ITEM
1. Business
Overview
Unless
otherwise provided in this Annual Report, references to the “Company,” “we,” “us,” and “our”
and similar references refer to Celcuity Inc., a Delaware corporation. We own various unregistered trademarks and service marks, including
our corporate logo. Solely for convenience, the trademarks, trade names and service marks in this Annual Report, including those owned
by third parties, may be referred to without the ®,TM or SM symbols, but such references should not be construed
as any indicator that the owner of such trademarks, trade names and service marks will not assert, to the fullest extent under applicable
law, their rights thereto. We do not intend the use or display of other companies’ trademarks, trade names and service marks to
imply an endorsement or sponsorship of us by any other companies.
We
are a clinical-stage biotechnology company focused on development of targeted therapies for treatment of multiple solid tumor indications.
Our lead therapeutic candidate is gedatolisib, a pan-PI3K/mTOR inhibitor. Its mechanism of action and pharmacokinetic properties are
highly differentiated from other currently approved and investigational therapies that target PI3K or mTOR alone or together. With respect
to our CDx development activities, our CELsignia diagnostic platform is uniquely able to analyze live patient tumor cells to identify
new groups of cancer patients likely to benefit from targeted therapies.
Our
therapeutic candidate, gedatolisib, is a potent, well-tolerated, small molecule dual inhibitor, administered intravenously, that selectively
targets all Class I isoforms of PI3K and mammalian target of rapamycin (mTOR). In April 2021, we obtained exclusive global development
and commercialization rights to gedatolisib under a license agreement with Pfizer, Inc. Our initial clinical development program for
gedatolisib will focus on the treatment of patients with hormone receptor positive (HR+), HER2-negative, advanced or metastatic breast
cancer. In 2022, we dosed our first patient in our Phase 3 clinical trial, VIKTORIA-1, evaluating gedatolisib in combination with fulvestrant
with or without palbociclib in patients with HR+/HER2- advanced breast cancer (ABC).
Supporting
the development of a potential first-in-class targeted therapy for breast cancer, like gedatolisib, with our CELsignia platform is a
natural extension of our strategy to use our CELsignia CDx to enable new indications for other companies’ targeted therapies. By
combining companion diagnostics designed to enable proprietary new drug indications with targeted therapies that treat signaling dysregulation
our CDx identifies, we believe we are uniquely positioned to improve the standard-of-care for many early and late-stage breast cancer
patients. Our goal is to play a key role in the multiple treatment approaches required to treat breast cancer patients at various stages
of their disease.
Therapeutic
(Rx) Product Development
Gedatolisib
Gedatolisib
is a potent, reversible dual inhibitor that selectively targets PI3K and mTOR. Gedatolisib was originally developed by Wyeth and clinical
development was continued by Pfizer after it acquired Wyeth. We exclusively licensed global rights to gedatolisib from Pfizer in April
2021. A Phase 1b trial evaluating patients with ER+/HER2- metastatic breast cancer was initiated in 2016 and subsequently enrolled 138
patients.
On
January 13, 2022, gedatolisib was granted Fast Track designation for the treatment of patients with HR+/HER2- metastatic breast cancer
after progression on CDK4/6 therapy. Fast Track designation is granted by the FDA for products that are intended for the treatment of
serious or life-threatening disease or conditions and which demonstrate the potential to address an unmet medical need.
On
July 18, 2022, gedatolisib was granted Breakthrough Therapy Designation for HR+/HER2- advanced breast cancer after progression on CDK4/6
therapy. Breakthrough Therapy designation is granted by the FDA to expedite the development and regulatory review of an investigational
medicine that is intended to treat a serious or life-threatening condition. The criteria for Breakthrough Therapy designation require
preliminary clinical evidence that demonstrates the drug may have substantial improvement on one or more clinically significant endpoints
over available therapy.
In
2022, we activated VIKTORIA-1, a Phase 3, open-label, randomized clinical trial to evaluate the efficacy and safety of two regimens in
adults with HR+/HER2- advanced breast cancer whose disease has progressed after prior CDK4/6 therapy in combination with an aromatase
inhibitor: 1) gedatolisib in combination with palbociclib and fulvestrant; and 2) gedatolisib in combination with fulvestrant. Two hundred
clinical sites in North America, Europe, South America, Asia, and Australia have been selected to participate in the study. The first
clinical site was activated in the third quarter of 2022. The first dosage of a patient in the trial occurred in December 2022.
Background
Breast
cancer is the most prevalent cancer in women, accounting for 30% of all female cancers and 13% of cancer-related deaths in the United
States. The National Cancer Institute estimated that approximately 281,000 new cases of breast cancer would be diagnosed in the United
States in 2020, and approximately 43,600 breast cancer patients would die of the disease. Approximately 190,000, or 70%, of these new
cases are for HR+/HER2- breast cancer.
Four
different breast cancer subtypes are currently identified using molecular tests that determine the level of HR and HER2 expression. About
70% of breast cancers are HR+/HER2-, which is indicative of hormone dependency. Despite progress in treatment strategies, metastatic
HR+/HER2- breast cancer (MBC) remains an incurable disease, with a median overall survival (OS) of three years and a five-year survival
rate of 29%.
Four
different classes of targeted therapies are currently used to treat HR+/HER2- tumors: endocrine-based therapies, CDK4/6 inhibitors, PI3K
inhibitors and mTOR inhibitors. Each of the CDK4/6 inhibitors, PI3K inhibitors and mTOR inhibitors are generally used to respond to the
related mechanisms of resistance to endocrine therapy, namely, activation of the CDK4/6, PI3K and mTOR pathways.
As
specifically relates to gedatolisib, activation of the PI3K/mTOR pathway has been implicated in a wide variety of human cancers, involving
either activating mutations, or other unknown drivers of pathway amplification. These include cancers of the breast, prostate, endometrial,
colon, rectum, and lung, among others.
Activities
associated with PI3K involve complex essential cell regulatory mechanisms including feedforward and feedback signaling loops.
Overactivation of the pathway is frequently present in human malignancies and plays a key role in cancer progression. Four catalytic
isoforms of Class I PI3K preferentially mediate signal transduction and tumor cell survival based on the type of malignancy and
the genetic or epigenetic alterations an individual patient harbors. Due to the multiple subcellular locations, activities, and
importance of the different PI3K complexes in regulating many types of cancer cell proliferation, control of PI3K activity is an
important target in cancer therapy.
mTOR
is a critical effector in cell-signaling pathways commonly dysregulated in human cancers. The mTOR signaling pathway integrates both
intracellular and extracellular signals and serves as a central regulator of cell metabolism, growth, proliferation, and survival. mTOR
is a serine/threonine protein kinase, a downstream effector of PI3K, and regulated by hormones, growth factors, and nutrients, that is
contained in two functionally distinct protein assemblies – mTORC1 and mTORC2. In cancer, dysfunctional signaling leads to various
constitutive activities of the mTOR complexes, making mTOR a good therapeutic target.
In
addition, the PI3K/mTOR pathway, like other mitogenic pathways, can also promote the activities of cyclin D and CDK4/6 to drive proliferative
cell cycling. The available evidence indicates that resistance to CDK4/6 inhibition in patients with HR+/HER2- advanced breast cancer
is a transient adaptive mechanism, most likely involving the PI3K/mTOR pathway. This data indicates that CDK4/6 signaling is restored
in CDK4/6 resistant tumors when PI3K/mTOR inhibitors are applied. Thus, continuing CDK4/6 inhibitor treatment in combination with a PI3K/mTOR
inhibitor in patients who progressed on their prior CDK4/6 inhibitor, would both blockade the reactivated CDK4/6 pathway and prevent
adaptive activation of the PI3K/mTOR pathway. This suggests the limited efficacy induced by current standard-of-care (SOC) therapies
in patients who have progressed on a CDK4/6 therapy reflects the mechanistic inadequacy of relying on partial PI3K/mTOR inhibition (e.g.,
alpelisib or everolimus) and no CDK4/6 inhibition to address this complex disease mechanism.
We
believe the complex connection between the PI3K/mTOR and CDK4/6 pathways can enable gedatolisib to adaptively reactivate CDK4/6 signaling
that reportedly occurs in CDK4/6 resistant tumors when the PI3K/mTOR pathway is completely blockaded. By re-activating CDK4/6 signaling,
we believe gedatolisib can restore the therapeutic effect of CDK4/6 inhibition when it is combined with a CDK4/6 inhibitor. The contributory
effect of a CDK4/6 inhibitor when combined with gedatolisib would thus largely reflect the interaction between the two therapies that
gedatolisib initiates.
Evidence
of gedatolisib anti-tumor in vivo activity was provided in a study evaluating the combination of gedatolisib and a CDK4/6 inhibitor in
cell-line xenograft model where response to endocrine therapy was improved and tumor regressions were induced. In a study evaluating
the MCF7 xenograft model (ER+/HER2-/PIK3CA mutant), the combination of gedatolisib with palbociclib and fulvestrant caused 90% tumor
regression with no tumor regrowth observed for more than 60 days after the final dose.
Advantages
of Gedatolisib over other PI3K and mTOR inhibitors
The
important role the PI3K/mTOR pathway plays in cancer has led to significant investment in the development of many different PI3K and
mTOR inhibitors for solid tumors. However, developing efficacious and well-tolerated therapies that target this pathway has been challenging.
This reflects the inherent adaptability and complexity of the PI3K pathway, where numerous feedforward and feedback loops, crosstalk
with other pathways, and compensatory pathways enable resistance to PI3K inhibition. Another major hurdle for the development of PI3K
pathway inhibitors has been the inability to achieve optimal drug-target blockade in tumors while avoiding undue toxicities in patients.
We
believe there is significant potential for gedatolisib to address previously treated breast cancer tumors and has the potential to be
used in other tumor types where the PI3K/mTOR pathway is either: i) driving tumorigenesis directly; ii) cooperating with other dysregulated
signaling pathways; or iii) a mechanism of resistance to other drug therapies.
As
a result, we believe gedatolisib’s unique mechanism of action, favorable pharmacokinetic properties, and intravenous formulation
offer distinct advantages over currently approved and investigational therapies that target PI3K or mTOR alone or together.
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Overcomes
limitations of therapies that only inhibit a single Class I PI3K isoform or only one mTOR kinase complex. |
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Gedatolisib
is a pan-class I isoform PI3K inhibitor with low nanomolar potency for the p110α, p110β, p110γ, and p110δ
isoforms. Because gedatolisib inhibits all four PI3K isoforms and both mTOR complexes, it prevents the confounding effect of isoform
interaction that may occur with isoform-specific PI3K inhibitors and the confounding interaction between PI3K isoforms and mTOR.
This compares to therapies that only inhibit a single Class I isoforms (e.g., alpelisib, a PI3K-α inhibitor) or only one mTOR
kinase complex (e.g., everolimus, an mTORC1 inhibitor), which cross-activate uninhibited sub-units due to numerous feedforward and
feedback loops between the PI3K isoforms and mTOR, which in turn induces compensatory resistance that reduces the efficacy of isoform
specific PI3K or single mTOR kinase complex inhibitors. |
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Better
tolerated by patients than oral PI3K and mTOR drugs. |
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Gedatolisib
is administered intravenously (IV) on a four-week cycle of three weeks-on, one week-off, in contrast to the orally administered pan-PI3K
or dual PI3K/mTOR inhibitors that are no longer being clinically developed. Oral pan-PI3K or PI3K/mTOR inhibitors have repeatably
been found to induce significant side effects that were not well tolerated by patients. This typically leads to a high proportion
of patients requiring dose reductions or treatment discontinuation, despite showing promising efficacy. By contrast, gedatolisib
stabilizes at lower concentration levels in plasma compared to orally administered PI3K inhibitors, resulting in less toxicity, while
maintaining concentrations sufficient to inhibit PI3K/mTOR signaling. |
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Isoform-specific
PI3K inhibitors administered orally were developed to reduce toxicities in patients. While the range of toxicities associated with
isoform-specific inhibitors is narrower than oral pan-PI3K or PI3K/mTOR inhibitors, administering them orally on a continuous basis
still leads to challenging toxicities. The experience with an FDA approved oral p110-α specific inhibitor, Piqray, illustrates
the challenge. In its Phase 3 pivotal trial, Piqray was found to induce a Grade 3 or 4 adverse event (AE) related to hyperglycemia
in 39% of patients evaluated. In addition, 26% of patients discontinued alpelisib due to treatment related adverse events. By contrast,
in the 103-patient dose expansion portion of the Phase 1b clinical trial with gedatolisib, only 7% of patients experienced Grade
3 or 4 hyperglycemia and less than 10% discontinued treatment. |
Clinical
Experience with Gedatolisib
As
of December 31, 2022, 492 patients with solid tumors have received gedatolisib in eight clinical trials sponsored by Pfizer. Of the 492
patients, 129 were treated with gedatolisib as a single agent in three clinical trials. The remaining 363 patients received gedatolisib
in combination with other anti-cancer agents in five clinical trials. Additional patients received gedatolisib in combination with other
anti-cancer agents in nine investigator sponsored clinical trials.
On
January 13, 2022, gedatolisib was granted Fast Track designation for the treatment of patients with HR+/HER2- metastatic breast cancer
after progression on CDK4/6 therapy. Fast Track designation is granted by the FDA for products that are intended for the treatment of
serious or life-threatening disease or conditions and which demonstrate the potential to address an unmet medical need. The designation
offers the opportunity for frequent interactions with the FDA to discuss the drug’s development plan and to ensure collection of
appropriate data needed to support drug approval, as well as eligibility for rolling submission of a New Drug Application.
On
July 18, 2022, gedatolisib was granted Breakthrough Therapy Designation for HR+/HER2- advanced breast cancer after progression on CDK4/6
therapy. Breakthrough Therapy designation is granted by the FDA to expedite the development and regulatory review of an investigational
medicine that is intended to treat a serious or life-threatening condition. The criteria for Breakthrough Therapy designation require
preliminary clinical evidence that demonstrates the drug may have substantial improvement on one or more clinically significant endpoints
over available therapy. The benefits of Breakthrough Therapy Designation include more intensive guidance from the FDA on an efficient
development program, access to a scientific liaison to help accelerate review time, and potential eligibility for priority review if
relevant criteria are met. Celcuity’s breakthrough application was supported by data from a Phase 1b study that assessed the safety,
tolerability and clinical activity of gedatolisib in combination with palbociclib and fulvestrant in patients with HR+/HER2- advanced
breast cancer whose disease progressed during treatment with a CDK4/6 therapy and an aromatase inhibitor.
Gedatolisib’s
safety, tolerability and pharmacokinetic profile were determined in a Phase 1 First-in-Human study. The favorability of preliminary results
from our most recently completed clinical trial, a Phase 1b study which evaluated 138 patients with HR+/HER2- advanced breast cancer
(ABC), led us to focus on our initial clinical development program on advanced breast cancer.
Phase
1 First-in-Human Study
In
2013, Pfizer completed a Phase 1, open-label, dose-escalation first-in human study of single-agent gedatolisib in patients with advanced
solid tumors. The primary objective of Part 1 of the study was to determine the safety, tolerability, and maximum tolerated dose (MTD)
of single-agent gedatolisib administered once weekly as an intravenous (IV) infusion. Seventy-seven patients with advanced solid tumors
received doses of gedatolisib and the MTD was determined to be 154 mg IV once weekly (n = 42). Based on results and analyses from subsequent
clinical trials, the maximum tolerated dose was determined to be 180 mg IV once weekly.
Phase
1b HR+/HER2- ABC Clinical Trial Results
In
2016, Pfizer initiated a Phase 1b dose-finding trial with an expansion portion for safety and efficacy to evaluate gedatolisib when added
to either the standard doses of palbociclib plus letrozole or palbociclib plus fulvestrant in patients with HR+/HER2- advanced breast
cancer. PI3K mutation status was not used as an eligibility criterion. Patient enrollment for the trial is complete.
A
total of 138 patients with HR+/HER2- advanced breast cancer were dosed in the clinical trial. Seven patients from this study continue
to receive study treatment, as of December 31, 2022, each of whom have received study treatment for more than four years.
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35
patients were enrolled in two dose escalation arms to evaluate the safety and tolerability and determine the MTD of gedatolisib when
used in combination with the standard doses of palbociclib and endocrine therapies. The MTD was determined to be 180 mg administered
intravenously once weekly. |
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103
patients were enrolled in one of four expansion arms (A, B, C, D) to determine if the triplet combination of gedatolisib plus palbociclib
and letrozole or gedatolisib plus palbociclib and fulvestrant produced a superior objective response (OR), compared to historical
control data of the doublet combination (palbociclib plus endocrine therapy). All patients received gedatolisib in combination with
standard doses of palbociclib and endocrine therapy (either letrozole or fulvestrant). In Arms A, B, and C, patients received an
intravenous dose of 180 mg of gedatolisib once weekly. In Arm D, patients received an intravenous dose of 180 mg of gedatolisib on
a four-week cycle of three weeks-on, one week-off. Objective response was determined using Response Evaluation Criteria in Solid
Tumors v1.0, or RECIST v1.0. |
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Arm
A: ABC with progression and no prior endocrine-based systemic therapy or a CDK4/6 inhibitor in the metastatic setting. First-line
endocrine-based therapy for advanced disease (CDK4/6 treatment naive). |
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Arm
B: ABC with progression during one or two prior endocrine-based systemic therapy in the advanced setting, with no prior therapy
with any CDK inhibitor. Second- or third-line endocrine-based therapy for metastatic disease. |
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Arm
C: ABC with progression during one or two prior endocrine-based systemic therapies in the advanced setting and following prior
therapy with a CDK inhibitor. Second- or third-line endocrine-based therapy for advanced disease. |
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Arm
D: ABC having progressed on a CDK inhibitor in combination with endocrine therapy as the most recent regimen for advanced disease.
Second- or third-line endocrine-based therapy for advanced disease. |
Analysis
for the 103 patients enrolled in the expansion portion of the Phase 1b clinical trial, as of a database cutoff date of June 29, 2022,
showed:
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Efficacy
analysis for all arms in aggregate: |
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63%
objective response rate (ORR) |
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92%
clinical benefit rate (CBR) |
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Best
responses, as measured by RECIST v1.0, are shown in the following chart for Arm A (1st line patients) and Arm D (2nd/3rd
line patients who received recommended dosing regimen). The dotted line represents the cutoff for partial response (PR), defined
as a 30% reduction from the baseline tumor assessment. |
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For
all arms in aggregate, all patients experienced at least one Grade 1 or Grade 2 treatment-emergent adverse event. The Grade 3 and
4 treatment-emergent adverse events occurring in at least 20% of patients were neutropenia (63%), stomatitis (27%) and rash (20%).
Neutropenia is a known class effect of CDK4/6 inhibitors. Stomatitis was reversible in most patients with a steroidal mouth rinse.
All grades of treatment-related adverse events related to hyperglycemia was reported in 22% of patients; Grade 3 or 4 hyperglycemia
was reported in 7% of patients. Gedatolisib was discontinued in less than 10% of patients. |
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For
the patients in Arm D, who received the Phase 3 dosing schedule, Grade 3 and 4 treatment-emergent adverse events occurring in at
least 20% of patients were neutropenia (67%), leukopenia (22%), and stomatitis (22%). All grades of treatment-related adverse events
related to hyperglycemia was reported in 26% of patients; Grade 3 or 4 hyperglycemia was reported in 7% of patients. Gedatolisib
was discontinued in 4% of patients. |
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Best
overall response data for each arm is presented in the table below: |
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Total Expansion Arms
(N=103, full analysis set) |
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Arm A | |
Arm B | |
Arm C | |
Arm D |
| Prior Therapy | |
1L
CDKi- naive | |
2L+ CDKi- naive | |
2L/3L
CDKi -pretreated | |
2L/3L
CDKi- pretreated |
| n (Full, response evaluable) | |
31, 27 | |
13,13 | |
32, 28 | |
27, 27 |
| Study Treatment | |
P + L + G | |
P + F + G | |
P + F + G | |
P + F + G |
| Gedatolisib schedule | |
weekly | |
weekly | |
weekly | |
3 wks on/1 wk off |
| ORR1 (evaluable) | |
85% | |
77% | |
36% | |
63% |
| mPFS 2 , mos (range) | |
NR
(16.9, NR) | |
12.9 (7.6, 38.3) | |
5.1
(3.3, 7.5) | |
12.9
(7.4, 16.7) |
| PFS % at 12 mos 2 | |
72.1% | |
54.5% | |
23.6% | |
53.2% |
(1)
ORR represents PR, except in Arm A, which had 1 CR = complete response. Responses per RECIST 1.1; (2) Includes 2 unconfirmed PR
Abbreviations: 1L= first line, 2L= second line; mos= months; NR = not reached; ORR, objective response rate; PFS, progression free
survival
Source:
Wesolowski 2022 SABCS
Other
Gedatolisib Clinical Trials
Phase
2 Pilot Clinical Trial for HER2+/PIK3CA+ Patients
The
Korean Cancer Study Group sponsored a Phase 2 pilot clinical trial to evaluate gedatolisib combined with a trastuzumab biosimilar (Herzuma®),
in patients with HER2+/PIK3CA+ metastatic breast cancers whose disease had progressed after treatment with three or more prior HER2 targeted
therapy regimens. The clinical trial commenced in December 2019 and interim efficacy data from the first 17 patients enrolled was presented
at the San Antonio Breast Cancer Symposium in December 2021. Patients received a trastuzumab biosimilar (8 mg/kg IV for 1st cycle loading
dose, and then 6 mg/kg IV every 3 weeks) plus gedatolisib (180 mg, weekly IV). The primary endpoint was objective response, a reduction
of at least 30% in tumor volume by RECIST v1.1.
As
of a data cutoff date of October 30, 2021, 10 of 17 patients achieved a partial response, an ORR of 59%, and four patients had stable
disease. Fourteen of 17 patients thus received either a partial response or stable disease, resulting in a clinical benefit rate of 82%.
Best responses are shown in the following chart. The dotted lines represent the cutoff for progressive disease (>20% tumor growth)
and for partial response (>30% tumor regression).
Best Response
*
Patient whose target lesion decreased by 63% but a new leptomeningeal seeding occurred.
The
duration of treatment for the 16 patients evaluated is shown in the chart below. As of the October 30, 2020 data cutoff, 16 patients
(80%) remained on therapy. Four patients discontinued treatment, one due to disease progression, one due to an adverse event of Grade
1 diarrhea, one participant decision, and one patient being unable to undergo the required MRI imaging due to a titanium rod implant
from non-treatment related worsening of scoliosis. At the time of data cut-off, the median time on treatment for these 20 patients was
10.1 cycles (approximately 10 months) and all 10 patients who had achieved an objective response remained on therapy assessment. At the
time of the analysis, nine patients had a continuing response. The dashed lines show the response at 3 months and 6 months.
