Item
1. Business
This
Annual Report on Form 10-K contains statements of a forward-looking nature relating to future events or our future financial performance.
These statements are only predictions and actual events or results may differ materially. In evaluating such statements, you should
carefully consider the various factors identified in this report that could cause actual results to differ materially from those
indicated in any forward-looking statements, including those set forth in “Risk Factors” in this Annual Report on
Form 10-K. See “Cautionary Note Regarding Forward Looking Statements.”
Our
Business Overview
We
are a late-stage biopharmaceutical company focused on developing and commercializing products to treat rare diseases where there
is an unmet medical need. We maintain two active business segments: Specialized BioTherapeutics (formerly “BioTherapeutics”)
and Public Health Solutions (formerly “Vaccines/BioDefense”).
Our
Specialized BioTherapeutics business segment is developing a novel photodynamic therapy (SGX301) utilizing topical synthetic hypericin
activated with safe visible fluorescent light for the treatment of cutaneous T-cell lymphoma (“CTCL”), our first-in-class
innate defense regulator technology, dusquetide (SGX942) for the treatment of oral mucositis in head and neck cancer, and proprietary
formulations of oral beclomethasone 17,21-dipropionate (“BDP”) for the prevention/treatment of gastrointestinal (“GI”)
disorders characterized by severe inflammation, including pediatric Crohn’s disease (SGX203) and acute radiation enteritis
(SGX201).
Our
Public Health Solutions business segment includes active development programs for RiVax®, our ricin toxin vaccine
candidate and SGX943, our therapeutic candidate for antibiotic resistant and emerging infectious disease. The development of our
vaccine programs currently is supported by our heat stabilization technology, known as ThermoVax®, under existing
and on-going government contract funding. With the government contract from the National Institute of Allergy and Infectious Diseases
(“NIAID”), we will attempt to advance the development of RiVax® to protect against exposure to ricin
toxin.
An
outline of our business strategy follows:
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Following positive primary endpoint topline analysis for the
Phase 3 clinical trial of SGX301, continue to explore partnership and commercialization while pursuing New Drug Application (“NDA”)
filing;
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Following positive interim analysis, complete enrollment
and report final results in our pivotal Phase 3 clinical trial of SGX942 for the treatment of oral mucositis in head and neck
cancer;
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Continue development of RiVax® in combination
with our ThermoVax® technology to develop a new heat stable vaccine in biodefense with NIAID funding support;
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Continue to apply for and secure additional government
funding for each of our Specialized BioTherapeutics and Public Health Solutions programs through grants, contracts and/or procurements;
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Pursue business development opportunities for our pipeline
programs, as well as explore merger/acquisition strategies; and
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Acquire or in-license new clinical-stage compounds for
development.
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Corporate
Information
We
were incorporated in Delaware in 1987 under the name Biological Therapeutics, Inc. In 1987, we merged with Biological Therapeutics,
Inc., a North Dakota corporation, pursuant to which we changed our name to “Immunotherapeutics, Inc.” We changed our
name to “Endorex Corp.” in 1996, to “Endorex Corporation” in 1998, to “DOR BioPharma, Inc.”
in 2001, and finally to “Soligenix, Inc.” in 2009. Our principal executive offices are located at 29 Emmons Drive,
Suite B-10, Princeton, New Jersey 08540 and our telephone number is (609) 538-8200.
Our
Product Candidates in Development
The
following tables summarize our product candidates under development:
Specialized
BioTherapeutics Product Candidates*
Soligenix
Product Candidate
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Therapeutic
Indication
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Stage
of Development
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SGX301
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Cutaneous T-Cell Lymphoma
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Phase 2 trial completed; demonstrated significantly higher response rate compared to placebo; Phase 3 completed; demonstrated statistical significance in primary endpoint in March 2020; extended treatment and follow-up outcomes pending throughout 2020
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SGX942
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Oral Mucositis in Head and Neck Cancer
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Phase 2 trial completed; demonstrated significant response compared to placebo with positive long-term (12 month) safety also reported; Phase 3 clinical trial enrolled first patient in December 2017, with positive interim analysis received in August 2019; final results expected in the fourth quarter of 2020
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SGX203†
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Pediatric Crohn’s disease
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Phase 1/2 clinical trial completed; efficacy data, pharmacokinetic (PK)/pharmacodynamic (PD) profile and safety profile demonstrated; Phase 3 clinical trial initiation contingent upon additional funding, such as through partnership
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SGX201†
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Acute Radiation Enteritis
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Phase 1/2 clinical trial completed; safety profile and preliminary efficacy demonstrated; further clinical development contingent upon additional funding, such as through partnership
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Public Health Solutions*†
ThermoVax®
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Thermostability of vaccines for Ricin toxin, Ebola, Marburg and SARS-CoV-2 (COVID-19) viruses
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Pre-clinical
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RiVax®
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Vaccine against
Ricin Toxin Poisoning
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Phase 1a and 1b trials completed, safety and neutralizing antibodies for protection demonstrated; Phase 1c trial initiated December 2019, closed January 2020
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SGX943
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Therapeutic against Emerging Infectious Diseases
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Pre-clinical
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Timelines subject to potential disruption due to COVID-19 outbreak.
† Contingent upon continued government contract/grant
funding or other funding source.
Specialized
BioTherapeutics Overview
SGX301
– for Treating Cutaneous T-Cell Lymphoma
SGX301
is a novel, first-in-class, photodynamic therapy that utilizes safe visible light for activation. The active ingredient in SGX301
is synthetic hypericin, a photosensitizer which is topically applied to skin lesions and then activated by fluorescent light 16
to 24 hours later. Hypericin is also found in several species of Hypericum plants, although the drug used in SGX301 is
chemically synthesized by a proprietary manufacturing process and not extracted from plants. Importantly, hypericin is optimally
activated with visible light thereby avoiding the negative consequences of ultraviolet light. Other light therapies using UVA
or UVB light can result in serious adverse effects including secondary skin cancers.
Combined
with photoactivation, in clinical trials synthetic hypericin has demonstrated significant anti-proliferative effects on activated
normal human lymphoid cells and inhibited growth of malignant T-cells isolated from CTCL patients. In both settings, it appears
that the mode of action is an induction of cell death in a concentration as well as a light dose-dependent fashion. These effects
appear to result, in part, from the generation of singlet oxygen during photoactivation of hypericin.
Hypericin
is one of the most efficient known generators of singlet oxygen, the key component for phototherapy. The generation of singlet
oxygen induces necrosis and apoptosis in adjacent cells. The use of topical synthetic hypericin coupled with directed visible
light results in generation of singlet oxygen only at the treated site. We believe that the use of visible light (as opposed to
cancer-causing ultraviolet light) is a major advance in photodynamic therapy. In a published Phase 2 clinical study in CTCL, after
six weeks of twice weekly therapy, a majority of patients experienced a statistically significant (p<0.04) improvement
with SGX301 whereas the placebo was ineffective: 58.3% compared to 8.3%, respectively.
SGX301 has received Orphan Drug designation
as well as Fast Track designation from the United States (“U.S.”) Food and Drug Administration (“FDA”).
The Orphan Drug Act is intended to assist and encourage companies to develop safe and effective therapies for the treatment of
rare diseases and disorders. In addition to providing a seven-year term of market exclusivity for SGX301 upon final FDA approval,
Orphan Drug designation also positions us to be able to leverage a wide range of financial and regulatory benefits, including government
grants for conducting clinical trials, waiver of FDA user fees for the potential submission of a NDA for SGX301, and certain tax
credits. In addition, Fast Track is a designation that the FDA reserves for a drug intended to treat a serious or life-threatening
condition and one that demonstrates the potential to address an unmet medical need for the condition. Fast Track designation is
designed to facilitate the development and expedite the review of new drugs. For instance, should events warrant, we will be eligible
to submit a NDA for SGX301 on a rolling basis, permitting the FDA to review sections of the NDA prior to receiving the complete
submission. Additionally, NDAs for Fast Track development programs ordinarily will be eligible for priority review. SGX301 for
the treatment of CTCL also was granted Orphan Drug designation from the European Medicines Agency (“EMA”) Committee
for Orphan Medical Products and Promising Innovative Medicine (“PIM”) designation from the Medicines and Healthcare
Products Regulatory Agency (“MHRA”) in the United Kingdom (“UK”).
In
August 2018, the U.S. Patent Office granted us a patent titled “Systems and Methods for Producing Synthetic Hypericin”
for the unique proprietary process manufacturing the highly purified form of synthetic hypericin, the active pharmaceutical ingredient
in SGX301.
In October 2019, U.S. Patent Office had
allowed the divisional patent application titled “Systems and Methods for Producing Synthetic Hypericin”. The allowed
claims are directed to unique, proprietary methods to produce a novel, highly purified form of synthetic hypericin. This new divisional
claim set expands on the previous issued claims in the parent U.S. patent.
Based on the positive and previously published
Phase 2 results, we initiated our pivotal Phase 3 clinical study of SGX301 for the treatment of CTCL during December 2015. This
trial, referred to as the “FLASH” study (Fluorescent Light Activated Synthetic Hypericin),
aims to evaluate the response to SGX301 as a skin directed therapy to treat early stage CTCL. We have completed patient enrollment
with approximately 35 CTCL centers across the U.S. participating in this pivotal trial. The Phase 3 protocol is a highly powered,
double-blind, randomized, placebo-controlled, multicenter trial that enrolled 169 subjects (166 evaluable). The trial consists
of three treatment cycles, each of eight weeks duration. Treatments are administered twice weekly for the first six weeks and treatment
response is determined at the end of the eighth week. In the first treatment cycle, approximately 66% of subjects receive SGX301
and 33% receive placebo treatment of their index lesions. In the second cycle, all subjects receive SGX301 treatment of their index
lesions, and in the third cycle, all subjects receive SGX301 treatment of all of their lesions. The majority of subjects enrolled
to date have elected to continue into the third optional, open-label cycle of the study. We continue to work closely with the Cutaneous
Lymphoma Foundation, as well as the National Organization for Rare Disorders. Subjects are followed for an additional six months
after their last evaluation visit. The primary efficacy endpoint is assessed on the percentage of patients in each of the two treatment
groups (i.e., SGX301 and placebo) achieving a partial or complete response of the treated lesions, defined as a ≥ 50% reduction
in the total Composite Assessment of Index Lesion Disease Severity (“CAILS”) score for three index lesions at the Cycle
1 evaluation visit (Week 8) compared to the total CAILS score at baseline. Other secondary measures assess treatment response including
duration, degree of improvement, time to relapse and safety.
During
September 2017, the National Cancer Institute (“NCI”), part of the National Institutes of Health (“NIH”)
awarded us a Small Business Innovation Research (“SBIR”) grant of approximately $1.5 million over two years to support
the conduct of our pivotal, Phase 3, randomized, double-blind, placebo-controlled study evaluating SGX301 (synthetic hypericin)
as a treatment for CTCL.
During October 2018, an Independent Data
Monitoring Committee (“DMC”) completed an unblinded interim analysis with data from approximately 100 subjects, including
an assessment of the Phase 3 FLASH study’s primary efficacy endpoint. The DMC provided a positive recommendation to randomize
approximately 40 additional subjects into the trial to maintain the rigorous assumption of 90% statistical power for the primary
efficacy endpoint. No safety concerns were reported by the DMC based on the interim analysis.
Positive primary endpoint analysis for the Phase 3 study for
SGX301 was completed in March 2020. The study enrolled 169 patients (166 evaluable) randomized 2:1 to receive either SGX301 (116
patients) or placebo (50 patients) and demonstrated a statistically significant treatment response (p=0.04) in the CAILS primary
endpoint assessment at 8 weeks for Cycle 1. A total of 16% of the patients receiving SGX301 achieved at least a 50% reduction in
their index lesions compared to only 4% of patients in the placebo group at 8 weeks. SGX301 treatment in the first cycle was safe
and well tolerated. In the second open-label treatment cycle (Cycle 2), all patients received SGX301 treatment and preliminary
results from blinded data to date suggest more than a 35% response rate (inclusive of patients receiving both 12 weeks and 6 weeks
of therapy), indicating the response increases with continued treatment. Final results from Cycle 2 are expected to be announced
in June 2020.
We
estimate the potential worldwide market for SGX301 is in excess of $250 million for all applications, including the treatment
of CTCL. This potential market information is a forward-looking statement, and investors are urged not to place undue reliance
on this statement. While we have determined this potential market size based on assumptions that we believe are reasonable, there
are a number of factors that could cause our expectations to change or not be realized.
Cutaneous
T-Cell Lymphoma
CTCL
is a class of non-Hodgkin’s lymphoma (“NHL”), a type of cancer of the white blood cells that are an integral
part of the immune system. Unlike most NHLs, which generally involve B-cell lymphocytes (involved in producing antibodies), CTCL
is caused by an expansion of malignant T-cell lymphocytes (involved in cell-mediated immunity) normally programmed to migrate
to the skin. These skin-trafficking malignant T-cells migrate to the skin, causing various lesions to appear that may change shape
as the disease progresses, typically beginning as a rash and eventually forming plaques and tumors. Mycosis fungoides (“MF”)
is the most common form of CTCL. It generally presents with skin involvement only, manifested as scaly, erythematous patches.
Advanced disease with diffuse lymph node and visceral organ involvement is usually associated with a poorer response rate to standard
therapies. A relatively uncommon sub-group of CTCL patients present with extensive skin involvement and circulating malignant
cerebriform T-cells, referred to as Sézary syndrome. These patients have substantially graver prognoses (expected five-year
survival rate of 24%), than those with MF (expected five-year survival rate of 88%).
CTCL
mortality is related to stage of disease, with median survival generally ranging from about 12 years in the early stages to only
2.5 years when the disease has advanced. There is currently no FDA-approved drug for front-line treatment of early stage CTCL.
Treatment of early-stage disease generally involves skin-directed therapies. One of the most common unapproved therapies used
for early-stage disease is oral 5 or 8-methoxypsoralen (“Psoralen”) given with ultraviolet A (“UVA”) light,
referred to as PUVA, which is approved for dermatological conditions such as disabling psoriasis not adequately responsive to
other forms of therapy, idiopathic vitiligo and skin manifestations of CTCL in persons who have not been responsive to other forms
of treatment. Psoralen is a mutagenic chemical that interferes with DNA causing mutations and other malignancies. Moreover, UVA
is a carcinogenic light source that when combined with the Psoralen, results in serious adverse effects including secondary skin
cancers; therefore, the FDA requires a Black Box warning for PUVA.
CTCL
constitutes a rare group of NHLs, occurring in about 4% of the approximate 500,000 individuals living with NHL. We estimate, based
upon review of historic published studies and reports and an interpolation of data on the incidence of CTCL, that it affects over
20,000 individuals in the U.S., with approximately 2,800 new cases seen annually.
Dusquetide
Dusquetide
(research name: SGX94) is an innate defense regulator (“IDR”) that regulates the innate immune system to simultaneously
reduce inflammation, eliminate infection and enhance tissue healing.
Dusquetide
is based on a new class of short, synthetic peptides known as IDRs. It has a novel mechanism of action in that it modulates the
body’s reaction to both injury and infection and is both simultaneously anti-inflammatory and anti-infective. IDRs have
no direct antibiotic activity but modulate host responses, increasing survival after infections with a broad range of bacterial
Gram-negative and Gram-positive pathogens including both antibiotic sensitive and resistant strains, as well as accelerating resolution
of tissue damage following exposure to a variety of agents including bacterial pathogens, trauma and chemo- or radiation-therapy.
IDRs represent a novel approach to the control of infection and tissue damage via highly selective binding to an intracellular
adaptor protein, sequestosome-1, also known as p62, which has a pivotal function in signal transduction during activation and
control of the innate defense system. Preclinical data indicate that IDRs may be active in models of a wide range of therapeutic
indications including life-threatening bacterial infections as well as the severe side-effects of chemo- and radiation-therapy.
Additionally, due to selective binding to p62, dusquetide may have potential anti-tumor action.
Dusquetide
has demonstrated efficacy in numerous animal disease models including mucositis, colitis, skin infection and other bacterial infections
and has been evaluated in a double-blind, placebo-controlled Phase 1 clinical trial in 84 healthy volunteers with both single
ascending dose and multiple ascending dose components. Dusquetide was shown to have a good safety profile and be well-tolerated
in all dose groups when administered by IV over 7 days and was consistent with safety results seen in pre-clinical studies. We
believe that market opportunities for dusquetide include, but are not limited to, oral and gastrointestinal mucositis, acute Gram-positive
bacterial infections (e.g., methicillin resistant Staphylococcus aureus (MRSA)), acute Gram-negative infections (e.g.,
acinetobacter, melioidosis), and acute radiation syndrome.
SGX942
– for Treating Oral Mucositis in Head and Neck Cancer
SGX942
is our product candidate containing our IDR technology, dusquetide, targeting the treatment of oral mucositis in head and neck
cancer patients. Oral mucositis in this patient population is an area of unmet medical need where there are currently no approved
drug therapies. Accordingly, we received Fast Track designation for the treatment of oral mucositis as a result of radiation and/or
chemotherapy treatment in head and neck cancer patients from the FDA. In addition, dusquetide has been granted PIM designation
in the UK by the MHRA for the treatment of severe oral mucositis in head and neck cancer patients receiving chemoradiation therapy.
The U.S. Patent and Trademark Office and the European Patent Office granted us the patent titled “Novel Peptides and Analogs
for Use in the Treatment of Oral Mucositis” on August 16, 2016 and January 23, 2019, respectively. The newly issued patent
claims therapeutic use of dusquetide and related IDR analogs, and adds to composition of matter claims for dusquetide and related
analogs that have been granted in the U.S. and worldwide.
We
initiated a Phase 2 clinical study of SGX942 for the treatment of oral mucositis in head and neck cancer patients in December
of 2013. We completed enrollment in this trial in the second half of 2015, and in December 2015 released positive preliminary
results. In this Phase 2 proof-of-concept clinical study that enrolled 111 patients, SGX942, at a dose of 1.5 mg/kg, successfully
reduced the median duration of severe oral mucositis by 50%, from 18 days to 9 days (p=0.099) in all patients and by 67%, from
30 days to 10 days (p=0.040) in patients receiving the most aggressive chemoradiation therapy for treatment of their head and
neck cancer. The p-values met the prospectively defined statistical threshold of p<0.1 in the study protocol. A less severe
occurrence of oral mucositis, ulcerative oral mucositis (defined as oral mucositis with a WHO score ≥2 corresponding to the
occurrence of overt ulceration in the mouth), was also monitored during the study. In the patients receiving the most aggressive
chemoradiation therapy, the median duration of oral mucositis was found to decrease from 65 days in the placebo treated patients
to 51 days in the patients treated with SGX942 1.5 mg/kg (p=0.099).
