Unless the context requires otherwise, references in this report
to “Stemline,” “Company,” “we,” “us” and “our” refer to Stemline Therapeutics, Inc.
Item 1. Business
Overview
We are a commercial-stage biopharmaceutical company
focused on discovering, acquiring, developing and commercializing oncology therapeutics.
ELZONRIS® (tagraxofusp-erzs) was approved by the U.S. Food and Drug Administration, or FDA, and is commercially
available in the U.S., for the treatment of adult and pediatric patients, two years and older, with blastic plasmacytoid
dendritic cell neoplasm, or BPDCN. ELZONRIS is the first treatment approved for BPDCN and the first approved CD123-directed
therapy. In addition, we are also assessing ELZONRIS, as both single agent and in combination, in a variety of other
indications including Phase 1 and 2 clinical trials in chronic myelomonocytic leukemia, or CMML, myelofibrosis, or MF,
multiple myeloma, or MM, and acute myeloid leukemia, or AML, with additional trials planned including a CD123+
all-comers trial. We are also advancing a pipeline of additional novel therapeutic candidates, including felezonexor
(SL-801), an oral small molecule XPO-1 inhibitor currently in an ongoing Phase 1 trial of patients with advanced solid
tumors, and SL-1001, an oral small molecule RET (rearranged during transfection) kinase inhibitor currently in
investigational new drug, or IND, directed studies intended for patients with a variety of genetically-defined
malignancies.
ELZONRIS regulatory and commercial
ELZONRIS is a targeted therapy directed to CD123. ELZONRIS was
approved by the FDA in December 2018 for the treatment of BPDCN in adults and in pediatric patients, two years and older.
ELZONRIS was granted Breakthrough Therapy Designation, or BTD, for the treatment of BPDCN in August 2016. ELZONRIS was granted
Orphan Drug Designation, or ODD, in the U.S. for BPDCN in June 2013 and granted ODD in Europe for BPDCN in November 2015.
ELZONRIS is the first drug ever approved for this indication, the first CD123-targeted agent approved, and is commercially available
to patients with BPDCN in the U.S.
In January 2019, Stemline submitted a Marketing
Authorization Application, or MAA, to the European Medicines Agency, or EMA, seeking approval of ELZONRIS for the treatment
of adult patients with BPDCN. The application is being reviewed on a standard timeline under the centralized procedure. In
June 2019, we received the Day 120 List of Outstanding Issues, which include matters relating to clinical, non-clinical,
quality, chemistry, manufacturing and controls, or CMC, and all stages of the clinical trial, including stage 4, which
largely utilized a new lyophilized drug product formulation. We continue to interact with the EMA regarding the application.
A scientific advisory group (SAG) meeting to discuss clinical data of tagraxofusp in patients with BPDCN was held on
March 5th, 2020. Aspects of benefit-risk (i.e. efficacy and safety) of tagraxofusp as a therapy for BPDCN as well as other
elements pertaining to the MAA procedure were discussed. Minutes of the meeting will be reflected in the European Public
Assessment Report, or EPAR. We expect an opinion or further questions from the Committee for Medicinal Products for Human
Use, or CHMP, in mid-2020. In anticipation of potential regulatory approval, we have assessed European staffing and
infrastructure needs, and have been hiring personnel to meet the needs of a possible second half of 2020 commercial launch in
Europe.
In addition, Stemline has instituted a global Early Access Program,
or EAP, whereby physicians may seek access to Stemline’s investigational medicine outside of a clinical trial and/or before
it is commercially available.
ELZONRIS additional clinical activities
We are seeking to broaden the commercial potential of
ELZONRIS, globally, through clinical trials in additional indications including CMML, MF, and AML, as maintenance therapy in
BPDCN patients post-transplant, as well as planned trials in other indications including a CD123+ all-comers
trial.
Additional pipeline candidates
Our other pipeline candidates include: felezonexor (SL-801),
a novel oral small molecule reversible inhibitor of XPO1, which is currently in a Phase 1 trial of patients with advanced solid
tumors and recent data were presented at the 2019 European Society of Medical Oncology, or ESMO, annual conference, and SL-1001,
an oral, selective small molecule RET kinase inhibitor that has demonstrated potent, selective,
preclinical anti-cancer activity in RET-driven tumor models and is currently in IND-enabling studies. Additional candidates include:
SL-901, an oral, small molecule kinase inhibitor, assessed in an abbreviated Phase 1 trial of patients with solid tumors in Europe,
currently in Investigational Medicinal Product Dossier, or IMPD-enabling studies, and SL-701, an immunotherapeutic, which has completed
a Phase 2 trial in patients with second-line glioblastoma.
Our Company
We were incorporated under the laws of the State of Delaware
in August 2003. Our principal executive office is located at 750 Lexington Avenue, Eleventh Floor, New York, New York
10022 and our telephone number is (646) 502-2311.
Our website address is www.stemline.com. The information set
forth on our website is not a part of this report. We will make available free of charge through our website our annual reports
on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments to these reports,
as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the Securities
and Exchange Commission, or SEC. We are not including the information on our website as a part of, nor incorporating it by reference
into, this report. The SEC maintains a website that contains annual, quarterly, and current reports, proxy statements, and other
information that issuers (including us) file electronically with the SEC. The SEC’s website address is http://www.sec.gov/.
Management
We are led by a team with extensive experience in the biopharmaceutical
industry including:
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Ivan Bergstein, M.D. — Chairman, Chief Executive Officer and President. Dr. Bergstein is Chief Executive Officer
and Founder of Stemline Therapeutics. Dr. Bergstein has managed the company’s evolution from early-stage research and
development to the FDA approval and commercial launch of its lead product, ELZONRIS. Prior to founding Stemline, Dr. Bergstein
was Medical Director of Access Oncology, Inc., a clinical stage oncology-focused biotechnology company where he was a key
member of a small team responsible for the acquisition and development of the company’s clinical stage assets and ultimately
the sale of the company to Keryx Biopharmaceuticals, Inc. He received a BA in mathematics from the University of Pennsylvania,
was elected to the Pi Mu Epsilon National Mathematics Honor Society, and was captain of the varsity wrestling team at Penn. He
then received an MD from the Mount Sinai School of Medicine where he was elected to the Alpha Omega Alpha Honor Medical Society,
received the Merck Award for Clinical Excellence, and subsequently completed an internship in general surgery. He then became the
Jerome A. Urban Post-Doctoral Research Fellow at the Cornell University Medical College where he studied and published work relating
to Wnt genes in human breast cancer. He then completed an internal medicine residency and hematology-oncology fellowship at the
New York Presbyterian Hospital — Weill Medical College of Cornell University where he studied and published work on gene
therapy manipulations of the sonic hedgehog pathway.
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Kenneth Hoberman — Chief Operating Officer. Mr. Hoberman has extensive financial, accounting, investor relations,
corporate governance and business development experience including M&A, strategic alliances and partnerships both domestic
and international. His operational expertise includes regulatory oversight, human resources, manufacturing and clinical development.
He was previously Vice President of Corporate and Business Development of Keryx Biopharmaceuticals, Inc., where he was instrumental
in the success of the company. He also helped secure multiple sources of capital including over $200 million in equity investments
through public and private offerings. He also initiated and executed a $100 million strategic alliance and originated, negotiated
and closed dozens of licensing and operational contracts, helping to grow the company’s market capitalization to over $1
billion. He also led the team that originated, in-licensed, and developed Auryxia™ which was approved by the FDA in September 2014.
He is on the Board of Directors of TG Therapeutics, Inc. (Nasdaq: TGTX). He received a B.S.B.A. in Finance from Boston University
and completed post-baccalaureate studies at Columbia University.
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David Gionco — Senior Vice President of Finance and Chief Accounting Officer. Mr. Gionco was previously Vice President,
Chief Financial Officer and Chief Accounting Officer of Savient Pharmaceuticals, Inc. where he oversaw the finance function
for the organization and was instrumental in helping to grow the company, raising over $350 million. Prior to this, Mr. Gionco
held audit, corporate accounting, financial planning, finance and controller roles at companies including Merck & Co., Inc.
(“Merck”) and, previously, Medco Health Solutions, Inc., which was acquired by Merck during his tenure. At Merck,
Mr. Gionco held various financial and accounting positions of increasing responsibility. Mr. Gionco also held senior
financial positions at Progenics Pharmaceuticals, Inc. (Nasdaq: PGNX) and Odyssey Pharmaceuticals, Inc. (a subsidiary
of Pliva, Inc., now Teva Pharmaceutical Industries Ltd. (NYSE: TEVA)). Mr. Gionco previously had seven years of
financial auditing experience with a major public accounting firm. Mr. Gionco holds a B.S. in Accounting from Fairleigh Dickinson
University and an MBA in Finance from Rutgers University. Mr. Gionco is a Certified Public Accountant in the State of New
York.
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Robert Francomano — Chief Commercial Officer. Mr. Francomano joined Stemline Therapeutics in 2016 and is responsible
for leading the transformation of the organization from a clinical-stage entity to one with a full commercial capability and infrastructure.
Mr. Francomano brings more than 25 years of biopharmaceutical experience to Stemline, with the majority of time spent in the
hematology/oncology therapeutic area. Prior to Stemline, Robert held several key roles of increasing responsibility within the
oncology divisions of Baxalta, Pfizer, GlaxoSmithKline and AstraZeneca with workstreams that spanned the life cycle continuum from
asset discovery through patent expiry. Mr. Francomano earned a bachelor’s degree in marketing/management from Siena
College (NY) and an MBA from the University of Albany with a concentration in pharmaceutical/chemical studies.
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Strategy
Our goal is to build a leading biopharmaceutical company focused
on improving the lives of patients by developing and commercializing innovative therapeutics for difficult-to-treat cancers. The
fundamental components of our business strategy to achieve this goal include the following:
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Commercialize ELZONRIS in the U.S. On December 21, 2018, the FDA granted approval of ELZONRIS
for the treatment of BPDCN in adults and pediatric patients two years and older, in both treatment-naïve and previously-treated
populations. ELZONRIS is the first treatment approved for BPDCN and the first approved CD123-targeted therapy. In an effort to
optimize commercial success, we have invested and continue to invest in disease awareness and an infrastructure that includes sales
professionals, marketing, medical affairs, and reimbursement specialists.
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Assess ELZONRIS in additional indications. We are also assessing ELZONRIS as monotherapy in additional indications including
in Phase 1/2 trials of patients with CMML and MF. ELZONRIS is also being assessed in Phase 1/2 trials of other indications including
AML and multiple myeloma, in combination with other therapies. A CD123+ all-comers trial is also being planned.
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Obtain approval and commercialize ELZONRIS in the E.U. Stemline submitted a MAA in January 2019 to the EMA seeking approval of ELZONRIS for the treatment of
adult patients with BPDCN. The MAA was accepted and is currently under review by the EMA. The application is being reviewed
on a standard timeline under the centralized procedure. A SAG in the EU met in March 2020. We
are in the process of building out a commercial infrastructure, including the hiring of commercial personnel, in Europe to
meet the needs of a possible European commercial launch in the second half of 2020 should ELZONRIS obtain approval in the
E.U.
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Assess felezonexor (SL-801) in a variety of cancer types. We are assessing felezonexor (SL-801) in a Phase 1 trial
of adult patients with advanced solid tumors. Patients are currently enrolling in this dose escalation study and we are assessing
safety, including attempting to identify a recommended dose and administration schedule, as well as potential efficacy.
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Develop SL-1001 in certain genetically-defined tumors. We are assessing SL-1001, a novel RET kinase inhibitor, which
is currently in IND-enabling studies with anticipation of entering clinical trials in 2021.
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ELZONRIS
Overview
ELZONRIS
is a novel targeted therapy directed to the interleukin-3 receptor-a, or CD123,
a target present on a wide range of malignancies as well as some autoimmune disorders. ELZONRIS has been approved by the FDA for
the treatment of BPDCN in adults and pediatric patients two years and older, in both treatment-naïve and previously-treated
populations. ELZONRIS is the first treatment approved for BPDCN and the first approved CD123-targeted therapy. The ELZONRIS label
contains a boxed warning for capillary leak syndrome, or CLS, which may be life-threatening or fatal. Physicians are advised to
monitor for signs and symptoms of CLS and take actions as recommended in the full prescribing information.
BPDCN, formerly known as blastic NK-cell lymphoma, is an
aggressive, orphan hematologic malignancy with historically poor outcomes. BPDCN may present with features similar to, and
can be mistaken for, certain diseases including AML, non-Hodgkin’s lymphoma, or NHL, acute lymphocytic leukemia, or
ALL, myelodysplastic syndrome, or MDS, and CMML, and other malignancies including those with skin manifestations as well as
certain or non-malignant cutaneous conditions. BPDCN typically presents in the bone marrow and/or skin, and may also involve
lymph nodes and viscera. The diagnosis of BPDCN is based on the immunophenotypic diagnostic triad of CD123, CD4, and CD56, as
well as other markers including TCL-1.
ELZONRIS is designed to specifically target CD123. CD123 is
expressed on BPDCN and is a key marker, as a part of a triad of markers, that enables proper diagnosis of BPDCN. Additionally,
CD123 represents a potential target for therapeutic research in a variety of cancers beyond BPDCN, as well as certain autoimmune
disorders. Expression of CD123 has also been associated with poor prognosis and clinical outcomes in additional diseases including
AML and CMML.
In April 2019, the pivotal trial results of ELZONRIS in
patients with BPDCN were published in the April 25 issue of the New England Journal of Medicine.
In
June 2019, ELZONRIS clinical data were presented at the 2019 American Society of Clinical Oncology, or ASCO, annual meeting
in Chicago, Illinois and at the 24th Congress of the European Hematology Association, or EHA, in Amsterdam, Netherlands. Presentations
included results from ongoing Phase 2 clinical trials of ELZONRIS monotherapy in relapsed/refractory CMML and relapsed/refractory
MF. In October 2019, ELZONRIS clinical data from the pivotal trial in BPDCN were presented at the 81st Annual Meeting of the
Japanese Society of Hematology, or JSH, in Tokyo, Japan. In November 2019, ELZONRIS preclinical results in systemic sclerosis,
an autoimmune disorder in which CD123+ plasmacytoid dendritic cells, or pDCs, play a role in disease pathogenesis, were presented
at the 2019 American College of Rheumatology, or ACR, annual meeting in Atlanta, Georgia. In December 2019, ELZONRIS clinical
and preclinical data were presented at the 2019 American Society of Hematology, or ASH, annual meeting in Orlando, Florida. Presentations
included results from ongoing Phase 2 clinical trials of ELZONRIS as monotherapy in patients with relapsed/refractory MF and in
combination with pomalidomide and dexamethasone in patients with relapsed/refractory multiple myeloma. Preclinical data of ELZONRIS
in combination with other agents in myeloproliferative neoplasms was also presented.
The FDA granted ELZONRIS BTD for the treatment of BPDCN in August 2016, and ODD for AML in February 2011
and ODD for BPDCN in June 2013. The EMA granted ELZONRIS ODD for AML in September 2015
and ODD for BPDCN in November 2015. The FDA granted the ELZONRIS Biologics License Application, or BLA, Priority Review and
subsequently approved the BLA on December 21, 2018, two months ahead of its February 21, 2019, Prescription Drug User
Fee Act, or PDUFA, date. In January 2019, Stemline submitted a MAA to the EMA, seeking
approval of ELZONRIS for the treatment of adult patients with BPDCN. The application is being reviewed on a standard timeline under
the centralized procedure. A SAG met during March 2020.
In addition to ELZONRIS, our pipeline of product candidates
includes: felezonexor (SL-801, an XPO1 inhibitor), SL-1001 (a RET kinase inhibitor), SL-901 (a kinase inhibitor) and SL-701 (an
immunotherapy).
ELZONRIS for blastic plasmacytoid dendritic cell neoplasm
(BPDCN)
ELZONRIS is the first treatment approved for BPDCN and the first
approved CD123-targeted therapy.
BPDCN is an aggressive hematologic cancer that carries a poor
prognosis. BPDCN had been previously classified as blastic NK cell lymphoma, agranular CD4+/CD56+ hematodermic neoplasm, and plasmacytoid
dendritic cell cancer. In 2008, this disease was renamed BPDCN by the World Health Organization, or WHO, due to the realization
of its derivation from plasmacytoid dendritic cells, or pDCs, which are specialized immune cells.
BPDCN is an aggressive malignancy that most commonly affects
middle-aged and older patients and is approximately three times more common in men than women. This malignancy typically presents
with skin lesions, as well as bone marrow involvement. BPDCN growth in the bone marrow results in decreased blood cell counts,
which can lead to serious infections, fatigue, bleeding, and death. BPDCN has had historically poor outcomes and was considered
an area of unmet medical need prior to the approval of ELZONRIS.
ELZONRIS mechanism of action
ELZONRIS is a novel targeted therapy directed to CD123. ELZONRIS
is comprised of human IL-3 recombinantly fused to a truncated diphtheria toxin, or DT, payload engineered such that IL-3 replaces
the native DT receptor-binding domain. In this way, the IL-3 domain of ELZONRIS directs the cytotoxic DT payload to cells expressing
CD123. Upon internalization, ELZONRIS irreversibly inhibits protein synthesis and induces apoptosis of the target cell.
CD123
CD123 is normally expressed on certain maturing hematopoietic
cells, including maturing myeloid cells, B cells, plasmacytoid dendritic cells, or pDCs, mast cells, basophils and eosinophils,
and appears to be involved in cell maturation, differentiation, and survival. CD123 expression appears to be lower on normal hematopoietic
stem cells.
CD123 is expressed on multiple malignancies, to varying extents,
including BPDCN, AML, certain myeloproliferative neoplasms, or MPNs, myelodysplastic syndrome, or MDS, CMML, B-cell acute lymphoid
leukemia, or B-ALL, hairy cell leukemia, Hodgkin’s and certain non-Hodgkin’s lymphomas. In addition to expression on
tumor bulk, CD123 expression has been reported on the cancer stem cells, or CSCs, of certain hematologic cancers including
AML, CMML, MDS, and potentially T-cell ALL. In addition, elevated CD123 expression has been correlated with poor prognosis in certain
hematologic cancers.
CD123+ plasmacytoid dendritic cells (pDCs)
CD123+ pDCs are the cell of origin for BPDCN. Notably,
CD123+ pDCs have also been reported in the microenvironment of several tumor types including multiple myeloma, CMML
and other MPNs including myelofibrosis, or MF, and mastocytosis, as well as AML and some solid tumors where they may play a tumor-promoting
role. In several cases, including CMML and AML, tumor microenvironmental pDCs have been shown to be neoplastic and part of the
malignant clone, indicating a potential need for therapeutic targeting. Accordingly, the potential to target neoplastic pDCs with
ELZONRIS in a variety of tumor types, both hematologic and possibly solid, could provide significant label and market expansion
opportunities.
CD123+ pDCs have also been implicated in the pathogenesis
of certain autoimmune diseases, including scleroderma and cutaneous lupus, and is a potential therapeutic target for these conditions.
We are conducting preclinical research in this area and preclinical data presented at the Annual European Congress of Rheumatology,
or EULAR, demonstrated the cytotoxic activity of ELZONRIS against potentially pathogenic pDCs. This data suggests depleting pDCs
or attenuation of pDC function could represent a potentially novel approach for the treatment of systemic sclerosis and certain
other autoimmune disorders. In November 2019, ELZONRIS preclinical results in systemic sclerosis, an autoimmune disorder
in which CD123+ pDCs play a role in disease pathogenesis, were presented at the 2019 American College of Rheumatology,
or ACR, annual meeting in Atlanta, Georgia.
ELZONRIS regulatory and commercial
On December 21, 2018, the FDA granted full approval
of ELZONRIS for the treatment of BPDCN in adult and pediatric patients two years and older, in both treatment-naïve and
previously-treated populations. ELZONRIS is commercially available in the U.S.
Stemline is committed to helping patients with BPDCN in the
U.S. access ELZONRIS through the Stemline ARC® program. Stemline ARC is a comprehensive access program designed to provide
support, information and assistance to patients prescribed ELZONRIS. Dedicated oncology nurse advocates are available to provide
personalized education about BPDCN and ELZONRIS to patients and their caregivers and to connect patients and their caregivers with
helpful tools and resources. Stemline ARC offers a copay assistance program for patients with commercial insurance who qualify.
Stemline is also partnering with patient advocacy groups to support the needs of other patients with BPDCN in the U.S.
In January 2019, Stemline submitted a MAA to the EMA seeking
approval of ELZONRIS for the treatment of adult patients with BPDCN. The application is being reviewed on a standard timeline under
the centralized procedure. A SAG in the EU met in March 2020. We are in the process of building
out a commercial infrastructure in Europe should ELZONRIS obtain approval.
Stemline’s commercial group is primarily focused on effectively
launching and commercializing ELZONRIS in the U.S. The commercial group is comprised of a wide range of functions including commercial
operations, sales, marketing, and market access and reimbursement. Additionally, the organization has established a medical affairs
presence in the field which is predominantly staffed by medical science liaisons. We aim to build on this field presence based
on routine reviews of the business and market. For 2020, we anticipate adding diagnostic and telephonic sales teams to further
enhance product uptake. We believe the aforementioned functions represent the necessary infrastructure to support a successful
launch of ELZONRIS in BPDCN in the U.S.
Over the past several years, the organization has been focused
on preparing the market, the product, and the organization for the successful launch of ELZONRIS. In December 2017, we initiated
our BPDCN disease awareness campaign at the American Society of Hematology, or ASH, annual meeting. One of the campaign’s
primary goals has been to educate multidisciplinary healthcare professionals, including hematologist-oncologists, dermatologists,
pathologists, and allied healthcare professionals about, among other things, the appropriate testing for CD123 in order to bring
the diagnosis of BPDCN to the forefront, while limiting misdiagnoses and underdiagnoses. The campaign highlighted the importance
of CD123 as a key diagnostic marker for correct patient identification. Beyond BPDCN, CD123 may have additional utility in identifying
other hematologic cancer patient subsets, including those with poor prognosis AML or CMML.
Access to ELZONRIS remains a top priority within our managed
care group, with key success criteria identified as removing hurdles to product access and reimbursement. The Centers for Medicare &
Medicaid Services, or CMS, granted approval for a New Technology Add-On Payment, or NTAP, for ELZONRIS for the treatment of BPDCN,
as well as a new ELZONRIS-specific J-code. Both of these milestones went into effect on October 1, 2019. NTAP is intended
to support Medicare beneficiaries’ access to ELZONRIS by providing an incremental payment to hospitals for qualifying Medicare
inpatient cases. A J-code is a permanent code assigned by CMS and used by Medicare, Medicaid, and commercial payers for billing
and claims processing specific to ELZONRIS. We have also set up a formal patient support program and commercial co-payment assistance
program known as the Stemline ARC program and have donated to an independent 501(c)(3) foundation for patients with BPDCN
that require assistance.
ELZONRIS Clinical Trials in Additional Indications
We are also conducting additional clinical development activities
with ELZONRIS including in Phase 1/2 clinical trials of patients with CMML, MF, and AML, and other trials are planned.
Chronic Myelomonocytic Leukemia (CMML)
At the 2019 EHA and ASCO annual conferences, we reported Phase
1/2 data from 23 patients with relapsed/refractory CMML who received ELZONRIS as a monotherapy in Stage 1 (lead-in, dose escalation
stage) and Stage 2 (expansion stage). A new Stage 3a cohort is now open for enrollment.
In Stage 1, ELZONRIS at 12 mcg/kg/day for 3 days every 3-6 weeks
was the highest tested dose for CMML, and a maximum tolerated dose, or MTD, was not reached. In Stage 2, patients are receiving
ELZONRIS at 12 mcg/kg/day for three (3) days every 3-6 weeks.
Median age was 69 years (range: 42-80); 83% were male. 52% (12/23)
of patients had baseline splenomegaly by physical examination (measured in centimeters that spleen was palpable below the left
costal margin). The most common treatment-related adverse events, or TRAEs, were hypoalbuminemia (35%), thrombocytopenia (30%),
vomiting and nausea (each 26%), and anaemia (22%). There were 3 cases of capillary leak syndrome; all three cases were grade 2.
The most common TRAEs, grade 3+, were thrombocytopenia (30%), anaemia (17%), and nausea (4%).
ELZONRIS monotherapy demonstrated improvements in splenomegaly
and bone marrow complete responses, or CRs, in patients with relapsed/refractory CMML. 100% (12/12) of evaluable patients with
baseline splenomegaly, by physical examination, had a spleen response: 67% (8/12) of these patients had splenomegaly reductions
by at least 50%, and 50% (4/8) of these patients with baseline splenomegaly of 5 cm or more below the left costal margin had splenomegaly
reductions of at least 50%. In addition, three patients had bone marrow CRs including one patient who was bridged to stem cell
transplant, or SCT.
Myelofibrosis (MF)
At the 2019 ASH annual conference in December 2019, the
ELZONRIS Phase 1/2 data was the subject of an oral presentation by our principal investigators. The presentation included data
from 29 patients with relapsed/refractory MF who received ELZONRIS in Stage 1 (lead-in, dose escalation stage) and Stage 2 (expansion
stage). Stage 1 has completed enrollment, and Stage 2 has been expanded and is ongoing, with patient enrollment and follow up continuing.
In Stage 1, ELZONRIS at 12 mcg/kg/day was the highest tested dose for MF, and an MTD was not reached. In Stage 2, patients are
receiving ELZONRIS at 12 mcg/kg/day for three (3) days every 3-6 weeks.
Median age was 69 years (range: 54-87); 52% were female. 79%
(23/29) of patients had baseline splenomegaly by physical examination (measured by spleen that is palpable >5 cm
below costal margin). In Stage 1, no dose limiting toxicities, or DLT, were identified and a maximum tolerated dose, or MTD, was
not reached. The most common TRAEs were alanine aminotransferase levels increased, headache and hypoalbuminaemia (each 17%).
The
most common TRAEs, grade 3+, were anemia (14%), and thrombocytopenia (6%). There was also one case of CLS which was
grade 3.
ELZONRIS monotherapy demonstrated improvements in splenomegaly
in patients with relapsed/refractory MF. 53% (8/15) of evaluable patients with baseline spleen size >5 cm palpable
by physical exam below the left costal margin experienced a reduction in splenomegaly: 20% (3/15) of patients had splenomegaly
reduction by at least 35% measured by palpation during physical exam below left costal margin. 44% (7/16) of patients had splenomegaly
reduction by at least 29% and 25% (4/16) had splenomegaly reductions by at least 45%. Additionally, 45% (9/20) of evaluable patients
had symptom burden reduction, including 3 with symptom response per IWG-MRT 2013 MF response criteria.
In patients with MF, monocytosis (>1x109/L monocytes)
has been associated with rapid disease progression and short survival, and may indicate an accelerated phase of the disease. In
the trial, 100% (5/5) of evaluable patients treated with ELZONRIS and who had baseline monocytosis and spleen size >5cm,
had reduction in baseline splenomegaly, of which 40% (2/5) had reduction by >35%.
An additional ASH presentation demonstrated that ELZONRIS,
either alone or in combination with ruxolitinib, had preclinical activity against primary MF patient samples, including those
in accelerated phase and with high molecular risk profiles, which have limited therapeutic options beyond ruxolitinib and
CD123 expression is evident. Based on these data, we are planning additional trials of ELZONRIS in MF, not only as a single
agent but potentially in combination with other agents, including JAK inhibitors.
