RISK FACTORS
Before making an investment decision, you should carefully consider the risks described below and discussed in the
section titled "Risk Factors" in our most recent Annual Report on Form 10-K, as well as the risks, uncertainties and additional information set forth in our SEC reports on Forms 10-K,
10-Q and 8-K and in other documents incorporated by reference in this prospectus supplement and the accompanying prospectus. We expect to update these Risk Factors from time to time in the periodic
and current reports that we file with the SEC after the date of this prospectus supplement. These updated Risk Factors will be incorporated by reference in this prospectus
supplement.
Our business, financial condition or results of operations could be materially adversely affected by any of these risks. The trading price of our common stock
could decline due to any of these risks,
and you may lose all or part of your investment. The risks and uncertainties we have described are not the only ones we face. Additional risks and uncertainties not presently known to us or that we
currently deem immaterial may also affect our business, financial condition results of operations and prospects. Certain statements below are forward-looking statements. See the information included
under the heading "Special Note Regarding Forward-Looking Statements."
Risks Related to Our Business
We have limited operating history, we have incurred significant operating losses since inception and we
expect to incur significant operating losses for the foreseeable future. We may never become profitable or, if achieved, be able to sustain profitability.
We have incurred significant operating losses since our inception and expect to incur significant losses for the foreseeable future as we
continue our clinical trial and development programs for MGL-3196 and other future product candidates. As of March 31, 2018, we had an accumulated deficit of approximately
$112.8 million. Losses have principally resulted from costs incurred in our preclinical and clinical trials, research and development programs and from our general and administrative expenses.
As of March 31, 2018, we had cash, cash equivalents and marketable securities of approximately $182.8 million. In the future, we intend to continue to conduct research and development,
clinical testing, regulatory compliance and, if MGL-3196 or other future product candidates are approved, sales and marketing activities that, together with anticipated general and administrative
expenses, will likely result in us incurring further significant losses for the foreseeable future.
We
currently generate no revenue from product sales, and we may never be able to commercialize MGL-3196 or other future product candidates. We do not currently have the required
approvals to market MGL-3196 or any other future product candidates, and we may never receive them. We may not be profitable even if we or any of our future development partners succeed in
commercializing any of our product candidates. Because of the numerous risks and uncertainties associated with developing and commercializing our product candidates, we are unable to predict the
extent of any future losses or when we will become profitable, if at all.
Our business depends on the success of MGL-3196, which is still in clinical development and has not completed
a pivotal trial. If we are unable to obtain regulatory approval for and successfully commercialize MGL-3196, or we experience significant delays in doing so, our business will be materially harmed.
To date, the sole focus of our product development has been MGL-3196, a liver-directed selective thyroid hormone receptor beta agonist for
potential use in non-alcoholic steatohepatitis, or NASH, and familial hypercholesterolemia, or FH. Successful continued development and ultimate regulatory approval of MGL-3196 for NASH or genetic
dyslipidemias, such as FH, is critical to the future success of our business. We have invested, and will continue to invest, a significant portion
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our time and financial resources in the clinical development of MGL-3196. We will need to raise sufficient funds to successfully complete our clinical development program for MGL-3196 in NASH and
FH. The future regulatory and commercial success of MGL-3196 is subject to a number of risks, including the following:
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we may not have sufficient financial and other resources to complete the necessary clinical trials for MGL-3196, including, but not limited to,
our currently ongoing Phase 2 clinical trials and our planned registrational clinical trials to obtain drug approval;
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the mechanism of action of MGL-3196 is complex and we do not know the degree to which it will translate into a therapeutic benefit, if any, in
NASH, FH or any other indication, and we do not know the degree to which the complex mechanism of action may contribute to long term safety issues or adverse events, if any, when MGL-3196 is taken for
prolonged periods such as in the treatment of NASH, FH or any other indication;
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we may not be able to obtain adequate evidence from clinical trials of efficacy and safety for MGL-3196 in NASH, FH or any other indication;
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we do not know the degree to which MGL-3196 will be accepted as a therapy by physicians, patients and payors, even if approved;
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in our clinical programs for MGL-3196, we may experience variability in patients, adjustments to clinical trial procedures and the need for
additional clinical trial sites, which could delay our clinical trial progress;
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the results of our clinical trials may not meet the level of statistical or clinical significance required by the FDA or comparable foreign
regulatory bodies for marketing approval;
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patients in our clinical trials may die or suffer other adverse effects for reasons that may or may not be related to MGL-3196, which could
delay or prevent further clinical development;
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the standards implemented by clinical or regulatory agencies may change at any time;
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we cannot be certain what efficacy endpoints FDA or foreign clinical or regulatory agencies may require in a Phase 3 clinical trial of
NASH or FH or for approval of our product candidates; we also cannot be certain if we will be able to gain accelerated approval of any of our product candidates based on surrogate endpoints;
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the FDA or foreign clinical or regulatory agencies will likely require efficacy endpoints for Phase 3 clinical trials for the treatment
of NASH or FH that differ from the endpoints of our current Phase 2 trials and the results of our Phase 3 clinical trials may not be as favorable as the results we have observed to date
in our current trials;
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other differences in the design of our planned Phase 3 clinical trials of the treatment of NASH, including the use of a new tablet
formulation of MGL-3196 and the inclusion of patients with more advanced NASH, could cause the results of our Phase 3 trials to be less favorable than the results we observed in our
Phase 2 trials in NASH;
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if we obtain accelerated approval of a product candidate based on a surrogate endpoint, we will likely be required to conduct a post-approval
clinical outcomes trial to confirm the clinical benefit of the product candidate and if the post-approval trial is not successful we may not be able to continue marketing the product;
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we cannot be certain of the number and type of clinical trials and non-clinical studies that FDA or other regulatory agencies will require in
order to approve MGL-3196 for NASH or FH;
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if approved for NASH, MGL-3196 will likely compete with the off-label use of currently marketed products and other therapies in development
that may reach approval for NASH prior to MGL-3196;
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if approved for FH, MGL-3196 will likely compete with currently approved and marketed products and other therapies in development that may
reach approval for FH prior to MGL-3196; and
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we may not be able to obtain, maintain or enforce our patents and other intellectual property rights.
Of
the large number of drugs in development in the pharmaceutical industry, only a small percentage results in the submission of a new drug application, or NDA, to the FDA and even
fewer are approved for commercialization. Furthermore, even if we do receive regulatory approval to market MGL-3196, any such approval may be subject to limitations on the indicated uses or patient
populations for which we may market the products. Accordingly, even if we are able to obtain the requisite financing to continue to fund our development programs, we may be unable to successfully
develop or commercialize MGL-3196. If we or any of our future development partners are unable to develop, or obtain regulatory approval for, or, if approved, successfully commercialize MGL-3196, we
may not be able to generate sufficient revenue to continue our business.
Clinical trials are very expensive, time-consuming and difficult to design and implement and involve
uncertain outcomes. Furthermore, the results of preclinical studies and early clinical trials are not always predictive of future results. Any product candidate that we advance into clinical trials,
including MGL-3196, may not have favorable results in later clinical trials or receive regulatory approval.
Drug development has inherent risk. We will be required to demonstrate through adequate and well-controlled clinical trials that our product
candidates are safe and effective, with a favorable benefit-risk profile, for use in our target indications before we can seek regulatory approvals for its commercial sale. Clinical studies are
expensive, difficult to design and implement, can take many years to complete and are uncertain as to outcome. Delay or failure can occur at any stage of development, including after commencement of
any of our clinical trials. In addition, success in early clinical trials does not mean that later clinical trials will be successful, because later-stage clinical trials may be conducted in broader
patient populations and involve different study designs. For instance, our Phase 1 results and our Phase 2 primary endpoint results in NASH may not be predictive of any future
Phase 2 results or of results in any Phase 3 clinical trial in NASH. Furthermore, our future trials will need to demonstrate sufficient safety and efficacy in significantly larger
patient populations for approval by regulatory authorities. Companies frequently suffer significant setbacks in advanced clinical trials, even after earlier clinical trials have shown promising
results, and we cannot be certain that we will not face similar setbacks. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that
have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products. In addition, only a
small percentage of drugs under development result in the submission of an NDA to the FDA and even fewer are approved for commercialization.
We
cannot be certain that any of our ongoing or future clinical trials will be successful, and any safety concerns observed in any one of our clinical trials in our targeted indications
could limit the prospects for regulatory approval of our product candidates in those and other indications.
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Because MGL-3196 has not yet received regulatory approval for any indication, it is difficult to predict the
time and cost of development and our ability to successfully complete clinical development and obtain the necessary regulatory approvals for commercialization.
