to study days 7, 14, and 28 for patients treated in cohort 3.
Figure
2: Improvement of visual acuity in cohort 3 on study days 7, 14, and 28
Apart
from improved visual acuity, improvements in vitreous haze and reduction in macular edema were observed in the patients treated
with PP-001.
PaniDrop:
Healthy Volunteers
Phase
1 Safety Study:
A
Phase I safety and tolerability study of PP-001 eye drops in healthy adult volunteers was completed. In this study, healthy volunteers
were repeatedly treated with ascending doses of PP-001 and placebo eyedrops. 0.05 and 0.15% eyedrops showed excellent tolerability.
Both doses can be used for future studies in patients having an infection or inflammation on the ocular surface.
OBG:
Corneal Wound Repair
Pivotal
Study:
In
the fourth quarter of 2019, we reported positive topline results from our corneal wound repair pivotal clinical trial of OBG for
the corneal re-epithelialization in patients having undergone PRK surgery. The prospective, controlled study randomized 234 patients
undergoing bilateral PRK surgery and was designed to assess safety and efficacy by comparing EyeGate’s OBG to the current
standard- of-care, a bandage contact lens (“BCL”). The primary endpoint was the proportion of study eyes achieving
complete wound closure on Day 3 (and remaining closed). This assessment was evaluated by an independent masked reading center,
using digital slit-lamp photographs of fluorescein staining in all treated eyes, and a protocol-driven method to quantify the
outcomes.
The
enrolled patients were randomized into one of two study groups, with patients receiving the same treatment in both eyes:
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Arm
1 (n=117) was comprised of OBG QID for two weeks after surgery.
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Arm
2 (n=117) was comprised of BCL administered four times daily.
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OBG
demonstrated superiority for the primary endpoint with a p-value of 0.0203. The statistical significance measurement was based
on the number of patients in each arm that achieved complete corneal defect closure three days post refractive surgery. At Day
3, 80.2% of eyes receiving the OBG treatment regimen were completely healed, compared with 67.0% for BCL. Additionally, at Day
2, the average wound size for all eyes treated with OBG was 3.61 mm2, compared to 6.66 mm2 for eyes treated
with BCL, which is 46% smaller than the standard-of-care.
OBG:
Punctate Epitheliopathies with a Focus on Dry Eye
Follow-On
Pilot Study:
In
the first quarter of 2020, we reported positive topline results from the follow-on clinical trial of OBG evaluating the potential
to help clinicians better manage patients with dry eye. This positive controlled, investigator masked study enrolled 20 patients,
or 40 eyes, with dry eye. This study confirmed the ability of OBG eye drops to demonstrate improvement of the ocular surface for
several important ophthalmic endpoints. OBG eye drops showed an improvement in central corneal region staining, high order ocular
aberrations (“HOA”) and best corrected visual acuity (“BCVA”), outperforming the positive control, Allergan’s
Refresh Plus Preservative-Free (“Refresh Plus”) lubricant eye drop.
Prior
to randomization there was a one-week run in period where all patients took Refresh eye drops only in both eyes. Patients with
a corneal staining score of ≥4, using the NEI scale, and a tear film break-up time (“TFBUT”) of ≤7 seconds at
Day 0, or at the end of the 7-day run-in period, then entered the 14-day treatment phase. To be randomized at Day 0, both eyes
had to qualify and have similar scores for staining and TFBUT. The patient acted as their own control and one eye was treated
with Refresh Plus eye drops and the other eye was treated with OBG eye drops.
The
twenty enrolled patients had one eye randomized to the OBG treatment group and the other eye randomized to the Refresh Plus treatment
group, for a total of 40 eyes randomized:
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Arm
1 (n=20 eyes) received OBG eye drops four times daily for four weeks.
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Arm
2 (n=20 eyes) received Refresh Plus eye drops four times daily for four weeks.
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The
primary endpoint was based on corneal epithelial healing as measured by fluorescein staining. Punctates are a sign of epithelial
compromise (corneal barrier disruption) which is characterized by a breakdown of the epithelium of the cornea and an increased
permeability to fluorescein dye. Thus, fluorescein dye is used to clinically evaluate the severity of corneal barrier disruption.
The National Eye Institutes (“NEI”) scale was used, which divides the cornea into five different regions. Each region
was scored on a scale from 0 to 3 for a total maximum score of 15 (a higher score represented a more severe disruption of the
corneal barrier). To be randomized into the study, each eye had to have a minimum total score of 4.
At
all visits, all corneal regions were assessed, but of particular interest due to vision quality involvement and corneal sensitivity,
is the central region of the cornea. All 20 patients randomized had a minimum scoring for the whole cornea (i.e., all 5 regions)
of at least 4 (maximum score = 15) in both eyes, and 16 of these patients also had a minimum score of at least 1 (maximum score
= 3) in the central region of the cornea in both eyes. OBG demonstrated a positive treatment effect as compared to Refresh Plus
at both Day 7 and Day 14. The overall improvement (i.e., reduction in staining) at Day 14 was approximately 27% from baseline
versus only approximately 9% for the positive control, Refresh Plus eye drops. OBG also showed improvement more quickly than Refresh
Plus eye drops with an approximately 10% reduction in staining versus an increase in staining of approximately 7% for the Refresh
Plus treatment group.
The
uniqueness of OBG is the combination of the high viscosity profile with a high shear rate. This means that with blinking or other
sources of shearing or energy that the viscosity of OBG temporarily drops. Thus, this clinical study was also used to confirm
that OBG does not result in blurriness of vision while on the eye. After all endpoint assessments were completed, one drop of
OBG and one drop of Refresh Plus was instilled onto each eye. This was completed in a masked fashion based on randomization of
each eye per drop. BCVA measurements were taken at 30 and 60 minutes to determine if instillation of either OBG or Refresh Plus
caused blurriness or a change in vision. At all assessment time points there was essentially no change in BCVA for OBG or Refresh
Plus, but OBG did perform better than Refresh Plus. At 30 minutes post instillation, OBG saw a negative change of 0.4% versus
a negative change of 1.0% for Refresh Plus. At 60 minutes, OBG had a positive effect of 0.2% versus a negative effect of 0.3%
for Refresh Plus.
Clinical
Development Plan
PP-001
The
clinical development plan for all PP-001 routes of delivery is under assessment.
OBG
We
are currently developing OBG as a device but are evaluating the potential to reclassify OBG as a drug. We attended a type-B meeting
with the FDA’s CDER division during the first quarter of 2021 to discuss OBG’s path forward as a drug and will continue
to evaluate the feedback received as we move towards reaching a decision on the reclassification.
Intellectual
Property and Proprietary Rights
Overview
We
are building an intellectual property portfolio for our PP-001 and modified HA platforms and any other product candidates that
we may develop, as well as other devices and product candidates for treatment of ocular indications in the U.S. and abroad. We
currently seek, and intend to continue to seek, patent protection in the U.S. and internationally for our product candidates,
methods of use, and processes for manufacture, and for other technologies, where appropriate. Our current policy is to actively
seek to protect our proprietary position by, among other things, filing patent applications in the U.S. and abroad relating to
proprietary technologies that are important to the development of our business. We also rely on, and will continue to rely on,
trade secrets, know-how, continuing technological innovation and in-licensing opportunities to develop and maintain our proprietary
position. We cannot be sure that patents will be granted with respect to any of our pending patent applications or with respect
to any patent applications filed by us in the future, nor can we be sure that any of our existing patents or any patents that
may be granted to us in the future will be commercially useful in protecting our technology.
Our
success will depend significantly on our ability to obtain and maintain patent and other proprietary protection for the technologies
that we consider important to our business, our ability to defend our patents, and our ability to preserve the confidentiality
of our trade secrets and operate our business without infringing the patents and proprietary rights of third parties.
Patent
Portfolio
Our
patent portfolio includes drug delivery device patents directed to PP-001 as composition-of-matter, formulations thereof and its
therapeutic uses in the treatment of viral and ocular disorders and diseases. In addition, further patent applications are directed
to the modified HA platform in combination with active therapeutics to treat ocular diseases. These issued patents will expire
between 2021 and 2036. Given the amount of time required for the development, testing and regulatory review of new product candidates,
patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned
and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar
or identical to ours. In the future, we intend to apply for restorations of patent term for some of our currently owned or licensed
patents to add patent life beyond their current expiration date, depending on the expected length of clinical trials and other
factors involved in the submission of the relevant new drug application or NDA. See “Government Regulation—Patent
Term Restoration and Marketing Exclusivity” below.
We
and our subsidiaries have been developing drug compositions and drug delivery systems for non-invasive treatment on the eye for
several years. These delivery systems include various patented and patent pending drug delivery devices, active therapeutics and
combination device/therapeutic to treat components of the eye, such as the cornea, sclera, and combinations thereof. These devices
and therapeutics have been further improved to provide better patient comfort levels, patient compliance and recovery times. We
hold 11 U.S. patents and 43 international patents.
License
Agreements
We
are a party to four license agreements as described below. These license agreements require us to pay or receive royalties or
fees to or from the licensor based on revenue or milestones related to the licensed technology.
On
July 2, 2013, we (through our Panoptes subsidiary) entered into a patent and know-how assignment agreement with 4SC Discovery
GmbH (“4SC”) transferring to us all patent rights and know-how to the compound PP-001. We are responsible for paying
royalties based on a specified percentage of net sales of PP-001.
On
July 2, 2013, we (through our Panoptes subsidiary) entered into an out-license agreement with 4SC Discovery GmbH (“4SC”)
granting 4SC the exclusive worldwide right to commercialize the compound PP-001 for rheumatoid arthritis and inflammatory bowel
disease, including Crohn’s Disease and Ulcerative Colitis. We are eligible to receive milestone payments totaling up to
155 million euros, upon and subject to the achievement of certain specified developmental and commercial milestones. In addition,
we are eligible to receive royalties based on a specified percentage of net sales of PP-001.
On
September 12, 2013, we (through our subsidiary, Jade Therapeutics, Inc.) entered into an agreement with BioTime, Inc. granting
to it the exclusive worldwide right to commercialize modified HA for ophthalmic treatments in humans. The agreement calls for
a license issue fee paid to BioTime of $50,000 and requires us to pay an annual fee of $30,000 and royalties to BioTime based
on revenue relating to any product incorporating the modified HA technology. The agreement expires when patent protection for
the modified HA technology lapses.
On
September 26, 2018, we entered into an intellectual property licensing agreement (the “SentrX Agreement”) with SentrX,
a veterinary medical device company that develops and manufactures veterinary wound care products. Under the SentrX Agreement,
we will in-license the rights to trade secrets and know-how related to the manufacturing of OBG. The SentrX Agreement will enable
us to pursue a different vendor with a larger capacity for manufacturing and an FDA-inspected facility for commercialization of
a product for human use. Under the SentrX Agreement, we paid SentrX an upfront payment of $250,000. SentrX is eligible to
receive milestone payments totaling up to $4.75 million, upon and subject to the achievement of certain specified developmental
and commercial milestones.
We
were previously a party to an exclusive worldwide license agreement with the University of Miami School of Medicine to license
technology relating to our former EyeGate® II Delivery System. This agreement, which was amended in December 2005, required
us to pay to the University of Miami an annual license fee of $12,500. This license also required payments to the University of
Miami upon our achievement of certain milestones. On July 9, 2020, we provided written notice to terminate this agreement effective
90 days from the written notice. Effective October 7, 2020, the Company’s agreement with the University of Miami School
of Medicine terminated.
We
were previously a party to an exclusive worldwide license agreement with the University of Utah Research Foundation to further
the commercial development of the NASH technology, together with alkylated HA. The agreement called for payments due to the University
of Utah, consisting of a license grant fee of $15,000 due within 30 days of signing, and minimum royalty payments, initially $5,000,
and escalating ratably up to $20,000 in 2021. On October 8, 2019, we provided written notice to terminate this agreement effective
120 days from the written notice. Effective February 5, 2020, the Company’s agreement with the University of Utah Research
Foundation terminated.
On
July 9, 2015, we entered into an exclusive worldwide licensing agreement with a subsidiary of Bausch Health Companies, Inc. (“BHC”),
through which we granted BHC exclusive, worldwide commercial and manufacturing rights to our EGP-437 Combination Product in the
field of anterior uveitis, as well as a right of last negotiation to license the EGP-437 Combination Product for other indications.
Under the agreement, BHC paid us an upfront payment of $1.0 million. We were eligible to receive milestone payments totaling up
to $32.5 million, upon and subject to the achievement of certain specified developmental and commercial milestones. In addition,
we were eligible to receive royalties based on a specified percentage of net sales of the EGP-437 Combination Product throughout
the world, subject to adjustment in certain circumstances. BHC voluntarily terminated this license agreement effective March 14,
2019.
On
February 21, 2017, we entered into an exclusive, worldwide licensing agreement with a subsidiary of BHC (the “New BHC Agreement”),
through which we granted BHC exclusive, worldwide commercial and manufacturing rights to our EGP-437 Combination Product in the
field of ocular iontophoretic treatment for post-operative ocular inflammation and pain in ocular surgery patients (the “New
Field”). Under the New BHC Agreement, BHC paid us an initial upfront payment of $4.0 million, and we were eligible to receive
milestone payments totaling up to approximately $99.0 million, upon and subject to the achievement of certain specified developmental
and commercial progress of the EGP-437 Combination Product for the New Field. In addition, we were eligible under the New BHC
Agreement to receive royalties based on a specified percentage of net sales of the EGP-437 Combination Product for the New Field
throughout the world, subject to adjustment in certain circumstances. BHC voluntarily terminated this license agreement effective
March 14, 2019.