Duration
of Treatment
Phase
1 Clinical Trial in Patients with Solid Tumors
A
phase 1 study conducted at the Indiana University Simon Cancer Center evaluated the safety, tolerability, pharmacokinetics and preliminary
activity of gedatolisib combined with carboplatin and paclitaxel in patients with advanced solid tumors previously who were treated with
two or more prior chemotherapies. Seventeen patients were enrolled (10 clear cell ovarian, one low-grade serous ovarian, four endometrial,
and two lung cancers). The ORR was 65% in all patients (11/17 patients: eight partial responses and three complete responses) and stable
disease was 17% (3/17). Among patients with clear cell ovarian cancer, the ORR was 80%, with three patients achieving a complete response.
Best
Response
Active
Gedatolisib Clinical Trials
Phase
3 HR+/HER2- ABC Clinical Trial (VIKTORIA-1)
In
2022, we initiated VIKTORIA-1, a Phase 3, open-label, randomized clinical trial to evaluate the efficacy and safety of gedatolisib in
combination with fulvestrant with or without palbociclib in adults with HR+/HER2- advanced breast cancer whose disease has progressed
after prior CDK4/6 therapy in combination with an aromatase inhibitor. This multi-center, international trial is expected to enroll 701
total subjects at approximately 200 clinical sites across North America, Europe, Latin America, and Asia. The first clinical site was
activated in the third quarter of 2022. The first patient was dosed in December 2022.
The
clinical trial will enable separate evaluation of subjects according to their PIK3CA status.
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Subjects
who meet eligibility criteria and do not have confirmed PIK3CA mutations (WT) will be randomly assigned (1:1:1) to receive
a regimen of either gedatolisib, palbociclib, and fulvestrant (Arm A), gedatolisib and fulvestrant (Arm B), or fulvestrant (Arm C).
Up to 351 subjects who are PIK3CA WT will be enrolled. |
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Subjects
who meet eligibility criteria and have PIK3CA mutations (MT) will be randomly assigned (3:3:1) to receive a regimen of either
gedatolisib, palbociclib, and fulvestrant (Arm D), alpelisib and fulvestrant (Arm E), or gedatolisib and fulvestrant (Arm F). Up
to 350 subjects who are PIK3CA MT will be enrolled. |
The
clinical trial primary endpoints are progression free survival (PFS), per RECIST 1.1 criteria, as assessed by blinded independent central
review (BICR). Two primary endpoints will be evaluated in subjects who are PI3KCA WT, and one primary endpoint will be evaluated in subjects
who are PI3KCA MT. In subjects who are PI3KCA WT, the PFS of gedatolisib in combination with palbociclib and fulvestrant (Arm A) will
be compared to fulvestrant monotherapy (Arm C), and the PFS in gedatolisib in combination with fulvestrant (Arm B) will be compared to
fulvestrant monotherapy (Arm C). In subjects who are PI3KCA MT, the PFS of gedatolisib in combination with palbociclib and fulvestrant
(Arm D) will be compared to alpelisib combined with fulvestrant (Arm E).
All
subjects will receive treatment according to the assigned study arm until objective progressive disease, unacceptable toxicity, death,
or withdrawal of consent, whichever occurs first. Subjects in Arm C will have the option to receive the treatment regimen provided in
Arm A or Arm B upon radiographically confirmed disease progression. Subjects will be followed for AEs, safety laboratory testing, tumour
assessment by RECIST v1.1, quality of life, and overall survival.
Planned
Phase 2 Gedatolisib Clinical Trials
We
expect to use the CELsignia PI3K Activity Test to help support development of gedatolisib for breast cancer indications. Our internal
studies demonstrate how measurement of PI3K-involved signaling may provide a sensitive and specific method of identifying patients most
likely to benefit from PI3K inhibitors. We believe CELsignia tests uniquely enable us to pursue indications simultaneously for unselected
patient populations and CELsignia selected patient sub-groups. This approach can greatly reduce the risk of pursing an indication for
a large, but unselected patient population, as we plan to do for the initial gedatolisib indication. By combining the capabilities of
CELsignia PI3K Activity Test with a potent pan-PI3K/mTOR inhibitor like gedatolisib, we believe we are uniquely suited to maximize the
probability of obtaining regulatory approval to market gedatolisib.
Accordingly,
we plan to initiate a Phase 2 clinical trial to evaluate gedatolisib in combination with palbociclib and letrozole in early-stage HR+/HER2-
breast cancer patients. The tumors from all patients will be evaluated with a CELsignia PI3K Pathway Test.
Pfizer
License Agreement
In
April 2021, we entered into a license agreement, or the Gedatolisib License Agreement, with Pfizer pursuant to which we acquired exclusive
(including as to Pfizer) worldwide sublicensable rights to research, develop, manufacture, and commercialize gedatolisib for the treatment,
diagnosis and prevention of all diseases. Pursuant to the Gedatolisib License Agreement, we are obligated to use commercially reasonable
efforts to develop and seek regulatory approval for at least one product in the U.S. and if regulatory approval is obtained, to commercialize
such product in the U.S and at least one international major market.
We
paid Pfizer a $5.0 million upfront fee upon execution of the Gedatolisib License Agreement and issued to Pfizer $5.0 million of our common
stock. We are also required to make milestone payments to Pfizer upon achievement of certain development and commercial milestone events,
up to an aggregate of $335.0 million. We will pay Pfizer tiered royalties on sales of gedatolisib at percentages ranging from the low
to mid-teens, that may be subject to deductions for expiration of valid claims, amounts due under third-party licenses and generic competition.
Unless earlier terminated, the Gedatolisib License Agreement will expire upon the expiration of all royalty obligations. The royalty
period will expire on a country-by-country basis upon the later of (a) 12 years following the date of First Commercial Sale of such Product
in such country, (b) the expiration of all regulatory or data exclusivity in such country for such Product or (c) the date upon which
the manufacture, use, sale, offer for sale or importation of such Product in such country would no longer infringe, but for the license
granted herein, a Valid Claim of a Licensed Patent Right. Capitalized terms in this paragraph have the meanings set forth in the Gedatolisib
License Agreement.
We
have the right to terminate the Gedatolisib License Agreement for convenience upon 90 days’ prior written notice. Pfizer may not
terminate the agreement for convenience. Either we or Pfizer may terminate the Gedatolisib License Agreement if the other party is in
material breach and such breach is not cured within the specified cure period. In addition, either we or Pfizer may terminate the Gedatolisib
License Agreement in the event of specified insolvency events involving the other party.
Manufacturing
We
rely on third parties to manufacture gedatolisib. We expect to enter into agreements with contract manufacturing organizations, or CMOs,
to produce drug substance for gedatolisib. We require all of our CMOs to conduct manufacturing activities in compliance with current
good manufacturing practice, or cGMP, requirements. We anticipate that these CMOs will have the capacity to support both clinical supply
and commercial-scale production, but we do not have any formal agreements at this time to cover commercial production. We may also elect
to enter into agreements with other CMOs to manufacture supplies of drug substance and finished drug product.
Sales
and Marketing
If
any of our product candidates are approved, we intend to market and commercialize them in the U.S. and select international markets,
either alone or in partnership with others. Cancer patients are managed by oncologists, medical geneticists and neurologists, and therefore
we believe can be reached with a targeted sales force.
Competition
for Gedatolisib
The
pharmaceutical industry is characterized by rapid evolution of technologies and intense competition. While we believe that our product
candidates, technology, knowledge, experience and scientific resources provide us with competitive advantages, we face competition from
major pharmaceutical and biotechnology companies, academic institutions, governmental agencies and public and private research institutions,
among others. Any product candidates that we successfully develop and commercialize will compete with approved treatment options, including
off-label therapies, and new therapies that may become available in the future. Key considerations that would impact our ability to effectively
compete with other therapies include the efficacy, safety, method of administration, cost, level of promotional activity and intellectual
property protection of our products. Many of the companies against which we may compete have significantly greater financial resources
and expertise than we do in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory
approvals and marketing approved products.
There
are several PI3K and mTOR inhibitors approved by the FDA, including Piqray and Afinitor from Novartis AG, Aliqopa from Bayer Corporation,
Copiktra from Verastem, Inc., Zydelig from Gilead Sciences, Inc. and we are aware that other companies are, or may be, developing products
for this indication, including AstraZeneca plc, BridgeBio Inc., Eli Lilly and Company, F. Hoffmann-La Roche Ltd, Kazia Therapeutics Limited,
Infinity Pharmaceuticals, Inc., Relay Therapeutics, Revolution Medicines Inc., and Takeda Pharmaceutical Company Limited. There may be
additional companies with programs suitable for addressing these patient populations that could be competitive with our efforts but that
have not yet disclosed specific clinical development plans. Smaller or early-stage companies, including oncology-focused therapeutics
companies, may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.
These companies may also compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical
trial sites, enrolling patients in clinical trials and acquiring technologies complementary to, or necessary for, our programs. The availability
of reimbursement from government and private payors will also significantly impact the pricing and competitiveness of our products. Our
competitors may obtain FDA or other regulatory approvals for their products more rapidly than we may obtain approvals for our product
candidates, which could result in our competitors establishing a strong market position before we are able to commercialize our product
candidates.
CELsignia
Development and CDx Programs
Overview
Our
proprietary CELsignia diagnostic platform is the only commercially ready technology we are aware of that uses a patient’s living
tumor cells to identify the specific abnormal cellular process driving a patient’s cancer and the targeted therapy that best treats
it. This enables us to identify patients whose tumors may respond to a targeted therapy, even though they lack a previously associated
molecular mutation. By identifying cancer patients whose tumors lack an associated genetic mutation but have abnormal cellular activity
a matching targeted therapeutic is designed to inhibit, we believe our CELsignia CDx can expand the markets for a number of already approved
targeted therapies. Our current CDx identifies breast and ovarian cancer patients whose tumors have cancer drivers potentially responsive
to treatment with human epidermal growth factor receptor 2-negative (HER2), mesenchymal-epithelial transition factor (c-MET), or phosphatidylinositol
3-kinases (PI3K) targeted therapeutics.
Our
CELsignia platform provides an important advantage over traditional molecular diagnostics. Current molecular diagnostics analyze fragmented
cells to obtain a snapshot of the genetic mutations present in a patient’s tumor. Using cell fragments prevents molecular diagnostics
from analyzing the dynamic cellular activities, known as cell signaling, that regulate cell proliferation or survival. Cancer can develop
when critical cell signaling, regulating physiologic activity such as cell proliferation, becomes abnormal or dysregulated. Since genetic
mutations are often only weakly correlated to the dysregulated cell signaling activity driving a patient’s cancer, a molecular
diagnostic is prone to providing an incomplete diagnosis. CELsignia tests overcome this limitation by measuring dynamic cell signaling
activity in a cancer patient’s living tumor cells. When a CELsignia test detects abnormal signaling activity, a more accurate diagnosis
of the patient’s cancer driver is obtained.
We
are supporting the advancement of new potential indications for four different targeted therapies, controlled by other pharmaceutical
companies, that would rely on a CELsignia CDx to select patients. Our first analytically validated and commercially ready test using
our CELsignia platform, the CELsignia HER2 Pathway Activity Test for breast cancer, diagnoses two new sub-types of HER2-negative breast
cancer that traditional molecular diagnostics cannot detect. Our internal studies show that approximately 15-20% of HER2-negative breast
cancer patients have abnormal HER2 signaling activity similar to levels found in HER2-positive breast cancer cells. As a result, these
HER2-negative patients have undiagnosed HER2-driven breast cancer and would be likely to respond to the same anti-HER2 targeted therapies
only HER2-positive patients receive today. We have three interventional clinical trials underway to evaluate the efficacy of HER2 targeted
therapies in breast cancer patients selected with our CELsignia HER2 Pathway Activity Test.
Our
second CELsignia test for breast cancer evaluates independent c-Met signaling activity and its involvement with HER family signaling
in HER2-negative breast cancer tumor cells. Our internal studies show that approximately 20%-25% of HER2-negative breast cancer patients
have abnormal c-Met signaling activity that is co-activated with abnormal HER family signaling. These studies suggest that this sub-group
of HER2-negative breast cancer patients may best respond to treatment with a combination of HER family and c-Met inhibitors. We have
one interventional clinical trial underway to evaluate the efficacy of HER2 and c-Met targeted therapies, in previously treated metastatic
HER2-negative breast cancer patients selected with our CELsignia Multi-Pathway Activity Test, or CELsignia MP Test.
Our
third CELsignia test for breast cancer evaluates PI3K signaling in HER2-negative breast cancer tumor cells. Our internal studies demonstrate
how measurement of PI3K-involved signaling may provide a more sensitive and specific method of identifying patients most likely to benefit
from PI3K inhibitors than current genetic tests that measure PI3K mutations. We intend to combine these three tests to expand the CELsignia
MP Test. With this next generation CELsignia test, we plan to provide an analysis of EGFR/HER1, HER2, HER3, c-MET, and PI3K-node involved
signaling activity for each patient tumor specimen received.
In
addition, we completed development of our first CELsignia test for ovarian cancer in 2020. This test identifies a new sub-group of ovarian
cancer patients with tumors that have abnormal c-Met and HER2 signaling activity. These findings suggest that a significant sub-group
of ovarian cancer patients may respond to treatment with a combination of ErbB and c-Met inhibitors. Nearly 14,000 women a year die from
ovarian cancer, a disease that has less than a 50% five-year survival rate and a limited range of targeted therapy options. There is
thus a significant unmet need for additional therapeutic options for ovarian cancer patients. As a companion diagnostic, our CELsignia
test for ovarian cancer will be intended to help pharmaceutical companies obtain new drug indications and expand treatment options for
this challenging tumor type.
Our
overall commercialization strategy is to develop diagnostics that expand the patient population eligible for targeted therapies. In furtherance
of this strategy, we have been and will continue to seek collaborations with pharmaceutical companies to field clinical trials to advance
the clinical development of their targeted therapies with the eventual goal of obtaining FDA approval of a new drug indication.
CELsignia
Clinical Trials
We
are currently collaborating on four Phase 2 clinical trials to evaluate the efficacy of our collaboration partners’ targeted
therapies in patients selected with one of our CELsignia tests. The goal of these trials is to support the development of four
potential new drug indications to treat patient groups found responsive by our CELsignia test to their approved targeted therapies.
These clinical trials include:
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FACT-1
Clinical Trial to Evaluate Efficacy of Genentech’s HER2 Targeted Therapies. We are collaborating with NSABP Foundation, Inc.
(“NSABP”) and Genentech, Inc. (“Genentech”) to evaluate the efficacy and safety of Genentech’s drugs,
Herceptin (trastuzumab) and Perjeta (pertuzumab), and chemotherapy in breast cancer patients selected with our CELsignia test. The
goal is to demonstrate that patients who have an abnormal HER2 signaling pathway, as identified by our CELsignia test, respond to
treatment with a matching targeted therapy. |
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|
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FACT-2
Clinical Trial to Evaluate Efficacy of Puma’s HER2 Targeted Therapy. We are collaborating with Puma Biotechnology, Inc. (“Puma”)
and West Cancer Center to conduct a Phase 2 single-arm interventional trial to evaluate the efficacy and safety of Puma’s
drug, Nerlynx (neratinib), and chemotherapy in breast cancer patients selected with our CELsignia test. The goal of the trial is
to demonstrate that triple-negative breast cancer patients who have a hyperactive HER2 signaling tumor, as identified by the CELsignia
test, respond to treatment with Nerlynx, a matching HER2 therapy. |
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|
|
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FACT-5
Clinical Trial to Evaluate Efficacy of Puma’s pan-HER Inhibitor and chemotherapy. We are collaborating with University of Rochester
Wilmot Cancer Center and Puma to evaluate the efficacy and safety of Puma’s drug, Nerlynx (neratinib), and the chemotherapy
capecitabine, in previously treated metastatic HER2-negative breast cancer patients with brain metastases selected with our CELsignia
HER2 Pathway Activity Test. The goal of the trial is to demonstrate that previously treated HER2-negative metastatic breast cancer
patients with brain metastases who have hyperactive HER2 signaling tumors, as identified by the CELsignia test, respond to treatment
with Nerlynx in combination with capecitabine. |
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|
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FACT-6
Clinical Trial to Evaluate Efficacy of Novartis’s c-Met Inhibitor and Puma’s pan-HER Inhibitor. We are collaborating
with MD Anderson Cancer Center, Novartis AG, and Puma, to conduct a Phase 1/2 clinical trial. This open-label Phase 1/2 trial will
evaluate the efficacy and safety of Novartis’ c-Met inhibitor, Tabrecta (capmatinib), and Puma’s pan-HER inhibitor, Nerlynx
(neratinib), in previously treated metastatic HER2-negative breast cancer patients selected with our CELsignia MP Test. The goal
of the trial is to demonstrate that previously treated HER2-negative metastatic breast cancer patients who have hyperactive HER2
and c-Met signaling tumors, as identified by the CELsignia test, respond to treatment with Tabrecta in combination with Nerlynx. |
Companion
Diagnostics Industry
According
to the Centers for Disease Control and Prevention, cancer was the second-leading cause of death in the United States in 2020, responsible
for nearly one of every four deaths. There are many types of cancer treatment options, including surgery, radiation therapy, chemotherapy,
immunotherapy, hormone therapy, stem cell transplant, and targeted therapy. Targeted therapies are drugs or other substances that block
the growth and spread of cancer by interfering with specific molecular targets involved in the progression of cancer. Targeted therapies
differ from standard chemotherapy drugs in that they are often cytostatic (block tumor cell proliferation) rather than cytotoxic (kill
tumor cells). According to the National Cancer Institute, there are currently more than 90 approved targeted oncology therapies, some
of which cost more than $100,000 per treatment course.
Diagnostic
tests to detect single biomarkers are now widely used by pathologists to determine the molecular sub-type of a cancer. When a molecular
biomarker test is used to support the choice of therapy to prescribe, it is often referred to as a “companion diagnostic.”
Increasing numbers of targeted therapeutics are prescribed based on the results from a companion diagnostic test to detect the presence
of a molecular biomarker. Only patients testing positive for the biomarker are eligible to receive the associated therapy.
Companion
diagnostics are becoming increasingly important to the pharmaceutical industry. The use of companion diagnostics to better match patients
to effective treatments positively impacts clinical outcomes and lowers expenditures on drugs that do not benefit patients. Stratifying
the eligible patient population to include only likely responders is particularly important when the percentage of likely responders
is only a fraction of the total cancer population. In these circumstances, narrowing the eligible patient population is often necessary
to meet the clinical endpoint targets required to receive FDA drug approval.
CELsignia
Testing Opportunities
We
expect to generate recurring companion diagnostic testing revenues once a CELsignia companion diagnostic-linked drug therapy is approved
for patient use. On average, we believe that the lifetime value of providing the companion diagnostic test will significantly exceed
the revenue generated from the companion diagnostic development program. We expect to offer each CELsignia test to patients at prices
ranging from $4,000–$7,000, depending on the number of pathways evaluated. No tests directly comparable to the CELsignia tests
are available today to offer reference points for pricing purposes. Pricing for several proprietary complex genomic tests, however, fall
within this range and we believe this provides guidance on the amount insurance companies are willing to pay for highly informative tests
that guide patient care.
Our
CELsignia Platform
We
have made significant investments in research and development of our CELsignia platform. To measure dynamic cellular activity, we internally
developed two distinct but complementary technologies, which now comprise our CELsignia platform:
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our
proprietary cell microenvironment; and |
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our
method to quantify dynamic patient cell signaling dysfunction. |
We
utilize our CELsignia platform to create CELsignia tests that measure specific signaling pathway activity in various tumor types.
Cell
microenvironment. Previous research has shown that cancer cells extracted from a patient’s tumor share the molecular features
of the primary cancers from which they were derived and could provide an ex vivo (outside the patient) model of a patient’s
tumor. The technology around tumor cell extraction from individual patients and culturing techniques, however, has largely remained undeveloped.
For instance, we are not aware of any competing diagnostic tests that use live patient tumor cells to measure dynamic cell signaling
activity. Studies on the topic have historically highlighted the challenges of deriving a viable patient tumor cell sample from an individual
patient tumor specimen.
We
have developed a cell microenvironment to extract and expand viable tumor cells from fresh human tumor tissue, which meets the three
critical clinical parameters a patient-derived tumor cell sample would need to satisfy in order to meet the regulatory and clinical requirements
for a diagnostic test measuring signaling activity:
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● |
The
patient cell sample tested must reflect the starting tumor’s composition. If samples do not reflect the original tumor’s
composition, test results derived from that sample may not be representative of the patient’s tumor. |
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The
sample must be available for testing in less than 21 days. Clinicians generally require test results in cases of complex diseases
such as cancer within two to three weeks so they can begin treatment of their patient as soon as the initial symptoms are evaluated
or a preliminary diagnosis is made. |
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At
least 90% of the tumor specimens obtained from a patient must yield testable samples. Clinicians will only order tests that require
a patient specimen when they are highly likely to receive a test result. |
Dynamic
patient cell signaling quantification. The second component of our CELsignia platform involves methods to quantify specific dynamic
signal transduction events in patient derived tumor cells. The complexity of signal transduction processes is immense, and the permutations
of the pathway variables are practically unquantifiable. Current analytical methods to assess these variables use cell fragments. Point-in-time
measurements are limited to assessment of the compositional status (e.g., mutation), concentration level (e.g., protein amount), or activation
status (e.g., phosphorylation) of a finite number of signaling pathway components. A key insight underlying our technology was our observation
that, no matter how sophisticated or detailed, a point-in-time molecular profile would only provide a snapshot. These methods could not
provide a complete, dynamic assessment of the signaling activity driving a patient’s cancer. These point-in-time molecular analyses
would, in many cases, only provide a weak correlation to the presence of the signaling pathway dysfunction driving a patient’s
cancer. Instead, we concluded that a complete diagnosis of cancer and an assessment of a patient’s response to treating their disease
requires measurement of the underlying activity of signaling pathways in live patient tumor cells.
To
measure live real-time dynamic cell signaling activity, we utilize an impedance biosensor instrument. An impedance biosensor is an analytical
platform that converts changes in cellular activity to a measurable electrical signal. When cells are stimulated and change their function,
the accompanying changes alter the electrical signal that is measured. The output value is quantified over time and used to determine
a Signaling Function Score. To determine the activity of a specific signaling pathway, an activating agent specific to a pathway receptor
is used to turn on the pathway and a corresponding inhibitory agent specific to the pathway receptor is used to turn signaling off. When
signaling pathways are stimulated in this manner, a change in the electrical signal occurs and Signaling Function Score recorded. By
relying on the principle of detecting signaling pathway activity, we believe we can develop tests for a range of disease types and targeted
therapies that affect various cellular pathways.
CELsignia
Multi-Pathway Activity Test
Our
CELsignia MP Test is a qualitative laboratory developed test or LDT that measures HER2, c-Met, and PI3K signaling activity in breast
and ovarian tumor cells obtained from patients previously diagnosed with cancer to determine whether or not the patients have one of
the following cancer sub-types:
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1. |
Abnormal
HER2 signaling driven cancer. |
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2. |
Abnormal
c-Met and HER2 signaling driven cancer. |
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3. |
Abnormal
PI3K-involved signaling driven cancer. |
CELsignia’s
Commercialization Strategy
Our
commercial activities will target three complementary groups at various phases of the development of our CELsignia tests.