MGL-3196 has not yet received regulatory approval for the treatment of NASH, FH or any other indication, and unexpected problems may arise that
could cause us to delay, suspend or terminate our development efforts in any or all indications. Further, MGL-3196 has not yet demonstrated efficacy in patients with NASH or FH, and the long-term
safety consequences of a liver-directed thyroid hormone receptor beta agonist are not known. Regulatory approval of new product candidates such as MGL-3196 can be more expensive and take longer than
approval for candidates for the treatment of more well-understood diseases with previously approved products.
If clinical trials or regulatory approval processes for our product candidates are prolonged, delayed or
suspended, we may be unable to commercialize our product candidates on a timely basis, which would require us to incur additional costs and delay our receipt of any revenue from potential product
sales.
We cannot predict whether we will encounter problems with any of our completed, ongoing or planned clinical trials that will cause us or any
regulatory authority to delay, suspend, or terminate those clinical trials or delay the analysis of data derived from them. A number of events, including any of the following, could delay or impede
completely the completion of our ongoing and planned clinical trials and negatively affect our ability to obtain regulatory approval for, and to market and sell, a particular product
candidate:
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conditions imposed on us by the FDA or other regulatory authorities regarding the scope or design of our clinical trials;
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insufficient supply of our product candidates or other materials necessary to conduct and complete our clinical trials;
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slow enrollment and retention rate of subjects in our clinical trials; and
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serious and unexpected drug-related side effects related to the product candidate being tested.
Commercialization
of our product candidates may be delayed by the imposition of additional conditions on our clinical trials by the FDA or any other applicable foreign regulatory
authority or the requirement of additional supportive studies by the FDA or such foreign regulatory authority.
We
do not know whether our clinical trials will begin as planned, will need to be restructured, will enroll an adequate number of patients on time, or will be completed on schedule, if
at all. Delays in the initiation, enrollment or completion of our clinical trials will result in increased development costs for our product candidates, and our financial resources may be insufficient
to fund any incremental costs. In addition, if our clinical trials are delayed, our competitors may be able to bring products to market before we do and the commercial viability of our product
candidates could be limited.
If we inadvertently fail to comply with foreign regulatory requirements governing human clinical trials and
marketing approval for drugs, we could be prevented from selling our drug candidates in foreign markets, which may adversely affect our operating results and financial condition.
The requirements governing the conduct of clinical trials, product licensing, pricing, and reimbursement for marketing our drug candidates
outside the United States vary greatly from country to country and may require additional testing. We expect that our future clinical
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development
of our drug candidates will involve a number of clinical trials in foreign jurisdictions, particularly in Europe. We have no experience in obtaining foreign regulatory approvals. The time
required to obtain approvals outside the United States may differ from that required to obtain FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. Approval by
the FDA does not guarantee approval by regulatory authorities in other countries, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other countries
or by the FDA. Failure to comply with these regulatory requirements or obtain required approvals could impair our ability to develop foreign markets for our drug candidates and may have a material
adverse effect on our results of operations and financial condition.
We depend on enrollment of patients in our clinical trials for our product candidates. If we encounter
difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.
Identifying and qualifying patients to participate in clinical trials of our product candidates is critical to our success. We may not be able
to initiate, continue, or complete clinical trials required by the FDA or foreign regulatory agencies for MGL-3196 if we are unable to locate and enroll a sufficient number of eligible patients to
participate in these clinical trials. We expect our Phase 3 clinical trials of MGL-3196 will require that we enroll significantly more patients than were enrolled in our Phase 2 trials.
Patient enrollment, a significant factor in the timing to conduct and complete clinical trials, is affected by many factors, including the size and nature of the patient population, the proximity of
patients to clinical sites, the eligibility criteria for the trial, the design of the clinical trial, competing clinical trials, and clinicians' and patients' perceptions as to the potential
advantages and disadvantages of the product candidate being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating. For
instance, we are aware that other companies conducting clinical trials in NASH patients have had delays in recruiting patients for their trials. In the proposed clinical trials, patient willingness to
undergo a liver biopsy in our NASH trials, and identification of patients willing to participate in our FH trials due to the rarity of the disease, are also risk factors. Potential patients for
MGL-3196 may not be adequately diagnosed or identified with the diseases which we are targeting or may not meet the entry criteria for our studies.
The
FDA typically requires sponsors of lipid-lowering product candidates to conduct drug-drug interaction studies with statins because statins may have increased safety risks when
administered together with other drug therapies that affect their pharmacokinetic profile. We have completed two Phase 1 clinical drug interaction studies of MGL-3196 and statins in 39 normal
healthy volunteers, which showed MGL-3196 to have a favorable safety profile and to be well-tolerated. We have completed a Phase 2 clinical trial in NASH including patients taking low dose
statins. We have also completed a Phase 2 clinical trial in HeFH including patients taking high dose statins. In general,
drug interactions between MGL-3196 and statins and any other drug that might result in adverse events could delay development in later clinical trials.
We
will be required to identify and enroll a sufficient number of patients for each of our ongoing and planned clinical trials of MGL-3196 for NASH and FH indications, respectively. We
also may encounter difficulties in identifying and enrolling NASH patients and FH patients with a stage of disease appropriate for our ongoing or future clinical trials. We may not be able to initiate
or continue clinical trials if we are unable to locate a sufficient number of eligible patients to participate in the clinical trials required by the FDA or other foreign regulatory agencies. In
addition, the process of finding and diagnosing patients may prove costly. Our inability to enroll a sufficient number of patients for any of our clinical trials would result in significant delays or
may require us to abandon one or more clinical trials.
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Any product candidate in our current or future clinical trials may cause unacceptable adverse events or side
effects or have other properties that may delay or prevent its regulatory approval or commercialization or limit its commercial potential.
Unacceptable adverse events or undesirable side effects caused by any of our product candidates in current or future clinical trials could
cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in the denial of regulatory approval by the FDA or other regulatory authorities for any or all targeted
indications and markets. This in turn could prevent us from completing development of or commercializing the affected product candidate and generating revenue from its sale. If any of our product
candidates cause unacceptable adverse events in clinical trials, we may not be able to obtain regulatory approval or commercialize such product candidate.
Occurrence
of serious treatment-related side effects could impede subject recruitment and clinical trial enrollment or the ability of enrolled patients to complete the trial, require us
to halt the clinical trial, and prevent receipt of regulatory approval from the FDA. They could also adversely affect physician or patient acceptance of our product candidates or result in potential
product liability claims. Any of these occurrences may harm our business, financial condition and prospects significantly.
Our product candidates will remain subject to ongoing regulatory review even if they receive marketing
approval, and if we fail to comply with continuing regulations, we could lose these approvals and the sale of any approved commercial products could be suspended.
Even if we receive regulatory approval to market a particular product candidate, the manufacturing, labeling, packaging, distribution, adverse
event reporting, storage, advertising, promotion, sampling, and record keeping related to the product will remain subject to extensive regulatory requirements. These requirements include submissions
of safety and other post-marketing information and reports, registration, as well as continued compliance with cGMP, regulations and GCPs, for any clinical trials that we conduct post-approval, all of
which may result in significant expense and limit our ability to commercialize such products. In addition, any regulatory approvals that we receive for our product candidates may also be subject to
limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including
Phase 4 clinical trials, and surveillance to monitor the safety and efficacy of the product candidate. The FDA may also require a REMS Program as a condition of approval of our product
candidates, which could include requirements for a medication guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient
registries and other risk minimization tools.
If
we fail to comply with the regulatory requirements of the FDA and other applicable domestic and foreign regulatory authorities, or previously unknown problems with any approved
product, manufacturer, or manufacturing process are discovered, we could be subject to administrative or judicially imposed sanctions, including:
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restrictions on the products, manufacturers, or manufacturing processes;
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warning letters or untitled letters;
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civil or criminal penalties;
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fines;
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injunctions;
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product seizures or detentions;
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pressure to initiate voluntary product recalls;
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suspension or withdrawal of regulatory approvals; and
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refusal to approve pending applications for marketing approval of new products or supplements to approved applications.
If
any of these events occurs, our ability to sell such products may be impaired, and we may incur substantial additional expense to comply with regulatory requirements, which could
adversely affect our business, financial condition and results of operations.
We operate in a highly competitive and rapidly changing industry, and our product candidates may become
obsolete.
We are engaged in a rapidly evolving field. Competition from other pharmaceutical companies, biotechnology companies and research and academic
institutions is intense and likely to increase. Many of those companies and institutions have substantially greater financial, technical and human resources than us. Those companies and institutions
also have substantially greater experience in developing products, conducting clinical trials, obtaining regulatory approval and in manufacturing and marketing pharmaceutical products. Our competitors
may succeed in obtaining regulatory approval for their products more rapidly than we do. Competitors have developed or are in the process of developing technologies that are, or in the future may be,
the basis for competitive products. Some of these competitive products may have an entirely different approach or means of accomplishing the desired therapeutic effect than products being developed by
us. Our competitors may succeed in developing products that are more effective and/or cost competitive than those we are developing, or that would render our product candidates less competitive or
even obsolete. In addition, one or more of our competitors may achieve product commercialization or patent protection earlier than us, which could materially adversely affect our business.