Confidential
Information and Inventions Assignment Agreements
We
currently require and will continue to require each of our employees and consultants to execute confidentiality agreements upon
the commencement of such individual’s employment, consulting, or collaborative relationships with us. These agreements provide
that all confidential information developed or made known during the course of the relationship with us be kept confidential and
not disclosed to third parties except in specific circumstances.
In
the case of employees, the agreements provide that all inventions resulting from such individual’s work performed for us,
utilizing our property, or relating to our business and conceived or completed by the individual during employment shall be our
exclusive property to the extent permitted by applicable law. Our consulting agreements also provide for assignment to us of any
intellectual property resulting from services performed by a consultant for us.
Sales
and Marketing
If
PP-001 or OBG is approved by the FDA for commercial sale, we may enter into agreements with third parties to sell PP-001 or OBG,
or we may choose to market these directly to physicians in the United States or globally through our own sales and marketing force
and related internal commercialization infrastructure. If we market PP-001 or OBG directly, we will need to incur significant
additional expenses and commit significant additional management resources to establish and train an internal sales and marketing
force to market and sell PP-001 or OBG.
Manufacturing
We
currently do not have an in-house manufacturing capability for our products and as a result, we will depend heavily on third-party
contract manufacturers to produce and package our products. We currently do not have any contractual relationships with third-party
manufacturers. We intend to rely on third-party suppliers that we have used in the past for the manufacturing of various components
that comprise our PP-001, OBG and other contemplated clinical trials.
Competition
The
biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition, and a strong
emphasis on proprietary products. While we believe that our technologies, knowledge, experience, and scientific resources provide
us with competitive advantages, we face potential competition from many different sources, including major pharmaceutical, specialty
pharmaceutical and biotechnology companies, academic institutions and governmental agencies and public and private research institutions.
Any product candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that
may become available in the future.
Our
potential competitors include large pharmaceutical and biotechnology companies, and specialty pharmaceutical and generic drug
companies. Many of our competitors have significantly greater financial resources and expertise in research and development, manufacturing,
preclinical testing, conducting clinical trials, obtaining regulatory approvals, and marketing approved products than we do. These
competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical
trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary
for, our programs. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative
arrangements with large and established companies.
The
key competitive factors affecting the success of each of our product candidates, if approved for marketing, are likely to be its
efficacy, safety, method of administration, convenience, price, the level of generic competition and the availability of coverage
and adequate reimbursement from government and other third-party payors.
Our
commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more
effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we may develop.
Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for
ours, which could result in our competitors’ establishing a strong market position before we are able to enter the market.
In addition, our ability to compete may be affected in many cases by insurers or other third-party payors seeking to encourage
the use of generic products. Generic products currently being used for the indications that we may pursue, and additional products
are expected to become available on a generic basis over the coming years. If our product candidates achieve marketing approval,
we expect that they will be priced at a significant premium over competitive generic products.
Government
Regulation
FDA
Approval Process
In
the U.S., pharmaceutical products are subject to extensive regulation by the FDA. The Food Drug and Cosmetic Act (“FDCA”)
and other federal and state statutes and regulations, govern, among other things, the research, development, testing, manufacture,
storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling,
and import and export of pharmaceutical products. Failure to comply with applicable FDA or other requirements may subject a company
to a variety of administrative or judicial sanctions, such as the FDA’s refusal to approve pending applications, a clinical
hold, warning letters, recall or seizure of products, partial or total suspension of production, withdrawal of the product from
the market, injunctions, fines, civil penalties, or criminal prosecution.
FDA
approval is required before any new drug, can be marketed in the U.S. The process required by the FDA before a new drug product
may be marketed in the U.S. generally involves:
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completion
of preclinical laboratory and animal testing and formulation studies in compliance with the FDA’s good laboratory practice
or GLP, regulation;
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submission
to the FDA of an Investigational New Drug or IND, for human clinical testing which must become effective before human clinical
trials may begin in the U.S.;
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approval
by an independent institutional review board or IRB, at each site where a clinical trial will be performed before the trial
may be initiated at that site;
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performance
of adequate and well-controlled human clinical trials in accordance with good clinical practices, or GCP, to establish the
safety and efficacy of the proposed product candidate for each intended use;
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satisfactory
completion of an FDA pre-approval inspection of the facility or facilities at which the product is manufactured to assess
compliance with the FDA’s current Good Manufacturing Practice or cGMP regulations;
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submission
to the FDA of a new drug application or NDA, which must be accepted for filing by the FDA;
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satisfactory
completion of an FDA advisory committee review, if applicable;
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payment
of user fees, if applicable; and
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FDA
review and approval of the NDA.
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The
preclinical and clinical testing and approval process requires substantial time, effort, and financial resources. Pre-clinical
tests include laboratory evaluation of product chemistry, formulation, manufacturing and control procedures and stability, as
well as animal studies to assess the toxicity and other safety characteristics of the product. The results of preclinical tests,
together with manufacturing information, analytical data and a proposed clinical trial protocol and other information, are submitted
as part of an IND to the FDA. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes
effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises concerns or questions and places
the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before
the clinical trial can begin. A clinical hold may occur at any time during the life of an IND and may affect one or more specific
studies or all studies conducted under the IND.
All
clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCPs. They must
be conducted under protocols detailing the objectives of the trial, dosing procedures, research subject selection and exclusion
criteria and the safety and effectiveness criteria to be evaluated. Each protocol must be submitted to the FDA as part of the
IND, and progress reports detailing the results of the clinical trials must be submitted at least annually. In addition, timely
safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events. An institutional
review board or IRB, at each institution participating in the clinical trial must review and approve each protocol before a clinical
trial commences at that institution and must also approve the information regarding the trial and the consent form that must be
provided to each trial subject or his or her legal representative, monitor the study until completed and otherwise comply with
IRB regulations.
Sponsors
of clinical trials generally must register and report, at the National Institutes of Health-maintained website ClinicalTrials.gov,
the key parameters of certain clinical trials. For purposes of an NDA submission and approval, human clinical trials are typically
conducted in the following sequential phases, which may overlap or be combined:
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Phase
1: The product is initially introduced into healthy human patients and tested for safety, dose tolerance, absorption,
metabolism, distribution and excretion and, if possible, to gain an early indication of its effectiveness.
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Phase
2: The product is administered to a limited patient population to identify possible adverse effects and safety
risks, to preliminarily evaluate the efficacy of the product for specific targeted indications and to determine dose tolerance
and optimal dosage. Multiple Phase 2 clinical trials may be conducted by the sponsor to obtain information prior to beginning
larger and more extensive clinical trials.
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Phase
3: These are commonly referred to as pivotal studies. When Phase 2 evaluations demonstrate that a dose range
of the product appears to be effective and has an acceptable safety profile, trials are undertaken in large patient populations
to further evaluate dosage, to obtain additional evidence of clinical efficacy and safety in an expanded patient population
at multiple, geographically-dispersed clinical trial sites, to establish the overall risk-benefit relationship of the product
and to provide adequate information for the labeling of the product.
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Phase
4: In some cases, the FDA may condition approval of an NDA for a product candidate on the sponsor’s agreement
to conduct additional clinical trials to further assess the product’s safety and effectiveness after NDA approval. Such
post-approval trials are typically referred to as Phase 4 studies.
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The
results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process,
analytical tests conducted on the chemistry of the drug, proposed labeling, and other relevant information are submitted to the
FDA as part of an NDA requesting approval to market the product. The submission of an NDA is subject to the payment of user fees;
a waiver of such fees may be obtained under certain limited circumstances. The FDA reviews all NDAs submitted to ensure that they
are sufficiently complete for substantive review before it accepts them for filing. The FDA may request additional information
rather than accept an NDA for filing. In this event, the NDA must be resubmitted with the additional information. The resubmitted
application also is subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA
begins an in-depth substantive review.
Section
505(b)(2) New Drug Applications
According
to section 505 of the FDCA, there are three types of new drug applications: (1) an application that contains full reports of investigations
of safety and effectiveness (section 505(b)(1)); (2) an application that contains full reports of investigations of safety and
effectiveness but where at least some of the information required for approval comes from studies not conducted by or for the
applicant and for which the applicant has not obtained a right of reference from the entity that performed the studies (section
505(b)(2)); and (3) an application that contains information to show that the proposed product is identical in active ingredient,
dosage form, strength, route of administration, labeling, quality, performance characteristics, and intended use, among other
things, to a previously approved product (section 505(j)).
Section
505(b)(2) of the FDCA enables an applicant to rely, in part, on the FDA’s findings of safety and efficacy for an existing
product, or published literature, in support of its NDA. Using this approval pathway may allow us to rely in part on information
in the public domain to support the safety and effectiveness of our products. The FDA may also require sponsors to perform additional
clinical trials, measurements, or other types of studies or assessments (e.g., bridging studies) to support any change from the
previously approved product. The review process is lengthy and often difficult, and the FDA may refuse to approve an NDA if the
applicable regulatory criteria are not satisfied or may require additional clinical or other data and information. Even if such
data and information is submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. Data
obtained from clinical trials are not always conclusive and the FDA may interpret data differently than we interpret the same
data. The FDA may issue a complete response letter, which may require additional clinical or other data or impose other conditions
that must be met in order to secure final approval of the NDA or an approved letter following satisfactory completion of all aspects
of the review process. The FDA reviews an NDA to determine, among other things, whether a product is safe and effective for its
intended use and whether its manufacturing is cGMP-compliant to assure and preserve the product’s identity, strength, quality
and purity. Before approving an NDA, the FDA will inspect the facility or facilities where the product is manufactured.
To
the extent that a Section 505(b)(2) NDA relies on clinical trials conducted for a previously approved drug product or the FDA’s
prior findings of safety and effectiveness for a previously approved drug product, the 505(b)(2) applicant must submit patent
certifications in its 505(b)(2) application with respect to any patents listed for the approved product on which the application
relies in the FDA’s publication, Approved Drug Products with Therapeutic Equivalence Evaluations (commonly referred to as
the Orange Book). Specifically, the applicant must certify for each listed patent that (1) the required patent information has
not been filed; (2) the listed patent has expired; (3) the listed patent has not expired, but will expire on a particular date
and approval is not sought until after patent expiration; or (4) the listed patent is invalid, unenforceable or will not be infringed
by the proposed new product. A certification that the new product will not infringe the previously approved product’s listed
patent or that such patent is invalid or unenforceable is known as a Paragraph IV certification. If the applicant does not challenge
one or more listed patents through a Paragraph IV certification, the FDA will not approve the Section 505(b)(2) NDA application
until all the unchallenged listed patents claiming the referenced product have expired. Further, the FDA will also not accept
or approve, as applicable, a Section 505(b)(2) NDA application until any non-patent exclusivity, such as exclusivity for obtaining
approval of a New Chemical Entity, listed in the Orange Book for the referenced product, has expired.
If
the 505(b)(2) NDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph
IV certification to the owner of the referenced NDA for the previously approved product and relevant patent holders within 20
days after the 505(b)(2) NDA has been accepted for submission by the FDA. The NDA and patent holders may then initiate a patent
infringement suit against the 505(b)(2) applicant. Under the FDCA, the filing of a patent infringement lawsuit within 45 days
of receipt of the notification regarding a Paragraph IV certification automatically prevents the FDA from approving the Section
505(b)(2) NDA for 30 months, or until a court deems the patent unenforceable, invalid, or not infringed, whichever is earlier.
Moreover, in cases where a 505(b)(2) application containing a Paragraph IV certification is submitted during a previously approved
drug’s five-year exclusivity period, the 30-month period is automatically extended to prevent approval of the 505(b)(2)
application until the date that is seven and one-half years after approval of the previously approved reference product. The court
also has the ability to shorten or lengthen either the 30-month or the seven and one-half year period if either party is found
not to be reasonably cooperating in expediting the litigation. Thus, the Section 505(b)(2) applicant may invest a significant
amount of time and expense in the development of its product only to be subject to significant delay and patent litigation before
its product may be commercialized. Alternatively, if the NDA applicant or relevant patent holder does not file a patent infringement
lawsuit within the specified 45-day period, the 30-month stay will not prevent approval of the 505(b)(2) application.
Notwithstanding
the approval of many products by the FDA pursuant to Section 505(b)(2), over the last few years, some pharmaceutical companies
and others have objected to the FDA’s interpretation of Section 505(b)(2). If the FDA changes its interpretation of Section
505(b)(2), or if the FDA’s interpretation is successfully challenged in court, this could delay or even prevent the FDA
from approving any Section 505(b)(2) NDAs that we submit.
In
the NDA submissions for our product candidates, we intend to follow the development and approval pathway permitted under the FDCA
that we believe will maximize the commercial opportunities for these product candidates.
Combination
Product Regulations
Medical
products containing a combination of new drugs, biological products, or medical devices may be regulated as “combination
products” in the U.S. A combination product generally is defined as a product comprised of components from two or more regulatory
categories, such as drug/device, device/biologic, or drug/biologic. Each component of a combination product is subject to the
requirements established by the FDA for that type of component, whether a new drug, biologic, or device. In order to facilitate
premarket review of combination products, the FDA designates one of its centers to have primary jurisdiction for the premarket
review and regulation of both components. The determination whether a product is a combination product or two separate products
is made by the FDA on a case-by-case basis.
