Forward-Looking Statements
This report includes forward-looking statements within the meaning
of Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created
in Section 21E. In particular, statements about our expectations, beliefs, plans, objectives or assumptions of future events
or performance are contained or incorporated by reference in this report. All statements other than statements of historical facts
contained herein are forward-looking statements. We have based these forward-looking statements on our current expectations about
future events. While we believe these expectations are reasonable, forward-looking statements are inherently subject to risks and
uncertainties, many of which are beyond our control. Our actual results may differ materially from those suggested by these forward-looking
statements for various reasons, including those discussed in this report under the heading “Risk Factors.” Given these
risks and uncertainties, you are cautioned not to place undue reliance on our forward-looking statements. The forward-looking statements
included in this report are made only as of the date hereof. We do not undertake, and specifically decline, any obligation to update
any of these statements or to publicly announce the results of any revisions to any forward-looking statements to reflect future
events or developments. When used in the report, unless otherwise indicated, “we,” “our,” “us,”
the “Company” and “BioCryst” refer to BioCryst Pharmaceuticals, Inc.
This Annual Report on Form 10-K also contains
statements about our proposed strategic combination with Idera Pharmaceuticals, Inc. Many risks and uncertainties could cause actual
results to differ materially from these forward-looking statements with respect to the pending transaction, and these risks, as
well as other risks associated with the pending transaction, are more fully disclosed in the joint proxy statement/prospectus that
is included in the registration statement on Form S-4 (File No. 333-223255) that was filed with the U.S. Securities and Exchange
Commission in connection with the pending transaction.
Agreement and Plan of Merger
As further described in Note 13 to the financial
statements, which includes the definitions of certain terms used below, on January 21, 2018, we entered into an Agreement and Plan
of Merger, or the “Merger Agreement”, with Idera Pharmaceuticals, Inc. (“Idera”), Nautilus Holdco, Inc.
(“Holdco”), Island Merger Sub, Inc. (“Merger Sub A”) and Boat Merger Sub, Inc. (“Merger Sub B”).
Pursuant to the Merger Agreement, Idera will merge into Island Merger Sub, Inc. and BioCryst will merge into Boat Merger Sub, Inc.
and each of Idera and BioCryst will survive the merger as wholly owned subsidiaries of Holdco.
U
pon
completion of the mergers described therein (the “Mergers”), each issued and outstanding share of Idera common stock
will be converted into the right to receive 0.20 shares of Holdco common stock (the "Idera exchange ratio"), and each
issued and outstanding share of BioCryst common stock will be converted into the right to receive 0.50 shares of Holdco common
stock (the "BioCryst exchange ratio" and together with the Idera exchange ratio, the "exchange ratios"). The
exchange ratios will not be adjusted for changes in the market price of either BioCryst common stock or Idera common stock between
the date of signing of the Merger Agreement and completion of the Mergers. Upon completion of the Mergers, each issued and outstanding
share of Idera preferred stock (with certain exceptions) will be converted into the right to receive an amount of Holdco common
stock based on its liquidation preference.
On a pro forma, fully diluted basis, giving effect to all
dilutive stock options, units and warrants, BioCryst stockholders will own 51.6% of the stock of the combined company and Idera
stockholders will own 48.4%. The stock issuance in the Merger is expected to be tax-free to stockholders.
The Merger Agreement
has been unanimously approved by the boards of directors of both companies. The transaction is subject to approval by the
stockholders of both companies and satisfaction of customary closing conditions.
Affiliates of Baker Bros. Advisors,
LP ("Baker Brothers"), which, at the time of signing the Merger Agreement was the beneficial owner of approximately 14%
of issued and outstanding BioCryst common stock and approximately 9% of issued and outstanding Idera common stock, have agreed,
among other things, to vote their shares of BioCryst common stock and Idera common stock in favor of the proposal to adopt the
Merger Agreement at each of the BioCryst special meeting and Idera special meeting.
The combined company,
which will be renamed post-closing, will be headquartered in Exton, PA, at the current Idera headquarters, with a consolidated
research center in Birmingham, AL, at the current BioCryst facility.
On March 6, 2018, a purported stockholder
of BioCryst filed a putative class action lawsuit against BioCryst, the BioCryst board of directors, Idera, Holdco,
Merger Sub A and Merger Sub B in the United States District Court for the District of Delaware, captioned
Melvyn Klein
v. BioCryst Pharmaceuticals, Inc., et al.
, Case No. 1:18-cv-00358-UNA. The complaint alleges that the defendants violated
Sections 14(a) and 20(a) of the Exchange Act because the preliminary Form S-4 filed with the Securities and Exchange Commission
allegedly contains material omissions and misstatements. The complaint seeks, among other things, injunctive relief preventing
the consummation of the Mergers until additional disclosures are made, and damages. BioCryst believes that the action is without
merit.
The transaction
is expected to be completed during the second quarter of 2018.
However, we have prepared this Annual Report on Form 10-K
and the forward-looking statements contained in this Annual Report on Form 10-K as an independent company without giving effect
to the Mergers.
Our Business
We are a biotechnology company that designs, optimizes and develops
novel small molecule drugs that block key enzymes involved in the pathogenesis of diseases. We focus on oral treatments for rare
diseases in which significant unmet medical needs exist and that align with our capabilities and expertise. We integrate the disciplines
of biology, crystallography, medicinal chemistry and computer modeling to discover and develop small molecule pharmaceuticals through
the process known as structure-guided drug design. Structure-guided drug design is a drug discovery approach by which we design
synthetic compounds from detailed structural knowledge of the active sites of enzyme targets associated with particular diseases.
We use X-ray crystallography, computer modeling of molecular structures and advanced chemistry techniques to focus on the three-dimensional
molecular structure and active site characteristics of the enzymes that control cellular biology. Enzymes are proteins that act
as catalysts for many vital biological reactions. Our goal generally is to design a compound that will fit in the active site of
an enzyme and thereby prevent its catalytic activity. Molecules from our discovery efforts which are commercially available or
that are in active development are summarized in the table below:
Drug/Drug Candidate
|
|
Drug Class
|
|
Therapeutic
Area(s)
|
|
Phase
|
|
Rights
|
RAPIVAB
®
(peramivir injection)
|
|
Intravenous Neuraminidase Inhibitor
|
|
Acute uncomplicated Influenza
|
|
Approved
(US & Canada)
|
|
Seqirus (worldwide, except Japan, Korea, Taiwan and Israel) BioCryst retains full U.S. Government stockpiling
rights
|
|
|
|
|
|
|
|
|
|
ALPIVAB
TM
(peramivir injection)
|
|
Intravenous Neuraminidase Inhibitor
|
|
Acute uncomplicated Influenza
|
|
MAA filed and being reviewed by the EMA
|
|
Seqirus (worldwide, except Japan, Korea, Taiwan and Israel)
|
|
|
|
|
|
|
|
|
|
RAPIACTA
®
(peramivir injection)
|
|
Intravenous Neuraminidase Inhibitor
|
|
Uncomplicated seasonal influenza
|
|
Approved
(Japan & Taiwan)
|
|
Shionogi
(Japan & Taiwan)
|
|
|
|
|
|
|
|
|
|
PERAMIFLU
®
(peramivir injection)
|
|
Intravenous Neuraminidase Inhibitor
|
|
Uncomplicated seasonal influenza
|
|
Approved
(Korea)
|
|
Green Cross
(Korea)
|
|
|
|
|
|
|
|
|
|
BCX7353
|
|
Oral Serine Protease Inhibitor Targeting Plasma Kallikrein
(intended to be a once-daily treatment)
|
|
Hereditary Angioedema (HAE)
|
|
Phase 3
|
|
BioCryst
(worldwide)
|
|
|
|
|
|
|
|
|
|
Second Generation
Kallikrein Inhibitors
|
|
Oral Serine Protease Inhibitors Targeting Plasma
Kallikrein
|
|
HAE and other indications
|
|
Preclinical
|
|
BioCryst
(worldwide)
|
|
|
|
|
|
BCX9250
BCX9499
|
|
Activin Receptor-Like Kinase-2 Inhibitors
|
|
Fibrodysplasia Ossificans Progressiva (FOP)
|
|
Preclinical
|
|
BioCryst (worldwide)
|
|
|
|
|
|
|
|
|
|
Lead Candidate
|
|
New Molecular Entity
|
|
Undisclosed
|
|
Preclinical
|
|
BioCryst (worldwide)
|
|
|
|
|
|
|
|
|
|
Galidesivir (formerly BCX4430)
|
|
RNA dependent-RNA Polymerase Inhibitor
|
|
Broad spectrum antiviral for 20 RNA viruses, including Ebola, Marburg, and Zika
|
|
Phase 1
|
|
BioCryst
(worldwide)
|
|
|
|
|
|
|
|
|
|
Mundesine® (forodesine)
|
|
Oral Purine Nucleoside Phosphorylase Inhibitor
|
|
Oncology- PTCL
|
|
Approved (Japan)
|
|
Mundipharma
(worldwide)
|
Business Strategy
Our business strategy is to create shareholder value by focusing our
discovery and development efforts on oral drugs for rare diseases for which a significant unmet medical need exists. We select
disease targets and product candidates in which a small molecule would offer a significant benefit over existing products or would
be the first to market. We strive to advance our product candidate portfolio from discovery to commercial markets efficiently by
utilizing a small group of talented and highly-skilled employees working in conjunction with strategic outsource partners. BioCryst
is unique in its approach to treat orphan diseases with orally-administered, small molecules utilizing crystallography and structure-guided
drug design. The principal elements of our strategy are:
|
•
|
|
Focusing on High Value-Added Structure-Guided Drug Design Technologies.
We utilize structure-guided drug design in order to most efficiently develop new therapeutic candidates. Structure-guided drug design is a process by which we design a product candidate through detailed analysis of the enzyme target, which the product candidate must inhibit in order to stop the progression of the disease or disorder. We believe that structure-guided drug design is a powerful tool for the efficient development of small-molecule product candidates that have the potential to be safe and effective. Our structure-guided drug design technologies typically allow us to design and synthesize multiple product candidates that inhibit the same enzyme target, with the goal of establishing broad patent protection and formulating compounds with competitive advantages.
|
|
•
|
|
Selecting Inhibitors that are Promising Product Candidates.
We start by selecting disease targets with well-understood biology and characteristics that fit with our ability to utilize structure-guided drug design capabilities to build potent and specific enzyme inhibitors. Next, we narrow our selection of these product candidates based on product characteristics, such as initial indications of safety and biologic activity on the target.
|
|
•
|
|
Developing our Product Candidates
Efficiently.
An important element of our business strategy is to efficiently progress our product candidates through the
development process. In order to accomplish this, we typically strive for disease targets with a defined clinical and
regulatory pathway for approval. In addition, we control fixed costs and overhead by outsourcing with strategic partners and
contractors or entering into license agreements with third parties, including the U.S. Government. We maintain a streamlined
corporate infrastructure that focuses our expertise. By contracting with the U.S. Government and outsourcing certain aspects
of our operations, we are able to control overhead costs and focus financial resources directly where they provide the most
benefit and reduce our business risk.
|
We are a Delaware corporation originally founded in 1986. Our corporate
headquarters is located at 4505 Emperor Blvd., Suite 200, Durham, North Carolina 27703 and the corporate telephone number
is (919) 859-1302. For more information about us, please visit our website at www.biocryst.com. The information on our website
is not incorporated into this Form 10-K.
Peramivir injection
(RAPIVAB
®
, RAPIACTA
®
, PERAMIFLU
®
,
ALPIVAB
TM
)
Peramivir was most recently approved under
a pediatric Supplemental New Drug Application (“sNDA”) in the United States in September 2017, extending its availability
for the treatment of acute uncomplicated influenza to pediatric patients 2 years and older. It was approved in Canada in January
2017, and was originally approved in the United States in December 2014. Peramivir is indicated for the treatment of acute uncomplicated
influenza in patients who have been symptomatic for no more than two days. Data from over 2,700 subjects treated with peramivir
in 27 clinical trials was utilized to support original regulatory approval in these countries. We made RAPIVAB available for commercial
sale in the U.S. through agreements with specialty distributorships during the 2014-2015 influenza season. On June 17, 2015, we
announced that we licensed peramivir for the treatment of influenza to CSL Limited (“CSL”), a global biopharmaceutical
company. Peramivir is being commercialized by a subsidiary of CSL called Seqirus UK Limited (“SUL” or “Seqirus”),
which specializes in influenza prevention through the supply of seasonal and pandemic influenza vaccine to global markets. Under
the terms of the agreement, SUL obtained worldwide rights to commercialize peramivir,with the exception of Japan, Korea, Taiwan
and Israel. We retained all rights to pursue pandemic stockpiling orders for RAPIVAB from the U.S. Government, while SUL is responsible
for government stockpiling outside the U.S. The product is not currently available in Canada.
The parties have entered
into the formal dispute resolution process under the License Agreement to resolve decisions related to the collaboration. With
the out-license of peramivir to SUL, our main activities for RAPIVAB are to obtain a stockpiling procurement contract with the
U.S. Government and to continue to fulfill our post-approval development requirements.
In January 2017, we announced that the
European Medicines Agency (“EMA”) has accepted the filing of our peramivir injection Marketing Authorization Application
(“MAA”) for treatment of symptoms typical of influenza in adults 18 years and older. On February 22, 2018, the
Committee for Medicinal Products for Human Use (“CHMP”) adopted a positive opinion for the treatment of uncomplicated
influenza in adults and children from the age of 2 years and thereby recommended the granting of a Marketing Authorization for
ALPIVAB
TM
. The final EMA decision is expected in the second quarter of 2018. If the MAA is approved, Seqirus will
have the ability to commercialize peramivir as ALPIVAB in the European Union for all 28 member states of the European Union, Norway
and Iceland.
RAPIVAB was developed under a $234.8 million
contract from the Biomedical Advanced Research and Development Authority within the United States Department of Health and Human
Services (“BARDA/HHS”). See “Collaborations and In-License Relationships—BARDA/HHS” below for a further
discussion of this development contract.
In January 2010, our partner Shionogi &
Co., Ltd. (“Shionogi”) received the first approval for peramivir injection and launched it in Japan under the commercial
name RAPIACTA. It is approved for the treatment of adults, children and infants with uncomplicated seasonal influenza and those
patients at high-risk for complications associated with influenza. In August 2010, Green Cross Corporation (“Green Cross”)
received marketing and manufacturing approval from the Korean Food & Drug Administration under the commercial name PERAMIFLU
to treat patients with influenza A & B viruses, including pandemic H1N1 and avian influenza.
Hereditary Angioedema (“HAE”) Drug Candidates
HAE is a rare, severely debilitating and potentially fatal genetic
condition that occurs in approximately 1 in 50,000 people. HAE symptoms include recurrent episodes of edema in various locations,
including the hands, feet, face, genitalia and airway. Airway swelling is particularly dangerous and can lead to death by asphyxiation.
In addition, patients often have bouts of severe abdominal pain, nausea and vomiting caused by swelling in the intestinal wall.
By inhibiting plasma kallikrein, our HAE drug candidates suppress bradykinin production. Bradykinin is the mediator of acute swelling
attacks in HAE patients.
BCX7353:
BCX7353 is a second
generation HAE compound and our lead molecule that is being developed as a once-daily (“QD”) oral therapy for the prevention
of HAE attacks (prophylaxis), as well as an acute therapy for HAE attacks. We have recently completed our Phase 2 prophylaxis program
(with the completion of APeX-1 and subsequent FDA and EMA regulatory interactions) and are in the process of initiating APeX-2
and APeX-S, a Phase 3 and a long-term safety clinical trial, respectively, required for marketing authorization in the United States
and Europe.
On October 27, 2015 The Japanese Ministry
of Health Labor & Welfare (“MHLW”) announced that BioCryst’s BCX7353 was one of six products designated under
MLHW’s Sakigake fast track review system. The Sakigake designation system promotes research and development in Japan, aiming
at early market availability for innovative pharmaceutical products. This designation provides for additional interactions with
the regulatory agency in Japan from early development through filing, prioritized development and review, and introduction of the
product as soon as possible to address a serious unmet medical need. With the final results of APeX-1 available, we expect to reach
agreement with the Japanese Pharmaceuticals and Medical Devices Agency (“PMDA”) and the MHLW in the first half of 2018
to determine the regulatory pathway and timeline for BCX7353 in Japan.
APeX-1 Phase 2 Trial in HAE
: In August 2016, we announced
that we had dosed the first subject in the Phase 2 APeX-1 clinical trial of BCX7353 for the orally administered QD prophylactic
treatment of HAE. APeX-1 was a three-part, dose-ranging, randomized, double-blind, placebo-controlled, dose ranging trial to evaluate
the safety, tolerability, pharmacokinetics, pharmacodynamics and efficacy of BCX7353 as a preventative treatment to eliminate or
reduce the frequency of angioedema attacks in HAE patients. APeX-1 was a 28-day trial and was conducted in several European countries,
Australia and Canada.
On February 27, 2017, we reported statistically significant and clinically
meaningful reductions in attack frequency from our first interim analysis (part 1) of the multi-part APeX-1 clinical trial in HAE
patients. On May 25, 2017, we announced positive results from a second interim analysis of our APeX-1 clinical trial. This second
interim analysis was a composite of pooled data from Parts 1 and 2 of the clinical trial.
On September 5, 2017, we announced final results from the Phase 2
APeX-1 clinical trial in HAE patients. This final analysis evaluated data from all patients in Parts 1, 2 and 3 of the trial and
evaluated four doses of BCX7353 ranging from 62.5 mg up to 350 mg for 28 days. The primary efficacy endpoint of APeX-1 was the
number of angioedema attacks. Efficacy analyses were conducted for HAE attacks reported over the entire dosing interval (Days 1
through 28) and during the dosing period in which plasma concentrations of BCX7353 should be at steady-state conditions (Days 8
through 28). Secondary efficacy endpoints included severity and duration of angioedema attacks and measures of health-related quality
of life. Safety was characterized through evaluation of adverse events and laboratory testing. Pharmacokinetics and pharmacodynamic
effects were assessed through measurement of plasma drug levels and kallikrein inhibition.
Seventy-five subjects were randomized and included in the final analysis
of pooled data from Parts 1, 2 and 3: 7 at 62.5 mg, 14 at 125 mg, 14 at 250 mg and 18 at 350 mg of BCX7353 QD; and 22 placebo.
The qualifying attack rate was approximately 1/week. Baseline characteristics were generally well balanced across the treatment
groups. Compliance with daily study drug dosing for 28 days was excellent (≥ 98% across all treatment groups). Subjects recorded
angioedema symptoms in a diary; diary records were reviewed and attacks adjudicated by an independent expert group. The primary
endpoint of the trial was the number of HAE attacks. The pre-specified per-protocol final analysis included data on a total of
67 subjects with Type 1 or Type 2 HAE completing > 90% of planned study drug doses. The percentage reductions by treatment group
in the mean rate of angioedema attacks for the pre-defined effective dosing period (weeks 2 through 4) in BCX7353 treated subjects
are indicated in the table below. Results from a pre-planned analysis of peripheral and abdominal attacks are also shown. Similar
results to those shown were seen in the analysis of weeks 1 through 4 and the intent-to-treat population.
|
|
|
Percentage change in attacks vs. placebo (p-Value)
Per protocol population, weeks 2-4 of treatment
|
|
|
N
|
All Attacks
|
Peripheral Attacks
|
Abdominal Attacks
|
|
BCX7353 350 mg
|
14
|
-58% (p < 0.001)
|
-90% (p < 0.001)
|
-5% (p=0.884)
|
|
BCX7353 250 mg
|
12
|
-46% (p=0.006)
|
-66% (p=0.005)
|
-13% (p=0.700)
|
|
BCX7353 125 mg
|
13
|
-73% (p < 0.001)
|
-79% (p < 0.001)
|
-63% (p=0.048)
|
|
BCX7353 62.5 mg
|
7
|
-7% (p=0.715)
|
-25% (p=0.371)
|
+22% (p=0.578)
|
The 125 mg dose level showed statistically significant and similar
benefit for all attacks, and also when split into abdominal attacks and peripheral attacks. In contrast, at the 250 mg and 350
mg dose levels, there was no statistically significant effect for abdominal attacks, despite strong and statistically significant
effects on peripheral attacks. Based on these findings, it is likely that subjects in the 250 mg and 350 mg arms recorded transient
drug-related abdominal AEs as HAE attack symptoms in their diary. As expected, the lowest dose tested (62.5 mg QD) showed no statistically
significant differences in attack rates (total, or when split into abdominal and peripheral) compared with placebo. The range of
doses studied and associated results complete the dose response evaluation required to inform Phase 3 dose selection.