In
addition to identifying the best dose of 1.5 mg/kg, this study achieved all objectives, including increased incidence of “complete
response” of tumor at the one month follow-up visit (47% in placebo vs. 63% in SGX942 at 1.5 mg/kg). Decreases in mortality
and decreases in infection rate were also observed with SGX942 treatment, consistent with the preclinical results observed in
animal models.
SGX942
was found to be generally safe and well tolerated, consistent with the safety profile observed in the prior Phase 1 study conducted
in 84 healthy volunteers. The long-term (12 month) follow-up data was consistent with the preliminary positive safety and efficacy
findings. While the placebo population experienced the expected 12-month survival rate of approximately 80%, as defined in the
Surveillance, Epidemiology, and End Results statistics 1975-2012 from the National Cancer Institute, the SGX942 1.5 mg/kg treatment
group reported a 12-month survival rate of 93% (7% mortality in the SGX942 1.5 mg/kg group compared to 19% in the placebo group).
Similarly, tumor resolution (complete response) at 12 months was better in the SGX942 1.5 mg/kg treatment group relative to the
placebo population (80% in the 1.5 mg/kg group compared to 74% in the placebo group). Moreover, in the patients receiving chemotherapy
every third week, the SGX942 1.5 mg/kg treatment group had a tumor resolution rate (complete response) of 82% throughout the 12
months following chemoradiation therapy, while the placebo group experienced a 64% complete response rate. The long-term follow-up
results from the Phase 2 study are reviewed in “Dusquetide: Reduction in Oral Mucositis associated with Enduring Ancillary
Benefits in Tumor Resolution and Decreased Mortality in Head and Neck Cancer Patients” published online in Biotechnology
Reports and available at the following link: https://doi.org/10.1016/j.btre.2017.05.002.
In addition to safety, evaluations of other secondary efficacy endpoints, such as the utilization of opioid pain medication, indicated
that the SGX942 1.5 mg/kg treatment group had a 40% decrease in the use of opioids at the later stage of the treatment phase of
the trial, when oral mucositis is usually most severe and expected to increase pain medication use. This was in contrast to the
placebo group, which demonstrated a 10% increase in use of opioids over this same period. Data from this Phase 2 trial was published
online in the Journal of Biotechnology. The publication also delineates the supportive nonclinical data in this indication, demonstrating
consistency in the qualitative and quantitative biological response, including dose response, across the nonclinical and clinical
data sets. The results are available at the following link: http://authors.elservier.com/sd/article/S01681656116315668.
On
September 9, 2016, we and SciClone Pharmaceuticals, Inc. (“SciClone”) entered into an exclusive license agreement,
pursuant to which we granted rights to SciClone to develop, promote, market, distribute and sell SGX942 in defined territories.
Under the terms of the license agreement, SciClone will be responsible for all aspects of development, product registration and
commercialization in the territories, having access to data generated by us. In exchange for exclusive rights, SciClone will pay
us royalties on net sales, and we will supply commercial drug product to SciClone on a cost-plus basis, while maintaining worldwide
manufacturing rights.
We
have received clearance from the FDA to advance the pivotal Phase 3 protocol for SGX942 in the treatment of oral mucositis in
patients with head and neck cancer receiving chemoradiation therapy. Additionally, we have received positive Scientific Advice
from the European Medicines Agency (“EMA”) for the development of SGX942 as a treatment for oral mucositis in patients
with head and neck cancer. The Scientific Advice from the EMA indicates that a single, double-blind, placebo-controlled, multinational,
Phase 3 pivotal study, if successful, in conjunction with the Phase 2 dose-ranging study, is generally considered sufficient to
support a marketing authorization application (“MAA”) to the EMA for potential licensure in Europe. The advice also
provided several suggestions to strengthen the study design and data collection that were integrated into the final protocol.
Scientific Advice is offered by the EMA to stakeholders for clarification of questions arising during development of medicinal
products. The scope of Scientific Advice is limited to scientific issues and focuses on development strategies rather than pre-evaluation
of data to support an MAA. Scientific Advice is legally non-binding and is based on the current scientific knowledge which may
be subject to future changes.
We
are working with leading oncology centers, a number of which participated in the Phase 2 study, to advance this Phase 3 clinical
trial referred to as the “DOM–INNATE” study (Dusquetide treatment in Oral Mucositis –
by modulating INNATE immunity). Based on the positive and previously published Phase 2 results (Study IDR-OM-01), the pivotal
Phase 3 clinical trial (Study IDR-OM-02) is a highly powered, double-blind, randomized, placebo-controlled, multinational trial
that will seek to enroll approximately 260 subjects with squamous cell carcinoma of the oral cavity and oropharynx who are scheduled
to receive a minimum total cumulative radiation dose of 55 Gy fractionated as 2.0-2.2 Gy per day with concomitant cisplatin chemotherapy
given as a dose of 80-100 mg/m2 every third week. Subjects are randomized to receive either 1.5 mg/kg SGX942 or placebo
given twice a week during and for two weeks following completion of chemoradiation therapy (“CRT”). The primary endpoint
for the study is the median duration of severe oral mucositis, which is assessed by oral examination at each treatment visit and
then through six weeks following completion of CRT. Oral mucositis is evaluated using the WHO Grading system. Severe oral mucositis
is defined as a WHO Grade of ≥3. Subjects are followed for an additional 12 months after the completion of treatment.
During July 2017, we initiated our pivotal
Phase 3 study with a controlled roll-out of U.S. study sites, followed by the addition of European centers in 2018. Approximately
50 U.S. and European oncology centers are participating in this pivotal Phase 3 study.
During
September 2017, the National Institute of Dental and Craniofacial Research (“NIDCR”), part of the NIH, awarded us
a SBIR grant of approximately $1.5 million over two years to support the conduct of our Phase 3, multinational, randomized, double-blind,
placebo-controlled study evaluating SGX942 (dusquetide) as a treatment for severe oral mucositis in patients with head and neck
cancer receiving CRT.
On
April 9, 2019, the U.S. Patent Office issued a new patent No. 10,253,068 titled “Novel Peptides for Treating and Preventing
Immune-Related Disorders, Including Treating and Preventing Infection by Modulating Innate Immunity” for our dusquetide
related analogs.
In
April 2019, the Paediatric Committee of the EMA approved our Paediatric Investigation Plan (“PIP”) for SGX942, a prerequisite
for filing a Marketing Authorization Application (“MAA”) for any new medicinal product in Europe. The EMA also agreed
that we may defer conducting the PIP until successful completion of our ongoing pivotal Phase 3 clinical trial of SGX942, which
allows us to file the adult indication MAA prior to completion of the PIP.
During August 2019, an independent DMC completed
an unblinded interim analysis with data from approximately 90 subjects, including an assessment of the Phase 3 DOM-INNATE study’s
primary efficacy endpoint. The DMC provided a positive recommendation to randomize approximately 70 additional subjects into the
trial to maintain the rigorous assumption of 90% statistical power for the primary efficacy endpoint. No safety concerns were
reported by the DMC based on the interim analysis. We currently anticipate final top-line results during the fourth quarter 2020.
In
August 2019, the National Institutes of Dental and Craniofacial Research (NIDCR), part of the NIH, awarded us a Phase I Small
Business Research (SBIR) of approximately $150,000 to support the evaluation of SGX942 (dusquetide) in pediatric indications.
This award will facilitate the assessment of SGX942 safety in juvenile animals, supporting future studies in pediatric populations,
including oral mucositis indications in pediatric patients undergoing stem cell transplants and treatments for head and neck cancer.
We
estimate the potential worldwide market for SGX942 is in excess of $500 million for all applications, including the treatment
of oral mucositis. This potential market information is a forward-looking statement, and investors are urged not to place undue
reliance on this statement. While we have determined this potential market size based on assumptions that we believe are reasonable,
there are a number of factors that could cause our expectations to change or not be realized.
Oral
Mucositis
Mucositis
is the clinical term for damage done to the mucosa by anticancer therapies. It can occur in any mucosal region, but is most commonly
associated with the mouth, followed by the small intestine. We estimate, based upon our review of historic studies and reports,
and an interpolation of data on the incidence of mucositis, that mucositis affects approximately 500,000 people in the U.S. per
year and occurs in 40% of patients receiving chemotherapy. Mucositis can be severely debilitating and can lead to infection, sepsis,
the need for parenteral nutrition and narcotic analgesia. The GI damage causes severe diarrhea. These symptoms can limit the doses
and duration of cancer treatment, leading to sub-optimal treatment outcomes.
The
mechanisms of mucositis have been extensively studied and have been linked to the interaction of chemotherapy and/or radiation
therapy with the innate defense system. Bacterial infection of the ulcerative lesions is regarded as a secondary consequence of
dysregulated local inflammation triggered by therapy-induced cell death, rather than as the primary cause of the lesions.
We
estimate, based upon our review of historic studies and reports, and an interpolation of data on the incidence of oral mucositis,
that oral mucositis is a subpopulation of approximately 90,000 patients in the U.S., with a comparable number in Europe. Oral
mucositis almost always occurs in patients with head and neck cancer treated with radiation therapy (greater than 80% incidence
of severe mucositis) and is common in patients undergoing high dose chemotherapy and hematopoietic cell transplantation, where
the incidence and severity of oral mucositis depends greatly on the nature of the conditioning regimen used for myeloablation.
Oral
BDP
Oral
BDP (beclomethasone 17,21-dipropionate) represents a first-of-its-kind oral, locally acting therapy tailored
to treat GI inflammation. BDP has been marketed in the U.S. and worldwide since the early 1970s as the active pharmaceutical ingredient
in a nasal spray and in a metered-dose inhaler for the treatment of patients with allergic rhinitis and asthma. Oral BDP is specifically
formulated for oral administration as a single product consisting of two tablets. One tablet is intended to release BDP in the
upper sections of the GI tract and the other tablet is intended to release BDP in the lower sections of the GI tract.
Based
on its pharmacological characteristics, oral BDP may have utility in treating other conditions of the gastrointestinal tract having
an inflammatory component. We are planning to pursue development programs for the treatment of pediatric Crohn’s disease,
acute radiation enteritis and gastrointestinal acute radiation syndrome pending further grant funding. We are also exploring the
possibility of testing oral BDP for local inflammation associated with ulcerative colitis, among other indications.
In
July 2019, the European Patent Office issued two patents, both titled “Topically Active Steroids for use in Radiation and
Chemotherapeutic Injury”, following the expiration of the objection period. The new patents (#2,373,160 and #2,902,031)
claim use of oral beclomethasone 17,21-dipropionate (BDP) for treatment of damage to the gastrointestinal (GI) tract as a result
of acute radiation injury, including total body irradiation in the accidental or biodefense context.
We
estimate the potential worldwide market for oral BDP is in excess of $500 million for all applications, including the treatment
of pediatric Crohn’s disease. This potential market information is a forward-looking statement, and investors are urged
not to place undue reliance on this statement. While we have determined this potential market size based on assumptions that we
believe are reasonable, there are a number of factors that could cause our expectations to change or not be realized.
SGX203
– for Treating Pediatric Crohn’s Disease
SGX203
is a two tablet delivery system of BDP specifically designed for oral use that allows for administration of immediate and delayed
release BDP throughout the small bowel and the colon. The FDA has given SGX203 Orphan Drug designation as well as Fast Track designation
for the treatment of pediatric Crohn’s disease. We will pursue a pivotal Phase 3 clinical trial of SGX203 for the treatment
of pediatric Crohn’s disease contingent upon additional funding, such as through partnership funding support.
Pediatric
Crohn’s Disease
Crohn’s
disease causes inflammation of the GI tract. Crohn’s disease can affect any area of the GI tract, from the mouth to the
anus, but it most commonly affects the lower part of the small intestine, called the ileum. The swelling caused by the disease
extends deep into the lining of the affected organ. The swelling can induce pain and can make the intestines empty frequently,
resulting in diarrhea. Because the symptoms of Crohn’s disease are similar to other intestinal disorders, such as irritable
bowel syndrome and ulcerative colitis, it can be difficult to diagnose. People of Ashkenazi Jewish heritage have an increased
risk of developing Crohn’s disease.
Crohn’s
disease can appear at any age, but it is most often diagnosed in adults in their 20s and 30s. However, approximately 30% of people
with Crohn’s disease develop symptoms before 20 years of age. We estimate, based upon our review of historic published studies
and reports, and an interpolation of data on the incidence of pediatric Crohn’s disease, that pediatric Crohn’s disease
is a subpopulation of approximately 80,000 patients in the U.S. with a comparable number in Europe. Crohn’s disease tends
to be both severe and extensive in the pediatric population and a relatively high proportion (approximately 40%) of pediatric
Crohn’s patients have involvement of their upper gastrointestinal tract.
Crohn’s
disease presents special challenges for children and teens. In addition to bothersome and often painful symptoms, the disease
can stunt growth, delay puberty, and weaken bones. Crohn’s disease symptoms may sometimes prevent a child from participating
in enjoyable activities. The emotional and psychological issues of living with a chronic disease can be especially difficult for
young people.
SGX201
– for Preventing Acute Radiation Enteritis
SGX201
is a delayed-release formulation of BDP specifically designed for oral use. In 2012, we completed a Phase 1/2 clinical trial testing
SGX201 in prevention of acute radiation enteritis. Patients with rectal cancer scheduled to undergo concurrent radiation and chemotherapy
prior to surgery were randomized to one of four dose groups. The objectives of the study were to evaluate the safety and maximal
tolerated dose of escalating doses of SGX201, as well as the preliminary efficacy of SGX201 for prevention of signs and symptoms
of acute radiation enteritis. The study demonstrated that oral administration of SGX201 was safe and well tolerated across all
four dose groups. There was also evidence of a potential dose response with respect to diarrhea, nausea and vomiting and the assessment
of enteritis according to National Cancer Institute Common Terminology Criteria for Adverse Events for selected gastrointestinal
events. In addition, the incidence of diarrhea was lower than that seen in published historical control data in this patient population.
This program was supported in part by a $500,000 two-year SBIR grant awarded by the NIH. We continue to work with our Radiation
Enteritis medical advisors to identify additional funding opportunities to support the clinical development program.
We
have received Fast Track designation from the FDA for SGX201 for acute radiation enteritis.
Acute
Radiation Enteritis
External
radiation therapy is used to treat most types of cancer, including cancer of the bladder, uterine, cervix, rectum, prostate, and
vagina. During delivery of treatment, some level of radiation will also be delivered to healthy tissue, including the bowel, leading
to acute and chronic toxicities. The large and small bowels are very sensitive to radiation and the larger the dose of radiation
the greater the damage to normal bowel tissue. Radiation enteritis is a condition in which the lining of the bowel becomes swollen
and inflamed during or after radiation therapy to the abdomen, pelvis, or rectum. Most tumors in the abdomen and pelvis need large
doses, and almost all patients receiving radiation to the abdomen, pelvis, or rectum will show signs of acute enteritis.
Patients
with acute enteritis may have nausea, vomiting, abdominal pain and bleeding, among other symptoms. Some patients may develop dehydration
and require hospitalization. With diarrhea, the gastrointestinal tract does not function normally, and nutrients such as fat,
lactose, bile salts, and vitamin B12 are not well absorbed.
Symptoms
will usually resolve within two to six weeks after therapy has ceased. Radiation enteritis is often not a self-limited illness,
as over 80% of patients who receive abdominal radiation therapy complain of a persistent change in bowel habits. Moreover, acute
radiation injury increases the risk of development of chronic radiation enteropathy, and overall 5% to 15% of the patients who
receive abdominal or pelvic irradiation will develop chronic radiation enteritis.
We
estimate, based upon our review of historic published studies and reports, and an interpolation of data on the treatment courses
and incidence of cancers occurring in the abdominal and pelvic regions, there to be over 100,000 patients annually in the U.S.,
with a comparable number in Europe, who receive abdominal or pelvic external beam radiation treatment for cancer, and these patients
are at risk of developing acute and chronic radiation enteritis.
Public
Health Solutions Overview
ThermoVax®
– Thermostability Technology
ThermoVax®
is a novel method for thermostabilizing vaccines with a variety of adjuvants, resulting in a single vial which can be reconstituted
with water for injection immediately prior to use.
One of the adjuvants utilized in ThermoVax®
is aluminum salts (known colloquially as Alum). Alum is the most widely employed adjuvant technology in the vaccine industry.
The value of ThermoVax®
lies in its potential ability to eliminate the need for cold chain production, transportation, and storage for Alum-adjuvanted
vaccines. This would relieve the high costs of producing and maintaining vaccines under refrigerated conditions. Based on historical
reports from the World Health Organization and other scientific reports, we believe that a meaningful proportion of vaccine doses
globally are wasted due to excursions from required cold chain temperature ranges. This is due to the fact that many vaccines need
to be maintained either between 2 and 8 degrees Celsius (“C”), frozen below -20 degrees C, or frozen below -60 degrees
C, and even brief excursions from these temperature ranges usually necessitates the destruction of the product or the initiation
of costly stability programs specific for the vaccine lots in question. ThermoVax® has the potential to facilitate
easier storage and distribution of strategic national stockpile vaccines for ricin exposure in emergency settings.
ThermoVax® development
specifically in the context of an Alum adjuvant was supported pursuant to our $9.4 million NIAID grant enabling development of
thermo-stable ricin (RiVax®) and anthrax vaccines. Proof-of-concept preclinical studies with ThermoVax®
indicate that it is able to produce stable vaccine formulations using adjuvants, protein immunogens, and other components
that ordinarily would not withstand long temperature variations exceeding customary refrigerated storage conditions. These studies
were conducted with our Alum-adjuvanted ricin toxin vaccine, RiVax® and our Alum-adjuvanted anthrax vaccine. Each
vaccine was manufactured under precise lyophilization conditions using excipients that aid in maintaining native protein structure
of the key antigen. When RiVax® was kept at 40 degrees C (104 degrees Fahrenheit) for up to one year, all of the
animals vaccinated with the lyophilized RiVax® vaccine developed potent and high titer neutralizing antibodies.