We
will be subject to regulations governing medical devices separate from those governing drugs. After the FDA permits a device to
enter commercial distribution, however, numerous regulatory requirements apply. These include:
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product
labeling regulations;
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general
prohibition against promoting products for unapproved or “off-label” uses;
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corrections
and removals (e.g., recalls);
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establishment
registration and device listing;
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general
prohibitions against the manufacture and distribution of adulterated and misbranded devices; and
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the
Medical Device Reporting regulation, which requires that manufacturers report to the FDA if their device may have caused or
contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious
injury if it were to recur.
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Failure
to comply with these regulatory requirements could result in civil fines, product seizures, injunctions, and/or criminal prosecution
of responsible individuals and us.
Post-Approval
Requirements
Once
an NDA is approved, a product will be subject to pervasive and continuing regulation by the FDA, including, among other things,
requirements relating to product/device listing, recordkeeping, periodic reporting, product sampling and distribution, advertising
and promotion and reporting of adverse experiences with the product.
In
addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to
register their establishments with the FDA and state agencies and are subject to periodic unannounced inspections by the FDA and
these state agencies for compliance with cGMP requirements. Changes to the manufacturing process are strictly regulated and generally
require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations
from cGMP and impose reporting and documentation requirements upon us and any third-party manufacturers that we may decide to
use. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control
to maintain cGMP compliance.
Once
an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained
or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including
adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements,
may result in, among other things:
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restrictions
on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;
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fines,
warning letters or holds on post-approval clinical trials;
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refusal
of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product
license approvals;
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product
seizure or detention, or refusal to permit the import or export of products; or
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injunctions
or the imposition of civil or criminal penalties.
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The
FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. While physicians
may prescribe for off label uses, manufacturers may only promote for the approved indications and in accordance with the provisions
of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off label
uses, and a company that is found to have improperly promoted off label uses may be subject to significant liability, both at
the federal and state levels.
Patent
Term Restoration and Marketing Exclusivity
Depending
upon the timing, duration and specifics of FDA approval of the use of our drug candidates, some of our U.S. patents may be eligible
for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the
Hatch-Waxman Act. The Hatch-Waxman Act permits a patent restoration term of up to five years as compensation for patent term lost
during product development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining
term of a patent beyond a total of 14 years from the product’s approval date. The patent term restoration period is generally
one-half the time between the effective date of an IND, and the submission date of an NDA, plus the time between the submission
date of an NDA and the approval of that application. Only one patent applicable to an approved drug is eligible for the extension
and the application for extension must be made prior to expiration of the patent. The U.S. Patent and Trademark Office, in consultation
with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, we intend to apply
for restorations of patent term for some of our currently owned or licensed patents to add patent life beyond their current expiration
date, depending on the expected length of clinical trials and other factors involved in the submission of the relevant NDA.
Market
exclusivity provisions under the FDCA also can delay the submission or the approval of certain applications. The FDCA provides
a five-year period of non-patent marketing exclusivity within the U.S. to the first applicant to gain approval of an NDA for a
new chemical entity. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the
same active moiety, which is the molecule or ion responsible for the action of the drug substance. During the exclusivity period,
the FDA may not accept for review an abbreviated new drug application or ANDA, or a 505(b)(2) NDA submitted by another company
for another version of such drug where the applicant does not own or have a legal right of reference to all the data required
for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or
non-infringement. The FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA, or supplement to an approved
NDA, if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are
deemed by the FDA to be essential to the approval of the application, for example, for new indications, dosages or strengths of
an existing drug. This three-year exclusivity covers only the conditions associated with the new clinical investigations and does
not prohibit the FDA from approving ANDAs for drugs containing the original active agent. Five-year and three-year exclusivity
will not delay the submission or approval of a full NDA; however, an applicant submitting a full NDA would be required to conduct
or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to
demonstrate safety and effectiveness.
Manufacturing
Requirements
We
and our third-party manufacturers must comply with applicable FDA regulations relating to FDA’s cGMP regulations. The cGMP
regulations include requirements relating to organization of personnel, buildings and facilities, equipment, control of components
and drug product containers and closures, production and process controls, packaging and labeling controls, holding and distribution,
laboratory controls, extensive records and reports, and returned or salvaged products. The manufacturing facilities for our products
must meet cGMP requirements to the satisfaction of the FDA pursuant to a pre-approval inspection before we can use them to manufacture
our products. We and our third-party manufacturers and certain key component suppliers are also subject to periodic inspections
of facilities by the FDA and other authorities, including procedures and operations used in the testing and manufacture of our
products to assess our compliance with applicable regulations. Failure to comply with statutory and regulatory requirements patients
a manufacturer to possible legal or regulatory action, including untitled letters, warning letters, determinations of product
adulteration, the seizure or recall of products, injunctions, consent decrees placing significant restrictions on or suspending
manufacturing operations and civil and criminal penalties. Adverse experiences with the product must be reported to the FDA and
could result in the imposition of market restrictions through labeling changes or in product removal. Product approvals may be
withdrawn if compliance with regulatory requirements is not maintained or if problems concerning safety or efficacy of the product
occur following approval. Such perceived problems concerning safety or efficacy may arise in the context of clinical studies continued
as a result of our post-marketing obligations, reports we or FDA receive from patients and healthcare providers, or literature
published by third parties regarding our products or similar products.
Third
Party Payor Coverage and Reimbursement
Reimbursement
is expected to use standard approaches for Ophthalmology. The commercial success of PP-001 and OBG, if and when commercialized,
and our other product candidates will depend, in part, upon the availability of coverage and reimbursement from third party payors
at the federal, state and private levels, including U.S. Government payor programs, such as Medicare and Medicaid, private health
care insurance companies and managed care plans that have attempted to control costs by limiting coverage and the amount of reimbursement
for particular procedures or drug treatments. The U.S. Congress and state legislatures from time to time propose and adopt initiatives
aimed at cost containment, which could impact our ability to sell our products profitably. Ongoing federal and state government
initiatives directed at lowering the total cost of health care will likely continue to focus on healthcare reform, the cost of
prescription pharmaceuticals and on the reform of the Medicare and Medicaid payment systems.
We
expect that the pharmaceutical industry will continue to experience pricing pressures due to these initiatives and the trend toward
managed healthcare and the increasing influence of managed care organizations. Our results of operations could be adversely affected
by current and future healthcare reforms.
Some
third-party payors also require pre-approval of coverage for new or innovative devices or drug therapies before they will reimburse
healthcare providers that use such therapies. While we cannot predict whether any proposed cost-containment measures will be adopted
or otherwise implemented in the future, the announcement or adoption of these proposals could have a material adverse effect on
our ability to obtain adequate prices for PP-001 and OBG, or any other product candidate that we may develop and operate profitably.
Other
Regulatory Requirements
We
are also subject to various laws and regulations regarding laboratory practices, the experimental use of animals, and the use
and disposal of hazardous or potentially hazardous substances in connection with our research. In each of these areas, as above,
the applicable regulatory agency will have broad regulatory and enforcement powers, including, among other things, the ability
to levy fines and civil penalties. Compliance with applicable environmental laws and regulations is expensive, and current or
future environmental regulations may impair our research, development, and production efforts, which could harm our business,
operating results, and financial condition.
Employees
and Human Capital Resources
As
of December 31, 2020, we had fourteen full time employees. None of our employees is represented by a collective bargaining agreement
and we have never experienced any work stoppage. We believe that we maintain good relations with our employees. Our employees
are highly skilled, and many hold advanced degrees and have experience with drug development. Our future performance depends significantly
upon the continued service of our key scientific, technical and senior management personnel and our continued ability to attract
and retain highly skilled employees. We provide our employees with competitive salaries and bonuses, opportunities for equity
ownership, development programs that enable continued learning and growth, and a robust employment package that promotes well-being
across all aspects of their lives. In addition to salaries, these programs include potential annual discretionary bonuses, equity
awards, healthcare and insurance benefits, paid time off, family leave, and flexible work schedules, among other benefits. We
have taken proactive steps throughout the COVID-19 pandemic to protect the health and safety of our employees. We expect to continue
to implement these measures until we determine that the COVID-19 pandemic is adequately contained for purposes of our business.
We may take further actions, in compliance with all appropriate government regulations, that we determine to be in the best interest
of our employees.
Business
Segment and Geographical Information
Operating
segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation
by the chief operating decision maker, or decision-making group, in making decisions on how to allocate resources and assess performance.
We view our operations and manage our business in one operating segment. We operate in one geographic segment.
Our
Corporate Information
EyeGate
Pharmaceuticals, Inc. was formed as a Delaware corporation on December 26, 2004. We were originally incorporated in 1998 under
the name of Optis France S.A. in Paris, France. We have two wholly owned subsidiaries, Jade Therapeutics, Inc. and Panoptes Pharma
Ges.m.b.H. The Company’s third subsidiary, EyeGate Pharma S.A.S. was dissolved effective December 31, 2020. Our principal
executive offices are located at 271 Waverley Oaks Road, Suite 108, Waltham, MA 02452, and our telephone number is (781) 788-9043.
Available
Information and Website
We
maintain an internet website at www.eyegatepharma.com and make available free of charge through our website our Annual
Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished
pursuant to Sections 13(a) and 15(d) of the Exchange Act. We make these reports available through our website as soon as reasonably
practicable after we electronically file such reports with, or furnish such reports to, the United States Securities and Exchange
Commission, or the SEC. You can review our electronically filed reports and other information that we file with the SEC on the
SEC’s web site at http://www.sec.gov. We also make available, free of charge on our website, the reports filed with the
SEC by our executive officers, directors and 10% stockholders pursuant to Section 16 under the Exchange Act as soon as reasonably
practicable after copies of those filings are provided to us by those persons. The information on our website is not incorporated
by reference into this Annual Report on Form 10-K and should not be considered to be a part of this Annual Report on Form 10-K.
Our website address is included in this Annual Report on Form 10-K as an inactive technical reference only.
Summary
of Risk Factors
Below
is a summary of the principal factors that make an investment in our common stock speculative or risky. This summary does not
address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks
that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with
other information in this Annual Report on Form 10-K and our other filings with the SEC before making an investment decision regarding
our common stock.
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We
have incurred significant operating losses since our inception, which have caused management
to determine there is substantial doubt regarding our ability to continue as a going
concern. We expect to incur losses for the foreseeable future and may never achieve or
maintain profitability.
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We
will need substantial additional funding. If we are unable to raise capital when needed,
we could be forced to delay, reduce or eliminate our product development programs or
commercialization efforts.
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Our
limited operating history may make it difficult for you to evaluate the success of our
business to date and to assess our future viability.
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Our
future success depends on our ability to retain key executives and to attract, retain
and motivate qualified personnel.
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The
coronavirus pandemic could adversely impact our business, including clinical trials.
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We
depend heavily on the success of PP-001 and OBG. If we are unable to successfully obtain
marketing approval for PP-001 or OBG, or experience significant delays in doing so, or
if after obtaining marketing approvals, we fail to commercialize PP-001 or OBG, our business
will be materially harmed.
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If
clinical trials of PP-001, OBG, or any other product candidate that we develop fail to
demonstrate safety and efficacy to the satisfaction of the FDA or foreign regulatory
authorities or do not otherwise produce favorable results, we may incur additional costs
or experience delays in completing, or ultimately be delayed or unable to complete, the
development and commercialization of PP-001, OBG, or any other product candidate.
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Even
if PP-001, OBG, or any other product candidate that we develop receives marketing approval,
it may fail to achieve the degree of market acceptance by physicians, patients, third-party
payors and others in the medical community necessary for commercial success and the market
opportunity for our product candidates may be smaller than we estimate.
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If
we are unable to establish sales, marketing and distribution capabilities, we may not
be successful in PP-001, OBG, or any other product candidates that we may develop if
and when they are approved.
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We
face substantial competition, which may result in others discovering, developing, or
commercializing products before or more successfully than we do.
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Even
if we are able to commercialize PP-001, OBG, or any other product candidate that we may
develop, the products may become subject to unfavorable pricing regulations, third-party
coverage or reimbursement practices or healthcare reform initiatives, which could harm
our business.
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We
rely, and expect to continue to rely, on third parties to conduct our clinical trials,
and those third parties may not perform satisfactorily, including failing to meet deadlines
for the completion of such trials.
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If
we are unable to obtain and maintain patent protection for our technology and products
or if the scope of the patent protection obtained is not sufficiently broad, our competitors
could develop and commercialize technology and products similar or identical to ours,
and our ability to successfully commercialize our technology and products may be impaired.
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We
may become involved in lawsuits to protect or enforce our patents or other intellectual
property, which could be expensive, time consuming and unsuccessful.
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Third
parties may initiate legal proceedings alleging that we are infringing their intellectual
property rights, the outcome of which would be uncertain and could have a material adverse
effect on the success of our business.
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If
we are not able to obtain required regulatory approvals, we will not be able to commercialize
PP-001, OBG, or any other product candidate that we may develop, and our ability to generate
revenue will be materially impaired.
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Our
principal stockholder holds a significant percentage of voting power and will be able
to exert significant control over us.
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We
incur increased costs as a result of operating as a public company, and our management
is required to devote substantial time to new compliance initiatives and corporate governance
practices.
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Because
we do not anticipate paying any cash dividends on our capital stock in the foreseeable
future, capital appreciation, if any, will be your sole source of gain.