If the FDA or other applicable regulatory authorities approve generic products that compete with any of our
or any of our partners' product candidates, the sales of our product candidates would be adversely affected.
Once an NDA or marketing authorization application outside the United States is approved, the product covered thereby becomes a "listed drug"
that can, in turn, be cited by potential competitors in support of approval of an abbreviated new drug application in the United States. Agency regulations and other applicable regulations and
policies provide incentives to manufacturers to create modified, non-infringing versions of a drug to facilitate the approval of an abbreviated new drug application or other application for generic
substitutes in the United States and in nearly every pharmaceutical market around the world. These manufacturers might only be required to conduct a relatively inexpensive study to show that their
product has the same active ingredient(s), dosage form, strength, route of administration and conditions of use, or labeling, as our product and that the generic product is bioequivalent to our
product, meaning it is absorbed in the body at the same rate and to the same extent as our product. These generic equivalents, which must meet the same quality standards as branded pharmaceuticals,
would be significantly less costly than our product to bring to market, and companies that produce generic equivalents are generally able to offer their products at lower prices. Thus, after the
introduction of a generic
competitor, a significant percentage of the sales of any branded product are typically lost to the generic product. Accordingly, competition from generic equivalents to our product or any of our
partners' future products, if any, would materially adversely affect our future revenue, profitability and cash flows and substantially limit our ability to obtain a return on the investments we have
made and expect to make in our or any of our partners' product candidates, including MGL-3196.
Competition
that our or any of our partners' products may face from generic versions of our products could materially and adversely impact our future revenue, profitability and cash
flows and
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substantially
limit our ability to obtain a return on the investments we have made in those product candidates.
If physicians and patients do not accept our future products or if the market for indications for which any
product candidate is approved is smaller than expected, we may be unable to generate significant revenue, if any.
Even if any of our product candidates obtain regulatory approval, they may not gain market acceptance among physicians, patients, and
third-party payers. Efforts to educate the medical community and third-party payers on the benefits of our product candidates may require significant resources and may not be successful. If any of our
product candidates do not achieve an adequate level of acceptance, we may not generate significant product revenue or any profits from operations. Physicians may decide not to recommend its treatments
for a variety of reasons including:
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timing of market introduction of competitive products;
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demonstration of clinical safety and efficacy compared to other products;
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cost-effectiveness;
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limited or no coverage by third-party payers;
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convenience and ease of administration;
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prevalence and severity of adverse side effects;
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restrictions in the label of the drug;
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other potential advantages of alternative treatment methods; and
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ineffective marketing and distribution support of its products.
If
any of our product candidates are approved, but fail to achieve market acceptance or such market is smaller than anticipated, we may not be able to generate significant revenue and
our business would suffer.
As we evolve from a company that is primarily involved in clinical development to a company that is also
involved in commercialization, we may encounter difficulties in expanding our operations successfully.
As we advance our product candidates through clinical trials, we will need to expand our development, regulatory, manufacturing, and marketing
and sales capabilities and may need to further contract with third parties to provide these capabilities. As our operations expand, we likely will need to manage additional relationships with such
third parties, as well as additional collaborators, distributors, marketers and suppliers.
Maintaining
third party relationships for these purposes will impose significant added responsibilities on members of our management and other personnel. We must be able to effectively
manage our development efforts; recruit and train sales and marketing personnel, effectively manage our participation in the clinical trials in which our product candidates are involved and improve
our managerial, development, operational and finance systems, all of which may impose a strain on our administrative and operational infrastructure.
If
we enter into arrangements with third parties to perform sales, marketing or distribution services, any product revenues that we receive, or the profitability of these product
revenues to us, are likely to be lower than if we were to market and sell any products that we develop without the involvement of these third parties. In addition, we may not be successful in entering
into arrangements with third parties to sell and market our products or in doing so on terms that are
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favorable
to us. We likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively. If we
do not establish sales and marketing capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our products.
The uncertainty associated with pharmaceutical reimbursement and related matters may adversely affect our
business.
Market acceptance and sales of any one or more of our product candidates will depend on reimbursement policies and may be affected by future
healthcare reform measures in the United States and in foreign jurisdictions. Government authorities and third-party payers, such as private health insurers and health maintenance organizations,
decide which drugs they will cover and establish payment levels. We cannot be certain that reimbursement will be available for any of our product candidates. Also, we cannot be certain that
reimbursement policies will not reduce the demand for, or the price paid for, our products. If reimbursement is not available or is available on a limited basis, we may not be able to successfully
commercialize any product candidates that we develop.
In
the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, also called the Medicare Modernization Act, or MMA, changed the way Medicare covers and
pays for pharmaceutical products. The legislation established Medicare Part D, which expanded Medicare coverage for outpatient prescription drug purchases by the elderly but provided authority
for limiting the number of drugs that will be covered in any therapeutic class. The MMA also introduced a new reimbursement methodology based on average sales prices for physician-administered drugs.
The United States and several foreign jurisdictions are considering, or have already enacted, a number of legislative and regulatory proposals to change the healthcare system in ways that could affect
our ability to sell our products profitably. Among policy makers and payers in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated
goals of containing healthcare costs, improving quality and/or expanding access to healthcare. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has
been significantly affected by major legislative initiatives. We expect to experience pricing pressures in connection with the sale of any products that we develop due to the trend toward managed
healthcare, the increasing influence of health maintenance organizations, and additional legislative proposals.
In
March 2010, the Patient Protection and Affordable Care Act, or ACA, became law in the United States. The goal of ACA is to reduce the cost of healthcare and substantially change the
way healthcare is financed by both government and private insurers. While we cannot predict what impact on federal reimbursement policies this legislation will have in general or on our business
specifically, the ACA may result in downward pressure on pharmaceutical reimbursement, which could negatively affect market acceptance of, and the price we may charge for, any products we develop that
receives regulatory approval. We also cannot predict the impact of ACA on us as many of the ACA reforms require the promulgation of detailed regulations implementing the statutory provisions, which
have not yet been fully implemented.
If any product liability lawsuits are successfully brought against us or any of our collaborative partners,
we may incur substantial liabilities and may be required to limit commercialization of our product candidates.
We face an inherent risk of product liability lawsuits related to the testing of our product candidates in seriously ill patients and will face
an even greater risk if product candidates are approved by regulatory authorities and introduced commercially. Product liability claims may be brought against us or our partners by participants
enrolled in our clinical trials, patients, healthcare
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providers
or others using, administering or selling any of our future approved products. If we cannot successfully defend ourselves against any such claims, we may incur substantial liabilities.
Regardless of merit or eventual outcome, liability claims may result in:
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decreased demand for any of our future approved products;
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injury to our reputation;
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withdrawal of clinical trial participants;
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termination of clinical trial sites or entire trial programs;
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significant litigation costs;
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substantial monetary awards to or costly settlements with patients or other claimants;
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product recalls or a change in the indications for which products may be used;
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loss of revenue;
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diversion of management and scientific resources from our business operations; and
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the inability to commercialize our product candidates.
If
any of our product candidates are approved for commercial sale, we will be highly dependent upon consumer perceptions of us and the safety and quality of our products. We could be
adversely affected if we are subject to negative publicity. We could also be adversely affected if any of our products or any similar products distributed by other companies prove to be, or are
asserted to be, harmful to patients. Also, because of our dependence upon consumer perceptions, any adverse publicity associated with illness or other adverse effects resulting from patients' use or
misuse of our products or any similar products distributed by other companies could have a material adverse impact on our results of operations.
We
do not currently hold product liability insurance coverage. Prior to commercialization of our product candidates, we will need to purchase insurance coverage. As a result, we may be
unable to maintain or obtain sufficient insurance at a reasonable cost to protect us against losses that could have a material adverse effect on our business. These liabilities could prevent or
interfere with our product development and commercialization efforts. A successful product liability claim or
series of claims brought against us, particularly if judgments exceed our insurance coverage, could decrease our cash resources and adversely affect our business, financial condition and results of
operations.
Our employees, contractors, vendors and partners may engage in misconduct or other improper activities,
including noncompliance with regulatory standards and requirements and insider trading.
We are exposed to the risk of fraud or other misconduct by our employees, contractors, vendors or partners. Misconduct by these parties could
include failures to comply with FDA regulations, to provide accurate information to the FDA, to comply with federal and state healthcare fraud and abuse laws and regulations, to report financial
information or data timely, completely or accurately, or to disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to
extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing,
discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Third-party misconduct could also involve the improper use of information obtained
in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. We have adopted a Code of Business Conduct and Ethics, but it is not always possible to
identify and deter misconduct, and the precautions we take to detect and prevent this activity may not be effective in
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controlling
unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If
any such actions are instituted against us resulting from this misconduct and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our
business, including the imposition of significant fines or other sanctions.