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Pharmaceutical
companies. For each CELsignia test we develop to diagnose a new cancer sub-type, we intend to identify the matching targeted
therapies, either currently approved or in the investigational phase, and the manufacturer of those therapies. We intend to initiate
discussions and seek to reach development agreements with each of these pharmaceutical companies when we have verified the prevalence
of the cancer sub-type and completed successful animal studies. |
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Medical
and surgical oncologists. We plan to initially target key opinion leaders (KOLs) in each cancer type once we have completed the
analytical validation of a CELsignia test. This will allow us to build awareness and credibility for the CELsignia test as we are
generating clinical validation data. When a new drug indication is received that requires use of a CELsignia companion diagnostic
to identify eligible patients, we will coordinate the pharmaceutical company’s go-to-market activities with our own. This coordination
will allow us to significantly leverage the pharmaceutical company’s sales, marketing, and reimbursement activities, unlike
traditional molecular diagnostic companies. |
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Payors.
When a new drug indication is received that requires use of a CELsignia companion diagnostic to identify eligible patients, we
expect to coordinate the pharmaceutical company’s reimbursement activities with our own. |
Our
CELsignia tests are laboratory developed tests, or LDTs, and subject to regulation under the Clinical Laboratory Improvement Amendments,
or CLIA. We completed the analytical validation of our first CELsignia test and received CLIA certification in 2016. Our current focus
is to field clinical trials with leading cancer centers in collaboration with pharmaceutical companies to demonstrate that cancer patients
diagnosed with an abnormal signaling pathway by a CELsignia test respond efficaciously to treatment with a matching targeted therapy.
Once favorable efficacy data is available, we expect to generate revenues from CELsignia tests performed in conjunction with the clinical
trials a pharmaceutical company will field during the registrational phase of our partners’ drug approval process. We also expect
that the agreements we enter into with the pharmaceutical companies partnering with us on these registrational trials will include milestone
payments at initiation and completion of trials and perhaps at various other negotiated points during the trials. We expect to generate
revenue from the sale of CELsignia tests ordered by physicians upon the approval of our pharmaceutical company’s matching drug,
as a companion diagnostic. A key requirement for success of these partnerships will be clinical trial results that demonstrate the advantages
of using a CELsignia test as a companion diagnostic.
A
CELsignia test would be launched upon the approval of a pharmaceutical company’s matching drug as a companion diagnostic. We would
expect physicians, typically a medical or surgical oncologist, to order our tests in conjunction with the roll-out of the pharmaceutical
company’s matching drug. The physician will prescribe a CELsignia test and coordinate provision of a patient specimen from a biopsy
or surgical procedure. The fresh tissue would then be shipped overnight directly to our laboratory where we would use our proprietary
methods to extract diseased cell samples from the patient’s tissue and perform the CELsignia tests ordered. Test results would
typically be available in 10 to 14 days after receipt of the patient specimen. For each patient sample analyzed, a Signaling Function
Score would be calculated quantitatively and converted into a final qualitative result: abnormal or normal. For patients found to have
an abnormal signaling pathway, clinicians would use the results of the CELsignia test as a guide to select a targeted drug that inhibits
the abnormal signaling activity identified.
Pricing
and Reimbursement
The
principal groups that we expect to pay us in the future for our CELsignia tests include:
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commercial
third-party payors; |
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government
payors, including Medicare and state Medicaid plans; |
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biopharmaceutical
customers; |
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hospitals,
cancer centers, and other institutions; and |
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patients. |
Adequate
reimbursement will be an important factor in achieving broad clinical adoption of our CELsignia tests. At the same time, we believe
broad clinical adoption will help drive favorable reimbursement decisions. To achieve broad reimbursement coverage with commercial
third-party payors and government payors, including Medicare and Medicaid, we plan to demonstrate the economic and clinical value of
our CELsignia tests to payors by employing a multi-pronged strategy:
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Set
a high bar for analytical validation. We expect to present data on the characterization of new cancer sub-types by CELsignia
tests at conferences and will seek to publish the results in peer-reviewed journals. |
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Meet
the evidence standards necessary to be consistent with leading clinical guidelines. We believe inclusion in leading clinical
practice guidelines plays a critical role in payers’ coverage decisions. We plan to conduct clinical validation and clinical
utility studies that are consistent with the requirements of the widely recognized National Comprehensive Cancer Network clinical
practice guidelines. |
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Execute
an internal managed care policy and claims adjudication function as part of our core business operations. We plan to make obtaining
adequate and widespread reimbursement a critical component of our business operations. We expect to hire a team of in-house claims
processing and reimbursement specialists who will work with patients and payors to navigate the claims process and obtain maximum
reimbursement. |
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Cultivate
a network of KOLs. KOLs are able to influence clinical practice by publishing research and determining whether new tests should
be integrated into practice guidelines. We expect to collaborate with KOLs early in the development process to ensure our clinical
studies are designed and executed in a way that clearly demonstrates the benefits of our tests to physicians and payers. |
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Compile
a growing library of peer-reviewed studies that demonstrate the test is effective. We will seek to publish peer-reviewed articles
and review papers to help support our efforts to obtain widespread adoption and reimbursement of our CELsignia tests. In each disease
area we pursue, we intend to conduct studies in order to develop similar supporting literature. |
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Reduce
expenditures. We intend to build economic models to measure the financial benefits of using our CELsignia test in guiding patient
treatment and minimizing the use of drugs that will not likely have a positive impact. We plan to use the data we gather through
the use of these models as we meet with commercial third-party payors and government payors. |
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Exploit
efforts by commercial third-party and government payors to contain healthcare costs. A major cost reduction opportunity is to
reduce expenditures for drug courses that provide no patient benefit. Our technology will enable physicians to prescribe therapies
that have significantly higher response rates than has been the case with targeted therapies to date. Since this will lower the drug
cost per responsive patient, we believe widespread use of our CELsignia tests is consistent with payors goals of delivering health
care more cost effectively. |
CELsignia’s
Competition
At
present, we are not aware of any other companies that offer diagnostic tests that use a patient’s live tumor cells to identify
the signaling pathway driving a patient’s cancer. There are several companies focused on developing genomic or proteomic analyses
of a patient’s diseased cells. Initial efforts identified protein targets or genetic mutations, oftentimes referred to as “biomarkers,”
that are associated with a disease process to enable development of drugs more closely tailored to specific patient populations.
As
tools for human genome analysis have become less expensive, a number of companies have also recently launched more complex genomic test
panels and gene expression signatures tests. These tests rely on a static measurement of molecular properties and mathematical analysis
to identify statistically significant correlations between the selected molecular properties and a clinical condition or outcome of populations
of patients with the “same” disease.
These
genetic tests often have limited predictive success because they only identify some, but not all, of, the molecular and cellular conditions
required for a drug therapy to function in a patient. They may identify the presence of the genes associated with a disease, but they
cannot determine how the gene products function in the context of a particular individual.
Providers
of genomic or proteomic tests include diagnostic kit manufacturers, hospitals, and independent laboratories. We do not plan to develop
tests where a molecular biomarker can identify drug responsive patients, so our current tests will not compete directly against the tests
provided by these other companies.
Diagnostics
competitors that have molecular method-based tests include, but are not limited to, Foundation Medicine, Caris Life Sciences, NeoGenomics,
LabCorp, Quest, Nanostring, Paradigm, Biocept, Exosome Diagnostics, Guardant Health, Roche Diagnostics, Qiagen, Myriad, and Genomic Health.
Principal
Suppliers for CELsignia
We
purchase commercially available reagents and instruments from a variety of suppliers. Our principal reagent suppliers include Bio-Techne
Corporation, Selleck Chemicals, Sigma-Aldrich, and VWR International. Our principal instrument suppliers include Agilent Technologies,
Integra Biosciences, Invitrogen, and Thermo Fisher Scientific. These items are purchased on a purchase order basis pursuant to the applicable
supplier’s standard terms and conditions. The items purchased from these suppliers are standard products sold widely to the biotechnology
industry. All items purchased are typically available within several days after an order is placed.
Intellectual
Property
Our
success depends in part on our ability to obtain and maintain proprietary protection for our product candidates, manufacturing and process
discoveries and other know-how, to operate without infringing the proprietary rights of others, and to prevent others from infringing
our proprietary rights. We plan to protect our proprietary positions using a variety of methods, which include protecting current U.S.
and foreign patents related to proprietary technology, inventions and improvements and prosecuting additional U.S. and foreign patents
that we determine are important to the development and implementation of our business. For example, we, our licensors, or our collaborators
currently have, or are pursuing, patents covering the composition of matter for our drug product candidates and we plan to generally
pursue patent protection covering methods-of-use for one or more clinical programs. We also rely on trade secrets, trademarks, know-how,
continuing technological innovation and potential in-licensing opportunities to develop and maintain our proprietary position.
Gedatolisib
Patents
We
entered into the Gedatolisib License Agreement with Pfizer in April 2021, pursuant to which we acquired exclusive worldwide rights under
Pfizer patents and know-how to develop, manufacture and commercialize gedatolisib. We have exclusive licenses under the Gedatolisib License
Agreement to patent rights in the U.S. and numerous foreign jurisdictions relating to gedatolisib. The patent rights in-licensed under
the Gedatolisib License Agreement include 11 granted patents in the U.S. and more than 290 patents granted in foreign jurisdictions including
Australia, Canada, China, France, Germany, Spain, United Kingdom and Japan. A U.S. patent covering gedatolisib as a composition of matter
has a statutory expiration date in December 2029 and a U.S. composition of matter patent that covers the lactic acid form of gedatolisib
that is currently in clinical development expires in December 2035, in each case, not including patent term adjustment or any patent
term extension, and relevant foreign counterparts.
CELsignia
Patents
With
respect to CELsignia, we have six issued U.S. patents and 30 issued international patents covering our diagnostic approach using cell
signaling analysis in living patient cells to guide treatment of patients with targeted therapies and cell sample preparation methods.
The earliest expiration date of patents is 2033. In addition, we have developed significant proprietary know-how and trade secrets for
the various cell sample preparation and cellular analysis methods we have developed.
Trade
Secrets
In
addition to patents, we rely on trade secrets and know-how to develop and maintain our competitive position. We typically rely on trade
secrets to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection. We
protect trade secrets and know-how by establishing confidentiality agreements and invention assignment agreements with our employees,
consultants, scientific advisors, contractors and partners. These agreements generally provide that all confidential information developed
or made known during the course of an individual or entity’s relationship with us must be kept confidential during and after the
relationship. These agreements also generally provide that all inventions resulting from work performed for us or relating to our business
and conceived or completed during the period of employment or assignment, as applicable, shall be our exclusive property. In addition,
we take other appropriate precautions, such as physical and technological security measures, to guard against misappropriation of our
proprietary information by third parties.
Government
Regulation
Approval
of Gedatolisib and Other Drug Products in the United States
Government
authorities in the U.S. at the federal, state and local level and in other countries and jurisdictions, including the EU, extensively
regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage,
record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of drug
products, such as gedatolisib. Generally, before a new drug can be marketed, considerable data demonstrating its quality, safety and
efficacy must be obtained, organized into a format specific for each regulatory authority and submitted for review and approved by the
regulatory authority.
Overview
of FDA Approval Process
In
the U.S., pharmaceutical products are subject to extensive regulation by the FDA. The Federal Food, Drug, and Cosmetic Act, or the FDC
Act, and other federal and state statutes and regulations, govern, among other things, the research, development, testing, manufacture,
storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling,
and import and export of pharmaceutical products. Failure to comply with applicable U.S. requirements may subject a company to a variety
of administrative or judicial sanctions, such as FDA refusal to approve pending New Drug Applications, or NDAs, warning or untitled letters,
product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties and
criminal prosecution.
Pharmaceutical
product development for a new product or certain changes to an approved product in the U.S. typically involves preclinical laboratory
and animal tests, the submission to the FDA of an investigational new drug applicable, or IND, which must become effective before clinical
testing may commence, and adequate and well-controlled clinical trials to establish the safety and effectiveness of the drug for each
indication for which FDA approval is sought. Satisfaction of FDA pre-market approval requirements typically takes many years and the
actual time required may vary substantially based upon the type, complexity and novelty of the product or disease.
Preclinical
tests include laboratory evaluation of product chemistry, formulation and toxicity, as well as animal trials to assess the characteristics
and potential safety and efficacy of the product. The conduct of the preclinical tests must comply with federal regulations and requirements,
including good laboratory practices. The results of preclinical testing are submitted to the FDA as part of an IND along with other information,
including information about product chemistry, manufacturing and controls and a proposed clinical trial protocol. Long term preclinical
tests, such as animal tests of reproductive toxicity and carcinogenicity, may continue after the IND is submitted. A 30-day waiting period
after the submission of each IND is required prior to the commencement of clinical testing in humans. If the FDA has neither commented
on nor questioned the IND within this 30-day period, the clinical trial proposed in the IND may begin.
The
clinical stage of development involves the administration of the investigational product to healthy volunteers or disease-affected patients
under the supervision of qualified investigators, generally physicians not employed by, or under control of, the trial sponsor, in accordance
with Good Clinical Practices, or GCPs, which include the requirement that all research subjects provide their informed consent for their
participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the
clinical trial, dosing procedures, subject selection and exclusion criteria and the parameters to be used to monitor subject safety and
assess efficacy. Each protocol, and any subsequent amendments to the protocol, must be submitted to the FDA as part of an investigational
new drug applicable, or IND. Furthermore, each clinical trial must be reviewed and approved by an Institutional Review Board, or IRB,
for each institution at which the clinical trial will be conducted to ensure that the risks to individuals participating in the clinical
trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the informed consent form that must
be provided to each clinical trial subject or his or her legal representative and must monitor the clinical trial until completed. There
also are requirements governing the reporting of ongoing clinical trials and completed clinical trial results to public registries. Information
about most clinical trials must be submitted within specific timeframes for publication on the www.clinicaltrials.gov website. Information
related to the product, patient population, phase of investigation, trial sites and investigators and other aspects of the clinical trial
is made public as part of the registration of the clinical trial. Sponsors are also obligated to discuss the results of their clinical
trials after completion. Disclosure of the results of these trials can be delayed in some cases for up to two years after the date of
completion of the trial. Competitors may use this publicly available information to gain knowledge regarding the progress of development
programs. Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined:
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Phase
1 clinical trials generally involve a small number of healthy volunteers or disease-affected patients who are initially exposed to
a single dose and then multiple doses of the product candidate. The primary purpose of these clinical trials is to assess the metabolism,
pharmacologic action, side effect tolerability and safety of the drug. |
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Phase
2 clinical trials involve studies in disease-affected patients to determine the dose required to produce the desired benefits. At
the same time, safety and further pharmacokinetic and pharmacodynamic information is collected, possible adverse effects and safety
risks are identified, and a preliminary evaluation of efficacy is conducted. |
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Phase
3 clinical trials generally involve a larger number of patients at multiple sites and are designed to provide the data necessary
to demonstrate the effectiveness of the product for its intended use, its safety in use and to establish the overall benefit/risk
relationship of the product and provide an adequate basis for product approval. These trials may include comparisons with placebo
and/or other comparator treatments. The duration of treatment is often extended to mimic the actual use of a product during marketing. |
A
registrational trial is a clinical trial that adequately meets regulatory agency requirements for the evaluation of a drug candidate’s
efficacy and safety such that it can be used to justify the approval of the drug. Generally, registrational trials are Phase 3 trials
but may be Phase 2 trials if the trial design provides a reliable assessment of clinical benefit, particularly in situations where there
is an unmet medical need.
Post-approval
trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These trials are used to
gain additional experience from the treatment of patients in the intended therapeutic indication, particularly for long-term safety follow
up. In certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a condition of approval of a Biologics License
Application, or BLA.
Progress
reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse
events occur. The FDA or the sponsor may suspend or terminate a clinical trial at any time, or the FDA may impose other sanctions on
various grounds, including a finding that the research patients are being exposed to an unacceptable health risk. Similarly, an IRB can
suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with
the requirements of the IRB or if the drug has been associated with unexpected serious harm to patients. There are also requirements
related to registration and reporting of certain clinical trials and completed clinical trial results to public registries.
After
completion of the required clinical testing, an NDA is prepared and submitted to the FDA. FDA approval of the NDA is required before
marketing of the product may begin in the U.S. The NDA must include the results of all preclinical, clinical and other testing and a
compilation of data relating to the product’s pharmacology, chemistry, manufacture and controls. The cost of preparing and submitting
an NDA is substantial. The submission of most NDAs is additionally subject to a substantial application user fee, currently $3,242,026
for Fiscal Year 2023, and the manufacturer and/or sponsor under an approved NDA are also subject to annual program fees for eligible
products, which are currently $393,933 for Fiscal Year 2023.
The
FDA has 60 days from its receipt of an NDA to determine whether the application will be accepted for filing based on the agency’s
threshold determination that it is sufficiently complete to permit substantive review. Once the submission is accepted for filing, the
FDA begins an in-depth review. The FDA has agreed to certain performance goals in the review of new drug applications. Most such applications
for standard review drug products are reviewed within ten to twelve months; most applications for priority review drugs are reviewed
in six to eight months. Priority review can be applied to drugs that the FDA determines offer major advances in treatment or provide
a treatment where no adequate therapy exists. The review process for both standard and priority review may be extended by FDA for three
additional months to consider certain late-submitted information, or information intended to clarify information already provided in
the submission.
The
FDA may also refer applications for novel drug products, or drug products that present difficult questions of safety or efficacy, to
an advisory committee—typically a panel that includes clinicians and other experts—for review, evaluation and a recommendation
as to whether the application should be approved. The FDA is not bound by the recommendation of an advisory committee, but it generally
follows such recommendations. Before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance
with GCP. Additionally, the FDA will inspect the facility or the facilities at which the drug is manufactured. The FDA will not approve
the product unless compliance with cGMP is satisfactory and the NDA contains data that provide substantial evidence that the drug is
safe and effective in the indication studied.
After
the FDA evaluates the NDA and the manufacturing facilities, it issues either an approval letter or a complete response letter. A complete
response letter generally outlines the deficiencies in the submission and may require substantial additional testing, or information,
in order for the FDA to reconsider the application. If, or when, those deficiencies have been addressed to the FDA’s satisfaction
in a resubmission of the NDA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two to
six months depending on the type of information included.
An
approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. As a condition
of NDA approval, the FDA may require a risk evaluation and mitigation strategy, or REMS, to help ensure that the benefits of the drug
outweigh the potential risks. REMS can include medication guides, communication plans for healthcare professionals and elements to assure
safe use, or ETASU. ETASU can include, but are not limited to, special training or certification for prescribing or dispensing, dispensing
only under certain circumstances, special monitoring and the use of patient registries. The requirement for a REMS can materially affect
the potential market and profitability of the drug. Moreover, product approval may require substantial post-approval testing and surveillance
to monitor the drug’s safety or efficacy. Once granted, product approvals may be withdrawn if compliance with regulatory standards
is not maintained or problems are identified following initial marketing.
Changes
to some of the conditions established in an approved application, including changes in indications, labeling or manufacturing processes
or facilities, require submission and FDA approval of a new NDA or NDA supplement before the change can be implemented. An NDA supplement
for a new indication typically requires clinical data similar to that in the original application, and the FDA uses the same procedures
and actions in reviewing NDA supplements as it does in reviewing NDAs.
U.S.
Exclusivity
Upon
NDA approval of a new chemical entity, or NCE, which is a drug that contains no active moiety that has been approved by the FDA in any
other NDA, that drug receives five years of marketing exclusivity during which the FDA cannot receive any Abbreviated New Drug Application,
or ANDA, seeking approval of a generic version of that drug. Certain changes to a drug, such as the addition of a new indication to the
package insert, are associated with a three-year period of exclusivity during which the FDA cannot approve an ANDA for a generic drug
that includes the change. An ANDA may be submitted one year before NCE exclusivity expires if a Paragraph IV certification is filed.
If there is no listed patent in the Orange Book, there may not be a Paragraph IV certification, and, thus, no ANDA may be filed before
the expiration of the exclusivity period.
Patent
Term Extension
After
NDA approval, owners of relevant drug patents may apply for up to a five-year patent extension for one patent. The allowable patent term
extension is calculated as half of the drug’s testing phase—the time between IND and NDA submission—and all of the
review phase—the time between NDA submission and approval up to a maximum of five years. The time can be shortened if the FDA determines
that the applicant did not pursue approval with due diligence. The total patent term after the extension may not exceed 14 years from
approval.
For
patents that might expire during the application phase, the patent owner may request an interim patent extension. An interim patent extension
increases the patent term by one year and may be renewed up to four times. For each interim patent extension granted, the post-approval
patent extension is reduced by one year. The director of the U.S. Patent and Trademark Office must determine that approval of the drug
covered by the patent for which a patent extension is being sought is likely. Interim patent extensions are not available for a drug
for which an NDA has not been submitted.
Fast
Track Designation and Accelerated Approval
The
FDA is required to facilitate the development, and expedite the review, of drugs that are intended for the treatment of a serious or
life-threatening disease or condition for which there is no effective treatment, and which demonstrate the potential to address unmet
medical needs for the condition. Under the Fast Track program, the sponsor of a new drug candidate may request that the FDA designate
the drug candidate for a specific indication as a Fast Track drug concurrent with, or after, the filing of the IND for the drug candidate.
The FDA must determine if the drug candidate qualifies for Fast Track Designation within 60 days of receipt of the sponsor’s request.
Under
the Fast Track program and the FDA’s accelerated approval regulations, the FDA may approve a drug for a serious or life-threatening
illness that provides meaningful therapeutic benefit to patients over existing treatments based upon a surrogate endpoint that is reasonably
likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality,
that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account
the severity, rarity or prevalence of the condition and the availability or lack of alternative treatments.
In
clinical trials, a surrogate endpoint is a measurement of laboratory or clinical signs of a disease or condition that substitutes for
a direct measurement of how a patient feels, functions or survives. Surrogate endpoints can often be measured more easily or more rapidly
than clinical endpoints. A drug candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including
the completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint. Failure to conduct required
post-approval studies, or confirm a clinical benefit during post-marketing studies, will allow the FDA to withdraw the drug from the
market on an expedited basis. All promotional materials for product candidates approved under accelerated regulations are subject to
prior review by the FDA.
In
addition to other benefits such as the ability to use surrogate endpoints and engage in more frequent interactions with the FDA, the
FDA may initiate review of sections of a Fast Track drug’s NDA before the application is complete. This rolling review is available
if the applicant provides, and the FDA approves, a schedule for the submission of the remaining information and the applicant pays applicable
user fees. However, the FDA’s time period goal for reviewing an application does not begin until the last section of the NDA is
submitted. Additionally, the Fast Track Designation may be withdrawn by the FDA if the FDA believes that the designation is no longer
supported by data emerging in the clinical trial process.