We continue to enroll patients with relapsed/refractory MF,
and have expanded the trial to increased enrollment and add additional sites, in order to further elucidate the safety and efficacy
profile of ELZONRIS in this patient population, including in patient subsets with monocytosis, thrombocytopenia and CD123 expression.
By the end of 2020, we expect to provide updates on potential registration pathways in MF.
Multiple Myeloma (MM)
ELZONRIS, in combination with pomalidomide and dexamethasone,
was assessed in a Phase 1/2 clinical trial in relapsed/refractory multiple myeloma.
At the 2019 ASH annual conference in December 2019, we
presented preliminary Phase 1/2 data from 9 patients with relapsed/refractory multiple myeloma who received ELZONRIS in combination
with pomalidomide and dexamethasone. The median age was 65 (range: 57-70); 56% were male. The median number of prior systemic therapies
was 3 (range: 2-6), with all patients having previously received dexamethasone, bortezomib, and lenalidomide. The most common grade
1/2 TRAE’s included hypoalbuminemia (67%), chills, insomnia, nausea, and pyrexia (each 56%), dizziness, and headache (each
44%). The most common grade 3+ TRAE’s were thrombocytopenia (44%), neutropenia (33%), and hypophosphatemia (22%). There
was one case of capillary leak syndrome which was grade 2.
Notably, five patients achieved partial
responses (PRs) along with decreases in plasmacytoid dendritic cell (pDC) levels while on treatment. The presence of pDCs,
which is the cell of origin of BPDCN, has been linked with myeloma growth and aggressiveness. These patients also experienced
decreased levels of myeloma-related laboratory assessed values after 1 cycle of treatment with ELZONRIS combined with
pomalidomide and dexamethasone.
Given the promising early results, and the strong scientific
rationale, potential avenues for further development in this indication are currently under consideration. These include new patient
populations, combination with daratumumab, and/or novel agents such as XPO1 inhibitors.
Acute Myeloid Leukemia (AML)
An investigator-sponsored trial of ELZONRIS in combination
with azacitidine and venetoclax is currently being evaluated in the dose escalation stage of a Phase 1/2 trial of patients
with relapsed/refractory AML, first-line AML who are unfit for chemotherapy, or high-risk myelodysplastic syndrome, or MDS.
CD123 expression will be assessed. The trial is enrolling and data updates are expected later this year and on into next
year.
Additional trials and potential indications for ELZONRIS
A Phase 1/2 trial is currently open for ELZONRIS as a maintenance
therapy, post-stem cell transplantation, in patients with BPDCN We expect to provide further program updates later this year.
Additional planned trials include ELZONRIS as monotherapy or
in combination with other agents in a basket of CD123+ malignancies which may include acute lymphoid leukemia, or ALL,
hairy cell leukemia, Hodgkin’s disease, and certain other lymphomas.
In addition to BPDCN, CMML, MF and AML, additional potential
indications for ELZONRIS include other hematologic cancers, solid tumors, and certain autoimmune disorders which are under evaluation
for further development.
SL-801
Felezonexor (SL-801) is a structurally novel, oral, small molecule,
reversible inhibitor of Exportin-1, or XPO1, a nuclear transport protein implicated in a variety of malignancies. XPO1 is a clinically
validated target in oncology, and the FDA recently approved an XPO1 inhibitor in patients with relapsed/refractory multiple myeloma.
Felezonexor has demonstrated preclinical in vitro and in vivo antitumor activity against a wide array of solid and hematologic
cancers. Felezonexor’s potential ability to reversibly bind XPO1 may offer the possibility to mitigate side effects and help
optimize the therapeutic index. We are currently enrolling patients with advanced solid tumors in a Phase 1 dose escalation trial
of single agent felezonexor. The dosing regimen for felezonexor was revised in an effort to improve tolerability while maintaining
dose intensity, and dosing resumed at 70 mg/day with a new schedule (Schedule B).
In September 2019, we provided an update at the European
Society of Medical Oncology, or ESMO, Congress 2019 in Barcelona, Spain. Results from 52 heavily pre-treated solid tumor patients
(~90% were third line or greater) with a wide spectrum of solid tumors, including gastrointestinal, breast, lung, neuroendocrine,
ovarian, and others were presented. Schedule A was amended to Schedule B in an effort to improve tolerability while maintaining
dose intensity. In Schedule B (n=7), grade 3 weakness was experienced. As such, the 75mg cohort was expanded and is being evaluated.
The most common TRAEs were nausea (69%), vomiting (53%), fatigue (44%), decreased appetite (24%), and diarrhea (22%), and the most
common TRAE, grade 3 or higher, was nausea (9%).
A partial response, or PR, of duration 18+ weeks, was achieved
with single agent felezonexor in a fourth line patient with KRAS-positive, microsatellite stable, or MSS, colorectal cancer. The
PR (based on RECIST 1.1 criteria) was reported after two cycles of felezonexor (70mg then 65mg due to elevated creatinine), with
the patient demonstrating serial reductions in the two target lesions (liver and spleen).
Response and treatment with felezonexor were ongoing at the
time of presentation. Stable disease, or SD, was achieved in 12 patients, with 11/12 of these patients third line or greater. Five
patients had SD for 4 and 11 months, including 1 patient with basal cell carcinoma with SD for ~11 months, and 20% disease shrinkage
was noted in one patient with a heavily pre-treated neuroendocrine tumor.
We believe the ideal therapeutic dose and regimen have yet to
be determined. Dose escalation is ongoing, and we intend to provide further updates as the Phase 1 clinical trial continues to
enroll.
SL-1001
SL-1001 is an oral, selective small molecule RET (rearranged
during transfection) kinase inhibitor. Genetic alterations in the RET kinase have been found in a diverse range of cancers. We
believe RET kinase represents a clinically validated target in multiple oncology indications. In March 2019, we in-licensed
this preclinical drug candidate from the CRT Pioneer Fund. The molecule was rationally designed by scientists at Cancer Research
UK Manchester Institute (United Kingdom), and has demonstrated potent, selective, preclinical anti-cancer activity, both in vitro
and in vivo, in RET-driven tumor models. IND-enabling studies are ongoing, and we expect to initiate clinical studies of SL-1001
in 2021.
SL-901
SL-901 is an oral, small molecule kinase inhibitor. In December 2017,
we in-licensed this drug candidate from UCB Biopharma SPRL. Prior to in-licensing, the agent had demonstrated preclinical activity
in several tumor types, and was evaluated in an abbreviated Phase 1 clinical trial in Europe. A PR was reported in one patient
with advanced lung cancer. Neither a dose-limiting toxicity nor a maximum tolerated dose was reached in the trial and we believe
further dose escalation is possible and warranted. In an effort to continue clinical dose escalation, we are currently conducting
pre-IMPD-enabling work in anticipation of a regulatory re-filing.
SL-701
SL-701 is an immunotherapy designed to direct the immune system
to attack targets present on brain cancer and other malignancies. SL-701 is comprised of several short synthetic peptides that
correspond to epitopes of targets including IL-13Rα2, EphA2, and survivin; two of these synthetic peptides (IL-13Rα2
and survivin) are mutant and believed to enhance immune activity. We completed a Phase 2 trial of SL-701 in adult patients with
second-line glioblastoma, or GBM. Phase 2 data preliminarily suggest SL-701 is generating target specific CD8+ T-cell responses
in patients, which may be translating into improved clinical outcomes, including improved overall survival, or OS, in a subset
of patients, which could form the basis of studies. SL-701 was awarded ODD from the FDA for the treatment of glioma in January 2015.
SL-501
SL-501 is a novel CD123-targeted therapy in preclinical development
that has demonstrated potency, in vitro and in vivo, against several hematologic tumor types, including AML, CMML, Hodgkin’s
lymphoma, and NHL.
Patents and Proprietary Rights
Our intellectual property portfolio consists of numerous issued
patents and pending applications in the U.S. and worldwide of both in-licensed and Stemline-originated inventions.
We continually assess our intellectual property strategy in
order to fortify our position in our market space. To that end, we are prepared to file additional patent applications in any of
the above families should our intellectual property strategy require such filings and/or where we seek to adapt to competition
or seize business opportunities. Further, we are prepared to file patent applications relating to the other products in our pipeline
soon after the experimental data necessary for a strong application become available and our cost-benefit analyses justify filing
such applications.
In addition to filing and prosecuting patent applications in
the United States, we typically file counterpart patent applications in Europe, Canada, Japan, Australia, and additional countries
where we think such foreign filing is likely to be beneficial.
We do not know if patents will be issued for all of the patent
applications in our portfolio, and there is no assurance that they will be. Furthermore, for patent claims now issued and for claims
to be issued in the future, we do not know if such claims will provide significant proprietary protection to our drug candidates
and proprietary technologies or if they will be challenged, circumvented, or invalidated. Our success will in part depend on our
ability to obtain and maintain patents protecting our drug candidates, technologies and inventions, to operate without infringing
the proprietary rights of third-parties, and to enforce and defend our patents and ensure others do not infringe on our proprietary
rights.
The term of individual patents depends upon the legal term of
the patents in the countries in which they are obtained. In most countries in which we file, the patent term is 20 years from
the earliest date of filing a non-provisional patent application (in the case of the US) or 20 years from the earliest date of
filing a PCT or Paris Convention application (in the case of other countries). In the United States, a patent’s term may
be shortened if a patent is terminally disclaimed over another patent or as a result of delays in patent prosecution by the patentee,
and a patent’s term may be lengthened by patent term adjustment, which compensates a patentee for administrative delays by
the U.S. Patent and Trademark Office in granting a patent, but deducts any applicant delay from that lengthened term.
The
term of a patent that covers an FDA-approved drug or biologic may also be eligible for patent term extension, which permits patent
term restoration as compensation for the patent term lost during the FDA regulatory review process. The Drug Price Competition
and Patent Term Restoration Act of 1984, or the Hatch-Waxman Act, permits a patent term extension of up to five years beyond the
expiration of the patent. The length of the patent term extension is related to the length of time the drug or biologic is under
regulatory review. Patent extension cannot extend the remaining term of a patent beyond a total of 14 years from the date
of product approval and only one patent applicable to an approved drug or biologic may be extended. Similar provisions are available
in Europe and other foreign jurisdictions to extend the term of a patent that covers an approved drug or biologic. In the future,
if and when our pharmaceutical products receive FDA approval, we expect to apply for patent term extensions on patents covering
those products. We anticipate that some of our issued patents may be eligible for patent term extensions. For more information
regarding U.S. patent laws, see “Business — Government Regulation.”
In addition to the patent term extension rights described above,
any of our product candidates that receive FDA approval may also be eligible for market exclusivity protection under the Federal
Food, Drug and Cosmetic Act or the Biologics Price Competition and Innovation Act of 2009. For more information regarding market
exclusivity laws, see “Business — Government Regulation.”
Many pharmaceutical companies, biotechnology companies and academic
institutions are competing with us in the field of oncology and filing patent applications potentially relevant to our business.
In order to contend with the inevitable possibility of third-party intellectual property conflicts, from time to time, we review
and assess the third-party intellectual property landscape for competitive and other developments that may inform or impact our
intellectual property development and commercialization strategies.
From time to time, we may find it necessary or prudent to obtain
licenses from third-party intellectual property holders. Where licenses are readily available at reasonable cost, such licenses
are considered a normal cost of doing business. In other instances, however, where a third-party holds relevant intellectual property
and is a direct competitor, a license might not be available on commercially reasonable terms or available at all. Accordingly,
we attempt to manage the risk that such third-party intellectual property may pose by conducting, among other measures, freedom-to-operate
studies to guide our early-stage research away from areas where we are likely to encounter obstacles in the form of third-party
intellectual property. As our programs advance, we continue to monitor the intellectual property landscape in an effort to assess
the advisability of licensing third-party intellectual property or taking other appropriate steps to address such freedom-to-operate
or development issues in the manner we deem in the best interests of the Company.
With respect to third-party intellectual property, it is impossible
to establish with certainty that our product candidates or discovery platform will be free of claims by third-party intellectual
property holders or whether we will require licenses from such third parties. Even with modern databases and on-line search engines,
literature searches are imperfect and may fail to identify relevant patents and published applications. Even when a third-party
patent is identified, we may conclude, upon a thorough analysis, that we do not infringe the patent or that the patent is invalid.
If the third-party patent owner disagrees with our conclusion and we continue with the business activity in question, we might
face patent litigation by the third-party. Alternatively, we might decide to initiate litigation in an attempt to have a court
declare the third-party patent invalid or not infringed by our activity. In either scenario, patent litigation typically is costly
and time-consuming, and the outcome is uncertain. The outcome of patent litigation is subject to uncertainties that cannot be quantified
in advance, for example, the credibility of expert witnesses who may disagree on technical interpretation of scientific data. Ultimately,
in the case of an adverse outcome in litigation, we could be prevented from commercializing a product or using certain aspects
of our discovery platform as a result of patent infringement claims asserted against us and/or face a significant monetary damages
award. This could have a material adverse effect on our business.
To protect our competitive position, it may be necessary to
enforce our patent rights through litigation against infringing third parties. Litigation to enforce our own patent rights is subject
to the same uncertainties discussed above. In addition, however, litigation involving our patents carries the risk that one or
more of our patents will be held invalid (in whole or in part, on a claim-by-claim basis) or held unenforceable. Such an adverse
court ruling could allow third parties to commercialize our products or our platform technology, and then compete directly with
us, without payment to us.
Patents and Proprietary Rights Covering Stemline’s
Drug Candidates
We have an exclusive worldwide license to ELZONRIS. These patent
rights include issued U.S. Patent 7,763,242; U.S. Patent 8,470,307; U.S. Patent 9,181,317; U.S. Patent 9,631,006; and U.S. Patent
10,259,853 covering methods of treating AML, BPDCN, MDS, and CMML that expire in 2027, as well as ten issued foreign patents. We
have applied for an extension of the U.S. patent term pursuant to the Hatch Waxman act for issued patents covering ELZONRIS and
if granted we will need to choose a single patent to extend. There are additional pending U.S. applications directed to methods
of using ELZONRIS to treat other diseases that, if issued, would also expire in 2027 or 2039. In addition, we have filed foreign
patent applications for the method of using ELZONRIS to treat various diseases, although there can be no assurances that such patents
will be issued. In addition to patent protection, we also have the exclusivity afforded by the FDA’s orphan designation of
ELZONRIS for the treatment of BPDCN and by the provisions of the Biologics Price Competition and Innovation Act of 2009. See “Government
Regulation — Orphan Drug Designation” and “— U.S. Patent Term Restoration and Marketing Exclusivity—Biologics
Price Competition and Innovation Act of 2009.”
We have exclusive and non-exclusive worldwide licenses to patents
covering SL-801. These patent rights include issued U.S. Patents 8,084,454 and 8,415,357 covering composition of matter and uses
of SL-801 that expire in 2030 and 2028, respectively, as well as eleven issued foreign patents that expire in 2028. We also have
additional pending foreign patent applications directed to SL-801 which if issued, for which there can be no guarantee, would provide
additional protection in certain non-U.S. territories and would be expected to expire in or around 2028.
We
have an exclusive worldwide license to patents covering the SL-701 component, IL-13Rα2 mutant, a non-exclusive worldwide
license to patents covering the SL-701 component, EphA2, and have filed U.S. and foreign patent applications covering the SL-701
component, survivin mutant. This intellectual property consists of an issued U.S. composition of matter patent (U.S. Patent 7,612,162)
directed to an immunogenic mutant IL-13Rα2 peptide expiring in 2026, an issued U.S. composition of matter patent (U.S. Patent
8,574,584) directed to an immunogenic EphA2 peptide expiring in 2024, issued U.S. method of use patents (U.S. Patent 8,114,407,
U.S. Patent 9,359,402, and U.S. Patent 10,131,699) directed to the use of EphA2 peptide expiring in 2024 and 2025, issued U.S.
method of use patent (U.S. Patent 8,859,488) directed to the combined use of IL-13Rα2 mutant and EphA2 peptides expiring
in 2026, an issued U.S. method of use patent (U.S. Patent 10,485,858) directed to the combined use of an IL-13Rα2 peptide,
an EphA2 peptide, a survivin mutant peptide, and a Tetanus toxoid peptide formulated as an emulsion expiring in 2033, an issued
European composition of matter patent (EP 2608799) directed to the combination of IL-13Rα2 mutant, EphA2, and survivin mutant
peptides expiring in 2031, an issued U.S. method of use patent (U.S. 10,485,858) directed to the combined use of an IL-13Rα2
mutant, EphA2, and a new immunogenic survivin mutant peptide expiring in 2033, and additional pending U.S. and foreign patent applications
directed to the use of an immunogenic mutant survivin peptide which, to the extent it issues, would be expected to expire in 2033.
We also have additional pending patent applications directed to methods of using SL-701 components to treat certain diseases which,
if issued (for which there can be no guarantee), would provide additional protection in the United States and certain non-U.S.
territories and would expire in 2025, 2031, or 2033. In addition to patent protection, we also have the exclusivity afforded by
the FDA’s orphan designation of SL-701 for the treatment of glioma and by the provisions of the Biologics Price Competition
and Innovation Act of 2009. See “Government Regulation — Orphan Drug Designation” and “— U.S. Patent
Term Restoration and Marketing Exclusivity—Biologics Price Competition and Innovation Act of 2009”.
We have an exclusive worldwide license to patents covering SL-901.
This intellectual property consists of the patent family derived from WO 2009/001089, issued in the US, Europe and other territories
(expiring in 2028); the patent family derived from WO 2008/001076, issued in the US and Europe (expiring in 2027); and the patent
family derived from WO 2006/114606, issued in the US, Europe and other territories, expiring in 2026. We also have additional pending
patent applications directed to SL-901 which, if issued (for which there can be no guarantee), would provide additional protection
in the United States and certain non-U.S. territories and would expire in 2038.
We have an exclusive worldwide license to pending patents covering
the SL-1001 component. This intellectual property consists of the patent family derived from PCT/GB2017/051076 (application date
April 18, 2017, pending in the US, Europe and other territories, which if issued would expire in 2037); the patent family
derived from PCT/GB2017/051077 (application date April 18, 2017, pending in the US, Europe and other territories); and the
patent family derived from PCT/GB2018/050986 (application date April 13, 2018, pending in the U.S. Europe and other territories,
which if issued would expire in 2038).
We also in-licensed or own certain patent rights, which includes
issued patents and pending patent applications in the U.S. and abroad, to our preclinical assets.
Patents and Proprietary Rights Covering CSC Focused Intellectual Property
We have exclusive worldwide rights to early and broad patents
and patent applications in the CSC field covering CSC therapeutics, diagnostics, including companion diagnostics, and drug discovery:
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two pending U.S. patent applications filed in 2007 directed to CSC-directed therapies and regimens, including CSC-directed
therapies and regimens for use in combination with companion diagnostics. Patent protection, to the extent it issues, would be
expected to extend to 2027;
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a pending patent application that covers oligonucleotide-based oncology therapies, including CSC-targeted therapeutics, which
target microRNA. Patent protection, to the extent it issues, would be expected to extend to 2022;
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a family of intellectual property covering methods to treat cancer through use of antibody-based compounds directed to IL-3Rα
as well as composition of matter covering IL-3Rα-targeted antibody conjugates, including U.S. Patent 6,733,743; U.S. Patent
7,651,678; U.S. Patent 8,163,279; U.S. Patent 8,852,551; U.S. Patent 8,992,910; U.S. Patent 9,518,119; U.S. Patent 9,873,743; U.S.
Patent 10,316,098; U.S. Patent 10,508,150; and other pending applications. Patent protection, to the extent it has or may issue,
would be expected to extend to 2021 or 2028, as applicable; and
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an issued (U.S. Patent 10,538,742) and one pending U.S. patent covering CSC-focused drug discovery, including a novel high
throughput screen to discover compounds that target CSCs, expiring in 2027.
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License and Research Agreements
Scott and White Memorial Hospital
Research and License Agreement (ELZONRIS)
In June 2006, we entered into a research and license agreement
with Scott and White Memorial Hospital (Temple, Texas) for ELZONRIS, our biologic targeted therapy directed to the IL-3R. Under
the agreement, Scott and White has granted us an exclusive, royalty-bearing, worldwide license under certain patent rights, know-how
and materials to research, develop, make, have made, formulate, use, sell, offer to sell and import ELZONRIS, and any products
containing or comprising such compound in finished dosage pharmaceutical form, for the diagnosis, prophylaxis and/or treatment
of any disease or condition in humans or animals. The patent rights exclusively licensed to us under the agreement are described
in more detail above under “Business — Patents and Proprietary Rights.”
We must pay Scott and White royalties based on adjusted gross
sales, by us or our sublicensees, of products containing the licensed compound for a period of ten years following the first commercial
sale of each product in each country. Through December 31, 2019, we have expensed approximately $0.6 million relating to royalty
to Scott and White. The royalty rates for each product range from the low- to mid-single digits and are tiered based on our annual
sales. We have sublicensing rights under the agreement, subject to our paying to Scott and White a percentage of the up-front payments
we receive from a sublicensee.
We must exercise commercially reasonable efforts to develop
and commercialize a licensed product and to achieve certain regulatory milestones within certain periods, subject to extensions
based on unforeseen technical, scientific, intellectual property or regulatory issues. If we fail to comply with our diligence
obligations with respect to at least one licensed product, then Scott and White may convert our exclusive license to a non-exclusive
license.
The agreement survives until the later of the expiration of
the last to expire licensed patent or the date on which we owe no further payments to Scott and White, after which our license
becomes fully paid, irrevocable, perpetual, non-exclusive and royalty-free. We may terminate the license in whole or on a country-by-country
and product-by-product basis upon prior written notice to Scott and White. If either we or Scott and White breach a material obligation
under the agreement, and such obligation is not cured within a specified period of time following written notice from the other
party, then the non-breaching party may terminate the agreement upon an additional written notice.
In addition, the agreement provides for Scott and White to conduct
a research program with ELZONRIS. In March 2010, the agreement was amended to further the regulatory advancement of ELZONRIS.
We have made certain payments to Scott and White for such research services pursuant to the agreement, which to date total approximately
$1.4 million in the aggregate. Additionally, we have been granted the exclusive right of reference to its IND for our own
regulatory filings. We may assign the agreement to an affiliate of ours, a purchaser of all or substantially all of our assets
or in connection with a merger, change in control or similar transaction by us.
CanBas, Ltd
License for SL-801
On December 26, 2014, we entered into a license agreement
with CanBas, Ltd. for SL-801. SL-801 is a small molecule, reversible inhibitor of XPO1. Under the terms of the agreement,
CanBas has granted us an exclusive, royalty-bearing, worldwide license, under certain patent rights, know-how and materials to
research, develop, make, have made, formulate, use, sell, offer to sell and import SL-801, and any products containing or comprising
such compound in finished dosage pharmaceutical form, for the treatment of any disease or condition in humans. The patent rights
exclusively licensed to us under the agreement are described in more detail above under “Patents and Proprietary Rights Covering
Stemline’s Drug Candidates.”
We are responsible to pay the remaining technical advisory
fees over the next 1.5 years totaling 165 million Japanese Yen (JPY), if the clinical development continues over this time
period. Additionally, we must pay CanBas tiered royalties based on aggregate net sales, by us or our sublicensees, of
products containing the licensed compound until the latest date of a period of ten years following the first commercial sale
of each product in each country; the date upon which there are no more valid claims or the expiration or termination of the
last regulatory exclusivity period. The royalty rates start in the low single digits and are tiered up based on annual net
sales. In the future, we may also be responsible, based on the achievement of specific clinical-development, regulatory and
sales-based commercial milestones, for certain payments to CanBas of up to $86 million. We have sublicensing rights under the
agreement, subject to our paying to CanBas a standard royalty percentage of the payments we receive from a sublicensee.
We must exercise commercially reasonable efforts to develop
and commercialize a licensed product and to achieve certain regulatory milestones within certain periods, subject to extensions
based on unforeseen technical, scientific, intellectual property or regulatory issues.
The agreement survives until the later of ten years following
the first commercial sale of each product in each country; the date upon which there are no more valid claims; or the expiration
or termination of the last regulatory exclusivity period, after which our license becomes fully paid, irrevocable, perpetual, non-exclusive
and royalty-free. We may terminate the license for any or no reason upon 60 days advance written notice to CanBas. If either we
or CanBas breach a material obligation under the agreement, and such obligation is not cured within a specified period of time
following written notice from the other party, then the non-breaching party may terminate the agreement upon an additional written
notice.
University of Pittsburgh
Exclusive License Agreement to IL-13Rα2 peptide (SL-701
component)
In September 2009, we entered into an exclusive license
agreement with the University of Pittsburgh, or the University, for the composition of matter, and use with other components, of
a proprietary immunogenic mutant analog peptide of IL-13Rα2, an active ingredient of SL-701, our brain cancer immunotherapy
candidate. Under the agreement, the University grants us an exclusive worldwide license under certain patent rights to make, have
made, use, sell and import brain cancer peptide antigen immunotherapies (including SL-701, which has been developed by the University
under a separate immunotherapy name designated by the University). The patent rights exclusively licensed to us under the agreement
are described in more detail above under “Business — Patents and Proprietary Rights.” The University retains
the right to practice the licensed patent rights for non-commercial education and research purposes. The license is also subject
to certain retained rights of the United States government. Our right to grant sublicenses to third parties is subject to the prior
written approval of the University, which the University may not unreasonably withhold or delay.
We paid the University an initial license fee and will pay the
University annual license maintenance fees until the first commercial sale of a licensed product. To date, we have paid an aggregate
of approximately $0.8 million in fees to the University under the agreement. We must also pay the University a low-single
digit royalty as a percentage of net sales of licensed products by us or our sublicensees, with standard provisions for royalty
offsets to the extent we need to obtain any rights from third-parties to commercialize the licensed products. We must also pay
a minimum annual royalty following the first commercial sale of a licensed product, but only to the extent the minimum annual royalty
amount is greater than the annual royalty otherwise due. We also must pay the University a percentage of non-royalty revenue we
receive from our sublicensees, which decreases if we enter into the applicable sublicense agreement after a certain clinical milestone
has been met. We also must make certain payments to the University of up to approximately $4.2 million upon the achievement
of specific regulatory and commercial milestone events.
We must use our commercially reasonable best efforts to develop
or commercialize a licensed product as soon as practicable, and to continue active, diligent marketing efforts throughout the term
of the agreement. We also must adhere to certain specific regulatory milestones with respect to initiating clinical trials and
submitting an application for regulatory approval of a licensed product. If we fail to meet any such milestone through no fault
of our own, we may negotiate with the University a one-time extension of the applicable dates, subject to paying the University
a fee. If we do not meet the extended milestone dates, then the University may terminate the agreement.
The agreement survives until the expiration of the last to expire
licensed patent. The University may terminate the agreement if we default in the performance of any of our obligations and do not
cure the default within a specified period of time after receiving notice from the University, or if we challenge the validity,
enforceability or ownership of the licensed patent rights anywhere in the world. The University may also terminate the agreement
if we cease to carry out our business or become bankrupt or insolvent. We may terminate the agreement for any reason upon prior
written notice to the University and payment of all amounts due to the University through the date of termination. Any sublicense
agreement entered into prior to termination will survive, subject to certain customary conditions. We may assign the agreement
to an affiliate of ours, a purchaser of all or substantially all of our assets or in connection with a merger, change in control
or similar transaction by us.