We enter into various contracts in the normal course of our business in which we indemnify the other party to
the contract. In the event we have to perform under these indemnification provisions, it could have a material adverse effect on our business, financial condition and results of operations.
In the normal course of business, we periodically enter into academic, commercial, service, collaboration, licensing, consulting and other
agreements that contain indemnification provisions. With respect to our academic and other research agreements, we typically indemnify the institution and related parties from losses arising from
claims relating to the products, processes or services made, used, sold or performed pursuant to the agreements for which we have secured licenses, and from claims arising from our or our potential
sublicensees' exercise of rights under the agreements. With respect to our commercial agreements, we indemnify our vendors from any third-party product liability claims that could result from the
production, use or consumption of the product, as well as for alleged infringements of any patent or other intellectual property right by a third party.
Should
our obligation under an indemnification provision exceed applicable insurance coverage or if we are denied insurance coverage, our business, financial condition and results of
operations could be adversely affected. Similarly, if we are relying on a collaborator to indemnify us and the collaborator is denied insurance coverage or the indemnification obligation exceeds the
applicable insurance coverage, and if the collaborator does not have other assets available to indemnify us, our business, financial condition and results of operations could be adversely affected.
If we fail to develop and commercialize other product candidates, we may be unable to grow our business.
Although the development and commercialization of MGL-3196 is our primary focus, as part of our longer-term growth strategy, we plan to
evaluate the development and commercialization of other therapies related to thyroid hormone, orphan and other diseases. We will evaluate internal opportunities from our compound libraries, and also
may choose to in-license or acquire other product candidates as well as commercial products to treat patients suffering from thyroid hormone, orphan or other disorders with high unmet medical needs
and limited treatment options. These other product candidates may require additional, time-consuming development efforts prior to commercial sale, including preclinical studies, clinical trials and
approval by the FDA and/or applicable foreign regulatory authorities. All product candidates are prone to the risks of failure that are inherent in pharmaceutical product development, including the
possibility that the product candidate will not be shown to be sufficiently safe and effective for approval by regulatory authorities. In addition, we cannot assure you that any such products that are
approved will be manufactured or produced economically, be successfully commercialized, be widely accepted in the marketplace, or be more effective than other commercially available alternatives.
If we lose key management personnel, or if we fail to recruit additional highly skilled personnel, our
ability to identify, develop and commercialize products will be impaired.
We are highly dependent on principal members of our management team, including our Chief Executive Officer, Paul A. Friedman, M.D., and our
Chief Medical Officer, Rebecca Taub, M.D. These executives each have significant pharmaceutical industry experience. The loss of any member of
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our
management team or scientific staff, including Drs. Friedman and Taub, would impair our ability to identify, develop and market new products. Our management and other employees may voluntarily
terminate their employment with us at any time. The loss of the services of these or other key personnel, or the inability to attract and retain additional qualified personnel, could result in delays
to development or approval, loss of sales and diversion of management resources. In addition, we depend on our ability to attract and retain other highly skilled personnel. Competition for qualified
personnel is intense, and the process of hiring and integrating such qualified personnel is often lengthy. We may be unable to recruit such personnel on a timely basis, if at all, which would
negatively impact our development and commercialization programs.
Additionally,
we do not currently maintain "key person" life insurance on the lives of our executives or any of our employees. This lack of insurance means that we may not receive
adequate compensation for the loss of the services of these individuals.
We currently have no marketing, sales or distribution infrastructure with respect to our product candidates.
If we are unable to develop our sales, marketing and distribution capabilities on our own or through collaborations with marketing partners, we will not be successful in commercializing our product
candidates.
We currently have no marketing, sales or distribution capabilities and have limited sales or marketing experience within our organization. If
our product candidate, MGL-3196, is approved, we intend either to establish a sales and marketing organization with technical expertise and supporting distribution capabilities to commercialize
MGL-3196, or to outsource this function to a third party. Either of these options would be expensive and time-consuming. Some or all of these costs may be incurred in advance of any approval of
MGL-3196. In addition, we may
not be able to hire a sales force in the United States that is sufficient in size or has adequate expertise in the medical markets that we intend to target. Any failure or delay in the development of
our internal sales, marketing and distribution capabilities would adversely affect the commercialization of MGL-3196 and other future product candidates.
With
respect to our existing and future product candidates, we may choose to collaborate with third parties that have direct sales forces and established distribution systems, either to
augment our own sales force and distribution systems or as an alternative to our own sales force and distribution systems. To the extent that we enter into co-promotion or other licensing
arrangements, our product revenue may be lower than if we directly marketed or sold any approved products. In addition, any revenue we receive will depend in whole or in part upon the efforts of these
third parties, which may not be successful and are generally not within our control. If we are unable to enter into these arrangements on acceptable terms or at all, we may not be able to successfully
commercialize any approved products. If we are not successful in commercializing any approved products, either on our own or through collaborations with one or more third parties, our future product
revenue will suffer and we may incur significant additional losses.
Even if we obtain FDA approval of MGL-3196 or any other future product candidate, we or our partners may
never obtain approval or commercialize our products outside of the United States, which would limit our ability to realize their full market potential.
In order to market any products outside of the United States, we must establish and comply with numerous and varying regulatory requirements of
other countries regarding clinical trial design, safety and efficacy. Clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval
in one country does not mean that regulatory approval will be obtained in any other country. Approval procedures vary among countries and can involve additional product testing and validation and
additional administrative review periods. Seeking foreign regulatory approvals could result in significant delays, difficulties and costs for us
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and
may require additional preclinical studies or clinical trials which would be costly and time consuming. Regulatory requirements can vary widely from country to country and could delay or prevent
the introduction of our products in those countries. Satisfying these and other regulatory requirements is costly, time consuming, uncertain and subject to unanticipated delays. In addition, our
failure to obtain regulatory approval in any country may delay or have negative effects on the process for regulatory approval in other countries. We and our partners do not have any product
candidates approved for sale in any jurisdiction, including international markets, and we do not have experience in obtaining regulatory approval in international markets. If we or our partners fail
to comply with regulatory requirements in international markets or to obtain and maintain required approvals, our target market will be reduced and our ability to realize the full market potential of
our products will be harmed.
If we do not obtain protection under the Hatch-Waxman Amendments and similar foreign legislation by extending
the term of patents covering each of our product candidates, our business may be materially harmed.
Depending upon the timing, duration and conditions of FDA marketing approval of our product candidates, one or more of our United States
patents may be eligible for limited patent term extension under Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent term extension of up to five years for a patent covering an
approved product as compensation for effective patent term lost during product development and the FDA regulatory review process. However, we may not receive an extension if we fail to apply within
applicable deadlines, fail to apply prior to expiration of relevant patents or otherwise fail to satisfy applicable requirements. Moreover, the length of the extension could be less than we request.
If we are unable to obtain patent term extension or the term of any such extension is less than we request, the period during which we can enforce our patent rights for that product may not extend
beyond the current patent expiration dates and our competitors may obtain approval to market competing products sooner. As a result, our revenue could be potentially materially reduced. Further, if
this occurs, our competitors may take advantage of our investment in development and trials by referencing our clinical and preclinical data and launch their product earlier than might otherwise be
the case.
We may fail to obtain orphan drug designations from the FDA for our product candidates, as applicable, and
even if we obtain such designations, we may be unable to maintain the benefits associated with orphan drug designation, including the potential for market exclusivity.
Our strategy includes filing for orphan drug designation where available for our product candidates. Under the Orphan Drug Act, the FDA may
grant orphan drug designation to a drug or biologic intended to treat a rare disease or condition, which is defined as one occurring in a patient population of fewer than 200,000 in the United States,
or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug or biologic will be recovered from sales in the United
States. In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and user-fee
waivers. In addition, if a product that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan
drug exclusivity, which means that the FDA may not approve any other applications, including a full NDA, to market the same drug or biologic for the same indication for seven years, except in limited
circumstances, such as a showing of
clinical superiority to the product with orphan drug exclusivity or where the manufacturer is unable to assure sufficient product quantity.