An analysis of the proportion of subjects achieving levels of percent
reduction in attacks was also performed; this analysis compared on-study attack rate to qualifying attack rate for each subject.
Response levels were defined as reductions of ≥50%, ≥70%, or ≥90%. Results for all dose groups indicated that the dose
group with the highest proportion of responders using each definition was the 125 mg group, and was 4 to 5 times greater than the
proportion of responders in the placebo group. The proportion of responders in the 62.5 mg group was similar to placebo.
In addition, we performed an exploratory ad hoc analysis of the placebo,
62.5 mg QD and 125 mg QD dose groups to examine the relationship of change in attack rate to dose and the effect of achieving target
drug levels. The 125 mg group had a mean change in attack rate of -0.73 per week (improvement from qualifying) compared to -0.07
attacks per week for placebo and -0.24 attacks per week for the 62.5 mg QD dose group. The effect of achieving the target drug
level (equivalent to 4 times EC50 against plasma kallikrein) at trough measured at steady state on study day 15 was also explored
for subjects randomized to the placebo, 62.5 mg and 125 mg levels. Placebo subjects were assigned a zero drug level value. Subjects
were categorized as achieving or not achieving the target level and the proportion of subjects in each of these two categories
who had responses of reductions in ≥50%, ≥70%, or ≥90% in attack rate was compared and the odds ratios calculated. The
odds for subjects achieving ≥50%, ≥70%, or ≥90% responses if the target drug level was met or exceeded were 5.6, 12.9
and 26.4 times higher respectively than for subjects who did not meet or exceed target drug level.
A significant increase in the proportion of attack-free subjects was
observed in the 125 mg QD dose group compared to placebo (46% versus 10%, p= 0.033). Furthermore, a clinically important and statistically
significant improvement in patient quality of life total score, measured using the AE-QoL (Quality of Life) instrument, was seen
in the 125 mg QD group compared to placebo (p < 0.001). The mean improvement in the 125 mg QD group was more than four times
the minimum clinically important difference.
Oral BCX7353 once-daily for 28 days was generally safe and well tolerated
in subjects with HAE. No new clinically significant safety findings were seen in Part 3 of the trial from the two earlier component
parts of the trial. Overall, there was one serious adverse event of moderate gastrointestinal infection that was determined by
the investigator not to be drug-related. Study drug was discontinued before day 28 in three subjects in the BCX7353 350 mg treatment
arm (unrelated pre-existing liver disorder; related gastroenteritis with liver disorder; and related vomiting/abdominal cramps).
The most common treatment-emergent AEs in descending order of frequency were the common cold, headache, diarrhea, nausea and abdominal
pain. Gastrointestinal AEs were infrequent at the 125 mg and 62.5 mg dose levels, and there were no clinically significant laboratory
abnormalities at these dose levels, though increases in liver enzymes were observed in several subjects at higher dose levels.
Adverse events in the gastrointestinal system organ class were more frequent in the 350 mg QD and 250 mg QD dose groups compared
to placebo. Elevated liver enzymes were reported in several subjects, and an analysis of liver enzyme safety tests including alanine
aminotransferase (“ALT”) levels showed that of 4 subjects who had elevations of ALT to more than or equal to 3 times
the upper limit of normal (“ULN”), all 4 had prior exposure to androgens, 3 were in the 350 mg QD group, 1 was in the
250 mg QD group, and 3 had baseline (prior to study drug administration) elevations in ALT of close to or greater than 3 times
the ULN.
Steady state BCX7353 plasma levels and kallikrein
inhibition levels were consistent with previous analyses. Steady state trough drug levels (24 hours after dosing) exceeded the
proposed target threshold for efficacy of 4 times the 50% effective concentration (EC 50) of 9ng/ml in 0%, 64%, 100% and 100% of
subjects at the 62.5 mg, 125 mg, 250 mg and 350 mg dose levels, respectively.
In the fourth quarter of 2017, we completed
regulatory interactions with the FDA and EMA and reached agreement on the Phase 3 program requirements to support NDA and MAA submissions
for prophylactic treatment of HAE with BCX7353. Based upon this agreement, we began screening patients in the APeX-S and APeX-2
clinical trials, which are the significant aspects of the remaining development program. Accordingly, we have initiated screening
for a 24-week randomized, double-blind, placebo-controlled Phase 3 clinical trial studying two doses of BCX7353 (“APeX-2”).
Patients will roll-over into a 24 week safety extension. Separately, we announced that we initiated a long-term safety trial (“APeX-S”),
which will enroll approximately 160 patients who will be randomized to the two doses of BCX7353 included in APeX-2. Subjects will
remain on study-drug for 48 weeks. On February 28, 2018, we announced that we had dosed the first patient in the APeX-S trial.
We have received orphan drug status from the FDA for BCX7353.
ZENITH-1 Trial
: On August 2, 2017, we announced the
dosing of the first subject into ZENITH-1, a clinical trial studying up to three dosage strengths of a liquid formulation of BCX7353
given as a single oral dose for the acute treatment of angioedema attacks in patients with HAE. ZENITH-1 is a randomized, double-blind,
placebo-controlled, adaptive dose-ranging trial of the efficacy, safety and tolerability of BCX7353 for treatment of acute angioedema
attacks, and will enroll up to 60 subjects with HAE. Blinded study drug is being dosed as an oral liquid after onset of symptoms,
for up to 3 attacks in each subject, with each subject receiving both BCX7353 (for 2 attacks) and placebo (for one attack) in a
randomized sequence. The trial is structured with up to 3 consecutive cohorts testing single doses of 750 mg (36 subjects), 500
mg (up to 12 subjects) and 250 mg (up to 12 subjects), starting with 750 mg. Efficacy assessments include patient-reported composite
visual analogue scale (“VAS”) scores, patient global assessment, change in symptoms, and use of rescue medication.
Treatment effect will be assessed by comparing the proportion of BCX7353-treated and placebo-treated attacks that have a stable
or improved composite VAS at 4 hours post dose. Enrollment has gone well with the trial thus far, and we have completed enrollment
in the 750 mg cohort and have begun enrolling patients in the 500 mg cohort.
Fibrodysplasia Ossificans Progressiva (“FOP”) Drug Candidates
FOP is a very rare disease that affects approximately
1 in 2 million people worldwide. In patients with FOP, minor trauma can result in rapid development of painful inflammatory masses.
These progress over several weeks resulting in the replacement of the affected soft tissue by permanent bone masses. There is no
cure for this condition, and there are no approved treatments for FOP.
On January 5, 2018, we announced the advancement of a program exploring
activin receptor-like kinase-2 (“ALK2”) inhibitors for treatment of FOP. ALK2 enzyme is a part of the normal signaling
pathway for bone formation and responds to binding its specific ligands (bone morphogenic proteins, or BMPs), by stimulating normal
bone growth and renewal in healthy children and adults. Specific activating mutations of the ALK2 gene are seen in all cases of
FOP. An activating mutation in ALK2 is necessary for the disease to occur, making the ALK2 kinase an ideal drug target for treatment
of FOP with an ALK2 kinase inhibitor. We have begun an Investigational New Drug Application (“IND”) enabling nonclinical
development with our two optimized lead candidates, BCX9250 and BCX9499. BCX9250 and BCX9499 were selected from a number of potential
candidates based on potency for the target kinase, selectivity, and safety screening criteria that included industry-standard in
vitro panels and in vivo PK and safety studies in laboratory animals. We plan to complete IND-enabling manufacturing and nonclinical
safety studies to support Phase 1 trials beginning in 2019, and as early as possible thereafter, clinical trials in patients with
FOP.
The goal of the ALK2 inhibitor project at BioCryst is to discover
and develop orally administered kinase inhibitor drug candidates that are able to slow or prevent the progressive formation of
bone in soft tissues, also known as heterotopic ossification (“HO”). The two lead candidate molecules dramatically reduced HO in
an experimental model of ALK2-driven HO in laboratory rats, with up to 89 percent reduction in volume of HO compared to controls.
Other Nondisclosed preclinical program
We have begun IND-enabling nonclinical development
with a lead candidate in an undisclosed orphan disease. We are choosing not to disclose the therapeutic area/orphan disease for
competitive reasons. We have evaluated a few promising candidates from a larger number of potential candidates based on potency
for the target, selectivity, and safety screening criteria that included industry-standard in vitro panels and in vivo PK and safety
studies in laboratory animals, and have selected a lead optimized compound to advance into IND-enabling nonclinical development
studies. Similar to our FOP program, we plan to complete IND-enabling manufacturing and nonclinical safety studies to support Phase
1 trials beginning in 2019.
Galidesivir (formerly BCX4430)
Galidesivir is a broad-spectrum antiviral
(“BSAV”) research program and is currently being developed under contracts with the National Institute of Allergy and
Infectious Diseases (“NIAID/HHS”) and the U.S. Department of Health and Human Services (“BARDA/HHS”).
The objective of our BSAV program is to develop galidesivir as a broad-spectrum therapeutic for viruses that pose a threat to national
health and security. The primary focus of the program is treatment of hemorrhagic fever viruses. NIAID/HHS funding has supported
galidesivir’s development as a treatment for Marburg virus and Ebola virus. In March 2014, galidesivir was featured in an
online
Nature
publication depicting successful efficacy results in animal models of infection with Marburg virus and Ebola
virus. Galidesivir completely protected cynomolgus macaques from Marburg virus infection when administered by intramuscular
(“i.m.”) injection 48 hours post-infection. Post-exposure i.m. administration of galidesivir also protected rodents
against Marburg virus and Ebola virus infections. In addition, galidesivir was shown to be active in vitro against a broad
range of other RNA viruses. The publication, which reported the protection of non-human primates from filovirus disease by
galidesivir, describes efficacy results generated from an ongoing collaboration between scientists in the U.S. Army Medical Research
Institute of Infection Diseases (“USAMRIID”) and us. Galidesivir has been shown to be active against more than
20 RNA viruses in nine different families, including filoviruses, togaviruses, bunyaviruses, arenaviruses, paramyxoviruses, coronaviruses
and flaviviruses. In animal studies, galidesivir has demonstrated survival benefits against a variety of serious pathogens,
including Ebola, Marburg, Yellow Fever and Zika viruses and from exposures to aerosolized Marburg virus, an experimental condition
designed to mimic an exposure scenario that could result during a bioterrorist attack.
On December 15, 2014, we announced the dosing of the first subject
in a randomized, placebo-controlled Phase 1 clinical trial to evaluate i.m. administration of galidesivir in healthy volunteers.
The main goals of this first-in-human study were to evaluate the safety, tolerability and pharmacokinetics of escalating doses
of galidesivir administered via i.m. injection in healthy subjects. In part one of the study, subjects received a single dose of
galidesivir; in part two of the study, subjects received galidesivir for seven days. There were six single-dose cohorts and four
multiple-dose cohorts evaluated, and 91 healthy volunteers participated. In August 2016, we reported the results of this study.
Galidesivir administered by i.m. injection was generally safe and well tolerated over the range of doses up to 10 mg/kg, and durations
tested (up to 7 days). Fifty subjects received doses of study drug and there were no serious or severe adverse events. The most
frequently reported adverse event across all cohorts was injection site pain and there were no clinically significant laboratory
abnormalities which occurred at any doses. In addition, co-administration of lidocaine with galidesivir was determined to ameliorate
injection site pain without altering the plasma pharmacokinetics profile of galidesivir. From this clinical trial, we determined
galidesivir was safe and well tolerated, and that exposure was dose-proportional and supported the continued development of this
BSAV drug candidate for serious emerging viral infections.
On December 23, 2014, we announced results from a successful proof-of-concept
study of galidesivir for the treatment of experimental Ebola virus infection in Rhesus macaques, conducted at USAMRIID. The primary
goal of the study was to assess the effect of galidesivir treatment on survival through Day 41 in animals infected with Ebola virus.
Dosing of placebo or galidesivir by i.m. injection was initiated 30-120 minutes after virus challenge and continued twice
a day (“BID”) for 14 days. Animals were dosed with either placebo, 16 mg/kg of galidesivir BID or 25 mg/kg of galidesivir
BID. Survival at day 41 in the 16 mg/kg BID group of galidesivir treated animals was 4 of 6 (66.7%, p < 0.001 compared to 0%
survival in controls) and 6 of 6 in the 25 mg/kg BID group (100%, p < 0.001 compared to controls). The overall survival rate
for galidesivir treated animals at day 41 was 10 of 12 (83%, p < 0.001 compared to controls). Preliminary evaluation of the
quantity of virus in the blood showed an approximate 3-log reduction in Ebola virus RNA copies/mL of plasma, compared with control
animals. This Rhesus macaque study was conducted following the completion, in November 2014, of a dose-ranging study of galidesivir
for the experimental treatment of cynomolgus macaques infected with Ebola virus. The cynomolgus macaque study was designed to evaluate
whether galidesivir showed a meaningful benefit for survival in Ebola virus non-human primate (“NHP”) disease models
and explore a dose range. In this study galidesivir demonstrated a statistically significant prolongation of survival for the animals
at the highest dose regimen tested, but no animals survived beyond 21 days.
On March 7, 2016, results from a preclinical study of our antiviral
galidesivir in interferon-receptor-deficient mice infected with Zika virus were presented at a World Health Organization (“WHO”)
conference in Geneva, Switzerland. The primary goal of the study was to assess the effect of galidesivir treatment on survival
through Day 28 in interferon-receptor-deficient mice infected with the Zika virus. Galidesivir was administered by i.m. injection
twice a day beginning four hours prior to virus challenge and continuing for eight days; two dose levels were tested. In the standard
dose galidesivir group, 7 of 8 mice survived through Day 28. In the low dose galidesivir group (n=8), and in control groups administered
vehicle placebo (n=8) or ribavirin at two dose levels (n=16); no animals survived to Day 28. Overall survival for the standard
dose level of galidesivir was superior to both the placebo and the ribavirin treatment control groups (p < 0.0001). For both
dose levels of galidesivir, median survival was superior to both control groups (>28 days for galidesivir standard dose and
23 days for low dose) compared to 14 to 17 days for controls.
Additional studies of galidesivir in the same mouse model were conducted
at Utah State University. In one study, surviving mice that were previously treated with the standard dose of galidesivir after
initial Zika virus challenge were re-challenged with the Zika virus on Day 28, without additional galidesivir treatment. All the
re-challenged mice survived through day 56 with no disease signs observed, indicating the development of effective immune responses.
A further experiment using the same AG129 mouse model tested the delayed treatment with galidesivir after viral challenge. Groups
of mice received galidesivir 150 mg/kg twice-daily by i.m. injection starting on days 1, 3, 5, or 7 post infection, or vehicle
(control group). All galidesivir treated groups showed a statistically significant survival benefit compared to vehicle controls.
On October 7, 2017, galidesivir nonclinical
results from a Zika virus infection model were presented at a scientific session at IDWeek by Dr. James B. Whitney, PhD, Assistant
Professor of Medicine, Harvard Medical School, and Principal Investigator in the Center for Virology and Vaccine Research at Beth
Israel Deaconess Medical Center in Boston. A total of 74 Rhesus macaques infected with a Puerto Rican ZIKV isolate by various routes
were studied, 55 treated with galidesivir and 19 with vehicle. Galidesivir i.m. was started at different times relative to virus
challenge in different treatment groups - from 90 minutes to 72 hours after subcutaneous (“SC”) ZIKV challenge, and
up to 5 days after intravaginal (“IVAG”) challenge. Efficacy of galidesivir was evaluated over a range of loading and
maintenance doses; the highest consisted of a one-day loading dose of 100mg/kg BID followed by a maintenance dose of 25mg/kg BID
for nine days. Outcome measures included virology – ZIKV RNA levels in plasma, urine, saliva, and cerebrospinal fluid (“CSF”)
– galidesivir pharmacokinetics, cellular and humoral immunologic markers, complete blood counts, and clinical chemistries.
All vehicle-treated control, animals developed
high levels of Zika virus in the blood plasma (viremia), and had readily detectable ZIKV RNA in CSF, saliva and urine post-infection.
In contrast, all animals treated with galidesivir in the first 24 hours after SC ZIKV challenge did not develop viremia, and were
either negative for or had significantly reduced ZIKV RNA in bodily fluids. Animals treated with galidesivir later (up to 72 hours
post infection) were partially protected – they had detectable plasma ZIKV RNA, but the onset of viremia was delayed, and
its magnitude was significantly reduced compared to controls. Animals infected via the IVAG route were protected by galidesivir
treatment when dosing was delayed as late as 5 days after infection, with no viremia and significant reductions in ZIKV RNA in
the CSF compared with controls. Galidesivir was well-tolerated and offered significant protection against ZIKV challenge.
After multiple discussions with the FDA,
NIAID/HHS, and BARDA/HHS regarding the most appropriate future development path for galidesivir, we will focus our efforts on Marburg
virus. While both Ebola and Marburg infections represent significant medical countermeasure (“MCM”) emergencies
or threats to the United States, we have concluded the greatest unmet medical need is now to develop a MCM to address the threat
of Marburg infection. Accordingly, we plan to open an IND for galidesivir i.v. for post-exposure prophylaxis and treatment of Marburg
infection.
Mundesine (forodesine)
Mundesine is a Purine Nucleoside Phosphorylase (“PNP”)
inhibitor developed by Mundipharma as a treatment for cancer under a world-wide license agreement. PNP is a purine salvage pathway
enzyme. High doses of PNP inhibitors could be useful in the treatment of hematological malignancies. Mundipharma has received orphan
drug status for Mundesine, and following its successful completion of a Phase 2 pivotal study in recurrent/refractory peripheral
T-cell lymphoma (“PTCL”) patients in Japan it was approved in April 2017 by the MHLW in Japan as Mundesine. We are
currently receiving royalties on Mundesine.
On November 11, 2011, we entered into
an Amended and Restated License and Development Agreement (the “Amended and Restated Agreement”) with Mundipharma,
amending and restating the February 1, 2006 exclusive, royalty-bearing Development and License Agreement for the development
and commercialization of Mundesine for use in the field of oncology. Under the terms of the Amended and Restated Agreement, Mundipharma
obtained worldwide rights to Mundesine, so Mundipharma controls the worldwide development and commercialization of Mundesine and
assumes all future development and commercialization costs.
We have licensed the PNP technology from Albert Einstein College of
Medicine of Yeshiva University (“AECOM”) and Industrial Research, Ltd. (“IRL”) and will owe sublicense
payments to AECOM/IRL based on the future milestone payments and royalties received by us from Mundipharma and any other partners
for which we out-license our PNP inhibitors. On November 17, 2011, we amended our agreement with AECOM/IRL whereby AECOM/IRL
agreed to accept a reduction of one-half of the percentage of Net Proceeds (as defined in the license agreement) received by us
under our Amended and Restated Agreement with Mundipharma. This reduction does not apply to royalty payments made as a result of
sales of licensed products by our sub licensees.