Breakthrough
Therapy Designation
Breakthrough
Therapy Designation by the FDA provides more extensive development consultation opportunities with FDA senior staff, allows for the rolling
review of the drug’s application for approval and indicates that the product could be eligible for priority review if supported
by clinical data at the time of application submission for drugs that are intended to treat a serious or life-threatening disease or
condition where preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies
on one or more clinically significant endpoints. Under the breakthrough therapy program, the sponsor of a new drug candidate may request
that the FDA designate the drug candidate for a specific indication as a breakthrough therapy concurrent with, or after, the filing of
the IND for the drug candidate. The FDA must determine if the drug candidate qualifies for Breakthrough Therapy Designation within 60
days of receipt of the sponsor’s request.
Disclosure
of Clinical Trial Information
Sponsors
of clinical trials of FDA regulated products, including drugs, are required to register and disclose certain clinical trial information.
Information related to the product, patient population, phase of investigation, trial sites and investigators and other aspects of the
clinical trial is then made public as part of the registration. Sponsors are also obligated to discuss the results of their clinical
trials after completion. Disclosure of the results of these trials can be delayed in certain circumstances for up to two years after
the date of completion of the trial. Competitors may use this publicly available information to gain knowledge regarding the progress
of development programs.
Approval
of Gedatolisib and Other Drug Products in the European Union
Overview
In
the EU, our product candidates also may be subject to extensive regulatory requirements. As in the U.S., medicinal products can be marketed
only if a marketing authorization from the competent regulatory agencies has been obtained. Similar to the U.S., the various phases of
preclinical and clinical research in the EU are subject to significant regulatory controls.
The
Clinical Trials Directive 2001/20/EC, the Directive 2005/28/EC on GCP, and the related national implementing provisions of the
individual EU Member States govern the system for the approval of clinical trials in the EU. Under this system, an applicant must
obtain prior approval from the competent national authority of the EU Member States in which the clinical trial is to be conducted.
Furthermore, the applicant may only start a clinical trial at a specific trial site after the competent ethics committee has issued
a favorable opinion. The clinical trial application must be accompanied by, among other documents, an Investigational Medicinal
Product Dossier or IMPD, or the Common Technical Document, with supporting information prescribed by Directive 2001/20/EC, Directive
2005/28/EC, where relevant the implementing national provisions of the individual EU Member States and further detailed in
applicable guidance documents. All suspected unexpected serious adverse reactions to the investigated drug that occur during the
clinical trial have to be reported to the competent national authority and the Ethics Committee of the Member State where they
occurred.
The
new Clinical Trials Regulation (EU) No 536/2014 came into effect in 2022. The Clinical Trials Regulation will be directly applicable
in all the EU Member States, repealing the current Clinical Trials Directive 2001/20/EC. The new Clinical Trials Regulation aims to simplify
and streamline the approval of clinical trials in the EU. The main characteristics of the regulation include: a streamlined application
procedure via a single-entry point, the “EU portal”; a single set of documents to be prepared and submitted for the application
as well as simplified reporting procedures for clinical trial sponsors; and a harmonized procedure for the assessment of applications
for clinical trials, which is divided in two parts. Part I is assessed by the competent authorities of all EU Member States in which
an application for authorization of a clinical trial has been submitted (Member States concerned). Part II is assessed separately by
each Member State concerned. Strict deadlines have been established for the assessment of clinical trial applications. The role of the
relevant ethics committees in the assessment procedure will continue to be governed by the national law of the concerned EU Member State.
However, overall related timelines will be defined by the Clinical Trials Regulation.
To
obtain a marketing authorization of a drug in the EU, we may submit Marketing Authorization Applications, or MAA, either under the so-called
centralized or national authorization procedures.
Centralized
Procedure
The
centralized procedure provides for the grant of a single marketing authorization following a favorable opinion by the European Medicines
Agency, or EMA, that is valid in all EU Member States, as well as Iceland, Liechtenstein and Norway. The centralized procedure is compulsory
for medicines produced by specified biotechnological processes, products designated as orphan medicinal products, advanced therapy medicines
(such as gene-therapy, somatic cell-therapy or tissue-engineered medicines) and products with a new active substance indicated for the
treatment of specified diseases, such as HIV/AIDS, cancer, diabetes, neurodegenerative disorders or autoimmune diseases and other immune
dysfunctions and viral diseases. The centralized procedure is optional for products that represent a significant therapeutic, scientific
or technical innovation, or whose authorization would be in the interest of public health. Under the centralized procedure the maximum
timeframe for the evaluation of an MAA by the EMA is 210 days, excluding clock stops, when additional written or oral information is
to be provided by the applicant in response to questions asked by the Committee of Medicinal Products for Human Use, or the CHMP. Accelerated
assessment might be granted by the CHMP in exceptional cases, when a medicinal product is expected to be of a major public health interest,
particularly from the point of view of therapeutic innovation. The timeframe for the evaluation of an MAA under the accelerated assessment
procedure is of 150 days, excluding stop-clocks.
National
Authorization Procedures
There
are also two other possible routes to authorize medicinal products in several EU countries, which are available for investigational medicinal
products that fall outside the scope of the centralized procedure:
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Decentralized
procedure. Using the decentralized procedure, an applicant may apply for simultaneous authorization in more than one EU country of
medicinal products that have not yet been authorized in any EU country and that do not fall within the mandatory scope of the centralized
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Mutual
recognition procedure. In the mutual recognition procedure, a medicine is first authorized in one EU Member State, in accordance
with the national procedures of that country. Following this, further marketing authorizations can be sought from other EU countries
in a procedure whereby the countries concerned agree to recognize the validity of the original, national marketing authorization. |
Under
the above-described procedures, before granting an MAA, the EMA or the competent authorities of the Member States of the European Economic
Area, or EEA, make an assessment of the risk-benefit balance of the product on the basis of scientific criteria concerning its quality,
safety and efficacy.
EU
Regulatory Exclusivity
In
the EU, new products authorized for marketing (i.e., reference products) qualify for eight years of data exclusivity and an additional
two years of market exclusivity upon marketing authorization. The data exclusivity period prevents generic applicants from relying on
the preclinical and clinical trial data contained in the dossier of the reference product when applying for a generic marketing authorization
in the EU during a period of eight years from the date on which the reference product was first authorized in the EU. The market exclusivity
period prevents a successful generic applicant from commercializing its product in the EU until ten years have elapsed from the initial
authorization of the reference product in the EU. The ten-year market exclusivity period can be extended to a maximum of eleven years
if, during the first eight years of those ten years, the marketing authorization holder obtains an authorization for one or more new
therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical
benefit in comparison with existing therapies.
Drug
Approval-Related Regulations – Rest of the World
For
other countries outside of the EU and the U.S., such as countries in Eastern Europe, Latin America or Asia, the requirements governing
the conduct of clinical trials, product licensing, pricing and reimbursement vary from jurisdiction to jurisdiction. Additionally, the
clinical trials must be conducted in accordance with cGCP requirements and the applicable regulatory requirements and the ethical principles
that have their origin in the Declaration of Helsinki. If we fail to comply with applicable foreign regulatory requirements, we may be
subject to, among other things, fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating
restrictions and criminal prosecution.
Regulations
of CELsignia Tests
CLIA
and CMS for Diagnostic
The
Centers for Medicare & Medicaid Services, or CMS, an agency within the U.S. Department of Health and Human Services, regulates all
clinical laboratory testing (except research) performed on humans in the United States through CLIA. All clinical laboratories that perform
clinical lab services on human specimens for the purpose of providing information on the diagnosis, prevention or treatment of disease
must receive CLIA certification. This covers approximately 175,000 laboratories as of 2017. Laboratories must obtain CLIA certification
and demonstrate compliance with CLIA requirements as confirmed by an inspection by CMS. We received our CLIA certification in 2016. We
also had our laboratory certified by the College of American Pathologies, or CAP, in 2016, an organization recognized by CMS as a third-party
reviewer of clinical laboratories. Several states, including, among others, New York and California, require licensure of out-of-state
labs that receive specimens from the state and compliance with the state’s individual laboratory regulations.
If
our laboratory is out of compliance with CLIA requirements, we may be subject to sanctions such as suspension, limitation or revocation
of our CLIA certificate, as well as directed plan of correction, state on-site monitoring, civil money penalties, civil injunctive suit
or criminal penalties. We must maintain CLIA compliance and certification to be eligible to bill for services provided to Medicare and
Medicaid beneficiaries. If we were to be found out of compliance with CLIA program requirements and subjected to sanction, our business
could be harmed. Failure to comply with state licensure laws, if applicable, could subject us to additional sanctions imposed by state
licensing authorities.
FDA
for Diagnostics
FDA
approval or clearance is not currently required for CELsignia tests offered as a stand-alone LDT test. If we are partnered with a drug
company to launch a CELsignia test as a companion diagnostic for a new drug indication, we would be required to obtain premarket approval,
or PMA, in conjunction with the pharmaceutical company seeking a new drug approval for the matching therapy. Historically, the FDA has
exercised enforcement discretion with respect to tests performed solely in a central laboratory, like the CELsignia tests or LDTs. The
FDA has not required laboratories that furnish only LDTs to comply with the agency’s requirements for medical devices (e.g., establishment
registration, device listing, quality systems regulations, premarket clearance or premarket approval, and post-market controls).
Although
the FDA proposed regulations that would apply to LDTs, the FDA decided that, at present, those regulations are not moving forward towards
approval and implementation. In mid-2014, the FDA published a draft Guidance Document describing a proposed approach for a regulatory
framework for LDTs that would have resulted in most of the high-value LDT tests marketed today eventually being required to obtain 510(k)
clearances or PMAs. If implemented, this regulatory framework would require most hospital clinical labs to abandon a number of tests
they perform or to pursue regulatory clearances or approvals to perform them. These proposals met significant resistance from Congress,
the hospital industry, and independent clinical laboratories. The FDA indicated in late 2016 that it does not intend to finalize the
draft Guidance Document at this time. However, the FDA continues to discuss potential regulatory approaches to LDTs.
Pricing
and Reimbursement of our Product Candidates
Significant
uncertainty exists as to the coverage and reimbursement status of any products we sell or may sell. Sales of any of our products will
depend, in part, on the extent to which the costs of the products will be covered by third-party payors, including government health
programs such as Medicare and Medicaid, commercial health insurers, managed care organizations or pharmaceutical companies. The process
for determining whether a third-party payor will provide coverage for a test sometimes is separate from the process for setting the price
of a drug product or for establishing the reimbursement rate that a payor will pay for the drug product. Third-party payors may limit
coverage to specific testing products on an approved list, which might not include all of the tests available for a particular indication.
In
order to obtain coverage and reimbursement for any product, we may need to conduct expensive pharmacoeconomic studies in order to demonstrate
the medical necessity and cost-effectiveness of the test. Whether or not we conduct such studies, our products may not be considered
medically necessary or cost-effective. A third-party payor’s decision to provide coverage for a test does not imply that an adequate
reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a product does not assure that
other payors will also provide coverage, and adequate reimbursement, for the product. Third-party reimbursement may not be sufficient
to enable us to maintain price levels high enough to realize an appropriate return on our investment in product development.
The
containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of tests and drugs have
been a focus in this effort. Third-party payors are increasingly challenging the prices charged for medical products and services, examining
the medical necessity and reviewing the cost-effectiveness of testing products, drug products and medical services and questioning safety
and efficacy. If these third-party payors do not consider our products to be cost-effective compared to other available tests, they may
not cover our products or, if they do, the level of payment may not be sufficient to allow us to sell our products at a profit. The U.S.
government, state legislatures and foreign governments have shown significant interest in implementing cost-containment programs to limit
the growth of government-paid healthcare costs, including price controls and restrictions on reimbursement. Adoption of such controls
and measures, and tightening of restrictive policies in jurisdictions with existing controls and measures, could limit payments for our
testing products or drugs that require use of our testing products and could adversely affect our net revenue and results.
We
expect to see continued focus by Congress and the Biden Administration on regulating pricing, which could result in legislative and regulatory
changes designed to control costs. For example, in August 2022, the IRA was signed into law, which, among other things, requires manufacturers
of certain drugs to engage in price negotiations with Medicare (beginning in 2026), imposes rebates under Medicare Part B and Medicare
Part D to penalize price increases that outpace inflation (first due in 2023), and replaces the Part D coverage gap discount program
with a new discounting program (beginning in 2025). We continue to evaluate the impact of the IRA on our business, operations and financial
condition and results as the full effect of the IRA on our business and the pharmaceutical industry remains uncertain. In addition, changes
to the Medicaid program or the federal 340B drug pricing program, which imposes ceilings on prices that drug manufacturers can charge
for medications sold to certain health care facilities, could have a material impact on our business.
Pricing
and reimbursement schemes vary widely from country to country. Some countries may require the completion of additional studies that compare
the cost-effectiveness of a particular test to currently available tests. The downward pressure on healthcare costs in general, particularly
prescription drugs and testing products, has become intense. As a result, increasingly high barriers are being erected to the entry of
new products. In addition, in some countries, cross-border imports from low-priced markets exert competitive pressure that may reduce
pricing within a country. Any country that has price controls or reimbursement limitations for testing products may not allow favorable
reimbursement and pricing arrangements for any of our products.
Coverage
policies, third-party reimbursement rates and pricing regulation may change at any time.
Other
Healthcare Laws
Manufacturing,
sales, promotion and other activities following product approval are also subject to regulation by numerous regulatory authorities in
the U.S. in addition to the FDA, including CMS, the HHS Office of Inspector General and HHS Office for Civil Rights, other divisions
of the HHS and the Department of Justice.
Healthcare
providers, physicians, and third-party payors will play a primary role in the recommendation and prescription of any products for which
we obtain marketing approval. Our current and future arrangements with third-party payors, healthcare providers and physicians may expose
us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements
and relationships through which we market, sell and distribute our drug and diagnostic products. In the U.S., these laws include, without
limitation, state and federal anti-kickback, false claims, physician transparency, and patient data privacy and security laws and regulations,
including but not limited to those described below.
The
U.S. federal Anti-Kickback Statute, or AKS, prohibits, among other things, any person or entity from knowingly and willfully offering,
paying, soliciting, receiving or providing any remuneration, directly or indirectly, overtly or covertly, to induce or in return for
purchasing, leasing, ordering or arranging for or recommending the purchase, lease or order of any good, facility, item or service reimbursable,
in whole or in part, under Medicare, Medicaid or other federal healthcare programs. The term “remuneration” has been broadly
interpreted to include anything of value. The AKS has been interpreted to apply to arrangements between pharmaceutical and medical device
manufacturers on the one hand and prescribers, purchasers, formulary managers and beneficiaries on the other hand. Although there are
a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, the exceptions and safe
harbors are drawn narrowly. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe
harbor does not make the conduct per se illegal under the AKS. Instead, the legality of the arrangement will be evaluated on a case-by-case
basis based on a cumulative review of all its facts and circumstances. Several courts have interpreted the statute’s intent requirement
to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business,
the statute has been violated. In addition, a person or entity does not need to have actual knowledge of the statute or specific intent
to violate it in order to have committed a violation. Moreover, a claim including items or services resulting from a violation of the
AKS constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act. On November 20, 2020, the Office of Inspector
General, or OIG finalized further modifications to the AKS. Under the final rule, OIG added safe harbor protections under the AKS for
certain coordinated care and value-based arrangements among clinicians, providers, and others. The final rule (with some exceptions)
became effective January 19, 2021. We continue to evaluate what effect, if any, this rule will have on our business.
In
addition, under a federal law directed at “self-referral,” commonly known as the “Stark Law,” there are prohibitions,
with certain exceptions, on referrals for certain designated health services, including laboratory services, that are covered by the
Medicare and Medicaid programs by physicians who personally, or through a family member, have an investment or ownership interest in,
or a compensation arrangement with, an entity performing the tests. The prohibition also extends to payment for any testing referred
in violation of the Stark Law. A person who engages in a scheme to circumvent the Stark Law’s referral prohibition may be fined
up to $100,000 for each such arrangement or scheme. In addition, any person who presents or causes to be presented a claim to the Medicare
or Medicaid programs in violation of the Stark Law is subject to civil monetary penalties of up to $15,000 per bill submission, an assessment
of up to three times the amount claimed and possible exclusion from participation in federal governmental payor programs. Bills submitted
in violation of the Stark Law may not be paid by Medicare or Medicaid, and any person collecting any amounts with respect to any such
prohibited bill is obligated to refund such amounts. Many states have comparable laws that are not limited to Medicare and Medicaid referrals.
Furthermore,
we could be held liable under the federal False Claims Act, which imposes civil penalties, including through civil whistleblower or qui
tam actions, against individuals or entities (including manufacturers) for, among other things, knowingly presenting, or causing to be
presented to federal programs (including Medicare and Medicaid) claims for items or services that are false or fraudulent, claims for
items or services not provided as claimed, or claims for medically unnecessary items or services. This could apply even if we are not
submitting claims directly to payors as would be the case with drug products. The government may deem manufacturers of such products
to have “caused” the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information
to customers or promoting a product off-label. Several biopharmaceutical, medical device and other healthcare companies have been prosecuted
under federal false claims and civil monetary penalty laws for, among other things, allegedly providing free product to customers with
the expectation that the customers would bill federal programs for the product. Other companies have been prosecuted for causing false
claims to be submitted because of the companies’ marketing of products for unapproved (e.g., or off-label), and thus non-covered,
uses. In addition, the civil monetary penalties statute imposes penalties against any person who is determined to have presented or caused
to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided
as claimed or is false or fraudulent.
Our
future marketing and activities relating to the reporting of wholesaler or estimated retail prices for our products, if approved, the
reporting of prices used to calculate Medicaid rebate information and other information affecting federal, state and third-party reimbursement
for our products, and the sale and marketing of our product candidates, are subject to scrutiny under these laws.
The
federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created additional federal criminal statutes that prohibit,
among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by means of false
or fraudulent pretenses, representations or promises, any money or property owned by, or under the control or custody of, any healthcare
benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program,
willfully obstructing a criminal investigation of a healthcare offense and knowingly and willfully falsifying, concealing or covering
up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for
healthcare benefits, items or services. Similar to the AKS, a person or entity does not need to have actual knowledge of the statute
or specific intent to violate it in order to have committed a violation.
In
addition, there has been a recent trend of increased federal and state regulation of payments made to physicians and certain other healthcare
providers. The Affordable Care Act, or the ACA, imposed, among other things, new annual reporting requirements through the Physician
Payments Sunshine Act for covered manufacturers for certain payments and “transfers of value” provided to physicians (defined
to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment
interests held by physicians and their immediate family members. Effective January 1, 2022, these reporting obligations will extend to
include transfers of value made to certain non-physician providers such as physician assistants and nurse practitioners. Failure to submit
timely, accurately and completely the required information for all payments, transfers of value and ownership or investment interests
may result in civil monetary penalties. Covered manufacturers must submit reports by the 90th day of each subsequent calendar
year and the reported information is publicly made available on a searchable website.
We
may also be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business.
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their respective implementing
regulations, including the Final HIPAA Omnibus Rule published on January 25, 2013, impose specified requirements relating to the privacy,
security and transmission of individually identifiable health information held by covered entities and their business associates. Among
other things, HITECH made HIPAA’s security standards directly applicable to “business associates,” defined as independent
contractors or agents of covered entities that create, receive, maintain or transmit protected health information in connection with
providing a service for or on behalf of a covered entity, although it is unclear that we would be considered a “business associate”
in the normal course of our business. HITECH also increased the civil and criminal penalties that may be imposed against covered entities,
business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions
in federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions.
In addition, state laws govern the privacy and security of health information in certain circumstances, many of which differ from each
other in significant ways and may not have the same requirements, thus complicating compliance efforts. See “European Data Collection”
below for a discussion of data privacy and security enactments of the EU.
For
example, California’s Consumer Privacy Act, or CCPA, went into effect in January 2020, and the California Attorney General has
since promulgated final regulations. The law provides broad rights to California consumers with respect to the collection and use of
their personal information and imposes data protection obligations on certain businesses. While the CCPA does not apply to protected
health information that is subject to HIPAA or personal information collected, used or disclosed in research, as defined by federal law,
the CCPA may still affect our business activities. Moreover, on November 3, 2020, California voters passed the California Privacy Rights
Act, or CPRA, under a ballot initiative. The CPRA amends the existing CCPA to include new consumer rights and additional data protection
obligations. The new data protection requirements under the CPRA apply to information collected on or after January 1, 2022. With the
promulgation of final regulations, the California State Attorney General has commenced enforcement actions against CCPA violators. The
uncertainty surrounding the implementation of CCPA and the amendments under the CPRA exemplifies the vulnerability of our business to
the evolving regulatory environment related to personal data and protected health information. The California law further expands the
need for privacy and process enhancements and commitment of resources in support of compliance. Moreover, more than ten states have proposed
bills in the last year with provisions similar to the CCPA and CPRA. It is likely that other states will pass laws similar to the CCPA
and the CPRA in the near future and a federal data protection law may also be on the horizon.
Similar
state and foreign fraud and abuse laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing
arrangements and claims involving healthcare items or services. Such laws are generally broad and are enforced by various state agencies
and private actions. Also, many states have similar fraud and abuse statutes or regulations that may be broader in scope and may apply
regardless of payor, in addition to items and services reimbursed under Medicaid and other state programs. Some state laws require pharmaceutical
companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant federal government compliance
guidance, and require drug manufacturers to report information related to payments and other transfers of value to physicians and other
healthcare providers, marketing expenditures or drug pricing.
In
order to sell products, we must also comply with state laws, including those that require the registration of manufacturers and wholesale
distributors of drug and biological products. These include, in certain states, manufacturers and distributors who ship products into
the state even if such manufacturers or distributors have no place of business within the state. Some states also impose requirements
on manufacturers and distributors to establish the pedigree of product in the chain of distribution, including some states that require
manufacturers and others to adopt new technology capable of tracking and tracing product as it moves through the distribution chain.
Several states have enacted legislation requiring pharmaceutical and biotechnology companies to establish marketing compliance programs,
file periodic reports with the state, make periodic public disclosures on sales, marketing, pricing, clinical trials and other activities,
and/or register their sales representatives, as well as to prohibit pharmacies and other healthcare entities from providing certain physician
prescribing data to pharmaceutical and biotechnology companies for use in sales and marketing, and to prohibit certain other sales and
marketing practices. All of our activities are potentially subject to federal and state consumer protection and unfair competition laws.
The
scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform,
especially in light of the lack of applicable precedent and regulations. Federal and state enforcement bodies have recently increased
their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions,
convictions and settlements in the healthcare industry. It is possible that governmental authorities will conclude that our business
practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare
laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that
may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, contractual
damages, reputational harm, diminished profits and future earnings, imprisonment, exclusion of drugs from government funded healthcare
programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations, as well as additional reporting obligations
and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with
these laws, any of which could adversely affect our ability to operate our business and our financial results. If any of the physicians
or other healthcare providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, they
may be subject to significant criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.