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We have not obtained orphan designation for any product candidates to date, although we believe some of the potential indications of our product candidates could
qualify for orphan drug designation and the related benefits if approved for such indications and we may file for orphan drug designation with respect to such indications. Even if we obtain such
designations, we may not be the first to obtain regulatory approval of a product candidate for the orphan-designated indication due to the uncertainties associated with developing pharmaceutical
products. In addition, exclusive marketing rights in the United States may be limited if we seek approval for an indication broader than the orphan-designated indication or may be lost if the FDA
later determines that the request for designation was materially defective or if we are unable to assure sufficient quantities of the product to meet the needs of patients with the orphan-designated
disease or condition. Further, even if we obtain orphan drug designation exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs
with different active moieties may receive and be approved for the same condition, and only the first applicant to receive approval will receive the benefits of marketing exclusivity. Even after an
orphan-designated product is approved, the FDA can subsequently approve a later drug with the same active moiety for the same condition if the FDA concludes that the later drug is clinically superior
if it is shown to be safer, more effective or makes a major contribution to patient care. Orphan drug designation neither shortens the development time or regulatory review time of a drug, nor gives
the drug any advantage in the regulatory review or approval process. In addition, while we may seek orphan drug designation for our product candidates, we may never receive such designations. Failure
to
obtain an orphan drug designation for our product candidates may have a material adverse effect on our business, results of operations and financial condition.
If we or our partners market products in a manner that violates fraud and abuse and other healthcare laws, or
if we or our partners violate government price reporting laws, we or our partners may be subject to administrative civil and/or criminal penalties.
Although we do not currently have any products on the market, if we obtain FDA approval for our product candidates, and begin commercializing
those products in the United States, our operations may be directly, or indirectly through our prescribers, customers and third-party payors, subject to various U.S. federal and state healthcare laws
and regulations. These laws include, among others, the U.S. federal Anti-Kickback Statute and the U.S. federal civil and criminal false claims laws. At such time, if ever, as we or any of our partners
market any of our future approved products, it is possible that some of our business activities and/or our partners could be subject to challenge under one or more of these laws.
Federal
false claims, false statements and civil monetary penalties laws prohibit, among others, any person from knowingly presenting, or causing to be presented, a false claim for
payment to the federal government or knowingly making, or causing to be made, a false statement to get a false claim paid. The federal healthcare program Anti-Kickback Statute prohibits, among other
things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce, or in return for, purchasing, leasing, ordering or arranging for the purchase, lease or order of any
healthcare item or service reimbursable under Medicare, Medicaid or other federally financed healthcare programs. This statute has been interpreted to apply to arrangements between pharmaceutical
manufacturers, on the one hand, and prescribers, purchasers and formulary managers, on the other. Although there are several statutory exceptions and regulatory safe harbors protecting certain common
activities from prosecution, the exceptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchasing or recommending may be subject to
scrutiny if they do not qualify for an exception or safe harbor.
In
addition, we and/or our partners may be subject to patient data privacy and security regulation, including the Health Insurance Portability and Accountability Act of 1996, as amended
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by
the Health Information Technology for Economic and Clinical Health Act, and their respective implementing regulations, which impose specified requirements relating to the privacy, security and
transmission of individually identifiable health information.
Most
states also have statutes or regulations similar to these federal laws, which may apply to items such as pharmaceutical products and services reimbursed by private insurers. We
and/or our partners may be subject to administrative, civil and criminal sanctions for violations of any of these federal and state laws. Pharmaceutical and other healthcare companies have been
prosecuted under these laws for a variety of promotional and marketing activities, such as: providing free trips, free goods, sham consulting fees and grants and other monetary benefits to
prescribers; reporting to pricing services inflated average wholesale prices that were then used by federal programs to set reimbursement rates; engaging in off-label promotion; and submitting
inflated best price information to the Medicaid Rebate Program to reduce liability for Medicaid rebates.
Ensuring
that our internal operations and future business arrangements with third parties comply with applicable healthcare laws and regulations will involve substantial costs. It is
possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations, agency guidance or case law involving applicable fraud and
abuse or other healthcare laws and regulations.
If the third parties on which we rely for the conduct of our clinical trials and results do not perform our
clinical trial activities in accordance with good clinical practices and related regulatory requirements, we may be unable to obtain regulatory approval for or commercialize our product candidates.
We use third-party service providers to conduct and/or oversee the clinical trials of our product candidates and expect to continue to do so
for the foreseeable future. We rely heavily on these parties for successful execution of our clinical trials. Nonetheless, we are responsible for confirming that each of our clinical trials is
conducted in accordance with FDA requirements and our general investigational plan and protocol.
The
FDA requires us and our third-party service providers to comply with regulations and standards, commonly referred to as good clinical practices, or GCP, for conducting, recording
and reporting the results of clinical trials to assure that data and reported results are credible and accurate, and that the trial participants are adequately protected. Our reliance on third parties
that we do not control does not relieve us of these responsibilities and requirements. Third parties may not complete activities on schedule or may not conduct our clinical trials in accordance with
regulatory or GCP requirements or the respective trial plans and protocols. In addition, third parties may not be able to repeat their past successes in clinical trials. The failure of these third
parties to carry out their obligations could delay or prevent the development, approval and commercialization of our product candidates or result in enforcement action against us.
If
our relationship with these third-party providers terminates, we may not be able to enter into arrangements with alternative providers or do so on commercially reasonable terms.
Switching or
adding additional third-party providers involves substantial cost and requires management time and focus, and could delay development and commercialization of our product candidates. Though we intend
to carefully manage our relationships with our third-party providers, there can be no assurance that we will not encounter challenges or delays in the future or that these delays or challenges will
not have a negative impact on our business and financial condition.
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We have relied on, and expect to continue to rely on, third-party manufacturers to produce our product
candidates.
We do not own or operate manufacturing facilities for the production of clinical or commercial quantities of our product candidates, and we
lack the resources and the capabilities to do so. As a result, we currently rely, and expect to rely for the foreseeable future, on third-party manufacturers to supply our product candidates. Reliance
on third-party manufacturers entails risks to which we would not be subject if we manufactured our product candidates or products ourselves, including:
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reliance on third-parties for manufacturing process development, regulatory compliance and quality assurance;
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limitations on supply availability resulting from capacity and scheduling constraints of third-parties;
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the possible breach of manufacturing agreements by third-parties because of factors beyond our control; and
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the possible termination or non-renewal of manufacturing agreements by third-parties, at a time that is costly or inconvenient to us.
If
we do not maintain our key manufacturing relationships, we may fail to find replacement manufacturers or develop our own manufacturing capabilities, which could delay or impair our
ability to obtain regulatory approval for our products and substantially increase our costs or deplete profit margins, if any. If we do find replacement manufacturers, we may not be able to enter into
agreements with them on terms and conditions favorable to us and there could be a substantial delay before new facilities could be qualified and registered with the FDA and other foreign regulatory
authorities.
The
FDA and other foreign regulatory authorities require manufacturers to register manufacturing facilities. The FDA and corresponding foreign regulators also inspect these facilities
to confirm compliance with current good manufacturing practices, or cGMPs. Contract manufacturers may face manufacturing or quality control problems causing drug substance production and shipment
delays or a situation where the contractor may not be able to maintain compliance with the applicable cGMP requirements. Any failure to comply with cGMP requirements or other FDA, European Medicines
Agency, or EMA, and comparable foreign regulatory requirements could adversely affect our clinical research activities and our ability to develop our product candidates and market our products
following approval.
Our
current and anticipated future dependence upon others for the manufacture of our product candidates may adversely affect our future profit margins and our ability to develop our
product candidates and commercialize any products that receive regulatory approval on a timely basis.
We previously identified a material weakness in our internal control over financial reporting and may
identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements of our financial statements or
cause us to fail to meet our reporting obligations or fail to prevent fraud; and in that case, our stockholders could lose confidence in our financial reporting, which would harm our business and
could negatively impact the price of our stock.
Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. If we fail to maintain an effective
system of internal controls, we may be unable to report our financial results accurately or prevent fraud; and, in that case, our stockholders could lose confidence in our financial reporting, which
would harm our business and could negatively impact
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the
price of our stock. On March 31, 2017, we filed with the SEC an amendment to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 to correct certain
errors therein. Management reported a material weakness in our system of internal controls over financial reporting as of September 30, 2016. A material weakness is a deficiency, or combination
of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be
prevented or detected on a timely basis. We remediated this material weakness. We cannot assure you that the measures we have taken to date will be sufficient to avoid future material weaknesses. Even
when we conclude that our internal control over financial reporting provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with U.S. generally accepted accounting principles, or GAAP, because of its inherent limitations, internal control over financial reporting may not prevent or detect
fraud or misstatements.
Our
reporting obligations as a public company will require significant managerial, operational and financial resources for the foreseeable future. If we fail to maintain the adequacy of
our internal control over financial reporting, we may not be able to produce reliable financial reports or help prevent fraud. Our failure to maintain effective internal control over financial
reporting could prevent us from filing our periodic reports on a timely basis which could result in the loss of investor confidence in the reliability of our financial statements, harm our business
and negatively impact the trading price of our common stock.
Risks Relating to Our Intellectual Property
Our rights to develop and commercialize our product candidates are subject in part to the terms and
conditions of a license to MGL-3196 granted to us by Roche.