Collaborations and In-License Relationships
U.S. Department of Health and
Human Services (“BARDA/HHS”)
.
In January 2007, BARDA/HHS awarded us a $102.6 million, four-year contract for
the advanced development of peramivir for the treatment of influenza. During 2009, peramivir clinical development shifted to focus
on intravenous delivery and the treatment of hospitalized patients. To support this focus, a September 2009 contract modification
was awarded to extend the i.v. peramivir program and to increase funding by $77.2 million. On February 24, 2011, we announced
that BARDA/HHS had awarded us a $55.0 million contract modification, intended to fund completion of the Phase 3 development of
i.v. peramivir for the treatment of patients hospitalized with influenza. That contract modification brought the total contract
award from BARDA/HHS to $234.8 million and provided funding to support the filing of an NDA to seek regulatory approval for i.v.
peramivir in the U.S. In December 2014, the FDA approved the NDA. The BARDA/HHS contract expired on June 30, 2014 according to
its terms.
On March 31, 2015, we announced that BARDA/HHS awarded us a contract
for the continued development of galidesivir as a potential treatment for diseases caused by RNA pathogens, including filoviruses. This
BARDA/HHS contract has a potential value of $39.1 million if all contract options are exercised. As of December 31, 2017, a total
of $20.6 million has been awarded under exercised options within this contract.
National Institute of Allergy and Infectious
Diseases (“NIAID/HHS”)
.
In September 2013, NIAID/HHS contracted with us for the development of galidesivir
as a treatment for Marburg, and subsequently, Ebola virus disease. NIAID/HHS, part of the National Institutes of Health, made an
initial award of $5.0 million to us. All options under this contract have been awarded and the total contract value is $39.5 million.
The goals of this contract, including amendments, are to file IND applications for i.v. and i.m. galidesivir for the treatment
of Marburg virus disease and other hemorrhagic fever viruses, to study galidesivir as a treatment for Ebola virus disease, and
to conduct a Phase 1 human clinical trials.
The contracts with BARDA/HHS and NIAID/HHS
are cost-plus-fixed-fee contracts. That is, we are entitled to receive reimbursement for all costs incurred in accordance with
the contracts provisions that are related to the development of galidesivir plus a fixed fee, or profit. BARDA/HHS and NIAID/HHS
will make periodic assessments of progress and the continuation of the contract is based on our performance, the timeliness and
quality of deliverables, and other factors. The government has rights under certain contract clauses to terminate these contracts.
These contracts are also terminable by the government at any time for breach or without cause.
Seqirus UK Limited
.
On June
16, 2015, we and SUL, a limited company organized under the laws of the United Kingdom and a subsidiary of CSL, a company organized
under the laws of Australia, entered into a License Agreement (the “SUL Agreement”) granting SUL and its affiliates
worldwide rights to develop, manufacture and commercialize peramivir for the treatment of influenza except for the rights to conduct
such activities in Israel, Japan, Korea and Taiwan (the permitted geographies together constituting the “Territory”).
Peramivir is an intravenous treatment for acute uncomplicated influenza and is currently approved for use in the United States,
Canada, Japan, Taiwan and Korea. RAPIVAB is the first and only intravenous influenza treatment in the world and was originally
approved by the U.S. Food and Drug Administration in December 2014 for the treatment of acute uncomplicated influenza in patients
18 years and older who have been symptomatic for no more than two days. We retain all rights and associated economics to procure
pandemic stockpiling orders for RAPIVAB from the U.S. Government, while SUL has the right to pursue government stockpiling outside
the U.S.
Pursuant to the SUL Agreement, peramivir is being commercialized by
CSL's subsidiary, SUL, which specializes in influenza prevention through the supply of seasonal and pandemic vaccine to global
markets. SUL is responsible for the manufacture, commercialization and decision-making authority with respect to the development
and commercialization of peramivir within the Territory and is responsible for all related costs, including sales and promotion.
We exercise sole decision-making authority with regard to the development and commercialization of peramivir outside of the Territory
and are responsible for all associated costs.
Under the terms of the SUL Agreement, we are responsible for fulfilling
all post-marketing approval commitments in connection with the FDA's approval of the NDA, and upon fulfillment will transfer ownership
of and financial responsibility for the NDA to SUL. Pursuant to potential rights to sell ALPIVAB in the EU, we are also responsible
for regulatory filings and interactions with the European Medicines Agency until marketing approval for ALPIVAB is obtained and
assigned to SUL. In accordance with the SUL Agreement, we and SUL formed a joint steering committee, composed of an equal number
of representatives from each party, to oversee, review and coordinate the conduct and progress of the commercialization of peramivir
in the Territory and any additional development. The parties have entered into the formal dispute resolution process under
the License Agreement to resolve decisions related to the collaboration.
Under the terms of the SUL Agreement, we received an upfront payment
of $33.7 million, have received $7.0 million of milestone payments and may receive an additional $5.0 million milestone payment
related to the successful marketing approval by the EMA for an adult indication in the EU. We are also entitled under the SUL Agreement
to receive tiered royalties at a percentage rate beginning in the mid-teens contingent upon meeting minimum thresholds of net sales,
as well as a low-thirties percentage of the gross profit from government stockpiling purchases made outside the U.S. Specifically,
we receive tiered royalties at a percentage rate in the mid-teens to low-forties on net sales in the U.S. during a Contract Year
(defined as July 1 - June 30) and tiered royalties at a percentage rate in the mid-teens to mid-twenties on net sales in the Territory,
other than in the U.S., during a Calendar Year, each subject to certain downward adjustments for circumstance or events impacting
the overall market opportunity. SUL's royalty payment obligations commence on the date of the SUL Agreement and expire, on a country-by-country
basis, upon the later of (i) the expiration of legal exclusivity in such country and (ii) ten years from the date of the SUL Agreement
(the "Royalty Term"). We developed RAPIVAB under a license from UAB and will owe sublicense payments to them on any future
milestone payments and/or royalties received by us from SUL.
The term of the SUL Agreement shall continue on a country-by-country
basis until the expiration of the last-to-expire Royalty Term in any such country in the Territory. Either party may terminate
the SUL Agreement in its entirety if the other party breaches a payment obligation, otherwise materially breaches the SUL Agreement,
subject to applicable cure periods, or if the other party suffers an insolvency event. We may also terminate the SUL Agreement
if SUL or any of its affiliates seek to challenge the validity of our patents. Termination does not affect a party's rights which
have accrued prior thereto, but there are no stated payments in connection with termination other than payments of obligations
previously accrued. For all terminations exercised by us, the SUL Agreement provides for the termination of any sublicenses granted
by SUL to third parties, and in the case of termination by us for cause, the ceasing of SUL's activities with respect to RAPIVAB,
the discontinued use of all of our intellectual property and the termination of licenses and rights previously granted to SUL.
If requested by us, SUL shall also promptly sell to us all licensed product it then holds in stock, otherwise, SUL may continue
to sell such licensed product for designated periods.
Shionogi & Co., Ltd. (“Shionogi”)
.
On February 28, 2007, we entered into a License, Development and Commercialization Agreement (as amended, supplemented or
otherwise modified, the “Shionogi Agreement”), an exclusive license agreement with Shionogi to develop and commercialize
peramivir in Japan for the treatment of seasonal and potentially life-threatening human influenza. In October 2008, we and Shionogi
amended the Shionogi Agreement to expand the territory covered by the agreement to include Taiwan. Under the terms of the Shionogi
Agreement, Shionogi obtained rights to injectable formulations of peramivir in Japan in exchange for a $14.0 million upfront
payment. The license provided for development milestone payments (up to $21.0 million), which have all been paid, and for
commercial milestone payments (up to $95.0 million) in addition to double-digit (between 10% and 20%) royalty payments on
product sales of peramivir.
In December 2017, we, on behalf of Royalty Sub (defined below), instituted
arbitration proceedings against Shionogi in order to resolve a dispute with Shionogi under the Shionogi Agreement regarding
the achievement of sales milestones and escalating royalties. In the event that we prevail in the arbitration, any amounts
realized in the arbitration or in respect of the milestone payments and escalating royalties that are the subject of the arbitration
would be for the benefit of Royalty Sub and be used by Royalty Sub to service its obligations under the non-recourse PhaRMA Notes
(defined below), except for any amounts realized by us in respect of royalties relating to sales to Japanese governmental entities,
which amounts would be retained by us. The costs associated with the arbitration proceedings are expected to be paid out of the
assets of Royalty Sub in accordance with the terms of the indenture and servicing agreement relating to the PhaRMA Notes, except
to the extent such costs are recovered in connection with any arbitration award in favor of us and Royalty Sub if they prevail
in the arbitration proceedings. Arbitration proceedings, like other legal proceedings, are inherently uncertain. As a result, we
cannot assure you that we will prevail in the arbitration. As any arbitration award in favor of us would accrue primarily to the
benefit of Royalty Sub and the holders of the PhaRMA Notes, and because the costs associated with the arbitration proceedings are
expected to come out of the assets of Royalty Sub if not recovered as part of any arbitration award in favor of us and Royalty
Sub, we do not currently anticipate that these arbitration proceedings will have a material adverse impact on us.
Generally, all payments under the Shionogi Agreement are non-refundable
and non-creditable, but they are subject to audit. Shionogi is responsible for all development, regulatory, and marketing costs
in Japan. The term of the Shionogi Agreement is from February 28, 2007 until terminated. Either party may terminate in the
event of an uncured breach. Shionogi has the right of termination without cause. In the event of termination, all license and rights
granted to Shionogi shall terminate and shall revert back to us. We developed peramivir under a license from the University of
Alabama Birmingham (“UAB”) and have paid sublicense payments to UAB on the upfront payments and will owe sublicense
payments on any future event payments and/or royalties received by us from Shionogi.
Shionogi Royalty Monetization and Non-Recourse Notes Payable
.
On March 9, 2011, we completed a $30.0 million financing transaction to monetize certain future royalty and milestone
payments under the Shionogi Agreement, pursuant to which JPR Royalty Sub LLC (“Royalty Sub”) a wholly-owned subsidiary
of BioCryst, issued the PhaRMA Notes discussed below. We received net proceeds of $22.7 million from this transaction.
As part of the transaction, we entered into a purchase and sale agreement
dated as of March 9, 2011 with Royalty Sub, whereby we transferred to Royalty Sub, among other things, (i) its rights
to receive certain royalty and milestone payments from Shionogi arising under the Shionogi Agreement, and (ii) the right to
receive payments under a Japanese yen/US dollar foreign currency hedge arrangement (as further described below, the “Currency
Hedge Agreement”) put into place by us in connection with the transaction. Royalty payments will be paid by Shionogi in Japanese
yen and milestone payments will be paid in U.S. dollars. Our collaboration with Shionogi was not impacted by this transaction.
On March 9, 2011, Royalty Sub completed a private placement to institutional
investors of $30.0 million in aggregate principal amount of its PhaRMA Senior Secured 14.0% Notes due 2020 (the “PhaRMA Notes”).
The PhaRMA Notes were issued by Royalty Sub under an Indenture, dated as of March 9, 2011 (the “Indenture”), by
and between Royalty Sub and U.S. Bank National Association, as Trustee. Principal and interest on the PhaRMA Notes issued are payable
from, and are secured by, the rights to royalty and milestone payments under the Shionogi Agreement transferred by us to Royalty
Sub and payments, if any, made to Royalty Sub under the Currency Hedge Agreement. The PhaRMA Notes bear interest at 14% per
annum, payable annually in arrears on September 1st of each year (the “Payment Date”). We remain entitled to receive
any royalties and milestone payments related to sales of peramivir by Shionogi following repayment by Royalty Sub of the PhaRMA
Notes.
Royalty Sub’s obligations to pay principal and interest on the
PhaRMA Notes are obligations solely of Royalty Sub and are without recourse to any other person, including the Company, except
to the extent of our pledge of its equity interests in Royalty Sub in support of the PhaRMA Notes. We may, but are not obligated
to, make capital contributions to a capital account that may be used to redeem, or on up to one occasion pay any interest shortfall
on, the PhaRMA Notes.
In September 2014, Royalty Sub was unable to pay the full amount
of interest payable in September 2013 by the next succeeding Payment Date for the PhaRMA Notes. This inability constituted
an event of default under the terms of the Indenture. Accordingly, we have classified the PhaRMA Notes and related accrued interest
as current liabilities on our balance sheet. As a result of the event of default under the PhaRMA Notes, the holders of the PhaRMA
Notes may pursue acceleration of the PhaRMA Notes, may foreclose on the collateral securing the PhaRMA Notes and the equity interest
in Royalty Sub and exercise other remedies available to them under the Indenture in respect of the PhaRMA Notes. In such event,
we may not realize the benefit of future royalty payments that might otherwise accrue to us following repayment of the PhaRMA Notes
and we might otherwise be adversely affected. Due to the non-recourse nature of the PhaRMA Notes, in the event of any potential
acceleration or foreclosure, we believe the primary impact to us would be the loss of future royalty payments from Shionogi and
legal costs associated with retiring the PhaRMA Notes. In addition, we may incur costs associated with liquidating the related
Currency Hedge Agreement, which would no longer be required in the event of foreclosure or if the PhaRMA Notes cease to be outstanding.
As the PhaRMA Notes are the obligation of Royalty Sub, we do not currently expect the event of default on the PhaRMA Notes to have
a significant impact on our future results of operations or cash flows. As of December 31, 2017, the PhaRMA Notes remain in default.
The Indenture does not contain any financial covenants. The Indenture
includes customary representations and warranties of Royalty Sub, affirmative and negative covenants of Royalty Sub, Events of
Default and related remedies, and provisions regarding the duties of the Trustee, indemnification of the Trustee, and other matters
typical for indentures used in structured financings of this type. The PhaRMA Notes are redeemable at the option of Royalty Sub
at any time at a redemption price equal to 100% of the outstanding principal balance of the PhaRMA Notes being redeemed, plus accrued
and unpaid interest through the redemption date on the PhaRMA Notes being redeemed.
Foreign Currency Hedge
.
In connection with the issuance
by Royalty Sub of the PhaRMA Notes, we entered into a Currency Hedge Agreement to hedge certain risks associated with changes in
the value of the Japanese yen relative to the U.S. dollar. Under the Currency Hedge Agreement, we have the right to purchase dollars
and sell yen at a rate of 100 yen per dollar for which we may be required to pay a premium in each year from 2018 through 2020.
A payment of $2.0 million will be required if, on May 18 of the relevant year, the U.S. dollar is worth 100 yen or less,
as determined in accordance with the Currency Hedge Agreement.
The Currency Hedge Agreement does not qualify
for hedge accounting treatment; therefore, mark-to-market adjustments are recognized in our Consolidated Statement of Comprehensive
Loss. Cumulative mark-to-market adjustments resulted in losses of $1.8 million, $1.7 million and $0.6 million for the twelve months
ended December 30, 2017, 2016, and 2015, respectively. In addition, realized currency exchange gains of $1.0 million, $0.8
million and $1.7 million were recognized in 2017, 2016 and 2015, respectively, related to the exercise of a U.S. dollar/Japanese
yen currency option under our foreign currency hedge. We are also required to post collateral in connection with the mark-to-market
adjustments based on defined thresholds. As of December 31, 2017, no collateral was posted under the Currency Hedge Agreement.
We will not be required at any time to post collateral exceeding the maximum premium payments remaining payable under the Currency
Hedge Agreement. The maximum amount of hedge collateral we would be required to post is $5.9 million. We are required to maintain
a foreign currency hedge at 100 yen per dollar under the agreements governing the PhaRMA Notes.
Green Cross
.
In June 2006,
we entered into an agreement with Green Cross to develop and commercialize peramivir in Korea. Under the terms of the agreement,
Green Cross is responsible for all development, regulatory, and commercialization costs in Korea. We received a one-time license
fee of $250,000. The license provides that we will share in profits resulting from the sale of peramivir in Korea, including the
sale of peramivir to the Korean government for stockpiling purposes. Furthermore, Green Cross will pay us a premium over its cost
to supply peramivir for development and any future marketing of peramivir products in Korea. Both parties have the right to terminate
in the event of an uncured material breach. In the event of termination, all rights, data, materials, products and other information
would be transferred to us.
In August 2010, we announced that Green Cross had received marketing
and manufacturing approval from the Korean Food & Drug Administration for i.v. peramivir, under the commercial name PERAMIFLU
®
.
PERAMIFLU is intended to treat patients with influenza A & B viruses, including pandemic H1N1 and avian influenza. Green
Cross received the indication of single dose administration of 300 mg i.v. peramivir.
Other Peramivir Collaborations
.
In addition to our collaborations
with Shionogi and Green Cross, in March 2011 we entered into an arrangement with Neopharm Scientific Limited, granting certain
commercial and distribution rights for peramivir in Israel.
Mundipharma
.
In February 2006, we entered into an exclusive,
royalty bearing right and license agreement with Mundipharma for the development and commercialization of Mundesine, a PNP inhibitor,
for use in oncology (the “Original Agreement”). Under the terms of the Original Agreement, Mundipharma obtained rights
to Mundesine in markets across Europe, Asia, and Australasia in exchange for a $10.0 million up-front payment. In addition,
Mundipharma contributed $10.0 million of the documented out-of-pocket development costs incurred by us in respect of the current
and planned trials as of the effective date of the agreement, and Mundipharma would conduct additional clinical trials at their
own cost up to a maximum of $15.0 million.
On November 11, 2011, we entered into the Amended and Restated
Agreement with Mundipharma (the “Amended and Restated Agreement”). Under the terms of this Amended and Restated Agreement,
Mundipharma obtained worldwide rights to Mundesine in the field of oncology. Mundipharma will control the development and commercialization
of Mundesine and assume all future development and commercialization costs. The Amended and Restated Agreement provides for the
possibility of future event payments totaling $15.0 million for achieving specified regulatory events for certain indications.
In addition, the Amended and Restated Agreement provides that we will receive tiered royalties ranging from mid- to high-single
digit percentages of net product sales in each country where Mundesine is sold by Mundipharma. These royalties are subject to downward
adjustments based on the then-existing patent coverage and/or the availability of generic compounds in each country. Generally,
all payments under the Amended and Restated Agreement are nonrefundable and non-creditable, but they are subject to audit. We licensed
forodesine and other PNP inhibitors from AECOM/IRL and will owe sublicense payments to AECOM/IRL on all milestone payments and
royalties received by us from Mundipharma.
Mundipharma will also have a right of exclusive negotiations with
us for a limited period of time if they initiate negotiations for a specified backup PNP inhibitor. Otherwise, they will be able
to participate in the same negotiations process we enter into with another company for the backup PNP inhibitor. The Amended and
Restated Agreement will continue for the commercial life of the licensed products, but may be terminated by either party following
an uncured material breach by the other party or in the event the pre-existing third party license with AECOM/IRL expires. It may
be terminated by Mundipharma upon 60 days written notice without cause or under certain other conditions as specified in the
Amended and Restated Agreement. If Mundipharma terminates the Amended and Restated Agreement, Mundipharma would no longer have
any rights in Mundesine and the rights would revert back to us; provided, however, that in the event the we determine to subsequently
use the data developed under the Amended and Restated Agreement for development and commercialization of Mundesine in the field
of oncology, then we would have to pay Mundipharma 150% of the cost of such data for such use.
Albert Einstein College of Medicine of Yeshiva University and
Industrial Research, Ltd. (“AECOM” and “IRL” respectively)
.