Non-Exclusive License Agreement to EphA2 peptide (SL-701
component)
In March 2012, we entered into a non-exclusive license
agreement with the University for the use of EphA2 epitopes, another active ingredient of SL-701. Under the agreement, the University
grants us a non-exclusive worldwide license under certain patent rights to use the EphA2 peptide in or packaged with the IL-13Rα2
peptide, as well as other immunotherapies we may develop and own or exclusively control, for the diagnosis, treatment or prevention
of diseases and tumors of the brain in human patients. The patent rights licensed to us under the agreement are described in more
detail above under “Business — Patents and Proprietary Rights.” The University retains the right to practice
the licensed patent rights for non-commercial education and research purposes. The license grant is also subject to certain retained
rights of the United States government. We may only grant sublicenses to third parties who are permitted sublicensees under the
exclusive IL-13Rα2 peptide license agreement with the University.
We must pay the University an initial license fee, and will
pay the University annual license maintenance fees until the net sales of a licensed product exceed a specified amount. To date,
we have paid an aggregate of approximately $0.1 million in fees to the University under the agreement. We must also pay the University
a customary low-single digit royalty for the license as a percentage of net sales of licensed products by us or our sublicensees,
with standard provisions for royalty offsets to the extent we need to obtain any rights from third-parties to commercialize the
licensed products. We must also pay a minimum annual royalty following the first commercial sale of a licensed product, but only
to the extent the minimum annual royalty amount is greater than the annual royalty otherwise due.
We must use our commercially reasonable best efforts to develop
or commercialize a licensed product as soon as practicable, and to continue active, diligent marketing efforts throughout the term
of the agreement. We also must adhere to certain specific regulatory milestones with respect to initiating clinical trials and
submitting an application for regulatory approval of a licensed product. If we fail to meet any such milestone by certain specified
dates, then the University may terminate the agreement.
The agreement survives until the expiration of the last to expire
licensed patent. The University may terminate the agreement if we default in the performance of any of our obligations and do not
cure the default within a specified time period of receiving notice from the University. The University may also terminate the
agreement if we cease to carry out our business or become bankrupt or insolvent. We may terminate the agreement for any reason
upon prior written notice to the University and payment of all amounts due to the University through the date of termination. Any
sublicense agreement entered into prior to termination will survive, subject to certain customary conditions. We may assign the
agreement to an affiliate of ours, a purchaser of all or substantially all of our assets or in connection with a merger, change
in control or similar transaction by us.
Non-Exclusive License Agreement to use and reference certain
data, information and regulatory filings (SL-701)
In March 2012, we entered into a non-exclusive license
agreement with the University. Pursuant to the agreement, we acquired a non-exclusive, worldwide license to use and reference certain
know-how, information and data that is contained in the INDs covering the clinical trials of SL-701 that were conducted by the
University for the development, manufacture, regulatory approval and commercialization of pharmaceutical products. We may grant
sublicenses in conjunction with a sublicense to a permitted sublicensee under the exclusive IL-13Rα2 peptide license agreement
with the University.
We paid the University an initial license fee, as well as payments
following a regulatory milestone. To date, we have paid an aggregate of approximately $27,500 in fees to the University under
the agreement. We also must pay the University a percentage of non-royalty revenue we receive from our sublicensees. We must use
our commercially reasonable best efforts to develop or commercialize a product derived from the use of the licensed data or information
as soon as practicable. We also must adhere to a specific regulatory milestone with respect to submitting an application for regulatory
approval that incorporates the licensed data or information, and if we fail to meet the milestone, the University may terminate
the agreement unless we have pre-paid the milestone payment listed above.
The term of the license agreement is 20 years, and the University
may terminate the agreement earlier (i) if we default in the performance of any of our obligations and do not cure the default
within a specified time period, (ii) upon the termination of the exclusive IL-13Rα2 peptide license agreement with the
University, or (iii) if we cease to carry out our business or become bankrupt or insolvent. We may terminate the agreement
at any time prior to incorporating or referencing the data or University INDs, after a specified number of days following written
notice. We may assign the agreement to an affiliate of ours, a purchaser of all or substantially all of our assets or in connection
with a merger, change in control or similar transaction by us.
Cambridge University Technical Services Limited
Exclusive Patent and Non-Exclusive Know-How License Agreement
(Platform Technology)
In September 2004, we entered into a license agreement
with Cambridge University Technical Services Limited, or CUTS, relating to our StemScreen® platform technology. Under the agreement,
we acquired an exclusive, royalty-bearing, worldwide license under patent rights owned by CUTS to develop, manufacture, have manufactured,
use, sell, offer to sell, market, have marketed, import, have imported, export and have exported products covered by the patent
rights, including a platform technology to discover and screen for compounds that target CSCs. The patent rights exclusively licensed
to us under the agreement are described in more detail above under “Business — Patents and Proprietary Rights.”
The license is subject to certain rights retained by CUTS for academic research and teaching. We also acquired a non-exclusive,
worldwide license to know-how related to the licensed patent rights. The agreement provides us with full sublicensing rights. Under
the agreement, we paid an upfront license fee and are obligated to make milestone payments of up to an aggregate of $1.7 million
upon specified regulatory events, as well as pay royalties of less than 1% on sales of licensed products. CUTS may terminate the
agreement, including our rights to the platform technology, for specified cause or upon certain events involving our bankruptcy
or insolvency.
Competition
The biotechnology and pharmaceutical industries are characterized
by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. Additionally, there has been
an increase in development of therapeutics targeting ultra orphan and rare oncologic indications, our main area of focus. While
we believe that our scientific knowledge, technology, and development experience provide us with competitive advantages, we face
potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies,
academic institutions, governmental agencies and public and private research institutions. Any current and/or future product candidates
that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available
in the future.
There are several biopharmaceutical companies whose primary
focus appears to be developing therapies against CSCs, including Verastem, Inc., OncoMed Pharmaceuticals, Inc., Sumitomo
Dainippon Pharma Co. Ltd., Bionomics Limited and Stemcentrx, Inc. (an AbbVie, Inc., company). There are also several
biopharmaceutical companies that do not appear to be primarily focused on CSCs, but may be developing at least one CSC-directed
compound. These companies include Astellas Pharma US, Inc., Boehringer Ingelheim GmbH, Geron Corp., GlaxoSmithKline plc, Ignyta, Inc.
(a Roche company), Macrogenics Inc., Micromet, Inc. (an Amgen, Inc. company), Pfizer Inc., Roche Holding AG,
Sanofi U.S. LLC, and others. Additionally, there are a number of companies working to develop new treatments for hematologic
cancers, which may compete with ELZONRIS and SL-801, including AbbVie, Inc., Ambit Biosciences Corporation (a Daiichi Sankyo
company), Amgen, Inc., Astex Pharmaceuticals (now an Otsuka Pharmaceutical company), Celator Pharmaceuticals, Inc. (a
Jazz Pharmaceuticals company), Celgene Corporation, Cellectis, Cyclacel Pharmaceuticals, Inc., Eisai Co. Ltd., Genzyme
Corporation (a Sanofi company), Immunogen, Inc., Janssen Pharmaceutical Companies of Johnson and Johnson, Karyopharm
Therapeutics, Inc., Kura Oncology, Inc., Novartis AG, Seattle Genetics, Inc., and Sunesis Pharmaceuticals, Inc., among others. There are also a number of drugs used for the treatment of brain cancer that may compete
with SL-701, including, Avastin® (Roche Holding AG), Gliadel® (Eisai Co. Ltd.), and Temodar® (Merck & Co., Inc.).
There are a number of companies working to develop brain cancer therapeutics with programs in clinical testing, including Agenus
Inc., Bristol-Myers Squibb, Inc., Cortice Biosciences, Inc., Celldex Therapeutics, Inc., CytRx Corporation, Inspyr
Therapeutics, Inc., GlaxoSmithKline plc., Northwest Biotherapeutics, Inc., Novartis AG, Roche Holding AG and others.
Many of our competitors have significantly greater financial
resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining
regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical, biotechnology
and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. These
competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical
trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for,
our programs. Small or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements
with large and established companies.
The key competitive factors affecting the success of all of
our product candidates, if approved, are likely to be their efficacy, safety, convenience, price, the level of generic competition
and the availability of reimbursement from government and other third-party payors.
Our commercial opportunity could be reduced or eliminated if
our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are
more convenient or are less expensive than any products that we may develop. Our competitors also may obtain FDA or other regulatory
approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing
a strong market position before we are able to enter the market. Also, if our competitors receive marketing approval for a product
for which it has an orphan designation, we may not be able to receive marketing approval for one of our products for the same indication
unless it demonstrates clinical superiority to such product. Our ability to compete may be affected in many cases by insurers or
other third-party payors seeking to encourage the use of generic products. If our therapeutic product candidates are approved,
we expect that they will be priced at a significant premium over any competitive generic products.
The most common methods of treating patients with cancer are
surgery, radiation and drug therapy, including chemotherapy, hormone therapy and targeted drug therapy. These therapies are numerous
and varied in their design, therapeutic application and mechanism of action. As a result, they may provide significant competition
for any of our product candidates for which we obtain market approval. In addition to currently marketed oncology therapies, there
are also a number of products in late stage clinical development to treat cancer. These products in development may provide efficacy,
safety, convenience and other benefits that are not provided by currently marketed therapies. As a result, they may provide significant
competition for any of our product candidates for which we obtain market approval.
Competition for ELZONRIS
There are a number of companies working to develop new treatments
for AML and other hematologic cancers, including Agios, Inc., Ambit Biosciences Corporation (a Daiichi Sankyo company), Astex
Pharmaceuticals (an Otsuka Pharmaceutical company), Boehringer Ingelheim, Celator Pharmaceuticals, Inc. (a Jazz Pharmaceuticals
company), Celgene Corporation, Cellectis, Cyclacel Pharmaceuticals, Inc., Eisai Co. Ltd., Epizyme, Inc., Genzyme
Corporation (a Sanofi company), Immunogen, Inc., Janssen Pharmaceutical Companies of Johnson and Johnson, Kura Oncology, Inc.,
Seattle Genetics, Inc., and Sunesis Pharmaceuticals, Inc., among others.
Competition for SL-801
Karyopharm Therapeutics is the only company, to our knowledge,
that currently has XPO1 inhibitors in clinical development. Karyopharm’s selinexor has been approved by the U.S. FDA (in
combination with dexamethasone) for the treatment of adult patients with relapsed refractory multiple myeloma, and is being evaluated
in a number of clinical trials in both solid and hematologic cancers, with the most advanced clinical programs in AML and diffuse
large B-Cell lymphoma, or DLBCL. Karyopharm has also advanced a second generation compound, KPT-8602, into clinical trials in relapsed/refractory
multiple myeloma.
Competition for SL-701
There are a limited number of drugs used for the treatment of
brain cancer, including Temodar® (Merck & Co., Inc.), nitrosoureas including Gliadel® (Eisai Co., Inc.),
and Avastin® (Roche Holding AG). There are a number of companies working to develop brain cancer therapeutics with programs
in clinical testing including Agenus Inc., Bristol-Myers Squibb, Inc., Cortice Biosciences, Inc., Celldex Therapeutics, Inc., CytRx
Corporation, Inspyr Therapeutics, Inc., GlaxoSmithKline plc., Northwest Biotherapeutics, Inc., Novartis AG,
Roche Holding AG and others.
Government Regulation
Government authorities in the United States, at the federal,
state and local level, and in other countries extensively regulate, among other things, the research, development, approval, manufacture,
testing, quality control, packaging, labeling, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring
and reporting, marketing and export and import of products such as those we are developing. Any pharmaceutical candidate that we
develop must be approved by the FDA before it may be legally marketed in the United States or by the appropriate foreign regulatory
agency before it may be legally marketed in foreign countries.
United States Drug Development Process
In the United States, the FDA regulates drugs and biologics
under the Federal Food, Drug and Cosmetic Act, or FDCA, and implementing regulations. Drugs are also subject to other federal,
state and local statutes and regulations. Biologics are subject to regulation by the FDA under the FDCA, the Public Health Service
Act, or the PHSA, and related regulations, and other federal, state and local statutes and regulations. Biological products include,
among other things, viruses, therapeutic serums, vaccines and most protein products. The process of obtaining regulatory approvals
and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure
of substantial time and financial resources. Failure to comply with the applicable United States requirements at any time during
the product development process, approval process or after approval, may subject an applicant to administrative or judicial sanctions.
FDA regulatory, compliance or enforcement actions could include a clinical hold, refusal to approve pending applications, warning
or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions,
fines, refusals of government contracts, restitution, disgorgement of profits, civil or criminal penalties, or withdrawal of an
approval. Any administrative action or judicial enforcement action could have a material adverse effect on us.
The process required by the FDA before a drug or biological
product may be marketed in the United States generally involves the following:
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Completion of preclinical laboratory tests, animal studies and formulation studies according to Good Laboratory Practices and
other applicable regulations;
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Submission to the FDA of an Investigational New Drug, or IND application, which FDA must acknowledge or approve before human
clinical trials may begin;
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Performance of adequate and well-controlled human clinical trials according to the FDA’s current Good Clinical Practices,
or CGCPs, and in accordance with human subject protection regulations, to establish the safety and efficacy of the proposed drug
or biologic for its intended use;
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Submission to the FDA of an NDA for a new drug product, or a BLA for a new biological product;
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Satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities where the drug or biologic
is to be produced to assess compliance with the FDA’s current good manufacturing practice regulations, or CGMPs, to assure
that the facilities, methods and controls are adequate to preserve the drug’s or biologic’s identity, strength, quality
and purity;
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Potential FDA inspection of the nonclinical and clinical trial sites that generated the data in support of the NDA or BLA;
and
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FDA review and approval of the NDA or BLA, which typically includes the successful resolution of any questions that arise in
the review process.
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The lengthy process of seeking required approvals and the continuing
need for compliance with applicable statutes and regulations post-approval require the expenditure of substantial resources. There
can be no certainty that approvals will be granted.
Before testing any compounds with potential therapeutic value
in humans, the drug or biological candidate undergoes preclinical testing. Preclinical testing include laboratory evaluations of
product chemistry, toxicity and formulation, as well as animal studies to assess the potential safety and activity of the drug
or biological candidate. The conduct of the preclinical tests must comply with federal regulations and requirements including Good
Laboratory Practices. The sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical
data, any available clinical data or published literature and a proposed clinical study design protocol, to the FDA as part of
the IND. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA places the clinical trial
on a clinical hold within that 30-day time period. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns
before the clinical trial can begin. The FDA may also impose clinical holds on a drug or biological candidate at any time before
or during clinical trials due to safety or compliance concerns. Accordingly, we cannot assure that submission of an IND will result
in the FDA allowing clinical trials to begin, or that, once begun, issues will not arise that cause such trial to be delayed, suspended
or terminated.
Clinical trials involve the administration of the drug or biological
candidate to healthy volunteers or patients having the disease being studied under the supervision of qualified investigators;
often these are physicians not employed by or under the trial sponsor’s control. Clinical trials are conducted under protocols
detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria,
and the parameters to be used to monitor subject safety. Each protocol must be submitted to the FDA as part of the IND. Clinical
trials must be conducted in accordance with the FDA’s current good clinical practices, or CGCPs, requirements, regulations
for the protection of human subjects and with applicable CGMP requirements. Further, each clinical trial must be reviewed and approved
by an institutional review board, or IRB, at or servicing each institution at which the clinical trial will be conducted. An IRB
is charged with protecting the welfare and rights of trial participants and considers such items as whether the risks to individuals
participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves
trial recruitment materials and the informed consent form that must be used as part of the informed consent process with each clinical
trial subject or his or her legal representative and must monitor the clinical trial until it is completed.
Human clinical trials prior to approval are typically conducted
in three sequential Phases that may overlap or be combined:
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Phase 1. The drug or biologic is initially introduced into small groups of healthy human subjects and tested for
safety, dosage tolerance, absorption, metabolism, distribution and excretion. In the case of some products for severe or life-threatening
diseases, especially when the product may be too inherently toxic to ethically administer to healthy volunteers, the initial human
testing is often conducted in patients having the specific disease.
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Phase 2. The drug or biologic is evaluated in a larger, but still limited patient population to identify possible
adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine
dosage tolerance, optimal dosage and dosing schedule for patients having the specific disease.
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Phase 3. Clinical trials are undertaken to further evaluate the selected dose, clinical efficacy and safety in
an expanded patient population at geographically dispersed clinical trial sites. These pivotal clinical trials, which usually involve
more subjects than earlier trials, are intended to establish the overall risk/benefit ratio of the product and provide adequate
data which serve as the basis to inform product labeling. Generally, at least two adequate and well-controlled Phase 3 clinical
trials are required by the FDA for approval of an NDA or BLA.
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Post-approval studies, or Phase 4 clinical trials, may
be conducted after initial marketing approval. These studies are used to gain additional experience from the treatment of patients
in the intended therapeutic indication and may be required by the FDA as part of the approval process.
Progress reports detailing the results of the clinical trials
must be submitted at least annually to the FDA and written IND safety reports must be submitted to the FDA by the investigators
for serious and unexpected adverse events or any finding from tests in laboratory animals that suggests a significant risk for
human subjects. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified
period, if at all. The FDA or the sponsor or its data safety monitoring board may suspend a clinical trial at any time on various
grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly,
an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in
accordance with the IRB’s requirements or if the drug or biologic has been associated with unexpected serious harm to patients.
Concurrent with clinical trials, companies usually complete
additional animal studies and develop additional information about the chemistry and physical characteristics of the drug or biologic
as well as finalize a process for manufacturing the product in commercial quantities in accordance with CGMP requirements. The
manufacturing process must be capable of consistently producing quality batches of the drug or biological candidate. In addition,
companies must develop and validate analytical methods for testing the identity, strength, quality and purity of raw materials,
in-process material and the final drug or biologic. Additionally, appropriate packaging must be selected and tested, and stability
studies must be conducted to demonstrate that the drug or biological candidate does not undergo unacceptable deterioration over
its shelf life.
U.S. Review and Approval Processes
The results of product development, preclinical studies and
clinical trials, along with descriptions of the manufacturing process, analytical tests conducted on the drug or biologic, proposed
packaging and labeling and other relevant information are submitted to the FDA as part of an NDA or BLA requesting approval to
market the product. The submission of an NDA or BLA is subject to the payment of substantial user fees; a waiver of such fees may
be obtained under certain limited circumstances. We believe that we will be required to submit BLAs or NDAs for our product candidates.
In addition, under the Pediatric Research Equity Act, or PREA,
an NDA or a BLA, or supplement to an NDA or a BLA, that covers a new active ingredient, new indication, new dosage form, new dosing
regimen, or new route of administration must contain data to assess the safety and effectiveness of the proposed indication of
the drug or biologic in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation
for which the product is safe and effective. The FDA may grant deferrals for submission of pediatric data or full or partial waivers.
PREA does not apply to any drug or biologic for an indication for which orphan designation has been granted unless FDA were to
issue a regulation to require pediatric assessments.
The FDA performs an administrative review of all NDAs and BLAs
submitted before it accepts them for filing and may request additional information rather than accepting an NDA or BLA for filing.
Once the submission is accepted for filing, the FDA begins an in-depth technical and scientific review of the NDA or BLA. Under
the goals and policies agreed to by the FDA under the Prescription Drug User Fee Act, or PDUFA, the FDA has established a performance
goal of ten months in which to complete its initial review of a standard NDA or BLA and respond to the applicant, and a performance
goal of six months for a priority NDA or BLA. The FDA does not always meet its PDUFA goal dates for standard and priority NDAs
and BLAs.
After the NDA or BLA submission is accepted for filing, the
FDA reviews the submission to determine, among other things, whether the proposed product is safe and effective for its intended
use, and whether the product is being manufactured in accordance with CGMP requirements to assure and preserve the product’s
identity, strength, quality and purity. The FDA reviews a BLA to determine, among other things, whether the product is safe, pure
and potent and the facility in which it is manufactured, processed, packaged or held meets standards designed to assure the product’s
continued safety, purity and potency. In addition to its own review, the FDA may refer applications for novel drug or biological
products or drug or biological products which present difficult questions of safety or efficacy to an advisory committee, typically
a panel that includes clinicians and other experts in the disease area, for review, evaluation and a recommendation as to whether
the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee,
but it considers such recommendations carefully when making decisions. On September 27, 2007, the Food and Drug Administration
Amendments Act of 2007 was enacted, giving the FDA enhanced post-market authority, including the authority to require post-marketing
studies and post-marketing clinical trials related to serious risks, labeling changes based on new safety information, and compliance
with risk evaluation and mitigation strategies, or REMS, approved by the FDA. The FDA’s exercise of this authority can result
in delays or increased costs during the period of product development, clinical trials and regulatory review and approval, which
may also increase costs related to complying with new post-approval regulatory requirements, and increase potential FDA restrictions
on the sale or distribution of approved products. During the approval process, the FDA will determine whether a REMS is necessary
to assure the safe use of the drug or biologic post-approval. If the FDA concludes that a REMS is needed, the sponsor of the NDA
or BLA must submit a proposed REMS; the FDA will not approve the NDA or BLA without a REMS, if required.
Before approving an NDA or BLA, the FDA will inspect the facilities
at which the product is to be manufactured. The FDA will not approve the product unless it determines that the manufacturing processes
and facilities are in compliance with CGMP requirements and adequate to assure consistent production of the product within required
specifications. In this inspection, the FDA also seeks to determine whether the manufacturing conforms with application commitments,
the authenticity and accuracy of data, and the adequacy of the company’s analytical methodology. Additionally, before approving
an NDA or BLA, the FDA will typically inspect one or more clinical sites to assure compliance with current good clinical practices,
or CGCPs. If the FDA determines the application, data, manufacturing process or manufacturing facilities are not acceptable, it
will outline the deficiencies in the submission and often will request additional testing or information.
The NDA or BLA review and approval process is lengthy and difficult
and the FDA may refuse to approve an NDA or BLA if the applicable regulatory criteria are not satisfied or the agency requires
additional clinical data or other data and information. Even if such data and information is submitted, the FDA may ultimately
decide that the NDA or BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive
and may be susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. In addition, protocol
deviations or data discrepancies could delay, limit or prevent regulatory approval. The FDA will issue a Complete Response Letter,
or CRL, if the agency decides not to approve the NDA or BLA. The CRL describes all of the specific deficiencies in the NDA or BLA
identified by the FDA. The deficiencies identified may be minor, for example, requiring labeling changes, or major, for example,
requiring additional clinical trials or new clinical data.
Additionally, the CRL may include recommended actions that the
applicant might take to place the application in a condition for approval. If a CRL is issued, the applicant may either resubmit
the NDA or BLA, addressing all of the deficiencies identified in the CRL, or withdraw the application.
If a product receives regulatory approval, the approval may
be limited to specific diseases and dosages or the indications for use may otherwise be limited, which could restrict the commercial
value of the product. Further, the FDA may require that certain contraindications, warnings or precautions be included in the product
labeling. In addition, the FDA may require Phase 4 testing which involves clinical trials designed to further assess a product’s
post-market safety and effectiveness and may require testing and surveillance programs to monitor the safety of approved products
that have been commercialized.
Orphan Drug Designation
Under the Orphan Drug Act, the FDA may grant orphan designation
to a drug or biological product intended to treat a rare disease or condition, which is generally a disease or condition that affects
fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States and for which there
is no reasonable expectation that the cost of developing and making a drug or biological product available in the United States
for this type of disease or condition will be recovered from sales of the product. Orphan product designation must be requested
before submitting an NDA or BLA. After the FDA grants orphan product designation, the identity of the therapeutic agent and its
potential orphan use are disclosed publicly by the FDA. Orphan product designation does not convey any advantage in or shorten
the duration of the regulatory review and approval process.
If a product that has orphan designation subsequently receives
the first FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan product
exclusivity, which means that the FDA may not approve any other applications to market the same drug or biological product for
the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product
with orphan exclusivity. Competitors, however, may receive approval of different products for the indication for which the orphan
product has exclusivity or obtain approval for the same product but for a different indication for which the orphan product has
exclusivity. Orphan product exclusivity also could block the approval of one of our products for seven years if a competitor obtains
approval of the same drug or biological product for the same indication as defined by the FDA or if our drug or biological candidate
is determined to be contained within the competitor’s product for the same indication or disease. If a drug or biological
product designated as an orphan product receives marketing approval for an indication broader than what is designated, it may not
be entitled to orphan product exclusivity. Orphan drug status in the European Union has similar but not identical benefits in the
European Union.
The FDA granted ODD to ELZONRIS for the treatment of AML, in
February 2011 and for BPDCN in June 2013. The European Medicines Agency, or EMA, granted ODD to ELZONRIS for the treatment
of AML in October 2015 and for BPDCN in November 2015. In addition, we received ODD for SL-701 for the treatment of glioma
in January 2015. ELZONRIS was granted BTD by the FDA, for the treatment of patients with BPDCN in August 2016. On
December 21, 2018, the FDA granted approval of ELZONRIS for the treatment of BPDCN in adult and pediatric patients
two years and older, in both treatment-naïve and previously-treated populations.
Expedited Development and Review Programs
The FDA has established Expedited Review Programs to review
applications for therapies that treat serious or life-threatening diseases or have the potential to provide unusually large benefits
to patients more efficiently and expeditiously.
A product may be eligible for the BTD program, allowing expedited development and review by FDA. A BTD may apply to a drug that is intended, alone or in combination
with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates
that the drug may demonstrate a substantial improvement over existing therapies on one or more clinically significant endpoints,
such as substantial treatment effects observed early in clinical development. The benefits of BTD include more intensive FDA guidance
on an efficient drug development program, an organizational commitment involving senior FDA managers, and eligibility for rolling
review and priority review of marketing applications. The receipt of a BTD for a product candidate may not result in a faster development
process, review or approval compared to drugs considered for approval under conventional FDA procedures and a BTD may be rescinded
by FDA where subsequent data no longer support the BTD of the candidate.
In August 2016, we announced that the FDA granted BTD to
ELZONRIS for the treatment of BPDCN. On December 21, 2018, the FDA granted approval of ELZONRIS for the treatment
of BPDCN in adult and pediatric patients two years and older, in both treatment-naïve and previously treated populations.
The FDA also has a Fast Track program that is intended to expedite
or facilitate the process for reviewing new drug and biological products that meet certain criteria. Specifically, new drug and
biological products are eligible for Fast Track designation if they are intended to treat a serious or life-threatening condition
and demonstrate the potential to address unmet medical needs for the condition. Fast Track designation applies to the drug product
alone or in combination with one or more other drugs for the specific indication for which it is being studied. Unique to a Fast
Track product, the FDA may consider reviewing sections of the NDA or BLA on a rolling basis before the complete application is
submitted. In addition, the sponsor and FDA would agree on a schedule for the submission of the sections of the NDA or BLA. If
the FDA agrees to a rolling review of a NDA or BLA, and determines that the schedule is acceptable, the sponsor pays any required
user fees upon submission of the first section of the NDA or BLA.