We entered into the Roche Agreement, with Roche, on December 18, 2008. Pursuant to the terms of the Roche Agreement, we assumed control
of all development and commercialization of MGL-3196 and hold exclusive worldwide rights for all potential indications. Under the Roche Agreement, Roche exclusively licensed certain patent rights and
know-how relating to MGL-3196 in exchange for consideration consisting of an upfront payment, milestone payments tied to the achievement of product development and regulatory milestones, and royalty
payments based on net sales of products containing MGL-3196 or another licensed product, subject to certain reductions. We must use commercially reasonable efforts to conduct clinical and commercial
development programs for products containing MGL-3196. If we determine that it is not reasonable to continue clinical trials or other development of MGL-3196, we may elect to cease further development
and Roche may terminate the license. If we determine not to pursue the development or commercialization of MGL-3196 in certain jurisdictions, including the United States, Roche may terminate the
license for such territories. The Roche Agreement will expire, unless earlier terminated pursuant to other provisions thereof, on the last to occur of (i) the expiration of the last valid claim
of a licensed patent covering the manufacture, use or sale of products containing MGL-3196, or (ii) ten years after the first sale of a product containing MGL-3196.
Under
the Roche Agreement, Roche controls prosecution of the licensed patent rights, although we have a right to comment.
We
do not have, nor have we had, any material disputes with Roche regarding the Roche Agreement. However, if there is any future dispute between us and Roche regarding the parties'
rights under the Roche Agreement, our ability to develop and commercialize MGL-3196, or any other product candidate covered by the Roche Agreement, may be materially harmed. Any uncured, material
breach under the Roche Agreement could result in our loss of exclusive rights to MGL-3196 and may lead to a complete termination of the Roche Agreement and force us to cease product development
efforts for MGL-3196.
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We may fail to comply with any of our obligations under agreements pursuant to which we license rights or
technology, which could result in the loss of rights or technology that are material to our business.
We may enter into license agreements from time to time. Licensing of intellectual property is important to our business and involves complex
legal, business and scientific issues. Disputes may arise regarding intellectual property subject to a license agreement, including but not limited to:
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the scope of rights granted under the license agreement and other interpretation-related issues;
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the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing
agreement;
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the sublicensing of patent and other rights;
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our diligence obligations under the license agreement and what activities satisfy those diligence obligations;
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the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by us and our licensors and
collaborators; and
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the priority of invention of patented technology.
If
disputes over intellectual property and other rights that we have licensed or acquired from third parties prevent or impair our ability to maintain our current licensing arrangements
on acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates.
Our success depends on our ability to protect our intellectual property and our proprietary technologies.
Our success depends on our ability to protect our intellectual property and our proprietary technologies. Our commercial success depends in
part on our ability to obtain and
maintain patent protection and trade secret protection for our product candidates, proprietary technologies, and their uses, as well as our ability to operate without infringing upon the proprietary
rights of others.
We
can provide no assurance that our patent applications or those of our licensors will result in additional patents being issued or that issued patents will afford sufficient
protection against competitors with similar technologies, nor can we provide any assurance that the patents issued will not be infringed, designed around or invalidated by third parties. Even issued
patents may later be found unenforceable or may be modified or revoked in proceedings instituted by third parties before various patent offices or in courts. The degree of future protection for our
proprietary rights is uncertain. Only limited protection may be available and may not adequately protect our rights or permit us to gain or keep any competitive advantage. This failure to properly
protect the intellectual property rights relating to our product candidates could have a material adverse effect on our financial condition and results of operations. Composition-of-matter patents on
the biological or chemical active pharmaceutical ingredients are generally considered to offer the strongest protection of intellectual property and provide the broadest scope of patent protection for
pharmaceutical products, as such patents provide protection without regard to any method of use or any method of manufacturing. While we have licensed rights to issued composition-of-matter patents in
the United States and other jurisdictions for MGL-3196, we cannot be certain that the claims in issued composition-of-matter patents will not be found invalid or unenforceable if challenged. We cannot
be certain that the claims in owned and licensed patent applications covering our product candidates will be considered patentable by the United States Patent and Trademark Office, or USPTO, and valid
by courts in the United States or by the patent offices and
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courts
in foreign jurisdictions. Even if we owned and licensed patent applications covering our product candidates, the patents may not be enforced against competitors. For example, a formulation
patent will not be enforced against those making and marketing a product that has the same active pharmaceutical ingredient in a different formulation that is not claimed in the formulation patent.
Method-of-use patents protect the use of a product for the specified method or for treatment of a particular indication. This type of patent may not be enforced against competitors making and
marketing a product that has the same active pharmaceutical ingredient but is used for a method not claimed in the patent. Moreover, even if competitors do not actively promote their product for our
targeted indications, physicians may prescribe these products "off-label." Although off-label prescriptions may infringe or contribute to the infringement of method-of-use patents, the practice is
common and such infringement is difficult to prevent or prosecute.
Our
licensed composition-of-matter patent licensed from Roche for MGL-3196 is expected to expire in the United States in 2026. Our co-owned patents and pending patent applications that
cover our particular solid form, dosage, method of manufacturing, and uses of MGL-3196 to treat various indications are expected to expire in 2033. While patent term adjustments or patent term
extensions could result in later expiration dates for each of these patents, there can be no assurances that we will receive any patent adjustments or patent term extensions. The patent application
process and
patent maintenance and enforcement are subject to numerous risks and uncertainties, and there can be no assurance that we or any of our future development partners will be successful in protecting our
product candidates by obtaining and defending patents. These risks and uncertainties include the following:
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the USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other
provisions during the patent process and after a patent has issued. There are situations in which noncompliance can result in abandonment or lapse of a patent or patent application, resulting in
partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwise have been the case;
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patent applications may not result in any patents being issued;
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patents may be challenged, invalidated, modified, revoked, circumvented, found to be unenforceable or otherwise may not provide any competitive
advantage;
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we and our licensor(s) may not have been the first to make the inventions covered by pending patent applications or issued patents;
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we and our licensor(s) may not have been the first to file patent applications for our product candidates or the compositions developed, or for
their uses;
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others may independently develop identical, similar or alternative products or compositions and uses thereof;
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we and our licensor(s)' disclosures in patent applications may not be sufficient to meet the statutory requirements for patentability;
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others may design around our owned and licensed patent claims to produce competitive products which fall outside of the scope of the patents;
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others may identify prior art or other bases which could invalidate our or licensor(s)' patents;
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our competitors might conduct research and development activities in the United States and other countries that provide a safe harbor from
patent infringement claims for certain research and development activities, as well as in countries where us and our licensor(s) do
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In
addition, we rely on the protection of our trade secrets and proprietary know-how. Although we have taken steps to protect our trade secrets and unpatented know-how, including
entering into confidentiality agreements with third parties, and confidential information and inventions agreements with employees, consultants and advisors, we cannot provide any assurances that any
of these parties would not breach the agreements to disclose any proprietary information, including trade secrets, and we may not be able to obtain adequate remedies for such breaches. Further, third
parties may still obtain this information by other means, such as breaches of our physical or computer security systems. Enforcing a claim that a party illegally disclosed or misappropriated a trade
secret is difficult, expensive and time-consuming, and the outcome is unpredictable. Moreover, third parties may come upon this or similar information lawfully and independently. We would have no
right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us. Further, intellectual property rights have limitations and do not necessarily
address all potential threats to our competitive position. If any of these events occurs or if we otherwise lose protection for our trade secrets or proprietary know-how, our business may be harmed.
Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of
our patent applications and the enforcement or defense of our issued patents.
On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a
number of significant changes to U.S. patent law. These include provisions that affect the way patent applications will be prosecuted and may also affect patent litigation. In particular, under the
Leahy-Smith Act, the United States transitioned in March 2013 to a "first inventor to file" system in which the first inventor to file a patent application will be entitled to the patent. Third
parties are allowed to submit prior art before the issuance of a patent by the USPTO, and a patent may become subject to post-grant proceedings including opposition, derivation, reexamination,
inter partes
review or interference proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such
submission, proceeding or litigation could reduce the scope or enforceability of, or invalidate, our patent rights, which could adversely affect our competitive position.
Claims by third parties that we infringe their proprietary rights may result in liability for damages or
prevent or delay our developmental and commercialization efforts.
The biotechnology industry has been characterized by frequent litigation regarding patent and other intellectual property rights. Numerous U.S.
and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing product candidates. As the biotechnology industry expands
and more patents are issued, the risk increases that our product candidates may be subject to claims of infringement of the patent rights of third parties. Because patent applications are maintained
in secrecy until the application is published, we may be unaware of third party patents that may be infringed by commercialization of
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MGL-3196
or our other product candidates. Moreover, because patent applications can take many years to issue, there may be currently-pending patent applications that may later result in issued patents
that our product candidates may infringe. In addition, identification of third party patent rights that may be relevant to our technology is difficult because patent searching is imperfect due to
differences in terminology among patents, incomplete databases and the difficulty in assessing the meaning of patent claims. Any claims of patent infringement asserted by third parties would be time
consuming and could likely:
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result in costly litigation;
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divert the time and attention of our technical personnel and management;
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cause development delays;
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prevent us from commercializing MGL-3196 for NASH or FH or our other product candidates until the asserted patent expires or is held finally
invalid or not infringed in a court of law;
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require us to develop non-infringing technology, which may not be possible on a cost-effective basis; or
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require us to enter into royalty or licensing agreements.