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Risk
Factors
The
following factors should be reviewed carefully, in conjunction with the other information contained in this Annual Report on Form
10-K. As previously discussed, our actual results could differ materially from our forward-looking statements. Our business faces
a variety of risks. These risks include those described below and may include additional risks and uncertainties not presently
known to us or that we currently deem immaterial. If any of the events or circumstances described in the following risk factors
occur, our business operations, performance and financial condition could be adversely affected and the trading price of our common
stock could decline.
Risks
Related to Our Financial Position and Need for Additional Capital
We
have incurred significant operating losses since our inception, which have caused management to determine there is substantial
doubt regarding our ability to continue as a going concern. We expect to incur losses for the foreseeable future and may never
achieve or maintain profitability.
Since
inception, we have incurred significant operating losses. Our net loss was approximately $8.1 million for the year ended December
31, 2020, $7.1 million for the year ended December 31, 2019 and $108.3 million from the period of inception (December 26, 2004)
through December 31, 2020. To date, we have financed our operations primarily through private placements and public offerings
of our securities, and payments from our license agreements. We have devoted substantially all of our financial resources and
efforts to research and development, including preclinical studies and, beginning in 2008, clinical trials. We are still in the
development stage of our product candidates and we have not completed development of any drugs. We expect to continue to incur
significant expenses and operating losses for the foreseeable future. Our net losses may fluctuate significantly from quarter
to quarter and year to year. Our recurring losses from operations have caused management to determine there is substantial doubt
regarding our ability to continue as a going concern, and as a result, our independent registered public accounting firm included
an explanatory paragraph in its report on our financial statements as of and for the year ended December 31, 2020 with respect
to this uncertainty.
We
anticipate that our expenses will continue to be significant with the clinical trials for the ongoing development of our PP-001
and OBG products.
Our
expenses will also increase if and as we:
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seek
marketing approval for PP-001 and OBG, whether alone or in collaboration with third parties;
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continue
the research and development of any of our other product candidates;
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seek
to develop additional product candidates;
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in-license
or acquire the rights to other products, product candidates or technologies;
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seek
marketing approvals for any product candidates that successfully complete clinical trials;
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establish
sales, marketing and distribution capabilities and scale up and validate external manufacturing capabilities to commercialize
any products for which we may obtain marketing approval;
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maintain,
expand and protect our intellectual property portfolio;
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hire
additional clinical, quality control, scientific and management personnel;
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expand
our operational, financial and management systems and personnel, including personnel to support our clinical development,
manufacturing and planned future commercialization efforts and our operations as a public company; and
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increase
our insurance coverage as we expand our clinical trials and commence commercialization of PP-001 and OBG.
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Because
of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict
the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. Our expenses will increase
if:
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we
are required by the U.S. FDA or foreign equivalents to perform studies or clinical trials in addition to those currently expected;
and
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there
are any delays in enrollment of patients in or completing our clinical trials or the development of PP-001, OBG or any other
product candidates that we may develop.
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Our
ability to become and remain profitable depends on our ability to generate revenue. We do not expect to generate significant revenue
unless and until we obtain marketing approval for, and commercialize PP-001 and OBG, or other product candidates that we may develop,
which may never occur. This will require us to be successful in a range of challenging activities, including:
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establishing
collaboration, distribution, or other marketing arrangements with third parties to commercialize PP-001 and OBG in markets
outside the U.S.;
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achieving
an adequate level of market acceptance of our product candidates;
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protecting
our rights to our intellectual property portfolio related to our product candidates; and
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ensuring
the manufacture of commercial quantities of PP-001 and OBG.
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Even
if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure
to become and remain profitable would depress the value of our company and could impair our ability to raise capital, expand our
business, maintain our research and development efforts, diversify our product offerings, or even continue our operations. A decline
in the value of our company could also cause you to lose all or part of your investment.
We
will need substantial additional funding. If we are unable to raise capital when needed, we could be forced to delay, reduce or
eliminate our product development programs or commercialization efforts.
We
expect to devote substantial financial resources to our ongoing and planned activities, particularly continuing the clinical development
of our PP-001 and OBG products. In the future, we expect to raise additional financial resources for the continued clinical development
of PP-001, OBG, and other product candidates we may develop. In addition, if we obtain regulatory approval for any of our product
candidates, we would need to devote substantial financial resources to commercialization efforts, including product manufacturing,
marketing, sales, and distribution. Accordingly, we will need to obtain substantial additional funding in connection with our
continuing operations. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce,
or eliminate our research and development programs or any future commercialization efforts.
Our
future capital requirements will depend on many factors, including:
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the
progress, costs and outcome of our clinical trials for our product candidates and of any clinical activities required for
regulatory review of our product candidates outside of the U.S.;
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the
costs and timing of process development and manufacturing scale up and validation activities associated with our product candidates;
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the
costs, timing and outcome of regulatory review of our product candidates in the U.S., and in other jurisdictions;
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the
costs and timing of commercialization activities for our product candidates if we receive marketing approval, including the
costs and timing of establishing product sales, marketing, distribution and outsourced manufacturing capabilities;
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subject
to receipt of marketing approval, the amount of revenue received from commercial sales
of our product candidates;
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our
ability to establish collaborations on favorable terms, if at all, particularly manufacturing,
marketing and distribution arrangements for our product candidates;
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the
costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property
rights and defending any intellectual property-related claims; and
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the
extent to which we in-license or acquire rights to other products, product candidates or technologies for the treatment of
ophthalmic diseases.
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As
of December 31, 2020, we had cash and cash equivalents of $1.2 million. With the net proceeds of approximately $8.0 million received
from closing a private placement on January 6, 2021, we believe we will have sufficient cash to fund planned operations through
August 31, 2021, however, the acceleration or reduction of cash outflows by management can significantly impact the timing for
raising additional capital to complete development of its products. To continue development, we will need to raise additional
capital through debt and/or equity financing or access additional funding through U.S. or foreign grants. Although we completed
our initial public offering and subsequent public offerings, registered direct offerings and private placements, additional capital
may not be available on terms favorable to us, if at all. Accordingly, no assurances can be given that management will be successful
in these endeavors. These conditions raise substantial doubt about our ability to continue as a going concern. The financial statements
do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the
amounts and classification of liabilities or any other adjustments that might be necessary should we be unable to continue as
a going concern.
Identifying
potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain
process that takes years to complete, and we may never generate the necessary data or results required to obtain regulatory approval
and achieve product sales. Our commercial revenues, if any, will be derived from sales of PP-001, OBG, or any other products that
we successfully develop, none of which we expect to be commercially available for several years, if at all. In addition, if approved,
any product candidate that we develop or any product that we in-license may not achieve commercial success. Accordingly, we will
need to obtain substantial additional financing to achieve our business objectives. Adequate additional financing may not be available
to us on acceptable terms, or at all. In addition, we may seek additional capital due to favorable market conditions or strategic
considerations, even if we believe we have sufficient funds for our current or future operating plans.
Raising
additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies
or product candidates.
Until
such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination
of equity offerings, debt financings, government or other third-party funding, collaborations, strategic alliances, licensing
arrangements and marketing and distribution arrangements. We do not have any committed external source of funds. To the extent
that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted,
and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder.
Debt financing and preferred equity 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 cannot raise funds on acceptable terms, we may not be able to grow our business or respond to competitive pressures.
If
we raise additional funds through government or other third-party funding, collaborations, strategic alliances, licensing arrangements
or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams,
research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise
additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product
development or future commercialization efforts or grant rights to develop and market products or product candidates that we would
otherwise prefer to develop and market ourselves.
Our
limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future
viability.
We
are a clinical-stage company with a limited operating history. Our operations to date have been limited to organizing and staffing
our company, acquiring rights to intellectual property, business planning, raising capital, developing our technology, identifying
potential product candidates, undertaking preclinical studies, and conducting clinical trials of PP-001 and OBG. We have not yet
demonstrated our ability to successfully complete development of a product candidate, obtain marketing approvals, manufacture
at commercial scale, or arrange for a third party to do so on our behalf, or conduct sales, marketing and distribution activities
necessary for successful product commercialization.
In
addition, as a pre-revenue business, we may encounter unforeseen expenses, difficulties, complications, delays and other known
and unknown factors. We will need to transition at some point from a company with a research and development focus to a company
capable of supporting commercial activities. We may not be successful in such a transition.
We
expect our financial condition and operating results to continue to fluctuate significantly from quarter-to-quarter and year-to-year
due to a variety of factors, many of which are beyond our control. Accordingly, you should not rely upon the results of any quarterly
or annual periods as indications of future operating performance.
Foreign
currency exchange rate fluctuations may have a negative impact on our financial results.
We
are subject to the risks of fluctuating foreign currency exchange rates, which could have an adverse effect on the costs and expenses
of our foreign subsidiary. As a result, currency fluctuations among the United States dollar, euro and the other currencies in
which we do business have caused and will continue to cause foreign currency translation and transaction gains and losses. We
have not used forward exchange contracts to hedge our foreign currency exposures. In the future, we may undertake to manage foreign
currency risk through hedging methods, including foreign currency contracts. We recognize foreign currency gains or losses arising
from our operations in the period incurred. We cannot guarantee that we will be successful in managing foreign currency risk or
in predicting the effects of exchange rate fluctuations upon our future operating results because of the number of currencies
involved, the variability of currency exposure and the potential volatility of currency exchange rates. We cannot predict with
any certainty changes in foreign currency exchange rates or the degree to which we can address these risks.
Risks
Related to the Discovery and Development of Our Product Candidates
We
depend heavily on the success of PP-001 and OBG. If we are unable to successfully obtain marketing approval for PP-001 and OBG,
or experience significant delays in doing so, or if after obtaining marketing approvals, we fail to commercialize PP-001 and OBG,
our business will be materially harmed.
We
have invested a significant portion of our efforts and financial resources in the development of OBG, and we expect to invest
a significant portion of our efforts and financial resources in the development of PP-001 in the future. There remains a significant
risk that we will fail to successfully develop either product candidate.
We
cannot accurately predict when or if PP-001 or OBG will prove effective or safe in humans or whether it will receive marketing
approval. Our ability to generate product revenues, which may never occur, will depend heavily on our obtaining marketing approval
for and commercializing PP-001 and OBG.
The
success of PP-001 and OBG will depend on several factors, including the following:
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obtaining
favorable results from clinical trials;
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applying
for and receiving marketing approvals from applicable regulatory authorities for PP-001 and OBG;
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making
arrangements with third-party manufacturers for commercial quantities of PP-001 and OBG and receiving regulatory approval
of our manufacturing processes and our third-party manufacturers’ facilities from applicable regulatory authorities;
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establishing
sales, marketing and distribution capabilities and launching commercial sales of PP-001 and OBG, if and when approved, whether
alone or in collaboration with others;
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acceptance
of PP-001 and OBG, if and when approved, by patients, the medical community and third-party payors;
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effectively
competing with other therapies, including the existing standard-of-care;
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maintaining
a continued acceptable safety profile of PP-001 and OBG following approval;
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obtaining
and maintaining coverage and adequate reimbursement from third-party payors;
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obtaining
and maintaining patent and trade secret protection and regulatory exclusivity; and
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protecting
our rights in our intellectual property portfolio related to PP-001 and OBG.
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If
we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability
to successfully commercialize PP-001 and OBG, which would materially harm our business.
If
clinical trials of PP-001, OBG or any other product candidate that we develop fail to demonstrate safety and efficacy to the satisfaction
of the FDA or foreign regulatory authorities or do not otherwise produce favorable results, we may incur additional costs or experience
delays in completing, or ultimately be delayed or unable to complete, the development and commercialization of PP-001, OBG, or
any other product candidate.
Before
obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete preclinical development
and then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans.
Clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome.
A failure of one or more clinical trials can occur at any stage of testing. The outcome of preclinical testing and
early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do
not necessarily predict final results. Moreover, preclinical and clinical data are often susceptible to varying interpretations
and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and
clinical trials have nonetheless failed to obtain marketing approval of their products.
If
we experience any of a number of possible unforeseen events in connection with our clinical trials, potential marketing approval
or commercialization of our product candidates could be delayed or prevented.
We
may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to
receive marketing approval or commercialize PP-001, OBG or any other product candidates that we may develop, including:
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clinical
trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require
us, to conduct additional clinical trials or abandon product development programs;
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the
number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in
these clinical trials may be slower than we anticipate, or participants may drop out of these clinical trials at a higher
rate than we anticipate;
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any
third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely
manner, or at all;
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regulators
or institutional review boards may not authorize us or our investigators to commence a clinical trial or conduct a clinical
trial at a prospective trial site;
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we
may experience delays in reaching, or fail to reach, agreement on acceptable clinical trial contracts or clinical trial protocols
with prospective trial sites;
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we
may decide, or regulators or institutional review boards may require us, to suspend or terminate clinical research for various
reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable
health risks;
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the
cost of clinical trials of our product candidates may be greater than we anticipate;
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the
supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates
may be insufficient or inadequate; and
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our
product candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators,
regulators, or institutional review boards to suspend or terminate the trials.
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If
we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently
contemplate, if we are unable to successfully complete clinical trials of our product candidates or other testing, if the results
of these trials or tests are not favorable or are only modestly favorable or if there are safety concerns, we may:
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be
delayed in obtaining marketing approval for our product candidates;
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not
obtain marketing approval at all;
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obtain
approval for indications or patient populations that are not as broad as intended or desired;
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obtain
approval with labeling that includes significant use or distribution restrictions or safety warnings;
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be
subject to additional post-marketing testing requirements; or
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have
the product removed from the market after obtaining marketing approval.