Any product submitted to the FDA for marketing approval, including
those submitted to a Fast Track program, may also be eligible for other types of FDA programs intended to expedite development
and review, such as priority review and accelerated approval.
Any product is eligible for Priority Review if it has the potential
to provide safe and effective therapy where no satisfactory alternative therapy exists or a significant improvement in the treatment,
diagnosis or prevention of a disease compared with marketed products. The FDA will attempt to direct additional resources to the
evaluation of an application for a new drug or biological product designated for priority review in an effort to facilitate the
review with the goal of taking Agency action on a marketing application within six (6) months.
Lastly, a product may be eligible for the Accelerated Approval
Program. 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 that they
may be approved on the basis of adequate and well-controlled clinical studies establishing that the product has an effect on a
surrogate endpoint that is reasonably likely to predict a clinical benefit, or on the basis of an effect on a clinical endpoint
other than survival or irreversible morbidity. As a condition of approval, the FDA generally requires that a sponsor of a drug
or biological product receiving accelerated approval perform adequate and well-controlled post-marketing clinical studies to establish
safety and efficacy for the approved indication. Failure to conduct such studies, or conducting such studies that do not establish
the required safety and efficacy may result in revocation of the original approval. In addition, the FDA currently requires as
a condition for accelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial
launch or subsequent marketing of the product. Fast Track designation, priority review and accelerated approval may expedite the
development or approval process.
Post-Approval Requirements
Any drug or biological products for which we receive FDA approvals
are subject to continuing regulation by the FDA, including, among other things, CGMP compliance, record-keeping requirements, reporting
of nonconforming distributed products which would require field alert reports (FARs) for NDAs and biological product deviation
reports (BPDRs) for BLAs, reporting of adverse events, providing the FDA with updated safety and efficacy information on an annual
basis or as required more frequently for specific events, product sampling and distribution requirements, complying with certain
electronic records and signature requirements and complying with FDA promotion and advertising requirements, which include, among
others, standards for direct-to-consumer advertising, prohibitions against promoting drugs and biologics for uses or in patient
populations that are not described in the drug’s or biologic’s approved labeling (known as “off-label promotion”),
rules for conducting industry-sponsored scientific and educational activities, limitations on comparative or superiority claims
and promotional activities involving data presentations. Failure to comply with FDA requirements can have negative consequences,
including for cause inspections; warning or untitled letters from the FDA, including demands for correction or removal of noncomplying
product; adverse publicity; mandated corrective advertising or communications with doctors; and civil or criminal penalties. Although
physicians may prescribe legally available drugs and biologics for off-label uses, manufacturers may not market or promote such
off-label uses.
We rely, and expect to continue to rely, on third parties for
the production of clinical and commercial quantities of our product candidates. Manufacturers of our product candidates are required
to comply with applicable FDA manufacturing requirements contained in the FDA’s CGMP regulations. CGMP regulations require
among other things, quality control and quality assurance as well as the corresponding maintenance of comprehensive records and
documentation. We are required by law to establish adequate oversight and control over raw materials, components and finished products
furnished by our third-party manufacturers, which we establish by contract, supplier qualification and periodic audits, but unforeseen
circumstances could affect our third-party manufacturers’ compliance with applicable regulations and standards. Drug and
biologic manufacturers and other entities involved in the manufacture and distribution of approved drugs and biologics are also
required to register their establishments and list any products made there with the FDA and comply with related requirements in
certain states, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with CGMP
and other laws. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality
control to maintain CGMP compliance. Discovery of problems with a product after approval may result in serious and extensive restrictions
on a product, manufacturer, or holder of an approved NDA or BLA, including suspension of a product until the FDA is assured that
quality standards can be met, continuing oversight of manufacturing by the FDA under a “consent decree,” which frequently
includes the imposition of penalties for failure to comply with the terms of the consent decree, audits conducted by outside experts,
extensive reporting requirements, and possible withdrawal of the product from the market. Historically, the minimum term of an
FDA consent decree has been five years, and violation of consent decree terms can result in the extension of the consent decree
term.
Major changes to the manufacturing process and other types of
major changes, such as adding new indications, require prior FDA approval before being implemented. Moderate and minor changes
require FDA notification but not prior approval.
The FDA also may require post-marketing testing, known as Phase 4
testing, risk minimization action plans and surveillance to monitor the effects of an approved product or place conditions on an
approval that could otherwise restrict the distribution or use of the product.
On July 9, 2012, the Food and Drug Administration Safety
and Innovation Act, among other things, renewed the drug user fee program, expanded the FDA’s inspection records access and
required manufacturers to establish appropriate oversight and controls over their suppliers and the supply chain, including raw
material suppliers and contract manufacturers, as a part of CGMP compliance. On November 27, 2013, the Drug Quality and Security
Act, which included the Drug Supply Chain Security Act, was enacted to, among other things, build an electronic, interoperable
system to identify and trace certain prescription drugs as they are distributed in the United States. Requirements for the tracing
of products through the pharmaceutical distribution supply chain took effect on January 1, 2015 for manufacturers and building
internal systems to ensure compliance with this law will require dedication of resources. In addition, this law requires engaging
in transactions only with authorized trading partners and can limit the pool of available trading partners. On August 18,
2017, the FDA Reauthorization Act of 2017, among other things, reauthorized and amended the user fee program eliminating the
establishment fee and replacing the Prescription Drug Product Fee with a Prescription Drug Program Fee.
U.S. Patent Term Restoration and Marketing Exclusivity
Drug Price Competition and Patent Term Restoration Act of
1984
Depending upon the timing, duration and specifics of the FDA
approval of the use of our drug and biologics candidates, some of our United States patents may be eligible for limited patent
term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman
Amendments. Although drafted to cover small-molecule drugs, as opposed to biologics, the Hatch-Waxman Amendments permit a patent
restoration term of up to five years as compensation for patent term lost during federal regulatory review preceding the FDA regulatory
review process. The FDA has been granting patent term extensions to biologics. However, patent term restoration cannot extend the
remaining term of a patent beyond a total of 14 years from the product’s approval date. The patent term restoration
period is generally one-half the time between the effective date of an IND and the submission date of an NDA or a BLA plus the
time between the submission date of an NDA or a BLA and the approval of that application. Only one patent applicable to an approved
drug or biologic is eligible for the extension and the application for the extension must be submitted within 60 days of approval
and prior to the expiration of the patent. Further, to be eligible for patent term extension a drug must be the first permitted
commercial marketing for which there was a regulatory review period. The United States Patent and Trademark Office, in consultation
with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, we may apply for
restoration of patent term for one of our currently owned or licensed patents to add patent life beyond its current expiration
date, depending on the expected length of the clinical trials and other factors involved in the filing of the relevant NDA.
Federal Food, Drug and Cosmetic Act
Market exclusivity provisions under the FDCA, which are independent
of patent status and any patent-related extensions and can run concurrently with a patent or not, can also delay the submission
or effective approval of certain applications of companies seeking to reference another company’s NDA. The length of time
that the FDA grants depends on the type of exclusivity.
If the new drug that is the subject of an approved NDA contains
a new chemical entity, the FDCA provides a five-year period of non-patent marketing exclusivity within the United States that runs
from the date of NDA approval. FDA regulations define “new chemical entity” as “a drug that contains no active
moiety that has been approved by FDA in any other NDA submitted under section 505(b) of the Federal Food, Drug, and Cosmetic
Act.” 21 C.F.R. § 314.108. During the five-year exclusivity period, no company may submit an ANDA or a 505(b)(2) NDA
for a drug product that contains the same active moiety as in the new chemical entity with one exception, however, such application
may be submitted after four years if it contains a certification of patent invalidity or noninfringement to one of the patents
listed in FDA’s Orange Book by the innovator NDA holder.
The FDCA also provides three years of marketing exclusivity
for an NDA, or supplement to an existing NDA, that contained new clinical investigations (other than bioavailability studies) that
were conducted or sponsored by the applicant and are deemed by FDA to be essential to the approval of the NDA or supplement. Such
new clinical investigations may support approval of, for example, new indications, dosages or strengths of an existing drug. This
three-year exclusivity period runs from the date of approval of the NDA or supplement containing the new clinical investigations
and covers only the conditions associated with the new clinical investigations. That is, it bars the FDA from approving an ANDA
or 505(b)(2) NDA for those conditions of approval. Unlike NCE exclusivity, exclusivity for new clinical investigations does
not prohibit the submission of an ANDA or 505(b)(2) NDA by another company during that three-year period.
Pediatric exclusivity is another type of regulatory market exclusivity
in the United States. Pediatric exclusivity, if granted by the FDA, adds six months to existing exclusivity periods and patent
terms. This six-month exclusivity, which runs from the end of other exclusivity protection or patent term, may be granted based
on the completion of a pediatric trial in accordance with an FDA-issued “Written Request” for such a trial. Biologic
products that are subject to the PHSA are not eligible for pediatric exclusivity under the FDCA.
Biologics Price Competition and Innovation Act of 2009
The Biologics Price Competition and Innovation Act of 2009,
or BPCIA, amended the PHSA to create a new licensure framework for biosimilar products, which could ultimately subject our biological
product candidates to competition. Under the BPCIA, a manufacturer may submit an application for licensure of a biological product
that is “biosimilar to” or “interchangeable with” a referenced, branded biologic product. Previously, there
had been no licensure pathway for such biosimilar or interchangeable products. For purposes of the BPCIA, a reference product is
defined as the single biological product licensed under a full BLA against which a biological product is evaluated in an application
submitted under a follow-on BLA.
The BPCIA also created a 12-year period of reference product
exclusivity, which can be extended to 12.5 years with pediatric exclusivity. The 12-year exclusivity period begins on the
date of first licensure of the reference product under the PHSA and during which the licensure of a follow-on application for a
biosimilar or interchangeable product cannot be made effective. During the first four years (or four and one-half years with pediatric
exclusivity) of the 12-year period, an application for a biosimilar or interchangeable version of the reference product cannot
be submitted to the FDA. Members have recently begun introducing bills that would decrease the reference product exclusivity from 12 to seven years. Congress has not yet enacted such a change in the BPCIA, but could move to enact such
a decrease in the reference product exclusivity period.
The BPCIA includes limits on obtaining 12-year reference product
exclusivity for certain changes or modifications to the reference product. A separate 12-year reference product exclusivity period
does not apply to:
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a BLA supplement for the product that is the reference product;
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a subsequent BLA filed by the same reference product sponsor or manufacturer (or a licensor, predecessor in interest, or other
related entity) for a change (not including a modification to the structure of the biological product) that results in a new indication,
route of administration, dosing schedule, dosage form, delivery system, delivery device or strength; or
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a modification to the structure of the biological product that does not result in a change in safety, purity or potency.
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In addition to creating a 12-year period of reference product
exclusivity, the BPCIA clarifies the interaction of that exclusivity with orphan drug exclusivity, such that, if a reference product
has been designated for a rare disease or condition the licensure of a biosimilar or interchangeable version of a reference product
for such disease or condition may only occur after the later of the expiration of any applicable seven-year orphan drug exclusivity
or the 12-year reference product exclusivity (or seven and one-half years and 12.5 years with pediatric exclusivity).
Like pediatric exclusivity applicable to drug products approved
under the FDCA, pediatric exclusivity applicable to biological reference products is subject to an exception. Pediatric exclusivity
will not apply to either the 12-year reference product or the seven-year orphan drug exclusivity periods if the FDA has not determined
that the study reports a BLA sponsor submitted in response to a written request for pediatric studies met the terms of that request
before nine months prior to the expiration of such period.
Our biological product candidates, if approved, could be considered
reference products entitled to 12-year exclusivity. Even if our products are considered to be reference products eligible for exclusivity,
another company could market a competing version of any of our biological products if the FDA approves a full BLA for such product
containing the sponsor’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the
safety, purity and potency of their product.
The BPCIA also sets forth a complex mechanism for resolving
patent disputes that involve a step-wise exchange of information prior to the initiation of a patent infringement lawsuit against
a biosimilar or interchangeable product sponsor. Unlike the Hatch-Waxman Act, the BPCIA provides no automatic stay on approval
of a biosimilar product application, except an interchangeable product receives the lesser of one year of exclusivity after the
date of first commercial marketing or 18 months of exclusivity after a final court decision or dismissal of a patent challenge
or, if the applicant has not been sued, after approval. The BPCIA does not prevent a competitor from conducting its own clinical
trials and submitting a full BLA on the same or similar product.
There is also currently substantial uncertainty as to how certain
terms of the BPCIA will be interpreted by the Courts, which may affect the timing of the entry of a biosimilar or interchangeable
product to market, and the required notice that the owner of the reference product exclusivity must be given by the owner of the
application of a biosimilar or interchangeable product. Should the courts resolve the interpretation issues in favor of the biosimilar
or interchangeable product applicants, the BPCIA may offer more limited exclusivity to the reference product than currently believed.
Other U.S. Healthcare Laws and Compliance Requirements
In the United States, healthcare-related activities are potentially
subject to regulation by various federal, state and local authorities in addition to the FDA, including the Centers for Medicare &
Medicaid Services, or CMS (formerly the Health Care Financing Administration), other divisions of the United States Department
of Health and Human Services, or HHS (e.g., the Office of Inspector General and the Office of Civil Rights), the United States
Department of Justice and individual United States Attorney offices within the Department of Justice, state attorneys general and
state and local governments. For example, sales, marketing and scientific/educational grant programs must comply with the federal
Anti-Kickback Statute, the federal False Claims Act, the privacy and security provisions of the Health Insurance Portability and
Accountability Act, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH ,
and similar state laws, each as amended. Pricing and rebate programs must comply with the Medicaid rebate requirements of the Omnibus
Budget Reconciliation Act of 1990, the Veterans Health Care Act of 1992, and the federal Anti-Kickback Statute, each as amended.
If products are made available to authorized users of the Federal Supply Schedule, or FSS, of the General Services Administration,
additional laws and requirements apply. Under the Veterans Health Care Act, or VHCA, drug companies are required to offer certain
pharmaceutical products at a reduced price to four federal agencies including the United States Department of Veterans Affairs,
the United States Department of Defense, the Coast Guard, the Public Health Service and certain private Public Health Service designated
entities (including the Indian Health Service) in order for reimbursement to be available for our product under Medicare and Medicaid.
FSS pricing to these four agencies must be equal to or less than the federal ceiling price, or FCP, which is, at a minimum, 24%
off the Non-Federal Average Manufacturer Price for the prior fiscal year.
Participation under the VHCA requires submission of pricing
data and calculation of discounts and rebates pursuant to complex statutory formulas, as well as the entry into government procurement
contracts governed by the Federal Acquisition Regulations.
In order to distribute products commercially, we must comply
with state laws that require the registration of manufacturers and wholesale distributors of pharmaceutical products in a state,
including, in certain states, manufacturers and distributors who ship products into the state even if such manufacturers or distributors
have no place of business within the state. Some states also impose requirements on manufacturers and distributors to establish
the pedigree of product in the chain of distribution, including some states that require manufacturers and others to adopt new
technology capable of tracking and tracing product as it moves through the distribution chain. Several states have enacted legislation
requiring pharmaceutical companies to establish marketing compliance programs, file periodic reports with the state, make periodic
public disclosures on sales, marketing, pricing, clinical trials and other activities, and/or register their sales representatives,
as well as to prohibit pharmacies and other healthcare entities from providing certain physician prescribing data to pharmaceutical
companies for use in sales and marketing, and to prohibit certain other sales and marketing practices. All of our activities are
potentially subject to federal and state consumer protection and unfair competition laws. In addition, in August 2013, the
federal Physician Payment Sunshine Act took effect and requires annual reporting by prescription drug manufacturers with at least
one (1) approved product of certain payments and transfers of value made to physicians and teaching hospitals. Post-approval
of any of our product candidates, we will need to ensure compliance with annual tracking and reporting of these payments and transfers
of value to CMS.
Europe and Worldwide Government Regulation
In addition to regulations in the United States, we will be
subject to a variety of regulations in other jurisdictions governing, among other things, clinical trials and any commercial sales
and distribution of our products.
Whether or not we obtain FDA approval for a product, we must
obtain the requisite approvals from regulatory authorities in foreign countries prior to the commencement of clinical trials or
marketing of the product in those countries. Certain countries outside of the United States have a similar process that requires
the submission of a clinical trial application much like the IND prior to the commencement of human clinical trials. In the European
Union, for example, a clinical trial application, or CTA, must be submitted to each country’s national health authority and
an independent ethics committee, much like the FDA and IRB, respectively. Once the CTA is approved in accordance with a country’s
requirements, clinical trials may proceed.
The requirements and process governing the conduct of clinical
trials, product licensing, pricing and reimbursement vary from country to country. In all cases, the clinical trials are required
to be in accordance with International Conference on Harmonisation (ICH) / WHO Good Clinical Practice standards and the applicable
regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.
To obtain regulatory approval of an investigational drug or
biological product under European Union regulatory systems, we must submit a marketing authorization application to the EMA. The
application used to file an NDA or a BLA in the United States is similar to that required in the European Union, with the exception
of, among other things, country-specific document requirements. For example, the EMA has already established a number of guidelines
for approval of various biosimilars.
For other countries outside of the European Union, such as countries
in Eastern Europe, Latin America or Asia, the requirements governing the conduct of clinical trials, product licensing, pricing
and reimbursement vary from country to country. In all cases, again, the clinical trials are conducted in accordance with CGCP
and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.
If we fail to comply with applicable foreign regulatory requirements,
we may be subject to, among other things, fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of
products, operating restrictions and criminal prosecution.
Pharmaceutical Coverage, Pricing and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement
status of any drug or biological candidates for which we obtain regulatory approval. In the United States and markets in other
countries, sales of any products for which we receive regulatory approval for commercial sale will depend in part on the availability
of reimbursement from third-party payors. Third-party payors include government health administrative authorities, managed care
providers, private health insurers and other organizations. The process for determining whether a payor will provide coverage for
a drug or biological product may be separate from the process for setting the price or reimbursement rate that the payor will pay
for the drug or biological product. Third-party payors may limit coverage to specific drug or biological products on an approved
list, or formulary, which might not include all of the FDA-approved drug or biological products for a particular indication. Third-party
payors are increasingly challenging the price and examining the medical necessity and cost-effectiveness of medical products and
services, in addition to their safety and efficacy. We may need to conduct expensive pharmacoeconomic studies in order to demonstrate
the medical necessity and cost-effectiveness of our products, in addition to the costs required to obtain the FDA approvals. Our
drug or biological candidates may not be considered medically necessary or cost-effective. A payor’s decision to provide
coverage for a drug or biological product does not imply that an adequate reimbursement rate will be approved. Adequate third-party
reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment
in product development.
In 2003, the United States government enacted legislation providing
a partial prescription drug benefit for Medicare recipients, which became effective at the beginning of 2006. Government payment
for some of the costs of prescription drugs and biologics may increase demand for any products for which we receive marketing approval.
However, to obtain payments under this program, we would be required to sell products to Medicare recipients through prescription
drug plans operating pursuant to this legislation. These plans will likely negotiate discounted prices for our products. Further,
to obtain coverage under Medicare Part B or Medicaid, we would be required to enter into a national rebate agreement with
the Secretary of HHS to provide substantial rebates and discounts to state Medicaid agencies, certain government purchasers, and
certain non-profit health care entities. Federal, state and local governments in the United States continue to consider legislation
to limit the growth of healthcare costs, including the cost of prescription drugs and biologics. Future legislation could limit
payments for pharmaceuticals such as the drug or biological candidates that we are developing.
Different pricing and reimbursement schemes exist in other countries.
In the European Community, governments influence the price of pharmaceutical products through their pricing and reimbursement rules and
control of national healthcare systems that fund a large part of the cost of those products to consumers. Some jurisdictions operate
positive and negative list systems under which products may only be marketed once a reimbursement price has been agreed. To obtain
reimbursement or pricing approval, some of these countries may require the completion of clinical trials that compare the cost-effectiveness
of a particular drug or biological candidate to currently available therapies. Other member states allow companies to fix their
own prices for medicines, but monitor and control company profits. The downward pressure on healthcare costs in general, particularly
prescription drugs and biologics, has become very intense. As a result, increasingly high barriers are being erected to the entry
of new products. In addition, in some countries, cross-border imports from low-priced markets exert a commercial pressure on pricing
within a country.
The marketability of any drug or biological candidates for which
we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail to provide adequate
coverage and reimbursement. In addition, emphasis on managed care in the United States has increased and we expect will continue
to increase the pressure on pharmaceutical pricing. Coverage policies and third-party reimbursement rates may change at any time.
Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval,
less favorable coverage policies and reimbursement rates may be implemented in the future.
Manufacturing
We do not currently own or operate any manufacturing facilities
for the clinical or commercial production of our drug candidates. For past investigator sponsored studies, all drug substance and
drug product for ELZONRIS and SL-701 were manufactured at academic and contract manufacturing organization, or CMO, facilities,
as directed by our academic collaborators. We have now developed manufacturing processes that are suitable for full-scale CGMP
manufacturing. Additionally, we have qualified FDA-audited third-party CMOs to produce sufficient quantities of ELZONRIS,
SL-801, and SL-701 drug substance and drug product of suitable quality for our active and contemplated corporate sponsored clinical
trials and commercialization. For ELZONRIS, commercial supplies have been manufactured in support of approval and routine resupply
manufacturing is ongoing. Our manufacturing programs are being managed with oversight by our manufacturing team, which is comprised
of full-time employees and consultants with experience in manufacturing pharmaceutical drug substance and drug products.
ELZONRIS Manufacturing and Supply
ELZONRIS is a recombinant protein generated from an antibiotic-resistance
driven DNA-based plasmid vector and manufactured by bacterial fermentation in E. coli. For past investigator sponsored studies,
ELZONRIS was manufactured at Wake Forest University. We have optimized the protein expression, generated CGMP master and working
cell banks, and developed the fermentation and purification steps of our manufacturing process to be suitable for scale-up in standard
manufacturing equipment. This technology has been transferred to a third-party CMO with expertise in bacterial fermentation, which
has further optimized and scaled-up the process in their CGMP production suite. The ELZONRIS drug substance has now met standard
industry quality specifications and is adequate to support commercial distribution as well as our ongoing and planned corporate
sponsored clinical trials. The drug product formulation and manufacturing process has been transferred to a third-party CMO with
expertise in sterile product manufacture for clinical and commercial supply, and they have successfully produced drug product meeting
CGMP requirements for use in clinical studies. We have also utilized the same process, scale and CMOs to manufacture drug substance
and drug product for current and future commercial supply. Additionally, we have a lyophilized formulation of ELZONRIS, which is
currently being developed.
SL-801 Manufacturing and Supply
SL-801 is a small molecule that is prepared via synthetic organic
chemistry. We have completed process development and CGMP manufacturing at an adequate scale to supply our ongoing and planned
corporate sponsored clinical studies. We have also developed a stable solid-oral tablet formulation that has been produced using
CGMP manufacturing equipment at our third-party CMO. We believe that the manufacturing scale and product quality procedures and
oversight ensure an adequate supply for our active and planned corporate sponsored clinical studies.
SL-701 Manufacturing and Supply
SL-701 is an immunotherapy that is comprised of several short
synthetic peptides. Each of the component peptides of SL-701 is manufactured individually by solid-phase synthesis and all have
been prepared to acceptable quality specifications in CGMP manufacturing equipment by our third-party CMO. The manufacturing scale
and product quality procedures and oversight ensure an adequate supply for our active and planned corporate sponsored clinical
studies. We have also developed a stable formulation that combines the individual peptides in a single sterile solution to generate
SL-701 drug product. This manufacturing process was transferred to a third-party CMO with expertise in sterile product manufacture.
This CMO has produced multiple CGMP drug product batches of sufficient quality and quantity to supply our corporate sponsored clinical
trials. SL-701 has been utilized with several different adjuvants including Montanide, GM-CSF, Imiquimod, and poly-ICLC. We
have been, and may continue to be, reliant on the availability of these adjuvants from their respective manufacturers.
SL-901
SL-901 is a small molecule that is prepared via synthetic organic
chemistry. Process development and active pharmaceutical ingredient, or API, CGMP manufacturing at an adequate scale to enable
an IND, or foreign equivalent, submission and supply our planned clinical studies have been completed. We have also developed a
stable capsule formulation that will be produced using CGMP manufacturing equipment at our third-party CMO. We believe that the
manufacturing scale and product quality procedures and oversight ensure an adequate supply for our planned clinical studies.
SL-1001
SL-1001 is a small molecule that is prepared via synthetic organic
chemistry. API process development and CGMP manufacturing is ongoing at a third-party CMO. Development of an oral capsule formulation
is also ongoing at a different third-party CMO. We believe that the manufacturing scale and product quality procedures and oversight
will ensure an adequate supply for our planned corporate sponsored clinical studies.
Sales and Marketing
Stemline’s commercial group is primarily focused on effectively
launching and commercializing ELZONRIS in the U.S. The commercial group is comprised of a wide range of functions including commercial
operations, sales, marketing, and market access and reimbursement. Additionally, the organization has established a medical affairs
presence in the field, which is predominantly staffed by medical science liaisons. We aim to build on this field presence based
on routine reviews of the business and market. For 2020, we anticipate adding diagnostic and telephonic sales teams to further
enhance product uptake. We believe the aforementioned functions represent the necessary infrastructure to support a successful
launch of ELZONRIS indicated for BPDCN in the U.S.
The commercial infrastructure of specialty oncology products
typically consists of a targeted, specialty sales force that calls on a highly targeted group of health care providers, or HCPs,
supported by sales management, internal sales support, an internal marketing group, and distribution. Additional capabilities important
to the oncology marketplace include the management of key accounts, such as managed care organizations, group-purchasing organizations,
specialty distributors, oncology group networks, and government accounts. As ELZONRIS is approved for an ultra-orphan indication
with a relatively small number of treating physicians. This corresponds with a reduced infrastructure need consisting of a small,
targeted sales force. The current staffing is thought to be sufficient to support our current sales and marketing objectives but
remains scalable given market needs. We have allocated management resources and made significant financial investments to support
the commercial launch of ELZONRIS, including preparation of marketing and sales training materials developed in compliance with
medical, legal and regulatory requirements. We may elect in the future to utilize strategic partners, distributors, or contract
sales forces to assist in the commercialization of our products.
In January 2019, Stemline submitted a MAA to the EMA,
seeking approval of ELZONRIS for the treatment of adult patients with BPDCN. The application is being reviewed under the
centralized procedure on a standard review timeline. A SAG in the EU met in March 2020. In
anticipation of potential regulatory success, we have assessed European staffing and infrastructure needs, and have hired
commercial personnel to meet the needs of a possible second half of 2020 commercial launch in Europe.
Research and Development
Company
sponsored research and development expenses totaled $50.7 million in 2019, $47.7 million in 2018, and $50.2 million in 2017.
“Research and development expenses” consist of costs associated with the development of our product candidates and
our platform technology, which include: clinical trial costs, CMC-related costs, nonclinical costs, employee related expenses,
external research and development expenses, license fees and milestone payments related to in-licensed products and technology,
and facilities, depreciation and other allocated expenses. See “Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Overview.”
Employees
As of March 16, 2020, we had 100
full-time employees, 7 of whom hold Ph.D. or M.D. degrees. None of our employees
is subject to a collective bargaining agreement or represented by a trade or labor union. We believe that we have a good relationship
with our employees.