Although
no third party has asserted a claim of patent infringement against us as of the filing date of this report, others may hold proprietary rights that could prevent MGL-3196 or
our other product candidates from being marketed. Any patent-related legal action against us claiming damages and seeking to enjoin commercial activities relating to our product candidate or processes
could subject us to potential liability for damages and require us to obtain a license to continue to manufacture or market MGL-3196 or our other product candidates. We cannot predict whether we would
prevail in any such actions or that any license required under any of these patents would be made available on commercially acceptable terms, if at all. In addition, we cannot be sure that we could
redesign our product candidate or processes to avoid infringement, if necessary. Accordingly, an adverse determination in a judicial or administrative proceeding, or the failure to obtain necessary
licenses, could prevent us from developing and commercializing MGL-3196 or our other product candidates, which could harm our business, financial condition and operating results.
Moreover,
we may be subject to a third party preissuance submission of prior art to the USPTO or in addition to interference proceedings, may become involved in opposition, derivation,
reexamination,
inter partes
review, post-grant review or other post-grant proceedings challenging our patent rights or the patent rights of others. An
adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and
compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third party patent rights. In addition, if the breadth or
strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future
product candidates.
We may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could
be expensive, time consuming, and unsuccessful. Further, our issued patents could be found invalid or unenforceable if challenged in court.
If we or any of our future development partners were to initiate legal proceedings against a third party to enforce a patent directed at one of
our product candidates, or one of our future product candidates, the defendant could counterclaim that our patent is invalid and/or unenforceable. In patent litigation in the United States, defendant
counterclaims alleging invalidity
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and/or
unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness,
non-enablement or insufficient written description. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information
from the USPTO or made a misleading statement during prosecution. Third parties may also raise similar claims before the USPTO, even outside the context of litigation. The outcome following legal
assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art of which we and the
patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent
protection on such product candidate. Such a loss of patent protection would have a material adverse impact on our business.
Interference
proceedings provoked by third parties or brought by us or declared by the USPTO may be necessary to determine the priority of inventions with respect to our patents or
patent applications or those of our licensors. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our
business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Our defense of litigation or interference proceedings may fail and, even if successful,
may result in substantial costs and distract our management and other employees. In addition, the uncertainties associated with litigation could have a material adverse effect on our ability to raise
the funds necessary to continue our clinical trials, continue our research programs, license necessary technology from third parties, or enter into development partnerships that would help us bring
our product candidates to market.
Furthermore,
because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could
be compromised by disclosure during this type of litigation. There could also be public announcements of the results
of hearings, motions, or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of
our common stock.
We may not be successful in obtaining or maintaining necessary rights to our product candidates through
acquisitions and in-licenses.
We currently have rights to the intellectual property, through licenses from third parties and under patents that we own or co-own, to develop
our product candidates. Because our programs may require the use of proprietary rights held by third parties, the growth of our business may depend in part on our ability to acquire, in-license, or
use these proprietary rights. For example, our product candidates may require specific formulations to work effectively and efficiently and the rights to these formulations may be held by others. We
may be unable to acquire or in-license any compositions, methods of use, processes, or other third party intellectual property rights from third parties that we identify as necessary for our product
candidates. The licensing and acquisition of third party intellectual property rights is a competitive area, and a number of more established companies are also pursuing strategies to license or
acquire third party intellectual property rights that we may consider attractive. These established companies may have a competitive advantage over us due to their size, cash resources, and greater
clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license
or acquire third party intellectual property rights on terms that would allow us to make an appropriate return on our investment.
We
may collaborate with U.S. and foreign academic institutions and industry collaborators to accelerate our preclinical or clinical research. Typically, these institutions provide us
with an option
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to
negotiate a license to any of the institution's rights in technology resulting from the collaboration. Regardless of such option, we may be unable to negotiate a license within the specified
timeframe or under terms that are acceptable to us. If we are unable to do so, the institution may offer the intellectual property rights to other parties, potentially blocking our ability to pursue
our program.
If
we are unable to successfully obtain rights to required third party intellectual property rights or maintain the existing intellectual property rights we have, we may have to abandon
development of that program and our business and financial condition could suffer.
Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a
competitor will discover them or that our trade secrets will be misappropriated or disclosed.
Because we rely on third parties to research and develop and to manufacture our product candidates, we must, at times, share trade secrets with
them. We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, consulting agreements or other similar
agreements with our advisors, employees, third party contractors and consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of the
third parties to use or disclose our confidential information, including our trade secrets. Despite the contractual provisions employed when working with third parties, the need to share trade secrets
and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in
violation of these agreements. Any of these could impair our competitive position.
In
addition, these agreements typically restrict the ability of our advisors, employees, third party contractors and consultants to publish data potentially relating to our trade
secrets, although our agreements may contain certain limited publication rights. For example, any academic institution that we may collaborate with in the future will usually expect to be granted
rights to publish data arising out of such collaboration, provided that we are notified in advance and given the opportunity to delay publication for a limited time period in order for us to secure
patent protection of intellectual property rights arising from the collaboration, in addition to the opportunity to remove confidential or trade secret information from any such publication. In the
future we may also conduct joint research and development programs that may require us to share trade secrets under the terms of our research and development or similar agreements. Despite our efforts
to protect our trade secrets, our competitors may discover our trade secrets, either through breach of our agreements with third parties, independent development or publication of information by any
of our third party collaborators. A competitor's discovery of our trade secrets would impair our competitive position and have an adverse impact on our business.
If our trademarks and trade names are not adequately protected, then we may not be able to build name
recognition in our markets of interest and our business may be adversely affected.
Our registered or unregistered trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be
infringing on other marks. We may not be able to protect our rights to these trademarks and trade names, which we need to build name recognition among potential partners or customers in our markets of
interest. At times, competitors may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. In addition, there
could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or
trademarks that incorporate variations of our registered or unregistered trademarks or trade names. Over the long term, if we are unable to establish name recognition based on our trademarks and trade
names, then we may not be able to compete effectively and our business may be adversely affected. Our efforts to enforce or protect our proprietary rights related to trademarks, trade secrets, domain
names, copyrights or other intellectual property may be ineffective and could result in substantial costs and diversion of resources and could adversely impact our financial condition or results of
operations.
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We may not be able to protect our intellectual property rights throughout the world.
While we have licensed from Roche issued composition-of-matter patents directed at MGL-3196 in the United States and other countries, filing,
prosecuting and defending patents on MGL-3196 in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States
can be less extensive than those in the United States. In addition, the laws of some foreign countries may not protect intellectual property rights to the same extent as federal and state laws in the
United States. Consequently, we may not be able to prevent third parties from practicing their inventions in all countries outside the United States, or from selling or importing products made using
our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products
and, further, may export otherwise infringing products to territories where we have patent protection but enforcement is not as strong as that in the United States. These products may compete with
MGL-3196, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
Many
companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries,
particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biopharmaceuticals, which could make it
difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign
jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and
our patent applications at risk of not issuing, and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies
awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial
advantage from the intellectual property that we develop or license.
Risks Related to Our Financial Position and Need for Capital
If we fail to obtain the capital necessary to fund our operations, we will be unable to successfully develop
and commercialize MGL-3196 and other future product candidates.
Although we believe that our existing cash and cash equivalents will be sufficient to fund our current operations through at least the next
12 months, we may require additional working capital in order to complete the remaining clinical development for MGL-3196 and our other product candidates through potential regulatory approval
and through potential commercialization of these product candidates. In particular, in order to initiate our Phase 3 clinical program for MGL-3196 in NASH, we may need to collaborate with a
strategic partner or raise additional working capital. We expect our spending levels to increase in connection with our clinical trials of MGL-3196 as well as other corporate activities. The amount
and timing of any expenditure needed to implement our development and commercialization programs will depend on numerous factors, including:
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the type, number, scope, progress, expansion costs, results of and timing of our ongoing or future clinical trials or the need for additional
clinical trials of MGL-3196 for NASH and FH or any of our other product candidates which we are pursuing or may choose to pursue in the future;
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the costs of obtaining, maintaining and enforcing our patents and other intellectual property rights;
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the costs and timing of obtaining regulatory approval for MGL-3196 for NASH and FH and any of our other product candidates;
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the costs and timing of obtaining or maintaining manufacturing for MGL-3196 for NASH and FH and any of our other product candidates, including
commercial manufacturing if any product candidate is approved;
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the costs and timing of establishing sales, marketing and reimbursement capabilities and enhanced internal controls over financial reporting;
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the terms and timing of establishing and maintaining collaborations, license agreements and other partnerships;
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costs associated with any new product candidates that we may develop, in-license or acquire;
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the effect of competing technological and market developments; and
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the costs associated with operating as a public company.