In contrast, animals that were vaccinated with the liquid RiVax® vaccine kept at 40 degrees C did not develop neutralizing
antibodies and were not protected against ricin exposure. The ricin A chain is extremely sensitive to temperature and rapidly
loses the ability to induce neutralizing antibodies when exposed to temperatures higher than 8 degrees C. When the anthrax vaccine
was kept for up to 16 weeks at 70 degrees C, it was able to develop a potent antibody response, unlike the liquid formulation
kept at the same temperature. Moreover, we also have demonstrated the compatibility of our thermostabilization technology with
other secondary adjuvants such as TLR-4 agonists.
We
also entered into a collaboration agreement with Axel Lehrer, PhD of the Department of Tropical Medicine, Medical Microbiology
and Pharmacology, John A. Burns School of Medicine, University of Hawaiʻi
at Manoa (“UH Manoa”) and Hawaii Biotech, Inc. (“HBI”) to develop a heat stable subunit Ebola vaccine.
Dr. Lehrer, a co-inventor of the Ebola vaccine with HBI, has shown proof of concept efficacy with subunit Ebola vaccines in non-human
primates. The most advanced Ebola vaccines involve the use of vesicular stomatitis virus and adenovirus vectors – live,
viral vectors which complicate the manufacturing, stability and storage requirements. Dr. Lehrer’s vaccine candidate is
based on highly purified recombinant protein antigens, circumventing many of these manufacturing difficulties. Dr. Lehrer and
HBI have developed a robust manufacturing process for the required proteins. Application of ThermoVax® may allow
for a product that can avoid the need for cold chain distribution and storage, yielding a vaccine ideal for use in both the developed
and developing world. This agreement has expired in accordance with its terms.
During September 2017, we announced we
will be participating in a NIAID Research Project (R01) grant awarded to UH Manoa for the development of a trivalent thermostabilized
filovirus vaccine (including protection against Zaire ebolavirus, Sudan ebolavirus and Marburg Marburgvirus),
with our awarded funding of approximately $700,000 over five years. Previous collaborations demonstrated the feasibility of developing
a heat stable subunit Ebola vaccine. Under the terms of the subaward, we will continue to support vaccine formulation development
with our proprietary vaccine thermostabilization technology, ThermoVax®. Ultimately, the objective is to produce
a thermostable trivalent filovirus vaccine for protection against Ebola and related diseases, allowing worldwide distribution without
the need for cold storage. Based on current U.S. government needs, efforts have recently been expanded to focus on a monovalent
or bivalent vaccine to specifically address Marburg marburgvirus.
On
December 21, 2010, we executed a worldwide exclusive license agreement with the University of Colorado (“UC”) for
certain patents relating to ThermoVax® in all fields of use. In April 2018, the UC delivered a notice of termination
of our license agreement based upon our failure to achieve one of the development milestones: initiation of the Phase 1 clinical
trial of the heat stabilization technology by March 31, 2018. After negotiating with the UC, we and the UC agreed to extend the
termination date to October 31, 2018 in order to allow us time to agree upon a potential agreement that would allow us to keep
the rights to, and to continue to develop, the heat stabilization technology or a product candidate containing the heat stabilization
technology in our field of use.
On
October 31, 2018, in a series of related transactions, (a) we and the UC agreed to terminate the original license agreement, (b)
the UC and VitriVax, Inc. (“VitriVax”) executed a worldwide exclusive license agreement for the heat stabilization
technology for all fields of use, and (c) we and VitriVax executed a worldwide exclusive sublicense agreement for the heat stabilization
technology for use in the fields of ricin and Ebola vaccines. We paid a $100,000 sublicense fee on the effective date of the sublicense
agreement. To maintain the sublicense we are obliged to pay a minimum annual royalty of $20,000 until first commercial sale of
a sublicensed product, upon which point, we shall pay an earned royalty of 2% of net sales subject to a minimum royalty of $50,000
each year. We are also required to pay royalty on any sub-sublicense income based on a declining percentage of all sub-sublicense
income calculated within the contractual period until reaching a minimum of 15% after two years. In addition, we are required
to pay VitriVax milestone fees of: (a) $50,000 upon initiation of a Phase II clinical trial of the sublicensed product, (b) $200,000
upon regulatory approval of a sublicensed product, and (c) $1 million upon achieving $10 million in aggregate net sales of a sublicensed
product in the U.S. or equivalent. To date none of these milestones have been met.
On February 7, 2019, European Journal of
Pharmaceutics and Biopharmaceutics published a scientific article demonstrating the successful thermostabilization of an Alum-adjuvanted
Ebola subunit vaccine candidate.
On July 31, 2019, we and our collaborators
presented two posters on the trivalent vaccine program. The first poster outlined the stability of the lyophilized formulations
of the Ebola virus glycoprotein upon lyophilization and storage at temperatures as high as 40 degrees C (104 degrees F) and identified
potential stability assays. The second poster further demonstrated the ability to co-lyophilize multiple antigens in the presence
of an emulsion forming adjuvant, facilitating the development of a thermostable trivalent vaccine.
On March 11 2020, we entered into a research collaboration
with the Axel Lehrer, PhD of the Department of Tropical Medicine, Medical Microbiology and Pharmacology, John A. Burns School
of Medicine, UH Manoa to further expand the filovirus collaboration to investigation of potential coronavirus vaccines, including
for SARS-CoV-2 (causing COVID-19). This research collaboration will utilize the technology platform developed in the search for
filovirus vaccines and will use well-defined surface glycoprotein(s) from one or more coronaviruses, which are expected to be
protective for COVID-19.
RiVax® –
Ricin Toxin Vaccine
RiVax® is our proprietary vaccine
candidate being developed to protect against exposure to ricin toxin and if approved, would be the first ricin vaccine. The immunogen
in RiVax® induces a protective immune response in animal models of ricin exposure and functionally active antibodies
in humans. The immunogen consists of a genetically inactivated ricin A chain subunit that is enzymatically inactive and lacks
residual toxicity of the holotoxin. RiVax® has demonstrated statistically significant (p < 0.0001) preclinical
survival results, providing 100% protection against acute lethality in an aerosol exposure non-human primate model (Roy et al,
2015, Thermostable ricin vaccine protects rhesus macaques against aerosolized ricin: Epitope-specific neutralizing antibodies
correlate with protection, PNAS USA 112:3782-3787), and has also been shown to be well tolerated and immunogenic in two Phase
1 clinical trials in healthy volunteers. Results of the first Phase 1 human trial of RiVax® established that the
immunogen was safe and induced antibodies that we believe may protect humans from ricin exposure. The antibodies generated from
vaccination, concentrated and purified, were capable of conferring immunity passively to recipient animals, indicating that the
vaccine was capable of inducing functionally active antibodies in humans. The outcome of this study was published in the Proceedings
of the National Academy of Sciences (Vitetta et al., 2006, A Pilot Clinical Trial of a Recombinant Ricin Vaccine in Normal Humans,
PNAS, 103:2268-2273). The second trial which was completed in September 2012 and was sponsored by University of Texas Southwestern
Medical Center (“UTSW”), evaluated a more potent formulation of RiVax® that contained an Alum-adjuvant.
The results of the Phase 1b study indicated that Alum-adjuvanted RiVax® was safe and well tolerated, and induced
greater ricin neutralizing antibody levels in humans than adjuvant-free RiVax®. The outcomes of this second study
were published in the Clinical and Vaccine Immunology (Vitetta et al., 2012, Recombinant Ricin Vaccine Phase 1b Clinical Trial,
Clin. Vaccine Immunol. 10:1697-1699). We have adapted the original manufacturing process for the immunogen contained in RiVax®
for thermostability and large scale manufacturing and recent studies have confirmed that the thermostabilized RiVax®
formulation enhances the stability of the RiVax® antigen, enabling storage for at least 1 year at temperatures
up to 40 °C (104 °F). The program will pursue approval via the FDA “Animal Rule” since it is not possible
to test the efficacy of the vaccine in a clinical study which would expose humans to ricin. Uniform, easily measured and species-neutral
immune correlates of protection that can be measured in humans and animals, and are indicative of animal survival to subsequent
ricin challenge, are central to the application of the “Animal Rule”. Recent work has identified such potential correlates
of immune protection in animals and work to qualify and validate these approaches is continuing, with the goal of utilizing these
assays in a planned Phase 1/2 clinical trial with the thermostable RiVax® formulation. During September 2018, we
published an extended stability study of RiVax®, showing up to 100% protection in mice after 12 months storage
at 40 °C (104 °F) as well as identification of a potential in vitro stability indicating assay, critical to adequately
confirming the long-term shelf life of the vaccine. We have entered into a collaboration with IDT Biologika GmbH to scale-up the
formulation/filling process and continue development and validation of analytical methods established at IDT to advance the program.
We also have initiated a development agreement with Emergent BioSolutions, Inc. to implement a commercially viable, scalable production
technology for the RiVax® drug substance protein antigen.
The
development of RiVax® has been sponsored through a series of overlapping challenge grants, UC1, and cooperative
grants, U01, from the NIH, granted to us and to UTSW where the vaccine originated. The second clinical trial was supported by
a grant from the FDA’s Office of Orphan Products to UTSW. To date, we and UTSW have collectively received approximately
$25 million in grant funding from the NIH for the development of RiVax®. In September 2014, we entered into a contract
with the NIH for the development of RiVax® that would provide up to an additional $24.7 million of funding in the
aggregate if options to extend the contract are exercised by the NIH. The development agreements with Emergent BioSolutions and
IDT are specifically funded under this NIH contract.
During
June 2017 NIAID exercised an option for the evaluation of RiVax® to fund additional animal efficacy studies. The
exercised option will provide us with approximately $2.0 million in additional funding. Additionally, during August 2017 NIAID
exercised an option to fund good manufacturing practices compliant RiVax® bulk drug substance and finished drug
product manufacturing, which is required for the conduct of future preclinical and clinical safety and efficacy studies. The exercised
option will provide us with approximately $2.5 million in additional non-dilutive funding, bringing the total amount awarded to
date under this contract to $21.2 million, of which $6.9 million is still available. If all contract options are exercised, the
total award of up to $24.7 million will support the preclinical, manufacturing and clinical development activities necessary to
advance heat stable RiVax® with the FDA. In addition to the ongoing funding of up to $24.7 million for the development
of RiVax®, biomarkers for RiVax® testing have been successfully identified, facilitating potential
approval under the FDA Animal Rule.
During December 2019, we initiated a third
Phase 1 double-blind, placebo-controlled, randomized study in eight healthy adult volunteer subjects designed to evaluate the
safety and immunogenicity of RiVax® utilizing ThermoVax®. During January 2020, we suspended the
study after the manufacturer of the drug substance notified us that, after release of the final drug product to us, the manufacturer
identified that the active drug substance tested outside the established specification parameters. Two subjects had received doses
as part of the study before the manufacturer provided this notice. Those two subjects will continue to be monitored and data captured
in accordance with the study protocol; however, they will not receive further doses of study drug. A clinical safety report will
be generated at study completion.
RiVax®
has been granted Orphan Drug designation as well as Fast Track designation by the FDA for the prevention of ricin intoxication.
In addition, RiVax® has also been granted Orphan Drug designation in the European Union (“EU”) from
the EMA Committee for Orphan Medical Products.
Assuming
development efforts are successful for RiVax®, we believe potential government procurement contract(s) could
reach as much as $200 million. This potential procurement contract information is a forward-looking statement, and investors are
urged not to place undue reliance on this statement. While we have determined this potential procurement contract value based
on assumptions that we believe are reasonable, there are a number of factors that could cause our expectations to change or not
be realized.
As
a new chemical entity, an FDA approved RiVax® vaccine has the potential to qualify for a biodefense Priority Review
Voucher (“PRV”). Approved under the 21st Century Cures Act in late 2016, the biodefense PRV is awarded upon approval
as a medical countermeasure when the active ingredient(s) have not been otherwise approved for use in any context. PRVs are transferable
and can be sold, with sales in recent years in excess of $100 million. When redeemed, PRVs entitle the user to an accelerated
review period of nine months, saving a median of seven months review time as calculated in 2009. However, FDA must be advised
90 days in advance of the use of the PRV and the use of a PRV is associated with an additional user fee ($2.2 million for fiscal
year 2020).
Ricin
Toxin
Ricin
toxin can be cheaply and easily produced, is stable over long periods of time, is toxic by several routes of exposure and
thus has the potential to be used as a biological weapon against military and/or civilian targets. As a bioterrorism agent,
ricin could be disseminated as an aerosol, by injection, or as a food supply contaminant. The potential use of ricin toxin as
a biological weapon of mass destruction has been highlighted in a Federal Bureau of Investigation Bioterror report released
in November 2007 titled Terrorism 2002-2005, which states that “Ricin and the bacterial agent anthrax are
emerging as the most prevalent agents involved in WMD
investigations” (http://www.fbi.gov/stats-services/publications/terrorism-2002-2005/terror02_05.pdf). In recent
years, Al Qaeda in the Arabian Peninsula has threatened the use of ricin toxin to poison food and water supplies and in
connection with explosive devices. Domestically, the threat from ricin remains a concern for security agencies. In April
2013, letters addressed to the U.S. President, a Senator and a judge tested positive for ricin. As recently as October 2018,
an envelope addressed to President Trump was suspected to contain this potent and potentially lethal toxin, which was
subsequently confirmed to contain pieces of castor beans used to make ricin.
The
Centers for Disease Control and Prevention has classified ricin toxin as a Category B biological agent. Ricin works by first binding
to glycoproteins found on the exterior of a cell, and then entering the cell and inhibiting protein synthesis leading to cell
death. Once exposed to ricin toxin, there is no effective therapy available to reverse the course of the toxin. The recent ricin
threat to government officials has heightened the awareness of this toxic threat. Currently, there is no FDA approved vaccine
to protect against the possibility of ricin toxin being used in a terrorist attack, or its use as a weapon on the battlefield
nor is there a known antidote for ricin toxin exposure.
SGX943
– for Treating Emerging and/or Antibiotic-Resistant Infectious Diseases
SGX943
is an IDR, containing the same active ingredient as SGX942. Dusquetide is a fully synthetic, 5-amino acid peptide with high aqueous
solubility and stability. Extensive in vivo preclinical studies have demonstrated enhanced clearance of bacterial infection
with SGX943 administration. SGX943 has shown efficacy against both Gram-negative and Gram-positive bacterial infections in preclinical
models, independent of whether the bacteria is antibiotic-resistant or antibiotic-sensitive.
The
innate immune system is responsible for rapid and non-specific responses to combat bacterial infection. Augmenting these responses
represents an alternative approach to treating bacterial infections. In animal models, IDRs are efficacious against both antibiotic-sensitive
and antibiotic-resistant infections, both Gram-positive and Gram-negative bacteria, and are active irrespective of whether the
bacteria occupies a primarily extracellular or intracellular niche. IDRs are also effective as stand-alone agents or in conjunction
with antibiotics. An IDR for the treatment of serious bacterial infections encompasses a number of clinical advantages including:
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Treatment when antibiotics are contraindicated, such
as:
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before
the infectious organism and/or its antibiotic susceptibility is known; or
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in
at-risk populations prior to infection.
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An ability to be used as an additive, complementary treatment
with antibiotics, thereby:
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enhancing
efficacy of sub-optimal antibiotic regimens (e.g., partially antibiotic-resistant infections);
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enhancing
clearance of infection, thereby minimizing the generation of antibiotic resistance (e.g., in treating melioidosis); and
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reducing
the required antibiotic dose, again potentially minimizing the generation of antibiotic resistance.
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An ability to modulate the deleterious consequences of
inflammation in response to the infection, including the inflammation caused by antibiotic-driven bacterial lysis; and
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Being unlikely to generate bacterial resistance since
the IDR acts on the host, and not the pathogen.
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Importantly,
systemic inflammation and multi-organ failure is the ultimate common outcome of not only emerging and/or antibiotic-resistant
infectious diseases, but also of most biothreat agents (e.g., Burkholderia pseudomallei), indicating that dusquetide would
be applicable not only to antibiotic-resistant infection, but also to biothreat agents, especially where the pathogen is not known
and/or has been engineered for enhanced antibiotic resistance.
In
May 2019, we were awarded a Defense Threat Reduction Agency (“DTRA”) subcontract of approximately $600,000 over three
years to participate in a biodefense contract for the development of medical countermeasures against bacterial threat agents.
As of December 31, 2019, there was negligible revenue earned or expense incurred related to the DTRA subcontract.
The
Drug Approval Process
The
FDA and comparable regulatory agencies in state, local and foreign jurisdictions impose substantial requirements on the clinical
development, manufacture and marketing of new drug and biologic products. The FDA, through regulations that implement the Federal
Food, Drug, and Cosmetic Act, as amended (“FDCA”), and other laws and comparable regulations for other agencies, regulate
research and development activities and the testing, manufacture, labeling, storage, shipping, approval, recordkeeping, advertising,
promotion, sale, export, import and distribution of such products. The regulatory approval process is generally lengthy, expensive
and uncertain. Failure to comply with applicable FDA and other regulatory requirements can result in sanctions being imposed on
us or the manufacturers of our products, including holds on clinical research, civil or criminal fines or other penalties, product
recalls, or seizures, or total or partial suspension of production or injunctions, refusals to permit products to be imported
into or exported out of the U.S., refusals of the FDA to grant approval of drugs or to allow us to enter into government supply
contracts, withdrawals of previously approved marketing applications and criminal prosecutions.
Before
human clinical testing in the U.S. of a new drug compound or biological product can commence, an Investigational New Drug (“IND”),
application is required to be submitted to the FDA. The IND application includes results of pre-clinical animal studies evaluating
the safety and efficacy of the drug and a detailed description of the clinical investigations to be undertaken.