Item1.A Risk
Factors.
You should carefully consider the following risks and uncertainties.
If any of the following occurs, our business, financial condition and/or operating results could be materially harmed. These factors
could cause the trading price of our common stock to decline, and you could lose all or a substantial part of your investment.
Risks Related to Development, Clinical Testing, Regulatory
Approval, and Commercialization of Our Product Candidates
We are heavily dependent on the success of our product
candidates and clinical product candidates and we cannot provide any assurance that any of our additional current or future product
candidates will be approved, commercialized, or successfully marketed in the future.
To date, we have invested a significant portion of our efforts
and financial resources in the acquisition and development of our clinical product candidates, which we plan to advance through
clinical development. Our future success depends heavily on our ability to successfully manufacture, develop, obtain regulatory
approval for, and commercialize these products and product candidates, which may never occur.
Before we generate any income from sales of our product candidates,
clinical product candidates or future product candidates in the United States or elsewhere, we must complete preclinical and clinical
development, conduct human subject research, submit clinical and manufacturing data to the U.S. Food and Drug Administration, or
FDA, or foreign equivalent, qualify a third-party contract manufacturing organization, or CMO, satisfy the FDA or foreign equivalent
that our CMO is capable of manufacturing the product in compliance with the FDA’s current good manufacturing practices (CGMPs),
submit a marketing application (e.g., Biologics License Application, or BLA, or foreign equivalent), or New Drug Application, or
NDA, or foreign equivalent, receive regulatory approval from the FDA or a foreign regulatory authority, build a commercial organization,
make substantial investments, and undertake significant marketing efforts ourselves or in partnership with others to ensure compliant
marketing and market acceptance of any products we commercialize. We are not permitted to engage in unrestricted marketing or promotion
of any of our product candidates before we receive regulatory approval from the FDA or comparable foreign regulatory authorities,
and we may never receive such regulatory approval for our current or future product candidates.
We cannot be certain that any further BLAs, NDAs or MAAs will
be filed within a specified period of time, or that any BLA or NDA or similar foreign marketing application will allow us to obtain
or maintain marketing approval. In addition, any marketing approval we may obtain may be for indications and uses that are more
limited than we expect or include contraindications or risk measures that limit market acceptance of the product subject to the
marketing approval. We also cannot be certain that our product or product candidates will be successful in clinical trials or that
the clinical trials or data will support filing any further BLAs or NDAs in the U.S., or similar foreign marketing applications
elsewhere. We also cannot be certain that any of our product candidates will receive the appropriate regulatory approval required
to commence clinical trials. Further, the FDA, an independent review committee, or IRC, or an oncologic drugs advisory committee,
or ODAC, may not agree with the interpretation by our investigators or us of the clinical safety and efficacy of our product candidates,
and our product candidates may not receive regulatory approval.
We do not have the resources to conduct and directly oversee
our product development programs without assistance from third parties. In the execution of our product development programs, we
may have to rely on collaborations with clinical partners as well as clinical research organizations, or CROs, CMOs, vendors and
other service providers. Failure by these entities to satisfactorily conduct clinical research or to provide the services requested
by us may negatively impact our product development programs, including, but not limited to, program delays or preventing approval
of our product candidates. We plan to seek regulatory approval to commercialize our product candidates in the United States, the
European Union and additional foreign jurisdictions. While the scope of regulatory review and approval can be similar in other
countries, to obtain separate regulatory review and approval in many other countries, we must comply with the numerous and varying
regulatory requirements of such countries, including those regarding safety and efficacy, clinical trials, manufacturing, post-marketing
commitments, and commercial sales, pricing and distribution of our product candidates, and we cannot predict or guarantee success
in these jurisdictions.
If the incidence and/or prevalence of diseases, or disease areas,
we are targeting for development and/or commercialization, and future growth, are low, including lower than our estimates or estimates
of third-parties, this could significantly delay patient enrollment in our additional ongoing or future clinical trials and/or
could negatively impact commercial revenue. The true incidence and/or prevalence, as well as market potential, can be difficult
to determine, ahead of commercial launch, for certain rare diseases, such as blastic plasmacytoid dendritic cell neoplasm, or BPDCN,
where there had been limited epidemiologic and published data, and databases, and where we are the first company to receive approval
for this indication, with no prior product revenue data. Additionally, due to the unfamiliarity and/or rarity of certain diseases,
such as BPDCN, health care providers may not be aware of, and/or may misdiagnose or underdiagnose such diseases, leading to low
trial enrollment and/or product revenue. Our disease awareness campaign, intended to raise awareness of the disease and increase
patient identification, could fail to do so for many reasons. At this time, we have no way of assuring the accuracy of any incidence/prevalence
or revenue numbers, or the chances for successful development in related areas, thus if these are low, despite expectations to
the contrary, this will negatively impact our revenue and future prospects for the company.
Clinical drug development involves a lengthy and expensive
process with an uncertain outcome.
Clinical testing is expensive and can take a substantial amount
of time to complete. Its outcome is inherently uncertain. In addition, failure can occur at any time during clinical development,
including after significant resources have been invested. We cannot predict whether we will encounter challenges with any of our
clinical trials that will cause us, or regulatory authorities, to delay, suspend or terminate current or future trials.
Clinical trials can be delayed, suspended or terminated for
many reasons, including but not limited to:
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delays or failures in reaching an agreement on acceptable terms with prospective CMOs, CROs, and clinical trial sites, the
terms of which can be subject to extensive negotiation and may vary significantly depending upon the circumstances;
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failure of our third-party contractors, including CROs and CMOs, or our investigators, to comply with regulatory requirements
or otherwise meet contractual obligations in a timely manner;
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delays or failure in obtaining the necessary approvals from regulators, institutional review boards, or IRBs, or scientific
review committees, or SRCs, in order to commence or continue a clinical trial;
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our inability to manufacture, or obtain from third-parties, adequate supply of drug substance, drug product or adjuvant therapies
sufficient to complete our preclinical studies and clinical trials;
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risk of loss of drug product, adjuvants and/or other components of the product, due to third-party storage and distribution
of such supplies;
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the FDA, or other regulatory authority, issuing a clinical hold or requiring alterations to any of our study designs, including
extending a study or requiring new studies, to our overall strategy or to our manufacturing plans;
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delays in patient enrollment, variability in the number and types of patients available for clinical trials, poor accrual,
or high drop-out rates of patients in our clinical trials;
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clinical trial sites deviating from trial protocols or dropping out of a trial and our inability to add new clinical trial
sites;
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difficulty in maintaining contact with patients after treatment, resulting in incomplete data;
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poor effectiveness of our product candidates during clinical trials;
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safety issues, including serious adverse events associated with our product candidates and patient exposure to unacceptable
health risks;
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reports of adverse events or other safety concerns involving ELZONRIS and our clinical drug candidates;
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receipt by a competitor of marketing approval for a product targeting an indication that one of our product candidates targets;
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governmental or regulatory delays and changes in regulatory leadership, requirements, policy and guidelines; or
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the FDA, or similar regulatory body, may not agree with the endpoints we select or the interpretation of the results related
to the endpoints in the evaluation of our product candidates, thereby refusing to approve our product candidates for marketing
approval, or withdrawing approval.
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We could also encounter delays if a clinical trial is suspended
or terminated by us, by the IRB where such trial is being conducted, by a Data Safety Monitoring Board, or DSMB, if one is utilized
for any such trial, or by the FDA or other regulatory authorities. Such authorities may suspend or terminate a clinical trial due
to a number of factors, including, among other things, failure to conduct the clinical trial in accordance with regulatory requirements
or our clinical protocols, regulatory violations identified during an inspection of the clinical trial operations or trial site,
imposition of a clinical hold by the FDA or other regulatory authorities, study subject safety concerns, adverse events or severe
adverse events, including deaths, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative
actions, or lack of adequate funding to continue the clinical trial.
There are unknown risks for our clinical product candidates,
including with respect to dosing, administration, pharmacokinetics, bioavailability, safety and efficacy, that we expect we will
learn about during clinical development, which could halt or delay this development program and/or alter our current strategy for
the development of these product candidates.
We may not have the necessary expertise or capabilities, including
adequate staffing, to successfully manage the execution and completion of any of our clinical trials, prepare clinical study reports
and MAAs, and ultimately obtain marketing approval for our product candidates in a timely manner, or at all.
In any clinical trial of a product candidate, the results of
such trial may not be adequate to support submission of a marketing application or marketing approval. Because our product candidates
are intended for use in life-threatening diseases, in many cases we ultimately intend to seek marketing approval for each product
candidate based on the results of a single clinical trial, which may be open-label and single-group in nature. As a result, these
trials may receive enhanced scrutiny from the FDA. For any such trial, if the FDA disagrees with our choice or definition of primary
endpoint, or the results for the primary endpoint are not robust or significant or clinically beneficial enough, including relative
to a control or historical data, the FDA may refuse to approve a BLA or NDA based on such intended pivotal trial, despite meeting
a primary endpoint of the study. In addition, the results of any such intended pivotal trial may be subject to confounding factors,
or may not be adequately supported by other study endpoints, possibly including overall survival, or OS, overall response rate,
or ORR, rate of complete response, or CR, rate of clinical complete response, or cCR, rate of partial response, or PR, rate and
definition of bone marrow complete response with partial or incomplete hematologic recovery, rate and definition of other responses
including spleen response, including measurement modality and timing of events, rate and definition of total symptom score response,
and/or response duration including definition of response duration, in which case the FDA may refuse to approve a BLA or NDA based
on such intended pivotal trial, despite meeting a primary endpoint of the study. The FDA may not accept the design of or our future
Stage 3a results of ELZONRIS in CMML, or our conclusions related to our design of or future Stage 3a results, as a basis to design
and implement the pivotal Stage 3b portion of the program. The FDA may also require the completion of additional clinical trials
before or as a condition for approving our product candidates.
If we experience delays in the completion of, or a termination
of, any clinical trial of our product candidates, the commercial prospects of our product candidates will be harmed, which will
have a negative impact on our ability to commence product sales and generate product income from any of our product candidates.
In addition, any delays in completing our clinical trials will increase our costs and slow down our product candidate development
and approval process, and may negatively impact our ability to raise additional capital to support these increased costs. Delays
in completing our clinical trials could also allow our competitors to obtain marketing approval before we do, or could shorten
the patent protection period during which we may have the exclusive right to commercialize our product candidates. Any of these
occurrences may harm our business, financial condition and prospects significantly. In addition, many of the factors that cause,
or lead to, a delay in the commencement or completion of clinical trials, may also ultimately lead to the denial of regulatory
approval of our product candidates.
Results of earlier clinical trials may not be
predictive of the results of later-stage or subsequent clinical trials and results in the commercial setting may be different
than clinical trial experience.
The results of preclinical studies and clinical trials,
including early stage, late stage, and investigator-sponsored or corporate-sponsored clinical trials of any investigational
or approved products, may not be predictive of the results of subsequent and/or later stage clinical trials such as Stage 3a
or Stage 3b versus Stage 1 and 2 of the ELZONRIS Phase 1/2 trial in CMML or Stage 4 versus Stages 1, 2, and 3 of the ELZONRIS
Phase 1/2 trial in BPDCN. Investigational or approved products in later stage, including subsequent stages of a given trial,
or larger clinical trials may fail to show the same safety and efficacy results demonstrated in earlier studies, including
having differing patients populations and/or endpoints and methods and schedules to assess such endpoints, despite having
progressed through preclinical studies and earlier clinical trials. Many companies in the biopharmaceutical industry have
suffered significant setbacks in later stage clinical trials, including canceling clinical development programs, due to
adverse safety profiles or lack of efficacy observed in the commercial setting, notwithstanding promising results in earlier
studies. Similarly, our clinical trials results, including with inclusion of subsequent stages of any given trial or
experience with products in the commercial setting, may not be successful, including from a regulatory standpoint, for these or
other reasons.
This drug development risk is heightened by any change in ongoing
and future clinical trials compared to completed clinical trials. As product candidates are advanced through preclinical studies
to early and late stage clinical trials and towards approval and commercialization, it is customary that various aspects of the
development program, such as manufacturing and methods of administration and dosing, are altered along the way in an effort to
optimize processes and results. While these types of changes are common and are intended to optimize the product candidates for
later stage clinical trials, approval and commercialization, such changes do carry the risk that they will not achieve these intended
objectives. For example, the results of our ongoing and future clinical trials may be adversely affected by the following changes:
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As we optimize and scale-up production of our clinical product candidates, there may be manufacturing, formulation, fill-finish
and other process and analytical changes that are part of the optimization and scale-up necessary for producing drug substance
and drug product of a quality, quantity and stability sufficient for later stage clinical development and commercialization. Delays,
including failures, in any of these steps, may delay initiation and completion of clinical trials, regulatory submissions, or commercial
launch. We may also need to demonstrate comparability between newly manufactured drug substances and/or drug products relative
to previously manufactured drug substances and/or drug products. Demonstrating comparability may cause us to incur additional costs
or delay initiation or completion of our clinical trials, including the need or choice to initiate a dose escalation study, and,
if unsuccessful, could require us to complete additional preclinical or clinical studies of our product candidates. Failure to
demonstrate comparability could also result in delays in regulatory submissions or commercial launch. We are also developing a
new lyophilized formulation of ELZONRIS. In the event that this formulation does not demonstrate comparability with the current
liquid/frozen formulation, including from a pharmacokinetic, safety and/or efficacy perspective, the commercial success of ELZONRIS
could be negatively impacted.
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We are, or may in the future be, treating patients with certain diseases or conditions that have not been previously treated
with our product candidates. In these instances, we may choose to treat patients at several different doses and use multi-cycle
dosing regimens to determine the optimal doses and schedules for both near-term and long-term safety and disease control in each
indication. Use of our product candidates in new disease populations and at new dosing regimens could produce unforeseen adverse
reactions and events that could impact the development and ability to obtain or maintain marketing approval for our product candidates.
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We may determine, based on safety and efficacy, that certain doses and regimens of our product candidates for particular indications
are optimal for initial near-term therapy whereas the same, or other, doses and regimens are optimal for longer-term maintenance
therapy.
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We are developing SL-701 as an injection administered under the skin, or subcutaneously, in our trials. Two previous investigator-sponsored
trials of an earlier version of SL-701 used this method of delivery. Another previous investigator-sponsored trial of an earlier
version of SL-701 used a different method of delivery, in which dendritic cells, which are a type of immune cell, were removed
from the patient, exposed to immunogenic peptides, and then re-injected into or near a lymph node of the patient (intra/peri-nodally).
Our plan continues with the subcutaneous injection method used in two of the previous studies and represents a change from one
of the other previous studies.
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We manufactured and formulated SL-701 as a mixture of IL-13R2 mutant peptide, EphA2 peptide, a new survivin mutant peptide,
and a tetanus toxoid peptide. An earlier version of this immunotherapy, which included IL-13R2 mutant and EphA2 peptides, was mixed
with additional peptides in previous studies, including a different survivin peptide in some studies.
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In the initial stage of our SL-701 corporate-sponsored trial, we used granulocyte-macrophage-colony-stimulating factor, or
GM-CSF, and imiquimod as the immunostimulants. In the second stage of our SL-701 trial, we used poly-ICLC as the immunostimulant,
which was the immunostimulant used, along with an earlier version of SL-701, in the previous investigator-sponsored study but is
not currently commercially available. If the poly-ICLC regimen is found to be superior, it would require successful approval and
commercialization of poly-ICLC in addition to SL-701 to support product launch, which would entail a more complicated regulatory
and commercialization strategy than required for a single product launch.
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In clinical trials, we have or are currently combining ELZONRIS with pomalidomide and dexamethasone in myeloma, ELZONRIS with
a hypomethylating agent and potentially a Bcl-2 inhibitor and potentially certain chemotherapeutic agents in various indications
including AML and BPDCN.
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In some of our current or future trials, we are, or may, combine our product candidates with each other or with other therapies
such as chemotherapy, radiation, targeted therapy, or anti-angiogenic therapy which could result in unforeseen toxicities.
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Any of the aforementioned changes, or other changes could make
the timing, including initiation, patient accrual, or results of our clinical trials less predictable, and could cause our product
candidates to perform differently, including causing toxicities, which could delay or suspend completion of our clinical trials,
delay, or prevent approval of our product candidates, and/or jeopardize our ability to obtain regulatory approval, commence product
sales and generate income.
Adverse events or other safety concerns involving ELZONRIS
or our clinical drug candidates could delay clinical development, delay or prevent us from obtaining or maintaining regulatory
approvals, or negatively impact sales or the commercial prospects for our product candidates.
Adverse events or other safety concerns involving ELZONRIS or
our clinical drug candidates in the development or commercial setting could interrupt, delay or halt our clinical trials and/or
commercial sales of our products. For example, CLS is a known, sometimes fatal, and well-documented side effect of ELZONRIS. Reports
of CLS cases, or other adverse events or other safety concerns involving ELZONRIS or our product candidates, could result in clinical
trial delays including regulatory authorities placing trials on clinical hold or denying or withdrawing approval for trials of
any or all indications, or adversely affect our ability to maintain or increase commercial sales of our product or products. Further,
patients receiving ELZONRIS or our product candidates with co-morbid diseases and/or indications not previously well-studied, and/or
in combination with other agents, may experience new or different serious adverse events in the future. Likewise, reports of adverse
events or other safety concerns involving ELZONRIS or our product candidates could interrupt, delay or halt ongoing or planned
clinical trials of such product candidates, could require redesign of study protocols and conduct of additional trials, could result
in our inability to file for or obtain regulatory approvals for any of our product candidates, or could negatively impact commercial
prospects for our product or product candidates.
If we experience delays in the enrollment of patients
in our clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.
We may not be able to continue clinical trials for our product
candidates if we are unable to enroll a sufficient number of eligible patients to participate in these trials, including as required
by the FDA or other regulatory authorities. Patient enrollment, a significant factor in the timing of clinical trials, is affected
by many factors including the size and nature of the patient population, the proximity of patients to clinical sites, the eligibility
criteria for the trial, the design of the clinical trial, competing clinical trials and clinicians’ and patients’ perceptions
as to the potential advantages of the drug being studied in relation to other available therapies, including any new drugs that
may be approved or may commence competing clinical trials for the indications we are investigating.
Some of our product candidates are being developed in rare indications
with small available study populations. There are very limited independently reported data on annual incidences of these rare diseases.
If the prevalence of these diseases is very low, including lower than our estimates or estimates of our third-party contractors,
this could significantly delay patient enrollment in any one or more of our ongoing or future clinical trials.
Further, if we fail to enroll and maintain the number of patients
for which the clinical trial was designed, the statistical power of that clinical trial may be reduced, which would make it harder
to demonstrate that the product candidate being tested in such clinical trial is safe and effective. Additionally, enrollment delays
in our clinical trials may result in increased development costs for our product candidates, which would cause the value of our
common stock to decline and limit our ability to obtain additional financing. Our inability to enroll a sufficient number of patients
for any of our current or future clinical trials would result in significant delays to, or may require us to terminate or not initiate,
one or more clinical trials.
The regulatory review and approval processes of the FDA
and comparable foreign authorities are lengthy, time-consuming and inherently unpredictable, and if we are ultimately unable to
obtain regulatory approval for our product candidates, our business will be substantially harmed.
The time required to obtain approval by the FDA and comparable
foreign authorities can be unpredictable and depends upon numerous factors, including the substantial discretionary review afforded
to the regulatory authorities, which could include the prerequisite of an advisory panel, e.g. ODAC review. In addition, regulations,
policies or guidance documents, or the type and amount of preclinical, CMC, clinical pharmacology, and clinical data necessary
to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions.
We may be required to undertake and complete certain additional preclinical, CMC, clinical pharmacology, bioanalytical, immunogenicity,
or clinical studies to generate additional data required to support the submission of an IND, a BLA, or an NDA to the FDA or equivalent
applications to comparable foreign authorities. An inadequacy in any of these areas, or a lack of personnel, financial resources
or performance, including by third parties, could result in a delayed or unsuccessful regulatory filing. The FDA, or other non-U.S.
regulatory authority, may provide feedback or make requests that are difficult to implement or not implementable at all, and/or
our understanding of regulatory feedback, including regulatory authority minutes, may be incorrect. Also, the FDA, or any other
non-U.S. regulatory authority, may require additional studies to support regulatory approval, including either full or accelerated
or conditional, which could result in a delay in our clinical programs and/or a delayed or unsuccessful regulatory filing, or no
filing at all.
To date, we have only obtained FDA regulatory approval for one
drug product, ELZONRIS, and it is possible that none of our other existing product candidates, additional indications for ELZONRIS
(including, but not limited to, CMML), or any product candidates we may seek to develop in the future will ever obtain regulatory
approval. Furthermore, approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions,
and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries
or by the FDA. Our MAA is currently under review by the European Medicines Agency, or EMA, under a standard timeline. In June 2019,
we received the Day 120 List of Questions which include matters relating to clinical, non-clinical, quality, and CMC, and all stages
of the clinical trials, including stage 4, which largely utilized a new lyophilized drug product. We continue to interact with
the EMA regarding the application and a SAG meeting was recently held during March 2020. While we remain
confident in our ability to successfully address these matters, we are still early in the process of evaluating our data and options
and we acknowledge that there is no guarantee we will be successful attaining full approval for previously-untreated and previously-treated
BPDCN, full approval for one or the other indications, conditional approval for both indications, conditional approval for one
or the other indications, or approval at all.
Our product candidates, alone or in combination with any adjuvant,
immunostimulant including GM-CSF or imiquimod or poly-ICLC, or other agents with which we may combine our drug candidates, could
fail to receive regulatory approval for many reasons, including, but not limited to:
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the FDA or comparable foreign regulatory authorities may disagree with the design, conduct or findings of our clinical trials;
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the FDA or comparable foreign regulatory authorities may identify protocol deviations or data quality or integrity concerns
with our preclinical studies or clinical trials;
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we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product
candidate is safe and effective for its proposed indication;
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the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign
regulatory authorities for approval;
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we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;
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the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from, or the study design
or execution of, preclinical studies or clinical trials;
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the FDA or comparable foreign regulatory authorities may not accept our definition, or criteria, for the primary endpoints
and/or other endpoints for evaluation of efficacy and clinical benefit to patients and may withhold marketing approval, despite
meeting the primary endpoint of a trial;
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the data collected from clinical trials of our product candidates may not be sufficient to support the submission of a BLA,
an NDA, or other submission or to obtain regulatory approval in the United States or elsewhere;
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we may fail to secure an appropriate right of reference to the data from preclinical studies or clinical trials of our product
candidates that we did not conduct or sponsor;
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the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party
manufacturers with which we currently contract for clinical supplies and plan to contract for commercial supplies;
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the FDA or comparable foreign regulatory authorities may fail to approve any companion diagnostics we develop; and
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the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a
manner rendering our clinical data insufficient for approval.
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This lengthy and costly review process, as well as the unpredictability
of future clinical trial results, may result in our failing to obtain regulatory approval to market our product candidates that
we may advance into and through clinical trials, which would significantly harm our business.
In addition, even as part of obtaining approval, regulatory
authorities may approve any of our product candidates for fewer or more limited indications than we request or may grant approval
contingent on the performance of costly post-marketing commitments, including additional clinical trials, observational studies,
and/or pregnancy registries, which could impact market adoption and acceptance and exceed commercialization budgets. Regulatory
authorities may also approve a product candidate with a label that includes labeling claims that may be undesirable for the successful
commercialization of that product candidate, including product contraindications, warnings or precautions, the need for inpatient
versus outpatient administration, or limitations on the administration schedule, such as the number of infusions or cycles. In
addition, we may not be able to ultimately set the price we intend to charge for our product candidates or obtain satisfactory
reimbursement or coverage for our product candidates. Moreover, in many foreign countries, a product candidate must be approved
for reimbursement before it can be approved for sale in that country and the reimbursement may be suboptimal. Any of the foregoing
scenarios could materially harm the commercial prospects for our product candidates.
If we are not successful in discovering, developing and
commercializing additional product candidates, our ability to expand our business and achieve our strategic objectives may be impaired.
Although we expect to focus a substantial amount of our efforts
on the continued clinical testing and regulatory interactions for our clinical stage drug candidates, another key element of our
strategy is to identify and test additional compounds. A portion of the preclinical research that we are conducting involves new
and unproven drug discovery methods, as well as the preclinical testing of new compounds and potential new uses of existing compounds.
The drug discovery that we are conducting using our StemScreen® platform technology may not be successful in identifying compounds
that are useful in treating humans with cancer. Research programs designed to identify product candidates require substantial technical,
financial and human resources, whether or not any product candidates suitable for approval and commercial marketing are ultimately
identified. Even if our research programs may initially show promise in identifying potential product candidates, they may fail
to yield product candidates for clinical development or commercialization for many reasons, including the following:
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the research methodology used may not be successful in identifying potential product candidates;
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competitors may develop alternatives that render our product candidates obsolete;
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a product candidate is subject to the ongoing collection of safety and efficacy data and may, on further study, be shown to
have harmful side effects, be prone to serious adverse events, fail to continue to exhibit that characteristics that support the
initial findings of safety and efficacy or to otherwise fail to meet applicable regulatory criteria;
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a product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all; and
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a product candidate may not be accepted as safe and effective by regulatory authorities, patients, the medical community or
third-party payors.
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If we are unable to identify additional compounds for preclinical
and clinical development, we may not have sufficient or any product income, which could result in significant harm to our financial
position and adversely impact our stock price.
If we obtain approval to market any products outside of
the U.S., a variety of risks associated with international operations and expansion could materially adversely affect our business.
If ELZONRIS is approved for marketing outside of the U.S., which
may not occur, we may enter into agreements with third parties to market ELZONRIS in certain jurisdictions. We have no prior experience
in these countries, and many biopharmaceutical companies have found the process of marketing their products in foreign countries
to be very challenging. We expect that we will be subject to additional risks related to international operations or entering into
international business relationships, including:
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different regulatory requirements for drug development and approvals and rules governing drug commercialization in foreign
countries, including postmarket surveillance, monitoring and reporting;
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possible failure by us or our distributors to obtain appropriate licenses or regulatory approvals for the sale or use of our
product candidates, if approved, in various countries;
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reduced or no protection over intellectual property rights;
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unexpected changes in tariffs, export and import restrictions, trade barriers, and regulatory requirements;
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economic weakness, including inflation, or political instability in particular foreign economies and markets;
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complexities associated with managing multiple payor-reimbursement regimes or self-pay systems;
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financial risks, such as longer payment cycles, difficulty enforcing contracts and collecting accounts receivable;
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compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;
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foreign reimbursement, pricing, and insurance regimes;
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foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations
incident to doing business in another country;
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workforce uncertainty in countries where labor unrest is more common than in the U.S.;
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difficulties in managing foreign operations;
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compliance with the U.S. Foreign Corrupt Practices Act, the United Kingdom Bribery Act 2010, or similar antibribery and anticorruption
laws in other jurisdictions as well as various regulations pertaining to data privacy, such as the European Union General Data
Privacy Regulation;
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production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and
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business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes,
typhoons, floods, and fires.
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We are subject to ongoing FDA regulatory requirements
related to ELZONRIS and our product candidates, both before and after regulatory approval, which require significant resources.