Some
of these factors are outside of our control. We do not expect our existing capital resources to be sufficient to enable us to fund the completion of our clinical trials and
commercialization of our product candidates. We expect that we will need to raise substantial additional funds in the future.
We
have not sold any products, and we do not expect to sell or derive revenue from any product sales for the foreseeable future. We may seek additional funding through future debt and
equity financings, as well as potential additional collaborations or strategic partnerships with other companies or through non-dilutive financings. Additional funding may not be available to us on
acceptable terms or at all. In addition, the terms of any financing may adversely affect the holdings or the rights of our stockholders. In addition, the issuance of additional shares by us, or the
possibility of such issuance, may cause the market price of our shares to decline.
If
we are unable to obtain additional funding on a timely basis, we may be unable to complete ongoing and planned clinical trials for MGL-3196 for NASH and FH and any of our other
product candidates, and we may be required to significantly curtail some or all of our activities. We also could be required to seek funds through arrangements with collaborative partners or otherwise
that may require us to relinquish rights to our product candidates or otherwise agree to terms unfavorable to us.
Our ability to use net operating loss and tax credit carryforwards and certain built-in losses to reduce
future tax payments may be limited by provisions of the Internal Revenue Code.
Our net operating losses have been fully offset by a valuation allowance due to uncertainties surrounding our ability to realize these tax
benefits. Under Section 382 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an "ownership change" (generally defined as a greater than 50% change (by value) in its
equity ownership over a three year period), the corporation's ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income may be
limited. Similar rules may apply under state tax laws. We have not performed a detailed analysis to determine whether an ownership change under Section 382 of the Code, or similar state
provisions, has previously occurred. As a result, if we earn net taxable income, our ability to use our pre-change net operating
loss carryforwards to offset U.S. federal taxable income may become subject to limitations, which could potentially result in increased future tax liability to us and may be substantial.
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Risks Relating to Ownership of Our Common Stock
The price of our common stock has been, and may continue to be, volatile.
Historically, the market price of our common stock has fluctuated over a wide range, and it is likely that the price of our common stock will
continue to be volatile in the future. The market price of our common stock could be impacted due to a variety of factors, including, in addition to global and industry-wide
events:
-
-
the losses we may incur;
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-
developments in patent or other proprietary rights owned or licensed by us, our collaborative partners or our competitors;
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public concern as to the safety and efficacy of products developed by us or others; and
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litigation.
In
addition, due to one or more of the foregoing factors in one or more future quarters, our results of operations may fall below the expectations of securities analysts and investors.
In that event, the market price of our common stock could materially decline.
A small number of our stockholders beneficially own a substantial amount of our common stock and have
substantial control over us; therefore, your ability to influence corporate matters may be limited.
Certain stockholders affiliated with our officers and directors collectively beneficially own or control approximately 44.8% of our outstanding
common stock as of March 31, 2018 and acting together, may have the ability to affect matters submitted to our stockholders for approval. This concentration of ownership may have the effect of
delaying, deferring or preventing a strategic transaction, even if such a transaction would benefit other stockholders.
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our
company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.
Provisions in our charter and bylaws may delay or prevent a merger, acquisition or other change of control that stockholders may consider
favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions include a classified board of directors. In addition, we are governed by the
provisions of Section 203 of the Delaware General Corporation Law, which prohibits, with some exceptions, stockholders owning in excess of 15% of our outstanding voting stock from merging or
combining with us. Although we believe these provisions together provide for an opportunity to receive higher bids by requiring potential acquirers to negotiate with our board of directors, they would
apply even if the offer may be considered beneficial by some stockholders.
Future sales and issuances of our common stock or rights to purchase common stock could result in additional
dilution of the percentage ownership of our stockholders and could cause our share price to fall.
We expect that significant additional capital will be needed in the future to continue our planned operations. To the extent we raise
additional capital by issuing equity securities, our stockholders may experience substantial dilution. We may sell common stock, convertible securities or other equity securities in one or more
transactions at prices and in a manner we determine from time to time. If we sell common stock, convertible securities or other equity securities in more than one transaction, investors may be
materially diluted by subsequent sales. Such sales may also
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result
in material dilution to our existing stockholders, and new investors could gain rights superior to our existing stockholders.
Sales of a substantial number of shares of our common stock in the public market could cause our stock price
to fall.
Sales of a substantial number of shares of our common stock in the public market by us, by our existing stockholders, or by the holders of our
Series A Convertible Preferred Stock upon conversion, or the perception that these sales might occur, could significantly reduce the market price of our common stock and impair our ability to
raise adequate capital through the sale of additional equity securities.
We do not anticipate paying cash dividends on our common stock, and accordingly, stockholders must rely on
stock appreciation for any return on their investment.
We have never declared or paid any cash dividend on our common stock and do not anticipate paying cash dividends on our common stock in the
future. As a result, the only
return to stockholders will be appreciation in the price of our common stock, which may never occur. Investors seeking cash dividends should not invest in our common stock.
Risks Related to Stockholders' Sales of Shares, Including Those Issued under the Securities Purchase
Agreement
Sales of a significant number of shares of our common stock in the public markets or significant short sales
of our common stock, or the perception that such sales could occur, could depress the market price of our common stock and impair our ability to raise capital.
As of March 31, 2018, there were 1,969,797 shares of Series A Convertible Preferred stock outstanding, all of which are readily
convertible into common stock at the option of the holders. In addition, there are an additional 1,122,585 shares of our common stock issuable upon the exercise of outstanding stock options. Sales of
a substantial number of shares of our common stock or other equity-related securities in the public markets, could depress the market price of our common stock. If there are significant sales or short
sales of our stock, the price decline that could result from this activity may cause the share price to decline further, which, in turn, may cause long holders of the common stock to sell their
shares, thereby contributing to sales of common stock in the market. Such sales also may impair our ability to raise capital through the sale of additional shares in the future at a time and price
that our management deems acceptable, if at all.
Risks Related to This Offering
Investors in this offering will pay a much higher price than the book value of our common stock.
If you purchase common stock in this offering, you will incur an immediate and substantial dilution of $274.81 per share, representing the
difference between the public offering price of $305.00 per share and our as adjusted net tangible book value per share after giving effect to this offering, and after deducting underwriting discounts
and commissions for shares sold in this offering and estimated offering expenses payable by us. See "Dilution." To the extent outstanding options or warrants we have issued are ultimately exercised,
you will incur additional dilution. Furthermore, if the underwriters exercise their option to purchase additional shares, you will also incur additional dilution.
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Our management will have broad discretion over the use of the net proceeds from this offering; you may not
agree with how we use the proceeds and the proceeds may not be invested successfully.
Our management will have broad discretion as to the use of the net proceeds from this offering by us and could use them for purposes other than
those contemplated at the time of this offering. Accordingly, you may be relying on the judgment of our management with regard to the use of these net proceeds, and you will not have the opportunity,
as part of your investment decision, to assess whether the proceeds are being used appropriately. It is possible that the proceeds will be invested in a way that does not yield a favorable, or any,
return for us.
Sales of additional shares of our common stock, including by us or our directors, officers and significant
stockholders following expiration or early release of the 90-day lock-up, could cause the price of our common stock to decline.
Sales of substantial amounts of our common stock in the public market, or the availability of such shares for sale, by us or others, including
the issuance of common stock upon exercise of outstanding options or upon the conversion of our Series A Convertible Preferred Stock, could adversely affect the price of our common stock. Based
on the total number of outstanding shares of our common stock as of March 31, 2018, upon completion of this offering, we will have
15,242,290 outstanding shares of common stock, plus any shares the underwriters may purchase from us by exercising their option to purchase additional shares. In connection with this offering, we, our
directors and officers and certain of our significant stockholders have entered into lock-up agreements with the underwriters under which we, our directors and officers and significant stockholders
have agreed, subject to specific exceptions described in the section titled "Underwriting", not to sell, directly or indirectly, any shares of common stock without the permission of Goldman
Sachs & Co. LLC for a period of 90 days following the date of this prospectus supplement. Upon expiration or earlier release of the lock-up, we, our directors or officers
or significant stockholders may sell shares into the market, which could adversely affect the market price of shares of our common stock. Sales of a substantial number of such shares upon expiration
of the lock-up agreements, the perception that such sales may occur, or early release of these agreements, could cause our market price to fall or make it more difficult for you to sell your common
stock at a time and price that you deem appropriate.
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