In June 2000, we licensed a series
of potent inhibitors of PNP from AECOM and IRL, (collectively, the “Licensors”). The lead product candidate from this
collaboration is forodesine. We have obtained worldwide exclusive rights to develop and ultimately distribute it, or any other,
product candidates that might arise from research on these inhibitors. We have the option to expand our license agreement with
the Licensors to include other inventions in the field made by the investigators or employees of the Licensors. We agreed to use
commercially reasonable efforts to develop these drugs. In addition, we have agreed to pay certain milestone payments for each
licensed product (which range in the aggregate from $1.4 million to almost $4.0 million per indication) for future development
of these inhibitors, single digit royalties on net sales of any resulting product made by us, and to share approximately one quarter
of future payments received from other third-party partners, if any. In addition, we have agreed to pay annual license fees, which
can range from $150,000 to $500,000, that are creditable against actual royalties and other payments due to the Licensors. This
agreement may be terminated by us at any time by giving 60 days advance notice or in the event of material uncured breach
by the Licensors.
In May 2010, we amended the license agreement through which we obtained
worldwide exclusive rights to develop and ultimately distribute any product candidates that might arise from research on a series
of PNP inhibitors, including forodesine. Under the terms of the amendment, the Licensors agreed to accept a reduction of one-half
in the percentage of future payments received from third-party sub licensees of the licensed PNP inhibitors that must be paid to
the Licensors. This reduction does not apply to (i) any milestone payments we may receive in the future under our license
agreement with Mundipharma and (ii) royalties received from its sub licensees in connection with the sale of licensed products,
for which the original payment rate will remain in effect. The rate of royalty payments to the Licensors based on net sales of
any resulting product made by us remains unchanged. At our sole option and subject to certain agreed upon conditions, any future
non-royalty payments due to be paid by us to the Licensors under the license agreement may be made either in cash, in shares of
our common stock, or in a combination of cash and shares.
On November 17, 2011, we further amended our agreements with
the Licensors whereby the Licensors agreed to accept a reduction of one-half in the percentage of Net Proceeds (as defined in the
license agreement) received by us under our Amended and Restated Agreement with Mundipharma that will be paid to AECOM/IRL.
On June 19, 2012, we further amended our agreements with the
Licensors whereby the parties clarified the definition of the field with respect to PNP inhibition and the Licensors agreed to
grant an exclusive worldwide license of galidesivir to us for any antiviral use.
The University of Alabama at Birmingham (“UAB”)
.
We currently have agreements with UAB for influenza neuraminidase and complement inhibitors. Under the terms of these agreements,
UAB performed specific research for us in return for research payments and license fees. UAB has granted us certain rights to any
discoveries in these areas resulting from research developed by UAB or jointly developed with us. We have agreed to pay single
digit royalties on sales of any resulting product and to share in future payments received from other third-party partners. We
have completed the research under the UAB agreements. These two agreements have initial 25-year terms, are automatically renewable
for five-year terms throughout the life of the last patent and are terminable by us upon three months’ notice and by UAB
under certain circumstances. Upon termination both parties shall cease using the other parties’ proprietary and confidential
information and materials, the parties shall jointly own joint inventions and UAB shall resume full ownership of all UAB licensed
products. There is currently no activity between us and UAB on these agreements, but when we license this technology, such as in
the case of the Shionogi and Green Cross agreements, or commercialize products related to these programs, we will owe sublicense
fees or royalties on amounts it receives.
Government Contracts
National Institute of Allergy and Infectious Diseases (“NIAID/HHS”)
.
In September 2013, NIAID/HHS contracted with us for the development of galidesivir as a treatment for Marburg, and subsequently,
Ebola virus disease. NIAID/HHS, part of the National Institutes of Health, made an initial award of $5.0 million to us. All options
under this contract have been awarded and the total contract value is $39.5 million. The goals of this contract, including amendments,
are to file IND applications for i.v. and i.m. galidesivir for the treatment of Marburg virus disease and other hemorrhagic fever
viruses, to study galidesivir as a treatment for Ebola virus disease and to conduct a Phase 1 human clinical trial.
U.S. Department of Health and
Human Services (“BARDA/HHS”)
.
On March 31, 2015, we announced that BARDA/HHS awarded us a contract for the
continued development of galidesivir as a potential treatment for diseases caused by RNA pathogens, including filoviruses. This
BARDA/HHS contract has a potential value of $39.1 million if all contract options are exercised. As of December 31, 2017, a total
of $20.6 million has been awarded under exercised options within this contract.
The contracts with NIAID/HHS and BARDA/HHS are cost-plus-fixed-fee
contracts. That is, we are entitled to receive reimbursement for all costs incurred in accordance with the contracts provisions
that are related to the development of peramivir and galidesivir plus a fixed fee, or profit. NIAID/HHS and BARDA/HHS will make
periodic assessments of progress and the continuation of the contract is based on our performance, the timeliness and quality of
deliverables, and other factors. The government has rights under certain contract clauses to terminate these contracts. These contracts
are also terminable by the government at any time for breach or without cause.
Patents and Proprietary Information
Our success will depend in part on our ability to obtain and enforce
patent protection for our products, methods, processes and other proprietary technologies, preserve our trade secrets, and operate
without infringing on the proprietary rights of other parties, both in the United States and in other countries. We own or have
rights to certain proprietary information, proprietary technology, issued and allowed patents and patent applications which relate
to compounds we are developing. We actively seek, when appropriate, protection for our products, proprietary technology and proprietary
information by means of U.S. and foreign patents, trademarks and contractual arrangements. In addition, we rely upon trade
secrets and contractual arrangements to protect certain of our proprietary information, proprietary technology and products.
The patent positions of companies like ours are generally uncertain
and involve complex legal and factual questions. Our ability to maintain and solidify our proprietary position for our technology
will depend on our success in obtaining effective patent claims and enforcing those claims once granted. We do not know whether
any of our patent applications or those patent applications that we license will result in the issuance of any patents. Our issued
patents and those that may issue in the future, or those licensed to us, may be challenged, invalidated, rendered unenforceable
or circumvented, which could limit our ability to stop competitors from marketing related products or the length of term of patent
protection that we may have for our products. In addition, the rights granted under any issued patents may not provide us with
competitive advantages against competitors with similar compounds or technology. Furthermore, our competitors may independently
develop similar technologies or duplicate any technology developed by us in a manner that does not infringe our patents or other
intellectual property. Because of the extensive time required for development, testing and regulatory review of a potential product,
it is possible that, before any of our product candidates or those developed by our partners can be commercialized, any related
patent may expire or remain in force for only a short period following commercialization, thereby reducing any advantage of the
patent.
As of December 31, 2017, we have been issued approximately 16
U.S. patents that expire between 2018 and 2034 and that relate to our HAE program compounds, neuraminidase inhibitor compounds,
BSAV compounds and PNP compounds. We have licensed a number of compounds protected by certain composition of matter patents from
AECOM and IRL, plus additional manufacturing patents, totaling 7 additional U.S. patents that expire between 2020 and 2029. Additionally,
we have approximately 11 Patent Cooperation Treaty or U.S. patent applications pending related to HAE program compounds, neuraminidase
inhibitor compounds, BSAV compounds, PNP compounds and FOP program compounds. Our pending applications may not result in issued
patents, our patents may not cover the products of interest or may not be enforceable in all, or any jurisdictions and our patents
may not provide us with sufficient protection against competitive products or otherwise be commercially viable. After expiration
of composition of matter patents for our products and product candidates, we may rely on data exclusivity, or in some cases, method
of use patents. The enforceability of these patents varies from jurisdiction to jurisdiction and may not be allowed or enforceable
in some territories where we may seek approval. We may not have the funds to continue patent prosecution or to defend all of our
existing patents in our current patent estate and may selectively abandon patents or patent families worldwide or in certain territories.
Our success is also dependent upon the skills, knowledge and experience
of our scientific and technical personnel, none of which is patentable. To help protect our rights, we require all employees, consultants,
advisors and partners to enter into confidentiality agreements, which prohibit the disclosure of confidential information to anyone
outside of BioCryst and, where possible, require disclosure and assignment to us of their ideas, developments, discoveries and
inventions. These agreements may not provide adequate protection for our trade secrets, know-how or other proprietary information
in the event of any unauthorized use or disclosure or the lawful development by others of such information.
Competition
The pharmaceutical and biotechnology industries are intensely competitive.
Many companies, including biotechnology, chemical and pharmaceutical companies, are actively engaged in activities similar to ours,
including research, development, and commercialization of drugs for the treatment of rare medical conditions. Many of these companies
have substantially greater financial and other resources, larger research and development staffs, and more extensive commercial
and manufacturing organizations than we do. In addition, many have considerable experience in preclinical testing, clinical trials
and other regulatory approval procedures. In addition, there are also academic institutions, governmental agencies and other research
organizations who conduct research in areas in which we are working. We expect to encounter significant competition for any of
the pharmaceutical products we plan to develop. Companies that successfully complete clinical trials, obtain required regulatory
approvals and commence commercial marketing and sales of their products may achieve a significant competitive advantage.
Antivirals
:
The pharmaceutical market for products that
prevent or treat influenza is very competitive. Key competitive factors for RAPIVAB (peramivir injection) include, among others,
efficacy, ease of use, safety, price and cost-effectiveness, storage and handling requirements and reimbursement. A number of neuraminidase
inhibitors are currently available in the U.S. and/or other counties, including Japan, for the prevention or treatment of
influenza, including seasonal flu vaccines and F. Hoffmann-La Roche Ltd.’s (“Roche”) TAMIFLU
®
(oseltamivir), generic oseltamivir, GlaxoSmithKline plc’s (“GSK”) RELENZA
®
and Daiichi Sankyo
Co., Ltd.’s INAVIR
®
. In addition, FUJIFILM Corporation’s favipiravir, a polymerase inhibitor, is approved
in Japan. Roche’s neuraminidase inhibitor is also approved for prophylaxis of influenza.
In addition to these companies with neuraminidase inhibitors, there
are other companies working to develop additional antiviral drugs to be used against various strains of influenza. Currently, there
are a number of other companies developing potential new influenza therapies. Various government entities throughout the world
are offering incentives, grants and contracts to encourage additional investment into preventative and therapeutic agents against
influenza, which may have the effect of further increasing the number of our competitors and/or providing advantages to certain
competitors.
Galidesivir is a product candidate in our
BSAV research program and is currently being developed under contracts with NIAID/HHS and BARDA/HHS. The objective of our BSAV
program is to develop galidesivir as a broad-spectrum therapeutic for viruses that pose a threat to national health and security.
The U.S. Government is investing in a number of programs intended to address gaps in its medical countermeasure plan. Therapeutic
products with potentially promising data to treat Ebola include FUJIFILM Corporation’s favipiravir (polymerase inhibitor)
and Mapp Biopharmaceutical, Inc.’s ZMapp (antibody-based). ZMapp has been used in Ebola patients. Gilead Sciences, Inc announced
in October 2015 that it had provided the investigational compound, GS-5734, to two patients with Ebola for compassionate use.
HAE
:
HAE is an autosomal dominant disease characterized
by painful, unpredictable, recurrent attacks of inflammation affecting the hands, feet, face, abdomen, urogenital tract, and the
larynx. The inflammation can be disfiguring, debilitating, or in the case of laryngeal attacks, life-threatening. Prevalence for
HAE is uncertain but is estimated to be approximately 1 case per 50,000 persons without known differences among ethnic groups and
is caused by deficient (Type I) or dysfunctional (Type II) levels of C1-Inhibitor (“C1-INH”), a naturally occurring
molecule that is known to inhibit kallikrein, bradykinin, and other serine proteases in the blood. If left untreated, HAE can result
in a mortality rate as high as 40% primarily due to upper airway obstruction. There are a number of licensed therapies for HAE,
including the following:
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C1-INH therapy is available as an acute therapy (Berinert
®
) and as a prophylactic therapy (Haegarda
®
and Cinryze
®
). These therapies are available subcutaneously and intravenously and work by replacing the missing or malfunctioning C1-INH protein in patients. Recominant C1-INH (Ruconest
®
) is also available as an acute therapy.
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Kallikrein Inhibition
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Kalbitor
®
(ecallantide) is a specific recombinant plasma kallikrein inhibitor that halts the production of bradykinin and can be dosed subcutaneously in an inpatient setting.
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Bradykinin receptor antagonist
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Firazyr
®
(icatibant) is a competitive antagonist of the bradykinin B2 receptor. Firazyr is approved for the treatment of acute attacks and is administered by subcutaneous administration.
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Other medications - Prophylactic administration of synthetic attenuated androgens (generically available as danazol or stanozolol) has been utilized to reduce the frequency or severity of attacks. However, long-term use of danazol or stanozolol may result in virilization and arterial hypertension. Six-month liver function tests, annual lipid profiles, and biennial hepatic ultrasound are recommended because these medications increase production of C1-INH in the liver.
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In addition
to BCX7353 there are a number of other HAE therapies in clinical development. These include SHP616, a prophylactic plasma derived
C1-INH delivered by subcutaneous injection developed by Shire Plc (“Shire”), with positive top line Phase 3 pivotal
data presented in September 2017; lanadelumab (SHP643, DX2930), a monoclonal antibody administered by subcutaneous injection for
prophylactic treatment of HAE developed by Shire, which has completed Phase 3 trials and has been submitted to the FDA for review;
Ruconest, developed by Pharming Group N.A. for routine prophylaxis of HAE, for which the FDA has accepted review of a Supplemental
Biologics License Application (“sBLA”) with an anticipated action date of September 21, 2018; two oral kallikrein inhibitors
being developed by Kalvista Pharmaceuticals, Inc. that have entered Phase 1 trials; and oral kallikrein inhibitors in preclinical
development by Attune Pharmaceuticals, Inc. and Verseon Corporation. CSL’s CSL312, an anti factor mAb (monoclonal antibody),
completed Phase 1 trials in November 2017 and is expected to start Phase 2 trials in 2018 in HAE patients. Ionis’s IONISPKKrx,
a RNA-targeted antisense drug to inhibit prekallikrein for prophylactic treatment of HAE, is currently in in Phase 1 trials with
an anticipated completion date in June 2018. Adverum Biotechnologies, Inc.’s ADVM-053, an AAV (adeno-associated virus)
expressing
C1-esterase inhibitor, is expected to file an IND in the second half of 2018. Additionally, Arrowhead Pharmaceuticals, Inc. is
in early development of ARO-F12, an RNAi (RNA interference) in early development for the treatment of HAE and thromboembolic disorders.
FOP:
FOP is a rare, severely
disabling condition characterized by the irregular formation of bone outside the normal skeleton, also known as heterotopic ossification
(“HO”). HO can occur in muscles, tendons and soft tissue. FOP patients progressively become bound by this irregular ossification,
with restricted movement and fused joints, resulting in deformities and premature mortality. There are currently no approved treatments
for FOP.
Other FOP therapies in clinical development
include Clementia Pharmaceuticals Inc.’s palovarotene, an oral, retinoic acid gamma receptor agonist, currently in Phase
3 trials (initiated December 2017); Regeneron Pharmaceuticals Inc.’s REGN2477, an i.v. anti-activin antibody in Phase 2 trials
(initiated November 2017); and several companies with programs in pre-clinical development, including Blueprint Medicines Corporation,
with its oral ALK2 kinase inhibitor, La Jolla Pharmaceutical Company, with three compounds (two ALK2 inhibitors and LJPC-6417,
a bone morphogenetic protein receptor type I antagonist), and Daiichi-Sankyo Co., Ltd, which is collaborating with Saitama Medical
University on an ALK2 inhibitor funded by Japan Agency for Medical Research.
In order to compete successfully in these and other therapeutic areas,
we must develop proprietary positions in patented drugs for therapeutic markets that have not been satisfactorily addressed by
conventional research strategies and, in the process, expand our expertise in structure-based drug design. Our product candidates,
even if successfully tested and developed, may not be adopted by physicians over other products and may not offer economically
feasible alternatives to other therapies.
Research and Development
We initiated our research and development
activities in 1986. We have assembled a scientific research staff with expertise in a broad base of advanced research technologies
including protein biochemistry, X-ray crystallography, chemistry and pharmacology. Our research facilities, located in Birmingham,
Alabama, include protein biochemistry and organic synthesis laboratories, testing facilities, X-ray crystallography, computer and
graphics equipment and facilities to make product candidates on a small scale for early stage clinical trials. During the years
ended December 31, 2017, 2016 and 2015, our research and development expenses were $67.0 million, $61.0 million, and $72.8 million
respectively.
Compliance
We conduct our business in an ethical, fair, honest and lawful manner.
We act responsibly, respectfully and with integrity in our relationships with patients, health care professionals, collaborators,
governments, regulatory entities, stockholders, suppliers and vendors.
In order to ensure compliance with applicable laws and regulations,
our Chief Financial Officer, General Counsel and Vice President of Human Resources oversee compliance training, education, auditing
and monitoring; enforce disciplinary guidelines for any infractions of our corporate polices; implement new policies and procedures;
respond to any detected issues; and undertake corrective action procedures. Our controls address compliance with laws and regulations
that govern public pharmaceutical companies including, but not limited to, the following: federal and state law, such as the Sarbanes-Oxley
Act of 2002 and the U.S. Foreign Corrupt Practices Act of 1977; NASDAQ listing requirements; the regulations of the Financial Industry
Regulatory Authority; the Securities and Exchange Commission (“SEC”); the FDA; and the United States Department of
Health and Human Services. Our standard operating procedures are designed to provide a framework for corporate governance in accordance
with ethical standards and best legal practices.
Government Regulation
The FDA regulates the pharmaceutical and biotechnology industries
in the U.S., and our product candidates are subject to extensive and rigorous domestic government regulations prior to commercialization.
The FDA regulates, among other things, the development, testing, manufacture, safety, efficacy, record-keeping, labeling, storage,
approval, advertising, promotion, sale and distribution of pharmaceutical products. In foreign countries, our products are also
subject to extensive regulation by foreign governments. These government regulations will be a significant factor in the production
and marketing of any pharmaceutical products that we develop. Failure to comply with applicable FDA and other regulatory requirements
at any stage during the regulatory process may subject us to sanctions, including:
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delays;
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warning letters;
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fines;
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product recalls or seizures;
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injunctions;
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penalties;
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refusal of the FDA to review pending market approval applications or supplements to approval applications;
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total or partial suspension of production;
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civil penalties;
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withdrawals of previously approved marketing applications; and
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criminal prosecutions.
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The regulatory review and approval process is lengthy, expensive and
uncertain. Before obtaining regulatory approvals for the commercial sale of any products, we or our partners must demonstrate that
our product candidates are safe and effective for use in humans. The approval process takes many years, substantial expenses may
be incurred and significant time may be devoted to clinical development.
Before testing potential product candidates in humans, we carry out
laboratory and animal studies to determine safety and biological activity. After completing preclinical trials, we must file an
IND, including a proposal to begin clinical trials, with the FDA. Thirty days after filing an IND, a Phase 1 human clinical trial
can start, unless the FDA places a hold on the trial.
Clinical trials to support a NDA are typically conducted in three
sequential phases, but the phases may overlap.
Phase 1—During Phase 1, the initial introduction of the drug
into healthy volunteers, the drug is tested to assess metabolism, pharmacokinetics and pharmacological actions and safety, including
side effects associated with increasing doses.
Phase 2—Phase 2 usually involves trials in a limited patient
population to: (1) assess the efficacy of the drug in specific, targeted indications; (2) assess dosage tolerance and
optimal dosage; and (3) identify possible adverse effects and safety risks.
Phase 3 (pivotal)—If a compound is found to be potentially effective
and to have an acceptable safety profile in Phase 2 evaluations, Phase 3 clinical trials, also called pivotal studies, major studies
or advanced clinical trials, are undertaken to further demonstrate clinical efficacy and to further test for safety within an expanded
patient population at geographically dispersed clinical trial sites. In general, the FDA requires that at least two adequate and
well-controlled Phase 3 clinical trials be conducted.