Ensuring business arrangements comply with applicable healthcare laws, as well as responding to possible investigations by government
authorities, can be time- and resource consuming and can divert a company’s attention from the business.
European
Data Collection
The
collection and use of personal health data in or arising from the EU are governed by the provisions of the Data Protection Directive,
and the General Data Protection Regulation, or GDPR. This directive imposes several requirements relating to the consent of the individuals
to whom the personal data relates, the information provided to the individuals, notification of data processing obligations to the competent
national data protection authorities and the security and confidentiality of the personal data. The Data Protection Directive and GDPR
also impose strict rules on the transfer of personal data out of the EU, to the U.S. Failure to comply with the requirements of the Data
Protection Directive, the GDPR and the related national data protection laws of the EU Member States may result in fines and other administrative
penalties. The GDPR introduces new data protection requirements in the EU and substantial fines for breaches of the data protection rules.
The GDPR regulations may impose additional responsibility and liability in relation to personal data that we process, including in respect
of clinical trials, and we may be required to put in place additional mechanisms ensuring compliance with the new data protection rules.
This may be onerous and adversely affect our business, financial condition, results of operations and prospects.
Current
and Future Legislation
In
the U.S. and other jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare
system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect
our ability to profitably sell any product candidates. We expect that current laws, as well as other healthcare reform measures that
may be adopted in the future, may result in more rigorous coverage criteria and additional downward pressure on the price that we, or
any collaborators, may receive.
The
ACA, for example, revised the methodology by which rebates owed by manufacturers for covered outpatient drugs are calculated under the
Medicaid Drug Rebate Program, extended the Medicaid Drug Rebate Program to utilization of covered drugs dispensed to individuals enrolled
in Medicaid managed care organizations and subjected manufacturers to new annual fees for certain branded prescription drugs. As the
price of our test may be included in the reimbursement rates for certain drugs, this could significantly impact our pricing. Even if
favorable coverage and reimbursement status is attained for one or more products, less favorable coverage policies and reimbursement
rates may be implemented in the future.
Since
its enactment, there have been numerous judicial, administrative, executive, and legislative challenges to certain aspects of the ACA,
and we expect there will be additional challenges and amendments to the ACA in the future. For example, various portions of the ACA are
currently undergoing legal and constitutional challenges in the U.S. Supreme Court, and the Trump Administration issued various Executive
Orders which eliminated cost sharing subsidies and various provisions that would impose a fiscal burden on states or a cost, fee, tax,
penalty or regulatory burden on individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices.
Additionally, Congress has introduced several pieces of legislation aimed at significantly revising or repealing the ACA. In December
2018, the CMS published a final rule permitting further collections and payments to and from certain ACA qualified health plans and health
insurance issuers under the ACA risk adjustment program in response to the outcome of the federal district court litigation regarding
the method CMS uses to determine this risk adjustment. Since then, the ACA risk adjustment program payment parameters have been updated
annually. It is unclear whether the ACA will be overturned, repealed, replaced, or further amended. We cannot predict what affect further
changes to the ACA would have on our business, especially given the new Biden Administration.
Additionally,
other federal health reform measures have been proposed and adopted in the U.S. since the ACA was enacted:
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The
Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on
Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021,
was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs.
These changes included aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, which went into effect
in April 2013 and, due to subsequent legislative amendments to the statute, including the BBA, will remain in effect through 2027,
unless additional Congressional action is taken. However, pursuant to the Coronavirus Aid, Relief and Economic Security Act, or CARES
Act, and subsequent legislation, these Medicare sequester reductions are suspended from May 1, 2020 through March 31, 2021 due to
the COVID-19 pandemic. Proposed legislation, if passed, would extend this suspension until the end of the pandemic. |
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The
American Taxpayer Relief Act of 2012, among other things, reduced Medicare payments to several providers, and increased the statute
of limitations period for the government to recover overpayments to providers from three to five years. |
Further,
there has been heightened governmental scrutiny over the manner in which companies set prices for their products, which have resulted
in several recent Congressional inquiries and proposed and enacted bills designed to, among other things, bring more transparency to
product pricing, review the relationship between pricing and patient programs, and reform government program reimbursement methodologies
for products. In addition, the U.S. government, state legislatures, and foreign governments have shown significant interest in implementing
cost containment programs, including price-controls, restrictions on reimbursement and requirements for substitution of generic products
for branded prescription drugs to limit the growth of government paid healthcare costs.
Individual
states in the U.S. have also increasingly passed legislation and implemented regulations designed to control pharmaceutical product pricing,
including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure
and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Congress and
the Biden administration have each indicated that it will continue to seek new legislative and/or administrative measures to control
drug costs. Individual states in the U.S. have also been increasingly passing legislation and implementing regulations designed to control
pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain
product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other
countries and bulk purchasing.
Other
Regulatory Requirements
Our
operations use small amounts of hazardous materials in research and development and generate regulated medical waste in the normal course
of performing our CELsignia tests. This subjects us to a variety of federal, state and local environmental and safety laws and regulations.
Some of the regulations under the current regulatory structure provide for strict liability, holding a party potentially liable without
regard to fault or negligence. We could be held liable for damages and fines as a result of our, or others’, business operations
should contamination of the environment or individual exposure to hazardous substances occur. We cannot predict how changes in laws or
development of new regulations will affect our business operations or the cost of compliance.
Impact
of COVID-19 on our Business
As
a result of the COVID-19 pandemic, we experienced delays in the enrollment of patients in our ongoing FACT-1 and FACT-2 clinical trials.
While the COVID-19 pandemic has significantly subsided, future outbreaks or variants of the virus may cause additional delays in our
clinical trial work.
Corporate
History
We
were organized as a Minnesota limited liability company in 2011 and commenced operations in 2012. On September 15, 2017, we converted
from a Minnesota limited liability company into a Delaware corporation and changed our name from Celcuity LLC to Celcuity Inc.
Employees
and Labor Relations
As
of December 31, 2022, we had 45 full-time employees, most of which were engaged in research and development activities. None of our employees
are currently represented by a labor union or covered by a collective bargaining agreement and we believe that our relations with our
employees are good. During 2022, our voluntary turnover rate was approximately 14%.
ITEM
1A. Risk Factors
Risk
factors that could cause actual results to differ from our expectations and that could negatively impact our financial condition and
results of operations are discussed below and elsewhere in this Annual Report. Additional risks and uncertainties not presently known
to us or that are currently not believed to be significant to our business may also affect our actual results and could harm our business,
financial condition and results of operations. If any of the risks or uncertainties described below or any additional risks and uncertainties
actually occur, our business, results of operations and financial condition could be materially and adversely affected.
Risks
Relating to Our Business
We
have a limited operating history and we may never generate revenue or profit.
We
are a clinical-stage biotechnology company that commenced activities in January 2012. We only have a limited operating history and our
business plan has not been tested. Since inception, we have had no revenue and have incurred significant operating losses. We have financed
our operations primarily through equity and debt offerings. To generate revenue and become and remain profitable, we need to develop
and commercialize gedatolisib pursuant to our license agreement with Pfizer and successfully complete our existing clinical trial collaborations
and cultivate partnerships with pharmaceutical companies. We must also build operational and financial infrastructure to support commercial
operations, train and manage employees, and market and sell our anticipated drug products and our CELsignia tests (as a companion diagnostic
and/or as a stand-alone test).
We
may never succeed in any of these activities and, even if we do, we may never generate revenue that is sufficient to achieve profitability.
We expect to continue to incur significant expenses and operating losses for the foreseeable future, and the net losses we incur may
fluctuate significantly from quarter to quarter. Our failure to become and remain profitable would decrease our value and could impair
our ability to raise capital, maintain or expand our research and development efforts, expand our business, or continue our operations.
Our
inability to raise additional capital on acceptable terms in the future may limit our ability to develop and commercialize our integrated
therapeutic (Rx) and companion diagnostic (CDx) strategy.
We
may require additional capital to finance capital expenditures and operating expenses over the next several years as we launch our integrated
therapeutic and companion diagnostic strategy and expand our infrastructure, commercial operations and research and development activities.
We may seek to raise additional capital through equity offerings, debt financings, collaborations or licensing arrangements. Additional
funding may not be available to us on acceptable terms, or at all. If we raise funds by issuing equity securities, dilution to our stockholders
could result. Any equity securities issued may also provide for rights, preferences or privileges senior to those of holders of our existing
securities. The incurrence of additional indebtedness or the issuance of certain equity securities could result in increased fixed payment
obligations and could also include restrictive covenants, such as limitations on our ability to incur additional debt or issue additional
equity, limitations on our ability to acquire or license intellectual property rights, and other operating restrictions that could adversely
affect our ability to conduct our business. In the event that we enter into collaborations or licensing arrangements to raise capital,
we may be required to accept unfavorable terms. If we are not able to secure additional funding when needed, we may have to delay, reduce
the scope of or eliminate one or more research and development programs or selling and marketing initiatives. In addition, we may have
to work with a partner on one or more of our products or market development programs, which could lower the economic value of those programs
to our company.
We
will be dependent on our ability to attract and retain key personnel.
Our
operations will be materially dependent upon the services of our officers and key employees, including Brian F. Sullivan, our Chief Executive
Officer, and Dr. Lance G. Laing, our Chief Science Officer. Successful implementation of our business plan will also require the services
of other consultants and additional personnel. We cannot assure you that we will be able to attract and retain such persons as employees,
independent contractors, consultants or otherwise. If we are not able to attract individuals with the skills required for our business,
or if we lose the services of either Mr. Sullivan or Dr. Laing, we may be unable to successfully implement our business plan.
The
COVID-19 pandemic may materially and adversely impact our business, including ongoing clinical trials.
The
outbreak of COVID-19 and government measures taken in response have had a significant impact on the global economy, with healthcare systems
particularly affected. As a result of the COVID-19 outbreak and related public health measures, we have and may in the future experience
disruptions that could materially and adversely impact our clinical trials, business, financial condition and results of operations.
Potential disruptions include but are not limited to:
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delays
or difficulties in enrolling patients in clinical trials and obtaining the results of completed clinical trials; |
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increased
rates of patients withdrawing from clinical trials following enrollment as a result of quarantine or concerns about COVID-19; |
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diversion
of healthcare resources away from the conduct of clinical trials; |
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delays
in prospective clinical trial collaborations with pharmaceutical companies and sponsors; |
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interruption
or delays in the operations of the FDA or other regulatory authorities, which may impact review and approval timelines; |
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limitations
on our ability to recruit and hire key personnel due to our inability to meet with candidates because of travel restrictions; and |
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limitations
on employee resources that would otherwise be focused on the conduct of clinical trials and research as a result of focus addressing
COVID-19 mitigation and loss of productivity from remote work. |
All
of the effects of COVID-19 described herein are expected to apply to any future recurrences of COVID-19 and any other pandemics that
may occur in the future.
Risks
Related to Our Drug Product, Gedatolisib
Our
future strategy is dependent on the success of our initial drug product, gedatolisib, as well as other drug products we may develop.
If we are unable to successfully complete clinical development of, obtain regulatory approval for or commercialize our drug products,
or if we experience delays in doing so, our business will be materially harmed.
To
date, we have not yet completed any registrational clinical trials or the development of any drug products. Our future success and ability
to generate revenue from our drug products, which we do not expect will occur for several years, if ever, is dependent on our ability
to successfully develop, obtain regulatory approval for and commercialize one or more drug products. We may not have the financial resources
to continue development of, or to modify existing or enter into new collaborations for, a drug product if we experience any issues that
delay or prevent regulatory approval of, or our ability to commercialize, our drug products, including:
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our
inability to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that our drug products are safe
and effective; |
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insufficiency
of our financial and other resources to complete the necessary preclinical studies and clinical trials; |
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negative
or inconclusive results from our preclinical studies, clinical trials or the clinical trials of others for drug products similar
to ours, leading to a decision or requirement to conduct additional preclinical studies or clinical trials or abandon a program; |
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product-related
adverse events experienced by subjects in our clinical trials or by individuals using drugs or therapeutic biologics similar to our
drug products; |
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delays
in submitting applications, or delays or failure in obtaining the necessary approvals from regulators to commence a clinical trial
or a suspension or termination of a clinical trial once commenced; |
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conditions
imposed by the FDA or comparable foreign regulatory authorities regarding the scope or design of our clinical trials; |
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poor
effectiveness of our drug products during clinical trials; |
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better
than expected performance of control arms, such as placebo groups, which could lead to negative or inconclusive results from our
clinical trials; |
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delays
in enrolling subjects in clinical trials; |
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high
drop-out rates of subjects from clinical trials; |
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inadequate
supply or quality of drug products or other materials necessary for the conduct of our clinical trials; |
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greater
than anticipated clinical trial or manufacturing costs; |
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unfavorable
FDA or comparable regulatory authority inspection and review of a clinical trial site; |
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failure
of our third-party contractors or investigators to comply with regulatory requirements or otherwise meet their contractual obligations
in a timely manner, or at all; |
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delays
and changes in regulatory requirements, policy and guidelines, including the imposition of additional regulatory oversight around
clinical testing generally or with respect to our therapies in particular; or |
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varying
interpretations of data by the FDA and comparable foreign regulatory authorities. |
We
were not involved in the early development of gedatolisib; therefore, we are dependent on third parties having accurately generated,
collected, interpreted and reported data from certain preclinical and clinical trials of gedatolisib.
We
had no involvement with or control over the initial preclinical and clinical development of gedatolisib. We are dependent on third parties
having conducted their research and development in accordance with the applicable protocols and legal, regulatory and scientific standards;
having accurately reported the results of all preclinical studies and clinical trials conducted with respect to such drug product; and
having correctly collected and interpreted the data from these trials. If these activities were not compliant, accurate or correct, the
clinical development, regulatory approval or commercialization of our drug product will be adversely affected.
As
an organization, we have never successfully completed any registrational clinical trials, and we may be unable to do so for any drug
candidates we may develop.
We
will need to successfully complete registrational clinical trials in order to obtain the approval of the FDA or comparable foreign regulatory
authorities to market our drug products. Carrying out clinical trials, including later-stage registrational clinical trials, is a complicated
process. As an organization, we have not previously completed any registrational clinical trials. In order to do so, we will need to
build and expand our clinical development and regulatory capabilities, and we may be unable to recruit and train qualified personnel.
We also expect to continue to rely on third parties to conduct our clinical trials. If these third parties do not successfully carry
out their contractual duties, meet expected deadlines or comply with regulatory requirements, we may not be able to obtain regulatory
approval of or commercialize any potential product candidates. Consequently, we may be unable to successfully and efficiently execute
and complete necessary clinical trials in a way that leads to submission and approval of our drug products. We may require more time
and incur greater costs than our competitors and may not succeed in obtaining regulatory approval of any drug products that we develop.
Failure to commence or complete, or delays in, our planned clinical trials, could prevent us from or delay us in commercializing our
drug products.
If
we encounter difficulties enrolling patients in any of our clinical trials, our clinical development activities could be delayed or otherwise
adversely affected.
The
timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient
number of patients who remain in the trial until its conclusion. We may experience difficulties in patient enrollment in our clinical
trials for a variety of reasons, including:
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the
patient eligibility and exclusion criteria defined in the protocol; |
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the
size of the patient population required for analysis of the clinical trial’s primary endpoints; |
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the
proximity of patients to clinical trial sites; |
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the
design of the clinical trial; |
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our
ability to recruit clinical trial investigators with the appropriate competencies and experience, and the ability of these investigators
to identify and enroll suitable patients; |
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perception
of the safety profile of our drug products; |
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our
ability to obtain and maintain patient consents; and |
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the
risk that patients enrolled in clinical trials will drop out of the trials before completion. |
Delays
in patient enrollment may result in increased costs or may affect the timing or outcome of our clinical trials, which could prevent completion
of these trials and adversely affect our ability to advance the development of our product candidates.
Clinical
development involves a lengthy and expensive process, with an uncertain outcome. We may incur additional costs or experience delays in
completing, or ultimately be unable to complete, the development and commercialization of our product candidates.
To
obtain the requisite regulatory approvals to commercialize any drug products, we must demonstrate through extensive preclinical studies
and clinical trials that such drug product is safe and effective in humans. Clinical testing is expensive and can take many years to
complete, and its outcome is inherently uncertain. We may be unable to establish clinical endpoints that applicable regulatory authorities
would consider clinically meaningful, and a clinical trial can fail at any stage of testing.
Differences
in trial design between early-stage clinical trials and later-stage clinical trials make it difficult to extrapolate the results of earlier
clinical trials to later clinical trials. Moreover, clinical data are often susceptible to varying interpretations and analyses, and
many companies that have believed their product candidates performed satisfactorily in clinical trials have nonetheless failed to obtain
marketing approval of their products. Additionally, we are conducting and plan to conduct some open-label trials, where both the patient
and investigator know whether the patient is receiving the investigational product candidate or either an existing approved drug or placebo.
Most typically, open-label clinical trials test only the investigational product candidate and sometimes may do so at different dose
levels. Open-label clinical trials are subject to various limitations that may exaggerate any therapeutic effect as patients in those
trials are aware when they are receiving treatment. Open-label clinical trials may be subject to a “patient bias” where patients
perceive their symptoms to have improved merely due to their awareness of receiving an experimental treatment. In addition, open-label
clinical trials may be subject to an “investigator bias” where those assessing and reviewing the outcomes of the clinical
trials are aware of which patients have received treatment and may interpret the information of the treated group more favorably given
this knowledge. Where a randomized, placebo-controlled clinical trial is designed to allow enrolled subjects to cross-over to the treatment
arm, there may be a risk of inadvertent unblinding of subjects prior to cross-over, which may limit the clinical meaningfulness of those
data and may require the conduct of additional clinical trials. As such, the results from an open-label trial may not be predictive of
future clinical trial results with any of our product candidates for which we include an open-label clinical trial when studied in a
controlled environment with a placebo or active control.
Successful
completion of clinical trials is a prerequisite to submitting a new drug application, or NDA, to the FDA and similar marketing applications
to comparable foreign regulatory authorities for each drug product and, consequently, the ultimate approval and commercial marketing
of any drug products. We may experience delays in initiating or completing clinical trials and preparing for regulatory submissions.
We also may experience numerous unforeseen events during, or as a result of, any future clinical trials that we could conduct that could
delay or prevent our ability to receive marketing approval or commercialize our current product candidates or any future product candidates.
Our costs will increase if we experience delays in clinical testing or marketing approvals. We do not know whether any of our clinical
trials will begin as planned, will need to be reassigned or will be completed on schedule, or at all. Significant clinical trial delays
also could shorten any periods during which we may have the exclusive right to commercialize our product candidates and may allow our
competitors to bring products to market before we do, potentially impairing our ability to successfully commercialize our product candidates
and harming our business and results of operations. Any delays in our clinical development programs may harm our business, financial
condition and results of operations significantly.
For
a new drug to be approved for marketing, the FDA and other regulatory authorities must determine that the drug is safe and effective.
Because all drugs can have adverse effects, the data from our Phase 3 clinical study must demonstrate to the satisfaction of the FDA
and other health authorities that the benefits of gedatolisib in combination with palbociclib and fulvestrant, or gedatolisib in combination
with fulvestrant, outweigh its risks. Failure to demonstrate sufficient magnitude of benefit, even if the benefit is found to be statistically
significant, may not support regulatory approval.
If
a drug meets its primary efficacy endpoint objective in a Phase 3 clinical trial, and the drug sponsor has additional nonclinical and
clinical data required by the FDA or other regulatory authorities, the drug sponsor may submit an NDA seeking marketing approval. Upon
submission of an NDA, these health authorities perform a benefit-risk assessment that considers the strength and quality of evidence
available and takes remaining uncertainties into account. These considerations include an assessment of the strengths and limitations
of clinical trials, including design, and potential implications for assessing drug efficacy, the magnitude of benefit and interpretation
of clinical importance, the benefit attributed to the drug when studied in combination with other therapies, and the clinical relevance
of the study endpoints. We have sought feedback from the FDA and other regulatory authorities on the design of our Phase 3 clinical trial
with the goal of addressing these considerations in the clinical trial’s design. However, due to the complexity of clinical trials,
the uncertainty of outcomes, and the uncertainty of how the FDA and other regulatory authorities may balance benefits and risks in their
review of an NDA, it may not be practical or possible to address all benefit-risk assessment considerations in a Phase 3 clinical trial
so that sufficient evidence is generated to support a marketing approval, even if the primary endpoint objective is achieved. The FDA
or other regulatory authorities may require us to redesign or conduct additional unplanned clinical trials before granting any approval
and we may not get approval at all. If we are required to conduct additional clinical trials or other testing of our drug candidates
beyond those that we currently contemplate, if we are unable to successfully complete clinical trials or other testing of our product
candidates, or if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns,
we may:
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● |
be
delayed in obtaining marketing approval for our product candidates or not obtain marketing approval at all; |
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● |
obtain
approval for indications or patient populations that are not as broad as intended or desired; |
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● |
obtain
approval with labeling that includes significant use or distribution restrictions or safety warnings, including boxed warnings; |
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be
subject to changes in the way the product is administered; |
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● |
be
required to perform additional clinical trials to support approval or be subject to additional post-marketing testing requirements; |
| |
● |
have
regulatory authorities withdraw, or suspend, their approval of the product or impose restrictions on its distribution in the form
of a REMS or through modification to an existing REMS; |
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be
sued; or |
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● |
experience
damage to our reputation. |
The
successful development of biopharmaceuticals is highly uncertain.
Successful
development of biopharmaceuticals is highly uncertain and is dependent on numerous factors, many of which are beyond our control. Product
candidates that appear promising in the early phases of development may fail to reach the market for several reasons including, among
other things, that clinical trial results may show the product candidates to be less effective than expected or to have unacceptable
side effects or toxicities; we may fail to receive the necessary regulatory approvals or there may be a delay in receiving such approvals;
or the proprietary rights of others and their competing products and technologies that may prevent our product candidates from being
commercialized.
The
length of time necessary to complete clinical trials and to submit an application for marketing approval for a final decision by a regulatory
authority varies significantly from one drug product to the next and from one country to the next and may be difficult to predict. Even
if we are successful in obtaining marketing approval, commercial success of any approved products will also depend in large part on the
availability of coverage and adequate reimbursement from third-party payors, including government payors such as the Medicare and Medicaid
programs and managed care organizations in the U.S. or country specific governmental organizations in foreign countries, which may be
affected by existing and future healthcare reform measures designed to reduce the cost of healthcare. Third-party payors could require
us to conduct additional studies, including post-marketing studies related to the cost effectiveness of a product, to qualify for reimbursement,
which could be costly and divert our resources. If government and other healthcare payors were not to provide coverage and adequate reimbursement
for our products once approved, market acceptance and commercial success would be reduced.
In
addition, if any of our drug products receive marketing approval, we will be subject to significant post-approval regulatory obligations.
In addition, there is always the risk that we, a regulatory authority or a third party might identify previously unknown problems with
a product post-approval, such as adverse events of unanticipated severity or frequency. Compliance with these requirements is costly,
and any failure to comply or other issues with our drug products post-approval could adversely affect our business, financial condition
and results of operations.