Additionally, our product and product candidates, if approved, could be subject to labeling and other restrictions and we may be
subject to regulatory and enforcement actions or penalties if we fail to comply with regulatory requirements or experience unanticipated
problems with our product.
Any additional regulatory approvals that we or our potential
strategic partners may receive for our product candidates may also be subject to limitations on the approved indication for use
for which the product may be marketed or to the conditions of approval, may contain product contraindications, warnings, or precautions
that limit the use of our product candidates or may contain requirements for potentially costly post-marketing testing, including
Phase 4 clinical trials, and surveillance to monitor the safety and efficacy of our product candidates. In addition, with regard
to ELZONRIS or any product candidates, should they become approved by the FDA, the manufacturing processes, testing, packaging,
labeling, storage, distribution, post-market reporting, advertising, promotion and recordkeeping for the product will be subject
to extensive and ongoing regulatory compliance requirements. These requirements include submissions of safety and other post-marketing
information and reports, as well as continued compliance with CGMPs for commercial manufacturing and good clinical practices, or
GCPs, for any clinical trials that we conduct post-approval. For example, we have several post-marketing commitments related to
the FDA approval of ELZONRIS. In addition, there are now and may be in the future manufacturing, formulation, fill-finish and other
process and analytical changes required by the FDA related to producing drug substance and drug product of a quality, quantity
and stability sufficient for commercial supply. Changes, delays or failures in any of these steps may negatively affect disposition
of manufactured batches of drug substance and/or drug product, and as a result, may require production of additional batches of
drug substance and/or drug product. Issues that may arise with a product, including adverse events of unanticipated severity or
frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements,
may result in, among other things:
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restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market, or product recalls;
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warning letters, untitled letters, or holds on clinical trials;
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refusal by the FDA to approve pending applications or supplements to approved applications filed by us or our strategic partners,
or suspension or revocation of product license approvals;
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product seizure or detention, or refusal to permit the import and export of products;
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investigations or inspections by government entities, including, but not limited to, FDA or foreign health authorities; and
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injunctions, fines, consent decrees, corporate integrity agreements, or the imposition of other civil penalties or criminal
penalties.
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We cannot predict the likelihood, nature or extent of government
regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are slow
or are unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able
to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain
profitability, which would adversely affect our business.
Risks Related to Commercialization of ELZONRIS and the Development
and Commercialization of Our Product Candidates
If we are unable to fully establish or implement our own
sales, marketing, and distribution capabilities in a timely manner, or are unable to enter into licensing or collaboration agreements
for these purposes, we may not be successful in commercializing our product or product candidates.
We continue to develop our infrastructure to commercialize ELZONRIS,
and potentially our product candidates, if any are approved. We may potentially enter into contract research, contract sales, licensing
or collaboration agreements to assist in the future development and commercialization of such product candidates.
To develop internal sales, distribution and marketing capabilities
for our product candidates that might be approved, we would have to invest significant amounts of financial and management resources,
some of which would be committed prior to knowing that our clinical drug candidates were approved. For ELZONRIS, as well as for
our product candidates for which we decide to perform sales, marketing, and distribution functions ourselves, we face a number
of additional risks, including:
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our inability to recruit, train, and retain adequate numbers of effective sales and marketing personnel;
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the inability of sales personnel to obtain access to physicians or effectively promote our approved product to physicians and
other providers;
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the lack of complementary drug product to be offered by sales personnel, which may put us at a competitive disadvantage relative
to companies with more extensive product lines;
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unforeseen costs and expenses associated with creating internal sales and marketing organizations;
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our inability to effectively build our manufacturing and commercial infrastructures to manufacture, market and sell our product
candidates;
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our inability to build and staff, or enter into a partnership to support, an effective commercial distribution organization;
and
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the addressable market for our product candidates may result in unsatisfactory income.
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Where and when appropriate, we may elect to utilize contract
sales forces or strategic partners to assist in the commercialization of our products and product candidates for which we might
receive marketing approval. If we enter into arrangements with third parties to perform sales, marketing and distribution services
for our product, the resulting revenues or the profitability from these revenues to us are likely to be lower than if we had sold,
marketed and distributed our product ourselves. In addition, we may not be successful in entering into arrangements with third
parties to sell, market and distribute our product candidates or may be unable to do so on terms that are favorable to us. We may
have limited control over such third-parties, and any of these third-parties may fail to devote the necessary resources and attention
to sell, market and distribute our products effectively and may engage in conduct that subjects us to significant regulatory enforcement
action, as well as civil and criminal liability. For ELZONRIS and our other product candidates that we commercialize on our own
and build our own sales and marketing organization, there is also a risk that our employees may engage in conduct that subjects
us to significant regulatory enforcement action, as well as civil and criminal liability. The sale of drug products is subject
to numerous regulatory and legal restrictions on promotional statements that may be made regarding a product’s benefits and
risks, in addition to certain restrictions and limitations on interactions with healthcare professionals. If we do not establish
sales, marketing and distribution capabilities successfully and in compliance with legal and regulatory requirements, either on
our own or in collaboration with third parties, we will not be successful in commercializing our product candidates.
Our commercial success depends upon attaining significant
market acceptance of ELZONRIS and our clinical drug candidates, if approved, among physicians and other healthcare providers, patients,
third-party payors and, in the cancer market, acceptance by the operators of major cancer clinics.
Even if our clinical drug candidates, or any other product candidate
that we may develop or acquire in the future, obtain regulatory approval, the product may not gain market acceptance among physicians,
third-party payors, patients and the medical community. For example, current cancer treatments such as chemotherapy and radiation
therapy are well established in the medical community, and doctors may continue to rely on these treatments. The degree of market
acceptance of ELZONRIS and any other product candidates for which we receive approval for commercial sale depends on a number of
factors, including:
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the assurance of efficacy and safety of our products, as demonstrated in clinical trials, and the degree to which our products
represent a clinically meaningful improvement in care as compared with other available therapies;
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the clinical indications for which our products are approved and any limiting contraindications, warnings, and precautions;
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acceptance by physicians, operators of major cancer clinics and patients of our products as safe and effective treatments;
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the willingness of the target patient populations to try new therapies, enroll in ongoing clinical trials, and of physicians
to prescribe these therapies;
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the potential and perceived advantages of our products over alternative treatments;
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the number of vials and cycles used in the commercial setting relative to what was used in the clinical trial setting and may
have been expected in the commercial setting
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the cost of treatment in relation to alternative treatments;
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the availability of adequate reimbursement and pricing by third parties and government authorities;
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the continued projected growth of oncology drug markets;
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relative convenience and ease of administration, including access to drug administration equipment such as syringe pumps;
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the requirement for in-patient versus out-patient administration;
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the prevalence and severity of adverse events and side effects; and
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the effectiveness of our sales and marketing efforts.
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In addition, we must be able to successfully identify patient
populations with sufficient numbers in order to successfully commercialize our products. There can be no guarantee that any of
our programs will be effective at identifying target patient populations, and the number of patients in the markets for which we
may receive marketing approval (e.g., in the United States, Europe and elsewhere) may turn out to be lower than expected, or patients
may not be otherwise amenable to treatment with our products, all of which would adversely affect the results of our operations
and our business.
If ELZONRIS, or any product candidates for which we were to
receive approval, failed to achieve market acceptance, we would not be able to generate significant income. In addition, there
are no guarantees that any approved product will be effective, or gain market acceptance, if we were to obtain approval for additional
indications.
Our product or product candidates may become subject to
unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, which would harm our business.
The regulations that govern marketing approvals, pricing and
reimbursement for new drug products vary widely from country to country and are subject to changes in interpretation, application
and new legislative proposals at any time. Some countries require the approval of the sale price of a drug before it can be marketed.
In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets,
prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted.
As a result, we might obtain marketing approval for a product in a particular country, but then be subject to price regulations
that delay our commercial launch of the product, possibly for lengthy time periods, and negatively impact the income we are able
to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability to recoup our investment
in one or more product candidates, even if our product candidates obtain marketing approval.
Our ability to commercialize any products successfully also
will depend in part on the extent to which reimbursement for these products and related treatments will be available from government
health administration authorities, private health insurers and other organizations. Government authorities and third-party payors,
such as private health insurers and health maintenance organizations, decide which medications they will cover and how much they
will pay for them. A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and
third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications.
Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and
are challenging the prices charged for medical products. We cannot be sure that reimbursement will be available for any product
that we commercialize and, if reimbursement is available, the level of reimbursement.
Reimbursement may impact the demand for, or the price of, any
product candidate for which we obtain marketing approval. Obtaining reimbursement for our products may be particularly difficult
because of the higher prices often associated with drugs administered under the supervision of a physician. If reimbursement is
not available or is available only to limited levels, we may not be able to successfully commercialize any product candidate for
which we obtain marketing approval.
There may be significant delays in obtaining reimbursement for
newly approved drugs, and coverage may be more limited than the purposes for which the drug is approved by the FDA or similar regulatory
authorities outside the United States. Moreover, eligibility for reimbursement does not imply that any drug will be paid for in
all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Interim reimbursement
levels for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement
rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels
already set for lower cost drugs and may be incorporated into existing payments for other services. Net prices for drugs may be
reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation
of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States.
Third-party payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement policies. Our
inability to promptly obtain coverage and profitable payment rates from both government-funded and private payors for any approved
products that we develop could have a material adverse effect on our operating results, our ability to raise the capital needed
to commercialize products and our overall financial condition.
Healthcare policy changes may have a material adverse
effect on us.
Our business may be affected by the efforts of government and
third-party payors to contain or reduce the cost of healthcare through various means. For example, the Patient Protection and Affordable
Care Act and the Health Care and Education Affordability Reconciliation Act of 2010 (collectively, the ACA), enacted in March 2010,
substantially changed the way healthcare is financed by both governmental and private insurers, and significantly impacted the
pharmaceutical industry. With regard to pharmaceutical products, among other things, the ACA expanded and increased industry rebates
for drugs covered under federal health care programs. Legislative proposals such as expanding the Medicaid drug rebate program
to the Medicare Part D program, providing authority for the government to negotiate drug prices under the Medicare Part D
program and lowering reimbursement for drugs covered under the Medicare Part B program have been raised in Congress but have
not been enacted so far. In the 116th U.S. Congress, there has been a renewed and bipartisan effort to address the cost of prescription
drugs, including legislation intended to increase competition by speeding the approval of generic drugs and their entry to the
marketplace, international reference pricing and direct government drug price negotiation, and increasing transparency on patents
and price increases. The administration can rely on its existing statutory authority to make policy changes that could have an
impact on the drug industry. For example, the Medicare program has in the past proposed to test alternative payment methodologies
for drugs covered under the Part B program and finalized a proposal to pay hospitals less for Part B-covered drugs purchased
through the 340B Drug Pricing Program effective January 1, 2018. At the end of 2019, the HHS released a draft rule related
to importation of prescription drugs. It is unclear how this might impact the pharmaceutical market, but signals a continued effort
by the administration to lower drug costs through regulatory action.
Modifications to or repeal of all or certain provisions of the
ACA have been attempted in Congress as a result of the outcome of the recent presidential and congressional elections, consistent
with statements made by the incoming administration and members of Congress during the presidential and congressional campaigns
and following the election. In January 2017, Congress voted to adopt a budget resolution for the fiscal year of 2017, or the
Budget Resolution, that authorizes the implementation of legislation that would repeal portions of the ACA.
The Budget Resolution is not a law. However, it is widely viewed
as the first step toward the passage of legislation that would repeal certain aspects of the ACA. Further, on January 20,
2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under the ACA
to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory
burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. In
March 2017, following the passage of the budget resolution for the fiscal year of 2017, the U.S. House of Representatives
passed legislation known as the American Health Care Act of 2017, which, if enacted, would amend or repeal significant portions
of the ACA. Attempts in the Senate in 2017 to pass similar ACA repeal legislation, including the Better Care Reconciliation Act
of 2017, were unsuccessful. However, in December 2017, the Tax Cuts and Jobs Act was enacted, which includes a provision that
effectively repeals the ACA’s individual mandate by reducing the tax penalty for failing to maintain minimum essential coverage
to zero. Following this legislation, Texas and 19 other states filed a lawsuit alleging that the ACA is unconstitutional as the
individual mandate was repealed, undermining the legal basis for the Supreme Court’s prior decision. On December 14,
Texas federal district court judge Reed O’Connor issued a ruling declaring that the ACA in its entirety is unconstitutional.
Upon appeal, the Fifth Circuit upheld the district court’s ruling that the individual mandate is unconstitutional. However,
the Fifth Circuit remanded the case back to the district court to conduct a more thorough assessment of the constitutionality of
the entire ACA despite the individual mandate being unconstitutional. While this decision has no immediate legal effect on the
ACA and its provisions, this lawsuit is ongoing. The Bipartisan Budget Act of 2018, or BBA, passed in February 2018, set government
spending levels for Fiscal Years 2018 and 2019 and revised certain provisions of the ACA. Specifically, beginning in 2019, the
BBA increased manufacturer point-of-sale discounts off negotiated prices of applicable brand drugs in the Medicare Part D
coverage gap from 50% to 70%, ultimately increasing the liability for brand drug manufacturers. This mandatory manufacturer discount
also applied to biosimilars beginning in 2019. Regardless of whether or not the ACA is changed or modified by Congress or the Supreme
Court, we expect both government and private health plans to continue to require healthcare providers, including healthcare providers
that may one day purchase our products, to contain costs and demonstrate the value of the therapies they provide.
Our product, or product candidates for which we intend
to seek approval as biological products, may face competition sooner than expected.
With the enactment of the Biologics Price Competition and Innovation
Act of 2009, or BPCIA, as part of the ACA, an abbreviated pathway for the approval of biosimilar and interchangeable biological
products was created. Under the BPCIA, an application for a biosimilar product cannot be submitted to the FDA until four years
after, and approval by the FDA cannot be made effective until 12 years after, the date of the first licensure of the reference
product. We believe that ELZONRIS, and or any of our product candidates that may receive marketing approval by the FDA as a biological
product under a BLA, should qualify for the 12-year period of exclusivity. However, there is a risk that the U.S. Congress could
amend the BPCIA to significantly shorten this exclusivity period, potentially creating the opportunity for generic competition
sooner than anticipated. Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of our reference
products in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend
on a number of marketplace and regulatory factors that are still developing. In addition, a competitor could decide to forego the
biosimilar route and submit a full BLA after completing its own preclinical studies and clinical trials. In such cases, any exclusivity
to which we may be eligible under the BPCIA would not prevent the competitor from marketing its product as soon as it is approved.
Risks Related to Our Financial Position and Capital Requirements
We have incurred net operating losses since our inception
and anticipate that we will continue to incur substantial operating losses for the foreseeable future. We may never achieve or
sustain profitability, which would depress the market price of our common stock, and could cause you to lose all or a part of your
investment.
We have incurred net losses from operations from our inception
through December 31, 2019 of approximately $377.6 million. We do not know whether or when we will become profitable. Our losses
have resulted principally from costs incurred in development and discovery activities. We anticipate that our operating losses
will decrease over the next several years as we execute our strategy to commercialize ELZONRIS coupled with our plan to expand
our discovery, research and development activities. We believe that our existing cash, cash equivalents, and investments, including
the cash proceeds received from our follow-on public offering during the third quarter of 2019, will be sufficient to fund our
operations and our capital expenditures for at least the next two years. If our cash is insufficient to meet future operating requirements,
we will have to raise additional funds. If we are unable to obtain additional funds on terms favorable to us or at all, we may
be required to cease or reduce our operating activities or sell or license to third-parties some or all of our intellectual property.
If we raise additional funds by selling additional shares of our capital stock, the ownership interests of our stockholders will
be diluted. If we need to raise additional funds through the sale or license of our intellectual property, we may be unable to
do so on terms favorable to us, if at all. In addition, if we do not continue to meet our diligence obligations under our license
agreements for our clinical drug candidates that we have in-licensed, we will lose our rights to develop and commercialize those
clinical drug candidates.
If we do not successfully develop and obtain regulatory approval
for our existing and future product candidates and effectively manufacture, market and sell our product candidates that are approved,
we may never generate sales of those product candidates, and even if we do generate sales, we may never achieve or sustain profitability
on a quarterly or annual basis. Our failure to become and remain profitable would depress the market price of our common stock
and could impair our ability to raise capital, expand our business, diversify our product offerings or continue our operations.
A decline in the market price of our common stock also could cause you to lose all or a part of your investment.
We will require additional financing to achieve our goals,
and a failure to obtain this capital when needed could force us to delay, limit, reduce or terminate our product development or
commercialization efforts.
Since our inception, most of our resources have been dedicated
to the discovery, acquisition, preclinical and clinical development of our product candidates. We have expended and believe that
we will continue to expend substantial resources for the development of our clinical product candidates and may expend additional
resources on other product candidates and drug acquisition or discovery efforts. These expenditures will include costs associated
with general administration, facilities, research and development, acquiring new technologies, manufacturing product and product
candidates, conducting preclinical experiments, conducting clinical trials, preparing for and having regulatory interactions including
applying for regulatory approvals, and commercializing ELZONRIS, as well as any product candidates that might receive approval
for sale, as well as costs associated with operating as a public company.
As the outcome of our ongoing and future clinical trials is
highly uncertain, our estimates of clinical trial costs necessary to successfully complete the development and commercialization
of our product candidates may differ significantly from our actual costs. In addition, other unanticipated costs may arise, which
could cause us to seek additional funds sooner than planned.
Our future capital requirements depend on many factors, including:
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the number of product candidates we pursue and the specific capital requirements to develop each product candidate;
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the scope, progress, results and costs of researching and developing our product candidates, and conducting preclinical studies
and clinical trials;
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the ability of our product candidates (including ELZONRIS for use in other indications) to progress through clinical development
successfully;
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the timing of, and the costs involved in, seeking regulatory approvals for our product candidates;
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the cost of commercialization activities for ELZONRIS, along with any of our other product candidates that may be approved
for sale, including marketing, sales and distribution costs;
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the cost associated with securing and establishing commercialization and manufacturing capabilities for our product and product
candidates for which we might receive regulatory approval;
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our ability to establish and maintain strategic partnerships, licensing or other arrangements and the economic and other terms
of such agreements;
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the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation
costs and the outcome of such litigation;
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the timing, receipt and amount of sales of, or royalties on, our future products, if any;
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our need and ability to hire additional management and scientific, medical, sales, and marketing personnel;
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the effect of competing technological and market developments; and
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our need to implement additional internal systems and infrastructure, including financial and reporting systems.
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Additional funds may not be available when we need them, on
terms that are acceptable to us, or at all. If adequate funds are not available to us on a timely basis, we may be required to:
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delay, limit, reduce or terminate preclinical studies, clinical trials or other research and development activities for one
or more of our product candidates;
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delay, limit, reduce or terminate manufacturing of our product candidates; or
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delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary
to commercialize any of our product candidates that received or might receive regulatory approval and ensure their acceptance by
third-party payors and the market.
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We will need to raise additional funds to complete our clinical
trials and achieve positive cash flow.
Raising additional capital may cause dilution to our existing
stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.
We will likely seek to raise additional capital through one
or a combination of efforts including equity offerings, debt financings, strategic partnerships and alliances and licensing arrangements.
To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests
of existing stockholders will be diluted, and the terms may include liquidation or other preferences that adversely affect stockholder
rights. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take
certain actions, such as incurring debt, making capital expenditures or declaring dividends. If we raise additional funds through
strategic partnerships and alliances and licensing arrangements with third parties, we may have to relinquish valuable rights to
our technologies or product candidates, or grant licenses on terms that are not favorable to us. If we are unable to raise additional
funds through equity or debt financing when needed, we may be required to delay, limit, reduce or terminate our product development
or commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop
and market ourselves.
Unstable market and economic conditions may have serious
adverse consequences on our business, financial condition and stock price.
There can be no assurance that deterioration in credit and financial
markets and confidence in economic conditions will not occur. Our general business strategy may be adversely affected by an economic
downturn, a volatile business environment or an unpredictable and unstable market. If equity and credit markets deteriorate, it
may make any necessary equity, debt, or other financing more difficult to secure, more costly, more dilutive, and less favorable
to existing shareholders. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material
adverse effect on our growth strategy, financial performance and stock price and could require us to delay or abandon our business
and clinical development plans. In addition, there is a risk that one or more of our current service providers, manufacturers and
other partners may not survive these difficult economic times, which could directly affect our ability to attain our operating
goals on schedule and on budget. There is a possibility that our stock price may decline, due in part to the volatility of the
stock market and the general economic downturn.
Although we received FDA approval for ELZONRIS, and even
if we receive regulatory approval for any of our product candidates, sales of our product depend on reimbursement by government
health administration authorities, private health insurers, and other organizations. If we are unable to obtain or maintain anticipated
levels, reimbursement for our product or coverage may be reduced, our pricing may be affected or our product sales, results of
operations or financial condition could be harmed.
We may not be able to sell our products on a profitable basis
or our profitability may be reduced if we are required to sell our products at lower than anticipated prices or reimbursement is
unavailable or limited in scope or amount. Our products may be priced significantly more expensive than traditional drug treatments
and almost all patients require some form of third-party coverage to afford their cost. We anticipate that we will depend, to a
significant extent, on governmental payers, such as Medicare and Medicaid in the U.S. or country specific governmental organizations
in foreign countries, and private third-party payers to defray the cost of our products to patients. These entities may refuse
to provide coverage and reimbursement, determine to provide a lower level of coverage and reimbursement than anticipated, or reduce
previously approved levels of coverage and reimbursement, including in the form of higher mandatory rebates or modified pricing
terms.
In certain countries where we sell or are seeking or may seek
to commercialize our products, pricing, coverage and level of reimbursement or funding of prescription drugs are subject to governmental
control. We may be unable to timely or successfully negotiate coverage, pricing, and reimbursement on terms that are favorable
to us, or such coverage, pricing, and reimbursement may differ in separate regions in the same country. 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, which may include a combination of distinct potential payers, including private insurance and governmental
payers as well as health technology assessment of medicinal products for pricing and reimbursement methodologies. Therefore, we
may not successfully conclude the necessary processes and commercialize our products in every, or even most countries in which
we seek to sell our products.
A significant reduction in the amount of reimbursement or pricing
for our products in one or more countries may reduce our profitability and adversely affect our financial condition. Certain countries
establish pricing and reimbursement amounts by reference to the price of the same or similar products in other countries. Therefore,
if coverage or the level of reimbursement is limited in one or more countries, we may be unable to obtain or maintain anticipated
pricing or reimbursement in current or new territories. In the U.S., the European Union member states, and elsewhere, there have
been, and we expect there will continue to be, efforts to control and reduce healthcare costs. In the U.S. for example, the price
of drugs has come under intense scrutiny by the U.S. Congress. Third party payers decide which drugs they will pay for and establish
reimbursement and co-payment levels. Government and other third-party payers are increasingly challenging the prices charged for
healthcare products, examining the cost effectiveness of drugs in addition to their safety and efficacy, and limiting or attempting
to limit both coverage and the level of reimbursement for prescription drugs.
Health insurance programs may restrict coverage of some products
by using payer formularies under which only selected drugs are covered, variable co-payments that make drugs that are not preferred
by the payer more expensive for patients, and by using utilization management controls, such as requirements for prior authorization
or failure first on another type of treatment. Payers may especially impose these obstacles to coverage for higher-priced drugs,
and consequently our products may be subject to payer-driven restrictions. Additionally, U.S. payers are increasingly considering
new metrics as the basis for reimbursement rates.
In countries where patients have access to insurance, their
insurance co-payment amount or other benefit limits may represent a barrier to obtaining or continuing use of our potential products.
We anticipate providing support for non-profit organizations that assist patients in accessing treatment for certain diseases.
Such organizations assist patients whose insurance coverage imposes prohibitive co-payment amounts or other expensive financial
obligations. Such organizations’ ability to provide assistance to patients is dependent on funding from external sources,
and we cannot guarantee that such funding will be provided at adequate levels, if at all. We also may provide our products without
charge to patients who have no insurance coverage for drugs through related charitable purposes. We are not able to predict the
financial impact of the support we may provide for these and other charitable purposes; however, substantial support could have
a material adverse effect on our profitability in the future.
Our commercial success depends on obtaining and maintaining
reimbursement at anticipated levels for our products. It may be difficult to project the impact of evolving reimbursement mechanics
on the willingness of payers to cover our products. If we are unable to obtain or maintain coverage, or coverage is reduced in
one or more countries, our pricing may be affected or our product sales, results of operations or financial condition could be
harmed.
Risks Related to Our Business and Industry
We are a commercial-stage biopharmaceutical company with
one FDA approved product in a single indication, which makes it difficult to assess our future viability.
We are a commercial-stage biopharmaceutical company with a limited
operating history. We have not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently
encountered by companies in new and rapidly evolving fields, particularly in the biopharmaceutical area. For example, to execute
our business plan, we will need to successfully:
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execute and sustain successful product candidate development activities;
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obtain required regulatory approvals for the development and commercialization of our product candidates, and any new or expanded
indications for these product candidates;
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maintain, defend, leverage and expand our intellectual property portfolio;
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build, deploy, and maintain sales, distribution and marketing capabilities, either on our own or in collaboration with strategic
partners should our product candidates obtain market approval;
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gain market and third-party payor acceptance for ELZONRIS, our approved product, and our other product candidates, should they
obtain market approval, or ELZONRIS should it obtain market approval in additional indications;
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develop and maintain CGMP compliant manufacturing and distribution capabilities sufficient to support the intended scope of
our preclinical and clinical development plans and the commercial demand for our product;
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complete required process characterization and validation activities to support any planned regulatory submission, which historically
has included the manufacture of at least three consecutive successful process validation batches for drug substance and at least
three consecutive successful process validation batches for drug product;
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implement a successful post-market surveillance program to monitor the safety of any approved product that are being commercially
marketed and sold;
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develop and maintain any strategic relationships we elect to enter into;
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satisfy our obligations under our licensing agreement and other agreements; and
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manage our spending as costs and expenses increase due to drug acquisition, discovery, preclinical development, clinical trials,
regulatory interactions, agreements, and approvals, manufacturing, and commercialization.
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If we are unsuccessful in accomplishing these objectives, we
may not be able to adequately commercialize our product(s) or product candidates, generate meaningful revenue, develop our
product candidates, raise capital, expand our business, or continue our operations.
We face substantial competition, which may result in others
discovering, developing or commercializing products before, or more successfully, than we do.
Our future success depends on our ability to demonstrate and
maintain a competitive advantage with respect to the design, development, and commercialization of product candidates. Our competitors
may succeed in developing competing products before we do for the same indications we are pursuing, obtaining regulatory approval
or gaining acceptance for products or for the same markets that we plan to target. If we are not “first to market”
with our product candidates, our competitive position could be compromised because it may be more difficult for us to obtain marketing
approval for that product candidate and successfully market that product candidate as a competitor.
Even if we are “first to market” with one or more
of our product candidates, a competitor could develop an alternative therapy for our approved indication(s) that demonstrates
a superior efficacy and/or safety profile relative to our approved product.