Initiation and completion of the clinical trial phases are dependent
on several factors including things that are beyond our control. For example, the clinical trials cannot begin at a particular
site until that site receives approval from its Institutional Review Board (“IRB”), which reviews the protocol and
related documents. This process can take from several weeks to several months. In addition, clinical trials are dependent on patient
enrollment, but the rate at which patients enroll in the study depends on:
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willingness of investigators to participate in a study;
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ability of clinical sites to obtain approval from their IRB;
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the availability of the required number of eligible subjects to be enrolled in a given trial;
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the availability of existing or other experimental drugs for the disease we intend to treat;
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the willingness of patients to participate; and
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the patients meeting the eligibility criteria.
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Delays in planned patient enrollment may result in increased expense
and longer development timelines.
After successful completion of the required clinical testing, generally
an NDA is submitted. Upon receipt of the NDA, the FDA will review the application for completeness. Within 60 days, the FDA will
determine if the application is sufficiently complete to warrant full review and will consider the application “filed”
at that time. Also upon receipt of the application, the FDA will assign a review priority to the application. Priority review applications
are usually reviewed within 6 months after the NDA is “filed”; standard review applications are usually reviewed within
10 months after the NDA is “filed”. The FDA will usually refer NDAs for new molecular entities to an appropriate advisory
committee for review and evaluation in regards to providing a recommendation as to whether the application should be approved.
The FDA is not bound to follow the recommendation of an advisory committee.
Following the review of the application,
which may include requests for additional information from the sponsor and results from inspections of manufacturing and clinical
sites, the FDA will issue an “action letter” on the application. The action letter will either be an “approval
letter,” in which case the product may be lawfully marketed in the United States, or a “complete response letter.”
A complete response letter will state that the FDA cannot approve the NDA in its present form and, usually, will describe all of
the specific deficiencies that the FDA has identified in the application. The complete response letter, when possible, will include
the FDA’s recommended actions to place the application in a condition for approval. Deficiencies can be minor (e.g., labeling
changes) or major (e.g., requiring additional clinical trials). A complete response letter may also be issued before the FDA conducts
the required facility inspection and/or reviews labeling, leaving the possibility that additional deficiencies in the original
NDA could be subsequently cited. An applicant receiving a complete response letter is permitted to resubmit the NDA addressing
the identified deficiencies (in which case a new two or six-month review cycle will begin), or withdraw the NDA. The FDA may consider
a failure to take action within one year of a complete response letter to be a request to withdraw, unless the applicant has requested
an extension of time in which to resubmit. If the FDA approves an NDA, the marketing of the product will be limited to the particular
disease states and conditions of use that are described in the product label.
We and all of our contract manufacturers are also required to comply
with the applicable FDA current Good Manufacturing Practice, or cGMP, regulations during clinical development and to ensure that
the product can be consistently manufactured to meet the specifications submitted in an NDA. The cGMP regulations include requirements
relating to product quality as well as the corresponding maintenance of records and documentation. Manufacturing facilities must
be approved by the FDA before they can be used to manufacture our products. Based on an inspection, the FDA determines whether
manufacturing facilities are in compliance with applicable regulations. Manufacturing facilities in non-United States countries
that are utilized to manufacture drugs for distribution into the United States are also subject to inspection by the FDA. Additionally,
failure to comply with local regulatory requirements could affect production and availability of product in relevant markets.
Human Resources
As of January 31, 2018, we had approximately
85 employees, of whom approximately 60 were engaged in the research and development function of our operations. Our research
and development staff, approximately 25 of whom hold Ph.D. or M.D. degrees, have diversified experience in biochemistry, pharmacology,
X-ray crystallography, synthetic organic chemistry, computational chemistry, medicinal chemistry, clinical development and regulatory
affairs.
Our employees are not represented by any collective bargaining agreements,
and we have never experienced a work stoppage. Employees are required to execute confidentiality and assignment of intellectual
property agreements. We consider our relations with our employees to be satisfactory.
Available Information
Our website address is www.biocryst.com. We make available, free of
charge, at our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K,
and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably
practicable after we electronically file such material with, or furnish it to, the SEC. We also make available at our website copies
of our audit committee charter, compensation committee charter, corporate governance and nominating committee charter and our code
of business conduct, which applies to all our employees as well as the members of our Board of Directors. Any amendment to, or
waiver from, our code of business conduct will be posted on our website.
Financial Information
For information related to our revenues, profits, net loss and total
assets, in addition to other financial information, please refer to the Financial Statements and Notes to Financial Statements
contained in this Annual Report. Financial information about revenues derived from foreign countries is included in Note 1
to the Financial Statements contained in this Annual Report.
An investment in our stock involves risks. You should carefully
read this entire report and consider the following uncertainties and risks, which may adversely affect our business, financial
condition or results of operations, along with all of the other information included in our other filings with the Securities and
Exchange Commission, before deciding to buy our common stock.
Risks Relating to the Mergers
Completion of the proposed combination
with Idera is subject to conditions and if these conditions are not satisfied or waived, the Mergers will not be completed.
On January 21, 2018, we announced that
we had entered into the Merger Agreement with Idera, Holdco, Merger Sub A and Merger Sub B, pursuant to which (i) Merger Sub
A will be merged with and into Idera, with Idera surviving as a wholly-owned subsidiary of Holdco, and (ii) Merger Sub B will be
merged with and into BioCryst, with BioCryst surviving as a wholly-owned subsidiary of Holdco. The consummation of the Mergers
is subject to customary closing conditions, including (i) the adoption of the Merger Agreement by the affirmative vote of
the holders of a majority of all outstanding shares of our capital stock entitled to vote thereon, (ii) the adoption of the
Merger Agreement by the affirmative vote of the holders of a majority of all outstanding shares of Idera common stock entitled
to vote thereon, (iii) the absence of any adverse law or order promulgated, entered, enforced, enacted or issued by any governmental
entity that prohibits, restrains or makes illegal the consummation of the Mergers, (iv) the shares of Holdco common stock
to be issued in the Mergers being approved for listing on the NASDAQ Global Select Market, (v) the expiration or termination
of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”) and other material
government approvals, (vi) the SEC having declared effective the Form S-4 Registration Statement of Holdco that will
contain the joint proxy statement/prospectus of the parties in connection with the Mergers, (vii) subject to certain materiality
exceptions, the accuracy of certain representations and warranties of each of Idera and BioCryst contained in the Merger Agreement
and the compliance by each party with the covenants contained in the Merger Agreement, (viii) the receipt of certain opinions
from legal counsel regarding the intended tax treatment of the Mergers and (ix) the absence of a material adverse effect with
respect to each of Idera and BioCryst. On February 15, 2018, the Federal Trade Commission notified us that our request for early
termination of the waiting period under the HSR Act had been granted.
The failure to satisfy all of the required
conditions could delay the completion of the Mergers by a significant period of time or prevent it from occurring. Any delay in
completing the Mergers could cause us to not realize some or all of the benefits that we expect to achieve if the Mergers are successfully
completed within the expected timeframe.
If we are unable to complete the proposed
Mergers, we may have incurred substantial expense and diverted significant management time and resources from our ongoing business.
In addition, if the Merger Agreement is terminated under certain circumstances specified in the Merger Agreement, we may be required
to pay Idera a termination fee of $25 million or a fixed expense reimbursement amount of $6 million. There can be no assurance
that the conditions to closing of the Mergers will be satisfied or waived or that the Mergers will be completed.
Combining Idera and BioCryst may be
more difficult, costly or time consuming than expected and the anticipated benefits and cost savings of the proposed Mergers may
not be realized.
We are operating and, until the completion
of the Mergers, will continue to operate independently of Idera. The success of the Mergers, including anticipated benefits and
cost savings, will depend, in part, on our ability to successfully combine and integrate the businesses. It is possible that the
pendency of the Mergers and/or the integration process could result in the loss of key employees, higher than expected costs, diversion
of management attention, the disruption of our ongoing businesses or inconsistencies in standards, controls, procedures and policies
that adversely affect the combined company’s ability to maintain relationships with patients, doctors, vendors and employees
or to achieve the anticipated benefits and cost savings of the Mergers.
We will incur transaction fees, including
legal, regulatory and other costs associated with closing the transaction, as well as expenses relating to formulating and implementing
integration plans, including facilities and systems consolidation costs and employment-related costs. We continue to assess the
magnitude of these costs, and additional unanticipated costs may be incurred in the Mergers and the integration of the two companies’
businesses. While we expect that the elimination of duplicative costs as well as the realization of other efficiencies related
to the integration of the businesses should allow us to offset integration-related costs over time, this net benefit may not be
achieved in the near term, at the levels anticipated, or at all. As part of the integration process, we may also attempt to divest
certain assets of the combined company, which may not be possible on favorable terms, or at all, or if successful, may change the
profile of the combined company. If we experience difficulties with the integration process, the anticipated benefits of the Mergers
may not be realized fully or at all, or may take longer to realize than anticipated.
Risks Relating to Our Business
We have incurred losses since our inception, expect to continue to incur
such losses, and may never be profitable.
Since our inception, we have not achieved sustained profitability.
We expect to incur additional losses for the foreseeable future, and our losses could increase as our research and development
efforts progress. We expect that such losses will fluctuate from quarter to quarter and losses and fluctuations may be substantial.
To become profitable, we, or our collaborative partners, must successfully
manufacture and develop product candidates, receive regulatory approval, and successfully commercialize and/or enter into profitable
agreements with other parties. It could be several years, if ever, before we receive significant revenue from any current or future
license agreements or revenues directly from product sales.
Because of the numerous risks and uncertainties associated with developing
our product candidates and their potential for commercialization, we are unable to predict the extent of any future losses. Even
if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. If we are
unable to achieve and sustain profitability, the market value of our common stock will likely decline.
Our success depends upon our ability to advance our products through
the various stages of development, especially through the clinical trial process.
To receive the regulatory approvals necessary for the sale of our
product candidates, we or our partners must demonstrate through preclinical studies and clinical trials that each product candidate
is safe and effective. The development process and related regulatory process are complex and uncertain. Because of the cost and
duration of clinical trials, we may decide to discontinue development of product candidates that are unlikely to show good results
in the clinical trials, unlikely to help advance a product to the point of a meaningful collaboration, or unlikely to have reasonable
commercial potential. We may suffer significant setbacks in pivotal pre-clinical studies and clinical trials (e.g. galidesivir,
BCX7353, other kallikrein inhibitors, our ALK2 inhibitors and our other rare disease product candidates), even after earlier clinical
trials show promising results. The development of our product candidates, including our clinical trials, may not be adequately
designed or executed, which could affect the potential outcome and analysis of study results. Any of our product candidates may
produce undesirable side effects in humans. The pre-clinical and clinical data from our product candidates could cause us or regulatory
authorities to interrupt, delay, modify or halt preclinical or clinical trials of a product candidate. Undesirable or inconclusive
data or side effects in humans could also result in the FDA or foreign regulatory authorities refusing to approve the product candidate
for any targeted indications. In addition, the FDA or other regulatory agencies may determine that study data from our product
candidates necessitates additional studies or study designs which differ from our planned development strategy, and regulatory
agencies may also require patient monitoring and testing or may implement restrictions or other conditions on our development activities,
any of which could materially impact the cost and timing of our planned development strategy. We, our partners, the FDA or foreign
regulatory authorities may suspend or terminate clinical trials at any time if we or they believe the trial participants face unacceptable
health risks. Clinical trials may fail to demonstrate that our product candidates are safe or effective and have acceptable commercial
viability. Regulatory authorities may interrupt, delay or halt clinical trials for a product candidate for any number of reasons.
Our ability to successfully complete clinical trials is dependent
upon many factors, including but not limited to:
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our ability to find suitable clinical sites and investigators to enroll patients;
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the ability to maintain contact with patients to provide complete data after treatment;
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our product candidates may not prove to be either safe or effective;
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clinical protocols or study procedures may not be adequately designed or followed by the investigators;
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formulation improvements may not work as expected, which could negatively impact commercial demand for our product candidates;
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manufacturing or quality control problems could affect the supply of product candidates for our trials; and
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delays or changes in our planned development strategy, the regulations or guidelines, or other unexpected conditions or requirements of government agencies.
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Clinical trials are lengthy and expensive. We or our partners incur
substantial expense for, and devote significant time to, preclinical testing and clinical trials, yet we cannot be certain that
the tests and trials will ever result in the commercial sale of a product. For example, clinical trials require adequate supplies
of drug and sufficient patient enrollment. Lack of adequate drug supply or delays in patient enrollment, including for APeX-2,
APeX-S and ZENITH-1, can result in increased costs and longer development times. Even if we or our partners successfully complete
clinical trials for our product candidates, we or our partners might not file the required regulatory submissions in a timely manner
and may not receive regulatory approval for the product candidates.
We focus on rare diseases, which may create additional risks and challenges.
Because we focus on developing drugs as treatments for rare diseases,
we may seek orphan drug, breakthrough therapy or fast track designations for our product candidates in the United States or the
equivalent designations elsewhere in the world. Often, regulatory agencies have broad discretion in determining whether or not
to grant such designations. We cannot guarantee that we will be able to receive orphan drug status from the FDA or equivalent regulatory
designations elsewhere. We also cannot guarantee that we will obtain breakthrough therapy or fast track designation, which may
provide certain potential benefits such as more frequent meetings with the FDA to discuss the development plan, intensive guidance
on an efficient drug development program, and potential eligibility for rolling review or priority review. Even if we are successful
in obtaining any such designation by the FDA or other regulatory agency for our product candidates, such designations may not lead
to faster development or regulatory review or approval, and it does not increase the likelihood that our product candidates will
receive marketing approval. We may not be able to obtain or maintain such designations for our product candidates, and our competitors
may obtain these designations for their product candidates, which could impact our ability to develop and commercialize our product
candidates or compete with such competitors, which may adversely impact our business, financial condition or results of operations.
Although we have received Sakigake designation for BCX7353 in Japan,
we may not experience a faster development, review or approval process compared to the conventional process.
Our clinical trials may not adequately show that our product candidates
are safe or effective.
Progression of our product candidates through the clinical development
process is dependent upon our trials indicating our product candidates have adequate safety and efficacy in the patients being
treated by achieving pre-determined safety and efficacy endpoints according to the clinical trial protocols. Failure to achieve
any of these endpoints in any of our programs, including BCX7353, galidesivir and our other rare disease product candidates, could
result in delays in our trials or require the performance of additional unplanned trials. This could result in delays in the development
of our product candidates and could result in significant unexpected costs or the termination of programs.
If our development collaborations with third parties, such as our development
partners and contract research organizations, fail, the development of our product candidates will be delayed or stopped.
We rely heavily upon third parties for many important stages of our
product candidate development, including but not limited to:
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discovery of compounds that cause or enable biological reactions necessary for the progression of the disease or disorder, called enzyme targets;
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licensing or designing of enzyme inhibitors for development as product candidates;
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execution of certain preclinical studies and late-stage development for our compounds and product candidates;
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management of our clinical trials, including medical monitoring and data management;
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execution of additional toxicology studies that may be required to obtain approval for our product candidates;
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formulation improvement strategies and methods; and
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manufacturing the starting materials and drug substance required to formulate our products and the product candidates to be used in our clinical trials, toxicology studies and any potential commercial product.
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Our failure to engage in successful collaborations at any one of these
stages would greatly impact our business. If we do not license enzyme targets or inhibitors from academic institutions or from
other biotechnology companies on acceptable terms, our drug development efforts would suffer. Similarly, if the contract research
organizations that conduct our initial or late-stage clinical trials, conduct our toxicology studies, manufacture our starting
materials, drug substance and product candidates or manage our regulatory function breached their obligations to us or perform
their services inconsistent with industry standards and not in accordance with the required regulations, this would delay or prevent
both the development of our product candidates and the availability of any potential commercial product.
If we lose our relationship with any one or more of these parties,
we could experience a significant delay in both identifying another comparable provider and then contracting for its services.
We may be unable to retain an alternative provider on reasonable terms, if at all. Even if we locate an alternative provider, it
is likely that this provider may need additional time to respond to our needs and may not provide the same type or level of service
as the original provider. In addition, any provider that we retain will be subject to applicable FDA current Good Laboratory Practices
(“cGLP”), current Good Manufacturing Practices (“cGMP”) and current Good Clinical Practices (“cGCP”),
and comparable foreign standards. We do not have control over compliance with these regulations by these providers. Consequently,
if these practices and standards are not adhered to by these providers, the development and commercialization of our product candidates
could be delayed. If any of the foregoing risks are realized, our business, financial condition and results of operations could
be materially adversely affected.
Because we have limited manufacturing experience, we depend on third-party
manufacturers to manufacture our product, product candidates and the materials for our product candidates. Often, especially early
in the development and commercialization process, we have only one source for manufacturing. If we cannot rely on existing third-party
manufacturers, we will be required to incur significant costs and potential delays in finding new third-party manufacturers.
We have limited manufacturing experience and only a small scale manufacturing
facility. We currently rely upon a very limited number of third-party manufacturers to manufacture the materials required for our
product, product candidates and most of the preclinical and clinical quantities of our product candidates. We depend on these third-party
manufacturers to perform their obligations in a timely manner and in accordance with applicable governmental regulations. Our third-party
manufacturers, which may be the only manufacturer we have engaged for a particular product, may encounter difficulties with meeting
our requirements, including but not limited to problems involving:
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inconsistent production yields;
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product liability claims or recalls of commercial product;
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difficulties in scaling production to commercial and validation sizes;
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interruption of the delivery of materials required for the manufacturing process;
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scheduling of plant time with other vendors or unexpected equipment failure;
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potential catastrophes that could strike their facilities or have an effect on infrastructure;
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potential impurities in our drug substance or products that could affect availability of product for our clinical trials or future commercialization;
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poor quality control and assurance or inadequate process controls; and
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lack of compliance or cooperation with regulations and specifications or requests set forth by the FDA or other foreign regulatory agencies, particularly associated with peramivir, BCX7353, galidesivir and our early stage compounds.
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These contract manufacturers may not be able to manufacture the materials
required for our product candidates at a cost or in quantities necessary to make them commercially viable. We also have no control
over whether third-party manufacturers breach their agreements with us or whether they may terminate or decline to renew agreements
with us. To date, our third-party manufacturers have met our manufacturing requirements, but they may not continue to do so. Furthermore,
changes in the manufacturing process or procedure, including a change in the location where the drug is manufactured or a change
of a third-party manufacturer, may require prior review and approval in accordance with the FDA’s cGMP and comparable foreign
requirements. This review may be costly and time-consuming and could delay or prevent the launch of a product. The FDA or similar
foreign regulatory agencies may at any time implement new standards, or change their interpretation and enforcement of existing
standards for manufacture, packaging or testing of products. If we or our contract manufacturers are unable to comply, we or they
may be subject to regulatory action, civil actions or penalties any of which could be costly to the Company and could result in
a delay or shortage of product.
If we are unable to maintain current manufacturing or other contract
relationships, or enter into new agreements with additional manufacturers on commercially reasonable terms, or if there is poor
manufacturing performance or failure to comply with any regulatory agency on the part of any of our third-party manufacturers,
we may not be able to complete development of, seek timely approval of, or market, our product candidates.
Our raw materials, drug substances, and product candidates are manufactured
by a limited group of suppliers, including some at a single facility. If any of these suppliers were unable to produce these items,
this could significantly impact our supply of product candidate material for further preclinical testing and clinical trials.
We face intense competition, and if we are unable to compete effectively,
the demand for our products, if any, may be reduced.