We
face significant competition from other biopharmaceutical companies, and our operating results will suffer if we fail to compete effectively.
The
biopharmaceutical industry is characterized by intense competition and rapid innovation. Our competitors may be able to develop other
compounds or drugs that are able to achieve similar or better results. Our potential competitors include major multinational pharmaceutical
companies, established biotechnology companies, specialty pharmaceutical companies and universities and other research institutions.
Many of our competitors have substantially greater financial, technical and other resources, such as larger research and development
staff and experienced marketing and manufacturing organizations and well-established sales forces. Smaller or early-stage companies may
also prove to be significant competitors, particularly as they develop novel approaches to treating disease indications that our product
candidates are also focused on treating. Established pharmaceutical companies may also invest heavily to accelerate discovery and development
of novel therapeutics or to in-license novel therapeutics that could make the product candidates that we develop obsolete. Mergers and
acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated in our competitors.
Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of
capital for investment in these industries. Our competitors, either alone or with collaboration partners, may succeed in developing,
acquiring or licensing on an exclusive basis drug or biologic products that are more effective, safer, more easily commercialized or
less costly than our product candidates or may develop proprietary technologies or secure patent protection that we may need for the
development of our technologies and products. We believe the key competitive factors that will affect the development and commercial
success of our product candidates are efficacy, safety, tolerability, reliability, convenience of use, price and reimbursement.
Even
if we obtain regulatory approval of drug products, the availability and price of our competitors’ products could limit the demand
and the price we are able to charge for our product candidates. We may not be able to implement our business plan if the acceptance of
our product candidates is inhibited by price competition or the reluctance of physicians to switch from existing methods of treatment
to our product candidates, or if physicians switch to other new drug or biologic products or choose to reserve our product candidates
for use in limited circumstances.
Even
if any drug product we develop receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients,
third-party payors and others in the medical community necessary for commercial success.
If
any future drug product we develop receives marketing approval, whether as a single agent or in combination with other therapies, it
may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community.
If the product candidates we develop do not achieve an adequate level of acceptance, we may not generate significant product revenues
and we may not become profitable. The degree of market acceptance of any product candidate, if approved for commercial sale, will depend
on a number of factors, including:
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efficacy
and potential advantages compared to other treatments; |
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● |
the
ability to offer our products, if approved, for sale at competitive prices; |
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● |
convenience
and ease of administration compared to other treatments; |
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● |
the
willingness of the target patient population to try new therapies and of physicians to prescribe these therapies; |
| |
● |
the
strength of marketing and distribution support; |
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● |
the
ability to obtain sufficient third-party coverage, market access and adequate reimbursement; and |
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the
prevalence and severity of any side effects. |
Risks
Related to Intellectual Property for Gedatolisib
We
depend on intellectual property licensed from third parties, including from Pfizer for our lead product candidate, and termination of
this license could result in the loss of significant rights, which would harm our business.
We
are dependent on patents, know-how and proprietary technology, both our own and licensed from others. All patents covering gedatolisib
and any combination therapies using our product candidates are licensed from third parties. Any termination of a product license could
result in the loss of significant rights and would cause material adverse harm to our ability to commercialize our product candidates.
Disputes
may also arise between us and our licensors regarding intellectual property subject to a license agreement, including:
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the
scope of rights granted under the license agreement and other interpretation-related issues; |
| |
● |
whether
and the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the
licensing agreement; |
| |
● |
our
right to sublicense patent and other rights to third parties under collaborative development relationships; |
| |
● |
our
diligence obligations with respect to the use of licensed technology in relation to our development and commercialization of our
product candidates and what activities satisfy those diligence obligations; and |
| |
● |
the
ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and
our partners. |
If
disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements
on acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates.
We
are generally also subject to all of the same risks with respect to protection of intellectual property that we own, as we are for intellectual
property that we license. If we or our licensors fail to adequately protect this intellectual property, our ability to commercialize
products could materially suffer.
If
we fail to comply with our obligations under our patent license with Pfizer, we could lose license rights that are important to our business.
We
are a party to a license agreement with Pfizer pursuant to which we in-license key patents for gedatolisib. This license imposes various
diligence, milestone payment, royalty, insurance and other obligations on us. If we fail to comply with these obligations, Pfizer may
have the right to terminate the license, in which event we would not be able to develop or market the products covered by such licensed
intellectual property. We may have limited control over the maintenance and prosecution of these in-licensed rights, activities or any
other intellectual property that may be related to our in-licensed intellectual property. For example, we cannot be certain that such
activities by these licensors have been or will be conducted in compliance with applicable laws and regulations or will result in valid
and enforceable patents and other intellectual property rights. We have limited control over the manner in which our licensors initiate
an infringement proceeding against a third-party infringer of the intellectual property rights, or defend certain of the intellectual
property that is licensed to us. It is possible that the licensors’ infringement proceeding or defense activities may be less vigorous
than had we conducted them ourselves.
We
may not be successful in obtaining or maintaining necessary rights to develop any future product candidates on acceptable terms.
Because
our programs may involve additional product candidates that 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. 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 or important to our business operations. We may fail to obtain any of these licenses at a reasonable cost or on
reasonable terms, if at all, which could harm our business. We may need to cease use of the compositions or methods covered by such third-party
intellectual property rights, and may need to seek to develop alternative approaches that do not infringe on such intellectual property
rights which may entail additional costs and development delays, even if we were able to develop such alternatives, which may not be
feasible. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies
licensed to us. In that event, we may be required to expend significant time and resources to develop or license replacement technology.
The
licensing and acquisition of third-party intellectual property rights is a competitive area, and companies, which may be more established,
or have greater resources than we do, may also be pursuing strategies to license or acquire third-party intellectual property rights
that we may consider necessary or attractive in order to commercialize our product candidates. More established companies may have a
competitive advantage over us due to their size, cash resources and greater clinical development and commercialization capabilities.
There can be no assurance that we will be able to successfully complete such negotiations and ultimately acquire the rights to the intellectual
property surrounding the additional product candidates that we may seek to acquire.
Risks
Related to Government Regulation for Gedatolisib
We
may not obtain the necessary regulatory approvals to commercialize our product candidate.
We
will need FDA approval to commercialize our product candidate in the U.S. In order to obtain FDA approval, we must submit to the FDA
a new drug application, or NDA, demonstrating that the drug product is safe for humans and effective for its intended use. This demonstration
requires significant research and animal tests, which are referred to as pre-clinical studies, as well as human tests, which are referred
to as clinical trials. Satisfaction of the FDA’s regulatory requirements typically takes many years, depends upon the type, complexity
and novelty of the drug product and requires substantial resources for research, development and testing. We cannot predict whether our
research and clinical approaches will result in a drug that the FDA considers safe for humans and effective for indicated uses. The FDA
has substantial discretion in the drug approval process and may require us to conduct additional pre-clinical and clinical testing or
to perform post-marketing studies. The approval process may also be delayed by changes in government regulation, future legislation or
administrative action or changes in FDA policy that occur prior to or during our regulatory review. Delays in obtaining regulatory approvals
may delay commercialization of, and our ability to derive product revenues from, our drug product; impose costly procedures on us; or
diminish any competitive advantages that we may otherwise enjoy. Even if we comply with all FDA requests, the FDA may ultimately reject
our NDA. We cannot be sure that we will ever obtain regulatory clearance for our drug product. Failure to obtain FDA approval of our
drug product will severely undermine our business by reducing our number of salable products and, therefore, corresponding product revenues.
The
FDA or comparable foreign regulatory authorities may disagree with our regulatory plan for our product candidates.
The
general approach for FDA approval of a new drug is dispositive data from one or more well-controlled Phase 3 clinical trials of the product
candidate in the relevant patient population. Phase 3 clinical trials typically involve a large number of patients, have significant
costs and take years to complete.
Our
clinical trial results may not support approval of our product candidates. In addition, our product candidates could fail to receive
regulatory approval, or regulatory approval could be delayed, for many reasons, including the following:
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● |
the
FDA or comparable foreign regulatory authorities may disagree with the dosing regimen, design or implementation of our clinical trials; |
| |
● |
we
may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that our product candidates
are safe and effective for any of their proposed indications; |
| |
● |
we
may encounter safety or efficacy problems caused by the COVID-19 pandemic; |
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● |
the
results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory
authorities for approval; |
| |
● |
we
may be unable to demonstrate that our product candidates’ clinical and other benefits outweigh their safety risks; |
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● |
the
FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical
trials; |
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● |
the
data collected from clinical trials of our product candidates may not be sufficient to the satisfaction of the FDA or comparable
foreign regulatory authorities to support the submission of an NDA or other comparable submission in foreign jurisdictions or to
obtain regulatory approval in the U.S. or elsewhere; |
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● |
the
FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers
with which we contract for clinical and commercial supplies; and |
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|
|
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● |
the
approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering
our clinical data insufficient for approval. |
Breakthrough
Therapy Designation or Fast Track Designation from the FDA may not actually lead to a faster development or regulatory review or approval
process.
If
a drug is intended for the treatment of a serious or life-threatening condition and the product demonstrates the potential to address
unmet medical needs for this condition, the product sponsor may apply for Fast Track Designation. The designation offers the opportunity
for frequent interactions with the FDA to discuss the drug’s development plan and to ensure collection of appropriate data needed
to support drug approval, as well as eligibility for submission of a New Drug Application.
In
addition, a drug may receive Breakthrough Therapy Designation if it is intended, alone or in combination with one or more other products,
to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product may demonstrate
substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects
observed early in clinical development. The benefits of Breakthrough Therapy Designation include more intensive guidance from the FDA
on an efficient development program, access to a scientific liaison to help accelerate review time, and potential eligibility for priority
review if relevant criteria are met. This designation can expedite the development and regulatory review of an investigational medicine
that is intended to treat a serious or life-threatening condition.
Both
Fast Track and Breakthrough Therapy Designations are within the discretion of the FDA. While the FDA has granted both designations to
our lead drug candidate, gedatolisib, such designations may not result in a faster development process, review or approval compared to
products considered for approval under conventional FDA procedures, and neither designation assures ultimate approval by the FDA. In
addition, the FDA may later decide that the product no longer meets the qualification conditions and may rescind either or both such
designations.
Obtaining
and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be successful in obtaining
regulatory approval of our product candidates in other jurisdictions.
Obtaining
and maintaining regulatory approval of our product candidates in one jurisdiction does not guarantee that we will be able to obtain or
maintain regulatory approval in any other jurisdiction, while a failure or delay in obtaining regulatory approval in one jurisdiction
may have a negative effect on the regulatory approval process in others. For example, even if the FDA grants marketing approval of a
product candidate, a comparable foreign regulatory authority must also approve the manufacturing, marketing and promotion of the product
candidate in those countries.
Approval
procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and greater than,
those in the U.S., including additional preclinical studies or clinical trials, as clinical trials conducted in one jurisdiction may
not be accepted by regulatory authorities in other jurisdictions. In many jurisdictions outside the U.S., a product candidate must be
approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge
for our products is also subject to approval.
We
may also submit marketing applications in other countries. Regulatory authorities in jurisdictions outside of the U.S. have requirements
for approval of product candidates with which we must comply prior to marketing in those jurisdictions. Obtaining foreign regulatory
approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could
delay or prevent the introduction of our products in certain countries. If we fail to comply with the regulatory requirements in international
markets and/or receive applicable marketing approvals, our target market will be reduced and our ability to realize the full market potential
of our product candidates will be harmed.
Even
if we receive regulatory approval of any product candidates, we will be subject to ongoing regulatory obligations and continued regulatory
review, which may result in significant additional expense and we may be subject to penalties if we fail to comply with regulatory requirements
or experience unanticipated problems with our product candidates.
If
any of our product candidates are approved, they will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging,
storage, advertising, promotion, sampling, record-keeping, conduct of post-marketing studies and submission of safety, efficacy and other
post-marketing information, including both federal and state requirements in the U.S. and requirements of comparable foreign regulatory
authorities. In addition, we will be subject to continued compliance with requirements for any clinical trials that we conduct post-approval.
Manufacturers
and manufacturers’ facilities are required to comply with extensive FDA and comparable foreign regulatory authority requirements.
Accordingly, we and others with whom we work must continue to expend time, money and effort in all areas of regulatory compliance, including
manufacturing, production and quality control.
Any
regulatory approvals that we receive for our product candidates may 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. Certain endpoint data
we hope to include in any approved product labeling also may not make it into such labeling, including exploratory or secondary endpoint
data such as patient-reported outcome measures. The FDA may impose consent decrees or withdraw approval if compliance with regulatory
requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously
unknown problems with our product candidates, including adverse events of unanticipated severity or frequency, or with our third-party
manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved
labeling to add new safety information, imposition of post-marketing studies or clinical trials to assess new safety risks or imposition
of distribution restrictions or other restrictions under a REMS program. Other potential consequences include, among other things:
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restrictions
on the marketing or manufacturing of our products, withdrawal of the product from the market or voluntary or mandatory product recalls; |
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fines,
warning letters or holds on clinical trials; |
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● |
refusal
by the FDA to approve pending applications or supplements to approved applications filed by us or suspension or revocation of license
approvals; |
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● |
product
seizure or detention or refusal to permit the import or export of our product candidates; and |
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injunctions
or the imposition of civil or criminal penalties. |
The
FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Products may be promoted
only for the approved indications and in accordance with the provisions of the approved label. The policies of the FDA and comparable
foreign regulatory authorities may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory
approval of our product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future
legislation or administrative action, either in the U.S. or abroad. If we are slow or unable to adapt to changes in existing requirements
or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval
that we may have obtained and we may not achieve or sustain profitability.
If
we commercialize any product candidates, we will be subject to U.S. and foreign governmental regulations as well as private payor policies
that mandate price controls or limitations on patient access to our products or establish prices paid by government entities or programs
for our products. Our business, and our future results could be adversely affected by changes in such regulations.
Government
and private payors routinely seek to manage utilization and control the costs of our products, and there is considerable public and government
scrutiny of pharmaceutical pricing. Efforts by states and the federal government to regulate prices or payment for pharmaceutical products,
including proposed actions to facilitate drug importation, limit reimbursement to lower international reference prices, require deep
discounts, and require manufacturers to report and make public price increases and sometimes provide a written justification for such
price increases, could adversely affect our business if implemented.
U.S.
and foreign governmental regulations that mandate price controls or limitations on patient access to our products or establish prices
paid by government entities or programs for our products could impact our business, and our future results could be adversely affected
by changes in such regulations or policies. The adoption of restrictive price controls in new jurisdictions, more restrictive controls
in existing jurisdictions or the failure to obtain or maintain timely or adequate pricing could also adversely impact revenue. We expect
pricing pressures will continue globally. In the U.S., pharmaceutical product pricing is subject to government and public scrutiny and
calls for reform, and many of our products are subject to increasing pricing pressures as a result. We expect to see continued focus
by the federal government on regulating pricing which could result in legislative and regulatory changes designed to control costs. For
example, in August 2022, the IRA was signed into law, which, among other things, requires manufacturers of certain drugs to engage in
price negotiations with Medicare, imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace
inflation, and replaces the Part D coverage gap discount program with a new discounting program. Some states have implemented, and others
are considering implementing, patient access constraints or cost cutting under the Medicaid program, and some are considering measures
that would apply to broader segments of their populations that are not Medicaid-eligible. State legislatures also have continued to focus
on addressing drug costs, generally by increasing price transparency or limiting drug price increases. Measures to regulate prices or
payment for pharmaceutical products, including legislation on drug importation, could adversely affect our business.
Risks
Related to Our CELsignia Tests
Our
success with CELsignia is heavily dependent on the success of our first CELsignia trials.
Our
business strategy is focused on attracting pharmaceutical company partnerships that provide revenue from the sale of CELsignia tests
during clinical trials, from milestone payments during clinical trials, from sales of our CELsignia tests as companion diagnostics or
stand-alone tests thereafter, and, potentially, from royalties on the incremental drug revenues our tests enable. Our ability to obtain
such partnerships and generate such revenue depends in part on the ability of our first CELsignia tests to demonstrate the potential
incremental opportunity available for pharmaceutical companies. We do not expect to receive the first interim results for our prospective
clinical trials for the CELsignia HER2 Pathway Activity Test until the second half of 2023. Success of the clinical trials using the
CELsignia HER2 Pathway Activity Test or CELsignia Multi-Pathway Activity Test will depend on many factors, such as successfully enrolling
patients, meeting trial endpoint goals, and completing the trial in a timely manner. Our ability to complete the trial could be delayed
or prevented for several reasons that are out of our control, such as the FDA withdrawing its authorization and approval to perform the
study, NSABP, West Cancer Center, MD Anderson Cancer Center, or University of Rochester determining that
the human and/or toxicology test results do not support continuing the trial, or participants having adverse reactions or side-effects
to the drugs administered in the study. If we are unable to demonstrate that the CELsignia HER2 Pathway Activity Test or CELsignia Multi-Pathway
Activity Test is suitable as a companion diagnostic for the targeted therapy, we will likely not be able to generate future revenue from
our CELsignia HER2 Pathway Activity Test or CELsignia Multi-Pathway Activity test and may not be able to attract other pharmaceutical
companies to partner with us for the development and commercialization of other CELsignia tests. Further, potential pharmaceutical company
partners may delay negotiating development agreements until results of the first clinical trial using our CELsignia HER2 Pathway Activity
Test trial are available. Even if the ultimate outcome of the first clinical trial using a CELsignia HER2 Pathway Activity Test trial
is positive, any delays could materially and adversely affect our business.
We
may not be successful in finding pharmaceutical company partners for continuing development of additional CELsignia tests.
We
intend to develop strategic partnerships with pharmaceutical companies for developing additional CELsignia tests. Many of the potential
partners are global, multi-billion-dollar pharmaceutical companies with sophisticated research and development organizations and multiple
priorities. We may not be successful in our efforts to establish such a strategic partnership or other alternative arrangements for our
CELsignia tests because, among other things, our research and development pipeline may be insufficient, such tests may be deemed to be
at too early of a stage of development for collaborative effort, or third parties may not view such tests as having the requisite potential
to demonstrate efficacy. In addition, we may be restricted under collaboration agreements from entering into future agreements with other
partners. Even if we are able to find suitable partners, we may not be successful in negotiating development agreements with such partners
that provide revenue from the sale of our CELsignia tests, from milestone payments, and/or from royalties on the incremental drug revenues
that our tests enable. If we are unable to reach agreements with suitable strategic partners on a timely basis, on acceptable terms or
at all, we may have to curtail the development of additional CELsignia tests, our expected revenue opportunities may be significantly
smaller than expected and our business may fail.
While
our CELsignia HER2 Pathway Activity Test and CELsignia Multi-Pathway Activity Test are commercially ready, we have not attempted to market
these to physicians or their patients as stand-alone tests and have no ability to determine if these tests or any of our other tests
will be commercially viable.
While
our CELsignia HER2 Pathway Activity Test and CELsignia Multi-Pathway Activity Test are analytically validated, conducted in our CLIA
certified and CAP accredited laboratory, and currently ready for commercial use as an LDT, we have not attempted to market them to physicians
or their patients. Furthermore, we have commenced only limited communications with KOLs to build awareness and credibility of our CELsignia
diagnostic platform and CELsignia tests. Accordingly, we have no ability to determine whether our CELsignia HER2 Pathway Activity Test,
CELsignia Multi-Pathway Activity Test or any other future CELsignia tests, will be commercially viable as stand-alone tests. We may never
be successful in generating revenue from our CELsignia tests as stand-alone tests, and if we are unable to build pharmaceutical partnerships
that enable us to market the CELsignia HER2 Pathway Activity Test, the CELsignia Multi-Pathway Activity Test, and other tests as companion
diagnostic tests, we may never generate any revenue and our business may fail.
Developing
our CELsignia tests involves a lengthy and complex process that may not be successful.
Our
CELsignia tests may take several years to develop from the time they are discovered to the time they are available for patient use, if
ever. In order to develop additional CELsignia tests into commercially ready products, we need to successfully complete a variety of
activities, including, among others, conducting substantial research and development, conducting extensive analytical testing, and maintaining
our CLIA certified and CAP accredited laboratory. In addition, our business strategy is focused on our CELsignia tests being sold as
companion diagnostics. This will require obtaining and maintaining partnerships with pharmaceutical companies and successfully completing
clinical studies that demonstrate the suitability of the applicable CELsignia test as a companion diagnostic for their targeted therapies.
These
activities will require us to expend significant resources. Based on comparable companies in this industry, few research and development
projects result in commercially viable products, and success in early clinical studies often is not replicated in later studies. At any
point, we may abandon development of a product candidate for several reasons, such as a clinical validation study failing to demonstrate
the prospectively defined endpoints of the study. We may also be required to expend considerable resources repeating clinical studies,
which would adversely affect the timing for generating potential revenue from a new product and our ability to invest in other products
in our pipeline.
Clinical
trials are expensive and complex with uncertain outcomes, which may prevent or delay commercialization of our CELsignia tests.
For
our CELsignia tests to become a companion diagnostic for a matching targeted therapy, we must conduct clinical trials to demonstrate
that patients who have an abnormal signaling pathway, as identified by our CELsignia tests, respond to treatment with a matching targeted
therapy. Clinical testing is expensive, is difficult to design and implement, and can take many years to complete, and its outcome is
inherently uncertain. As a company, we have limited experience in conducting or participating in clinical trials. We cannot be certain
that any future clinical trials will conclusively demonstrate that any CELsignia test is effective as a companion diagnostic. If our
trials do not yield positive results, we may be unable to maintain the pharmaceutical company partnerships we build or find additional
partners, we may not be able to successfully commercialize our CELsignia tests or generate any revenue, our business may fail, and you
may lose part or all of your investment.
We
cannot be certain that our existing clinical trial or future clinical trials, if any, will begin or be completed on time, if at all.
We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to commercialize
our CELsignia tests, such as:
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delay
or failure in reaching agreement on acceptable clinical trial contracts or clinical trial protocols with planned trial sites and/or
strategic partners; |
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delay
or failure in reaching agreement with the FDA or a comparable foreign regulatory authority on a trial design, in obtaining authorization
from such authorities to commence the trial, and/or in complying with conditions or other requirements imposed by such regulatory
authorities with respect to the trial; |
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delay
or failure in recruiting and enrolling suitable subjects to participate in one or more clinical trials, or in such participants completing
a trial or returning for follow-up during or after the trial; |
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● |
clinical
sites, investigators or other third-parties deviating from the trial protocol, failing to conduct the trial in accordance with regulatory
and contractual requirements, and/or dropping out of a trial; |
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regulatory
imposition of a clinical hold for any of our clinical trials, where a clinical hold in a trial in one indication would result in
a clinical hold for clinical trials in other indications; and |
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changes
in governmental regulations or administrative actions. |
Significant
nonclinical or clinical trial delays could prevent us from maintaining and/or developing new pharmaceutical company partnerships. Delays
could also shorten any periods during which we may have the exclusive right to commercialize our CELsignia tests or allow our competitors
to bring products to market before we do. As such, any delays could impair our ability to successfully commercialize our CELsignia tests
and may materially and adversely affect our business, financial condition, results of operations and prospects.