Clinical
trials are normally done in three phases, although the phases may overlap. Phase 1 trials are smaller trials concerned primarily
with metabolism and pharmacologic actions of the drug and with the safety of the product. Phase 2 trials are designed primarily
to demonstrate effectiveness and safety in treating the disease or condition for which the product is indicated. These trials
typically explore various doses and regimens. Phase 3 trials are expanded clinical trials intended to gather additional information
on safety and effectiveness needed to clarify the product’s benefit-risk relationship and generate information for proper
labeling of the drug, among other things. The FDA receives reports on the progress of each phase of clinical testing and may require
the modification, suspension or termination of clinical trials if an unwarranted risk is presented to patients. When data is required
from long-term use of a drug following its approval and initial marketing, the FDA can require Phase 4, or post-marketing, studies
to be conducted.
With certain exceptions, once successful
clinical testing is completed, the sponsor can submit a NDA, for approval of a drug, or a Biologic License Application (“BLA”),
for biologics such as vaccines, which will be reviewed, and if successful, approved by the FDA, allowing the product to be marketed.
The process of completing clinical trials for a new drug is likely to take a number of years and require the expenditure of substantial
resources. Furthermore, the FDA or any foreign health authority may not grant an approval on a timely basis, if at all. The FDA
may deny the approval of an NDA or BLA, in its sole discretion, if it determines that its regulatory criteria have not been satisfied
or may require additional testing or information. Among the conditions for marketing approval is the requirement that the prospective
manufacturer’s quality control and manufacturing procedures conform to good manufacturing practice regulations. In complying
with standards contained in these regulations, manufacturers must continue to expend time, money and effort in the area of production,
quality control and quality assurance to ensure full technical compliance. Manufacturing facilities, both foreign and domestic,
also are subject to inspections by, or under the authority of, the FDA and by other federal, state, local or foreign agencies.
Even
after initial FDA or foreign health authority approval has been obtained, further studies, including Phase 4 post-marketing studies,
may be required to provide additional data on safety and will be required to gain approval for the marketing of a product as a
treatment for clinical indications other than those for which the product was initially tested. For certain drugs intended to
treat serious, life-threatening conditions that show great promise in earlier testing, the FDA can also grant conditional approval.
However, drug developers are required to study the drug further and verify clinical benefit as part of the conditional approval
provision, and the FDA can revoke approval if later testing does not reproduce previous findings. The FDA may also condition approval
of a product on the sponsor agreeing to certain mitigation strategies that can limit the unfettered marketing of a drug. Also,
the FDA or foreign regulatory authority will require post-marketing reporting to monitor the side effects of the drug. Results
of post-marketing programs may limit or expand the further marketing of the product. Further, if there are any modifications to
the drug, including any change in indication, manufacturing process, labeling or manufacturing facility, an application seeking
approval of such changes will likely be required to be submitted to the FDA or foreign regulatory authority.
In
the U.S., the FDCA, the Public Health Service Act, the Federal Trade Commission Act, and other federal and state statutes and
regulations govern, or influence the research, testing, manufacture, safety, labeling, storage, record keeping, approval, advertising
and promotion of drug, biological, medical device and food products. Noncompliance with applicable requirements can result in,
among other things, fines, recall or seizure of products, refusal to permit products to be imported into the U.S., refusal of
the government to approve product approval applications or to allow us to enter into government supply contracts, withdrawal of
previously approved applications and criminal prosecution. The FDA may also assess civil penalties for violations of the FDCA
involving medical devices.
For biodefense development, such as with RiVax®,
the FDA has instituted policies that are expected to result in shorter pathways to market. This potentially includes approval
for commercial use utilizing the results of animal efficacy trials, rather than efficacy trials in humans. However, we will still
have to establish that the vaccine and countermeasures it is developing are safe in humans at doses that are correlated with the
beneficial effect in animals. Such clinical trials will also have to be completed in distinct populations that are subject to
the countermeasures; for instance, the very young and the very old, and in pregnant women, if the countermeasure is to be licensed
for civilian use. Other agencies will have an influence over the benefit-risk scenarios for deploying the countermeasures and
in establishing the number of doses utilized in the Strategic National Stockpile. We may not be able to sufficiently demonstrate
the animal correlation to the satisfaction of the FDA, as these correlates are difficult to establish and are often unclear. Invocation
of the animal rule may raise issues of confidence in the model systems even if the models have been validated. For many of the
biological threats, the animal models are not available and we may have to develop the animal models, a time-consuming research
effort. There are few historical precedents, or recent precedents, for the development of new countermeasure for bioterrorism
agents. Despite the animal rule, the FDA may require large clinical trials to establish safety and immunogenicity before licensure
and it may require safety and immunogenicity trials in additional populations. Approval of biodefense products may be subject
to post-marketing studies, and could be restricted in use in only certain populations.
Vaccines
are approved under the BLA process that exists under the Public Health Service Act. In addition to the greater technical challenges
associated with developing biologics, the potential for generic competition is lower for a BLA product than a small molecule product
subject to an NDA under the Federal Food, Drug and Cosmetic Act. Under the Patient Protection and Affordable Care Act enacted
in 2010, a “generic” version of a biologic is known as a biosimilar and the barriers to entry – whether legal,
scientific, or logistical – for a biosimilar version of a biologic approved under a BLA are higher.
Orphan
Drug Designation
Under the Orphan Drug Act, the FDA may
grant orphan drug designation to drugs or biologics intended to treat a rare disease or condition – generally a disease or
condition that affects fewer than 200,000 individuals in the U.S. Orphan drug designation must be requested before submitting an
NDA or BLA. After the FDA grants orphan drug designation, the generic identity of the drug or biologic and its potential orphan
use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in, or shorten the duration of, the
regulatory review and approval process. The first NDA or BLA applicant to receive FDA approval for a particular active ingredient
to treat a particular disease with FDA orphan drug designation is entitled to a seven-year exclusive marketing period in the U.S.
for that product, for that indication. During the seven-year exclusivity period, the FDA may not approve any other applications
to market the same drug or biologic for the same disease, except in limited circumstances, such as a showing of clinical superiority
to the product with orphan drug exclusivity. Orphan drug exclusivity does not prevent the FDA from approving a different drug or
biologic for the same disease or condition, or the same drug or biologic for a different disease or condition. Among the other
benefits of orphan drug designation are tax credits for certain research and a waiver of the NDA or BLA application user fee.
Fast
Track Designation and Accelerated Approval
The
FDA is required to facilitate the development, and expedite the review, of drugs or biologics that are intended for the treatment
of a serious or life-threatening disease or condition for which there is no effective treatment and which demonstrate the potential
to address unmet medical needs for the condition. Under the fast track program, the sponsor of a new drug or biologic candidate
may request that the FDA designate the candidate for a specific indication as a fast track drug or biologic concurrent with, or
after, the filing of the IND for the candidate. The FDA must determine if the drug or biologic candidate qualifies for fast track
designation within 60 days of receipt of the sponsor’s request. Unique to a fast track product, the FDA may initiate review
of sections of a fast track product’s NDA or BLA before the application is complete. This rolling review is available if
the applicant provides, and the FDA approves, a schedule for the submission of the remaining information and the applicant pays
applicable user fees. However, the FDA’s time period goal for reviewing an application does not begin until the last section
of the NDA or BLA is submitted. Additionally, the fast track designation may be withdrawn by the FDA if the FDA believes that
the designation is no longer supported by data emerging in the clinical trial process.
Any
product submitted to the FDA for marketing, including under a fast track program, may be eligible for other types of FDA programs
intended to expedite development and review, such as accelerated approval. Drug or biological products studied for their safety
and effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing
treatments may receive accelerated approval, which means the FDA may approve the product based upon a surrogate endpoint that
is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity
or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit,
taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments.
In
clinical trials, a surrogate endpoint is a measurement of laboratory or clinical signs of a disease or condition that substitutes
for a direct measurement of how a patient feels, functions, or survives. Surrogate endpoints can often be measured more easily
or more rapidly than clinical endpoints. A drug or biologic candidate approved on this basis is subject to rigorous post-marketing
compliance requirements, including the completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical
endpoint. Failure to conduct required post-approval studies, or confirm a clinical benefit during post-marketing studies, will
allow the FDA to withdraw the drug or biologic from the market on an expedited basis. All promotional materials for drug candidates
approved under accelerated regulations are subject to prior review by the FDA.
Pediatric
Information
Under
the Pediatric Research Equity Act (“PREA”), NDAs or BLAs or supplements to NDAs or BLAs must contain data to assess
the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing
and administration for each pediatric subpopulation for which the drug is safe and effective. The FDA may grant full or partial
waivers, or deferrals, for submission of data. Unless otherwise required by regulation, PREA does not apply to any drug for an
indication for which orphan designation has been granted.
Early
Access to Medicines Scheme
Launched
in April 2014 in the United Kingdom by the MHRA, the Early Access to Medicines Scheme (“EAMS”) offers severely ill
patients with life-threatening and seriously debilitating conditions the lifeline of trying ground-breaking new medicines earlier
than they would normally be accessible. PIM designation is the first phase of EAMS and is awarded following an assessment of early
nonclinical and clinical data by the MHRA. The criteria product candidates must meet to obtain PIM designation are:
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Criterion
1 – The condition should be life-threatening or seriously debilitating with a high unmet medical need (i.e., there is
no method of treatment, diagnosis or prevention available or existing methods have serious limitations).
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Criterion 2 –
The medicinal product is likely to offer major advantage over methods currently used in the UK.
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Criterion 3 –
The potential adverse effects of the medicinal product are likely to be outweighed by the benefits, allowing for the reasonable
expectation of a positive benefit risk balance. A positive benefit risk balance should be based on preliminary scientific
evidence that the safety profile of the medicinal product is likely to be manageable and acceptable in relation to the estimated
benefits.
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False
Claims Laws
The
federal False Claims Act prohibits, among other things, any person or entity from knowingly presenting, or causing to be presented,
a false claim for payment to, or approval by, the federal government or knowingly making, using, or causing to be made or used
a false record or statement material to a false or fraudulent claim to the federal government. As a result of a modification made
by the Fraud Enforcement and Recovery Act of 2009, a claim includes “any request or demand” for money or property
presented to the U.S. government.
Anti-Kickback
Laws
The
federal Anti-Kickback Statute prohibits, among other things, any person or entity, from knowingly and willfully offering, paying,
soliciting or receiving any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return
for purchasing, leasing, ordering or arranging for the purchase, lease or order of any item or service reimbursable under Medicare,
Medicaid or other federal healthcare programs. The term remuneration has been interpreted broadly to include anything of value.
The Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers,
purchasers, and formulary managers on the other.
United
States Healthcare Reform
Federal
Physician Payments Sunshine Act and its implementing regulations require that certain manufacturers of drugs, devices, biological
and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program
(with certain exceptions) to report information related to certain payments or other transfers of value made or distributed to
physicians and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians
and teaching hospitals and to report annually certain ownership and investment interests held by physicians and their immediate
family members.
In
addition, we may be subject to data privacy and security regulation by both the federal government and the states in which we
conduct our business. The Health Insurance Portability and Accountability Act (“HIPAA”), as amended by the Health
Information Technology for Economic and Clinical Health Act (“HITECH”), and its implementing regulations, imposes
certain requirements relating to the privacy, security and transmission of individually identifiable health information. Among
other things, HITECH makes HIPAA’s privacy and security standards directly applicable to “business associates”
– independent contractors or agents of covered entities that receive or obtain protected health information in connection
with providing a service on behalf of a covered entity. HITECH also created four new tiers of civil monetary penalties, amended
HIPAA to make civil and criminal penalties directly applicable to business associates and possibly other persons, and gave state
attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA
laws and seek attorneys’ fees and costs associated with pursuing federal civil actions. In addition, state laws govern the
privacy and security of health information in certain circumstances, many of which differ from each other in significant ways
and may not have the same effect, thus complicating compliance efforts.
Third-Party
Suppliers and Manufacturers
Drug
substance and drug product manufacturing is outsourced to qualified suppliers. We do not have manufacturing capabilities/infrastructure
and do not intend to develop the capacity to manufacture drug products substances. We have agreements with third-party manufacturers
to supply bulk drug substances for our product candidates and with third parties to formulate, package and distribute our product
candidates. Our employees include professionals with expertise in pharmaceutical manufacturing development, quality assurance
and third party supplier management who oversee work conducted by third-party companies. We believe that we have on hand or can
easily obtain sufficient amounts of product candidates to complete our currently contemplated clinical trials. All of the drug
substances used in our product candidates currently are manufactured by single suppliers. While we have not experienced any supply
disruptions, the number of manufacturers of the drug substances is limited. In the event it is necessary or advisable to acquire
supplies from alternative suppliers, assuming commercially reasonable terms could be reached, the challenge would be the efficient
transfer of technology and know-how from current manufactures to the new supplier. Formulation and distribution of our finished
product candidates also currently are conducted by single suppliers but we believe that alternative sources for these services
are readily available on commercially reasonable terms, subject to the efficient transfer of technology and know-how from current
suppliers to the new supplier.
All
of the current agreements for the supply of bulk drug substances for our product candidates and for the formulation or distribution
of our product candidates relate solely to the development (including preclinical and clinical) of our product candidates. Under
these contracts, our product candidates are manufactured upon our order of a specific quantity. In the event that we obtain marketing
approval for a product candidate, we will qualify secondary suppliers for all key manufacturing activities supporting the marketing
application.
Marketing
and Collaboration
We
do not currently have any sales and marketing capability, other than to potentially market our biodefense vaccine products directly
to government agencies. With respect to other commercialization efforts, we currently intend to seek distribution and other collaboration
arrangements for the sales and marketing of any product candidate that is approved, while also evaluating the potential to commercialize
on our own in orphan disease indications. From time to time, we have had and are having strategic discussions with potential collaboration
partners for our biodefense vaccine product candidates, although no assurance can be given that we will be able to enter into
one or more collaboration agreements for our product candidate on acceptable terms, if at all. We believe that both military and
civilian health authorities of the U.S. and other countries will increase their stockpiling of therapeutics and vaccines to treat
and prevent diseases and conditions that could ensue following a bioterrorism attack.
On
December 20, 2012, we re-acquired the North American and European commercial rights to oral BDP through an amendment of our collaboration
and supply agreement with Sigma-Tau Pharmaceuticals, Inc., which is now known as Leadiant Biosciences, Inc. (“Leadiant”).
The amendment requires us to make certain approval and commercialization milestone payments to Leadiant which could reach up to
$6 million. In addition, we have agreed to pay Leadiant: (a) a royalty amount equal to 3% of all net sales of oral BDP made directly
by us, and any third-party partner and/or their respective affiliates in the U.S., Canada, Mexico and in each country in the European
Territory for the later to occur of: (i) a period of ten years from the first commercial sale of oral BDP in each country, or
(ii) the expiration of our patents and patent applications relating to oral BDP in such country (the “Payment Period”);
and (b) 15% of all up-front payments, milestone payments and any other consideration (exclusive of equity payments) received by
us and/or a potential partner from us and/or potential partner’s licensees, distributors and agents for oral BDP in each
relevant country in the territory, which amount will be paid on a product-by-product and a country-by-country basis for the Payment
Period.
On
August 25, 2013, we entered into an agreement with SciClone Pharmaceuticals, Inc. (“SciClone”), pursuant to which
SciClone provided us with access to its oral mucositis clinical and regulatory data library in exchange for exclusive commercialization
rights for SGX942 in the People’s Republic of China, including Hong Kong and Macau, subject to the negotiation of economic
terms. SciClone’s data library was generated from two sequential Phase 2 clinical studies conducted in 2010 and 2012 evaluating
SciClone’s compound, SCV-07, for the treatment of oral mucositis caused by chemoradiation therapy in head and neck cancer
patients, before SciClone terminated its program. By analyzing data available from the placebo subjects in the SciClone trials,
we acquired valuable insight into disease progression, along with quantitative understanding of its incidence and severity in
the head and neck cancer patient population. This information assisted us with the design of the SGX942 Phase 2 clinical trial,
in which positive preliminary results were announced in December 2015.
On
September 9, 2016, we and SciClone entered into an exclusive license agreement, pursuant to which we granted rights to SciClone
to develop, promote, market, distribute and sell SGX942 in the People’s Republic of China, including Hong Kong and Macau,
as well as Taiwan, South Korea and Vietnam. Under the terms of the license agreement, SciClone will be responsible for all aspects
of development, product registration and commercialization in the territory, having access to data generated by us. In exchange
for exclusive rights, SciClone will pay us royalties on net sales, and we will supply commercial drug product to SciClone on a
cost-plus basis, while maintaining worldwide manufacturing rights. We also entered into a common stock purchase agreement with
SciClone pursuant to which we sold 352,942 shares of our common stock to SciClone for approximately $8.50 per share, for an aggregate
price of $3,000,000.
Competition
Our
competitors are pharmaceutical and biotechnology companies, most of whom have considerably greater financial, technical, and marketing
resources than we do. Universities and other research institutions, including the U.S. Army Medical Research Institute of Infectious
Diseases, also compete in the development of treatment technologies, and we face competition from other companies to acquire rights
to those technologies.
SGX301
Competition
The FDA has approved several treatments
for later stages (IIB-IV) of CTCL and/or in conditions that are unresponsive to prior treatment. Three are targeted therapies (Targretin®-caps,
Ontak® and Adcetris®), two are histone deacetylases inhibitors (Zolina® and Istodax®)
and the remaining two are topical therapies (Valchor® and Targretin®-gel). There are currently no
FDA approved therapies for the treatment of front-line, early stage (I-IIA) CTCL; however certain topical chemotherapies and topical,
radiation, photodynamic and other therapies which are approved for indications other than CTCL are prescribed off-label for the
treatment of early stage CTCL. These include psoralen combined with ultraviolet A (UVA) light therapy (“PUVA”); however,
PUVA treatments are usually limited to three times per week and 200 times in total due to the potentially carcinogenic side effect.
There are other drugs currently in development that may have the potential to be used in early stage (I-IIA) CTCL – two topical
therapies are in phase 2 (sirolimus and SHAPE gelled solution), one photodynamic therapy (Silicon Phthalocyanine 4) in Phase 1
and one systemic therapy for stage IB, II or III CTCL completing Phase 2 (cobomarsen). Other treatments for later stage disease
are not considered direct competitors.