The biotechnology and pharmaceutical industries are highly competitive
and subject to rapid and substantial technological change. There are many companies seeking to develop products for the same indications
that we currently target. Our competitors in the United States and elsewhere are numerous and include, among others, major multinational
pharmaceutical and chemical companies and specialized biotechnology firms. Most of these competitors have greater resources than
we do, including greater financial resources, larger research and development staffs and more experienced marketing and manufacturing
organizations. In addition, most of our competitors have greater experience than we do in conducting clinical trials and obtaining
FDA and other regulatory approvals. Accordingly, our competitors may succeed in obtaining FDA or other regulatory approvals of
product candidates more rapidly than we do. Companies that complete clinical trials, obtain required regulatory approvals, and
commence commercial sale of their drugs before we do may achieve a significant competitive advantage, including patent and FDA
exclusivity rights that would delay our ability to market products. We face, and will continue to face, competition in the licensing
of potential product candidates for desirable disease targets, licensing of desirable product candidates, and development and marketing
of our product candidates from academic institutions, government agencies, research institutions and biotechnology and pharmaceutical
companies. Competition may also arise from, among other things:
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other drug development technologies;
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methods of preventing or reducing the incidence of disease, including vaccines; and
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new small molecule or other classes of therapeutic agents.
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Developments by others may render our product candidates or technologies
obsolete or noncompetitive.
We are performing research on or developing products for the treatment
of several rare disorders, including HAE and FOP, as well as developing broad spectrum antivirals for use as medical countermeasures.
We expect to encounter significant competition for any of the pharmaceutical products we are developing and plan to develop. Companies
that complete clinical trials, obtain required funding or government support, obtain required regulatory approvals and commence
commercial sales or stockpiling orders of their products before their competitors may achieve a significant competitive advantage.
Such is the case with the current neuraminidase inhibitors marketed by GSK and Roche for influenza; CINRYZE
®
, KALBITOR
®
and FIRAZYR
®
, marketed by Shire for HAE; BERINERT
®
and HAEGARDA
®
marketed by CSL for
HAE; and RUCONEST
®
marketed by Pharming for HAE.
Further, several pharmaceutical and biotechnology
firms have announced efforts in HAE and in other therapeutic areas where we have discovery and development efforts ongoing. Notably,
prophylactic treatment for HAE is becoming increasingly competitive with the recent approval of CSL’s HAEGARDA, Shire’s
positive Phase 3 data for the monoclonal antibody, lanadelumab, and Pharming’s completion of a Phase 2 HAE prophylaxis trial
and filing of an sBLA for RUCONEST. Additionally, Kalvista Pharmaceuticals, Inc. (KVD818) and Attune Pharmaceuticals, Inc. (ATN-249)
have oral candidates for HAE prophylaxis in Phase 1 development. Therapeutic products with potentially promising data to treat
Ebola include Mapp Biopharmaceutical, Inc.’s ZMapp (antibody-based) and Gilead Sciences, Inc.’s product currently under
development (small molecule), both of which have been used in Ebola infected patients. Shionogi also recently announced positive
Phase 3 data for S033188, an oral treatment for influenza. For FOP, Clementia Pharmaceuticals Inc.’s palovarotene, an oral,
retinoic acid gamma receptor agonist, currently in Phase 3, and Regeneron Pharmaceuticals Inc.’s REGN2477, an i.v. anti-activin
antibody in Phase 2, are the most advanced development programs in the space. If one or more of our competitors’ products
or programs are successful, the market for our products may be reduced or eliminated.
Compared to us, many of our competitors and potential competitors
have substantially greater:
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capital resources;
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research and development resources, including personnel and technology;
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regulatory experience;
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preclinical study and clinical testing experience;
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manufacturing and marketing experience; and
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production facilities.
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Any of these competitive factors could impede our funding efforts,
render technology and product candidates noncompetitive or eliminate or reduce demand for our product candidates.
We face risks related to our government-funded programs; if BARDA/HHS
or NIAID/HHS were to eliminate, reduce or delay funding from our contracts, this would have a significant negative impact on the
programs associated with such funding and could have a significant negative impact on our revenues and cash flows.
Our projections of revenues and incoming cash flows are substantially
dependent upon BARDA/HHS and NIAID/HHS reimbursement for the costs related to our galidesivir program. If BARDA/HHS or NIAID/HHS
were to eliminate, reduce or delay the funding for these programs or disallow some of our incurred costs, we would have to obtain
additional funding for continued development or regulatory registration for these product candidates or significantly reduce or
stop the development effort.
In contracting with BARDA/HHS and NIAID/HHS, we are subject to various
U.S. Government contract requirements, including general clauses for a cost-reimbursement research and development contract, which
may limit our reimbursement or if we are found to be in violation could result in contract termination. If the U.S. Government
terminates any of its contracts with us for its convenience, or if we default by failing to perform in accordance with the contract
schedule and terms, significant negative impact on our cash flows and operations could result.
Our government contracts with BARDA/HHS and NIAID/HHS have special contracting
requirements, which create additional risks of reduction or loss of funding.
We have completed work under a contract with BARDA/HHS for the development
of our neuraminidase inhibitor, RAPIVAB. We also have entered into contracts with BARDA/HHS and NIAID/HHS for the development of
galidesivir as a treatment for diseases caused by RNA pathogens, including Marburg virus disease and Ebola virus disease. In contracting
with these government agencies, we are subject to various U.S. Government contract requirements, including general clauses for
a cost-reimbursement research and development contract, which may limit our reimbursement or, if we are found to be in violation,
could result in contract termination.
U.S. Government contracts typically contain a number of extraordinary
provisions that would not typically be found in commercial contracts and which may create a disadvantage and additional risks to
us as compared to competitors that do not rely on U.S. Government contracts. These risks include the ability of the U.S. Government
to unilaterally:
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terminate or reduce the scope of our contract with or without cause;
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interpret relevant regulations (federal acquisition regulation clauses);
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require performance under circumstances which may not be favorable to us;
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require an in process review where the U.S. Government will review the project and its options under the contract;
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control the timing and amount of funding, which impacts the development progress of our programs; and
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audit and object to our contract-related costs and fees, including allocated indirect costs.
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Our government contracts with BARDA/HHS and NIAID/HHS have termination
and audit provisions which create additional risks to us.
The U.S. Government may terminate its contracts with us either for
its convenience or if we default by failing to perform in accordance with the contract schedule and terms. Termination for convenience
provisions generally enable us to recover only our costs incurred or committed, and settlement expenses and profit on the work
completed prior to termination. Termination does not permit these recoveries under default provisions. In the event of termination
or upon expiration of a contract, the U.S. Government may dispute wind-down and termination costs and may question prior expenses
under the contract and deny payment of those expenses. Should we choose to challenge the U.S. Government for denying certain payments
under a contract, such a challenge could subject us to substantial additional expenses which we may or may not recover. Further,
if the U.S. Government terminates its contracts with us for its convenience, or if we default by failing to perform in accordance
with the contract schedule and terms, significant negative impact on our cash flows and operations could result.
As a U.S. Government contractor, we are required
to comply with applicable laws, regulations and standards relating to our accounting practices and are subject to periodic audits
and reviews. As part of any such audit or review, the U.S. Government may review the adequacy of, and our compliance with, our
internal control systems and policies, including those relating to our purchasing, property, estimating, compensation and management
information systems. Audits under the active BARDA/HHS and NIAID/HHS galidesivir contracts may occur at the election of the U.S.
Government and have been concluded through fiscal 2015; all subsequent fiscal years are still open and auditable. Based on the
results of its audits, the U.S. Government may adjust our contract-related costs and fees, including allocated indirect costs.
This adjustment could impact the amount of revenues reported on a historic basis and could impact our cash flows under the contracts
prospectively. In addition, in the event BARDA/HHS or NIAID/HHS determines that certain costs and fees were unallowable or determines
that the allocated indirect cost rate was higher than the actual indirect cost rate, BARDA/HHS or NIAID/HHS would be entitled to
recoup any overpayment from us as a result. In addition, if an audit or review uncovers any improper or illegal activity, we may
be subject to civil and criminal penalties and administrative sanctions, including termination of our contracts, forfeiture of
profits, suspension of payments, fines and suspension or prohibition from doing business with the U.S. Government. We could also
suffer serious harm to our reputation if allegations of impropriety were made against us. In addition, under U.S. Government purchasing
regulations, some of our costs may not be reimbursable or allowed under our contracts. Further, as a U.S. Government contractor,
we are subject to an increased risk of investigations, criminal prosecution, civil fraud, whistleblower lawsuits and other legal
actions and liabilities as compared to private sector commercial companies.
If we fail to reach milestones or to make annual minimum payments or
otherwise breach our obligations under our license agreements, our licensors may terminate our agreements with them and seek additional
remedies.
If we are unable or fail to meet payment obligations, performance
milestones relating to the timing of regulatory filings, product supply obligations, post approval commitments for RAPIVAB, or
development and commercial diligence obligations; are unable or fail to make milestone payments or material data use payments in
accordance with applicable provisions; or fail to pay the minimum annual payments under our respective licenses, our licensors
may terminate the applicable license or seek other available remedies. As a result, our development of the respective product candidate
or commercialization of the product would cease.
If we fail to obtain additional financing or acceptable partnership
arrangements, we may be unable to complete the development and commercialization of our product candidates or continue operations.
As our programs advance, our costs are likely to increase. Our current
and planned discovery activities, pre-clinical and clinical trials, the related development, manufacturing, regulatory approval
process requirements, and the additional personnel resources and testing required for supporting the development of our product
candidates will consume significant capital resources. Our expenses, revenues and cash utilization rate could vary significantly
depending on many factors, including: our ability to raise additional capital; the development progress of our collaborative agreements
for our product candidates; the amount of funding we receive from NIAID/HHS and BARDA/HHS for galidesivir or from other new partnerships
with third parties for the development of our product candidates, including BCX7353 and our other rare disease product candidates;
the commercial success of peramivir achieved by our partners; the amount or profitability of any orders for peramivir or galidesivir
by any government agency or other party; the progress and results of our current and proposed clinical trials for our most advanced
product candidates, including BCX7353 and our other rare disease product candidates; the progress made in the manufacture of our
lead products and the progression of our other programs.
We expect that we will be required to raise additional capital to
complete the development and commercialization of our current product candidates and we may seek to raise capital at any time.
Additional funding, whether through additional sales of securities, additional borrowings, or collaborative arrangements with partners,
including governmental agencies in general and from any BARDA/HHS or NIAID/HHS contract specifically, may not be available when
needed or on terms acceptable to us. The issuance of preferred or common stock or convertible securities, with terms and prices
significantly more favorable than those of the currently outstanding common stock, could have the effect of diluting or adversely
affecting the holdings or rights of our existing stockholders. Additional borrowings may subject us to more restrictive covenants
than are currently applicable to us under our September 23, 2016 Senior Credit Facility with an affiliate of MidCap Financial Services,
LLC, as administrative agent (the “Senior Credit Facility”). In addition, collaborative arrangements may require us
to transfer certain material rights to such corporate partners. Insufficient funds or lack of an acceptable partnership may require
us to delay, scale-back or eliminate certain of our research and development programs.
In order to continue future operations and continue our drug development
programs, we will be required to raise additional capital. In addition to seeking strategic partnerships, transactions and government
funding, we may decide to access the equity or debt markets, incur additional borrowings, or seek other sources to meet liquidity
needs. Our ability to raise additional capital may be limited and may greatly depend upon the success of ongoing development related
to our current drug development programs, including post approval studies for RAPIVAB, the progress, timeline and ultimate
outcome of our kallikrein inhibitors, including the BCX7353 program (including, but not limited to, formulation progress,
Phase 3 trials, long-term human safety studies, and the timing of carcinogenicity or other required studies), the progress of our
ALK2 inhibitors for the treatment of FOP and other rare disease product candidates, funding for and continued successful development
of galidesivir, and the progress of our early discovery programs. In addition, constriction and volatility in the equity and debt
markets may restrict our future flexibility to raise capital when such needs arise. Furthermore, we have exposure to many different
industries, financing partners and counterparties, including commercial banks, investment banks and partners (which include investors,
licensing partners, and the U.S. Government) which may be unstable or may become unstable in the current economic and political
environment. Any such instability may impact these parties’ ability to fulfill contractual obligations to us or they might
limit or place burdensome conditions upon future transactions with us. Also, it is possible that suppliers may be negatively impacted.
Any such unfavorable outcomes in our current programs or unfavorable economic conditions could place severe downward pressure on
the price of our common stock and may decrease opportunities to raise capital in the capital or credit markets, and further could
reduce the return available on invested corporate cash, which, if severe and sustained, could have a material and adverse impact
on our results of operations and cash flows and limit our ability to continue development of our product candidates.
We may not be able to continue as a going concern if we do not obtain
additional capital.
We have sustained operating losses for the majority of our corporate
history and expect that our 2018 expenses will exceed our 2018 revenues. We expect to continue to incur operating losses and negative
cash flows until revenues reach a level sufficient to support ongoing operations.
Our liquidity needs will be largely determined by the success of
operations in regards to the progression of our product candidates in the future. Our plans to alleviate the doubt regarding our
ability to continue as a going concern primarily include our ability to control the timing and spending on our research and development
programs and raising additional funds through equity financings. We also may consider other plans to fund operations including:
(1) securing or increasing U.S. Government funding of our programs, including obtaining procurement contracts; (2) out-licensing
rights to certain of our products or product candidates, pursuant to which the we would receive cash milestones; (3) raising additional
capital through equity or debt financings or from other sources; (4) obtaining additional product candidate regulatory approvals,
which would generate revenue, milestones and cash flow; (5) reducing spending on one or more research and development programs,
including by discontinuing development; and/or (6) restructuring operations to change our overhead structure.
There can be no assurance that any of our plans will be successful
or that additional capital will be available to us on reasonable terms, or at all, when needed. If we are unable to obtain sufficient
additional capital, we may be forced to curtail operations, delay or stop ongoing clinical trials, cease operations altogether
or file for bankruptcy.
If we fail to successfully commercialize or establish collaborative
relationships to commercialize certain of our product candidates, or if any partner terminates or fails to perform its obligations
under agreements with us, potential revenues from commercialization of our product candidates could be reduced, delayed or eliminated.
Our business strategy is to increase the asset value of our product
candidate portfolio. We believe this is best achieved by retaining full product rights or through collaborative arrangements with
third parties as appropriate. As needed, potential third-party relationships could include preclinical development, clinical development,
regulatory approval, marketing, sales and distribution of our product candidates.
Currently, we have established collaborative
relationships with Mundipharma for the development and commercialization of Mundesine and with each of Shionogi and Green Cross
for the development and commercialization of peramivir in Japan, Taiwan and South Korea. Most recently we have established a collaborative
relationship with Seqirus UK Limited for RAPIVAB on a worldwide basis other than Israel, Japan, Korea and Taiwan. The process of
establishing and implementing collaborative relationships is difficult, time-consuming and involves significant uncertainty, including:
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our partners may seek to renegotiate or terminate their relationships with us due to unsatisfactory commercial, regulatory or clinical results, including post approval clinical commitments, a change in business strategy, a change of control or other reasons;
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our contracts for collaborative arrangements may expire;
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our partners may choose to pursue alternative technologies, including those of our competitors;
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we may have disputes with a partner that could lead to litigation or arbitration;
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we do not have day to day control over the activities of our partners and have limited control over their decisions;
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our ability to generate future event payments and royalties from our partners depends upon their abilities to establish the safety and efficacy of our product candidates, obtain regulatory approvals and achieve market acceptance of products developed from our product candidates;
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we or our partners may fail to properly initiate, maintain or defend our intellectual property rights, where applicable, or a party may utilize our proprietary information in such a way as to invite litigation that could jeopardize or potentially invalidate our proprietary information or expose us to potential liability;
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we or our partners may not devote sufficient capital or resources towards our product candidates; and
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we or our partners may not comply with applicable government regulatory requirements.
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If we or our partners fail to fulfill our responsibilities in a timely
manner, or at all, our commercialization efforts related to that collaboration could be reduced, delayed or terminated, or it may
be necessary for us to assume responsibility for activities that would otherwise have been the responsibility of our partner. If
we are unable to establish and maintain collaborative relationships on acceptable terms, we may have to delay or discontinue further
development of one or more of our product candidates, undertake commercialization activities at our own expense or find alternative
sources of funding. Any delay in the development or commercialization of our product candidates would severely affect our business,
because if our product candidates do not progress through the development process or reach the market in a timely manner, or at
all, we may not receive additional future event payments and may never receive milestone, product sales or royalty payments.
We do not have a great deal of experience in commercializing our products
or technologies, and our future revenue generation is uncertain.
We do not have a great deal of experience in commercializing our product
candidates or technologies. We currently have limited marketing and commercial capability, no direct or third-party sales force
and limited distribution capabilities. We may be unable to establish or sufficiently increase these capabilities for products we
currently, or plan to, commercialize. In addition, our revenue from collaborative agreements may be dependent upon the status of
our preclinical and clinical programs.
Our ability to receive revenue from products we commercialize presents
several risks, including:
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we or our collaborators may fail to successfully complete clinical trials, or satisfy post-marketing commitments, sufficient to obtain and keep FDA marketing approval;
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many competitors are more experienced and have significantly more resources, and their products could reach the market faster, be more cost effective or have a better efficacy or tolerability profile than our product candidates;
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we may fail to employ a comprehensive and effective intellectual property strategy, which could result in decreased commercial value of our Company and our products;
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we may fail to employ a comprehensive and effective regulatory strategy, which could result in a delay or failure in commercialization of our products;
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our ability to successfully commercialize our products is affected by the competitive landscape, which cannot be fully known at this time;
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reimbursement is constantly changing, which could greatly affect usage of our products; and
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future revenue from product sales would depend on our ability to successfully complete clinical studies, obtain regulatory approvals, and manufacture, market and commercialize our approved drugs.
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Commercialization of peramivir by our partners is subject to the potential
commercialization risks described herein and numerous additional risks. Any potential revenue benefits to us in the form of milestone
payments, royalties or other consideration are highly speculative.
Commercialization success of peramivir is uncertain and is subject
to all the risks and uncertainties disclosed in our other risk factors relating to drug development and commercialization. In addition,
commercialization of peramivir products is subject to further risks and may be negatively impacted by a number of factors, including,
but not limited to, the following:
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peramivir may not prove to be adequately safe and effective for market approval in markets other than the United States, Canada, Japan, Korea and Taiwan;
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necessary funding for post-marketing commitments and further development of peramivir may not be available timely, at all, or in sufficient amounts;
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flu prevention or pandemic treatment concerns may not materialize at all, or in the near future;
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advances in flu vaccines or other antivirals, including competitive i.v. antivirals, could substantially replace potential demand for peramivir;
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a limited number of governmental entities are expected to be the primary potential stockpiling customers for peramivir and if we are not successful at marketing peramivir to these entities for any reason, we will not receive substantial revenues from stockpiling orders;
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government and third party payors may not provide sufficient coverage or reimbursement which would negatively impact the demand for peramivir;
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we may not be able to supply commercial material to our partners and our partners may not be able to maintain or establish sufficient and acceptable commercial manufacturing, either directly or through third-party manufacturers;
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the commercial demand and acceptance for peramivir by healthcare providers and by patients may not be sufficient to result in substantial revenues of peramivir to our partners and may result in little to no milestones or royalties to us;
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effectiveness of marketing and commercialization efforts for peramivir by our partners;
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market satisfaction with existing alternative therapies;
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perceived efficacy relative to other available therapies;
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disease prevalence;
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cost of treatment;
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pricing and availability of alternative products;
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marketing and sales activities of competitors;
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shifts in the medical community to new treatment paradigms or standards of care; and
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relative convenience and ease of administration.
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We are subject to various federal and state laws related to RAPIVAB and
other products under development and, if we or our partners do not comply with these regulations, we could face substantial penalties.