We expect any product candidate that we are able to commercialize
will compete with products from other companies in the biotechnology and pharmaceutical industries. For example, there are a number
of biopharmaceutical companies focused on developing therapeutics with which we may potentially compete including AbbVie Inc.,
Agenus Inc., Agios Pharmaceuticals, Inc., Ambit Biosciences Corporation (now a Daiichi Sankyo company), Amgen Inc., Astellas
Pharma U.S., Inc., Astex Pharmaceuticals (now an Otsuka Pharmaceutical company), Bayer AG, Bionomics Limited, Blueprint Medicines
Corp., Boehringer Ingelheim GmbH, Bristol-Myers Squibb, Inc., Celator Pharmaceuticals (now a Jazz Pharmaceuticals company),
Celgene Corporation, Celldex Therapeutics, Inc. Cellectis, Cortice Biosciences, Inc., CTI BioPharma Corp., Cyclacel Pharmaceuticals, Inc.,
CytRx Corporation, Eli Lilly and Company, Eisai Co., Ltd., Genmab, Sanofi Genzyme Corporation, Geron Corp., GlaxoSmithKline
plc, Humanigen, Inc., Ignyta, Inc. (a Roche company), ImmunoCellular Therapeutics, Ltd., ImmunoGen, Inc., Impact
Biomedicines, Inc. (now a Celgene company), Incyte Corporation, Inspyr Therapeutics, Inc., Janssen Pharmaceutical
Companies of Johnson & Johnson, Karyopharm Therapeutics Inc., Kura Oncology, Inc., Macrogenics, Inc., Merck &
Co., Inc., Micromet, Inc. (an Amgen Inc. company), Mustang Bio, Inc., Northwest Biotherapeutics, Inc., Novartis
International AG, OncoMed Pharmaceuticals, Inc., Pfizer Inc., Roche Holding AG, Sanofi U.S. LLC, Seattle Genetics, Inc.,
Stemcentrx, Inc. (an AbbVie company), Sumitomo Dainippon Pharma Co., Ltd., Sunesis Pharmaceuticals, Inc.,
Verastem, Inc., Xencor, Inc. and others.
Many of our competitors have substantially greater commercial
infrastructures and financial, technical and personnel resources than we have. In addition, many are farther along in their clinical
development programs. We may not be able to compete unless we successfully:
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design and develop products that address an unmet medical need or demonstrate a superior benefit/risk profile to other products
in the market;
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conduct successful preclinical studies and clinical trials;
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attract qualified scientific, medical, sales, marketing and commercial personnel;
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obtain patent and/or other intellectual property protections for our processes and product candidates;
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obtain required regulatory approvals; and
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collaborate with others in the design, development and commercialization of new products.
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Established competitors may invest heavily to quickly discover
and develop novel compounds that could make our product candidates obsolete. In addition, any new product that competes with an
approved product must demonstrate compelling advantages in efficacy, convenience, tolerability and safety in order to overcome
price competition and to be commercially successful. If we are not able to compete effectively against our competitors, our business
will not grow and our financial condition and operations will suffer.
If we fail to attract and keep senior management and key
scientific and marketing personnel, we may be unable to successfully develop our product candidates, conduct our clinical trials,
and commercialize ELZONRIS or our product candidates.
Our success depends in part on our continued ability to attract,
retain and motivate highly qualified management, clinical and scientific personnel. We are highly dependent upon our senior management
as well as other employees, consultants and scientific and medical collaborators. As of March 16, 2020, we had 100 full-time
employees, which may make us more reliant on our individual employees than companies with a greater number of employees. The loss
of services of any of these individuals or one or more of our other members of senior management could delay or prevent the successful
development of our product pipeline, completion of our ongoing and future clinical trials or the commercialization and successful
marketing launch of our product candidates.
Although we have not historically experienced unique difficulties
attracting and retaining qualified employees, we could experience such problems in the future. For example, competition for qualified
personnel in the biotechnology and pharmaceuticals field is intense. We will need to hire additional personnel as we expand our
clinical development and commercial activities. We may not be able to attract and retain quality personnel on acceptable terms.
In addition, we rely on consultants and advisors, including
scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our
consultants and advisors may also be engaged with companies other than us and may have commitments under consulting or advisory
contracts with other entities that may limit their availability to us.
If our employees or third parties acting on our behalf
commit fraud or other misconduct, including noncompliance with regulatory standards and requirements, our business may experience
serious adverse consequences.
We are exposed to the risk of fraud or other misconduct by employees
and third parties acting on our behalf. Misconduct by employees or third parties could include intentional failures to comply with
FDA regulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply
with federal and state healthcare fraud and abuse laws and regulations, to report financial information or data accurately or to
disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are
subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These
laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission,
customer incentive programs and other business arrangements. Employee misconduct could also involve the improper use of information
obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. We have
adopted a Code of Business Conduct and Ethics, but it is not always possible to identify and deter employee and third-party misconduct,
and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks
or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance
with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves
or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant
fines, penalties, other sanctions, and exclusion from government-funded healthcare programs.
We expect to expand our development, regulatory, and sales
and marketing capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.
In connection with our commercial launch of ELZONRIS and possible
international expansion, we expect to experience significant growth in the number of our employees and the scope of our operations,
particularly in the areas of drug development, regulatory affairs, quality, commercial compliance, medical affairs, and sales and
marketing. For example, we plan to hire additional personnel in connection with our commercial launch of ELZONRIS in the United
States and Europe and prepare for potential regulatory filings for ELZONRIS in other markets. To manage our anticipated future
growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and
continue to recruit and train additional qualified personnel. The hiring, training and integration of new employees may be more
difficult, costly and/or time-consuming for us because we have fewer resources than a larger organization. Our future financial
performance, our ability to successfully commercialize ELZONRIS and our product candidates, and our ability to compete effectively
will depend, in part, on our ability to manage any future growth effectively. Our management team has limited experience in managing
a company with this anticipated growth, and we may not be able to do so effectively. The physical expansion of our operations may
lead to significant costs and may divert our management and business development resources. We may not be able to effectively manage
the expansion of our operations, which could delay the execution of our business plans or disrupt our operations.
If product liability lawsuits are brought against us,
we may incur substantial liabilities and may be required to limit commercialization of our product candidates.
We face an inherent risk of product liability as a result
of the clinical testing and commercial sale of our product candidates and products. For example, we may be sued if any
product we develop allegedly causes or contributes to an injury or is found to be otherwise defective during product testing,
clinical study, clinical use, manufacturing, marketing or sale. Any such product liability claims may include allegations of
defects in manufacturing, defects in design, failure to warn of dangers inherent in the product, negligence, strict liability
and a breach of warranties. Fraud-based claims, as well as claims made pursuant to state consumer protection acts, are also a
possibility. If we cannot successfully defend ourselves against product liability claims, we may incur substantial
liabilities or be required to limit commercialization of our product candidates. Even a successful defense would require
significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result
in:
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decreased demand for our product and product candidates that we may develop;
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injury to our reputation;
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withdrawal of clinical trial participants and inability to enroll future clinical trial participants;
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costs to defend the related litigation;
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a diversion of management’s time and our resources;
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substantial monetary awards to trial participants or patients;
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product recalls, withdrawals or labeling, marketing or promotional restrictions;
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the inability to commercialize our product candidates; and
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a decline in our stock price.
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Our inability to obtain and retain sufficient product liability
insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization
of products we develop. Although we maintain liability insurance, any claim that may be brought against us could result in a court
judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits
of our insurance coverage. Our insurance policies also have various exclusions, and we may be subject to a product liability claim
for which we have no coverage. We will have to pay any amounts awarded by a court or negotiated in a settlement that exceed our
coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to
pay such amounts.
Our relationships with healthcare providers, physicians,
and third-party payors in the United States and in foreign jurisdictions are subject to applicable anti-kickback, fraud and abuse
and other healthcare laws and regulations, which could expose us to criminal, civil or administrative sanctions, contractual damages,
potential exclusion from government-funded healthcare programs, reputational harm, and diminished profits and future earnings.
Healthcare providers, physicians and third-party payors in the
United States and in foreign jurisdictions play a primary role in the recommendation and prescription of any product candidates
for which we obtain marketing approval. Our future arrangements with third-party payors and customers may expose us to fraud and
abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through
which we market, sell and distribute our products for which we obtain marketing approval. Restrictions under applicable federal,
state and foreign healthcare laws and regulations include the following:
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the federal healthcare Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting,
offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral
of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal
and state healthcare programs such as Medicare and Medicaid;
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the federal False Claims Act imposes civil penalties, against individuals or entities for knowingly presenting, or causing
to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid,
decrease or conceal an obligation to pay money to the federal government and also includes provisions allowing for private, civil
whistleblower or “qui tam” actions;
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the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology
for Economic and Clinical Health Act, or HITECH, imposes criminal and civil liability for executing a scheme to defraud any healthcare
benefit program. HIPAA and HITECH also regulate the use and disclosure of identifiable health information by healthcare providers,
health plans and healthcare clearinghouses, and impose obligations, including mandatory contractual terms, with respect to safeguarding
the privacy, security and transmission of identifiable health information as well as requiring notification of regulatory breaches.
HIPAA and HITECH violations may prompt civil and criminal enforcement actions as well as enforcement by state attorney generals;
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the federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact
or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services;
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the federal transparency requirements under the ACA, commonly referred to as the Sunshine Act requires manufacturers of drugs,
devices, biologics and medical supplies to report to the HHS information related to U.S.-licensed physician and teaching hospital
payments and other transfers of value including research payments and ownership and investment interests;
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analogous state laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements
and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers,
and some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines
and the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report
information related to payments to physicians and other healthcare providers or marketing expenditures;
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the U.S. Foreign Corrupt Practices Act, or FCPA, and other anti-corruption laws and regulations pertain to interactions with
foreign government officials. The FCPA prohibits U.S. companies and their employees, officers, and representatives from paying,
offering to pay, promising, or authorizing the payment of anything of value, directly or indirectly, to any foreign government
official, which includes any officer, employee, political candidate or any person acting in an official capacity for or on behalf
of any agency, instrumentality, department, subdivision, or other body of any national, state, or local government, for the purpose
of influencing the foreign official in his or her official capacity, inducing the foreign official to do or omit to do an act in
violation of his or her lawful duty, or to secure any improper advantage in order to obtain or retain business or to otherwise
seek favorable treatment. In many countries in which we operate or sell our products, the healthcare professionals with whom we
interact may be considered to be foreign government officials for purposes of the FCPA. The FCPA’s Accounting Provisions
separately require that publicly traded companies make and keep books, records and accounts, which in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the company’s assets and devise and maintain a system of internal
controls sufficient to assure management’s control, authority, and responsibility over the company’s assets;
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the European Union’s General Data Protection Regulation and implementing laws in its member states govern the collection
and processing of residents’ personal data and, among other requirements, imposes certain consent and data access rights.
Such laws may impact our ability to conduct clinical trials that involve personal data and engage in other activities that require
the processing of personal data. Outside of the U.S. and the European Union, there are numerous other jurisdictions that have their
own privacy and information security laws, and new laws and regulations are being considered and/or enacted globally, which may
affect our ability to collect, process, and store their residents’ personal data; and
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analogous anti-kickback, fraud and abuse and healthcare laws and regulations in foreign countries.
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The ACA broadened the reach of fraud and abuse laws by, among
other things, amending the intent requirement of the federal Anti-Kickback Statute and the applicable criminal healthcare fraud
statutes contained within 42 U.S.C. Section 1320a-7b. Pursuant to the statutory amendment, a person or entity no longer needs
to have actual knowledge of this statute or specific intent to violate it in order to have committed a violation. In addition,
the ACA provides that the government may assert that a claim including items or services resulting from a violation of the federal
Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act or the civil monetary
penalties statute. Many states have adopted laws similar to the federal Anti-Kickback Statute, some of which apply to the referral
of patients for healthcare items or services reimbursed by any source, not only the Medicare and Medicaid programs.
Efforts to ensure that our business arrangements with third
parties will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental
authorities will conclude that our business practices do not comply with current or future statutes, regulations or case law involving
applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these
laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative
penalties, damages, fines, exclusion from government-funded healthcare programs, such as Medicare and Medicaid, and the curtailment
or restructuring of our operations. If any of the physicians or other providers or entities with whom we expect to do business
are found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including
exclusion from government-funded healthcare programs.
If we fail to comply with environmental, health and safety
laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on
the success of our business.
We and our suppliers are subject to numerous environmental,
health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment
and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including
chemicals and biological materials. Our operations also release hazardous waste. We generally contract with third parties for the
disposal of these materials and wastes. We cannot eliminate the risk of release, contamination or injury from these materials.
In the event of release, contamination or injury resulting from our use of hazardous materials, we could be held liable for any
resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or
criminal fines and penalties.
Although we maintain workers’ compensation insurance to
cover us for costs and expenses that we may incur due to injuries to our employees resulting from the use of hazardous materials,
this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental
liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous
or radioactive materials.
In addition, we and our suppliers may incur substantial costs
in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and
regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also
may result in substantial fines, penalties or other sanctions.
Our internal computer systems, or those of our third-party
CMOs, CROs or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption
of our product candidates’ development programs.
Despite the implementation of security measures, our internal
computer systems and those of our third-party CMOs, CROs and other contractors and consultants are vulnerable to damage from computer
viruses, unauthorized access, theft, natural disasters, terrorism, war and telecommunication and electrical failures. While we
have not experienced any such system failure, accident or security breach to date, if such an event were to occur and cause interruptions
in our operations, it could result in a material disruption of our programs. For example, the loss of clinical trial data for our
product candidates could result in delays in our regulatory approval efforts and significantly increase our costs due to recovering
or reproducing the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications,
loss of or damage to other data or applications relating to our technology or product candidates, or inappropriate disclosure or
theft of confidential or proprietary information, we could incur liabilities and the further development of our product candidates
could be delayed.
Europe has enacted a new data privacy regulation, the
General Data Protection Regulation, a violation of which could subject us to significant fines.
In May 2018, a new privacy regime, the General Data Protection
Regulation, or GDPR, took effect across all member states of the European Economic Area. The new regime increases our obligations
with respect to clinical trials conducted in the member states by expanding the definition of personal data to include coded data,
and requiring changes to informed consent practices and more detailed notices for clinical trial subjects and investigators. In
addition, it increases the scrutiny that clinical trial sites located in the member states should apply to transfers of personal
data from such sites to countries that are considered to lack an adequate level of data protection, such as the United States.
The regime imposes substantial fines for breaches of data protection requirements, which can be up to four percent of global turnover
or 20 million Euros, whichever is greater, and it also confers a private right of action on data subjects for breaches of data
protection requirements. Compliance with these directives is a rigorous and time-intensive process that may increase our cost of
doing business, and the failure to comply with these laws could subject us to significant fines.
Risks Related to Our Dependence on Third Parties in the U.S.
and Abroad
Third parties have conducted clinical trials of our product
candidates in the past, and our ability to influence the design and conduct of such trials was limited. Our current and future
corporate-sponsored trials will also require us to rely on various third parties. Any failure by a third-party to meet its obligations
with respect to the clinical and regulatory development of our product candidates may delay or impair our ability to obtain regulatory
approval for our products.
We are currently advancing our clinical-stage product candidates
through multiple corporate-sponsored clinical trials under corporate-sponsored INDs and through investigator sponsored trials.
Prior to sponsoring our INDs for our product candidates, faculty members at academic institutions and other companies may have
conducted and sponsored the INDs and clinical trials relating to our drug candidates. As such, we did not control the design or
conduct of any trials conducted prior to the initiation of our corporate-sponsored INDs, and it is possible that the FDA will not
view these previous trials as providing adequate support for future clinical trials or regulatory filings.
In addition, we have relied on contractual arrangements with
academic institutions and investigators that provide us certain information rights with respect to the completed investigator-sponsored
trials, including access to, and the ability to use and reference the data, including for our own regulatory filings, resulting
from the completed trials. If these obligations are breached by the investigators or institutions, or if the data prove to be inadequate,
then our ability to conduct our planned corporate-sponsored clinical trials may be adversely affected. Additionally, the FDA may
disagree with our interpretation of the adequacy of the preclinical, manufacturing, and/or clinical data from these studies. If
so, the FDA may require us to obtain and submit additional preclinical, manufacturing, and/or clinical data relating to our planned
trials and/or may not accept such additional data as adequate for our regulatory filings.
We rely on, and expect to continue to rely on, third parties
to monitor, support, conduct and/or oversee 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
to monitor, support, conduct and/or oversee these clinical trials, 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.
To conduct our preclinical and clinical studies, we rely on
academic institutions, CROs, hospitals, clinics and other third-party collaborators who are outside our direct control, which limits
our control over the overall conduct of these studies and the ability to successfully complete them. In our corporate-sponsored
trials and investigator sponsored trials of ELZONRIS and our clinical drug candidates, we have continued to engage various third
parties. 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 contract or in accordance with regulatory requirements. If these third-parties fail to meet expected deadlines, 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 trials of our product candidates may be extended, delayed, compromised or terminated, and as a result we may not be able to
commercialize our product candidates.
We may not be successful in establishing and maintaining
strategic partnerships, which could adversely affect our ability to develop and commercialize products.
We may seek to enter into strategic partnerships in the future,
including alliances with other biotechnology or pharmaceutical companies, to enhance and accelerate the development and commercialization
of our products in territories outside the United States. We face significant competition in seeking appropriate strategic partners
and the negotiation process is time-consuming and complex. Moreover, we may not be successful in our efforts to establish a strategic
partnership or other alternative arrangements for any future product candidates and programs because our research and development
pipeline may be insufficient, our product candidates and programs may be deemed to be at too early a stage of development for collaborative
effort, and/or third-parties may not view our product candidates and programs as having the requisite potential to demonstrate
safety and efficacy. Even if we are successful in our efforts to establish strategic partnerships, the terms that we agree upon
may not be favorable to us, and we may not be able to maintain such strategic partnerships if, for example, development or approval
of a product candidate is delayed or sales of an approved product are disappointing.
If we ultimately determine that entering into strategic partnerships
is in our best interest but either fail to enter into, are delayed in entering into, or fail to maintain such strategic partnerships:
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the development of certain of our current or future product candidates may be terminated or delayed;
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our cash expenditures related to development of certain of our current or future product candidates would increase significantly
and we may need to seek additional financing;
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we may be required to hire additional employees or otherwise develop expertise, such as sales and marketing expertise, for
which we have not budgeted;
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we may bear all of the risk related to the development of any such product candidates;
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the competitiveness of any product candidate that is commercialized could be reduced; and
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with respect to our platform technology, StemScreen®, we may not realize its potential as a means of identifying and validating
new cancer therapies.
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We rely on third-party manufacturers to produce and supply
our commercial products, as well as our clinical and preclinical product candidates. Any failure by a third-party manufacturer
to produce supplies for us may delay or impair our ability to initiate or complete our clinical trials, commercialize our products,
or continue to sell our approved products.
We do not currently own or operate any manufacturing facilities,
and we lack sufficient internal staff and infrastructure to produce commercial supplies, as well as clinical and preclinical product
candidate supplies, ourselves. As a result, we work with third-party CMOs to produce and test our products and clinical product
candidates in acceptable quality and quantity for our ongoing and future clinical trials, as well as for commercial supply. If
we are unable to maintain such third-party manufacturing sources, or fail to do so on commercially reasonable terms or on a timely
basis, we may not be able to successfully produce, develop, and market ELZONRIS or our clinical drug candidates or may be delayed
in doing so. We purchase and plan to purchase immunostimulants used with SL-701 from third parties. Whereas GM-CSF and Imiquimod
are commercially available products, poly-ICLC (Hiltonol®) is a development stage candidate and not commercially available.
We do not have a right to manufacture poly-ICLC directly or through our third-party CMOs, and are wholly dependent on a third-party
manufacturer of poly-ICLC for clinical supply. This third-party manufacturer currently has a limited supply and may be unable to
provide adequate poly-ICLC to us in the future.
We also expect to rely upon third parties to produce and
test drug substance and drug product required for the clinical trials and commercial supply of our product and product
candidates. If we are unable to arrange for third-party manufacturing sources, or to do so on commercially reasonable terms
or on a timely basis, we may not be able to complete the development of such other product candidates or market those that
are approved. Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured product
candidates ourselves, including reliance on the third-party for regulatory compliance and quality assurance, the possibility
of breach of the manufacturing agreement by the third-party because of factors beyond our control (including a failure to
synthesize and manufacture our product candidates in accordance with our product specifications), and the possibility of
termination or nonrenewal of the agreement by the third-party, based on its own business priorities, at a time that is costly
or damaging to us. We will be dependent on the ability of these third-party manufacturers to produce adequate supplies of
drug product to support our clinical development programs, our supply needs for ELZONRIS, and future commercialization of any
product candidates for which we may receive regulatory approval. In addition, the FDA and other regulatory authorities
require that our products and product candidates be manufactured according to CGMPs, and similar standards for products
manufactured for markets outside the U.S. Any failure by our third-party manufacturers to comply with CGMPs or failure to
scale up manufacturing processes, including any failure to deliver sufficient quantities of product or product candidates of
acceptable quality in a timely manner, could lead to a delay in, or failure to obtain, regulatory approval for trial
initiation or marketing of any of our product candidates or commercial products. In addition, such failures could be the
basis for action by the FDA to withdraw product approvals previously granted to us and for other regulatory action, which
could result in or lead to recall, seizure, import alerts, fines, imposition of operating restrictions, total or partial
suspension of production, injunctions, consent decrees, or civil or criminal sanctions.
Any adverse developments affecting our manufacturing operations
or the operations of our third-party providers could result in a product shortage of clinical or commercial requirements, withdrawal
of our product candidates or any approved products, shipment delays, lot failures or recalls. We may also have to write-off inventory
and incur other charges and expenses for products that fail to meet specifications, undertake costly remediation efforts or seek
more costly manufacturing alternatives. Each of these could have an adverse material impact on our business individually or in
the aggregate.
We rely on our third-party manufacturers to purchase from third-party
suppliers the materials necessary to produce our products, and product candidates for our clinical studies. There are a small number
of suppliers for certain capital equipment and materials that we use to manufacture and test our drugs. Such suppliers may not
sell these materials to our third-party manufacturers at the times we need them or on commercially reasonable terms. We do not
have control over the process or timing of the acquisition of these materials by our third-party manufacturers. Moreover, we currently
do not have any agreements for the commercial production of these materials. Although we generally do not begin a clinical trial
unless we believe we have a sufficient supply of a product candidate to complete the clinical trial, any significant delay in the
supply of a product candidate or the material components thereof for a clinical trial, including an ongoing clinical trial, due
to the need to replace a third-party manufacturer, could considerably delay completion of our clinical studies, product testing
and potential regulatory approval of our product candidates. If our third-party manufacturers or we are unable to purchase these
materials after regulatory approval has been obtained for our product candidates, the commercial launch of our product candidates
would be delayed or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of our
products or product candidates.
We are working with our third-party manufacturers to optimize
the manufacturing processes for our products and product candidates, including related drug substances, so that these products
and product candidates may be routinely produced in adequate quantities of adequate quality, and at an acceptable cost, to support
our clinical trials and commercialization of products that might be approved. Our third-party manufacturers may not be able to
control batch-to-batch variability below an acceptable threshold, increasing the risk of batch failures, which could cause significant
delays and increased costs to our programs. Our third-party manufacturers may not be able to manufacture our products or product
candidates at a cost, or in quantities, or in a timely manner necessary, to develop and commercialize them. If we successfully
commercialize any of our product candidates, we may be required to establish or access large-scale commercial manufacturing capabilities,
and may require different technologies to manufacture these products. In addition, assuming that our drug development pipeline
increases and matures, we will have a greater need for clinical trial and commercial manufacturing capacity. To meet our projected
needs for commercial manufacturing, third parties with whom we currently work may need to increase their scale of production and/or
we may need to secure additional suppliers with appropriate technologies to support our new product candidates. If our projected
needs for commercial manufacturing are not accurate, or we do not obtain regulatory approval of new products or additional indications
for existing products or additional delivery systems, or are significantly delayed or limited in doing so, our revenue may be adversely
affected, we may experience surplus inventory and we may be required to write down certain assets.
Business or economic disruptions or global health concerns
could seriously harm our development efforts and increase our costs and expenses.
Broad-based business or economic disruptions
could adversely affect our ongoing or planned research and development, clinical, or commercial activities. For example, in December 2019
an outbreak of a novel strain of coronavirus originated in Wuhan, China, and has since spread to a number of other countries,
including the United States. To date, this outbreak has already resulted in extended shutdowns of certain businesses in the Wuhan
region and has had ripple effects to businesses around the world. The outbreak may result in additional or more extensive travel
restrictions, closures, disruptions of businesses or facilities in China or other affected regions around the world or lead to
social, economic, political or labor instability in the affected areas may impact our suppliers’ or our customers’
operations.
Global epidemics, such as the coronavirus,
could also negatively affect the hospitals and clinical sites in which we conduct any of our clinical trials, which could have
a material adverse effect on our business and our results of operation and financial condition. We cannot presently predict the
scope and severity of any potential business shutdowns or disruptions, but if we or any of the third parties with whom we engage,
including the suppliers, clinical trial sites, regulators and other third parties with whom we conduct business, were to experience
shutdowns or other business disruptions, our ability to conduct our business in the manner and on the timelines presently planned
could be materially and negatively impacted.
We are currently sole sourced for supply of our drug substance
and drug product for each of our product and product candidates. Any problems experienced by our third-party manufacturers or their
vendors could result in a delay or interruption in the supply of our products or product candidates to us until the third-party
manufacturer or its vendor cures the problem or until we locate and qualify an alternative source of manufacturing and supply.
The third-party manufacturers of our product and product candidates
require specialized equipment and utilize complicated production processes that would be difficult, time-consuming and costly to
duplicate. Thus, we have multiple third-party manufacturers who supply our drug product candidates, one third-party manufacturer
for each of our product and product candidates. Because of this arrangement, there is a greater risk that issues in execution or
changes in business focus and/or product risk assessments at a third-party manufacturer could cause delays in the clinical development
or manufacture of a product or product candidate than if we used more than one third-party manufacturer for each product and product
candidate. For each of our product and product candidates, we currently rely on third-party manufacturers to purchase from their
third-party vendors the materials necessary to manufacture our product and product candidates for commercial supply and our clinical
studies. Any prolonged disruption in a third-party manufacturer’s vendor’s ability to supply materials for our manufacturing
could have a significant negative impact on our third-party manufacturer’s ability to manufacture our product or product
candidates. This would cause us to seek additional third-party manufacturing contracts, thereby increasing, if applicable, our
development costs and timelines, and any commercialization costs. In addition, our third-party manufacturers may experience problems
not related to their vendors that could also have a significant negative impact on their ability to manufacture our product and
product candidates. This would cause us to seek additional third-party manufacturing contracts, thereby increasing, if applicable,
our development costs and timelines and any commercialization costs. Moreover, third-party manufacturers and third-party laboratories
performing analytical and other testing could receive inspection findings from regulatory authorities that require investigation
and remediation, and this could result in business interruptions affecting the production of our product and product candidates.