Even
if our CELsignia tests achieve positive clinical trial results, they may fail to achieve the degree of market acceptance by physicians,
patients, third-party payors and others in the medical community necessary for commercial success.
If
any of our potential CELsignia tests, including our first CELsignia HER2 Pathway Activity Test and CELsignia Multi-Pathway Activity Test,
achieve positive clinical trial results, they may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party
payors and others in the medical community necessary for commercial success. For example, conventional genomic- or proteomic-based analyses
are commonly used today to diagnose cancer and prescribe cancer medications, and physicians may continue to rely on these diagnostic
tests instead of adopting the use of a CELsignia test. The degree of market acceptance of our CELsignia tests will depend on a number
of factors, including:
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their
efficacy and other potential advantages compared to alternative diagnostic tests; |
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our
ability to offer them for sale at competitive prices; |
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their
convenience and ease of obtaining patient specimens compared to alternative diagnostics; |
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the
willingness of the target patient population to try new diagnostics and of physicians to initiate such diagnostics; |
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the
strength of marketing and distribution support; |
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the
availability of third-party coverage and adequate reimbursement for our diagnostic tests; and |
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our
ability to partner with pharmaceutical companies to develop companion diagnostic programs for the new cancer sub-types we discover. |
If
our CELsignia tests do not achieve an adequate level of acceptance, we may never generate significant product revenues and we may not
become profitable.
Our
CELsignia related business, operational and financial goals may not be attainable if the market opportunities for our CELsignia tests
or our pharmaceutical company partners are smaller than we expect. Our internal research and estimates on market opportunities have not
been verified by independent sources, and we have not independently verified market and industry data from third-parties that we have
relied on.
The
total market opportunities that we believe exist are based on a variety of assumptions and estimates, including the number of potential
companion diagnostic programs we will be able to successfully pursue, the amount of potential milestone payments that we could receive
in companion diagnostic programs, the number of patients we will test in clinical trials, the price we will be able to charge for our
tests and the total annual number of cancer patients with undiagnosed abnormal cell signaling. In addition, we have relied on third-party
publications, research, surveys and studies for information related to determining market opportunities, including without limitation,
information on the number of cancer patients and those receiving various forms of treatment, the cost of drug therapy, the amount of
revenue generated from various types of drug therapy, the objective response rates of drug therapies, the number of deaths caused by
cancer and the expected growth in cancer drug therapy and diagnostic markets. Our internal research and estimates on market opportunities
have not been verified by independent sources, and we have not independently verified market and industry data from third-parties that
we have relied on. Any or all of our assumptions and/or estimates may prove to be incorrect for several reasons, such as inaccurate reports
or information that we have relied on, potential patients or providers not being amenable to using our CELsignia platform for diagnostic
testing or such patients becoming difficult to identify and access, limited reimbursement for companion diagnostics, pricing pressure
due to availability of alternative diagnostic tests, or an inability of the CELsignia tests’ companion drugs to obtain the necessary
regulatory approvals for new indications. If any or all of our assumptions and estimates prove inaccurate, we and our companion diagnostic
pharmaceutical partners may not attain our business, operational and financial goals.
The
expected selling price range of our CELsignia tests is an estimate. We have not yet sold any such tests and the actual price we are able
to charge may be substantially lower than our expected price range.
We
have estimated the selling price range of our CELsignia tests based on the pricing of other diagnostic tests currently available and
assumptions regarding the efficacy and market acceptance of our tests. We have not yet sold our CELsignia tests and cannot be certain
of the actual price we may be able to charge. The availability and price of our competitors’ products could limit the demand and
the price we are able to charge. We may not achieve our business plan if acceptance is inhibited by price competition, if pharmaceutical
companies refuse to pay our expected prices for CELsignia tests in clinical trials, if physicians are reluctant to switch from other
diagnostic tests to our CELsignia tests or if physicians switch to other new products or choose to reserve our CELsignia tests for use
in limited circumstances. Furthermore, reductions in the reimbursement rate of third-party payors have occurred and may occur in the
future. Each of these factors could cause our selling price to be substantially lower than expected, and we may fail to generate revenue
or become profitable.
The
insurance coverage and reimbursement status of new diagnostic products is uncertain. Failure to obtain or maintain adequate coverage
and reimbursement for CELsignia tests could limit our ability to market those CELsignia tests and decrease our ability to generate revenue.
The
availability and extent of reimbursement by governmental and private payors is essential for most patients to be able to afford expensive
diagnostic tests and treatments. Sales of any of our potential CELsignia tests will depend substantially, both in the United States and
internationally, on the extent to which the costs of our CELsignia tests will be paid by health maintenance, managed care, and similar
healthcare management organizations, or reimbursed by government health administration authorities, private health coverage insurers
and other third-party payors. Reimbursement by a payor may depend on a number of factors, including a payor’s determination that
the CELsignia tests are neither experimental nor investigational, appropriate for the specific patient, cost-effective, supported by
peer-reviewed publications, and included in clinical practice guidelines.
If
reimbursement is not available, or is available only to a limited amount, we may not be able to successfully commercialize our CELsignia
tests at expected levels, or potentially at all. Even if coverage is provided, the approved reimbursement amount may not be high enough
to allow us to establish or maintain pricing sufficient to realize a sufficient return on our research and development investment.
There
is significant uncertainty related to the insurance coverage and reimbursement of newly approved diagnostic products. In the United States,
the principal decisions about reimbursement for new diagnostic products and services are typically made by CMS. CMS decides whether and
to what extent a new product or service will be covered and reimbursed under Medicare. Private payors tend to follow CMS to a substantial
degree. As such, a significant portion of our potential revenue depends on CMS approving coverage and reimbursement of our CELsignia
tests.
Outside
the United States, international operations are generally subject to extensive governmental price controls and other market regulations,
and we believe the increasing emphasis on cost-containment initiatives in Europe, Canada and other countries has and will continue to
put pressure on the pricing and usage of diagnostic tests such as our potential CELsignia tests. In many countries, particularly the
countries of the European Union, the prices of medical products are subject to varying price control mechanisms as part of national health
systems. In these countries, pricing negotiations with governmental authorities can take considerable time. To obtain reimbursement or
pricing approval in some countries, we may be required to demonstrate the cost-effectiveness of our CELsignia tests relative to other
available diagnostic tests. The prices of products under such systems may be substantially lower than in the United States. Other countries
allow companies to fix their own prices for products but monitor and control company profits. Additional foreign price controls or other
changes in pricing regulation could restrict the amount that we are able to charge for our CELsignia tests. Accordingly, in markets outside
the United States, the reimbursement for our potential CELsignia tests may be reduced compared with the United States and may be insufficient
to generate commercially reasonable revenue and profit.
Moreover,
increasing efforts by governmental and third-party payors, in the United States and internationally, to cap or reduce healthcare costs
may cause such organizations to limit both coverage and level of reimbursement for new products approved and, as a result, they may not
cover or provide adequate payment for our potential CELsignia tests. The downward pressure on healthcare costs in general, particularly
prescription drugs and surgical procedures and other treatments, has become very intense. We expect to experience pricing pressures in
connection with the sale of any CELsignia tests due to the trend toward managed healthcare, the increasing influence of health maintenance
organizations and additional legislative changes.
We
may encounter difficulties in commercializing and marketing our CELsignia products, including in hiring and retaining a qualified sales
force.
In
order to commercialize any CELsignia test, we must build marketing, sales, managerial and other non-technical capabilities or make arrangements
with third parties to perform these services, and we may not be successful in doing so. For each CELsignia test we develop, we intend
to pursue development agreements with the pharmaceutical companies that provide matching targeted therapies. Once we have completed the
analytical validation of a CELsignia test, we plan to target KOLs to build product awareness. Once we have clinical validation data available,
we expect to expand our sales and marketing efforts to target the broader market and coordinate our go-to-market activities with those
of our partner pharmaceutical companies. These activities will be expensive and time consuming and will require significant attention
of our executive officers to manage. In particular, there is intense competition for qualified sales personnel and our inability to hire
or retain an adequate number of sales representatives could limit our ability to maintain or expand our business and increase sales.
Furthermore, there is no guarantee that any new drug indications will require our CELsignia tests as a companion diagnostic or that any
pharmaceutical company will effectively coordinate sales and marketing activities with us. Any failure or delay in these activities,
including if we are unable to develop our marketing and sales networks or if our sales personnel do not perform as expected, would adversely
impact the commercialization our CELsignia platform, and our business, financial condition, results of operations and prospects may be
materially and adversely affected.
We
face significant competition from other diagnostic companies and our operating results will suffer if we fail to compete effectively.
The
diagnostic testing industry is intensely competitive. We have competitors both in the United States and abroad, including universities
and other research institutions and providers of diagnostics that focus on developing genomic or proteomic analyses of a patient’s
diseased cells or theranostic tests to predict specific patient responses to a drug therapy. Many of our competitors have substantially
greater financial, technical and other resources, such as larger research and development staff and well-established marketing and sales
forces. Our competitors may succeed in developing, acquiring or licensing, on an exclusive basis, products or services that are more
effective or less costly than the CELsignia tests that we are currently developing or that we may develop. In addition, established medical
technology, biotechnology and/or pharmaceutical companies may invest heavily to accelerate discovery and development of diagnostic tests
that could make our CELsignia tests less competitive.
Our
ability to compete successfully will depend largely on our ability to:
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discover
and develop CELsignia tests for cancer sub-types that are superior to other products in the market; |
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demonstrate
compelling advantages in the efficacy and convenience of our CELsignia tests on a cost competitive basis; |
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attract
qualified scientific, product development and commercial personnel; |
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obtain
and maintain patent and other proprietary protection as necessary for our CELsignia platform; |
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obtain
required U.S. and international regulatory approvals; |
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successfully
collaborate with research institutions and pharmaceutical companies in the discovery, development and commercialization of our current
and future CELsignia tests; and |
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successfully
expand our operations and build a sales force to support commercialization. |
If
our sole laboratory facility becomes inoperable, we will be unable to perform our tests and our business will be harmed.
We
do not have redundant laboratory facilities. We perform all of our diagnostic services in our laboratory located in Minneapolis, Minnesota.
Our facility and the equipment we use to perform our tests would be costly to replace and could require substantial lead time to repair
or replace. The facility may be harmed or rendered inoperable by physical damage from fire, floods, tornadoes, power loss, telecommunications
failures, break-ins and similar events, which may render it difficult or impossible for us to perform our tests for some period of time.
The inability to perform our tests may result in the loss of customers or harm our reputation, and we may be unable to regain those customers
in the future. Although we possess insurance for damage to our property and the disruption of our business, this insurance may not be
sufficient to cover all of our potential losses and may not continue to be available to us on acceptable terms, or at all.
In
order to rely on a third party to perform our tests, we could only use another facility with established state licensure and CLIA accreditation
under the scope of which our potential CELsignia tests could be performed following validation and other required procedures. We cannot
assure you that we would be able to find another CLIA-certified facility willing to adopt CELsignia tests and comply with the required
procedures, or that this laboratory would be willing to perform the tests for us on commercially reasonable terms.
Our
instrument or reagent suppliers may fail to meet our quality requirements for the items we purchase or fail to provide a continuous supply
of the items we utilize to perform our CELsignia tests.
We
utilize highly specialized reagents and instruments to perform our CELsignia tests. We may be unable to find suitable replacement reagents
and instruments on a timely basis, if at all. Interruption in the supply of these items or degradation in their quality could delay analytical
and clinical studies, and/or render us unable to deliver CELsignia tests. This would interrupt sales and adversely affect our business,
results of operations and financial condition.
Performance
issues or price increases by our shipping carriers could adversely affect our business, results of operations and financial condition,
and harm our reputation and ability to provide our CELsignia tests on a timely basis.
Expedited,
reliable shipping is essential to our operations. Should our shipping carrier encounter delivery performance issues such as loss, damage
or destruction of a sample, such occurrences may damage our reputation and lead to decreased demand for our services and increased cost
and expense to our business. In addition, any significant increase in shipping rates could adversely affect our operating margins and
results of operations. Similarly, strikes, severe weather, natural disasters or other service interruptions by delivery services we use
would adversely affect our ability to receive and process patient samples on a timely basis. There are only a few providers of overnight
nationwide transport services, and there can be no assurance that we will be able to maintain arrangements with providers on acceptable
terms, if at all.
Our
CELsignia tests represent a novel approach to companion diagnostics, which could result in heightened regulatory scrutiny, delays in
clinical development, or delays in our ability to commercialize any products.
Our
unique and proprietary CELsignia technology is the first cancer diagnostic platform we are aware of that can detect the underlying signaling
dysfunction driving a patient’s cancer. Because this is a novel approach to companion diagnostics, there can be no assurance as
to the length of a clinical trial period, the number of patients the FDA or another applicable regulatory authority will require to be
enrolled in the trials in order to establish the safety and efficacy of our CELsignia tests and the companion drugs, or that the data
generated in these trials will be acceptable to the FDA or another applicable regulatory authority to support marketing approval of new
indications for the companion drugs. This could delay or prohibit our clinical trials and/or commercialization of our CELsignia tests.
If
the FDA were to begin regulating our tests, we could incur substantial costs and delays associated with trying to obtain premarket clearance
or approval.
Most
LDTs are not currently subject to FDA regulation, although reagents, instruments, software or components provided by third parties and
used to perform LDTs may be subject to regulation. We believe that the CELsignia tests are LDTs, which is a term that describes tests
that are designed and performed within a single laboratory. As a result, we believe the CELsignia tests are not currently subject to
regulation by the FDA in accordance with the FDA’s current policy of exercising enforcement discretion regarding LDTs.
Historically,
the FDA has not required laboratories that furnish only LDTs to comply with the agency’s requirements for medical devices (e.g.,
establishment registration, device listing, quality systems regulations, premarket clearance or premarket approval, and post-market controls).
In mid-2014, the FDA published a draft Guidance Document describing a proposed approach for a regulatory framework for LDTs, but in late
2016, the FDA indicated it did not intend to finalize the LDT Guidance Document at that time. It is not clear when or if the FDA will
seek to alter the current LDT regulatory framework in the future. We cannot provide any assurance that FDA regulation, including premarket
review, will not be required in the future for our tests, whether through additional guidance issued by the FDA, new enforcement policies
adopted by the FDA or new legislation enacted by Congress. We cannot predict with certainty the timing or content of future legislation
enacted or guidance issued regarding LDTs, or how it will affect our business.
If
premarket review is required by the FDA at a future date or if we decide to voluntarily pursue FDA premarket review of our CELsignia
tests, there can be no assurance that our CELsignia tests or any tests we may develop in the future will be cleared or approved by the
FDA on a timely basis, if at all, nor can there be assurance that labeling claims will be consistent with our current claims or adequate
to support continued adoption of and reimbursement for our CELsignia tests. If our CELsignia tests are allowed to remain on the market
but there is uncertainty in the marketplace about our tests, if they are labeled investigational by the FDA, or if labeling claims the
FDA allows us to make are more limited than we expect, reimbursement may be adversely affected and we may not be able to sell our CELsignia
tests. Compliance with FDA regulations would increase the cost of conducting our business and subject us to heightened regulation and
scrutiny by the FDA and penalties for failure to comply with these requirements.
If
we fail to obtain required federal and state laboratory licenses, we could lose the ability to perform our tests.
Clinical
laboratory tests, including our CELsignia tests, are regulated under CLIA. CLIA is a federal law that regulates clinical laboratories
that perform testing on specimens derived from humans for the purpose of providing information for the diagnosis, prevention or treatment
of disease. CLIA regulations mandate specific standards for laboratories in the areas of personnel qualifications, administration, and
participation in proficiency testing, patient test management and quality assurance. CLIA certification is also required in order for
us to be eligible to bill state and federal healthcare programs, as well as many private third-party payers, for any tests we launch.
We will also be required to maintain state licenses in certain states to conduct testing in our laboratories. While we currently have
CLIA certification for our Minnesota laboratory, failure to maintain this certification would adversely affect our ability to launch
our CELsignia tests.
CELsignia
Risks Related to Intellectual Property
If
we are unable to obtain and maintain intellectual property protection for our CELsignia technology, or if the scope of the intellectual
property protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and diagnostic tests
similar or identical to ours, and our ability to successfully commercialize our technology and diagnostic tests may be impaired.
Our
ability to compete successfully will depend in part on our ability to obtain and enforce patent protection for our products,
preserve our trade secrets and operate without infringing the proprietary rights of third parties. We have applied for patents that
protect our technology. Our patent portfolio includes six issued U.S. patents and 30 issued international patents. Each patent and patent application covers methods of use. However, we cannot assure you
that our intellectual property position will not be challenged or that all patents for which we have applied will be granted. The
validity and breadth of claims in patents involve complex legal and factual questions and, therefore, may be highly uncertain.
Uncertainties and risks that we face include the following:
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our
pending or future patent applications may not result in the issuance of patents; |
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the
scope of any existing or future patent protection may not exclude competitors or provide competitive advantages to us; |
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our
patents may not be held valid if subsequently challenged; |
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other
parties may claim that our products and designs infringe the proprietary rights of others, and even if we are successful in defending
our patents and proprietary rights, such litigation may be costly; and |
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other
parties may develop similar products, duplicate our products, or design around our patents. |
The
patent prosecution process is expensive and time-consuming, and we may not be able to file, prosecute, maintain, enforce or license all
necessary or desirable patent applications at a reasonable cost or in a timely manner, or in all jurisdictions. We may choose not to
seek patent protection for certain innovations and may choose not to pursue patent protection in certain jurisdictions, and under the
laws of certain jurisdictions, patents or other intellectual property rights may be unavailable or limited in scope. It is also possible
that we will fail to identify patentable aspects of our discovery and nonclinical development output before it is too late to obtain
patent protection.
The
patent position of companies like ours is highly uncertain, involves complex legal and factual questions and has in recent years been
the subject of much litigation. The U.S. Patent and Trademark Office, or U.S. PTO, has not established a consistent policy regarding
the breadth of claims that it will allow in medical technology patents. In addition, the laws of foreign jurisdictions may not protect
our rights to the same extent as the laws of the United States. For example, India and China do not allow patents for methods of treating
the human body. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications
in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore,
we cannot know with certainty whether we were the first to make the inventions claimed in our owned or licensed patents or pending patent
applications, or that we were the first to file for patent protection of such inventions. As a result, the issuance, scope, validity,
enforceability and commercial value of our patent rights are highly uncertain. Our pending and future patent applications may not result
in patents being issued that protect our technology or CELsignia tests, in whole or in part, or which effectively prevent others from
commercializing competitive technologies and diagnostic tests. Changes in either the patent laws or interpretation of the patent laws
in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection.
Moreover,
we may be subject to a third-party pre-issuance submission of prior art to the U.S. PTO or patent offices in foreign jurisdictions, or
become involved in opposition, derivation, reexamination, inter parties review, post-grant review or interference proceedings challenging
our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce
the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology and compete directly with us, without
payment to us, or result in our inability to commercialize CELsignia platform 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 develop or commercialize current or future CELsignia tests.
Even
if our owned patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection,
prevent competitors from competing with us or otherwise provide us with any competitive advantage. Our competitors may be able to circumvent
our owned patents by developing similar or alternative technologies or products in a non-infringing manner.
The
issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our owned patents may be challenged
in the courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or freedom to operate
or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others
from using or commercializing similar or identical technology and product candidates, or limit the duration of the patent protection
of our technology and potential diagnostic tests. Given the amount of time required for the development, testing and regulatory review
of new diagnostic tests, patents protecting such tests might expire before or shortly after such candidates are commercialized. As a
result, our owned patent portfolio may not provide us with sufficient rights to exclude others from commercializing diagnostic tests
similar or identical to ours.
Third
parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would
be uncertain and could have a material adverse effect on the success of our business.
The
commercial success of CELsignia tests depends upon our ability, and the ability of our collaborators, to develop, manufacture, market
and sell our CELsignia tests and use our proprietary technologies without infringing the proprietary rights of third parties. There is
considerable intellectual property litigation in the medical technology, biotechnology and pharmaceutical industries. We may become party
to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our CELsignia
platform, including interference or derivation proceedings before the U.S. PTO and similar bodies in other jurisdictions. Third parties
may assert infringement claims against us based on existing patents or patents that may be granted in the future.
If
we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third
party to continue developing and marketing our CELsignia platform and CELsignia tests. However, we may not be able to obtain any required
license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving
our competitors access to the same technologies licensed to us. We could be forced, including by court order, to cease commercializing
the infringing technology or product. In addition, we could be found liable for monetary damages, including treble damages and attorneys’
fees if we are found to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our CELsignia
platform or force us to cease some of our business operations, which could materially harm our business. Claims that we have misappropriated
the confidential information or trade secrets of third parties could have a similar negative impact on our business.
If
we are not able to prevent disclosure of our trade secrets and other proprietary information, the value of our CELsignia platform could
be significantly diminished.
We
rely on trade secret protection to protect our interests in proprietary know-how and in processes for which patents are difficult to
obtain or enforce. We may not be able to protect our trade secrets adequately. We have a policy of requiring our consultants, advisors
and strategic partners to enter into confidentiality agreements and our employees to enter into invention, non-disclosure and non-compete
agreements. However, no assurance can be given that we have entered into appropriate agreements with all parties that have had access
to our trade secrets, know-how or other proprietary information. There is also no assurance that such agreements will provide meaningful
protection of our trade secrets, know-how or other proprietary information in the event of any unauthorized use or disclosure of information.
Furthermore, we cannot provide assurance that any of our employees, consultants, contract personnel, or strategic partners, either accidentally
or through willful misconduct, will not cause serious damage to our programs and/or our strategy, for example by disclosing important
trade secrets, know-how or proprietary information to our competitors. It is also possible that our trade secrets, know-how or other
proprietary information could be obtained by third parties as a result of breaches of our physical or electronic security systems. Any
disclosure of confidential data into the public domain or to third parties could allow our competitors to learn our trade secrets and
use the information in competition against us. In addition, others may independently discover our trade secrets and proprietary information.
Any action to enforce our rights is likely to be time consuming and expensive, and may ultimately be unsuccessful, or may result in a
remedy that is not commercially valuable. These risks are accentuated in foreign countries where laws or law enforcement practices may
not protect proprietary rights as fully as in the United States. Any unauthorized disclosure of our trade secrets or proprietary information
could harm our competitive position.
Other
Risks Related to Government Regulation for Our Business
Failure
to comply with the HIPAA security and privacy regulations may increase our operational costs.