Our or our partners’ activities related to RAPIVAB, or any of
our other products under development and following their regulatory approval, are subject to regulatory and law enforcement authorities
in addition to the FDA, including the Federal Trade Commission, the Department of Justice, and state and local governments. In
the case of our collaboration with SUL, although SUL is responsible for RAPIVAB marketing and commercialization efforts, we continue
to carry certain risks associated with RAPIVAB because we hold the RAPIVAB NDA. For example, we are responsible for reporting adverse
drug experiences, we have responsibility for certain post-approval studies, we may have responsibilities and costs related to a
recall or withdrawal of RAPIVAB from sale, we may incur liability associated with RAPIVAB manufacturing contracted by us or in
support of any of our partners, we are required to maintain records and provide data and reports to regulatory agencies related
to RAPIVAB (e.g. risk evaluation and mitigation strategies, track and trace requirements, adverse events), and we may incur certain
promotional regulatory and government pricing risks, all of which could have a material adverse impact on our operations and financial
condition.
In addition, we are subject to the federal physician sunshine act
and certain similar physician payment and drug pricing transparency legislation in various states. We are also subject to various
federal and state laws pertaining to health care “fraud and abuse,” including both federal and state anti-kickback
and false claims laws. These laws regulate our or our partners’ operations, sales and marketing practices, price reporting,
and relationships with physicians and other customers and third-party payors. Anti-kickback laws generally prohibit a manufacturer
from soliciting, offering, receiving, or paying any remuneration to generate business, including the purchase or prescription of
a particular drug. Although the specific provisions of these laws vary, their scope is generally broad and there may be no regulations,
guidance or court decisions that clarify how the laws apply to particular industry practices. False claims laws prohibit anyone
from knowingly and willingly presenting, or causing to be presented for payment to third party payors (including Medicare and Medicaid)
claims for reimbursement or services that are false or fraudulent, claims for items or services not provided as claimed, or claims
for medically unnecessary items or services. The sunshine provisions apply to manufacturers with products reimbursed under certain
government programs and require those manufacturers to disclose annually to the federal government certain payments made to physicians
(defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as, ownership
and investment interests held by physicians (as defined above) and their immediate family members. State laws may also require
disclosure of pharmaceutical pricing information and marketing expenditures. Although we seek to comply with these statutes, it
is possible that our practices, or those of our partners, might be challenged under health care fraud and abuse, anti-kickback,
false claims or similar laws. Violations of the physician sunshine act and similar state legislation or the fraud and abuse laws
may be punishable by civil or criminal sanctions, including fines and civil monetary penalties, and future exclusion from participation
in government healthcare programs.
We have a number of outstanding post-marketing commitments to the
FDA that we retain, despite our partnership with SUL, which we may not complete successfully or on time for any number of reasons,
including but not limited to lack of funds to complete the studies and insufficient interest by appropriate sites, investigators
or study subjects. For example, as a condition of the approval of RAPIVAB, we were required to complete a pediatric patient study
of RAPIVAB and to submit the final results of this clinical trial to the FDA. We may be subject to penalties if we fail to comply
with post-approval legal and regulatory requirements and our products could be subject to continual recordkeeping and reporting
requirements, review and periodic inspections by the FDA and other regulatory bodies. Regulatory approval of a product may be subject
to limitations on the indicated uses for which the product may be marketed or to the other restrictive conditions of approval that
limit our ability to promote, sell or distribute a product. Furthermore, the approval of RAPIVAB and any other future product candidates
may be subject to requirements for costly post-marketing testing and surveillance to monitor its safety or efficacy.
Advertising and promotion are subject to stringent FDA rules and oversight
and as the holder of the NDA we may be held responsible for any advertising and promotion conducted by our partner that is not
in compliance with the rules and regulations. In particular, the claims in all promotional materials and activities must be consistent
with the FDA approvals for approved products, and must be appropriately substantiated and fairly balanced with information on the
safety risks and limitations of the products. Adverse event information concerning approved products must be reviewed and as the
NDA holder of RAPIVAB we are required to make expedited and periodic adverse event reports to the FDA and other regulatory authorities.
In addition, the research, manufacturing, distribution, sale and promotion
of products are potentially subject to regulation by various federal, state and local authorities in addition to the FDA, including
the Centers for Medicare and Medicaid Services, other divisions of the U.S. Department of Health and Human Services, the U.S. Department
of Justice and individual U.S. Attorney offices within the Department of Justice, and state and local governments. Until we can
successfully transfer the pricing responsibilities to our partner, we remain responsible for pricing and rebate programs. Pricing
and rebate programs must comply with the Medicaid rebate requirements of the Omnibus Budget Reconciliation Act of 1990, as amended,
and the Veterans Health Care Act of 1992, as amended. If products are made available to authorized users of the Federal Supply
Schedule of the General Services Administration, additional laws and requirements apply. All of these activities are also potentially
subject to federal and state healthcare false claims and fraud and abuse laws, as well as consumer protection and unfair competition
laws.
If our operations with respect to RAPIVAB or our other products that
are subject to healthcare laws and regulations are found to be in violation of any of the healthcare fraud and abuse laws described
above or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties,
damages, fines and the curtailment or restructuring of our operations. Any penalties, damages, fines, curtailment or restructuring
of our operations could adversely affect our ability to operate our business and our financial results. Although compliance programs
can mitigate the risk of investigation and prosecution for violations of these laws, the risks cannot be entirely eliminated. Any
action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal
expenses and divert our management's attention from the operation of our business. Moreover, achieving and sustaining compliance
with all applicable federal and state fraud and abuse laws may be costly.
We and our partners may be subject to new legislation, regulatory proposals
and healthcare payor initiatives that may increase our costs of compliance and adversely affect our or our partners’ ability
to market our products, including RAPIVAB, obtain collaborators and raise capital.
The Patient Protection and Affordable Care Act, or PPACA, made extensive
changes to the delivery of health care in the U.S. The PPACA included numerous provisions that affect pharmaceutical companies,
some of which became effective immediately and others of which have taken effect over the past several years. For example, the
PPACA expanded health care coverage to the uninsured through private health insurance reforms and an expansion of Medicaid. The
PPACA also imposed substantial costs on pharmaceutical manufacturers, such as an increase in liability for rebates paid to Medicaid,
new drug discounts that must be offered to certain enrollees in the Medicare prescription drug benefit, an annual fee imposed on
all manufacturers of brand prescription drugs in the U.S., and an expansion of an existing program requiring pharmaceutical discounts
to certain types of hospitals and federally subsidized clinics. The PPACA also contains cost containment measures that could reduce
reimbursement levels for health care items and services generally, including pharmaceuticals. It also required reporting and public
disclosure of payments and other transfers of value provided by pharmaceutical companies to physicians and teaching hospitals.
We expect that the current presidential administration and U.S. Congress
will likely continue to seek to modify, repeal, or otherwise invalidate all, or certain provisions of, the PPACA. There is still
significant uncertainty with respect to the impact that the current presidential administration and the U.S. Congress may have
on the PPACA, if any, and any changes will likely take time to unfold. As such, we cannot predict what effect the PPACA or other
healthcare reform initiatives that may be adopted in the future will have on our business.
We cannot predict what effect the PPACA or other healthcare reform
initiatives that may be adopted in the future will have on our business. The continuing efforts of the government, insurance companies,
managed care organizations and other payors of health care services to contain or reduce costs of health care could result in decreased
net revenues from our pharmaceutical products and decrease potential returns from our development efforts. In addition, pharmaceutical
and device manufacturers are also required to report and disclose certain payments and transfers of value to, and investment interests
held by, physicians and their immediate family members during the preceding calendar year. Failure to submit required information
may result in civil monetary penalties for payments, transfers of value or ownership or investment interests not reported in an
annual submission. Compliance with the PPACA and state laws with similar provisions is difficult and time consuming, and companies
that do not comply with these state laws face civil penalties. Because of the breadth of these laws and the narrowness of the safe
harbors, it is possible that some of our business activities could be subject to challenge under one or more of such laws. Such
a challenge could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
In addition, there have been a number of other legislative and regulatory
proposals aimed at changing the pharmaceutical industry. In particular, legislation has been enacted in certain states and at a
federal level that requires development of an electronic pedigree to track and trace each prescription drug at the saleable unit
level through the distribution system. Compliance with these electronic pedigree requirements may increase our operational expenses
and impose significant administrative burdens. In addition, our compliance may be deemed insufficient and we could face a material
adverse effect on our business, financial condition, results of operations and growth prospects. As a result of these and
other new proposals, we may determine to change our current manner of operation, provide additional benefits or change our contract
arrangements, any of which could have a material adverse effect on our business, financial condition and results of operations.
Adequate coverage and reimbursement in the U.S. and other markets
is critical to the commercial success of RAPIVAB or any other product that we might bring to market. Recently in the U.S. there
has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which
has resulted in several Congressional inquiries and proposed bills designed to, among other things, reform government program reimbursement
methodologies. Third-party payors are increasingly challenging the prices charged for medical products and services and, in some
cases, imposing restrictions on the coverage of particular drugs. Many third-party payors negotiate the price of medical services
and products and develop formularies which establish pricing and reimbursement levels. Exclusion of a product from a formulary
can lead to its sharply reduced usage in the third-party payor’s patient population. The process for obtaining coverage can
be lengthy and costly, and we expect that it could take several months before a particular payor initially reviews our product
and makes a decision with respect to coverage. For example, third-party payors may require cost-benefit analysis data from us in
order to demonstrate the cost-effectiveness of RAPIVAB or any other product we might bring to market. For any individual third-party
payor, we may not be able to provide data sufficient to gain reimbursement on a similar or preferred basis to competitive products,
or at all which may have a material adverse effect on our business, financial condition and results of operations.
There are risks related to the potential government use or sale of peramivir
(RAPIVAB).
United States Government use or sale of RAPIVAB in emergency situations,
or otherwise, may result in the use of RAPIVAB outside of its approved use. To the extent that RAPIVAB is used as a treatment for
influenza by the U.S. Government or peramivir by any other government entity, there can be no assurance that it will prove to be
generally safe, well-tolerated and effective. Such government use of RAPIVAB/peramivir may create certain liabilities for us or
our partners in the case of government use outside of the U.S. There is no assurance that we or our manufacturers will be able
to fully meet the demand for peramivir in the event of additional orders. Further, we may not achieve a favorable price for additional
orders of RAPIVAB in the U.S. or peramivir in any other country. Our competitors may develop products that could compete with or
replace peramivir. We may face competition in markets where we have no existing intellectual property protection or are unable
to successfully enforce our intellectual property rights.
There is no assurance that the non-U.S. partnerships that we have
entered into for peramivir will result in any order for peramivir in those countries. There is no assurance that peramivir will
be approved for any use or will achieve market approval in additional countries. In the event that any emergency use or market
approval is granted, there is no assurance that any government order or commercialization of peramivir in any countries will be
substantial or will be profitable to us. In addition, the sale of peramivir, emergency use or other use of peramivir in any country
may create certain liabilities for us and our partners.
If we or our partners do not obtain and maintain governmental approvals
for our product candidates under development, we or our partners will not be able to sell these potential products, which would
significantly harm our business because we will receive no revenue.
We or our partners must obtain regulatory approval before marketing
or selling our future product candidates. If we or our partners are unable to receive regulatory approval and do not market or
sell our future product candidates, we will never receive any revenue from such product sales. In the United States, we or our
partners must obtain FDA approval for product candidates that we intend to commercialize. The process of preparing for and obtaining
FDA approval may be lengthy and expensive, and approval is never certain. Products distributed abroad are also subject to foreign
government regulation and export laws of the United States. Because of the risks and uncertainties in biopharmaceutical development,
our product candidates could take a significantly longer time to gain regulatory approval than we expect or may never gain approval.
If the FDA delays regulatory approval of our product candidates, our management’s credibility, our value and our operating
results may suffer. Even if the FDA or foreign regulatory agencies approve a product candidate, the approval may limit the indicated
uses for a product candidate and/or may require post-approval studies.
The FDA regulates, among other things, the record keeping and storage
of data pertaining to potential pharmaceutical products. We currently store most of our preclinical research data, our clinical
data and our manufacturing data at our facility. While we do store duplicate copies of most of our clinical data offsite and a
significant portion of our data is included in regular backups of our systems, we could lose important data if our facility incurs
damage, or if our vendor data systems fail, suffer damage or are destroyed. If we receive approval to market our potential products,
whether in the United States or internationally, we will continue to be subject to extensive regulatory requirements. These requirements
are wide ranging and govern, among other things:
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adverse drug experience reporting regulations;
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product promotion;
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product manufacturing, including good manufacturing practice requirements; and
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product changes or modifications.
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Our failure to comply with existing or future regulatory requirements,
or our loss of, or changes to, previously obtained approvals, could have a material adverse effect on our business because we will
not receive product or royalty revenues if we or our partners do not receive approval of our products for marketing.
Royalties and milestone payments from Shionogi under our license
agreement with Shionogi (the "Shionogi Agreement") will be required to be used by Royalty Sub to service its obligations under
its PhaRMA Notes, and generally will not be available to us for other purposes until Royalty Sub has repaid in full its obligations
under the PhaRMA Notes.
In March 2011, our wholly-owned subsidiary Royalty Sub issued $30.0
million in aggregate principal amount of PhaRMA Notes. The PhaRMA Notes are secured principally by (i) certain royalty and milestone
payments under the Shionogi Agreement, pursuant to which Shionogi licensed from us the rights to market peramivir in Japan and
Taiwan, (ii) rights to certain payments under a Japanese yen/U.S. dollar Currency Hedge Agreement put into place by us in connection
with the issuance of the PhaRMA Notes and (iii) the pledge by us of our equity interest in Royalty Sub. Payments from Shionogi
to us on non-governmental sales under the Shionogi Agreement will generally not be available to us for other purposes until Royalty
Sub has repaid in full its obligations under the PhaRMA Notes. Accordingly, these funds will be required to be dedicated to Royalty
Sub’s debt service and not available to us for product development or other purposes. As of September 1, 2014, the payments
from Shionogi were insufficient for Royalty Sub to service its obligations under the PhaRMA Notes, resulting in an event of default
with respect to the PhaRMA Notes. As a result of this event of default, the holders of the PhaRMA Notes may be able to pursue acceleration
of the PhaRMA Notes and foreclose on the collateral securing the PhaRMA Notes and our equity interest in Royalty Sub and may exercise
other remedies available to them under the indenture or other documents related to the PhaRMA Notes. In such event, we may
not realize the benefit of future royalty payments that might otherwise accrue to us following repayment of the PhaRMA Notes, we
may incur legal costs and we might otherwise be adversely affected.
Because an event of default has occurred under the PhaRMA Notes, the
holders of the PhaRMA Notes may be able to pursue acceleration of the PhaRMA Notes and foreclose on the collateral securing the
PhaRMA Notes and our equity interest in Royalty Sub, in which case we may not realize the benefit of future royalty payments that
might otherwise accrue to us following repayment of the PhaRMA Notes and we could otherwise be adversely affected.
Royalty Sub’s ability to service its payment obligations in
respect of the PhaRMA Notes, and our ability to benefit from our equity interest in Royalty Sub, is subject to numerous risks.
Royalty Sub’s ability to service the PhaRMA Notes may be adversely affected by, among other things, changes in or any termination
of our relationship with Shionogi, reimbursement, regulatory, manufacturing and/or intellectual property issues, product returns,
product recalls, product liability claims and allegations of safety issues, as well as other factors. As Royalty Sub has been unable
to service its obligations under the PhaRMA Notes and an event of default has occurred under the PhaRMA Notes, the holders of the
PhaRMA Notes may be able to pursue acceleration of the PhaRMA Notes and foreclose on the collateral securing the PhaRMA Notes and
our equity interest in Royalty Sub and may exercise other remedies available to them under the indenture or other documents
related to the PhaRMA Notes. In such event, we may not realize the benefit of future royalty payments that might otherwise
accrue to us following repayment of the PhaRMA Notes, we may incur legal costs and we might otherwise be adversely affected.
We may be required to pay significant premiums under the Currency Hedge
Agreement entered into by us in connection with the issuance of the PhaRMA Notes. In addition, because our potential obligations
under the foreign currency hedge are marked to market, we may experience additional quarterly volatility in our operating results
and cash flows attributable to the Currency Hedge Agreement.
In connection with the issuance by Royalty Sub of the PhaRMA Notes,
we entered into a Currency Hedge Agreement to hedge certain risks associated with changes in the value of the Japanese yen relative
to the U.S. dollar. Under the foreign currency hedge agreement, we may be required to pay an annual premium in the amount of $2.0
million in each May continuing through May 2020. Such payment will be required if, in May of the relevant year, the spot rate of
exchange for Japanese yen-U.S. dollars (determined in accordance with the Currency Hedge Agreement) is such that the U.S. dollar
is worth 100 yen or less. We will be required to mark to market our potential obligations under the currency hedge and post cash
collateral, which may cause us to experience additional quarterly volatility in our operating results and cash flows as a result.
Additionally, we may be required to pay significant premiums or a termination fee under the foreign currency hedge agreement entered
into by us in connection with the issuance of the PhaRMA Notes. We are required to maintain a foreign currency hedge at 100 yen
per dollar under the agreements governing the PhaRMA Notes.
Our Senior Credit Facility
contains restrictions that limit our flexibility in operating our business. We may be required to make a prepayment or repay the
outstanding indebtedness earlier than we expect if a prepayment event or an event of default occurs, including a material adverse
change with respect to us, which could have a material adverse effect on our business.
The Senior Credit Facility contains various
covenants that limit our ability to engage in specified types of transactions. These covenants limit our ability to, among other
things:
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convey, sell, lease, license, transfer or otherwise dispose of certain parts of our business or property;
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change the nature of our business;
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liquidate or dissolve;
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enter into certain change in control or acquisition transactions;
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incur or assume certain debt;
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grant certain types of liens on our assets;
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modify, liquidate or transfer assets in certain collateral accounts;
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pay dividends or make certain distributions to our stockholders;
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make certain investments;
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enter into material transactions with affiliates; and
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modify existing debt or collaboration arrangements.
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The restrictive covenants
contained in the Senior Credit Facility could cause us to be unable to pursue business opportunities that we or our stockholders
may consider beneficial without the lender’s permission or without repaying all Senior Credit Facility obligations.
A breach of any of these covenants could result in an event of default
under the Senior Credit Facility. An event of default will also occur if, among other things, a material adverse change in our
business, operations or condition occurs, which could potentially include negative results in clinical trials, or a material impairment
of the prospect of our repayment of any portion of the amounts we owe under the Senior Credit Facility occurs. In the case of a
continuing event of default under the agreement, the lender could elect to declare all amounts outstanding to be immediately due
and payable, proceed against the collateral in which we granted to the lender a security interest under the Senior Credit Facility,
or otherwise exercise the rights of a secured creditor. Amounts outstanding under the Senior Credit Facility are secured by substantially
all of our assets and those of our subsidiaries, excluding certain specified assets but including proceeds from those assets.
If we fail to adequately protect or enforce our intellectual property
rights or secure rights to patents of others, the value of those rights would diminish.
Our success will depend in part on our ability and the abilities of
our partners to obtain, protect and enforce viable intellectual property rights including but not limited to trade name, trademark
and patent protection for our Company and its products, methods, processes and other technologies we may license or develop, to
preserve our trade secrets, and to operate without infringing the proprietary rights of third parties both domestically and abroad.