We may face losses related to the supply of drug substances, drug product, adjuvants and other components of the product due to
third-party distribution and storage of such product. We may suffer losses due to third-party manufacturers’ shortages or
supply shortages of their vendors. We may suffer losses as a result of business interruptions that exceed coverage under our manufacturers’
insurance policies. Events beyond our control, such as natural disasters, fire, sabotage or business accidents could have a significant
negative impact on our operations by disrupting our product candidate development and commercialization efforts until our third-party
manufacturers can repair their facilities or we can qualify alternate third-party contract manufacturers to assume this manufacturing
role, which we may not be able to do on reasonable terms, if at all. In addition, if we are required to change manufacturers for
any reason, we will be required to verify that the new manufacturer maintains facilities and procedures that comply with quality
standards and with all applicable regulations and guidelines and that they can successfully transfer our manufacturing processes
to produce product of equivalent quality and quantity. FDA or other local health authority approval of any new manufacturer would
also be required. The delays associated with the qualification of a new manufacturer or the requalification of an existing manufacturer
could negatively affect our ability to develop product candidates or produce approved products in a timely manner. Any delay or
interruption in our clinical studies or in the development, validation and commercialization of our product or product candidates
could negatively affect our business.
Because of our reliance on contract manufacturers, we may choose
to maintain a higher inventory of drug product and/or drug substance for any of our product candidates or approved products than
would be necessary if we had direct control of the manufacturing assets.
To the extent we elect to enter into licensing or collaboration
agreements to develop and commercialize our products or product candidates, our dependence on such relationships may adversely
affect our business.
Our global commercialization strategy for certain of our product
or product candidates may depend on our ability to enter into agreements with collaborators to obtain assistance and funding for
the development and commercialization of these product or product candidates. Supporting diligence activities conducted by potential
collaborators and negotiating the financial and other terms of a collaboration agreement are long and complex processes with uncertain
results. Even if we are successful in entering into one or more collaboration agreements, collaborations may involve greater uncertainty
for us, as we have less control over certain aspects of our collaborative programs than we do over our proprietary development
and commercialization programs. We may determine that continuing to collaborate under the terms provided is not in our best interest,
and we may terminate such collaboration. Our collaborators could delay or terminate their agreements, and our product or product
candidates subject to collaborative arrangements may never be successfully commercialized.
Further, our future collaborators may develop alternative products
or pursue alternative technologies either on their own or in collaboration with others, including our competitors, and the priorities
or focus of our collaborators may shift, so that our programs receive less attention or resources than we would like, or they may
be terminated altogether. Any such actions by our collaborators, may adversely affect our business prospects and ability to earn
income. In addition, we could have disputes with our future collaborators, on issues such as the interpretation of terms in our
agreements. Any such disagreements could lead to delays in the development or commercialization of any potential products or could
result in time-consuming and expensive litigation or arbitration, which might not be resolved in our favor.
Even with respect to certain other products that we intend to
commercialize ourselves, we may enter into agreements with collaborators to share in the burden of conducting clinical trials,
manufacturing, and marketing our product candidates or products. In addition, our ability to apply our proprietary technologies
to develop proprietary compounds will depend on our ability to establish and maintain licensing arrangements or other collaborative
arrangements with the holders of proprietary rights to such compounds. We may not be able to establish such arrangements on favorable
terms or at all, and our future collaborative arrangements might not be successful.
Risks Related to Our Intellectual Property Rights
We could be unsuccessful in obtaining adequate patent
protection for one or more of our products or product candidates.
Our commercial success will depend in part on obtaining and
maintaining patent protection and trade secret protection in the U.S. and other countries with respect to our product and product
candidates or any future product candidate that we may license or acquire and the methods we use to manufacture them, as well as
successfully defending these patents and trade secrets against third-party challenges. We seek to protect our proprietary position
by filing patent applications in the United States and abroad related to our novel technologies and product or product candidates,
and by the maintenance of our trade secrets through proper procedures. We will only be able to protect our technologies from unauthorized
use by third parties to the extent that valid and enforceable patents or trade secrets cover them in the market they are being
used or developed. We cannot be certain that patents will be issued, or that issued or allowed patents will not later be found
to be invalid and/or unenforceable. The patent prosecution process is expensive and time-consuming, and we may not be able to file
and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. An adverse determination
in any such submission, patent office trial, proceeding or litigation could reduce the scope of, render unenforceable, or invalidate,
our patent rights, allow third parties to commercialize our technology or products and compete directly with us, without payment
to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights. It is
also possible that we will fail to identify any patentable aspects of our research and development output and methodology, and,
even if we do, an opportunity to obtain patent protection may have passed. Given the uncertain and time-consuming process of filing
patent applications and prosecuting them, it is possible that our product, product candidates or process(es) originally covered
by the scope of the patent application may have changed or been modified, leaving our product or product candidates process(es)
without patent protection.
The patent position of biotechnology and pharmaceutical companies
is generally highly uncertain, involves complex legal and factual questions, and has in recent years been the subject of much litigation.
In addition, no consistent policy regarding the breadth of claims allowed in pharmaceutical or biotechnology patents has emerged
to date in the U.S. The patent situation outside the U.S. is even more uncertain. The laws of foreign countries may not protect
our rights to the same extent as the laws of the U.S., and we may fail to seek or obtain patent protection in all major markets.
For example, European patent law restricts the patentability of methods of treatment of the human body more than U.S. law does.
Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the
U.S. and other jurisdictions are typically not published until 18 months after a first filing, or in some cases not at all. Therefore,
we cannot know with certainty whether we or our licensors were the first to make the inventions claimed in patents or pending patent
applications that we own or licensed, or that we or our licensors were the first to file for patent protection of such inventions.
In the event that a third party has also filed a U.S. patent application relating to our product candidates or a similar invention,
depending upon the priority dates claimed by the competing parties, we may (i) fail to obtain a patent based on anticipation
or obviousness over a competitor’s earlier filed application or (ii) have to participate in interference proceedings
declared by the United States Patent and Trademark Office, or USPTO, to determine priority of invention in the U.S. Moreover, we
may be subject to a third-party pre-issuance submission of prior art to the USPTO, or become involved in opposition, derivation,
reexamination, inter partes review, post-grant review or interference proceedings challenging our patent rights or the patent rights
of others. The costs of these proceedings could be substantial and it is possible that our efforts to establish we were the first-to-file
on our technology or products or that we had priority of invention would be unsuccessful, resulting in a material adverse effect
on our U.S. patent position. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights
are highly uncertain. Our pending and future patent applications may not result in patents being issued which protect our technology
or products, in whole or in part, or which effectively prevent others from commercializing competitive technologies and products.
Changes in either the patent laws or interpretation of the patent laws in the U.S. and other countries may diminish the value of
our patents or narrow the scope of our patent protection. For example, the federal courts of the U.S. have taken an increasingly
dim view of the patent eligibility of certain subject matter, such as naturally occurring nucleic acid sequences, amino acid sequences
and certain methods of utilizing same, which include their detection in a biological sample and diagnostic conclusions arising
from their detection. Such subject matter, which had long been a staple of the biotechnology and biopharmaceutical industry to
protect their discoveries, is now considered, with few exceptions, ineligible in the first instance for protection under the patent
laws of the U.S. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in our patents or in those
licensed from a third-party. In addition, if the breadth or strength of protection provided by our patents and patent applications
is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product
candidates.
Recent patent reform legislation could increase the uncertainties
and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents. The Supreme
Court has issued several decisions in patent cases in recent years, which either narrow the scope of patent protection or weaken
the rights of patent owners in certain situations. In addition to increasing uncertainty in regards to our ability to obtain patents
in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending
on decisions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in
unpredictable ways that could hinder our ability to obtain new patents or to enforce our existing patents and patents that we might
obtain in the future. On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into
law. The Leahy-Smith Act includes a number of significant changes to the United States patent law. These include changes to transition
from a “first-to-invent” system to a “first-to-file” system and to the way issued patents are challenged.
The formation of the Patent Trial and Appeal Board (PTAB) now
provides a quicker and less expensive process for challenging issued patents. Our patents, even after they are issued by the USPTO,
may be challenged by competitors in the PTAB, in addition to challenges we could have faced previously in district court. The USPTO
recently developed new regulations and procedures to govern the administration of the Leahy-Smith Act, and many of the substantive
changes to patent law associated with the Leahy-Smith Act, and in particular, the first-inventor-to-file provisions, only became
effective on March 16, 2013. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation
of our business.
Even if our patent applications issue as patents, they
may not issue in a form that will provide us with any meaningful protection, prevent competitors from competing with us or otherwise
provide us with any competitive advantage. Our competitors may be able to circumvent our owned or licensed patents by developing
similar or alternative technologies or products in a non-infringing manner.
Our patents and patent applications may not be sufficient to
protect our product and product candidates from commercial competition. For example, we cannot obtain a composition of matter patent
and are limited in the types of claims that we can obtain for ELZONRIS due to earlier published prior art. We have however obtained
U.S. and foreign patents for certain methods of using ELZONRIS to treat AML, BPDCN, CMML, and myelodysplastic syndrome, or MDS.
In addition, we have filed additional U.S. and foreign patent applications for the method of using ELZONRIS to treat AML, MDS,
BPDCN, CMML, and other diseases although there can be no assurances that such patents will issue.
Failure to obtain patents directed to all approved uses of ELZONRIS
may enable a competitor to market ELZONRIS for such approved but unpatented indication(s), which could lead to price erosion for
sales of ELZONRIS. With respect to SL-701, although we have licensed an issued U.S. patent directed to the composition of matter
for the mutant immunogenic IL-13Rα2 peptide, as well as issued patents in Europe, Japan, Australia, and Mexico directed to
uses of the SL-701 composition, we currently do not have any composition of matter patent protection for SL-701. We have filed
U.S. and foreign patent applications directed to methods of use of a new survivin mutant peptide for use in SL-701. The U.S. patent
application directed to certain uses of a new survivin mutant peptide for use in SL-701 for treating brain cancer has been issued
by the USPTO as U.S. 10,485,858 and patents have been issued for certain uses of the SL-701 composition in Europe and Japan. While
we have a non-exclusive license to issued U.S. patents directed to methods of use for the EphA2 peptide, we currently do not have
any composition of matter patent protection, although we do have rights to foreign pending patent applications that seek to cover
certain uses of this peptide. With respect to SL-801 and SL-901, we have licensed composition of matter patents issued in the U.S.
and abroad directed to the SL-801 compound and SL-901. With respect to SL-1001, we have filed U.S. and foreign patent applications
directed to the SL-1001 composition, and these applications are pending Our inability to obtain adequate patent protection for
our product candidates or platform technology could adversely affect our business.
Issued patents covering one or more of our product or
product candidates could be found invalid or unenforceable if challenged in court.
If we were to initiate legal proceedings against a third-party
to enforce a patent covering one of our products or product candidates, the defendant could counterclaim that our patent is invalid
and/or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability
are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, for
example, lack of patentable subject matter, novelty, obviousness, written description or non-enablement.
Grounds for an unenforceability assertion could be an allegation
that someone connected with the prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement,
during prosecution. The outcome following legal assertions of invalidity and unenforceability during patent litigation is unpredictable.
Furthermore, any claims asserted against accused infringers could provoke those parties to petition the USPTO to institute inter
partes review against the asserted patents, which may lead to a finding that all or some of the claims of the patent are invalid.
With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we and
the patent examiner and we were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or
unenforceability, we would lose at least part, and perhaps all, of the patent protection on one or more of our products or product
candidates or certain aspects of our platform technology, StemScreen®. Such a loss of patent protection could have a material
adverse impact on our business. Furthermore, adverse results on U.S. patents may affect related patents in our global portfolio.
Claims that our product or product candidates or other
technologies, or the sale or use of our products or technology infringe the patent rights of third parties could result in costly
litigation or could require substantial time and money to resolve, even if litigation is avoided.
We cannot guarantee that our product or product candidates,
the use of our product or product candidates, or our platform technology, StemScreen®, do not infringe third-party patents
or other intellectual property. Third parties might allege that we are infringing their patent rights or that we have misappropriated
their trade secrets. Such third parties might resort to litigation against us. The basis of such claims that our product candidates
or platform technology infringe the rights of third parties could also adversely affect our business. Regardless of the outcome
of any litigation, defending the litigation may be expensive, time-consuming and distracting to management. For example, we are
aware of third-party patents with certain claims that may be directed to some of our product candidates, including one of the peptides
used in SL-701 and structures which may be related to SL-1001. We may need to seek a license with respect to one or more of these
third-party patents in order to commercialize our products. No assurance can be given that any such licenses will be available,
or that they will be available on reasonable or commercially acceptable terms or at all. Failure to obtain any required licenses
could restrict our ability to commercialize our products in certain territories or subject us to patent infringement litigation,
could result in us having to cease commercialization of our products and/or subject us to money damages in such territories.
It is also possible that we have failed to identify relevant
patents or applications. Patent applications covering our product, product candidates, or platform technology could have been filed
by others without our knowledge. Additionally, pending patent applications which have been published can, subject to certain limitations,
be later amended in a manner that could cover our platform technologies, our product, product candidates or the use of our products.
In order to avoid or settle potential claims with respect to
any patent rights of third parties, we may choose or be required to seek a license from a third-party and be required to pay license
fees or royalties or both. These licenses may not be available on expected, reasonable, or acceptable terms, or at all. Even if
we or any future strategic partners were able to obtain a license, the rights may be non-exclusive, which could result in our competitors
gaining access to the same intellectual property.
Ultimately, we could be prevented from commercializing one or
more of our products or product candidates, or be forced to cease some aspect of our business operations, if, as a result of actual
or threatened patent infringement claims, we are unable to enter into licenses on acceptable terms. Even if we were to ultimately
prevail, or to settle at an early stage, such litigation could burden us with substantial unanticipated costs. In addition, litigation
or threatened litigation could result in significant demands on the time and attention of our management team, distracting them
from the pursuit of other company business.
Unfavorable outcomes in intellectual property litigation
could limit our research and development activities and/or our ability to commercialize certain products.
If third parties successfully assert intellectual property rights
against us, we might be barred from using certain aspects of our platform technology or barred from developing and commercializing
certain products. Prohibitions against using certain technologies, or prohibitions against commercializing certain products, could
be imposed by a court or by a settlement agreement between a patent owner and us. In addition, if we are unsuccessful in defending
against allegations of patent infringement or misappropriation of trade secrets, we may be forced to pay substantial damage awards
to the plaintiff. There is inevitable uncertainty in any litigation, including intellectual property litigation. There can be no
assurance that we would prevail in any intellectual property litigation, even if the case against us is weak or flawed. If litigation
leads to an outcome unfavorable to us, we may be required to obtain a license from the patent owner, in order to continue our research
and development programs or to market our product. It is possible that the necessary licenses will not be available to us on commercially
acceptable terms, or at all. This could limit our research and development activities, our ability to commercialize certain products,
or both.
Most of our competitors are larger than we are and have substantially
greater resources. They are, therefore, likely to be able to sustain the costs of complex patent litigation longer than we could.
In addition, the uncertainties associated with litigation could have a material adverse effect on our ability to raise the funds
necessary to continue our clinical trials, continue our internal research programs, in-license needed technology, or enter into
strategic partnerships that would help us bring our product candidates to market. Such litigation or proceedings could substantially
increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution
activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately.
Intellectual property litigation may lead to unfavorable
publicity that harms our reputation and causes the market price of our common stock to decline.
During the course of any patent litigation, there could be public
announcements of the results of hearings, rulings on motions, and other interim proceedings in the litigation. If securities analysts
or investors regard these announcements as negative, the perceived value of our product candidates, platform technology, programs,
or intellectual property could be diminished. Accordingly, the market price of our common stock may decline.
ELZONRIS, our clinical drug candidates, as well as some
of our other product candidates and our platform technologies, are protected by intellectual property licensed from third parties,
including academic institutions. If the licensors terminate the licenses, or fail to prosecute, maintain, enforce, and/or defend
the licensed patents and patent applications, our competitive position, market share, and business prospects would be harmed.
We are a party to several license agreements relating to certain
patents and patent applications owned by third parties, upon which certain aspects of our business depend. In particular, we hold
an exclusive license from Scott and White Memorial Hospital, or Scott and White, for ELZONRIS and SL-501, and we hold three licenses,
including an exclusive license and two non-exclusive licenses, from the University of Pittsburgh relating to SL-701. Our license
agreement with Scott and White survives, unless earlier terminated, until the later of the expiration of the last to expire licensed
patent or the date on which we owe no further payments to Scott and White. Our exclusive and our non-exclusive patent license agreements
with the University of Pittsburgh survive, unless earlier terminated, until the expiration of the last to expire licensed patent,
and our non-exclusive license with the University of Pittsburgh to use and reference certain clinical trial data and information
survives for a term of twenty years unless earlier terminated. We hold an exclusive worldwide license from CanBas Co., Ltd.
for SL-801. The agreement with CanBas Co., Ltd. survives until the later of ten years following the first commercial sale
of each product in each country; the date upon which there are no more valid claims; or the expiration or termination of the last
regulatory exclusivity period, after which our license becomes fully paid, irrevocable, perpetual, non-exclusive and royalty-free.
In March 2019, we acquired an exclusive worldwide license to pending patents covering the SL-1001 component from CRT Pioneer
Fund. We also hold an exclusive worldwide license from UCB Biopharma SPRL for the patents covering SL-901. In addition, we hold
licenses from academic institutions relating to intellectual property underlying ELZONRIS and our product candidates. We also hold
an exclusive license from CRT Pioneer Fund LP for SL-1001, which survives until Stemline’s obligation to pay royalties ends,
which the agreement defines as the later of the date when the licensed product is no longer within the scope of a valid claim of
a licensed patent in the country of sale or manufacture or the expiry of any extended exclusivity period in the relevant country,
unless earlier terminated. We expect to enter into additional license agreements as part of the development of our business.
In some instances, we depend on our licensors to protect the
proprietary rights covering our technology and we have limited, if any, control over the amount or timing of resources that they
devote on our behalf, or the priority they place on, maintaining patent rights and prosecuting patent applications to our advantage.
Moreover, in some instances, we have limited, if any, control over the strategies and arguments employed in the maintenance of
patent rights and the prosecution of patent applications to our advantage. Our current or future licensors may not successfully
prosecute certain patent applications under which we are licensed and on which our business depends. Even if patents issue from
these applications, our licensors may fail to maintain these patents, may decide not to pursue litigation against third-party infringers,
may fail to prove infringement, or may fail to defend against counterclaims of patent invalidity or unenforceability. Moreover,
and possibly unbeknownst to us, our licensors may experience serious difficulties related to their overall business or financial
stability, and they may be unwilling or unable to continue to expend the financial resources required to maintain and prosecute
these patents and patent applications. While we intend to take actions reasonably necessary to enforce our patent rights, we depend,
in part, on our licensors to protect a substantial portion of our proprietary rights and to inform us of the status of those protections
and efforts thereto.
Our licensors may also be notified of alleged infringement and
be sued for infringement of third-party patents or other proprietary rights. We may have limited, if any, control or involvement
over the defense of these claims, and our licensors could be subject to injunctions and temporary or permanent exclusionary orders
in the U.S. or other countries. Our licensors are not obligated to defend or assist in our defense against third-party claims of
infringement.
In addition, in spite of our best efforts, our licensors might
conclude that we have materially breached our license agreements and might therefore seek to terminate the license agreements,
thereby removing our ability to obtain regulatory approval and to market products covered by these license agreements. Our licensors
may also seek to terminate the license agreements if we fail to satisfy our diligence obligations and/or meet specified milestones
or upon insolvency. From time to time, we have had to request extensions of our development obligations contained in some of our
license agreements, and we may need to seek further extensions in the future.
Although we have obtained such extensions in the past, there
can be no assurance that our licensors will continue to extend the development timelines or other milestones contained in our license
agreements. If these in-licenses are terminated, or if the underlying patents fail to provide the intended market exclusivity,
we could lose our rights to develop and commercialize ELZONRIS and the product candidates governed by the licenses, and competitors
would have the freedom to seek regulatory approval of, and to market, products identical to ours. This could have a material adverse
effect on our competitive business position and our business prospects.
Confidentiality agreements with employees and third parties
may not prevent unauthorized disclosure of trade secrets and other proprietary information.
In addition to patents, we rely on trade secrets, technical
know-how, and proprietary information concerning our business strategy in order to protect our competitive position in the field
of oncology. In the course of our research and development activities and our business activities, we often rely on confidentiality
agreements to protect our proprietary information. Such confidentiality agreements are used, for example, when we talk to vendors
of laboratory or clinical development services or potential strategic partners. In addition, each of our employees is required
to sign a confidentiality agreement upon joining our company. We take steps to protect our proprietary information, and our confidentiality
agreements are carefully drafted to protect our proprietary interests. Nevertheless, there can be no guarantee that an employee
or an outside party will not make an unauthorized disclosure of our proprietary confidential information. This might happen intentionally
or inadvertently, and we may not be able to obtain adequate remedies for such breaches. It is possible that a competitor will make
use of such information, and that our competitive position will be compromised, in spite of any legal action we might take against
persons making such unauthorized disclosures.
Trade secrets are difficult to protect. Courts outside the United
States sometimes are less willing than U.S. courts to protect trade secrets. Moreover, if any of our trade secrets were to be lawfully
obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate
it, from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently
developed by a competitor, our competitive position would be harmed.
Our research and development strategic partners may have rights
to publish data and other information to which we have rights. In addition, we sometimes engage individuals or entities to conduct
research relevant to our business. The ability of these individuals or entities to publish or otherwise publicly disclose data
and other information generated during the course of their research is subject to certain contractual limitations. These contractual
provisions may be insufficient or inadequate to protect our confidential information. If we do not apply for patent protection
prior to such publication, or if we cannot otherwise maintain the confidentiality of our proprietary technology and other confidential
information, then our ability to obtain patent protection or to protect our trade secret information may be jeopardized.
Intellectual property rights do not necessarily address
all potential threats to our competitive advantage.
The degree of future protection afforded by our intellectual
property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business,
or permit us to maintain our competitive advantage. The following examples are illustrative:
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others may be able to make compounds that are the same as or similar to our product or product candidates but that are not
covered by the claims of the patents that we own or have exclusively licensed;
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we or our licensors or any future strategic partners might not have been the first to make the inventions covered by the issued
patent or pending patent application that we own or have exclusively licensed;
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we or our licensors or any future strategic partners might not have been the first to file patent applications covering certain
of our inventions;
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others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing
our intellectual property rights;
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it is possible that our pending patent applications will not lead to issued patents;
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it is possible that our applications for patent term extension for ELZONRIS pursuant to the Hatch Waxman Act will not result
in added patent term, or may result in a shorter patent term extension than we applied for or that is available under the Hatch
Waxman Act;
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the scope of our issued patents may not extend to competitive products developed or produced by others;
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issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held
invalid or unenforceable, as a result of legal challenges by our competitors;
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our competitors might conduct research and development activities in countries where we do not have patent rights or where
the patent rights that we do not have are not comparable to those afforded in the United States, or where the applicable laws provide
a safe harbor exemption from infringement liability for certain research purposes, and then use the information learned from such
activities to develop competitive products for sale in our major commercial markets;
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we may not develop additional proprietary technologies that are patentable; and
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the intellectual property rights of others may have an adverse effect on our business.
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Risks Related to Our Common Stock
The market price of our common stock may be highly volatile
and our stockholders could incur substantial losses.
The market price of our common stock may be highly volatile,
and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. Since our initial
public offering which occurred in January 2013, the price of our common stock has ranged from $3.43 per share to $47.25 per
share. The stock market in general and the market for biopharmaceutical companies in particular have experienced extreme volatility
that has often been unrelated to the operating performance of particular companies. The market price for our common stock may be
influenced by many factors, including:
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our ability to commercialize our approved product candidates;
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results from or delays of clinical trials of our product or product candidates, as well as results of regulatory reviews relating
to the approval of our product candidates;
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our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial;
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our dependence on third parties, including clinical research organizations and contract manufacturing organizations, trial
sites, clinical trial sponsors and clinical investigators;
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the results of our efforts to discover, develop, acquire or in-license additional product candidates or products;
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new products, product candidates or new uses for existing products or technologies introduced or announced by our competitors
and the timing of these introductions or announcements;
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regulatory or legal developments in the United States and other countries;
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our ability to maintain the license agreements for our product or product candidates;
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developments or disputes concerning patent applications, issued patents or other proprietary rights;
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the recruitment or departure of key scientific or management personnel;
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the level of expenses related to any of our product or product candidates or clinical development programs;
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actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities
analysts;
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variations in our financial results or those of companies that are perceived to be similar to us;
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sales of common stock by us or our stockholders in the future, as well as the overall trading volume of our common stock;
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changes in the structure of healthcare payment systems and product pricing restrictions;
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market conditions in the pharmaceutical and biotechnology sectors;
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general economic, industry and market conditions and other factors that may be unrelated to our operating performance or the
operating performance of our competitors, including changes in market valuations of similar companies; and
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the other factors described in this “Risk Factors” section.
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Our executive officers, directors and principal stockholders
maintain the ability to exert substantial influence over all matters submitted to stockholders for approval.
Our executive officers, directors and principal stockholders
beneficially own shares representing approximately 17.7% of our outstanding capital stock. As a result, if these stockholders
were to choose to act together, they would be able to exert substantial influence over all matters submitted to our stockholders
for approval, as well as our management and affairs. For example, these persons, if they choose to act together, would exert substantial
influence over the election of directors and approval of any merger, consolidation or sale of all or substantially all of our
assets. This concentration of voting power could delay or prevent an acquisition of our company on terms that other stockholders
may desire.
Provisions in our corporate charter documents and under
Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts
by our stockholders to replace or remove our current management.
Provisions in our corporate charter and our bylaws may discourage,
delay or prevent a merger, acquisition or other change in control of us that stockholders may consider favorable, including transactions
in which they might otherwise receive a premium for their shares. These provisions could also limit the price that investors might
be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. Among
other things, these provisions:
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establish a classified board of directors such that not all members of the board are elected at one time
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allow the authorized number of our directors to be changed only by resolution of our board of directors;
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limit the manner in which stockholders can remove directors from the board;
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establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations
to our board of directors;
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require that stockholder actions must be affected at a duly called stockholder meeting and prohibit actions by our stockholders
by written consent;
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limit who may call special stockholder meetings and the matters transacted at such meetings;
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authorize our board of directors to issue preferred stock without stockholder approval, which could be used to institute a
“poison pill” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing
acquisitions that have not been approved by our board of directors; and
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require the approval of the holders of at least 75% of the votes that all our stockholders would be entitled to cast to amend
or repeal certain provisions of our charter or bylaws.
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Moreover, because we are incorporated in Delaware, we are governed
by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15%
of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction
in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in
a prescribed manner. Any provision in our corporate charter or our bylaws or Delaware law that has the effect of delaying or deterring
a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock,
and could also affect the price that some investors are willing to pay for our common stock.
If we fail to maintain an effective system of internal
control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result,
stockholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price
of our common stock.
Effective internal controls over financial reporting are necessary
for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent
fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could cause
us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404 of the
Sarbanes-Oxley Act, or the subsequent testing by our independent registered public accounting firm, may reveal deficiencies in
our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive
changes to our consolidated financial statements or identify other areas for further attention or improvement. Inferior internal
controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect
on the trading price of our common stock.
We do not expect to pay dividends on our capital stock
in the foreseeable future.
We have never declared or paid cash dividends on our capital
stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business,
and we do not anticipate paying any cash dividends on our capital stock in the foreseeable future. In addition, the terms of any
future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will
be your sole source of gain for the foreseeable future.