SGX94/942
Competition
Because
SGX94 (dusquetide) uses a novel mechanism of action in combating bacterial infections, there are no direct competitors at this
time. Bacterial infections are routinely treated with antibiotics and SGX94 treatment is anticipated to be utilized primarily
where antibiotics are insufficient (e.g., due to antibiotic resistance) or contra-indicated (e.g., in situations where the development
of antibiotic resistance is a significant concern). Many groups are working on the antibiotic resistance problem and research
into the innate immune system is intensifying, making emerging competition likely (from companies such as Celtaxsys Inc., Innaxon
Therapeutics and Innate Pharma SA).
There
is currently one drug approved for the treatment of oral mucositis in hematological cancer (palifermin). There are currently no
approved drugs for treatment of oral mucositis in cancers with solid tumors (e.g., head and neck cancer). There are several drugs
in clinical development for oral mucositis – three in Phase 3 (an epidermal growth factor under development by Daewoong
Pharmaceutical Co. Ltd. a protease inhibitor under investigation at a Chinese hospital, and daily infused GC4419 by Galera Therapeutics
Inc.), four in Phase 2 (under development by Innovation Pharmaceuticals, Intrexon Corporation, Monopar Therapeutics LLC, Moberg
Pharma) and various natural products in small and/or open label studies (including sage, turmeric, honey and olive oil). In addition,
there are medical devices approved for the treatment of oral mucositis including MuGard, GelClair, Episil and Caphosol. These
devices attempt to create a protective barrier around the oral ulceration with no biologic activity in treating the underlying
disease.
Oral
BDP Competition
There
are a number of approved treatments for Crohn’s disease and additional compounds are in late-stage development.
Remicade
(infliximab) and Humira (adalimumab) are currently approved for the treatment of pediatric Crohn’s disease; however, both
carry significant Black Box warnings in their labeling for increased risk of serious infection and malignancy, and therefore are
approved for treatment of moderate to severe patients. Entocort (enteric-coated budesonide) is currently approved for the treatment
of mild to moderate active Crohn’s disease involving the lower GI tract (ileum and/or the ascending colon) in patients eight
years of age and older who weigh more than 25 kilograms. There is one other marketed biologic, Tysabri (natalizumab), in a Phase
2 study for pediatric Crohn’s.
ThermoVax®
Competition
Multiple
groups and companies are working to address the unmet need of vaccine thermostability using a variety of technologies. In addition,
other organizations, such as the Bill and Melinda Gates Foundation and PATH, have programs designed to advance technologies to
address this need.
Several
stabilization technologies currently being developed involve mixing vaccine antigen +/- adjuvant with various proprietary excipients
or co-factors that either serve to stabilize the vaccine or biological product in a liquid or dried (lyophilized) form. Examples
of these approaches include the use of various plant-derived sugars and macromolecules being developed by companies such as Stabilitech
Ltd. Variation Biotechnologies, Inc. (“VBI”) is developing a lipid system (resembling liposomes) to stabilize viral
antigens, including virus-like particles (“VLPs”), and for potential application to a conventional influenza vaccine
among others.
Other
approaches involve process variations to freeze-dry live virus vaccines. For example, PaxVax, Inc. is seeking to employ a
spray drying technology in concert with enteric coating to achieve formulations for room temperature stability of live virus vaccines
using adenovirus vectors. VBI is seeking to utilize their proprietary stabilization technology for a number of vaccines (as
a co-development service, similar to the business model being developed by Stabilitech Ltd.), whereas PaxVax is applying the technology
to their own proprietary vaccine development programs. Stabilitech uses combinations of excipients, which include glassifying
sugars similar to the ThermoVax® technology, and variations in drying cycles during lyophilization, as does the
ThermoVax® technology.
Additionally,
companies like Pharmathene, Inc., Panacea Biotec Ltd., and Compass Biotech Inc. are developing proprietary vaccines with the application
of some form of stabilization technology.
Public
Health Solutions Competition
We
face competition in the area of biodefense product development from various public and private companies, universities and governmental
agencies, such as the U.S. Army, some of whom may have their own proprietary technologies which may directly compete with our
technologies.
The
U.S. Army Medical Research Institute of Infectious Diseases, the DoD’s lead laboratory for medical research to counter biological
threats is also developing a ricin vaccine candidate, RVEc™. RVEc™ has been shown to be fully protective in mice exposed
to lethal doses of ricin toxin by the aerosol route. Further studies, in both rabbits and nonhuman primates, were conducted to
evaluate RVEc™’s safety as well as its immunogenicity, with positive results observed. A monoclonal antibody is also
being developed by Mapp Biopharmaceutical Inc. as a ricin therapeutic, with administration 4 hours after exposure demonstrating
efficacy while administration 12 hours after ricin exposure was not protective in animal models.
Patents
and Other Proprietary Rights
Our
goal is to obtain, maintain and enforce patent protection for our products, formulations, processes, methods and other proprietary
technologies, preserve our trade secrets, and operate without infringing on the proprietary rights of other parties, both in the
U.S. and in other countries. Our policy is to actively seek to obtain, where appropriate, the broadest intellectual property protection
possible for our product candidates, proprietary information and proprietary technology through a combination of contractual arrangements
and patents, both in the U.S. and elsewhere in the world.
We
also depend upon the skills, knowledge and experience of our scientific and technical personnel, as well as that of our advisors,
consultants and other contractors, none of which is patentable. To help protect our proprietary knowledge and experience that
is not patentable, and for inventions for which patents may be difficult to enforce, we rely on trade secret protection and confidentiality
agreements to protect our interests. To this end, we require all employees, consultants, advisors and other contractors to enter
into confidentiality agreements, which prohibit the disclosure of confidential information and, where applicable, require disclosure
and assignment to us of the ideas, developments, discoveries and inventions important to our business.
In 2014, we acquired a novel photodynamic
therapy that utilizes safe visible light for activation, which we refer to as SGX301. The active ingredient in SGX301 is synthetic
hypericin, a photosensitizer which is topically applied to skin lesions and then activated by fluorescent light 16 to 24 hours
later. As part of the acquisition, we acquired a license agreement relating to the use of photo-activated hypericin, composition
of matter patent for SGX301 (U.S. patent 8,629,302) and additional issued and pending applications, both in the U.S. and abroad.
U.S. patent 8,629,302 is expected to expire in September 2030. In August 2018, we were granted a U.S. patent (No. 10,053,513) titled
“Systems and Methods for Producing Synthetic Hypericin”. This newly issued patent, expected to expire in 2036, broadens
the production around synthetic hypericin. Our proprietary formulation of synthetic hypericin also has been granted a European
patent for the treatment of psoriasis, EP 2571507, and complements the method of treatment claims covered by the previously issued
U.S. patent 6001882, Photoactivated hypericin and the use thereof. Further, on January 7, 2020, Soligenix was also granted a U.S.
patent (No. 10,526,268) titled “Systems and Methods for Producing Synthetic Hypericin”, which further expanded protection
for the composition of purified synthetic hypericin. This patent is also expected to expire in 2036.
In addition to issued and pending patents,
we also have “Orphan Drug” designations for SGX301 in the U.S. and the EU for CTCL, SGX203 in the U.S. for pediatric
Crohn’s disease, as well as for RiVax® in the U.S. and EU. Our Orphan Drug designations provide for seven
years of post-approval marketing exclusivity in the U.S. and ten years exclusivity in Europe. We have pending patent applications
for this indication that, if granted, may extend our anticipated marketing exclusivity beyond the U.S. seven year or EU. ten year
post-approval exclusivity provided by Orphan Drug legislation.
In 2013, we expanded our patent portfolio
to include innate defense regulation through the acquisition of the novel drug technology, known as SGX94. By binding to the pivotal
regulatory protein p62, also known as sequestosome-1, SGX94 regulates the innate immune system to reduce inflammation, eliminate
infection and enhance healing. As part of the acquisition, we acquired all rights, including composition of matter patents for
SGX94 as well as other analogs and crystal structures of SGX94 with its protein target p62, including U.S. patent 8,124,721 and
additional pending applications, both in the U.S. and abroad. SGX94 was developed pursuant to discoveries made by Professors B.
Brett Finlay and Robert Hancock of University of British Columbia (“UBC”). U.S. patent 8,124,721 is expected to expire
in April 2028. The U.S. Patent Office has granted the patent entitled “Novel Peptides and Analogs for Use in the Treatment
of Oral Mucositis”. The newly issued patent claims therapeutic use of dusquetide and related IDR analogs, and adds to composition
of matter claims for dusquetide and related analogs that have been granted in the U.S. and worldwide. In January 2019, the European
Patent Office granted the patent entitled “Novel Peptides for Treating and Preventing Immune-Related Disorders, Including
Treating and Preventing Infection by Modulating Innate Immunity”. This newly issued patient claims composition of matter
of IDR analogs, expanding patent protection around our lead IDR, dusquetide. In 2019, we further expanded protection for dusquetide
and related IDR analogs with patents granted in Canada (composition of matter) and in New Zealand and the U.S. (No. 10,526,268;
protecting therapeutic use in oral mucositis).
We
have issued U.S. patents 8,263,582 that cover the use of oral BDP for treating inflammatory disorders of the gastrointestinal
tract, which patent is expected to expire in March 2022. We also have European patent EP 1392321 claiming the use of topically
active corticosteroids in orally administered dosage forms that act concurrently to treat inflammation in the upper and lower
gastrointestinal tract, as well as European patent EP 2242477 claiming the use of orally ingested BDP for treatment of interstitial
lung disease. European patents EP 1392321 and EP 2242477 are expected to expire in March 2022 and January 2029.
The
subject of U.S. patent application number 12/633,631 filed December 8, 2009 and continued into patent application 15/495,798 filed
April 24, 2017 and corresponding European patent application number 09836727.9, which was granted as patent 2373160 in October
2017 and pursued in multiple European countries, is the use of topically active BDP in radiation and chemotherapeutics injury.
Additionally, we have numerous patent filings currently issued or pending in foreign jurisdictions covering this subject matter,
including Australia, Canada, China, Hong Kong, Israel, Japan, South Korea and New Zealand.
ThermoVax® is the subject of U.S. patent 8,444,991
issued on May 21, 2013 titled “Method of Preparing an Immunologically-Active Adjuvant-Bound Dried Vaccine Composition”
and licensed to us by VitriVax, Inc. ThermoVax® is also U.S. patent application number 13/474,661 filed May 17,
2012 titled “Thermostable Vaccine Compositions and Methods of Preparing Same” and jointly invented by the UC and the
Company. The patent application and the corresponding foreign filings are pending or granted and they address the use of adjuvants
in conjunction with vaccines that are formulated to resist thermal inactivation. The license agreement covers thermostable vaccines
for biodefense. U.S. patent 8,444,991 is expected to expire in February 2030. An additional patent, covering vaccine combinations
such as ricin toxin and anthrax, was filed in 2015 and granted on May 21, 2019 in the U.S. (No. 10,293,041, titled “Multivalent
Stable Vaccine Composition and Methods of Making Same”) and is expected to expire in 2035.
RiVax® is the subject of three
issued U.S. patent numbers 6,566,500, 6,960,652, and 7,829,668, all titled “Compositions and methods for modifying toxic
effects of proteinaceous compounds.” This patent family includes composition of matter claims for the modified ricin toxin
A chain which is the immunogen contained in RiVax®, and issued in 2003, 2005 and 2010 respectively. The initial
filing date of these patents is March 2000 and they will expire on March 30, 2020. The issued patents contain claims that describe
alteration of sequences within the ricin A chain that affect vascular leak, one of the deadly toxicities caused by ricin toxin.
Another U.S. patent number 7,175,848 titled “Ricin A chain mutants lacking enzymatic activity as vaccines to protect against
aerosolized ricin,” was filed in October of 2000 and is expected to expire in September 2020.
SGX301
License Agreement
In
September 2014, we acquired a worldwide exclusive license agreement with New York University and Yeda Research and Development
Company Ltd. for the rights to a novel photodynamic therapy that utilizes safe visible light for activation, which we refer to
as SGX301. To maintain this license we are obligated to pay $25,000 in annual license fees. In addition, we will pay the licensors:
(a) a royalty amount equal to 3% of all net sales of SGX301 made directly by us and/or any affiliates; (b) a royalty amount equal
to 2.5% of all net sales of SGX301 made by our sublicensees, subject to stated maximums and (c) 20% of all payments, not based
on net sales, received by us from our sublicensees. This license may be terminated by either party upon notice of a material breach
by the other party that is not cured within the applicable cure period. The exclusive license includes rights to several issued
U.S. patents, including U.S. patent numbers 6,867,235 and 7,122,518, among other domestic and foreign patent applications. U.S.
Patent numbers 6,867,235 and 7,122,518 are expected to expire in January 2020 and November 2023, respectively.
We acquired the license agreement for SGX301
and related intangible assets, including U.S. patent 8,629,302, properties and rights pursuant to an asset purchase agreement
with Hy Biopharma Inc. (“Hy Biopharma”). As consideration for the assets acquired, we initially paid $275,000 in cash
and issued 184,912 shares of common stock with a market value of $3,750,000, and in March 2020 we issued 1,956,182 shares of common
stock at a value of $5,000,000 (based upon an effective per share price of $2.56) as a result of SGX301 demonstrating statistical
significant treatment response in the Phase 3 clinical trial. Provided the final success-orientated milestone is attained, we
will be required to make a payment of up to $5.0 million, if and when achieved, payable in our common stock.
SGX94
License Agreements
On
December 18, 2012, we announced the acquisition of a first in class drug technology, known as SGX94 (dusquetide), representing
a novel approach to modulation of the innate immune system. SGX94 is an IDR that regulates the innate immune system to reduce
inflammation, eliminate infection and enhance tissue healing by binding to the pivotal regulatory protein p62, also known as sequestosome-1.
As part of the acquisition, we acquired all rights, including composition of matter patents, preclinical and Phase 1 clinical
study datasets for SGX94. We also assumed a license agreement with UBC to advance the research and development of the SGX94 technology.
The license agreement with UBC provides us with exclusive worldwide rights to manufacture, distribute, market sell and/or license
or sublicense products derived or developed from this technology. Under the license agreement we are obligated to pay UBC (i)
an annual license maintenance fee of CAN $1,000, and (ii) milestone payments which could reach up to CAN $1.2 million. This license
agreement (a) will automatically terminate if we file, or become subject to an involuntary filing, for bankruptcy, and (b) may
be terminated by UBC in the event of, among other things, our insolvency, dissolution, grant of a security interest in the technology
licensed to us pursuant to the license agreement, or material breach of or failure to perform material obligations under the license
agreement or other research agreements between us and UBC.
Oral
BDP License Agreement
On
November 24, 1998, the Company, known at the time as Enteron Pharmaceuticals, Inc. (“Enteron”) and George B. McDonald
(“Dr. McDonald”) entered into an exclusive license agreement for the rights to intellectual property, including know-how,
relating to oral BDP. We have an exclusive license to commercially exploit the covered products worldwide, subject to Dr. McDonald’s
right to make and use the technology for research purposes and the U.S. Government’s right to use the technology for government
purposes. Pursuant to the license agreement, as amended, we are is required to (i) reimburse Dr. McDonald for certain out-of-pocket
expenses incurred by Dr. McDonald in connection with the patent applications and issued patents, (ii) pay Dr. McDonald
$300,000 upon approval by the FDA of our first NDA incorporating oral BDP; (iii) pay Dr. McDonald royalty payments equal
to 3% of net sales of the covered products and (iv) pay Dr. McDonald $400,000 in cash upon an approval of oral BDP by the European
Medicines Agency.
Additionally,
in the event that sublicenses our rights under the license agreement, we will be required to pay Dr. McDonald 10% of any sublicense
fees and royalty payments paid by the sublicense to us.
The
term of the license agreement expires upon the expiration of the licensed patent applications or patents. Dr. McDonald has the
right to terminate the license agreement in its entirety or to terminate exclusivity under the agreement if we or its sublicenses
have not commercialized or are not actively attempting to commercialize a covered product.
Additionally,
the agreement terminates: (i) automatically upon us becoming insolvent; (ii) upon 30 days’ notice, if we breach any obligation
under the agreement without curing such breach during the notice period; and (iii) upon 90 days’ notice by us. After any
termination, we will have the right to sell our inventory for a period not to exceed three months following the date of termination,
subject to the payment of the amounts owed under the agreement.
ThermoVax®
License Agreement
On
December 21, 2010, we executed a worldwide exclusive license agreement with the UC for ThermoVax®, which is the
subject of U.S. patent number 8,444,991 issued on May 21, 2013 titled “Method of Preparing an Immunologically-Active Adjuvant-Bound
Dried Vaccine Composition.” This patent and its corresponding foreign filings are licensed to us by the UC and they address
the use of adjuvants in conjunction with vaccines that are formulated to resist thermal inactivation. U.S. Patent 8,444,991 is
expected to expire in December 2031. The license agreement also covers thermostable vaccines for biodefense as well as other potential
vaccine indications. In addition, we, in conjunction with UC, filed domestic and foreign patent applications claiming priority
back to a provisional application filed on May 17, 2011 titled: “Thermostable Vaccine Compositions and Methods of Preparing
Same.” In April 2018, the UC delivered a notice of termination of our license agreement based upon our failure to achieve
one of the development milestones: initiation of the Phase 1 clinical trial of the heat stabilization technology by March 31,
2018. After negotiating with the UC, we and the UC agreed to extend the termination date to October 31, 2018 in order to allow
us time to agree upon a potential agreement that would allow us to keep the rights to, and to continue to develop, the heat stabilization
technology or a product candidate containing the heat stabilization technology in our field of use.
On
October 31, 2018, in a series of related transactions, (a) we and the UC agreed to terminate the original license agreement, (b)
the UC and VitriVax executed a worldwide exclusive license agreement for the heat stabilization technology for all fields of use,
and (c) we and VitriVax executed a worldwide exclusive sublicense agreement for the heat stabilization technology for use in the
fields of ricin and Ebola vaccines. We paid a $100,000 sublicense fee on the effective date of the sublicense agreement. To maintain
the sublicense we are obliged to pay a minimum annual royalty of $20,000 until first commercial sale of a sublicensed product,
upon which point, we will be required to pay an earned royalty of 2% of net sales subject to a minimum royalty of $50,000 each
year. We are also required to pay royalties on any sub-sublicense income based on a declining percentage of all sub-sublicense
income calculated within the contractual period until reaching a minimum of 15% after two years. In addition, we are required
to pay VitriVax milestone fees of: (a) $50,000 upon initiation of a Phase II clinical trial of the sublicensed product, (b) $200,000
upon regulatory approval of a sublicensed product, and (c) $1 million upon achieving $10 million in aggregate net sales of a sublicensed
product in the U.S. or equivalent. To date none of these milestones have been met.