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Our
product development costs will also increase if we experience delays in testing or marketing approvals. We do not know whether
any of our pre-clinical studies or clinical trials will begin as planned, will need to be restructured or will be completed on
schedule, or at all. Significant preclinical or clinical trial delays also could shorten any periods during which we may have
the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do
and impair our ability to successfully commercialize our product candidates.
If
we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary regulatory approvals
could be delayed or prevented.
We
may not be able to initiate or continue clinical trials for PP-001 and OBG, or our other product candidates that we may develop
if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the
FDA or similar regulatory authorities outside the U.S. In addition, some of our competitors may have ongoing clinical trials for
product candidates that treat the same indications as PP-001 and OBG, and patients who would otherwise be eligible for our clinical
trials may instead enroll in clinical trials of our competitors’ product candidates.
Our
inability to enroll a sufficient number of patients for our clinical trials would result in significant delays, could require
us to abandon one or more clinical trials altogether and could delay or prevent our receipt of necessary regulatory approvals.
Enrollment delays in our clinical trials may result in increased development costs for our product candidates, which would cause
the value of our company to decline and limit our ability to obtain additional financing.
If
serious adverse or unacceptable side effects are identified during the development of our product candidates, we may need to abandon
or limit our development of such product candidates.
If
PP-001, OBG, or any of our other product candidates are associated with serious adverse events or undesirable side effects in
clinical trials or have characteristics that are unexpected, we may need to abandon their development or limit development to
more narrow uses or subpopulations in which the serious adverse events, undesirable side effects or other characteristics are
less prevalent, less severe or more acceptable from a risk-benefit perspective. Many compounds that initially showed promise in
clinical or early stage testing for treating ophthalmic disease have later been found to cause side effects that prevented further
development of the compound.
We
may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates
or indications that may be more profitable or for which there is a greater likelihood of success.
Because
we have limited financial and managerial resources, we focus on research programs and product candidates that we identify for
specific indications. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other
indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize
on viable commercial products or profitable market opportunities. Our spending on current and future research and development
programs and product candidates for specific indications may not yield any commercially viable products. If we do not accurately
evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that
product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous
for us to retain sole development and commercialization rights to such product candidate. To the extent our contemplated trials
are unsuccessful, we may not be able to raise additional funds for subsequent trials or pursuing other indications.
Risks
Related to the Commercialization of Our Product Candidates
Even
if PP-001, OBG, or any other product candidate that we develop receives marketing approval, it may fail to achieve the degree
of market acceptance by physicians, patients, third-party payors, and others in the medical community necessary for commercial
success and the market opportunity for our product candidates may be smaller than we estimate.
If
PP-001, OBG, or any other product candidate that we develop receives marketing approval, it may nonetheless fail to gain sufficient
market acceptance by physicians, patients, third-party payors, and others in the medical community.
Our
assessment of the potential market opportunity for PP-001 and OBG is based on industry and market data that we obtained from industry
publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys
and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do
not guarantee the accuracy or completeness of such information. If the actual market for PP-001 and OBG is smaller than we expect,
our product revenue may be limited, and it may be more difficult for us to achieve or maintain profitability.
If
we are unable to establish sales, marketing and distribution capabilities, we may not be successful in PP-001, OBG, or any other
product candidates that we may develop if and when they are approved.
We
do not have a sales or marketing infrastructure. To achieve commercial success for any product for which we have obtained marketing
approval and have not licensed the commercialization rights, we will need to establish sales, marketing, and distribution capabilities,
either ourselves or through collaborations or other arrangements with third parties.
In
the future, we plan to build sales and marketing infrastructure to market or co-promote PP-001 and OBG products and possibly other
product candidates that we develop, if and when they are approved. There are risks involved with establishing our own sales, marketing,
and distribution capabilities. For example, recruiting and training a sales force is expensive and time consuming and could delay
any product launch. If the commercial launch of PP-001, OBG, or any other product candidate for which we recruit a sales force
and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred
these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales
and marketing personnel.
Factors
that may inhibit our efforts to commercialize product candidates on our own include:
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our
inability to recruit, train and retain adequate numbers of effective sales and marketing personnel;
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the
inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to prescribe our products;
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the
lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to
companies with more extensive product lines; and
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unforeseen
costs and expenses associated with creating an independent sales and marketing organization.
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We
expect to enter into arrangements with third parties to perform consulting, sales, marketing, and distribution services in markets
outside the U.S. We may also enter into arrangements with third parties to perform these services in the U.S. if we do not establish
our own sales, marketing, and distribution capabilities in the U.S. or if we determine that such third-party arrangements are
otherwise beneficial. Our product revenues and our profitability, if any, under any such third-party sales, marketing or distribution
arrangements are likely to be lower than if we were to market, sell and distribute our product candidates. In addition, we may
not be successful in entering into arrangements with third parties to sell, market and distribute our product candidates or may
be unable to do so on terms that are favorable to us. We likely will have little control over such third parties, and any of them
may fail to devote the necessary resources and attention to sell and market our product candidates effectively. If we do not establish
sales, marketing, and distribution capabilities successfully, either on our own or in collaboration with third parties, we will
not be successful in commercializing PP-001, OBG, or any other product candidates that we may develop.
We
face substantial competition, which may result in others discovering, developing, or commercializing products before or more successfully
than we do.
The
development and commercialization of new drug products is highly competitive. We face competition with respect to PP-001, OBG,
and our other current product candidates and will face competition with respect to any product candidates that we may seek to
develop or commercialize in the future, from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology
companies worldwide. There are a number of large pharmaceutical and biotechnology companies that currently market and sell products
or are pursuing the development of products for the treatment of the disease indications for which we are developing our product
candidates. Potential competitors also include academic institutions, government agencies and other public and private research
organizations that conduct research, seek patent protection, and establish collaborative arrangements for research, development,
manufacturing, and commercialization.
Our
commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more
effective, have fewer or less severe side effects, are more convenient or are less expensive than our product candidates. Our
competitors also may obtain FDA or foreign regulatory approval for their products more rapidly than we may obtain approval for
ours, which could result in our competitors establishing a strong market position before we are able to enter the market.
In
addition, our ability to compete may be affected in many cases by insurers or other third-party payors, particularly Medicare,
seeking to encourage the use of generic products. Generic products are currently being used for the indications that we are pursuing,
and additional products are expected to become available on a generic basis over the coming years. If PP-001, OBG, or any other
product candidate that we may develop achieves marketing approval, we expect that it will be priced at a premium over competitive
products.
Many
of the companies against which we are competing or against which we may compete in the future have significantly greater financial
resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining
regulatory approvals, and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology
industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller and other early-stage
companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established
companies. These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing
clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary
for, our programs.
Even
if we are able to commercialize PP-001, OBG, or any other product candidate that we may develop, the products may become subject
to unfavorable pricing regulations, third-party coverage or reimbursement practices or healthcare reform initiatives, which could
harm our business.
Our
ability to commercialize PP-001, OBG, or any other product candidates that we may develop successfully will depend, in part, on
the extent to which coverage and adequate reimbursement for these products and related treatments will be available from government
healthcare programs, private health insurers, managed care plans and other organizations. Government authorities and third-party
payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish
reimbursement levels. A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities
and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications.
Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices
and are challenging the prices charged for medical products. Coverage and reimbursement may not be available for our product candidates
and, even if they are available, the level of reimbursement may not be satisfactory.
Inadequate
reimbursement may adversely affect the demand for, or the price of, any product candidate for which we obtain marketing approval.
Obtaining and maintaining adequate reimbursement for our products may be difficult. We may be required to conduct expensive pharmacoeconomic
studies to justify coverage and reimbursement or the level of reimbursement relative to other therapies. If coverage and adequate
reimbursement are not available or reimbursement is available only to limited levels, we may not be able to successfully commercialize
any product candidate for which we obtain marketing approval.
There
may be significant delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than
the indications for which the drug is approved by the FDA or similar regulatory authorities outside the U.S. Moreover, eligibility
for coverage and reimbursement does not imply that a drug will be paid for in all cases or at a rate that covers our costs, including
research, development, manufacture, sale, and distribution expenses. Interim reimbursement levels for new drugs, if applicable,
may also not be sufficient to cover our costs and may not be made permanent. Reimbursement rates may vary according to the use
of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs
and may be incorporated into existing payments for other services. Net prices for drugs 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 drugs from countries where they may be sold at lower prices than in the U.S. Third-party payors often rely upon Medicare
coverage policy and payment limitations in setting their own reimbursement policies. Our inability to promptly obtain coverage
and adequate reimbursement rates from both government-funded and private payors for any approved products that we develop would
compromise our ability to generate revenues and become profitable.
The
regulations that govern marketing approvals, pricing, coverage, and reimbursement for new drug products vary widely from country
to country. Current and future legislation may significantly change the approval requirements in ways that could involve additional
costs and cause delays in obtaining approvals. Some countries require approval of the sale price of a drug before it can be marketed.
In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign
markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is
granted. As a result, we might obtain marketing approval for a product in a particular country, but then be subject to price regulations
that delay our commercial launch of the product, possibly for lengthy time periods, and negatively impact the revenues we are
able to generate from the sale of the product in that country. To obtain reimbursement or pricing approval in some countries,
we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available
therapies. Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even
if our product candidates obtain marketing approval.
There
can be no assurance that our product candidates or any products that we may in-license, if they are approved for sale in the U.S.
or in other countries, will be considered medically reasonable and necessary for a specific indication, that they will be considered
cost-effective by third-party payors, that coverage and an adequate level of reimbursement will be available, or that third-party
payors’ reimbursement policies will not adversely affect our ability to sell our product candidates profitably.
Our
strategy of obtaining rights to product candidates and approved products through in-licenses and acquisitions may not be successful.
We
may expand our product pipeline through opportunistically in-licensing or acquiring the rights to other products, product candidates
or technologies. The future growth of our business may depend in part on our ability to in-license or acquire the rights to approved
products, additional product candidates or technologies. However, we may be unable to in-license or acquire the rights to any
such products, product candidates or technologies from third parties. The in-licensing and acquisition of pharmaceutical products
is a competitive area, and a number of more established companies are also pursuing strategies to license or acquire products,
product candidates or technologies that we may consider attractive. These established companies may have a competitive advantage
over us due to their size, cash resources and greater clinical development and commercialization capabilities.
In
addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable
to in-license or acquire the rights to the relevant product, product candidate or technology on terms that would allow us to make
an appropriate return on our investment. Furthermore, we may be unable to identify suitable products, product candidates or technologies
within our area of focus. If we are unable to successfully obtain rights to suitable products, product candidates or technologies,
our ability to pursue this element of our strategy could be impaired.
Product
liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that
we develop.
We
face an inherent risk of product liability exposure related to the use of the product candidates that we develop in human clinical
trials and will face an even greater risk if we commercially sell any products that we develop. If we cannot successfully defend
ourselves against claims that our product candidates or products caused injuries, we will incur substantial liabilities. Regardless
of merit or eventual outcome, liability claims may result in:
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decreased
demand for any product candidates or products that we develop;
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injury
to our reputation and significant negative media attention;
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withdrawal
of clinical trial participants;
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significant
costs to defend the related litigation;
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substantial
monetary awards to trial participants or patients;
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reduced
time and attention of our management to pursue our business strategy; and
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the
inability to commercialize any products that we develop.
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While
we obtain insurance for each clinical trial we perform, we may not be adequately insured to cover all liabilities that we may
incur. We will need to increase our insurance coverage as we expand our clinical trials. We will need to further increase our
insurance coverage if we commence commercialization of any product candidate that receives marketing approval. Insurance coverage
is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to
satisfy any liability that may arise.
Risks
Related to Our Dependence on Third Parties
We
may enter into collaborations with other third parties for the development or commercialization of our product candidates. If
our collaborations are not successful, we may not be able to capitalize on the market potential of these product candidates.
We
expect to utilize a variety of types of collaboration, distribution, and other marketing arrangements with third parties to commercialize
PP-001 and OBG in markets outside the U.S. We also may enter into arrangements with third parties to perform these services in
the U.S. if we do not establish our own sales, marketing and distribution capabilities in the U.S. or if we determine that such
third-party arrangements are otherwise beneficial. We also may seek third-party collaborators for development and commercialization
of other product candidates. Our likely collaborators for any sales, marketing, distribution, development, licensing, or broader
collaboration arrangements include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies
and biotechnology companies. To date, the only agreements we entered into were our Licensing Agreements with BHC, which were terminated
effective March 14, 2019. Our ability to generate revenues from these arrangements will depend on our collaborators’ abilities
and efforts to successfully perform the functions assigned to them in these arrangements.
Collaboration
agreements may not lead to development or commercialization of product candidates in the most efficient manner, or at all. If
we do not receive the funding we expect under collaboration agreements, our development of our product candidates could be delayed
and we may need additional resources to develop our product candidates. All of the risks relating to product development, regulatory
approval and commercialization described in this Annual Report on Form 10-K also apply to the activities of our collaborators.