The patent position of biotechnology and pharmaceutical companies is generally highly uncertain, involves complex legal and factual
questions and has recently been the subject of much litigation. Neither the United States Patent and Trademark Office (“USPTO”),
the Patent Cooperation Treaty offices, nor the courts of the United States and other jurisdictions have consistent policies nor
predictable rulings regarding the breadth of claims allowed or the degree of protection afforded under many biotechnology and pharmaceutical
patents. Further, we may not have worldwide patent protection for all of our product candidates and our intellectual property rights
may not be legally protected or enforceable in all countries throughout the world. In some jurisdictions, some of our product candidates
in certain programs, including our HAE program, may have short or no composition of matter patent life and we may therefore rely
on orphan drug exclusivity or data exclusivity. There can be no assurance that we will obtain orphan drug exclusivity or data exclusivity
in every jurisdiction. Further, in some jurisdictions, we may rely on formulation patents or method of use patents. Both the ability
to achieve issuance and the enforcement of formulation and method of use patents can be highly uncertain and can vary from jurisdiction
to jurisdiction, and such patents may therefore not adequately prevent competitors and potential infringers in some jurisdictions.
The validity, scope, enforceability and commercial value of the rights protected by such patents, therefore, is highly uncertain.
We also rely on trade secrets to protect technology in cases when
we believe patent protection is not appropriate or obtainable. However, trade secrets are difficult to protect. If we cannot maintain
the confidentiality of our technology and other confidential information in connection with our collaborators and advisors, our
ability to receive patent protection or protect our proprietary information may be imperiled.
We may be involved in lawsuits to protect or enforce our patents, the
patents of our partners or our other intellectual property rights, which could be expensive, time consuming and unsuccessful
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Competitors may infringe or otherwise violate our patents, the patents
of our licensors or our other intellectual property rights. To counter infringement or unauthorized use, we may be required to
file legal claims, which can be expensive and time-consuming and unsuccessful. An adverse result in any litigation or defense proceeding
could put one or more of our patents at risk. Our success depends in part on avoiding the infringement of other parties’
patents and other intellectual property rights as well as avoiding the breach of any licenses relating to our technologies and
products. In the United States, patent applications filed in recent years are confidential for 18 months, while older applications
are not published until the patent issues. As a result, avoiding patent infringement may be difficult and we may inadvertently
infringe third-party patents or proprietary rights. These third parties could bring claims against us, our partners or our licensors
that even if resolved in our favor, could cause us to incur substantial expenses and, if resolved against us, could additionally
cause us to pay substantial damages. Further, if a patent infringement suit were brought against us, our partners or our licensors,
we or they could be forced to stop or delay research, development, manufacturing or sales of any infringing product in the country
or countries covered by the patent we infringe, unless we can obtain a license from the patent holder. Such a license may not be
available on acceptable terms, or at all, particularly if the third party is developing or marketing a product competitive with
the infringing product. Even if we, our partners or our licensors were able to obtain a license, the rights may be nonexclusive,
which would give our competitors access to the same intellectual property.
If we or our partners are unable or fail to adequately initiate, protect,
defend or enforce our intellectual property rights in any area of commercial interest or in any part of the world where we wish
to seek regulatory approval for our products, methods, processes and other technologies, the value of the product candidates to
produce revenue would diminish. Additionally, if our products, methods, processes, and other technologies or our commercial use
of such products, processes, and other technologies, including but not limited to any trade name, trademark or commercial strategy
infringe the proprietary rights of other parties, we could incur substantial costs. The USPTO and the patent offices of other jurisdictions
have issued to us a number of patents for our various inventions and we have in-licensed several patents from various institutions.
We have filed additional patent applications and provisional patent applications with the USPTO. We have filed a number of corresponding
foreign patent applications and intend to file additional foreign and U.S. patent applications, as appropriate. We have also filed
certain trademark and trade name applications worldwide. We cannot assure you as to:
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the degree and range of protection any patents will afford against competitors with similar products;
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if and when patents will issue;
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if patents do issue we cannot be sure that we will be able to adequately defend such patents and whether or not we will be able to adequately enforce such patents; or
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whether or not others will obtain patents claiming aspects similar to those covered by our patent applications.
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If the USPTO or other foreign patent office upholds patents issued
to others or if the USPTO grants patent applications filed by others, we may have to:
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obtain licenses or redesign our products or processes to avoid infringement;
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stop using the subject matter claimed in those patents; or
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pay damages.
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We may initiate, or others may bring against us, litigation or
administrative proceedings related to intellectual property rights, including proceedings before the USPTO or other foreign patent
office. Any judgment adverse to us in any litigation or other proceeding arising in connection with a patent or patent application
could materially and adversely affect our business, financial condition and results of operations. In addition, the costs of any
such proceeding may be substantial whether or not we are successful.
Our success is also dependent upon the skills, knowledge and experience,
none of which is patentable, of our scientific and technical personnel. To help protect our rights, we require all employees, consultants,
advisors and partners to enter into confidentiality agreements that prohibit the disclosure of confidential information to anyone
outside of our company and require disclosure and assignment to us of their ideas, developments, discoveries and inventions. These
agreements may not provide adequate protection for our trade secrets, know-how or other proprietary information in the event of
any unauthorized use or disclosure or the lawful development by others of such information, and if any of our proprietary information
is disclosed, our business will suffer because our revenues depend upon our ability to license or commercialize our product candidates
and any such events would significantly impair the value of such product candidates.
Our failure to comply with data protection
laws and regulations could lead to government enforcement actions and significant penalties against us and adversely impact our
operating results.
European Union (“EU”) Member
States, Switzerland and other countries have adopted data protection laws and regulation, which impose significant compliance obligations. For
example, the EU Data Protection Directive, as implemented into national laws by the EU Member States, imposes strict obligations
and restrictions on the ability to collect, analyze and transfer personal data, including health data from clinical trials and
adverse event reporting. Data protection authorities from the different EU Member States may interpret the EU Data Protection
Directive and national laws differently, which adds to the complexity of processing personal data in the European Union, and guidance
on implementation and compliance practices is often updated or otherwise revised. Our failure to comply with these laws and
regulations could lead to government enforcement actions and significant penalties against us and adversely impact our operating
results.
We are subject to litigation, which could result
in losses or unexpected expenditure of time and resources.
From time to time, we may be called upon to defend ourselves against
lawsuits relating to our business. Due to the inherent uncertainties in litigation, we cannot accurately predict the ultimate
outcome of any such proceedings. An unfavorable outcome in any such proceedings could have an adverse impact on our business,
financial condition and results of operations. If our stock price is volatile, we may become involved in securities class
action lawsuits in the future. Any litigation in the future, regardless of its merits, could result in substantial costs and
a diversion of management’s attention and resources that are needed to successfully run our business.
We face an inherent risk of liability in the event that the use or misuse
of our products results in personal injury or death and our product liability insurance coverage may be insufficient.
If the use or misuse of peramivir, forodesine or any other regulatory
body-approved products we or a partner may sell in the future harms people, we may be subject to costly and damaging product liability
claims brought against us by consumers, healthcare providers, pharmaceutical companies, third-party payors or others. The use of
our product candidates in clinical trials, including post marketing clinical studies, could also expose us to product liability
claims. We cannot predict all of the possible harms or side effects that may result from the use of our products or the testing
of product candidates and, therefore, the amount of insurance coverage we currently have may not be adequate to cover all liabilities
or defense costs we might incur. A product liability claim or series of claims brought against us could give rise to a substantial
liability that could exceed our resources. Even if claims are not successful, the costs of defending such claims and potential
adverse publicity could be harmful to our business.
We face an inherent risk of product liability exposure related to
the testing of our product candidates in human clinical trials and will face even greater risks upon any commercialization by us
of our product candidates. We have product liability insurance covering our clinical trials. Clinical trial and product liability
insurance is becoming increasingly expensive. As a result, we may be unable to obtain sufficient insurance or increase our existing
coverage at a reasonable cost to protect us against losses that could have a material adverse effect on our business. An individual
may bring a product liability claim against us if one of our products or product candidates causes, or is claimed to have caused,
an injury or is found to be unsuitable for consumer use. Any product liability claim brought against us, with or without merit,
could result in:
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liabilities that substantially exceed our product liability insurance, which we would then be required to pay from other sources, if available;
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an increase of our product liability insurance rates or the inability to maintain insurance coverage in the future on acceptable terms, or at all;
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withdrawal of clinical trial volunteers or patients;
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damage to our reputation and the reputation of our products, resulting in lower sales;
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regulatory investigations that could require costly recalls or product modifications;
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litigation costs; and
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the diversion of management’s attention from managing our business.
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Insurance coverage is increasingly more costly and difficult to obtain
or maintain.
While we currently have insurance for our business, property, directors
and officers, and our products, insurance is increasingly more costly and narrower in scope, and we may be required to assume more
risk in the future. If we are subject to claims or suffer a loss or damage in excess of our insurance coverage, we will be required
to bear any loss in excess of our insurance limits. If we are subject to claims or suffer a loss or damage that is outside of our
insurance coverage, we may incur significant uninsured costs associated with loss or damage that could have an adverse effect on
our operations and financial position. Furthermore, any claims made on our insurance policies may impact our ability to obtain
or maintain insurance coverage at reasonable costs or at all.
If our facility incurs damage or power is lost for a significant length
of time, our business will suffer.
We store clinical and stability samples at our facility that could
be damaged if our facility incurs physical damage or in the event of an extended power failure. We have backup power systems in
addition to backup generators to maintain power to all critical functions, but any loss of these samples could result in significant
delays in our drug development process.
In addition, we store most of our preclinical
and clinical data at our facilities. Duplicate copies of most critical data are secured off-site. Any significant degradation or
failure of our computer systems could cause us to inaccurately calculate or lose our data. Loss of data could result in significant
delays in our drug development process and any system failure could harm our business and operations.
A significant disruption in our information technology systems or a
cyber-security breach could adversely affect our business.
We are increasingly dependent on information technology systems to
operate our business. Like other companies in our industry, our networks and infrastructure may be vulnerable to cyber-attacks
or intrusions, including by computer hackers, foreign governments, foreign companies or competitors, or may be breached by employee
error, malfeasance or other disruption. A breakdown, invasion, corruption, destruction or interruption of critical information
technology systems could negatively impact operations. If our systems are damaged, fail to function properly or otherwise
become unavailable, we may incur substantial costs to repair or replace them, and we may experience loss of critical data and interruptions
or delays in our ability to perform critical functions, which could adversely affect our business, financial condition or results
of operations. Any compromise of our data security could also result in a violation of applicable privacy and other laws, significant
legal and financial exposure, damage to our reputation, loss or misuse of the information and a loss of confidence in our data
security measures, which could harm our business. There can be no assurance that our efforts to protect our data and information
technology systems will prevent breakdowns or breaches in our systems, or those of third parties with which we do business, and
any such events could adversely affect our business.
If we fail to retain our existing key personnel or fail to attract and
retain additional key personnel, the development of our product candidates and commercialization of our products and the related
expansion of our business will be delayed or stopped.
We are highly dependent upon our senior management and scientific
team, the unexpected loss of whose services might impede the achievement of our development and commercial objectives. Competition
for key personnel with the experience that we require is intense and is expected to continue to increase. Our inability to attract
and retain the required number of skilled and experienced management, commercial, operational and scientific personnel will harm
our business because we rely upon these personnel for many critical functions of our business.
If because of our use of hazardous materials, we violate any environmental
controls or regulations that apply to such materials, we may incur substantial costs and expenses in our remediation efforts.
Our research and development involves the controlled use of hazardous
materials, chemicals and various radioactive compounds. We are subject to federal, state and local laws and regulations governing
the use, storage, handling and disposal of these materials and some waste products. Accidental contamination or injury from these
materials could occur. In the event of an accident, we could be liable for any damages that result and any liabilities could exceed
our resources. Compliance with environmental laws and regulations or a violation of such environmental laws and regulations could
require us to incur substantial unexpected costs, which would materially and adversely affect our results of operations.
Risks relating to investing in our common stock
Our existing principal stockholders hold a substantial amount of our
common stock and may be able to influence significant corporate decisions, which may conflict with the interest of other stockholders.
Several of our stockholders own greater than 5% of our outstanding
common stock. Our top ten stockholders own more than 50% of BioCryst and can individually, and as a group, influence our operations
based upon their concentrated ownership. These stockholders, if they act together, may be able to influence the outcome of matters
requiring approval of the stockholders, including the election of our directors and other corporate actions.
Our stock price has been, and is likely to continue to be, highly volatile,
which could cause the value of an investment in our common stock to decline significantly.
The market prices for securities of biotechnology companies in general
have been highly volatile and may continue to be highly volatile in the future. Moreover, our stock price has fluctuated frequently,
and these fluctuations are often not related to our financial results. For the twelve months ended December 31, 2017, the 52-week
range of the market price of our stock was from $3.95 to $9.25 per share. The following factors, in addition to other risk factors
described in this section, may have a significant impact on the market price of our common stock:
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announcements of technological innovations or new products by us or our competitors;
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developments or disputes concerning patents or proprietary rights;
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additional dilution through sales of our common stock or other derivative securities;
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status of new or existing licensing or collaborative agreements and government contracts;
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announcements relating to the status of our programs;
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developments and announcements regarding new and virulent strains of influenza;
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we or our partners achieving or failing to achieve development milestones;
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publicity regarding actual or potential medical results relating to products under development by us or our competitors;
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publicity regarding certain public health concerns for which we are or may be developing treatments;
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regulatory developments in both the United States and foreign countries;
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public concern as to the safety of pharmaceutical products;
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actual or anticipated fluctuations in our operating results;
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changes in financial estimates or recommendations by securities analysts;
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changes in the structure of healthcare payment systems, including developments in price control legislation;
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announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
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additions or departures of key personnel or members of our board of directors;
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purchases or sales of substantial amounts of our stock by existing stockholders, including officers or directors;
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economic and other external factors or other disasters or crises; and
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period-to-period fluctuations in our financial results.
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Future sales and issuances of securities may dilute the ownership interests
of our current stockholders and cause our stock price to decline.
Future sales of our common stock by current stockholders into the
public market could cause the market price of our stock to fall. As of January 31, 2018, there were 98,606,110 shares of our
common stock outstanding. We may from time to time issue securities in relation to a license arrangement, collaboration, merger
or acquisition. We may also sell, for our own account, shares of common stock or other equity securities, from time to time at
prices and on terms to be determined at the time of sale.
As of January 31, 2018, there were 14,470,341 stock options and
restricted stock units outstanding, 484,077 shares available for issuance under our Amended and Restated Stock Incentive Plan,
and 277,391 shares available for issuance under our Employee Stock Purchase Plan. In addition, we could also make equity compensation
grants outside of our Stock Incentive Plan. The shares underlying existing stock options, restricted stock units and possible future
stock options, stock appreciation rights and stock awards have been registered pursuant to registration statements on Form S-8.
If some or all of such shares are sold or otherwise issued into the
public market over a short period of time, our current stockholders’ ownership interests may be diluted and the value of
all publicly traded shares is likely to decline, as the market may not be able to absorb those shares at then-current market prices.
Additionally, such sales and issuances may make it more difficult for us to sell equity securities or equity-related securities
in the future at a time and price that our management deems acceptable, or at all.
In March 2017, we entered into a Registration Rights Agreement with
entities affiliated with Baker Bros. Advisors LP (the “Baker Entities”) to provide that, if requested, we will register
the shares of our common stock beneficially owned by the Baker Entities for resale under the Securities Act. Our registration obligations
pursuant to the Registration Rights Agreement cover all shares then held or thereafter acquired by the Baker Entities, for up to
ten years, and include our obligation to facilitate certain underwritten public offerings of our common stock by the Baker Entities
in the future. On May 10, 2017, we filed a registration statement on Form S-3 with respect to 11,710,951 shares of common stock
held by the Baker Entities. If the Baker Entities, by exercising their underwriting rights or otherwise, sell a large number of
our shares, or the market perceives that the Baker Entities intend to sell a large number of our shares, this could adversely affect
the market price of our common stock.
We have anti-takeover provisions in our corporate charter documents
that may result in outcomes with which you do not agree.
Our board of directors has the authority to issue up to 4,800,000
shares of undesignated preferred stock and to determine the rights, preferences, privileges and restrictions of those shares without
further vote or action by our stockholders. The rights of the holders of any preferred stock that may be issued in the future may
adversely affect the rights of the holders of common stock. The issuance of preferred stock could make it more difficult for third
parties to acquire a majority of our outstanding voting stock.
In addition, our certificate of incorporation provides for staggered
terms for the members of the board of directors and supermajority approval of the removal of any member of the board of directors
and prevents our stockholders from acting by written consent or from calling special meetings of stockholders. Our certificate
also requires supermajority approval of any amendment of these provisions. These provisions and other provisions of our by-laws
and of Delaware law applicable to us could delay or make more difficult a merger, tender offer or proxy contest involving us.
We have never paid dividends on our common stock and do not anticipate
doing so in the foreseeable future.
We have never paid cash dividends on our stock. We currently intend
to retain all future earnings, if any, for use in the operation of our business. Accordingly, we do not anticipate paying cash
dividends on our common stock in the foreseeable future.
Information Regarding Forward-Looking Statements
This filing contains forward-looking statements within the meaning
of Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created
in Section 21E. All statements other than statements of historical facts contained in this filing are forward-looking statements.
These forward-looking statements can generally be identified by the use of words such as “may,” “will,”
“intends,” “plans,” “believes,” “anticipates,” “expects,” “estimates,”
“predicts,” “potential,” the negative of these words or similar expressions. Statements that describe our
future plans, strategies, intentions, expectations, objectives, goals or prospects are also forward-looking statements. Discussions
containing these forward-looking statements are principally contained in “Business,” “Risk Factors” and
“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as any amendments
we make to those sections in filings with the SEC. These forward-looking statements include, but are not limited to, statements
about:
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statements about the benefits of the transactions contemplated by the Merger Agreement, including future
financial and operating results;
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Idera's and BioCryst's plans, objectives, expectations and intentions;
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the expected timing of completion of the transactions contemplated by the Merger Agreement; and other
statements relating to the Mergers that are not historical facts;
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the preclinical development, clinical development, commercialization, or post-marketing studies of our product candidates and products, including our HAE program, peramivir, galidesivir, and early stage discovery programs;
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the potential funding from our contracts with NIAID/HHS and BARDA/HHS for the development of galidesivir;
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the potential for government stockpiling orders of peramivir, additional regulatory approvals of peramivir or milestones royalties or profit from sales of peramivir by us or our partners;
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the potential use of peramivir as a treatment for H1N1, H5N1, and H7N9 or other strains of influenza;
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the implementation of our business model, strategic plans for our business, products, product candidates and technology;
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our ability to establish and maintain collaborations or out-license rights to our product candidates;
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plans, programs, progress and potential success of our collaborations, including SUL for peramivir, Mundipharma for Mundesine
and Shionogi and Green Cross for peramivir in their territories;
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Royalty Sub’s ability to service its payment obligations in respect of the PhaRMA Notes;
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the Currency Hedge Agreement entered into by us in connection with the issuance by Royalty Sub of the PhaRMA Notes;
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the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and technology;
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our ability to operate our business without infringing the intellectual property rights of others;
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estimates of our expenses, revenues, capital requirements, annual cash utilization, and our needs for additional financing;
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our ability to continue as a going concern;
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the timing or likelihood of regulatory filings or regulatory agreements, deferrals, and approvals;
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our ability to raise additional capital to fund our operations or repay our recourse debt obligations;
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our ability to comply with the covenants as set forth in the agreements governing our debt obligations;
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our financial performance; and
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competitive companies, technologies and our industry.
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These statements relate to future events or to our future financial
performance and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance
or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking
statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those
listed under “Risk Factors.” Any forward-looking statement reflects our current views with respect to future events
and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, industry
and future growth. Except as required by law, we assume no obligation to update or revise these forward-looking statements for
any reason, even if new information becomes available in the future.