RiVax®
License Agreement
In
June 2003, we executed a worldwide exclusive option to license patent applications with UTSW for the nasal, pulmonary and oral
uses of a non-toxic ricin vaccine. In June 2004, we entered into a license agreement with UTSW for the injectable rights to the
ricin vaccine and, in October 2004, we negotiated the remaining oral rights to the ricin vaccine. To maintain this license we
are obligated to pay $50,000 in annual license fees. Through this license, we have rights to the issued patent number 7,175,848
titled “Ricin A chain mutants lacking enzymatic activity as vaccines to protect against aerosolized ricin.” This patent
includes methods of use and composition claims for RiVax®.
Research
and Development Expenditures
We
spent approximately $8.1 million and $6.8 million in the years ended December 31, 2019 and 2018, respectively, on research and
development. The amounts we spent on research and development per product during the years ended December 31, 2019, and 2018 are
set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this
Annual Report on Form 10-K.
Employees
As of December 31, 2019, we employed a total
of 16 persons, including 1 part-time employees and 15 full-time employees, six of whom are MDs/PhDs. None of our employees are
a party to a collective bargaining agreement. We consider our relationships with our employees to be good.
Available
Investor Information
We
file electronically with the Securities and Exchange Commission (“SEC”) our annual reports 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 Section 13(a)
of 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We make available through our website,
free of charge, copies of these reports as soon as reasonably practicable after we electronically file or furnish them to the
SEC. Our website is located at www.soligenix.com. You can also request copies of such documents by contacting the company at (609)
538-8200 or sending an email to info@soligenix.com.
Item
1A. Risk factors
An
investment in our securities involves a high degree of risk. You should carefully consider the following information about these
risks, together with the other information about these risks contained in this Annual Report, as well as the other information
contained in this Annual Report generally, before deciding to buy our securities. Any of the risks we describe below could adversely
affect our business, financial condition, operating results or prospects. The market prices for our securities could decline if
one or more of these risks and uncertainties develop into actual events and you could lose all or part of your investment. Additional
risks and uncertainties that we do not yet know of, or that we currently think are immaterial, may also impair our business operations.
You should also refer to the other information contained in this Annual Report, including our financial statements and the related
notes.
Risks
Related to our Business
We
have had significant losses and anticipate future losses; if additional funding cannot be obtained, we may reduce or discontinue
our product development and commercialization efforts.
We
have experienced significant losses since inception and, at December 31, 2019, had an accumulated deficit of approximately $176
million. We expect to incur additional operating losses in the future and expect our cumulative losses to increase. As of December
31, 2019, we had approximately $5.4 million in cash and cash equivalents available. Based on our projected budgetary needs, funding
from existing contracts and grants over the next two years and sales pursuant to our At the Market Issuance Sales Agreement (“FBR
Sales Agreement”) with B. Riley FBR, Inc. (“FBR”), we expect to be able to maintain the current level of our
operations through at least March 31, 2021.
In September 2014, we entered into a contract
with the NIH for the development of RiVax® to protect against exposure to ricin toxin that would provide up to
$24.7 million of funding in the aggregate over six years if options to extend the contract are exercised by the NIH. In September
2013, we entered into contracts with NIAID and BARDA for the development of OrbeShield® (oral BDP) that would provide
up to $32.7 million of funding in the aggregate if options to extend the contracts are exercised by BARDA and the NIH. We have
received approximately $18 million in combined BARDA and NIH contract funding for the development of OrbeShield®
(oral BDP). We have completed the contract with NIAID and the BARDA contract base period, with BARDA electing not to extend the
contract. In addition, in 2017, we were awarded two separate grants from the NIH of approximately $1.5 million each to support
our pivotal Phase 3 trials of SGX301 for the treatment of CTCL and SGX942 for the treatment of oral mucositis in head and neck
cancer. Our biodefense grants have an overhead component that allows us an agency-approved percentage over our incurred costs.
We estimate that the overhead component associated with our existing contracts and grants will fund some fixed costs for direct
employees working on these contracts and grants as well as other administrative costs. As of December 31, 2019, we have approximately
$2.97 million in awarded contract and grant funding available.
Our
product candidates are positioned for or are currently in clinical trials, and we have not yet generated any significant revenues
from sales or licensing of these product candidates. From inception through December 31, 2019, we have expended approximately
$88 million developing our current product candidates for pre-clinical research and development and clinical trials, and we currently
expect to spend approximately $9.4 million for the year ending December 31, 2020 in connection with the development of our therapeutic
and vaccine products, licenses, employment agreements, and consulting agreements, of which approximately $2.97 million is expected
to be reimbursed through our existing government contracts and grants.
We
have no control over the resources and funding NIH, BARDA and NIAID may devote to our programs, which may be subject to periodic
renewal and which generally may be terminated by the government at any time for convenience. Any significant reductions in the
funding of U.S. government agencies or in the funding areas targeted by our business could materially and adversely affect our
biodefense program and our results of operations and financial condition. If we fail to satisfy our obligations under the government
contracts, the applicable Federal Acquisition Regulations allow the government to terminate the agreement in whole or in part,
and we may be required to perform corrective actions, including but not limited to delivering to the government any incomplete
work. If NIH, BARDA or NIAID do not exercise future funding options under the contracts or grants, terminate the funding or fail
to perform their responsibilities under the agreements or grants, it could materially impact our biodefense program and our financial
results.
Unless
and until we are able to generate sales or licensing revenue from one of our product candidates, we will require additional funding
to meet these commitments, sustain our research and development efforts, provide for future clinical trials, and continue our
operations. There can be no assurance we can raise such funds. If additional funds are raised through the issuance of equity securities,
stockholders may experience dilution of their ownership interests, and the newly issued securities may have rights superior to
those of the common stock. If additional funds are raised by the issuance of debt, we may be subject to limitations on our operations.
If we cannot raise such additional funds, we may have to delay or stop some or all of our drug development programs.
If
we are unable to develop our product candidates, our ability to generate revenues and viability as a company will be significantly
impaired.
In
order to generate revenues and profits, our organization must, along with corporate partners and collaborators, positively research,
develop and commercialize our technologies or product candidates. Our current product candidates are in various stages of clinical
and pre-clinical development and will require significant further funding, research, development, pre-clinical and/or clinical
testing, regulatory approval and commercialization, and are subject to the risks of failure inherent in the development of products
based on innovative or novel technologies. Specifically, each of the following is possible with respect to any of our product
candidates:
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we may
not be able to maintain our current research and development schedules;
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we may
be unable to secure procurement contracts on beneficial economic terms or at all from the U.S. government or others for our
biodefense products;
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we may
encounter problems in clinical trials; or
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the
technology or product may be found to be ineffective or unsafe, or may fail to obtain marketing approval.
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If
any of the risks set forth above occur, or if we are unable to obtain the necessary regulatory approvals as discussed below, we
may be unable to develop our technologies and product candidates and our business will be seriously harmed. Furthermore, for reasons
including those set forth below, we may be unable to commercialize or receive royalties from the sale of any other technology
we develop, even if it is shown to be effective, if:
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it is
not economical or the market for the product does not develop or diminishes;
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we are
not able to enter into arrangements or collaborations to manufacture and/or market the product;
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the
product is not eligible for third-party reimbursement from government or private insurers;
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others
hold proprietary rights that preclude us from commercializing the product;
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we are
not able to manufacture the product reliably;
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others
have brought to market similar or superior products; or
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the
product has undesirable or unintended side effects that prevent or limit its commercial use.
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We
expect a number of factors to cause our operating results to fluctuate on a quarterly and annual basis, which may make it difficult
to predict our future performance.
We
are a late-stage biopharmaceutical company. Our operations to date have been primarily limited to developing our technology and
undertaking pre-clinical studies and clinical trials of our product candidates in our two active business segments, Specialized
BioTherapeutics and Public Health Solutions. We have not yet obtained regulatory approvals for any of our product candidates.
Consequently, any predictions made about our future success or viability may not be as accurate as they could be if we had commercialized
products. Our financial condition has varied significantly in the past and will continue to fluctuate from quarter-to-quarter
or year-to-year due to a variety of factors, many of which are beyond our control. Factors relating to our business that may contribute
to these fluctuations include other factors described elsewhere in this Annual Report and also include:
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our
ability to obtain additional funding to develop our product candidates;
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delays
in the commencement, enrollment and timing of clinical trials;
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the
success of our product candidates through all phases of clinical development;
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any
delays in regulatory review and approval of product candidates in clinical development;
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our
ability to obtain and maintain regulatory approval for our product candidates in the U.S. and foreign jurisdictions;
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potential
side effects of our product candidates that could delay or prevent commercialization, limit the indications for any approved
drug, require the establishment of risk evaluation and mitigation strategies, or cause an approved drug to be taken off the
market;
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our
dependence on third-party contract manufacturing organizations to supply or manufacture our products;
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our
dependence on contract research organizations to conduct our clinical trials;
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our
ability to establish or maintain collaborations, licensing or other arrangements;
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market
acceptance of our product candidates;
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our
ability to establish and maintain an effective sales and marketing infrastructure, either through the creation of a commercial
infrastructure or through strategic collaborations;
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competition
from existing products or new products that may emerge;
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the
ability of patients or healthcare providers to obtain coverage of or sufficient reimbursement for our products;
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our
ability to discover and develop additional product candidates;
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our
ability and our licensors’ abilities to successfully obtain, maintain, defend and enforce intellectual property rights
important to our business;
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our
ability to attract and retain key personnel to manage our business effectively;
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our
ability to build our finance infrastructure and improve our accounting systems and controls;
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potential
product liability claims;
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potential
liabilities associated with hazardous materials; and
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our
ability to obtain and maintain adequate insurance policies.
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Accordingly,
the results of any quarterly or annual periods should not be relied upon as indications of future operating performance.
We
have no approved products on the market and therefore do not expect to generate any revenues from product sales in the foreseeable
future, if at all.
To
date, we have no approved product on the market and have not generated any significant product revenues. We have funded our operations
primarily from sales of our securities and from government contracts and grants. We have not received, and do not expect to receive
for at least the next several years, if at all, any revenues from the commercialization of our product candidates. To obtain revenues
from sales of our product candidates, we must succeed, either alone or with third parties, in developing, obtaining regulatory
approval for, manufacturing and marketing drugs with commercial potential or successfully obtain government procurement or stockpiling
agreements. We may never succeed in these activities, and we may not generate sufficient revenues to continue our business operations
or achieve profitability.
Our
business is subject to extensive governmental regulation, which can be costly, time consuming and subjects us to unanticipated
delays.
Our
business is subject to very stringent federal, foreign, state and local government laws and regulations, including the Federal
Food, Drug and Cosmetic Act, the Environmental Protection Act, the Occupational Safety and Health Act, and state and local counterparts
to these acts. These laws and regulations may be amended, additional laws and regulations may be enacted, and the policies of
the FDA and other regulatory agencies may change.
The
regulatory process applicable to our products requires pre-clinical and clinical testing of any product to establish its safety
and efficacy. This testing can take many years, is uncertain as to outcome, and requires the expenditure of substantial capital
and other resources. We estimate that the clinical trials of our product candidates that we have planned will take at least several
years to complete. Furthermore, failure can occur at any stage of the trials, and we could encounter problems that cause us to
abandon or repeat clinical trials. Favorable results in early studies or trials, if any, may not be repeated in later studies
or trials. Even if our clinical trials are initiated and completed as planned, we cannot be certain that the results will support
our product candidate claims. Success in preclinical testing, Phase 1 and Phase 2 clinical trials does not ensure that later Phase
2 or Phase 3 clinical trials will be successful. In addition, we, the FDA or other regulatory authorities may suspend clinical
trials at any time if it appears that we are exposing participants to unacceptable health risks or the FDA or other regulatory
authorities find deficiencies in our submissions or conduct of our trials.
We
may not be able to obtain, or we may experience difficulties and delays in obtaining, necessary domestic and foreign governmental
clearances and approvals to market a product. Also, even if regulatory approval of a product is granted, that approval may entail
limitations on the indicated uses for which the product may be marketed.
Following
any regulatory approval, a marketed product and its manufacturer are subject to continual regulatory review. Later discovery of
problems with a product or manufacturer may result in restrictions on such product or manufacturer. These restrictions may include
product recalls and suspension or withdrawal of the marketing approval for the product. Furthermore, the advertising, promotion
and export, among other things, of a product are subject to extensive regulation by governmental authorities in the U.S. and other
countries. If we fail to comply with applicable regulatory requirements, we may be subject to fines, suspension or withdrawal
of regulatory approvals, product recalls, seizure of products, operating restrictions and/or criminal prosecution.
There
may be unforeseen challenges in developing our biodefense products.
For
development of biodefense vaccines and therapeutics, the FDA has instituted policies that are expected to result in accelerated
approval. This includes approval for commercial use using the results of animal efficacy trials, rather than efficacy trials in
humans, referred to as the Animal Rule. However, we will still have to establish that the vaccines we are developing are safe
in humans at doses that are correlated with the beneficial effect in animals. Such clinical trials will also have to be completed
in distinct populations that are subject to the countermeasures; for instance, the very young and the very old, and in pregnant
women, if the countermeasure is to be licensed for civilian use. Other agencies will have an influence over the risk benefit scenarios
for deploying the countermeasures and in establishing the number of doses utilized in the Strategic National Stockpile. We may
not be able to sufficiently demonstrate the animal correlation to the satisfaction of the FDA, as these correlates are difficult
to establish and are often unclear. Invocation of the Animal Rule may raise issues of confidence in the model systems even if
the models have been validated. For many of the biological threats, the animal models are not available and we may have to develop
the animal models, a time-consuming research effort. There are few historical precedents, or recent precedents, for the development
of new countermeasures for bioterrorism agents. Despite the Animal Rule, the FDA may require large clinical trials to establish
safety and immunogenicity before licensure and it may require safety and immunogenicity trials in additional populations. Approval
of biodefense products may be subject to post-marketing studies, and could be restricted in use in only certain populations. The
government’s biodefense priorities can change, which could adversely affect the commercial opportunity for the products
we are developing. Further, other countries have not, at this time, established criteria for review and approval of these types
of products outside their normal review process, i.e., there is no Animal Rule equivalent, and consequently there can be no assurance
that we will be able to make a submission for marketing approval in foreign countries based on such animal data.
Additionally,
few facilities in the U.S. and internationally have the capability to test animals with ricin, or otherwise assist us in qualifying
the requisite animal models. We have to compete with other biodefense companies for access to this limited pool of highly specialized
resources. We therefore may not be able to secure contracts to conduct the testing in a predictable timeframe or at all.
We
are dependent on government funding, which is inherently uncertain, for the success of our biodefense operations.
We
are subject to risks specifically associated with operating in the biodefense industry, which is a new and unproven business area.
We do not anticipate that a significant commercial market will develop for our biodefense products. Because we anticipate that
the principal potential purchasers of these products, as well as potential sources of research and development funds, will be
the U.S. government and governmental agencies, the success of our biodefense division will be dependent in large part upon government
spending decisions. The funding of government programs is dependent on budgetary limitations, congressional appropriations and
administrative allotment of funds, all of which are inherently uncertain and may be affected by changes in U.S. government policies
resulting from various political and military developments. Our receipt of government funding is also dependent on our ability
to adhere to the terms and provisions of the original grant and contract documents and other regulations. We can provide no assurance
that we will receive or continue to receive funding for grants and contracts we have been awarded. The loss of government funds
could have a material adverse effect on our ability to progress our biodefense business.
If
the parties we depend on for supplying our drug substance raw materials and certain manufacturing-related services do not timely
supply these products and services, it may delay or impair our ability to develop, manufacture and market our products. We do
not have or anticipate having internal manufacturing capabilities.
We
rely on suppliers for our drug substance raw materials and third parties for certain manufacturing-related services to produce
material that meets appropriate content, quality and stability standards, which material will be used in clinical trials of our
products and, after approval, for commercial distribution. To succeed, clinical trials require adequate supplies of drug substance
and drug product, which may be difficult or uneconomical to procure or manufacture. We and our suppliers and vendors may not be
able to (i) produce our drug substance or drug product to appropriate standards for use in clinical studies, (ii) perform under
any definitive manufacturing, supply or service agreements with us or (iii) remain in business for a sufficient time to be able
to develop, produce, secure regulatory approval of and market our product candidates. If we do not maintain important manufacturing
and service relationships, we may fail to find a replacement supplier or required vendor or develop our own manufacturing capabilities
which could delay or impair our ability to obtain regulatory approval for our products and substantially increase our costs or
deplete profit margins, if any. If we do find replacement manufacturers and vendors, we may not be able to enter into agreements
with them on terms and conditions favorable to us and, there could be a substantial delay before a new facility could be qualified
and registered with the FDA and foreign regulatory authorities.
We
rely on third parties for pre-clinical and clinical trials of our product candidates and, in some cases, to maintain regulatory
files for our product candidates. If we are not able to maintain or secure agreements with such third parties on acceptable terms,
if these third parties do not perform their services as required, or if these third parties fail to timely transfer any regulatory
information held by them to us, we may not be able to obtain regulatory approval for, or commercialize, our product candidates.
We
rely on academic institutions, hospitals, clinics and other third-party collaborators for preclinical and clinical trials of our
product candidates. Although we monitor, support, and/or oversee our pre-clinical and clinical trials, because we do not conduct
these trials ourselves, we have less control over the timing and cost of these studies and the ability to recruit trial subjects
than if we conducted these trials wholly by ourselves. If we are unable to maintain or enter into agreements with these third
parties on acceptable terms, or if any such engagement is terminated, we may be unable to enroll patients on a timely basis or
otherwise conduct our trials in the manner we anticipate. In addition, there is no guarantee that these third parties will devote
adequate time and resources to our studies or perform as required by a contract or in accordance with regulatory requirements,
including maintenance of clinical trial information regarding our product candidates. If these third parties fail to meet expected
deadlines, fail to timely transfer to us any regulatory information, fail to adhere to protocols or fail to act in accordance
with regulatory requirements or our agreements with them, or if they otherwise perform in a substandard manner or in a way that
compromises the quality or accuracy of their activities or the data they obtain, then preclinical and/or clinical trials of our
product candidates may be extended, delayed or terminated, or our data may be rejected by the FDA or regulatory agencies.