Additionally,
subject to its contractual obligations to us, if a collaborator of ours were to be involved in a business combination, it might
deemphasize or terminate the development or commercialization of any product candidate licensed to it by us. If one of our collaborators
terminates its agreement with us, we may find it more difficult to attract new collaborators and our perception in the business
and financial communities could be harmed.
If
we are not able to establish additional collaborations, we may have to alter our development and commercialization plans and our
business could be adversely affected.
For
some of our product candidates, we may decide to collaborate with pharmaceutical and biotechnology companies for the development
and potential commercialization of therapeutic products. We face significant competition in seeking appropriate collaborators.
Whether we reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s
resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation
of a number of factors. Those factors may include the design or results of clinical trials, the likelihood of approval by the
FDA or similar regulatory authorities outside the U.S., the potential market for the subject product candidate, the costs and
complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, the existence
of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without
regard to the merits of the challenge, and industry and market conditions generally. The collaborator may also consider alternative
product candidates or technologies for similar indications that may be available to collaborate on and whether such a collaboration
could be more attractive than the one with us for our product candidate. We may also be restricted under future license agreements
from entering into agreements on certain terms with potential collaborators. Collaborations are complex and time-consuming to
negotiate and document. In addition, there have been a significant number of recent business combinations among large pharmaceutical
companies that have resulted in a reduced number of potential future collaborators.
If
we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all, we may have to
curtail the development of a product candidate, reduce or delay its development program or one or more of our other development
programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures
and undertake development or commercialization activities at our own expense. If we elect to fund and undertake development or
commercialization activities on our own, we may need to obtain additional expertise and additional capital, which may not be available
to us on acceptable terms or at all. If we fail to enter into collaborations and do not have sufficient funds or expertise to
undertake the necessary development and commercialization activities, we may not be able to further develop our product candidates
or bring them to market or continue to develop our product platform.
We
rely, and expect to continue to rely, on third parties to conduct our clinical trials, and those third parties may not perform
satisfactorily, including failing to meet deadlines for the completion of such trials.
We
have relied on third parties, such as contract research organizations (“CROs”) to conduct our completed trials of
our product candidates, and do not plan to independently conduct clinical trials of our product candidates. We expect to continue
to rely on third parties, such as CROs, clinical data management organizations, medical institutions, and clinical investigators,
to conduct our clinical trials. These agreements might terminate for a variety of reasons, including a failure to perform by the
third parties. If we need to enter into alternative arrangements, that would delay our product development activities.
Our
reliance on these third parties for research and development activities will reduce our control over these activities but will
not relieve us of our responsibilities. For example, we will remain responsible for ensuring that each of our clinical trials
is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDA requires us to
comply with standards, commonly referred to as Good Clinical Practices for conducting, recording, and reporting the results of
clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality
of trial participants are protected. We also are required to register ongoing clinical trials and post the results of completed
clinical trials on a government-sponsored database, ClinicalTrials.gov, within specified timeframes. Failure to do so can result
in fines, adverse publicity, and civil and criminal sanctions.
Furthermore,
these third parties may also have relationships with other entities, some of which may be our competitors. If these third parties
do not successfully carry out their contractual duties, meet expected deadlines or conduct our clinical trials in accordance with
regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing approvals
for our product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our product
candidates.
We
contract with third parties for the manufacture of PP-001 and OBG for clinical trials and expect to continue to do so in connection
with the commercialization of PP-001, OBG, and for clinical trials and commercialization of any other product candidates that
we may develop. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates
or products or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization
efforts.
We
do not currently own or operate manufacturing facilities for the production of clinical or commercial quantities of PP-001, OBG
or any other of our product candidates. We rely, and expect to continue to rely, on third parties to manufacture clinical and
commercial supplies of PP-001 and OBG, preclinical and clinical supplies of our other product candidates that we may develop,
and commercial supplies of products if and when any of our product candidates receives marketing approval. Our current and anticipated
future dependence upon others for the manufacture of PP-001, OBG, and any other product candidate or product that we develop may
adversely affect our future profit margins and our ability to commercialize any products that receive marketing approval on a
timely and competitive basis. In addition, any performance failure on the part of our existing or future manufacturers could delay
clinical development or marketing approval.
We
currently rely exclusively on third-party manufacturers to assemble and prepare PP-001 and OBG on a purchase order basis. We do
not currently have any contractual commitments for commercial supply of bulk drug substance for PP-001 and OBG, or fill-finish
services. We also do not currently have arrangements in place for redundant supply or a second source for bulk drug substance
for PP-001 and OBG, or for fill-finish services. The prices at which we are able to obtain supplies of PP-001, OBG and fill-finish
services may vary substantially over time and adversely affect our financial results.
If
our third-party manufacturers for PP-001 or OBG fail to fulfill our purchase orders or should become unavailable to us for any
reason, we believe that there are a limited number of potential replacement manufacturers, and we likely would incur added costs
and delays in identifying or qualifying such replacements. We could also incur additional costs and delays in identifying or qualifying
a replacement manufacturer for fill-finish services if our existing third-party manufacturer should become unavailable for any
reason. We may be unable to establish any agreements with such replacement manufacturers or to do so on acceptable terms. Even
if we could transfer manufacturing to a different third party, the shift would likely be expensive and time consuming, particularly
since the new facility would need to comply with the necessary regulatory requirements and we would need FDA approval before using
or selling any products manufactured at that facility.
In
connection with our application for a license to market PP-001, OBG or other product candidates in the U.S., we may be required
to conduct a comparability study if the product we intend to market is supplied by a manufacturer different from the one who supplied
the product evaluated in our clinical studies. Delays in designing and completing this study to the satisfaction of the FDA could
delay or preclude our development and commercialization plans and thereby limit our revenues and growth.
Reliance
on third-party manufacturers entails additional risks, including:
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PP-001,
OBG and any other product candidates that we may develop may compete with other product candidates and products for access
to a limited number of suitable manufacturing facilities that operate under current good manufacturing practices (“cGMP”)
regulations;
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reliance
on the third party for regulatory compliance and quality assurance;
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the
possible breach of the manufacturing agreement by the third party;
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the
possible misappropriation of our proprietary information, including our trade secrets and know-how; and
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the
possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us.
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Third-party
manufacturers may not be able to comply with cGMP regulations or similar regulatory requirements outside the U.S. Our failure,
or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed
on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation,
seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly
and adversely affect supplies of our products.
Risks
Related to Our Intellectual Property
If
we are unable to obtain and maintain patent protection for our technology and products or if the scope of the patent protection
obtained is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical
to ours, and our ability to successfully commercialize our technology and products may be impaired.
Our
success depends in large part on our ability to obtain and maintain patent protection in the U.S. and other countries with respect
to our proprietary technology and products. We and our licensors have sought to protect our proprietary position by filing patent
applications in the U.S. and abroad related to our novel technologies and product candidates. The patent prosecution process is
expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a
reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and
development output before it is too late to obtain patent protection. Maintaining patents in the U.S. is an expensive process
and it is even more expensive to maintain patents and patent applications in foreign countries. As a result, it is possible that
we and our licensors will fail to maintain such patents thereby reducing the rights of our portfolio.
The
patent position of pharmaceutical, biotechnology and medical device companies generally is highly uncertain, involves complex
legal and factual questions and has in recent years been the subject of much litigation. As a result, the issuance, scope, validity,
enforceability and commercial value of our and our licensors’ patent rights are highly uncertain. Our and our licensors’
pending and future patent applications may not result in patents being issued which protect our technology or products or which
effectively prevent others from commercializing competitive technologies and products. In addition, the laws of foreign countries
may not protect our rights to the same extent as the laws of the U.S. Publications of discoveries in the scientific literature
often lag behind the actual discoveries, and patent applications in the U.S. and other jurisdictions are typically not published
until 18 months after filing, or in some cases not at all. Therefore, we cannot know with certainty whether we or our licensors
were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, or that we or our
licensors were the first to file for patent protection of such inventions. As a result, the issuance, scope, validity, enforceability,
and commercial value of our owned or licensed patent rights are highly uncertain. We currently have 43 pending patents. Our pending
and future patent applications may not result in patents being issued which protect our technology or products, in whole or in
part, or which effectively prevent others from commercializing competitive technologies and products. In particular, during prosecution
of any patent application, the issuance of any patents based on the application may depend upon our ability to generate additional
preclinical or clinical data that support the patentability of our proposed claims. We may not be able to generate sufficient
additional data on a timely basis, or at all. Moreover, changes in either the patent laws or interpretation of the patent laws
in the U.S. and other countries may diminish the value of our patents or narrow the scope of our patent protection.
Moreover,
we may be subject to a third-party pre-issuance submission of prior art to the U.S. Patent and Trademark Office, or become involved
in opposition, derivation, reexamination, inter partes review, post-grant review or interference proceedings challenging
our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could
reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete
directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing
third-party patent rights. In addition, if the breadth or strength of protection provided by our patents and patent applications
is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product
candidates.
Even
if our owned and licensed patent applications issue as patents, they may not issue in a form that will provide us with any meaningful
protection, prevent competitors from competing with us or otherwise provide us with any competitive advantage. Our competitors
may be able to circumvent our owned or licensed patents by developing similar or alternative technologies or products in a non-infringing
manner.
The
issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our owned and licensed patents
may be challenged in the courts or patent offices in the U.S. and abroad. Such challenges may result in loss of exclusivity or
freedom to operate or in patent claims being narrowed, invalidated, or held unenforceable, in whole or in part, which could limit
our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of
the patent protection of our technology and products. Given the amount of time required for the development, testing and regulatory
review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are
commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others
from commercializing products similar or identical to ours.
We
may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time
consuming and unsuccessful.
Competitors
may infringe our issued patents or other intellectual property. To counter infringement or unauthorized use, we may be required
to file infringement claims, which can be expensive and time consuming. Any claims we assert against perceived infringers could
provoke these parties to assert counterclaims against us alleging that we infringe their patents. In addition, in a patent infringement
proceeding, a court may decide that a patent of ours is invalid or unenforceable, in whole or in part, construe the patent’s
claims narrowly or refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover
the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk of being
invalidated or interpreted narrowly. Furthermore, because of the substantial amount of discovery required in connection with intellectual
property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this
type of litigation.
Third
parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which
would be uncertain and could have a material adverse effect on the success of our business.
Our
commercial success depends upon our ability, and the ability of our collaborators, to develop, manufacture, market and sell our
product candidates and use our proprietary technologies without infringing the proprietary rights of third parties. There is considerable
intellectual property litigation in the medical device, biotechnology, and pharmaceutical industries. We may become party to,
or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our products
and technology, including interference or derivation proceedings before the U.S. Patent and Trademark Office. The risks of being
involved in such litigation and proceedings may increase as our product candidates near commercialization and as we gain the greater
visibility associated with being a public company. Third parties may assert infringement claims against us based on existing patents
or patents that may be granted in the future. We may not be aware of all such intellectual property rights potentially relating
to our product candidates and their uses. Thus, we do not know with certainty that PP-001, OBG, or any other product candidate,
or our commercialization thereof, does not and will not infringe or otherwise violate any third party’s intellectual property.
If
we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such
third party to continue developing and marketing our products and technology. However, we may not be able to obtain any required
license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby
giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, to cease
commercializing the infringing technology or product. In addition, we could be found liable for monetary damages, including treble
damages and attorneys’ fees if we are found to have willfully infringed a patent. A finding of infringement could prevent
us from commercializing our product candidates or force us to cease some of our business operations. Claims that we have misappropriated
the confidential information or trade secrets of third parties could have a similar negative impact on our business.
If
we fail to comply with our obligations in our intellectual property licenses and funding arrangements with third parties, we could
lose rights that are important to our business.
We
are party to licensing agreements that impose, and, for a variety of purposes, we will likely enter into additional licensing
and funding arrangements with third parties that may impose, diligence, development and commercialization timelines and milestone
payment, royalty, insurance and other obligations on us. Under certain of our existing licensing agreements, we are obligated
to pay royalties or make specified milestone payments on net product sales to the extent they are covered by the agreements. We
also are obligated under certain of our existing license agreements to pay maintenance and other fees. We also have diligence
and development obligations under certain of those agreements that we are required to satisfy. If we fail to comply with our obligations
under current or future license and collaboration agreements, our counterparties may have the right to terminate these agreements,
in which event we might not be able to develop, manufacture or market any product that is covered by these agreements or may face
other penalties under the agreements. Such an occurrence could diminish the value of the product candidate being developed under
any such agreement. Termination of these agreements or reduction or elimination of our rights under these agreements may result
in our having to negotiate new or reinstated agreements with less favorable terms or cause us to lose our rights under these agreements,
including our rights to important intellectual property or technology.
We
may be subject to claims by third parties asserting that our employees or we have misappropriated their intellectual property
or claiming ownership of what we regard as our own intellectual property.
Some
of our employees were previously employed at universities or other biotechnology or pharmaceutical companies. Although we try
to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be subject
to claims that these employees or we have used or disclosed intellectual property, including trade secrets or other proprietary
information, of any such employee’s former employer. Litigation may be necessary to defend against these claims.
In
addition, while it is our policy to require our employees and contractors who may be involved in the development of intellectual
property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement
with each party who in fact develops intellectual property that we regard as our own. Our and their assignment agreements may
not be self-executing or may be breached, and we may be forced to bring claims against third parties, or defend claims they may
bring against us, to determine the ownership of what we regard as our intellectual property.
If
we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual
property rights or personnel. Even if we are successful in prosecuting or defending against such claims, litigation could result
in substantial costs and be a distraction to management.