A
portion of the data that we obtain and handle for or on behalf of our clients is considered protected health information, or PHI, subject
to HIPAA. Under HIPAA and our contractual agreements with our HIPAA-covered entity health plan customers, we are considered a “business
associate” to those customers and are required to maintain the privacy and security of PHI in accordance with HIPAA and the terms
of our business associate agreements with our clients, including by implementing HIPAA-required administrative, technical and physical
safeguards. We are also required to maintain similar business associate agreements with our subcontractors that have access to PHI of
our customers in rendering services to us or on our behalf. We will incur significant costs to establish and maintain these safeguards
and, if additional safeguards are required to comply with HIPAA regulations or our clients’ requirements, our costs could increase
further, which would negatively affect our operating results. Furthermore, we cannot guarantee that such safeguards have been and will
continue to be adequate under applicable laws. If we have failed, or fail in the future, to maintain adequate safeguards, or we or our
agents or subcontractors use or disclose PHI in a manner prohibited or not permitted by HIPAA, our subcontractor business associate agreements,
or our business associate agreements with our customers, or if the privacy or security of PHI that we obtain and handle is otherwise
compromised, we could be subject to significant liabilities and consequences.
Compliance
with global privacy and data security requirements could result in additional costs and liabilities to us or inhibit our ability to collect
and process data globally, and the failure to comply with such requirements could subject us to significant fines and penalties, which
may have a material adverse effect on our business, financial condition or results of operations.
The
regulatory framework for the collection, use, safeguarding, transfer and other processing of information is rapidly evolving and is likely
to remain uncertain for the foreseeable future. Globally, virtually every jurisdiction in which we operate has established its own data
security and privacy frameworks with which we must comply. For example, the collection, use, disclosure, transfer, or other processing
of personal data regarding individuals in the European Union, including personal health data, is subject to the EU General Data Protection
Regulation (the “GDPR”), which took effect across all member states of the European Economic Area (the “EEA”)
in May 2018. The GDPR is wide-ranging in scope and imposes numerous requirements on companies that process personal data, including requirements
relating to the processing of health and other sensitive data, obtaining consent of the individuals to whom the personal data relates,
providing information to individuals regarding data processing activities, implementing safeguards to protect the security and confidentiality
of personal data, providing notification of data breaches, and taking certain measures when engaging third-party processors. In addition,
the GDPR also imposes strict rules on the transfer of personal data to countries outside the European Union, including the United States,
and, as a result, increases the scrutiny that clinical trial sites located in the EEA should apply to transfers of personal data from
such sites to countries that are considered to lack an adequate level of data protection, such as the United States. The GDPR also permits
data protection authorities to require destruction of improperly gathered or used personal information and/or impose substantial fines
for violations of the GDPR, which can be up to 4% of global revenue or €20 million, whichever is greater, and it also confers a
private right of action on data subjects and consumer associates to lodge complaints with supervisory authorities, seek judicial remedies,
and obtain compensation for damages resulting from violations of the GDPR. In addition, the GDPR provides that EU member states may make
their own further laws and regulations limiting the processing of personal data, including genetic, biometric or health data.
Similar
actions are either in place or under way in the United States. There are a broad variety of data protection laws that are applicable
to our activities, and a wide range of enforcement agencies at both the state and federal levels that can review companies for privacy
and data security concerns based on general consumer protection laws. The Federal Trade Commission and state Attorneys General all are
aggressive in reviewing privacy and data security protections for consumers. New laws are also being considered at both the state and
federal levels. For example, the California Consumer Privacy Act (the “CCPA”), which went into effect on January 1, 2020,
and was amended by the California Privacy Rights Act (the “CPRA”), effective January 1, 2023, secure new privacy rights for
consumers and impose new obligations on us. Many other states have implemented or are considering similar legislation which will change
the privacy law landscape in the United States. For example, Virginia, Colorado, Utah and Connecticut have all adopted privacy laws,
which take effect in 2023. A broad range of legislative measures also have been introduced at the federal level. Accordingly, failure
to comply with federal and state laws (both those currently in effect and future legislation) regarding privacy and security of personal
information could expose us to fines and penalties under such laws. There also is the threat of consumer class actions related to these
laws and the overall protection of personal data.
Given
the breadth and depth of changes in data protection obligations, preparing for and complying with these requirements is rigorous and
time intensive and requires significant resources and a review of our technologies, systems and practices, as well as those of any third-party
collaborators, service providers, contractors or consultants that process or transfer personal data collected in the European Union.
The GDPR and other changes in laws or regulations associated with the enhanced protection of certain types of sensitive data, such as
healthcare data or other personal information from our clinical trials, could require us to change our business practices and put in
place additional compliance mechanisms, may interrupt or delay our development, regulatory and commercialization activities and increase
our cost of doing business, and could lead to government enforcement actions, private litigation and significant fines and penalties
against us and could have a material adverse effect on our business, financial condition or results of operations. Similarly, failure
to comply with federal and state laws regarding privacy and security of personal information could expose us to fines and penalties under
such laws. Even if we are not determined to have violated these laws, government investigations into these issues typically require the
expenditure of significant resources and generate negative publicity, which could harm our reputation and our business.
We
will also need to expend a considerable amount of resources complying with other federal, state and foreign laws and regulations. If
we are unable to comply or have not complied with such laws, we could face substantial penalties or other adverse actions.
Our
operations are subject, directly or indirectly, to other federal, state and foreign laws and regulations that are complex and their application
to our specific products, services and relationships may not be clear and may be applied to our business in ways that we do not anticipate.
Compliance with laws and regulations will require us to expend considerable resources implementing internal policies and procedures for
compliance and ongoing monitoring and will require significant attention of our management team. This will be challenging as an early-stage
company with limited financial resources and human capital. These laws include, for example:
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Title
XI of the Social Security Act, commonly referred to as the federal Anti-Kickback Statute, which prohibits the knowing and willful
offer, payment, solicitation or receipt of remuneration, directly or indirectly, in cash or in kind, in return for or to reward the
referral of patients or arranging for the referral of patients, or in return for the recommendation, arrangement, purchase, lease
or order of items or services that are covered, in whole or in part, by a federal healthcare program such as Medicare or Medicaid; |
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The
civil False Claims Act, that forbids the knowing submission or “causing the submission” of false or fraudulent information
or the failure to disclose information in connection with the submission and payment of claims for reimbursement to Medicare, Medicaid,
federal healthcare programs or private health plans; |
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The
federal Physician Self-referral Law, commonly known as the Stark Law, which prohibits physicians from referring Medicare or Medicaid
patients to providers of ”designated health services” with whom the physician or a member of the physician’s
immediate family has an ownership interest or compensation arrangement, unless a statutory or regulatory exception applies, and similar
state equivalents that may apply regardless of payor; and |
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The
U.S. Foreign Corrupt Practices Act of 1977, as amended, or FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. §
201, the U.S. Travel Act, and the USA PATRIOT Act, which among other things, prohibit companies and their employees, agents, third-party
intermediaries, joint venture partners and collaborators from authorizing, promising, offering, or providing, directly or indirectly,
improper payments or benefits to recipients in the public or private sector. |
Many
states and foreign governments have adopted similar laws and regulations. Violations of law could subject us to civil or criminal penalties,
monetary fines, disgorgement, individual imprisonment, contractual damages, reputational harm, diminished profits and future earnings
and curtailment of our operations. We could also be required to change or terminate some portions of operations or business or could
be disqualified from providing services to healthcare providers doing business with government programs.
Risks
Related to Our Reliance on Third Parties
We
will rely on third parties to conduct certain aspects of our preclinical studies and clinical trials. If these third parties do not successfully
carry out their contractual duties, meet expected deadlines or comply with regulatory requirements, we may not be able to obtain regulatory
approval for, or commercialize, any potential product candidates.
We
will depend upon third parties to conduct certain aspects of our preclinical studies and depend on third parties, including independent
investigators, to conduct our clinical trials, under agreements with universities, medical institutions, contract research organizations,
or CROs, strategic partners and others. We expect to negotiate budgets and contracts with such third parties, which may result in delays
to our development timelines and increased costs.
We
continue to build our infrastructure and hire personnel necessary to execute our operational plans. We will rely especially heavily on
third parties over the course of our clinical trials, and, as a result, may have limited control over the clinical investigators and
limited visibility into their day-to-day activities, including with respect to their compliance with the approved clinical protocol.
Nevertheless, we are responsible for ensuring that each of our clinical trials is conducted in accordance with the applicable protocol,
legal and regulatory requirements and scientific standards, and our reliance on third parties does not relieve us of our regulatory responsibilities.
We and these third parties are required to comply with GCP requirements, which are regulations and guidelines enforced by the FDA and
comparable foreign regulatory authorities for product candidates in clinical development. Regulatory authorities enforce these GCP requirements
through periodic inspections of clinical trial sponsors, clinical investigators and clinical trial sites. If we or any of these third
parties fail to comply with applicable GCP requirements, the clinical data generated in our clinical trials may be deemed unreliable
and the FDA or comparable foreign regulatory authorities may require us to suspend or terminate these trials or perform additional preclinical
studies or clinical trials before approving our marketing applications. We cannot be certain that, upon inspection, such regulatory authorities
will determine that any of our clinical trials comply with GCP requirements. In addition, our clinical trials must be conducted with
product produced under cGMP requirements and may require a large number of patients.
Our
failure or any failure by these third parties to comply with these regulations may require us to repeat clinical trials, which would
delay the regulatory approval process. Moreover, our business may be adversely affected if any of these third parties violates federal
or state fraud and abuse or false claims laws and regulations or healthcare privacy and security laws.
Any
third parties conducting aspects of our preclinical studies or our clinical trials will not be our employees and, except for remedies
that may be available to us under our agreements with such third parties, we cannot control whether or not they devote sufficient time
and resources to our preclinical studies and clinical programs. These third parties may also have relationships with other commercial
entities, including our competitors, for whom they may also be conducting clinical trials or other product development activities, which
could affect their performance on our behalf. If these third parties do not successfully carry out their contractual duties or obligations
or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the preclinical or clinical data they obtain
is compromised due to the failure to adhere to our protocols or regulatory requirements or for other reasons, our development timelines,
including clinical development timelines, may be extended, delayed or terminated and we may not be able to complete development of, obtain
regulatory approval of or successfully commercialize our product candidates. As a result, our financial results and the commercial prospects
for our product candidates would be harmed, our costs could increase and our ability to generate revenue could be delayed or precluded
entirely.
The
pharmaceutical companies that we partner with may not be successful in receiving regulatory approval for drug indications or may not
commercialize their companion therapies for our expected companion diagnostic programs.
While
we intend to provide our pharmaceutical company partners with new patient populations for such partners’ existing or investigational
targeted therapies, there can be no assurances that such partners will be able to obtain regulatory approval for new indications to treat
these patient populations or otherwise be successful in commercializing these new therapies. The pharmaceutical companies we partner
with:
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may
not meet clinical trial endpoint targets in evaluating efficacy of a targeted therapy in the patient population; |
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may
encounter regulatory or production difficulties that could constrain the supply of the companion therapies; |
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may
have difficulties gaining acceptance of the use of the companion therapies in the clinical community; |
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may
not pursue commercialization of any companion therapies; |
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may
elect not to continue or renew commercialization programs based on changes in their strategic focus or available funding, or external
factors, such as an acquisition, that divert resources or create competing priorities; |
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may
not commit sufficient resources to the marketing and distribution of such companion therapies; or |
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may
terminate their relationship with us. |
Any
of these factors could adversely affect our commercialization strategy, business, results of operations and financial
condition.
Our
reliance on third parties to formulate and manufacture our drug product will expose us to a number of risks that may delay the development,
regulatory approval and commercialization of our drug product or result in higher product costs.
We
have no direct experience in drug formulation or manufacturing and do not intend to establish our own manufacturing facilities. We lack
the resources and expertise to formulate or manufacture our own product candidates. Instead, we will contract with one or more manufacturers
to manufacture, supply, store and distribute drug supplies for our clinical trials. If our drug product receives FDA approval, we will
rely on one or more third-party contractors to manufacture our drugs. Our anticipated future reliance on a limited number of third-party
manufacturers exposes us to risks that, among other things, we may be unable to identify manufacturers on acceptable terms or at all
because the number of potential manufacturers is limited and the FDA must approve any replacement contractor; our third-party manufacturers
might be unable to formulate and manufacture our drugs in the volume and of the quality required to meet our clinical and/or commercial
needs, if any; our future contract manufacturers may not perform as agreed or may not remain in the contract manufacturing business for
the time required to supply our clinical trials or to successfully produce, store and distribute our products; and our contract manufacturers
may fail to comply with good manufacturing practice and other government regulations and corresponding foreign standards. Each of these
risks could delay our clinical trials, the approval, if any, of our product candidates by the FDA, or the commercialization of our product
candidates or result in higher costs or deprive us of potential product revenues.
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 are prosecuted and
may also affect patent litigation. The U.S. PTO recently developed new regulations and procedures to govern administration of the Leahy-Smith
Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions,
only became effective on March 16, 2013. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation
of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution
of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on
our business and financial condition. Depending on future actions by the U.S. Congress, the federal courts, and the U.S. PTO, the laws
and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce
our existing patents and patents that we might obtain in the future. In addition, there may be patent law reforms in foreign jurisdictions
that could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense
of our issued patents in those foreign jurisdictions.
We
may be subject to claims by third parties asserting that our employees or we have misappropriated their intellectual property, or claiming
ownership of what we regard as our own intellectual property.
Our
current and future employees may have been previously employed at universities or other biotechnology, diagnostic technology or pharmaceutical
companies, including our competitors or potential competitors and strategic partners. Although we try to ensure that our employees do
not use the proprietary information or know-how of others in their work for us, we may be subject to claims that these employees or we
have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee’s
former employer. Litigation may be necessary to defend against these claims.
In
addition, while it is our policy to require our employees and contractors who may be involved in the development of intellectual property
to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party
who in fact develops intellectual property that we regard as our own. Our and their assignment agreements may not be self-executing or
may be breached, and we may be forced to bring claims against third parties, or defend claims they may bring against us, to determine
the ownership of what we regard as our intellectual property.
If
we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property
rights or personnel. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial
costs and be a distraction to management.
Any
lawsuits relating to infringement of intellectual property rights necessary to defend ourselves or enforce our rights will be costly
and time consuming and could be unsuccessful.
Because
competition in our industry is intense, competitors may infringe or otherwise violate our issued patents, patents of our licensors or
other intellectual property. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be
expensive and time consuming, and could distract our technical and management personnel from their normal responsibilities. Any claims
we assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that we infringe their
patents. In addition, in a patent infringement proceeding, a court may decide that a patent of ours is invalid or unenforceable, in whole
or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on the grounds
that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our
patents at risk of being invalidated or interpreted narrowly. We may also elect to enter into license agreements in order to settle patent
infringement claims or to resolve disputes prior to litigation, and any such license agreements may require us to pay royalties and other
fees that could be significant. 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.
Risks
Relating to Our Common Stock
Provisions
in our corporate charter documents and under Delaware law could make an acquisition of our company, which may be beneficial to our stockholders,
more difficult and may prevent attempts by our stockholders to replace or remove our current management.
Provisions
in our certificate of incorporation and our bylaws may discourage, delay or prevent a merger, acquisition or other change in control
of our company that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your
shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock,
thereby depressing the market price of our common stock. In addition, because our board of directors will be responsible for appointing
the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our
current management by making it more difficult for stockholders to replace members of our board of directors. Among other things, these
provisions:
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allow
the authorized number of our directors to be changed only by resolution of our board of directors; |
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limit
the manner in which stockholders can remove directors from our board of directors; |
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establish
advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our board of
directors; |
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require
that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our stockholders by written
consent; |
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limit
who may call stockholder meetings; |
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authorize
our board of directors to issue preferred stock without stockholder approval, which could be used to institute a “poison pill”
that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not
been approved by our board of directors; and |
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require
the approval of the holders of at least two-thirds of the votes that all our stockholders would be entitled to cast to amend or repeal
specified provisions of our certificate of incorporation or bylaws. |
Moreover,
we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess
of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction
in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed
manner.
Any
of these provisions of our charter documents or Delaware law could, under certain circumstances, depress the market price of our common
stock.
The
price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for purchasers of our
common stock or could subject us to securities litigation.
Our
stock price may be extremely volatile. The stock market in general and the market for smaller medical technology companies in particular
have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of
this volatility, investors may not be able to sell our common stock at or above the price they paid for such stock. The market price
for our common stock may be influenced by many factors, including:
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the
success of competitive products or technologies; |
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results
of planned clinical trials of our Phase 3 (VIKTORIA-1), CELsignia HER2 Pathway Activity Test, CELsignia Multi-Pathway Activity Test or
other CELsignia tests may develop in the future; |
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regulatory
or legal developments in the United States and other countries; |
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developments
or disputes concerning patent applications, issued patents or other proprietary rights; |
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the
recruitment or departure of key personnel; |
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the
level of expenses related to any of our CELsignia tests or clinical development programs; |
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actual
or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts; |
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operating
results that fail to meet expectations of securities analysts that cover our company; |
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variations
in our financial results or those of companies that are perceived to be similar to us; |
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changes
in the structure of healthcare payment systems; |
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market
conditions in the pharmaceutical, biotechnology and medical technology sectors; |
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sales
of our stock by us, our insiders and our other stockholders; |
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general
economic and market conditions; and |
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the
other factors described in this “Risk Factors” section. |
Additionally,
companies that have experienced volatility in the market price of their stock have been subject to an increased incidence of securities
class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result
in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.
Future
sales of shares of our common stock, including by us and significant stockholders, could negatively affect our stock price.
Sales
of a substantial number of shares of our common stock in the public market could occur at any time. Such sales, or the perception in
the market that the holders of a large number of shares of our common stock intend to sell their shares, could reduce the trading price
of our common stock.
On
December 9, 2022, we issued 6,182,574 shares of common stock, 1,120,873 shares of Series A Preferred Stock and warrants exercisable for
6,956,450 shares of common stock to certain institutional and other accredited investors in a private placement pursuant to a securities
purchase agreement entered into on May 15, 2022. Each share of Series A Preferred Stock is convertible at the option of the holder, subject
to the Beneficial Ownership Limitation described below, into 10 shares of common stock. Under the terms of the Series A Preferred Stock
and the warrants, we will not effect the conversion of any Series A Preferred Stock or the exercise of any such warrant, and the investor
will not have the right to convert any portion of the Series A Preferred Stock or to exercise any portion of any warrant, to the extent
that, after giving effect to an attempted conversion or exercise, the aggregate number of shares of common stock beneficially owned by
the investor, together with its affiliates, would exceed 9.99% of the number of shares of common stock outstanding immediately after
giving effect to the conversion or exercise, which percentage may be reset at the investor’s election to a higher percentage, not
to exceed 19.9%, upon 61 days’ notice to us, or to a lower percentage, effective immediately after notice to us. We refer to such
percentage limitation as the Beneficial Ownership Limitation. We filed a registration statement on Form S-3 covering the resale of up
to 24,347,754 shares of common stock, consisting of (i) 6,182,574 shares of common stock purchased by the investors under the securities
purchase agreement, (ii) 11,208,730 shares of common stock issuable upon conversion of the Series A Preferred Stock and (iii) 6,956,450
shares of common stock issuable upon exercise of the warrants, which was declared effective in January 2023. The Form S-3 covers the
resale of the number of shares of common stock issued or issuable to the investors without giving effect to the Beneficial Ownership
Limitation, but the investors may not convert or exercise, and subsequently resell the underlying shares of common stock of, any portion
of the Series A Preferred Stock or the warrants to the extent such conversion or exercise would result in the investor exceeding the
applicable Beneficial Ownership Limitation. The investors may resell all, some or none of the shares of common stock registered pursuant
to the Form S-3 at any time or in their discretion, subject to the Beneficial Ownership Limitation.
On
February 4, 2022, we entered into an Open Market Sale AgreementSM with Jefferies LLC, as agent, pursuant to which we may offer
and sell, from time to time, through Jefferies, shares of our common stock having an aggregate offering price of up to $50,000,000. On
October 12, 2022, pursuant to this agreement, we sold 500,000 shares of common stock in a single transaction at a price of $10.35 per
share, generating gross proceeds of $5.2 million ($4.8 million net of commissions and offering expenses). At December 31, 2022, $44.8
million of common stock remains available for sale under the Jefferies agreement. The extent to which we utilize the Open Market Sale
AgreementSM as a source of funding will depend on a number of factors, including the prevailing market price of our common
stock, general market conditions and the extent to which we are able to secure funds from other sources.
Sales
of substantial amounts of shares of our common stock or other securities by our stockholders, by us under the Open Market Sale AgreementSM,
by the private placement investors pursuant to the Form S-3 or through any other means could also lower the market price of our common
stock, make it more difficult for you to sell your shares at a price that you desire and impair our ability to raise capital through
the sale of equity or equity-related securities.
Our
Series A Preferred Stock has rights, preferences, and privileges that are not held by, and are preferential to, the rights of holders
of our common stock.
The
Certificate of Designations of Preferences, Rights and Limitations of Series A Convertible Preferred Stock provides that, in the event
of any voluntary or involuntary liquidation, dissolution or winding up of the Company, or in the event of a Deemed Liquidation Event
(as defined in the Certificate of Designations of Preferences, Rights and Limitations of Series A Convertible Preferred Stock), the holders
of Series A Preferred Stock are entitled to be paid from assets of the Company available for distribution to its stockholders, before
any payment is made to the holders of common stock by reason of their ownership thereof, an amount per share equal to the greater of
(i) the original issue price ($5.75 on an as-converted-to-common stock basis), plus all accrued and unpaid dividends and (ii) the amount
that the holder would have been entitled to receive at such time if the Series A Preferred Stock were converted into common stock. The
Company may not, without the consent of holders of a majority of the outstanding shares of Series A Preferred Stock, amend its charter
in a manner that adversely affects the powers, preferences or rights of the Series A Preferred Stock or issue or obligate itself to issue
shares of any additional class or series of capital stock unless the same ranks junior to the Series A Preferred Stock with respect to
the distribution of assets on the liquidation, dissolution or winding up of the Company and the payment of dividends.
If
securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business,
our stock price and trading volume could decline.
The
trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us
or our business. We do not have any control over these analysts. There can be no assurance that analysts will cover us or provide favorable
coverage. If one or more of the analysts who cover us downgrade our stock or change their opinion of our stock, our stock price would
likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose
visibility in the financial markets, which could cause our stock price or trading volume to decline.
We
incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to
new compliance initiatives and corporate governance practices.
As
a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley
Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the continued listing requirements of The Nasdaq Stock Market and
other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance
of effective disclosure and financial controls and corporate governance practices. Our management and other personnel will need to devote
a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have increased our ongoing legal
and financial compliance costs and will make some activities more time-consuming and costly.
Pursuant
to Section 404 of the Sarbanes-Oxley Act, or Section 404, we are required to furnish a report by our management on our internal control
over financial reporting. Depending upon our filer status, we could also be required to include an attestation report on internal control
over financial reporting issued by our independent registered public accounting firm as required by Section 404(b). While we, as of December
31, 2022, concluded that our internal control over financial reporting was effective, we may need to dedicate additional internal resources
and engage outside consultants to maintain compliance with Section 404 in the future. Any material weaknesses that we may identify in
the future could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial
statements.