The
manufacturing of our products is a highly exacting process, and if we or one of our materials suppliers encounter problems manufacturing
our products, our business could suffer.
The
FDA and foreign regulators require manufacturers to register manufacturing facilities. The FDA and foreign regulators also inspect
these facilities to confirm compliance with current Good Manufacturing Practice (“cGMP”) or similar requirements that
the FDA or foreign regulators establish. We, or our materials suppliers, may face manufacturing or quality control problems causing
product production and shipment delays or a situation where we or the supplier may not be able to maintain compliance with the
FDA’s cGMP requirements, or those of foreign regulators, necessary to continue manufacturing our drug substance. Any failure
to comply with cGMP requirements or other FDA or foreign regulatory requirements could adversely affect our clinical research
activities and our ability to market and develop our products.
We
may use our financial and human resources to pursue a particular research program or product candidate and fail to capitalize
on programs or product candidates that may be more profitable or for which there is a greater likelihood of success.
Because
we have limited financial and human resources, we are currently focusing on the regulatory approval of certain product candidates.
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 existing and future 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 strategic alliance, 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, or we may allocate internal resources to a product candidate in an area in which it would have
been more advantageous to enter into a partnering arrangement.
Even
if approved, our products will be subject to extensive post-approval regulation.
Once a product is approved, numerous post-approval
requirements apply. Among other things, the holder of an approved NDA is subject to periodic and other FDA monitoring and reporting
obligations, including obligations to monitor and report adverse events and instances of the failure of a product to meet the specifications
in the NDA. Application holders must submit new or supplemental applications and obtain FDA approval for certain changes to the
approved product, product labeling, or manufacturing process. Application holders must also submit advertising and other promotional
material to the FDA and report on ongoing clinical trials.
Depending
on the circumstances, failure to meet these post-approval requirements can result in criminal prosecution, fines, injunctions,
recall or seizure of products, total or partial suspension of production, denial or withdrawal of pre-marketing product approvals,
or refusal to allow us to enter into supply contracts, including government contracts. In addition, even if we comply with FDA
and other requirements, new information regarding the safety or effectiveness of a product could lead the FDA to modify or withdraw
product approval.
Even
if we obtain regulatory approval to market our product candidates, our product candidates may not be accepted by the market.
Even
if the FDA approves one or more of our product candidates, physicians and patients may not accept it or use it. Even if physicians
and patients would like to use our products, our products may not gain market acceptance among healthcare payors such as managed
care formularies, insurance companies or government programs such as Medicare or Medicaid. Acceptance and use of our products
will depend upon a number of factors including: perceptions by members of the health care community, including physicians, about
the safety and effectiveness of our drug product; cost-effectiveness of our product relative to competing products; availability
of reimbursement for our product from government or other healthcare payers; and effectiveness of marketing and distribution efforts
by us and our licensees and distributors, if any.
The
degree of market acceptance of any product that we develop will depend on a number of factors, including:
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the safety and effectiveness
of our products, including any significant potential side effects, as compared to alternative products or treatment methods;
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the timing of market
entry as compared to competitive products;
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the rate of adoption
of our products by doctors and nurses;
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product labeling
or product insert required by the FDA for each of our products;
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reimbursement policies
of government and third-party payors;
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effectiveness of
our sales, marketing and distribution capabilities and the effectiveness of such capabilities of our collaborative partners,
if any; and
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unfavorable publicity
concerning our products or any similar products.
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Our
product candidates, if successfully developed, will compete with a number of products manufactured and marketed by major pharmaceutical
companies, biotechnology companies and manufacturers of generic drugs. Our products may also compete with new products currently
under development by others. Physicians, patients, third-party payors and the medical community may not accept and utilize any
of our product candidates. If our products do not achieve market acceptance, we will not be able to generate significant revenues
or become profitable.
Because
we expect sales of our current product candidates, if approved, to generate substantially all of our product revenues for the
foreseeable future, the failure of these products to find market acceptance would harm our business and could require us to seek
additional financing.
We
do not have extensive sales and marketing experience and our lack of experience may restrict our success in commercializing some
of our product candidates.
We
do not have extensive experience in marketing or selling pharmaceutical products whether in the U.S. or internationally. To obtain
the expertise necessary to successfully market and sell any of our products, the development of our own commercial infrastructure
and/or collaborative commercial arrangements and partnerships will be required. Our ability to make that investment and also execute
our current operating plan is dependent on numerous factors, including, the performance of third party collaborators with whom
we may contract.
Our
products, if approved, may not be commercially viable due to change in health care practice and third party reimbursement limitations.
Initiatives
to reduce the federal deficit and to change health care delivery are increasing cost-containment efforts. We anticipate that Congress,
state legislatures and the private sector will continue to review and assess alternative benefits, controls on health care spending
through limitations on the growth of private health insurance premiums and Medicare and Medicaid spending, price controls on pharmaceuticals,
and other fundamental changes to the health care delivery system. Any changes of this type could negatively impact the commercial
viability of our products, if approved. Our ability to successfully commercialize our product candidates, if they are approved,
will depend in part on the extent to which appropriate reimbursement codes and authorized cost reimbursement levels of these products
and related treatment are obtained from governmental authorities, private health insurers and other organizations, such as health
maintenance organizations. In the absence of national Medicare coverage determination, local contractors that administer the Medicare
program may make their own coverage decisions. Any of our product candidates, if approved and when commercially available, may
not be included within the then current Medicare coverage determination or the coverage determination of state Medicaid programs,
private insurance companies or other health care providers. In addition, third-party payers are increasingly challenging the necessity
and prices charged for medical products, treatments and services.
Our
product candidates may cause serious adverse events or undesirable side effects which may delay or prevent marketing approval,
or, if approval is received, require them to be taken off the market, require them to include safety warnings or otherwise limit
their sales.
Serious
adverse events or undesirable side effects from any of our product candidates could arise either during clinical development or,
if approved, after the approved product has been marketed. The results of future clinical trials may show that our product candidates
cause serious adverse events or undesirable side effects, which could interrupt, delay or halt clinical trials, resulting in delay
of, or failure to obtain, marketing approval from the FDA and other regulatory authorities.
If
any of our product candidates cause serious adverse events or undesirable side effects:
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regulatory authorities
may impose a clinical hold which could result in substantial delays and adversely impact our ability to continue development
of the product;
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regulatory authorities
may require the addition of labeling statements, specific warnings, a contraindication or field alerts to physicians and pharmacies;
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we may be required
to change the way the product is administered, conduct additional clinical trials or change the labeling of the product;
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we may be required
to implement a risk minimization action plan, which could result in substantial cost increases and have a negative impact
on our ability to commercialize the product;
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we may be required
to limit the patients who can receive the product;
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we may be subject
to limitations on how we promote the product;
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sales of the product
may decrease significantly;
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regulatory authorities
may require us to take our approved product off the market;
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we may be subject
to litigation or product liability claims; and
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our reputation may
suffer.
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Any
of these events could prevent us from achieving or maintaining market acceptance of the affected product or could substantially
increase commercialization costs and expenses, which in turn could delay or prevent us from generating significant revenues from
the sale of our products.
If
we fail to obtain or maintain orphan drug exclusivity for our product candidates, our competitors may sell products to treat the
same conditions and our revenue will be reduced.
Under the Orphan Drug Act, the FDA may
designate a product as an orphan drug if it is intended to treat a rare disease or condition, defined as a patient population of
fewer than 200,000 in the U.S., or a patient population greater than 200,000 in the U.S. where there is no reasonable expectation
that the cost of developing the drug will be recovered from sales in the U.S. In the EU, the European Medicines Agency’s
Committee for Orphan Medicinal Products grants orphan drug designation to promote the development of products that are intended
for the diagnosis, prevention, or treatment of a life-threatening or chronically debilitating condition affecting not more than
five in 10,000 persons in the EU. Additionally, designation is granted for products intended for the diagnosis, prevention, or
treatment of a life-threatening, seriously debilitating or serious and chronic condition when, without incentives, it is unlikely
that sales of the drug in the EU would be sufficient to justify the necessary investment in developing the drug or biological product
or where there is no satisfactory method of diagnosis, prevention, or treatment, or, if such a method exists, the medicine must
be of significant benefit to those affected by the condition.
In
the U.S., orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical
trial costs, tax advantages, and user-fee waivers. In addition, if a product receives the first FDA approval for the indication
for which it has orphan designation, the product is entitled to orphan drug exclusivity, which means the FDA may not approve any
other application to market the same drug for the same indication for a period of seven years, except in limited circumstances,
such as a showing of clinical superiority over the product with orphan exclusivity or where the manufacturer is unable to assure
sufficient product quantity. In the EU, orphan drug designation entitles a party to financial incentives such as reduction of
fees or fee waivers and ten years of market exclusivity following drug or biological product approval. This period may be reduced
to six years if the orphan drug designation criteria are no longer met, including where it is shown that the product is sufficiently
profitable not to justify maintenance of market exclusivity.
Even though we have orphan drug designation
for SGX301 in the U.S. and Europe, and SGX203, RiVax® in the U.S., we may not be the first to obtain marketing
approval for any particular orphan indication due to the uncertainties associated with developing drugs or biologic products.
Further, even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from
competition because different drugs with different active moieties can be approved for the same condition. Absent patent or other
intellectual property protection, even after an orphan drug is approved, the FDA or European Medicines Agency may subsequently
approve the same drug with the same active moiety for the same condition if the FDA or European Medicines Agency concludes that
the later drug is safer, more effective, or makes a major contribution to patient care.
Federal
and/or state health care reform initiatives could negatively affect our business.
The
availability of reimbursement by governmental and other third-party payers affects the market for any pharmaceutical product.
These third-party payers continually attempt to contain or reduce the costs of healthcare. There have been a number of legislative
and regulatory proposals to change the healthcare system and further proposals are likely. Medicare’s policies may decrease
the market for our products. Significant uncertainty exists with respect to the reimbursement status of newly approved healthcare
products.
Third-party
payers are increasingly challenging the price and cost-effectiveness of medical products and services. Once approved, we might
not be able to sell our products profitably or recoup the value of our investment in product development if reimbursement is unavailable
or limited in scope, particularly for product candidates addressing small patient populations. On July 15, 2008, the Medicare
Improvements for Patients and Providers Act of 2008 became law with a number of Medicare and Medicaid reforms to establish a bundled
Medicare payment rate that includes services and drug/labs that were separately billed at that time. Bundling initiatives that
have been implemented in other healthcare settings have occasionally resulted in lower utilization of services that had not previously
been a part of the bundled payment.
In
addition, in some foreign countries, the proposed pricing for a drug must be approved before it may be lawfully marketed. The
requirements governing drug pricing vary widely from country to country. We expect that there will continue to be a number of
U.S. federal and state proposals to implement governmental pricing controls. While we cannot predict whether such legislative
or regulatory proposals will be adopted, the adoption of such proposals could have a material adverse effect on our business,
financial condition and profitability.
We
may not be able to retain rights licensed to us by third parties to commercialize key products or to develop the third party relationships
we need to develop, manufacture and market our products.
We
currently rely on license agreements from New York University, Yeda Research and Development Company Ltd., the University of Texas
Southwestern Medical Center, the University of British Columbia, Harvard University and George B. McDonald, MD as well as sublicense
agreement from VitriVax for the rights to commercialize key product candidates. We may not be able to retain the rights granted
under these agreements or negotiate additional agreements on reasonable terms, if at all. Our existing license agreements impose,
and we expect that future license agreements will impose, various diligence, milestone payment, royalty, and other obligations
on us. If we fail to comply with our obligations under these agreements, or we are subject to a bankruptcy, we may be required
to make certain payments to the licensor, we may lose the exclusivity of our license, or the licensor may have the right to terminate
the license, in which event we would not be able to develop or market products covered by the license.
Additionally,
the milestone and other payments associated with these licenses will make it less profitable for us to develop our drug candidates.
See “Business - Patents and Other Proprietary Rights” for a description of our license agreements.
Licensing
of intellectual property is of critical importance to our business and involves complex legal, business, and scientific issues.
Disputes may arise regarding intellectual property subject to a licensing agreement, including but not limited to:
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the scope of rights
granted under the license agreement and other interpretation-related issues;
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the extent to which
our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement;
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the sublicensing
of patent and other rights;
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our diligence obligations
under the license agreement and what activities satisfy those diligence obligations;
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the ownership of
inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our
collaborators; and
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the priority of
invention of patented technology.
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If
disputes over intellectual property and other rights that we have licensed prevent or impair our ability to maintain our current
licensing arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates.
Additionally, the research resulting in
certain of our licensed patent rights and technology was funded by the U.S. government. As a result, the government may have certain
rights, or march-in rights, to such patent rights and technology. When new technologies are developed with government funding,
the government generally obtains certain rights in any resulting patents, including a non-exclusive license authorizing the government
to use the invention for non-commercial purposes. The government can exercise its march-in rights if it determines that action
is necessary because we fail to achieve practical application of the government-funded technology, because action is necessary
to alleviate health or safety needs, to meet requirements of federal regulations or to give preference to U.S. industry. In addition,
our rights in such inventions may be subject to certain requirements to manufacture products embodying such inventions in the U.S.
Any exercise by the government of such rights could harm our competitive position, business, financial condition, results of operations
and prospects.
Furthermore,
we currently have very limited product development capabilities and no manufacturing, marketing or sales capabilities. For us
to research, develop and test our product candidates, we need to contract or partner with outside researchers, in most cases with
or through those parties that did the original research and from whom we have licensed the technologies. If products are successfully
developed and approved for commercialization, then we will need to enter into additional collaboration and other agreements with
third parties to manufacture and market our products. We may not be able to induce the third parties to enter into these agreements,
and, even if we are able to do so, the terms of these agreements may not be favorable to us. Our inability to enter into these
agreements could delay or preclude the development, manufacture and/or marketing of some of our product candidates or could significantly
increase the costs of doing so. In the future, we may grant to our development partners rights to license and commercialize pharmaceutical
and related products developed under the agreements with them, and these rights may limit our flexibility in considering alternatives
for the commercialization of these products. Furthermore, third-party manufacturers or suppliers may not be able to meet our needs
with respect to timing, quantity and quality for the products.
Additionally,
if we do not enter into relationships with additional third parties for the marketing of our products, if and when they are approved
and ready for commercialization, we would have to build our own sales force or enter into commercialization agreements with other
companies. Development of an effective sales force in any part of the world would require significant financial resources, time
and expertise. We may not be able to obtain the financing necessary to establish a sales force in a timely or cost effective manner,
if at all, and any sales force we are able to establish may not be capable of generating demand for our product candidates, if
they are approved.
We
may suffer product and other liability claims; we maintain only limited product liability insurance, which may not be sufficient.
The
clinical testing, manufacture and sale of our products involves an inherent risk that human subjects in clinical testing or consumers
of our products may suffer serious bodily injury or death due to side effects, allergic reactions or other unintended negative
reactions to our products. As a result, product and other liability claims may be brought against us. We currently have clinical
trial and product liability insurance with limits of liability of $10 million, which may not be sufficient to cover our potential
liabilities. Because liability insurance is expensive and difficult to obtain, we may not be able to maintain existing insurance
or obtain additional liability insurance on acceptable terms or with adequate coverage against potential liabilities. Furthermore,
if any claims are brought against us, even if we are fully covered by insurance, we may suffer harm such as adverse publicity.
We
may use hazardous chemicals in our business. Potential claims relating to improper handling, storage or disposal of these chemicals
could affect us and be time consuming and costly.
Our
research and development processes and/or those of our third party contractors involve the controlled use of hazardous materials
and chemicals. These hazardous chemicals are reagents and solvents typically found in a chemistry laboratory. Our operations also
may produce hazardous waste products. Federal, state and local laws and regulations govern the use, manufacture, storage, handling
and disposal of hazardous materials. While we attempt to comply with all environmental laws and regulations, including those relating
to the outsourcing of the disposal of all hazardous chemicals and waste products, we cannot eliminate the risk of contamination
from or discharge of hazardous materials and any resultant injury. In the event of such an accident, we could be held liable for
any resulting damages and any liability could materially adversely affect our business, financial condition and results of operations.
Compliance
with environmental laws and regulations may be expensive. Current or future environmental regulations may impair our research,
development or production efforts. We might have to pay civil damages in the event of an improper or unauthorized release of,
or exposure of individuals to, hazardous materials. We are not insured against these environmental risks. We may agree to indemnify
our collaborators in some circumstances against damages and other liabilities arising out of development activities or products
produced in connection with these collaborations.
In
addition, the federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of
hazardous or radioactive materials and waste products may require us to incur substantial compliance costs that could materially
adversely affect our business, financial condition and results of operations.
We
may not be able to compete with our larger and better financed competitors in the biotechnology industry.
The
biotechnology industry is intensely competitive, subject to rapid change and sensitive to new product introductions or enhancements.
Most of our existing competitors have greater financial resources, larger technical staffs, and larger research budgets than we
have, as well as greater experience in developing products and conducting clinical trials. Our competition is particularly intense
in the gastroenterology and transplant areas and is also intense in the therapeutic area of inflammatory bowel diseases. We face
intense competition in the biodefense area from various public and private companies and universities as well as governmental
agencies, such as the U.S. Army, which may have their own proprietary technologies that may directly compete with our technologies.
In addition, there may be other companies that are currently developing competitive technologies and products or that may in the
future develop technologies and products that are comparable or superior to our technologies and products. We may not be able
to compete with our existing and future competitors, which could lead to the failure of our business.
Additionally,
if a competitor receives FDA approval before we do for a drug that is similar to one of our product candidates, FDA approval for
our product candidate may be precluded or delayed due to periods of non-patent exclusivity and/or the listing with the FDA by
the competitor of patents covering its newly-approved drug product. Periods of non-patent exclusivity for new versions of existing
drugs such as our current product candidates can extend up to three and one-half years. See “Business - The Drug Approval
Process.”