Intellectual
property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.
Even
if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur
significant expenses and could distract our technical and management personnel from their normal responsibilities. In addition,
there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities
analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common
stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for
development activities or any future sales, marketing, or distribution activities. We may not have sufficient financial or other
resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such
litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from
the initiation and continuation of patent litigation or other proceedings could compromise our ability to compete in the marketplace.
If
we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
In
addition to seeking patents for some of our technology and product candidates, we also rely on trade secrets, including unpatented
know-how, technology, and other proprietary information, to maintain our competitive position. 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, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other
third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants.
Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our
trade secrets, and we may 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. In
addition, some courts inside and outside the U.S. are less willing or unwilling to protect trade secrets. If any of our trade
secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those
to whom they communicate it, 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, our competitive position would be harmed.
Risks
Related to Regulatory Approval of Our Product Candidates and Other Legal Compliance Matters
If
we are not able to obtain required regulatory approvals, we will not be able to commercialize PP-001, OBG, or any other product
candidate that we may develop, and our ability to generate revenue will be materially impaired. The marketing approval process
is expensive, time-consuming, and uncertain. As a result, we cannot predict when or if we, or any collaborators we may have in
the future, will obtain marketing approval to commercialize PP-001, OBG, or any other product candidate.
The
activities associated with the development and commercialization of our product candidates, including PP-001 and OBG, including
design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution,
are subject to comprehensive regulation by the FDA and other regulatory agencies in the U.S. and similar regulatory authorities
outside the U.S. Failure to obtain marketing approval for a product candidate will prevent us from commercializing the product
candidate. We have not received approval to market PP-001, OBG, or any other product candidate from regulatory authorities in
any jurisdiction. We have only limited experience in filing and supporting the applications necessary to gain marketing approvals
and expect to rely on third-party CROs and consultants to assist us in this process.
The
process of obtaining marketing approvals, both in the U.S. and abroad, is expensive and may take many years, especially if additional
clinical trials are required, if approval is obtained at all. Securing marketing approval requires the submission of extensive
preclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication to establish
the product candidate’s safety, purity, and potency. Securing marketing approval also requires the submission of information
about the product manufacturing process to, and inspection of manufacturing facilities by, the regulatory authorities. The FDA
or other regulatory authorities may determine that PP-001, OBG, or any other product candidate that we may develop is not safe,
effective or pure, is only moderately effective or has undesirable or unintended side effects, toxicities or other characteristics
that preclude our obtaining marketing approval or prevent or limit commercial use. Any marketing approval we ultimately obtain
may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.
The
regulatory process can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product
candidates involved.
Failure
to obtain marketing approval in international jurisdictions would prevent our product candidates from being marketed abroad.
In
order to market and sell PP-001, OBG, and any other product candidate that we may develop in other jurisdictions, we or our third-party
collaborators must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval
procedure varies among countries and can involve additional testing. The time required to obtain approval may differ substantially
from that required to obtain FDA approval. The regulatory approval process outside the U.S. generally includes all of the risks
associated with obtaining FDA approval. In addition, in many countries outside the U.S., it is required that the product be approved
for reimbursement before the product can be sold in that country. We or these third parties may not obtain approvals from regulatory
authorities outside the U.S. on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities
in other countries or jurisdictions, and approval by one regulatory authority outside the U.S. does not ensure approval by regulatory
authorities in other countries or jurisdictions or by the FDA. We may not be able to file for marketing approvals and may not
receive necessary approvals to commercialize our products in any market.
Even
if we, or any collaborators we may have in the future, obtain marketing approvals for PP-001, OBG, or our other product candidates,
the terms of those approvals, ongoing regulations and post-marketing restrictions may limit how we, or they, manufacture and market
our products, which could materially impair our ability to generate revenue.
Once
marketing approval has been granted, an approved product and its manufacturer and marketer are subject to ongoing review and extensive
regulation. We, and any collaborators we may have in the future, must therefore comply with requirements concerning advertising
and promotion for any of our products for which we or they obtain marketing approval. Promotional communications with respect
to prescription products are subject to a variety of legal and regulatory restrictions and must be consistent with the information
in the product’s approved labeling. Thus, if PP-001, OBG, or any other product candidate that we may develop receives marketing
approval, the accompanying label may limit the approved use of our product, which could limit sales of the product.
In
addition, manufacturers of approved products and those manufacturers’ facilities are required to comply with extensive FDA
requirements, including ensuring that quality control and manufacturing procedures conform to cGMPs, which include requirements
relating to quality control and quality assurance as well as the corresponding maintenance of records and documentation and reporting
requirements. We, our contract manufacturers, our future collaborators and their contract manufacturers will also be subject to
other regulatory requirements, including submissions of safety and other post-marketing information and reports, registration
and listing requirements, requirements regarding the distribution of samples to physicians, recordkeeping, and costly post-marketing
studies or clinical trials and surveillance to monitor the safety or efficacy of the product such as the requirement to implement
a risk evaluation and mitigation strategy.
We
may be subject to substantial penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems
with our products.
Violations
of the Federal Food, Drug, and Cosmetic Act relating to the promotion or manufacturing of prescription products may lead to investigations
by the FDA, Department of Justice and state Attorneys General alleging violations of federal and state healthcare fraud and abuse
laws, as well as state consumer protection laws. In addition, later discovery of previously unknown adverse events or other problems
with our products, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may yield various
adverse results, including:
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restrictions
on such products, manufacturers, or manufacturing processes;
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restrictions
on the labeling or marketing of a product;
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restrictions
on product distribution or use;
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requirements
to conduct post-marketing studies or clinical trials;
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withdrawal
of the products from the market;
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refusal
to approve pending applications or supplements to approved applications that we submit;
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recall
of products;
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fines,
restitution or disgorgement of profits or revenues;
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suspension
or withdrawal of marketing approvals;
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refusal
to permit the import or export of our products;
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product
seizure; or
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injunctions
or the imposition of civil or criminal penalties.
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Our
relationships with customers and third-party payors may be subject, directly or indirectly, to applicable anti-kickback, fraud
and abuse, false claims, transparency, health information privacy and security, and other healthcare laws and regulations, which
could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm, administrative burdens and diminished
profits and future earnings.
Healthcare
providers, physicians and third-party payors in the U.S. and elsewhere will play a primary role in the recommendation and prescription
of any product candidates, including PP-001 and OBG, for which we obtain marketing approval. Our future arrangements with third-party
payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain
the business or financial arrangements and relationships through which we market, sell and distribute any products for which we
obtain marketing approval. In addition, we may be subject to transparency laws and patient privacy regulation by U.S. federal
and state governments and by governments in foreign jurisdictions in which we conduct our business. The applicable federal, state,
and foreign healthcare laws and regulations that may affect our ability to operate include:
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the
federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, offering,
receiving, or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either
the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may
be made under a federal healthcare program such as Medicare and Medicaid;
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federal
civil and criminal false claims laws and civil monetary penalty laws, including the federal False Claims Act, which impose
criminal and civil penalties, including civil whistleblower or qui tam actions,
against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, including
the Medicare and Medicaid programs, claims for payment that are false or fraudulent or making a false statement to avoid,
decrease or conceal an obligation to pay money to the federal government;
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the
federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes criminal and civil liability
for executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;
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HIPAA,
as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and their respective implementing
regulations, which imposes obligations, including mandatory contractual terms, on covered healthcare providers, health plans
and healthcare clearinghouses, as well as their business associates, with respect to safeguarding the privacy, security, and
transmission of individually identifiable health information; and
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analogous
state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing
arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including
private insurers; state and foreign 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 providers; state and foreign laws that require drug manufacturers to report information
related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and
state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ
from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
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Efforts to ensure that our business arrangements with third parties will comply with
applicable healthcare laws and regulations may involve substantial costs. It is possible
that governmental authorities will conclude that our business practices may not comply
with current or future statutes, regulations or case law involving applicable fraud and
abuse or other healthcare laws and regulations. If our operations are found to be in
violation of any of these laws or any other governmental regulations that may apply to
us, we may be subject to significant civil, criminal, and administrative penalties, including,
without limitation, damages, fines, imprisonment, exclusion from participation in government
funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring
of our operations. If any of the physicians or other healthcare providers or entities
with whom we expect to do business is found to be not in compliance with applicable laws,
it may be subject to criminal, civil or administrative sanctions, including exclusions
from participation in government funded healthcare programs.
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Previously
enacted and future legislation may affect our ability to commercialize and the prices we obtain for any products that are approved
in the U.S. or foreign jurisdictions.
In
the U.S. and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding
the healthcare system that could affect our ability to profitably sell or commercialize any product candidate, including PP-001
and OBG, for which we obtain marketing approval or that we may in-license. The pharmaceutical industry has been a particular focus
of these efforts and has been significantly affected by legislative initiatives. Current laws, as well as other healthcare reform
measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure
on the price that we receive for any approved product.
In
the U.S., the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (“MMA”) changed the way Medicare
covers and pays for pharmaceutical products. Cost reduction initiatives and other provisions of this legislation could limit coverage
of and reduce the price that we receive for any approved products. While the MMA applies only to product benefits for Medicare
beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement
rates. Therefore, any reduction in reimbursement that results from the MMA or other healthcare reform measures may result in a
similar reduction in payments from private payors.
In
March 2010, former President Obama signed into law the Patient Protection and Affordable Care Act, as amended by the Health Care
and Education Affordability Reconciliation Act (collectively “PPACA”). Among the provisions of PPACA of importance
to our business, including, without limitation, our ability to commercialize and the prices we may obtain for any of our product
candidates and that are approved for sale, are the following:
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an
annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents;
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an
increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program;
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a
new Medicare Part D coverage gap discount program, in which participating manufacturers must agree to offer 50% point-of-sale
discounts off negotiated drug prices during the coverage gap period as a condition for the manufacturer’s outpatient
drugs to be covered under Medicare Part D;
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expansion
of healthcare fraud and abuse laws, including the federal False Claims Act and the federal Anti-Kickback Statute, and the
addition of new government investigative powers, and enhanced penalties for noncompliance;
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extension
of manufacturers’ Medicaid rebate liability;
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expansion
of eligibility criteria for Medicaid programs; and
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expansion
of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program.
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In
addition, other legislative changes have been proposed and adopted since PPACA was enacted. These changes include aggregate
reductions to Medicare payments to providers of up to 2% per fiscal year, which went into effect in April 2013. In January
2013, former President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare
payments to several types of providers, and increased the statute of limitations period for the government to recover overpayments
to providers from three to five years. These new laws may result in additional reductions in Medicare and other healthcare
funding. In addition, it is possible that changes in administration and policy, including the potential repeal of all or parts
of the PPACA, could result in additional proposals and/or changes to health care system legislation.
The
pricing of prescription pharmaceuticals is also subject to governmental control outside the U.S. In these countries, pricing negotiations
with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement
or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of
our product candidate to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount,
or if pricing is set at unsatisfactory levels, our ability to generate revenues and become profitable could be impaired.
If
we or our third-party manufacturers fail to comply with environmental, health and safety laws and regulations, we could become
subject to fines or penalties or incur significant costs.
We
and our third-party manufacturers are subject to numerous environmental, health and safety laws and regulations, including those
governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. From
time to time and in the future, our operations may involve the use of hazardous and flammable materials, including chemicals and
biological materials, and produce hazardous waste products. We generally contract with third parties for the disposal of these
materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination
or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability
could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties for failure
to comply with such laws and regulations.
Although
we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees,
this insurance may not provide adequate coverage against potential liabilities.
In
addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations.
These current or future laws and regulations may impair our research, development, or production efforts. Our failure to comply
with these laws and regulations also may result in substantial fines, penalties, or other sanctions.
Further,
with respect to the operations of our third-party contract manufacturers, it is possible that if they fail to operate in compliance
with applicable environmental, health and safety laws and regulations or properly dispose of wastes associated with our products,
we could be held liable for any resulting damages, suffer reputational harm, or experience a disruption in the manufacture and
supply of our product candidates or products.
Risks
Related to Employee Matters and Managing Growth
Our
future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.
We
are highly dependent on the research and development, clinical and business development expertise of Franz Obermayr, our Acting
Chief Executive Officer, the financial expertise of Sarah Romano, our Chief Financial Officer, as well as the other principal
members of our management, scientific and clinical team and a number of third-party consultants. Although we have entered into
employment agreements with Mr. Obermayr and Ms. Romano, either of them may terminate his or her employment with us at any time.
We do not maintain “key person” insurance for any of our executives or other employees.
Recruiting
and retaining qualified scientific, clinical, manufacturing and sales and marketing personnel will also be critical to our success.
The loss of the services of our executive officers or other key employees could impede the achievement of our research, development
and commercialization objectives and seriously harm our ability to successfully implement our business strategy. Furthermore,
replacing executive officers and key employees may be difficult and may take an extended period of time because of the limited
number of individuals in our industry with the breadth of skills and experience required to successfully develop, gain regulatory
approval of and commercialize products. Competition to hire from this limited pool is intense, and we may be unable to hire, train,
retain or motivate these key personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology
companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities
and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist
us in formulating our research and development and commercialization strategy. Our consultants and advisors may be employed by
employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their
availability to us. If we are unable to continue to attract and retain high quality personnel, our ability to pursue our growth
strategy will be limited.
We
expect to expand our development capabilities and potentially implement sales, marketing, and distribution capabilities, and as
a result, we may encounter difficulties in managing our growth, which could disrupt our operations.
We
may experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of
drug development, regulatory affairs and, if any of our product candidates receives marketing approval, sales, marketing, and
distribution. To manage our potential future growth, we must continue to implement and improve our managerial, operational, and
financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limited
financial resources and the limited experience of our management team in managing a company with such potential growth, we may
not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The expansion
of our operations may lead to significant costs and may divert our management and business development resources. Any inability
to manage growth could delay the execution of our business plans or disrupt our operations.
We
may fail to realize any benefits and incur losses related to any acquisition.
The
success of our strategic acquisitions will depend, in part, on our ability to successfully integrate the acquired businesses with
our existing business, including our recent acquisition of Panoptes Pharma Ges.m.b.H. It is possible that the integration process
could result in the loss of key employees, the disruption of ongoing business or inconsistencies in standards, controls, procedures,
and policies that adversely affect our ability to maintain relationships with clients, customers and employees or to achieve the
anticipated benefits of the acquisition. Successful integration may also be hampered by any differences between the operations
and corporate culture of the two organizations. If we experience difficulties with the integration process, the anticipated benefits
of the acquisition may not be realized fully, or at all, or may take longer to realize than expected.
Risks
Related to Our Common Stock
Our
principal stockholder holds a significant percentage of voting power and will be able to exert significant control over us.
Armistice
Capital Master Fund Ltd. (the “Master Fund”), an entity affiliated with Steve J. Boyd and Keith Maher, each of whom
are members of our board of directors and over which Mr. Boyd holds voting and investment power, holds shares of common stock
that represent approximately 47.2% of all outstanding voting power, and as such may significantly influence the results of matters
voted on by the Company’s shareholders. The Master Fund additionally holds 4,092 shares of Series C Preferred Stock that
are convertible into 852,500 shares of common stock and warrants to purchase 3,733,186 shares of common stock. 1,602,085 of the
warrants are subject to a blocker provision that prevents the Master Fund from exercising such warrants to the extent it would
result in the Master Fund beneficially owning more than either 4.99% or 9.99% of shares of our common stock. The interests of
the Master Fund, Mr. Boyd and Mr. Maher may conflict with your interests. This significant concentration of share ownership may
adversely affect the trading price for our common stock because investors may perceive disadvantages in owning stock in companies
with controlling stockholders.
Because
we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will
be your sole source of gain.
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. In addition, any future debt agreements that we may enter into, may
preclude us from paying dividends without the lenders’ consent or at all. As a result, capital appreciation, if any, of
our common stock will be your sole source of gain for the foreseeable future.
General Risk Factors
The coronavirus pandemic could adversely
impact our business, including clinical trials.
In December 2019, a novel strain of coronavirus,
COVID-19, was reported to have surfaced in Wuhan, China. Since then, COVID-19 has spread globally. As the COVID-19 pandemic continues,
we could experience disruptions that could severely impact our business and clinical trials, including:
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delays or difficulties in enrolling patients in clinical
trials;
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delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff;
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diversion of healthcare resources away from the conduct
of clinical trials, including the diversion of hospitals serving as clinical trial sites and hospital staff supporting the conduct
of clinical trials;
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interruption of key clinical trial activities, such as
clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers
and others;
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limitations in employee resources that would otherwise
be focused on the conduct of clinical trials, including because of sickness of employees or their families or the desire of employees
to avoid contact with groups of people;
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delays in receiving approval from local regulatory authorities
to initiate our planned clinical trials;
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delays in clinical sites receiving the supplies and materials
needed to conduct our clinical trials;
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interruption in global manufacturing and shipping that
may affect the transport of clinical trial materials and materials, including testing equipment and personal protective equipment,
used at our facilities;
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changes in local regulations as part of a response to
the COVID-19 coronavirus outbreak which may require us to change the ways in which clinical trials are conducted, which may result
in unexpected costs;
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delays in necessary interactions with local regulators,
ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of
government employees; and
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delay in the timing of interactions with the FDA due
to absenteeism by federal employees or by the diversion of their efforts and attention to approval of other therapeutics or other
activities related to COVID-19.
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The global outbreak of the COVID-19 coronavirus
continues to rapidly evolve. The extent to which the COVID-19 coronavirus may impact our business and clinical trials will depend
on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of the outbreak,
travel restrictions and social distancing in the U.S. and other countries, business closures or business disruptions and the effectiveness
of actions taken in the U.S. and other countries to contain and treat the disease.
Laws and regulations governing international
operations may preclude us from developing, manufacturing, and selling certain products outside of the U.S. and require us to develop
and implement costly compliance programs.
We must dedicate additional
resources to comply with numerous laws and regulations in each jurisdiction in which we plan to operate, including our operations
in Austria. The Foreign Corrupt Practices Act (“FCPA”) prohibits any U.S. individual or business from paying, offering,
authorizing payment, or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate
for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining
or retaining business. The FCPA also obligates companies whose securities are listed in the U.S. to comply with certain accounting
provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation,
including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international
operations.
Compliance with the
FCPA is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, the FCPA presents
particular challenges in the pharmaceutical industry, because, in many countries, hospitals are operated by the government, and
doctors and other hospital employees are considered foreign officials. Certain payments to hospitals in connection with clinical
trials and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions.
Various laws, regulations
and executive orders also restrict the use and dissemination outside of the U.S., or the sharing with certain non-U.S. nationals,
of information classified for national security purposes, as well as certain products and technical data relating to those products.
Our foreign operations require us to dedicate additional resources to comply with these laws, and these laws may preclude us from
developing, manufacturing, or selling certain products and product candidates outside of the U.S., which could limit our growth
potential and increase our development costs.
The failure to comply
with laws governing international business practices may result in substantial civil and criminal penalties and suspension or debarment
from government contracting. The SEC also may suspend or bar issuers from trading securities on U.S. exchanges for violations of
the FCPA’s accounting provisions.
Our business and operations would
suffer in the event of system failures.
Despite the implementation
of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, 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 drug
development programs. For example, the loss of clinical trial data from completed or ongoing or planned clinical trials 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 the further development of our product candidates could
be delayed.
Provisions in our corporate charter
documents and under Delaware law could make an acquisition of our company, which may be beneficial to our stockholders, more difficult
and may prevent attempts by our stockholders to replace or remove our current management.
Provisions in our
restated certificate of incorporation and our amended and restated bylaws may discourage, delay or prevent a merger, acquisition
or other change in control of our company that stockholders may consider favorable, including transactions in which you might otherwise
receive a premium for your shares. These provisions could also limit the price that investors might be willing to pay in the future
for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our board of directors
is responsible for appointing the members of our management team, these provisions 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. Among other things, these provisions:
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establish a classified board of directors such that only
one of three classes of directors is elected each year;
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allow the authorized number of our directors to be changed
only by resolution of our board of directors;
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limit the manner in which stockholders can remove directors
from our board of directors;
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establish advance notice requirements for stockholder
proposals that can be acted on at stockholder meetings and nominations to our board of directors;
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require that stockholder actions must be effected at
a duly called stockholder meeting and prohibit actions by our stockholders by written consent;
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limit who may call stockholder meetings;
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authorize our board of directors to issue preferred stock
without stockholder approval, which could be used to institute a “poison pill” that would work to dilute the stock
ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors;
and
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require the affirmative vote of stockholders holding
at least two-thirds of shares entitled to be cast to amend or repeal specified provisions of our restated certificate of incorporation
or our amended and restated bylaws.
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Moreover, because
we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which
prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of
three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless
the merger or combination is approved in a prescribed manner.
The price of our common stock may
be volatile and fluctuate substantially, which could result in substantial losses for purchasers of our common stock.
Our stock price may
be volatile. The stock market in general and the market for smaller specialty pharmaceutical 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,
you may not be able to sell your common stock at or above the price you paid for such shares. The market price for our common stock
may be influenced by many factors, including:
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the success of competitive products or technologies;
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results of clinical trials of PP-001, OBG, or any other
product candidate that we may develop;
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results of clinical trials of product candidates 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 scientific or management
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 discover, develop, acquire
or in-license additional products, product candidates or technologies for the treatment of ophthalmic diseases, the costs of commercializing
any such products and the costs of development of any such product candidates or technologies;
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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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changes in the structure of healthcare payment systems;
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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 factors described in this “Risk Factors”
section.
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In the past, following
periods of volatility in the market price of a company’s securities, securities class-action litigation has often been instituted
against that company. We also may face securities class-action litigation if we cannot obtain regulatory approvals for or if we
otherwise fail to commercialize PP-001 or OBG. Such litigation, if instituted against us, could cause us to incur substantial costs
to defend such claims and divert management’s attention and resources.
Our ability to use our net operating
loss carryforwards and certain other tax attributes may be limited.
As of December 31,
2020, we had federal net operating loss carryforwards of approximately $62.1 million, state net operating loss carryforwards of
approximately $43.2 million and aggregate federal and state research and development tax credit carryforwards of approximately
$2.3 million and $0.495 million, respectively, available to reduce future taxable income. Certain of these federal and state net
operating loss carryforwards and federal and state tax credit carryforwards will expire at various dates through 2039, if not utilized.
Federal net operating losses generated as of December 31, 2017 will carry-forward until 2037 and net operating losses generated
during the year ended December 31, 2018 and later will be carried forward indefinitely until utilized, but their utilization will
be limited to 80% of taxable income. Utilization of these net operating loss and tax credit carryforwards may be subject to a substantial
limitation under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, and comparable provisions
of state, local and foreign tax laws due to changes in ownership of our company that have occurred previously or that could occur
in the future. Under Section 382 of the Code and comparable provisions of state, local and foreign tax laws, if a corporation undergoes
an “ownership change,” generally defined as a greater than 50% change by value in its equity ownership over a three-year
period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes,
such as research and development tax credits, to reduce its post-change income may be limited. We have not completed a study to
determine whether our initial public offering, subsequent public and private offerings, and other transactions that have occurred
may have triggered an ownership change limitation. We may also experience ownership changes in the future as a result of subsequent
shifts in our stock ownership. As a result, if we generate taxable income, our ability to use our pre-change net operating loss
and tax credits carryforwards to reduce U.S. federal and state taxable income may be subject to limitations, which could result
in increased future tax liability to us. In addition, the Tax Cuts and Jobs Act (“TCJA”) enacted on December 22, 2017
limits the amount of net operating losses that we are permitted to deduct in any taxable year to 80% of our taxable income in such
year. The TCJA also eliminates the ability to carry back net operating losses to prior years, but allows net operating losses generated
after 2017 to be carried forward indefinitely. As such, there is a risk that due to such items, our existing net operating losses
could expire or be unavailable to offset future income.
Sales of a substantial number of
shares of our common stock by our existing stockholders in the public market could cause our stock price to fall.
Sales of a substantial
number of shares of our common stock in the public market or the perception that these sales might occur, could significantly reduce
the market price of our common stock and impair our ability to raise adequate capital through the sale of additional equity securities.
We are a smaller reporting company
and the reduced disclosure requirements applicable to smaller reporting companies may make our common stock less attractive to
investors.
We are a smaller reporting company (“SRC”)
and a non-accelerated filer, which allows us to take advantage of exemptions from various reporting requirements that are applicable
to other public companies that are not SRCs or non-accelerated filers, including not being required to comply with the auditor
attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, reduced disclosure obligations, including
disclosures regarding executive compensation, in our Annual Report and our periodic reports and proxy statements and providing
only two years of audited financial statements in our Annual Report and our periodic reports. We will remain an SRC until (a) the
aggregate market value of our outstanding common stock held by non-affiliates as of the last business day our most recently completed
second fiscal quarter exceeds $250 million or (b) in the event we have over $100 million in annual revenues, the aggregate market
value of our outstanding common stock held by non-affiliates as of the last business day our most recently completed second fiscal
quarter exceeds $700 million. We cannot predict whether investors will find our common stock less attractive if we rely on certain
or all of these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading
market for our common stock and our stock price may be more volatile and may decline.
We incur increased costs as a result
of operating as a public company, and our management is required to devote substantial time to new compliance initiatives and corporate
governance practices.
As a public company,
we incur significant legal, accounting, and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act,
the Dodd-Frank Wall Street Reform and Consumer Protection Act, FINRA rules and other applicable securities rules and regulations
impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial
controls and corporate governance practices. Our management and other personnel need to devote a substantial amount of time to
these compliance initiatives. Moreover, these rules and regulations increase our legal and financial compliance costs and make
some activities more time-consuming and costly.
We continue to evaluate
these rules and regulations and cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.
These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and,
as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies.
This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to
disclosure and governance practices.
Pursuant to Section
404 of the Sarbanes-Oxley Act, or Section 404, we are required to furnish a report by our management on our internal control over
financial reporting. However, while we remain a non-accelerated filer, we will not be required to include an attestation report
on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance
with Section 404 within the prescribed period, we have engaged in a process to document and evaluate our internal control over
financial reporting. In this regard, we will need to continue to dedicate internal resources, engage outside consultants and adopt
a detailed work plan to continue to assess and document the adequacy of internal control over financial reporting, continue steps
to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement
a continuous reporting and improvement process for internal control over financial reporting. If we identify one or more material
weaknesses in our internal control over financial reporting, it could result in an adverse reaction in the financial markets due
to a loss of confidence in the reliability of our financial statements.