These
competitive factors could require us to conduct substantial new research and development activities to establish new product targets,
which would be costly and time consuming. These activities would adversely affect our ability to commercialize products and achieve
revenue and profits.
Competition
and technological change may make our product candidates and technologies less attractive or obsolete.
We
compete with established pharmaceutical and biotechnology companies that are pursuing other forms of treatment for the same indications
we are pursuing and that have greater financial and other resources. Other companies may succeed in developing products earlier
than us, obtaining FDA approval for products more rapidly, or developing products that are more effective than our product candidates.
Research and development by others may render our technology or product candidates obsolete or noncompetitive, or result in treatments
or cures superior to any therapy we develop. We face competition from companies that internally develop competing technology or
acquire competing technology from universities and other research institutions. As these companies develop their technologies,
they may develop competitive positions that may prevent, make futile, or limit our product commercialization efforts, which would
result in a decrease in the revenue we would be able to derive from the sale of any products.
There
can be no assurance that any of our product candidates will be accepted by the marketplace as readily as these or other competing
treatments. Furthermore, if our competitors’ products are approved before ours, it could be more difficult for us to obtain
approval from the FDA. Even if our products are successfully developed and approved for use by all governing regulatory bodies,
there can be no assurance that physicians and patients will accept our product(s) as a treatment of choice.
Furthermore,
the pharmaceutical research industry is diverse, complex, and rapidly changing. By its nature, the business risks associated therewith
are numerous and significant. The effects of competition, intellectual property disputes, market acceptance, and FDA regulations
preclude us from forecasting revenues or income with certainty or even confidence.
Our
business could be harmed if we fail to retain our current personnel or if they are unable to effectively run our business.
We
currently have 18 employees and we depend upon these employees, in particular Dr. Christopher Schaber, our President and Chief
Executive Officer, to manage the day-to-day activities of our business. Because we have such limited personnel, the loss of any
of them or our inability to attract and retain other qualified employees in a timely manner would likely have a negative impact
on our operations. We may be unable to effectively manage and operate our business, and our business may suffer, if we lose the
services of our employees.
Instability
and volatility in the financial markets could have a negative impact on our business, financial condition, results of operations,
and cash flows.
During
recent years, there has been substantial volatility in financial markets due at least in part to the uncertainty with regard to
the global economic environment. In addition, there has been substantial uncertainty in the capital markets and access to additional
financing is uncertain. Moreover, customer spending habits may be adversely affected by current and future economic conditions.
These conditions could have an adverse effect on our industry and business, including our financial condition, results of operations,
and cash flows.
To
the extent that we do not generate sufficient cash from operations, we may need to issue stock or incur indebtedness to finance
our plans for growth. Recent turmoil in the credit markets and the potential impact on the liquidity of major financial institutions
may have an adverse effect on our ability to fund our business strategy through borrowings, under either existing or newly created
instruments in the public or private markets on terms we believe to be reasonable, if at all.
We
may not be able to utilize all of our net operating loss carryforwards.
The State of New Jersey’s Technology
Business Tax Certificate Program allows certain high technology and biotechnology companies to sell unused net operating loss (“NOL”)
carryforwards to other New Jersey-based corporate taxpayers. In accordance with this program, for the year ended December 31, 2017,
we sold New Jersey NOL carryforwards, resulting in the recognition of $610,676 of income tax benefit. Due to a delay in the program,
these funds were not recognized or received until April of 2019. We have applied for and received confirmation that we have NOLs
that qualify for an income tax benefit in the amount of $836,893 for the year ended December 31, 2018. The program has been delayed
again this year, and we will therefore not recognize this benefit until we receive our certificate for the funds. We have not yet
sold our 2019 New Jersey NOLs but may do so in the future. If there is an unfavorable change in the State of New Jersey’s
Technology Business Tax Certificate Program (whether as a result of a change in law, policy or otherwise) that terminates the program
or eliminates or reduces our ability to use or sell our NOL carryforwards or if we are unable to find a suitable buyer to utilize
our New Jersey NOL carryforwards to the extent the NOLs expire before we are able to utilize them against our taxable income, our
cash taxes may increase which may have an adverse effect on our financial condition.
Global
pathogens that could have an impact on financial markets, materials sourcing, patients, governments and population (e.g. COVID-19).
Based
on the current outbreak of the Coronavirus SARS-CoV-2, the pathogen responsible for COVID-19, which has already had an impact
on financial markets, there could be additional repercussions to our operating business, including but not limited to, the sourcing
of materials for our product candidates, manufacture of supplies for our preclinical and/or clinical studies, delays in clinical
operations, which may include the availability or the continued availability of patients for our trials due to such things as
quarantines, our conduct of patient monitoring and clinical trial data retrieval at investigational study sites.
The future impact of the outbreak is highly uncertain and cannot be predicted, and we cannot provide any
assurance that the outbreak will not have a material adverse impact on our operations or future results or filings with regulatory
health authorities. The extent of the impact to us, if any, will depend on future developments, including actions taken to contain
the coronavirus.
Risks
Related to our Intellectual Property
We
may be unable to commercialize our products if we are unable to protect our proprietary rights, and we may be liable for significant
costs and damages if we face a claim of intellectual property infringement by a third party.
Our
near and long-term prospects depend in part on our ability to obtain and maintain patents, protect trade secrets and operate without
infringing upon the proprietary rights of others. In the absence of patent and trade secret protection, competitors may adversely
affect our business by independently developing and marketing substantially equivalent or superior products and technology, possibly
at lower prices. We could also incur substantial costs in litigation and suffer diversion of attention of technical and management
personnel if we are required to defend ourselves in intellectual property infringement suits brought by third parties, with or
without merit, or if we are required to initiate litigation against others to protect or assert our intellectual property rights.
Moreover, any such litigation may not be resolved in our favor.
Although
we and our licensors have filed various patent applications covering the uses of our product candidates, patents may not be issued
from the patent applications already filed or from applications that we might file in the future. Moreover, the patent position
of companies in the pharmaceutical industry generally involves complex legal and factual questions, and has been the subject of
much litigation. Any patents we own or license, now or in the future, may be challenged, invalidated or circumvented. To date,
no consistent policy has been developed in the U.S. Patent and Trademark Office (the “PTO”) regarding the breadth
of claims allowed in biotechnology patents.
In
addition, because patent applications in the U.S. are maintained in secrecy until patent applications publish or patents issue,
and because publication of discoveries in the scientific or patent literature often lags behind actual discoveries, we cannot
be certain that we and our licensors are the first creators of inventions covered by any licensed patent applications or patents
or that we or they are the first to file. The PTO may commence interference proceedings involving patents or patent applications,
in which the question of first inventorship is contested. Accordingly, the patents owned or licensed to us may not be valid or
may not afford us protection against competitors with similar technology, and the patent applications licensed to us may not result
in the issuance of patents.
It
is also possible that our owned and licensed technologies may infringe on patents or other rights owned by others, and licenses
to which may not be available to us. We may be unable to obtain a license under such patent on terms favorable to us, if at all.
We may have to alter our products or processes, pay licensing fees or cease activities altogether because of patent rights of
third parties.
In
addition to the products for which we have patents or have filed patent applications, we rely upon unpatented proprietary technology
and may not be able to meaningfully protect our rights with regard to that unpatented proprietary technology. Furthermore, to
the extent that consultants, key employees or other third parties apply technological information developed by them or by others
to any of our proposed projects, disputes may arise as to the proprietary rights to this information, which may not be resolved
in our favor.
We
may be involved in lawsuits to protect or enforce our patents, which could be expensive and time consuming.
The
pharmaceutical industry has been characterized by extensive litigation regarding patents and other intellectual property rights,
and companies have employed intellectual property litigation to gain a competitive advantage. We may become subject to infringement
claims or litigation arising out of patents and pending applications of our competitors, or additional interference proceedings
declared by the PTO to determine the priority of inventions. The defense and prosecution of intellectual property suits, PTO proceedings,
and related legal and administrative proceedings are costly and time-consuming to pursue, and their outcome is uncertain. Litigation
may be necessary to enforce our issued patents, to protect our trade secrets and know-how, or to determine the enforceability,
scope, and validity of the proprietary rights of others. An adverse determination in litigation or interference proceedings to
which we may become a party could subject us to significant liabilities, require us to obtain licenses from third parties, or
restrict or prevent us from selling our products in certain markets. Although patent and intellectual property disputes might
be settled through licensing or similar arrangements, the costs associated with such arrangements may be substantial and could
include our paying large fixed payments and ongoing royalties. Furthermore, the necessary licenses may not be available on satisfactory
terms or at all.
Competitors
may infringe our patents, and we may file infringement claims to counter infringement or unauthorized use. This can be expensive,
particularly for a company of our size, and time-consuming. In addition, in an infringement proceeding, a court may decide that
a patent of ours is not valid or is unenforceable or may refuse to stop the other party from using the technology at issue on
the grounds that our patents do not cover its technology. An adverse determination of any litigation or defense proceedings could
put one or more of our patents at risk of being invalidated or interpreted narrowly.
Also,
a third party may assert that our patents are invalid and/or unenforceable. There are no unresolved communications, allegations,
complaints or threats of litigation related to the possibility that our patents are invalid or unenforceable. Any litigation or
claims against us, whether or not merited, may result in substantial costs, place a significant strain on our financial resources,
divert the attention of management and harm our reputation. An adverse decision in litigation could result in inadequate protection
for our product candidates and/or reduce the value of any license agreements we have with third parties.
Interference
proceedings brought before the PTO may be necessary to determine priority of invention with respect to our patents or patent applications.
During an interference proceeding, it may be determined that we do not have priority of invention for one or more aspects in our
patents or patent applications and could result in the invalidation in part or whole of a patent or could put a patent application
at risk of not issuing. Even if successful, an interference proceeding may result in substantial costs and distraction to our
management.
Furthermore,
because of the substantial amount of discovery required in connection with intellectual property litigation or interference proceedings,
there is a risk that some of our confidential information could be compromised by disclosure. In addition, there could be public
announcements of the results of hearings, motions or other interim proceedings or developments. If investors perceive these results
to be negative, the price of our common stock could be adversely affected.
If
we infringe the rights of third parties we could be prevented from selling products, forced to pay damages, and defend against
litigation.
If
our products, methods, processes and other technologies infringe the proprietary rights of other parties, we could incur substantial
costs and we may have to: obtain licenses, which may not be available on commercially reasonable terms, if at all; abandon an
infringing product candidate; redesign our products or processes to avoid infringement; stop using the subject matter claimed
in the patents held by others; pay damages; and/or defend litigation or administrative proceedings which may be costly whether
we win or lose, and which could result in a substantial diversion of our financial and management resources.
Risks
Related to our Securities
The
price of our common stock and warrants may be highly volatile.
The
market price of our securities, like that of many other research and development public pharmaceutical and biotechnology companies,
has been highly volatile and the price of our common stock and warrants may be volatile in the future due to a wide variety of
factors, including:
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announcements by
us or others of results of pre-clinical testing and clinical trials;
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announcements of
technological innovations, more important bio-threats or new commercial therapeutic products by us, our collaborative partners
or our present or potential competitors;
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failure of our common
stock or warrants to continue to be listed or quoted on a national exchange or market system, such as The Nasdaq Stock Market
(“NASDAQ”) or NYSE Amex LLC;
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our quarterly operating
results and performance;
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developments or
disputes concerning patents or other proprietary rights;
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litigation
and government proceedings;
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changes
in government regulations;
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our
available working capital;
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economic
and other external factors;
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general
market conditions.
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Since January 1, 2020, the closing stock
price of our common stock has fluctuated between a high of $3.34 per share to a low of $1.42 per share. Since January 1, 2020,
the closing price of our common stock warrants has fluctuated between a high of $1.08 per warrant to a low of $0.16 per warrant.
On March 23, 2020 the last reported sales prices of our common stock and our common stock warrant on The Nasdaq Capital Market
were $1.47 per share and $0.48 per warrant. The fluctuation in the price of our common stock and warrants has sometimes been unrelated
or disproportionate to our operating performance. In addition, potential dilutive effects of future sales of shares of common stock
and warrants by us, as well as potential sale of common stock by the holders of warrants and options, could have an adverse effect
on the market price of our shares.
If
we fail to remain current with our listing requirements, we could be removed from The Nasdaq Capital Market, which would limit
the ability of broker-dealers to sell our securities and the ability of shareholders to sell their securities in the secondary
market.
Companies
trading on The Nasdaq Stock Market, such as our Company, must be reporting issuers under Section 12 of the Exchange Act, as amended,
and must meet the listing requirements in order to maintain the listing of common stock on The Nasdaq Capital Market. If we do
not meet these requirements, the market liquidity for our securities could be severely adversely affected by limiting the ability
of broker-dealers to sell our securities and the ability of shareholders to sell their securities in the secondary market.
The
warrants may not have any value.
The
outstanding warrants do not confer any rights of common stock ownership on their holders, such as voting rights or the right to
receive dividends, but rather merely represent the right to acquire shares of common stock at a fixed price for a limited period
of time. Specifically, the holders of the outstanding warrants may exercise their right to acquire the common stock and pay the
per share exercise price, prior to the expiration date, after which date any unexercised warrants will expire and have no further
value. In the event our common stock does not exceed the exercise price of the warrants during the period when the warrants are
exercisable, the warrants may not have any value.
Shareholders
may suffer substantial dilution related to issued stock warrants and options.
As
of December 31, 2019, we had a number of agreements or obligations that may result in dilution to investors. These include:
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warrants
to purchase a total of approximately 6,192,711 shares of our common stock at a current weighted average exercise price of
approximately $2.88;
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options
to purchase approximately 1,506,972 shares of our common stock at a current weighted average exercise price of approximately
$3.77; and
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The
FBR Sales Agreement pursuant to which we may, but have no obligation to, sell up to an additional $0.9 million worth of our
common stock as of March 23, 2020.
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We
also have an incentive compensation plan for our management, employees and consultants. We have granted, and expect to grant in
the future, options to purchase shares of our common stock to our directors, employees and consultants. To the extent that warrants
or options are exercised, our stockholders will experience dilution and our stock price may decrease.
Our
shares of common stock and warrants are thinly traded, so stockholders may be unable to sell at or near ask prices or at all if
they need to sell shares or warrants to raise money or otherwise desire to liquidate their shares.
Our
common stock and warrants have from time to time been “thinly-traded,” meaning that the number of persons interested
in purchasing our common stock or warrants at or near ask prices at any given time may be relatively small or non-existent. This
situation is attributable to a number of factors, including the fact that we are a small company that is relatively unknown to
stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales
volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow
an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we become more seasoned
and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent,
as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous
sales without an adverse effect on share price. We cannot give stockholders any assurance that a broader or more active public
trading market for our common shares and warrants will develop or be sustained, or that current trading levels will be sustained.
We
do not currently intend to pay dividends on our common stock in the foreseeable future, and consequently, our stockholders’
ability to achieve a return on their investment will depend on appreciation in the price of our common stock.
We
have never declared or paid cash dividends on our common stock and do not anticipate paying any cash dividends to holders of our
common stock in the foreseeable future. Consequently, our stockholders must rely on sales of their common stock and warrants after
price appreciation, which may never occur, as the only way to realize any future gains on their investments. There is no guarantee
that shares of our common stock or warrants will appreciate in value or even maintain the price at which our stockholders have
purchased their shares.
Upon
our dissolution, our stockholders may not recoup all or any portion of their investment.
In
the event of our liquidation, dissolution or winding-up, whether voluntary or involuntary, the proceeds and/or our assets remaining
after giving effect to such transaction, and the payment of all of our debts and liabilities will be distributed to the holders
of common stock on a pro rata basis. There can be no assurance that we will have available assets to pay to the holders of common
stock, or any amounts, upon such a liquidation, dissolution or winding-up. In this event, our stockholders could lose some or
all of their investment.
The
issuance of our common stock pursuant to the terms of the asset purchase agreement with Hy Biopharma Inc. may cause dilution and
the issuance of such shares of common stock, or the perception that such issuances may occur, could cause the price of our common
stock to fall.
On April 1, 2014, we entered into an option
agreement pursuant to which Hy Biopharma granted us an option to purchase certain assets, properties and rights (the “Hypericin
Assets”) related to the development of Hy Biopharma’s synthetic hypericin product candidate for the treatment of CTCL,
which we refer to as SGX301, from Hy Biopharma. In exchange for the option, we paid $50,000 in cash and issued 4,307 shares of
common stock in the aggregate to Hy Biopharma and its assignees. We subsequently exercised the option, and on September 3, 2014,
we entered into an asset purchase agreement with Hy Biopharma, pursuant to which we purchased the Hypericin Assets. Pursuant to
the purchase agreement, we initially paid $275,000 in cash and issued 184,912 shares of common stock in the aggregate to Hy Biopharma
and its assignees, and the licensors of the license agreement acquired from Hy Biopharma. In March 2020, we issued 1,956,182 shares
of common stock at a value of $5,000,000 (based upon an effective per share price of $2.56) as a result of SGX301 demonstrating
statistical significant treatment response in the Phase 3 clinical trial. We may issue up to $5.0 million worth of our common stock
(subject to a cap equal to 19.99% of our issued and outstanding common stock) in the aggregate upon attainment of a specified milestone.
The final milestone payment will be payable if SGX301 is approved for the treatment of CTCL by either the FDA or the EMA. Also
on September 3, 2014, we entered into a Registration Rights Agreement with Hy Biopharma, pursuant to which we may be required to
file a registration statement with the SEC.
The
number of shares that we may issue under the purchase agreement will fluctuate based on the market price of our common stock.
Depending on market liquidity at the time, the issuance of such shares may cause the trading price of our common stock to fall.
We
may ultimately issue all, some or none of the additional shares of our common stock that may be issued pursuant to the purchase
agreement. We are required to register any shares issued pursuant to the purchase agreement for resale under the Securities Act
of 1933, as amended (the “Securities Act”). After any such shares are registered, the holders will be able to sell
all, some or none of those shares. Therefore, issuances by us under the purchase agreement could result in substantial dilution
to the interests of other holders of our common stock. Additionally, the issuance of a substantial number of shares of our common
stock pursuant to the purchase agreement, or the anticipation of such issuances, could make it more difficult for us to sell equity
or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales.