Throughout this Annual Report, “Cadrenal,”
“the Company,” “we” and “our” refer to Cadrenal Therapeutics, Inc.
Our business faces significant risks and uncertainties
of which investors should be aware before making a decision to invest in our common stock. If any of the following risks are realized,
our business, financial condition and results of operations could be materially and adversely affected. The following is a summary of
the more significant risks relating to the Company. A more detailed description of our risk factors is set forth below under the caption
“Risk Factors” in Item 1A in Part I of this Annual Report.
Item 1. Business.
Overview
We are focused on developing tecarfarin, a novel
therapy with orphan drug indication, designed for the prevention of systemic thromboembolism (blood clots) of cardiac origin in patients
with end-stage renal disease, or ESRD, and atrial fibrillation (irregular heartbeat), or AFib. We secured the rights to tecarfarin on
April 1, 2022 via an asset purchase agreement from HESP LLC, a wholly owned subsidiary of Horizon Technology Finance Corporation. HESP
LLC acquired the assets of Espero BioPharma, Inc., or Espero, including tecarfarin, in an assignment for the benefit of creditors in
which the creditor, Horizon Technology Finance Corporation and Horizon Credit II LLC (collectively, Horizon), a secured lender of Espero,
designated HESP LLC as the assignee of Espero’s assets.
Tecarfarin is an anticoagulant that uses a drug
design process which targets a different pathway than the most commonly prescribed drugs used in the treatment of thrombosis and AFib.
Tecarfarin has been evaluated in eleven (11) human clinical trials conducted by its previous owners and other third parties in over 1,003
individuals (269 patients were treated for at least six months and 129 patients were treated for one year or more). In Phase 1, Phase
2 and Phase 2/3 clinical trials, tecarfarin has generally been well-tolerated in both healthy adult subjects and patients with chronic
kidney disease, or CKD. In the Phase 2/3 trial, EMBRACE-AC, the largest tecarfarin trial with 607 patients having completed it, only
1.6% of the blinded tecarfarin subjects suffered from major bleeding and there were no thrombotic events. Five patients died during the
trial, but only one death due to intracerebral hemorrhage was considered to be possibly related to the tecarfarin.
In 2019, the United States Food and Drug Administration,
or FDA, provided input on the Phase 3 trial design for tecarfarin, which was submitted by Espero, the previous owner of tecarfarin. We
intend to submit our Phase 3 trial design to the FDA using the same protocol that was submitted by Espero. Assuming the FDA accepts our
Phase 3 trial design, we intend to commence the Phase 3 pivotal trial in the first half of 2024. However, there can be no assurance that
the trial design will be accepted by the FDA. We are pursuing regulatory approval of tecarfarin as an individual treatment, although
we might evaluate, in consultation with the FDA, other potential uses in the future.
In March 2019, the FDA granted orphan drug designation,
or ODD, for tecarfarin for the prevention of systemic thromboembolism of cardiac origin in patients with ESRD and AFib. The FDA grants
ODD status to drugs that are intended for the treatment, diagnosis, or prevention of rare diseases or conditions, which are defined as
a disease or condition that affects fewer than 200,000 people in the U.S. The ODD program provides a drug developer with certain benefits
and incentives, including a seven-year period of U.S. marketing exclusivity from the date of marketing authorization, waiver of FDA user
fees, and tax credits for clinical research. The granting of an orphan drug designation does not alter the FDA’s regulatory requirements
to establish safety and effectiveness of a drug through adequate and well-controlled studies to support approval and commercialization.
Furthermore, orphan drug designation does not indicate or guarantee FDA approval of the New Drug Application, or NDA, and we might not
receive exclusivity.
Tecarfarin was developed by researchers using
a retrometabolic drug design process which targets a different metabolic pathway than the most commonly prescribed drugs for the treatment
of thrombosis and AFib. “Drug metabolism” refers to the process by which a drug is inactivated by the body and rendered easier
to eliminate or to be cleared by the body. Most approved drugs, including warfarin, the only FDA-approved Vitamin K antagonists, or VKAs,
which is a prescribed drug for the treatment of thrombosis, are metabolized in the liver through a pathway known as the Cytochrome CYP450
system, or CYP450, by the enzymes known as CYP2C9 and CYP3A4. By using a different metabolic pathway, tecarfarin eliminates or minimizes
the CYP450 metabolism in the liver. Patients taking multiple medications that interact with CYP2C9, or CYP3A4 or those with impaired
kidney function, can experience an overload in the pathway, creating a bottleneck that often leads to insufficient clearance, which results
in a toxic build-up of one or more drugs. In some instances, patients taking multiple medications metabolized by the same CYP450 pathway
may experience decreased efficacy of one or more of the medications due to rapid metabolism or increased drug effect and/or toxicity
due to enzyme induction. Patient-specific genetic differences can also hinder drug clearance in the CYP450 pathway. Our product candidate
tecarfarin was designed to follow a metabolic pathway distinct from the CYP450 pathway and is metabolized by both CYP450 and non-CYP450
pathways. We believe this may allow elimination by large capacity and non-saturable tissue esterase pathways that exist throughout the
body rather than just in the liver.
Tecarfarin is an orphan designated, vitamin K
antagonist, oral, once-daily anticoagulant in the same drug class as warfarin designed for use in patients requiring chronic VKA anticoagulation,
to prevent systemic thromboembolism of cardiac origin in patients with ESRD and AFib. The prevailing treatment for thrombosis is with
an oral anticoagulant, either a VKA, like warfarin, or non-vitamin K oral anticoagulant (“NOAC”). VKAs block the production
of vitamin K-dependent blood clotting factors, such that the blood is “thinned,” preventing clots, while NOACs directly block
the activity of certain of these clotting factors. Tecarfarin, like warfarin, is a VKA.
Vitamin K epoxide Reductase Complex subunit 1
(VKORC1) is a significant enzyme for effective clotting. VKORC1 reduces vitamin K epoxide to its active form (Vitamin K), which is the
rate-limiting step in the physiological process of vitamin K recycling. Vitamin K serves as a cofactor for normal function of several
clotting/anticoagulation factors including Factors II, VII, IX and X and Proteins C, S, and Z. VKORC1 genetic deficiencies result in
increased sensitivity to VKAs, which results in an increase in the risk of significant hemorrhaging. We believe tecarfarin has similar
potency for VKORC1 inhibition as warfarin, but it is an investigational new drug, and we must demonstrate it is safe and effective for
its proposed indication.
![](https://content.edgar-online.com/edgar_conv_img/2023/03/30/0001213900-23-024260_image_001.jpg)
AFib is the most common arrhythmia, with its
incidence and prevalence increasing over the last 20 years. AFib is associated with an approximate five-fold increased risk of stroke.
The risk of developing AFib increases in patients with CKD. According to 2021 estimates by the Centers for Disease Control and Prevention,
or CDC, approximately 15% of the U.S. adult population, or 37 million people, have CKD. An estimated 0.4% of people in the U.S. suffer
from Stage 4 CKD and 0.1% of people in the U.S. have ESRD.
Patients with ESRD and AFib represent a spectrum
of disorders involving both the heart and kidneys (known as cardiorenal syndrome or CRS) in which acute or chronic dysfunction in one
organ may induce acute or chronic dysfunction in the other organ. These patients have typically been excluded from randomized clinical
trials because the approved therapies for AFib have metabolic profiles that may increase drug exposures thereby increasing the known
risks and challenges in managing these patients. The presence of either CKD or AFib, increases the risk of serious thromboembolic adverse
clinical outcomes, such as stroke and death. Antithrombotic therapy is typically recommended to decrease this risk in AFib patients,
but there are no approved treatment options for patients with ESRD and AFib. Warfarin may cause substantial harm in these patients. Low-dose
apixaban (Eliquis) was approved by the FDA for use in ESRD patients on hemodialysis based upon limited pharmacokinetic data by 8 subjects,
despite that randomized trials to date of apixaban versus warfarin for AFib excluded patients with severe and end-stage kidney disease.
The RENAL-AF (Trial to Evaluate Anticoagulation Therapy in Hemodialysis Patients With Atrial Fibrillation) was terminated early in 2019
by its sponsor.
There are more than 809,000 Americans with ESRD,
with approximately 70% on dialysis, according to the United States Renal Data System. Approximately 150,000 ESRD patients also have AFib.
AFib nearly doubles the anticipated mortality and increases the stroke risk by approximately five-fold in these patients. There is evidence
that AFib is an independent risk factor for developing ESRD in CKD patients. Both diseases share common risk factors including hypertension,
diabetes, vascular disease, and advancing age. Cardiovascular disease contributes to more than half of all deaths among patients with
ESRD. According to the Annual Data Report published by the United States Renal Data System, total Medicare spending for patients with
ESRD reached $51 billion in 2019, accounting for approximately 7% of the Medicare paid claims costs.
We have licensed out the rights to tecarfarin
for several Asian markets including China, to Lee’s Pharmaceutical Holdings Limited, an integrated research-driven and market-oriented
biopharmaceutical publicly listed company based in Hong Kong with over 25 years’ experience in the pharmaceutical industry in China.
Lee’s Pharmaceutical Holdings Limited is developing tecarfarin as an anti-thrombotic for patients with mechanical heart valves.
In 2020 and 2021, Lee’s Pharmaceutical Holdings Limited completed two Phase 1 studies in China and Hong Kong and is currently preparing
for its Phase 2 trial.
| * | The rights to tecarfarin for several Asian markets including
China have been out licensed to Lee’s Pharmaceutical, a publicly listed company based in Hong Kong, who is developing tecarfarin
as an anti-thrombotic for patients with mechanical heart valves. |
Members of our management team have extensive
experience in drug discovery, development and commercialization and have held senior leadership positions at a number of pharmaceutical
and biotechnology companies. We also benefit from our broad network of established relationships with leaders in the industry and medical
community.
As more fully set forth in our risk factors,
we are a clinical development biopharmaceutical company with a limited operating history. We have a history of operating losses and expect
to continue to incur substantial losses for the foreseeable future. Our cash and the proceeds from our initial public offering will only
fund our operations for a limited time. The proceeds from our initial public offering are insufficient to allow us to fully fund our
planned pivotal Phase 3 clinical trial. We will need to raise additional capital for the initiation of enrollment of patients and completion
of the planned pivotal Phase 3 trial.
With respect to tecarfarin, we have two issued
U.S. patents directed to tecarfarin. While the patents currently expire in 2024, we expect to seek extensions of patent terms. In the
United States, the Drug Price Competition and Patent Term Restoration Act of 1984 permits a patent term extension of up to five years
beyond the normal expiration of the patent, which is limited to the approved indication (or any additional indications approved during
the period of extension). We also intend to seek exclusivity for our proprietary product candidates through market and data exclusivity
granted by regulatory agencies in the United States and other countries. Further, as discussed above, the ODD program provides a drug
developer with certain benefits and incentives, including a seven-year period of U.S. marketing exclusivity from the date of marketing
authorization.
While we have engaged intellectual property counsel
to assist in protecting our patent ownership rights, to date, we have not had intellectual property counsel conduct a freedom to operate
analysis regarding our tecarfarin product. As a result, we cannot be certain that we will not be exposed to third party legal claims,
liabilities and/or litigation actions when we seek to develop, make and market products using our tecarfarin technology.
Clinical Trials
Tecarfarin has been evaluated in 11 human clinical
trials in over 1,003 individuals which includes eight Phase 1 trials, two Phase 2 trials and one Phase 2/3 trial evaluating the efficacy
and safety of tecarfarin.
In a Phase 2/3 randomized and blinded trial sponsored
by ARYx Therapeutics, Inc. in 2008, 607 patients with indications for chronic anticoagulation were treated with either tecarfarin or
warfarin. The Time in Therapeutic Range, or TTR, with tecarfarin was similar to that with well-managed warfarin and tecarfarin appeared
to have a favorable safety profile and be well tolerated with only 1.6% of the blinded tecarfarin subjects suffering from major bleeding
and no thrombotic events. When thrombotic and major bleeding events during the blinded period were combined, a numerical imbalance favoring
tecarfarin over warfarin was seen (warfarin 11 subjects, 3.6%; tecarfarin 5 subjects, 1.6%). The trial however did not meet its primary
endpoint as superiority of tecarfarin over warfarin as measured by TTR was not demonstrated.
In a subsequent Phase 1 study with 23 patients
with CKD sponsored by Armetheon, Inc. in 2016, the metabolism of warfarin was inhibited, but not tecarfarin. The safety of repeated dosing
of tecarfarin in CKD patients remained unknown. However, if the pharmacokinetic findings of this single-dose study are present with repeated
dosing, tecarfarin may lead to dosing that is more predictable than warfarin in CKD patients who require anticoagulation therapy.
Recent Events
Fast Track Designation
On January 13, 2023, the FDA designated as a
Fast Track development program the investigation of tecarfarin for the prevention of systemic thromboembolism of cardiac origin in patients
with ESRD and AFib. Fast Track is a process designed to facilitate the development and expedite the review of drugs to treat serious
conditions and fill an unmet medical need.
Initial Public Offering
On January 24, 2023,
we completed our initial public offering of 1,400,000 shares of our common stock at a public offering price of $5.00 per share, generating
gross proceeds of $7,000,000. Our shares of common stock commenced trading on the Nasdaq Capital Market (“Nasdaq”) on January
20, 2023 under the symbol “CVKD.”
In connection with our
initial public offering, on January 19, 2023, we entered into an underwriting agreement (the “Underwriting Agreement”) with
Boustead Securities, LLC, as representative of the underwriters (the “Representative”), a form of which was previously filed
as an exhibit to our registration statement on Form S-1, as amended (File No. 333-267562), which was declared effective by
the Securities and Exchange Commission (the “SEC”) on January 19, 2023 (the “Registration Statement”). Pursuant
to the Underwriting Agreement, we agreed to issue to the underwriters a five-year warrant (the “Representative’s Warrant”)
to purchase an aggregate of 84,000 shares of our common stock, which is equal to six percent (6%) of the shares of common stock sold
in the initial public offering. Such Representative’s Warrant has an exercise price of $6.00, which is equal to 120% of the public
offering price of the common stock in the initial public offering.
In connection with the
closing of the initial public offering, we entered into separate indemnification agreements with each of our directors (we had previously
entered into separate indemnification agreements with each of our executive officers). The indemnification agreements, in addition to
our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws, require us to indemnify our directors, executive
officers and certain controlling persons to the fullest extent permitted by Delaware law.
Resale Offering
Pursuant to a separate prospectus (the “Resale
Prospectus”), dated January 19, 2023, 1,704,783 shares of our common stock have been registered for resale by certain of our shareholders
(the “Selling Shareholders”). We did, and will not, receive any proceeds from the sales by the Selling Stockholders of the
securities set forth in the Resale Prospectus.
Our Strategy
Our goal is to build a biopharmaceutical company
with a foundation of product candidates that significantly advance patient care in cardiorenal diseases. Key elements of our strategy
are as follows:
| ● | Complete the clinical
development of and seek FDA approval for tecarfarin. We intend to initiate our pivotal Phase
3 clinical trial in the first half of 2024, subject to completion of our initial public offering
and funding from additional financings, which we believe will be our remaining pivotal trial
based upon the latest feedback that the prior owner of tecarfarin had with the FDA in 2019.
ACTOR AF: Anti-Coagulation with Tecarfarin on Outcomes in Renal disease and Atrial Fibrillation
is designed as a Phase 3, 492-patient, Randomized, Double-Blind, Placebo-Controlled Outcomes
Study of Tecarfarin vs. Placebo in Subjects with End-Stage Renal Disease and Atrial Fibrillation
not Currently Treated with Chronic Oral Anticoagulation. If we are able to complete the Phase
3 clinical trial and we are able to obtain FDA approval of our NDA, we believe tecarfarin
can be an alternative treatment for patients who are currently without an approved treatment. |
| ● | If we obtain FDA
approval of our NDA for our first indication, we intend to seek to expand the label for tecarfarin
through a supplemental NDA. We intend to explore the full potential of tecarfarin in additional
indications, including the treatment of patients with Left Ventricular Assist Devices (LVADs)
and Mechanical Heart Valves (MHVs) who require chronic anticoagulation. A LVAD is an implantable
pump attached to the heart, connecting the apex of the left ventricle to the ascending aorta.
LVADs are intended to treat patients suffering from advanced heart failure. MHVs are a type
of prosthetic heart valve constructed of durable materials such as titanium or carbon that
can potentially last a patient’s lifetime. Despite their high durability, MHVs are
associated with an increased risk of developing blood clots that may interrupt blood flow
and travel to various organs (thromboembolism). Oral anticoagulation therapy with a vitamin
K antagonist (warfarin) continues to be the recommended treatment option for patients implanted
with an MHV based on the 2014 American Heart Association/American College of Cardiology Guidelines. |
| ● | We intend to partner
and/or in-license and/or acquire clinical and pre-clinical stage cardiorenal products to
augment our current pipeline which consists of one investigational product. |
| ● | Create a commercial
infrastructure for our product candidates. If tecarfarin is approved by the FDA, we intend
to expand our commercial infrastructure and hire and train a focused and dedicated specialty
cardiorenal salesforce which we believe can efficiently cover the top prescribing physicians
and approximately 3,000 anticoagulation clinics in the U.S., which presently monitor patients
on warfarin. If approved, we intend to initially target our tecarfarin commercialization
efforts at the two largest dialysis providers in the U.S., DaVita Kidney Care and Fresenius
Medical Care. DaVita maintains more than 2,800 brick-and-mortar dialysis centers in the U.S.,
while Fresenius’ North America subsidiary owns more than 2,500 on the continent —
together accounting for more than 70% of the entire U.S. market. |
Retrometabolic Drug Design Process
We utilize a retrometabolic drug design process
to design product candidates that follow a metabolic pathway that we believe will confer significant clinical advantages over existing
drugs metabolized by the CYP450 pathway. “Drug metabolism” refers to the process by which a drug is inactivated by the body
and rendered easier to eliminate or to be cleared by the body. Most approved drugs are metabolized in the liver through the CYP450 pathway
by the enzymes known as CYP2C9 and CYP3A4. The CYP450 metabolic pathway has limited capacity, and patients taking multiple medications
that interact with CYP2C9, or those with impaired kidney function, can experience an overload in the pathway, creating a bottleneck causing
insufficient clearance, which results in a toxic build-up of one or more drugs. In some instances, patients taking multiple medications
that interact with CYP2C9 may also experience that a drug is eliminated too quickly from the body, reducing the efficacy of the drug.
Patient-specific genetic differences can also hinder drug clearance in the CYP450 pathway. Our product candidates were designed
so that they follow a metabolic pathway distinct from or in addition to the CYP450 pathway, eliminating or minimizing the CYP450 metabolism
by the liver, and are instead or additionally eliminated by large capacity and non-saturable tissue esterase pathways that exist
throughout the body rather than just in the liver. We believe that the use of these alternative pathways can minimize the impact of drug-to-drug interactions,
impaired kidney function and genetic variability, on the metabolism of our drugs, thereby ultimately minimizing clearance-related safety
issues.
As part of the retrometabolic design process,
we first design a metabolite, which we refer to as the “ideal metabolite,” that is non-toxic, pharmacologically inactive,
water soluble and rapidly eliminated from the body through a pathway distinct from the CYP450 pathway. This ideal metabolite becomes
the foundation upon which we develop a limited series of potential molecular drug candidates that have the same pharmacology and function
as the original drug. We then test the potential drug candidates we have created preclinically to assess whether the candidates have
the same activity as the original drug and to ensure the candidates break down properly to the ideal metabolite. This process allows
us to identify the drug candidates that would be best suited for further clinical development.
By designing drugs that break down to the ideal
metabolite, and accordingly, are not cleared through the CYP450 pathway, we create product candidates that we believe would reduce many
of the safety risks and complications that patients experience with drugs that are cleared through the CYP450 pathway. As a result, we
believe there may be better compliance with a tecarfarin treatment regimen, if approved by FDA, which may also result in increased efficacy
for the patients taking our drug product candidates.
Our Investigational Product Candidate
Tecarfarin for Use in Patients with ESRD
and AFib
ESRD and AFib Current Treatment Landscape
Thrombosis is the formation or presence of a
blood clot (a thrombus) within a blood vessel that blocks normal blood flow. A formed thrombus can detach from the vessel or heart atrium
wall, resulting in a thromboembolism that causes a blockage of the blood flow to vital organs, such as the brain, heart and lungs. According
to the CDC, each year, approximately 800,000 people in the U.S. experience a new or recurrent stroke, of which approximately 87%
are ischemic strokes, which are caused by either a thrombotic event or embolism, in which blood flow to the brain is blocked. In addition,
the CDC estimates that as many as 900,000 people in the U.S. could be affected by venous thromboembolism (blood clotting in the
veins) or a pulmonary embolism (blood clotting in the lungs) each year.
The American Heart Association estimates that
5 million Americans suffer from heart-valve disease, which forces the heart to work harder to pump blood and can lead to heart
failure and sudden death. The disease can be present at birth or result from infections, heart attacks or other heart conditions. Further,
more than 182,000 heart valve replacements are performed every year in the U.S. Mechanical heart valves also create a risk of thrombotic
events.
The prevailing treatment for patients at risk
of thrombosis is an oral anticoagulant, or OAC, of which there are two common types: vitamin K antagonists, or VKAs, and non-vitamin K
oral anticoagulants, or NOACs.
Vitamin K Antagonists: Warfarin
Vitamin K antagonists, or VKAs, are substances
that block the production of vitamin K-dependent blood clotting factors such that the blood is “thinned,” preventing
clots. VKAs are used as anticoagulants in the treatment of thrombosis. For patients treated with a VKA, the international normalized
ratio, or INR, a system established by the World Health Organization and the International Committee on Thrombosis and Hemostasis, is
a commonly available, inexpensive measure of the body’s coagulation status. Each VKA patient’s dose must be individualized,
based on a target range for his or her INR test. The percentage of time that a patient’s INR is maintained within his or her target
range is known as the time in therapeutic range, or TTR. TTR is a well-established FDA metric used to evaluate anticoagulation
control (safety and efficacy) of a VKA based on prothrombin time and the INR. When used as a therapy, VKAs are titrated to a patient’s
individual INR range and that patient is expected to visit a clinic for regular INR monitoring. A higher TTR reflects better anticoagulation
control and is related to improved clinical outcomes, including rates of death, bleeding, myocardial infarction, stroke and systemic
embolism, and a TTR measure of ≥ 70% is generally accepted as the goal for stable anticoagulation with a VKA. When patients are
above their individual INR range, they are at higher risk for bleeding, due to reduced clotting ability, while patients are below their
target INR range are at higher risk for thrombotic events. Potential benefits of monitoring INR include ascertaining patient compliance
with their drug treatment regimen, the ability to detect when dose adjustments are needed and maintaining safety and efficacy of the
drug treatment. TTR is predictive of adverse events, including mortality, stroke and myocardial infarction.
As depicted in the chart below, higher TTR is
generally correlated with higher survival rates.
![](https://content.edgar-online.com/edgar_conv_img/2023/03/30/0001213900-23-024260_image_003.jpg)
Source: Currie et al. Heart 2006 (92) 196-200
Higher TTR levels are also associated with better
kidney functioning, as measured by estimated glomerular filtration rate (eGFR), as reported by the Journal of the American Heart Association
in 2017.
![](https://content.edgar-online.com/edgar_conv_img/2023/03/30/0001213900-23-024260_image_004.jpg)
VKAs are reversible, meaning that in cases of
over-anticoagulation, vitamin K or fresh frozen plasma, or a combination, can be administered to bring patients back down into their
INR range.
Warfarin is currently one VKA treatment option
for thrombosis in the U.S. and has been in use since the 1950s. However, as reported by the National Center for Biotechnology Information,
there are many adverse events associated with warfarin, including bleeding, skin necrosis and hair loss, and warfarin has been reported
as number three on the list of drugs implicated in adverse effects causing hospital admission due to its many drug-to-drug interactions.
Due to these side effects and the increasing use of NOACs, the use of warfarin has decreased during the last decade.
Limitations of Warfarin Treatment
Warfarin has significant safety risks stemming
from its metabolic process, including its elimination pathway. Other drawbacks of warfarin are widely recognized such as narrow therapeutic
range, slow onset and offset of action causing difficulty to manage during peri-invasive procedures, and multiple drug and food
interactions.
Warfarin’s efficacy and safety profile
are affected by its metabolism and elimination characteristics and various interactions with other drugs. Warfarin is metabolized through
the CYP450 pathway, primarily by the CYP2C9 enzyme, and approximately 15% of clinically used drugs are metabolized by the same enzyme,
including certain anticoagulants, antiplatelets and non-steroidal anti-inflammatory drugs, or NSAIDS. Patients taking
warfarin and on CYP2C9 interacting drugs may experience either or both of, warfarin being eliminated by the body too quickly, thereby
decreasing its anticoagulation effect, or warfarin being eliminated by the body too slowly, resulting in excessive and dangerous thinning
of the blood. In both of these situations, increased monitoring is required and dose adjustments are often necessary. Patients who take
both warfarin and these CYP2C9 interacting drugs also have an increased risk of being outside their individual INR target range and experiencing
lower or higher TTR. For these patients, their CYP2C9 interacting drugs must be used with caution, or at times, their use must cease.
Warfarin’s efficacy and safety profile
are also affected by genetic mutations that lead to a lower activity of the CYP2C9 enzyme, the primary enzyme used to eliminate warfarin
from the body. Clinical studies have shown that these persons require lower dosages of warfarin and are at an increased risk of anticoagulation.
Currently, warfarin is commonly used in patients
with non-valvular AFib and in patients with valvular heart diseases (VHD) with AFib. However, as reported by an article published
by the Egyptian Heart Journal on March 28, 2022, an analysis of 6,454 patients with AFib taking warfarin showed that almost 50%
of the time the INR was outside the target range of 2–3, leading to a higher risk of bleeding and thrombotic complications. The
major adverse effect associated with warfarin is bleeding. Major and fatal bleeding events occur at rates of 7.2 and 1.3 per 100 patient-years,
respectively, according to a meta-analysis of 33 studies.
INR should be more frequently monitored in patients
with impaired kidney function. Patients with impaired kidney function have a decreased ability to metabolize drugs through the CYP450
pathway, and accordingly have an increased risk of being outside their individual INR target range and experiencing lower TTR. Further,
according to an article published by Frontiers in Medicine in January 2021, warfarin was associated with an increase in the risk
of major bleeding without reduction in stroke/thromboembolism or mortality in patients with end-stage CKD requiring dialysis.
As a result of some or all of the above, and
other factors, trials have shown that patients treated with warfarin often experience TTRs lower than 70%, the generally accepted TTR
threshold representing stable anticoagulation. In a 2019 study conducted to evaluate the TTR of 300 patients on long-term warfarin
for non-valvular AFib, as reported by an article published in Health and Quality of Life Outcomes on October 20, 2020, 75.5%
of patients had a poor TTR with a mean of only 39.5%, with the mean TTR of all patients in the study being 47%. In another study of 406
AFib patients conducted in Lithuania to evaluate the quality of warfarin as anticoagulation therapy, more than half (57.3%) of INR values
were outside of the target range and the median TTR was only 40%, with only 20% of patients having a TTR greater than or equal to 65%.
Non-Vitamin K Oral Anticoagulants (NOACs)
or Direct Acting Oral Anticoagulants (DOACs)
Non-vitamin K oral anticoagulants, or NOACs,
or DOACs, are a form of OAC treatment that inhibits certain blood clotting factors. While VKAs block the synthesis of vitamin K-dependent blood
clotting factors, NOACs block the activity of these clotting factors. There are two classes of NOACs, oral direct thrombin inhibitors
and oral direct factor Xa inhibitors. Currently, there are only four NOACs approved by the FDA for use outside of a hospital setting:
apixaban (the generic name for Eliquis), dabigatran (the generic name for Pradaxa), rivaroxaban (the generic name for Xarelto) and edoxaban
(the generic name for Savaysa). NOACs are generally more rapid in onset and offset of action than VKAs, have few strong drug-to-drug interactions
and do not require INR monitoring.
Limitations of NOAC Treatment for Patients
with ESRD and AFib
NOACs have been approved in the U.S. for
the treatment of specific oral anticoagulation indications; however, there are anticoagulation indications for which NOACs are warned
against use or are not recommended for use, including for anticoagulation treatment in patients with mechanical heart valves. NOACs do
not have the same broad label indication as warfarin and are only indicated for some thrombosis indications.
Our Proposed Solution: Tecarfarin for Treatment
of ESRD and AFib
Tecarfarin, our lead investigational product
candidate, is a VKA, once-daily OAC designed for use in patients with ESRD and AFib. Tecarfarin was designed using a retrometabolic
drug design which targets a different metabolic pathway than the most commonly prescribed drugs for the treatment of thrombosis and AFib.
Like warfarin, tecarfarin will also require INR monitoring. Due to its retrometabolic design, tecarfarin is eliminated by large capacity
and non-saturable tissue esterase pathways that exist throughout the body, rather than just in the liver. This is a metabolic pathway
that is distinct from the CYP450 pathway and infrequently used by other medications, which could potentially reduce the risk for drug-to-drug interactions.
Moreover, unlike warfarin, we do not believe tecarfarin’s metabolism is affected by CYP2C9 genetic variant alleles or by kidney
function.
Given the metabolic process and related safety
issues with warfarin and the limited treatment indications for which NOACs are approved, we believe there is a significant thrombosis
patient population in need of an alternative anticoagulation treatment. The lack of stable and predictable anticoagulation control is
particularly problematic in large underserved patient subpopulations with risk factors such as:
| ● | Patients treated
with CYP2C9 interacting drugs; |
| ● | Patients with
severely impaired kidney function; |
| ● | Patients with
genetic variant alleles for CYP2C9; and |
| ● | Patients with
mechanical heart valve implants. |
Tecarfarin Clinical Program
Tecarfarin has been evaluated in eleven clinical
trials: eight Phase 1 trials, two Phase 2 trials and one Phase 2/3 trial evaluating the efficacy and safety of tecarfarin.
We are currently planning to commence what we believe to be our remaining pivotal Phase 3 trial in the first half of 2024. A readout
of the two-year animal carcinogenicity study is expected to be completed in first half of 2024. We will also conduct any further
trials as may be required by the FDA.
A summary of the clinical trials conducted to
date with tecarfarin is shown below.
Study Number | |
Study Description | |
Study Population | |
Number Exposed | |
Date started | |
Date completed | |
Sponsor |
ZK-TEK-201905 | |
Multiple-dose tolerance and PK-PD study of tecarfarin | |
Healthy Chinese Volunteers | |
| 40 | |
| 2020 | |
January 2021 | |
Zhaoke Pharmaceutical (Guangzhou) Co., Ltd |
LP-HK-001 | |
Phase 1, Sequential Cohort, Single-dose escalation study | |
Healthy Chinese Volunteers | |
| 40 | |
| June 2018 | |
July 2019 | |
Lee’s Pharmaceutical (Hong Kong) Limited |
CLN-512 | |
Phase 1 pharmacokinetic study in chronic kidney disease
subjects | |
Chronic kidney disease subjects; healthy volunteers | |
| 23 | |
| November 2015 | |
May 2016 | |
Armetheon, Inc. |
Study Number | |
Study Description | |
Study Population | |
Number Exposed | | |
Date started | |
Date completed | |
Sponsor |
CLN-505 | |
Phase 2/3 randomized, blinded head-to-head
anticoagulation in broad indications (EMBRACE-AC) | |
Patients (all indications) | |
| 609 | | |
June 2008 | |
December 2009 | |
ARYx Therapeutics, Inc. |
CLN-509 | |
Pilot Phase 2 study for trial methodology to be used in
CLN-505 | |
Patients (all indications) | |
| 50 | | |
January 2008 | |
August 2008 | |
ARYx Therapeutics, Inc. |
CLN-504 | |
Phase 2a open-label anticoagulation in AFib | |
Patients Requiring Oral Anticoagulation | |
| 66 | | |
December 2006 | |
October 2007 | |
ARYx Therapeutics, Inc. |
CLN-508 | |
Phase 1 DDI study with amiodarone | |
Healthy volunteers | |
| 19 | | |
July 2007 | |
September 2007 | |
ARYx Therapeutics, Inc. |
CLN-507 | |
Phase 1 DDI study with fluconazole | |
Healthy volunteers | |
| 20 | | |
June 2007 | |
August 2007 | |
ARYx Therapeutics, Inc. |
CLN-503 | |
Phase 1 Dose titration to target | |
Healthy volunteers | |
| 28 | | |
October 2006 | |
January 2007 | |
ARYx Therapeutics, Inc. |
CLN-502 | |
Phase 1 Effect on INR in multiple dose response | |
Healthy volunteers | |
| 42 | | |
November 2005 | |
July 2006 | |
ARYx Therapeutics, Inc. |
CLN-501 & CLN-501.X | |
Phase 1 Safety and human pharmacokinetics | |
Healthy volunteers | |
| 66 | | |
August 2005 | |
April 2006 | |
ARYx Therapeutics, Inc. |
Phase 2 Trials
CLN-504: Trial CLN-504 was an open-label study
in which 66 patients with AFib were treated with tecarfarin for a period of six weeks, with the option of continuing treatment for
an additional six weeks. The trial, which was conducted by our predecessor company that owned the rights to tecarfarin, was primarily
designed to determine an optimal dosing regimen and monitoring schedule and to describe the efficacy and explore the quality of anticoagulation
as measured by TTR for INR. Before the trial, warfarin-treated patients had a mean TTR of 59.4%. After the initial three weeks
of dose titration, the tecarfarin-treated patients were within the target INR range 71.4% of the time (p<0.001). The most commonly
reported treatment-related adverse events, or TEAEs, were mild hemorrhagic complications of anticoagulation, such as bruising and
nosebleed.
There were two deaths after trial drug treatment
was completed: one patient died due to idiopathic pulmonary fibrosis and pneumonia two weeks following his last dose of tecarfarin,
and one patient died due to bronchial carcinoma two weeks following his last dose of tecarfarin. These deaths were not attributed
to tecarfarin.
CLN-509: The CLN-509 trial was a
pilot Phase 2 study to assess clinical trial methodology to be used in CLN-505, in patients having a variety of clinical indications
requiring chronic oral anticoagulation, as measured by INR. Fifty patients, including patients with AFib, some of whom were already taking
warfarin and some of whom had not, received daily doses of tecarfarin ranging from 1 mg to 60 mg to maintain their INR value (the INR
varied based upon the patient’s condition). The objectives of evaluating safety and INR control in patients with a variety of clinical
indications for chronic oral anticoagulation and assessing the feasibility of tecarfarin treatment in multiple dose strengths were met.
INR control was shown for patients with atrial fibrillation, venous thromboembolic disease, prosthetic heart valves, and cardiomyopathy.
There were no off-target adverse events due to tecarfarin and there were no clinically important safety signals in other measures
of safety. The results of this trial resulted in the development of the clinical trial methodology for the Phase 2/3 trial (EMBRACE-AC).
CLN-505 (EMBRACE-AC): The Phase 2/3
CLN-505 trial, referred to as the EMBRACE-AC trial, was a multi-center, randomized, stratified, double-blind, parallel group,
active control trial for a minimum period of six months and up to one year designed to compare the quality of anticoagulation of
tecarfarin and warfarin as determined by TTR. Dosing of study drugs was managed by a centralized dose control center. In total,
609 patients were enrolled and of those, 607 patients completed the trial and of these, 304 patients received warfarin and 303 patients
received tecarfarin. The EMBRACE-AC trial did not achieve statistical significance on its primary endpoint and the results of the
primary analysis showed that tecarfarin was not superior to warfarin as measured by TTR. However, the TTR observed in patients taking
tecarfarin (72.3%) was numerically similar to patients taking warfarin (71.5%) (difference of 0.8%; p=0.51).
As part of its original design, the EMBRACE-AC trial
included analyses of INR measurements while patients were temporarily off their trial drug due to other medical reasons. Subsequently
a post-hoc analysis was conducted in which we excluded INR values collected during these periods and showed that the percentage
of TTR was higher on tecarfarin (68.8%) than on warfarin (66.4%) (difference of 2.3%; p<0.04).
Post-hoc analyses were conducted in other
patient subgroups in our EMBRACE-AC trial. The following chart depicts the findings of the analysis of the study and the degree
to which TTR% on tecarfarin was higher than on warfarin:
![](https://content.edgar-online.com/edgar_conv_img/2023/03/30/0001213900-23-024260_image_005.jpg)
| ● | In the 179 patients
taking CYP2C9 interacting drugs, the TTR of patients taking tecarfarin was similar to that
of patients taking warfarin (72.2% and 69.9%, respectively; p=0.15). |
| ● | In the 55 patients
taking CYP2C9 interacting drugs who also had a CYP2C9 genetic variant allele, the TTR of
patients taking tecarfarin was similar to that of patients taking warfarin (76.5% and 69.5%,
respectively; p=0.09). |
| ● | In the 84 patients
with mechanical heart valve implants, the TTR of patients taking tecarfarin was similar to
that of patients taking warfarin (68.4% and 66.3%, respectively; p=0.51). |
The potential benefit of tecarfarin over warfarin
as measured by TTR was not demonstrated in EMBRACE-AC. However, the TTR observed in patients taking tecarfarin in the trial, and
in the subpopulations described above, were numerically similar to the TTR observed in the patients taking warfarin, and the TTR observed
in patients taking tecarfarin demonstrated stable anticoagulation. The TTR in patients treated with warfarin exceeded previously reported
TTR rates observed in patients taking warfarin, which are typically in the 50% to 65% range, which we believe was due to the use of dose
control centers in the administration of the trial. When dose control centers are used in the administration of warfarin, large teams
of medical professionals are able to closely monitor patients and mitigate many of the drug-to-drug and genetic variant-related limitations
of the drug that are not easily managed in real world settings.
EMBRACE-AC also provided information for
dosing and dose adjustments for tecarfarin. The average daily doses required of both tecarfarin and warfarin was analyzed in patients
who had poor, intermediate or extensive metabolism capacity of the CYP2C9 enzyme. Patients with poor metabolism capacity of the CYP2C9
enzyme who were treated with warfarin required a significantly lower average daily dose compared to those patients with extensive CY2C9
enzyme metabolism capacity. In contrast, as depicted below, the required dosage of tecarfarin did not vary significantly based on the
patient’s CYP2C9 activity level.
![](https://content.edgar-online.com/edgar_conv_img/2023/03/30/0001213900-23-024260_image_006.jpg)
Tecarfarin appeared to be well tolerated with
only 1.6% of the blinded tecarfarin subjects suffering from major bleeding and no thrombotic events. When thrombotic and major bleeding
events during the blinded period were combined, a numerical imbalance favoring tecarfarin over warfarin was seen (warfarin 11 subjects,
3.6%; tecarfarin 5 subjects, 1.6%). The safety data from EMBRACE-AC showed comparable rates of adverse events between the two treatment
groups. TEAEs were reported for 93.2% of patients who received tecarfarin and 90.5% of patients who received warfarin. TEAEs reported
by ≥10% of patients in either treatment group were nasopharyngitis (18.6% and 19.3%, blinded tecarfarin and warfarin, respectively),
contusion (15.6% and 14.8%, respectively), epistaxis (8.1% and 11.1%, respectively), upper respiratory tract infection (10.7% and 10.8%,
respectively), diarrhea (10.1% and 9.2%, respectively) and headache (10.7% and 8.9%, respectively). Most TEAEs were mild (32.2%, tecarfarin
and 30.2%, warfarin) or moderate (45.0% and 46.6%, respectively) in severity.
The trial had some limitations. The TTR with
warfarin achieved in Embrace-AC was much higher than that typically seen in clinical trials and as compared to “real-world practice,”
exceeding 71% on an interpolated basis in both treatment arms. The most likely reason stemmed from the dosing of study drugs which was
managed by a centralized dose control center, which had access to genotyping.
Five patients died during the trial, with four
deaths occurring during the double-blind period: one patient (tecarfarin; off drug) died due to mantle cell lymphoma, pneumonia
and sepsis; one patient (tecarfarin; on drug) died due to cardiorespiratory arrest and myocardial infarction; one patient (warfarin;
off drug) died due to metastatic colon cancer; one patient (warfarin; off drug) died due to lung cancer; and one patient (not randomized)
died due to intracerebral hemorrhage. The patient who died due to intracerebral hemorrhage was considered to be possibly related to the
study drug, but the remaining four deaths were not attributed to the drug.
During the blinded period of the trial, five
patients on tecarfarin and six patients on warfarin experienced major bleeding events. The occurrence of major bleeding events for both
tecarfarin and warfarin was lower when compared to prior anticoagulation trials. Among warfarin-treated patients, there were five
thrombotic events (two ischemic strokes, two deep vein thromboses and one pulmonary embolism), while there were no such events among
tecarfarin-treated patients.
Phase 1 Trials
CLN-501: Trials CLN-501 and CLN-501.X
evaluated the safety tolerability of tecarfarin in a total of 64 healthy volunteers. The studies were sufficiently similar in their requirements
and study populations to be combined and analyzed together. The primary differences between the studies were the study drug formulation
(CLN-501 used a solution formulation while study 501.X used tablets) and the range of single doses studied. In CLN-501, cohorts
of 6 eligible subjects were randomly assigned to receive tecarfarin at one of eight ascending dose levels between 0.2 and 10.0 mg or
placebo. In CLN-501.X, similar cohorts received tecarfarin at one of three ascending dose levels (20.0, 30.0, or 40.0 mg) or placebo.
The studies demonstrated that there were no apparent differences between pharmacokinetics parameters after tecarfarin was administered
at single doses from 0.2 to 10.0 mg as an oral solution or at single doses from 20.0 to 40.0 mg as an oral solid tablet formulation and
that tecarfarin was well-tolerated.
CLN-502: Trial CLN-502 evaluated
tecarfarin pharmacokinetics, dose range, and duration of dosing that would attain a stead steady state INR of 1.7 to 2.0 and would give
stead-state plasma concentrations of tecarfarin. Forty-two healthy volunteer subjects were randomized and received either 1, 3, 6, 10, 20, 30,
or 40 mg of tecarfarin or placebo (the 3 and 6 mg cohorts were discontinued after one week due to lack of pharmacodynamic effect). The
study successfully determined the active dose of tecarfarin and provided the pharmacokinetic and pharmacodynamic basis for subsequent
multidose trials. Doses of 20 mg and above brought subjects into the target INR range of 1.7 to 2.0, with the 40 mg dose bringing all
subjects into the target range within one week of dosing. The trial demonstrated that tecarfarin was well-tolerated at all doses
studied as assessed by adverse events, vital signs, electrocardiography, and laboratory testing, and that a loading dose of 40 mg could
be appropriate for initiating anticoagulation in Phase II trials.
CLN-503: Trial CLN-503 evaluated
the safety and tolerability of tecarfarin versus warfarin when administered alone and in combination with amiodarone as measured by INR
in 28 healthy subjects. During the first phase, subjects were administered tecarfarin or warfarin for 10 days, with doses titrated daily
to achieve a target INR range of 1.5 to 2.0. Subjects who remained within the target INR range without requiring a dose change continued
to the next phase with amiodarone, with all subjects receiving 200 mg amiodarone twice daily in addition to tecarfarin or warfarin. The
primary objectives of the trial were completely met. Both tecarfarin and warfarin were well-tolerated, both alone and in the presence
of amiodarone. There were no safety signals as ascertained by adverse event reports, clinical laboratory testing, vital sign measurement,
and by electrocardiography. The quality of anticoagulation was good for both cohorts and a target INR was reached and maintained during
the 3-day maintenance period. The results of the trial suggested the use of the same INR therapeutic range for tecarfarin as is
recommended for warfarin.
CLN-507: Trial CLN-507 evaluated
the effects of co-administration of fluconazole, a drug that blocks the activity of the CYP450 enzyme, with either 50 mg tecarfarin
or 17.5 mg warfarin in 20 healthy volunteers. The trial demonstrated that co-administration of fluconazole did not affect the
metabolism or elimination of tecarfarin. In contrast, the co-administration of fluconazole prolonged the half-life of warfarin.
CLN-512: Trial CLN-512 evaluated
the effects of severe chronic kidney dysfunction on the metabolism and elimination of tecarfarin and warfarin. Thirteen patients with
severe kidney dysfunction (stage 4 chronic kidney disease, or CKD) and 10 healthy volunteers (matched for age, weight, gender and CYP2C9
genotype) were administered 30 mg tecarfarin and 10 mg warfarin in a randomized crossover design. The trial demonstrated that
tecarfarin’s elimination from the body was not affected by severe kidney dysfunction: the half-life and the amount of drug
in the body were similar in people with CKD and healthy patients. In contrast, the plasma concentration and half-life of warfarin
was increased in patients with CKD, with warfarin’s exposure increasing 44% in these patients. These effects were exaggerated in
patients with CYP2C9 genetic variant alleles and in those who required concomitant CYP2C9 interacting drugs. At the conclusion of the
trial, the safety of repeated dosing of tecarfarin in CKD patients remained unknown. However, overall, the results of this study suggest
that no adjustment in the dose of tecarfarin is needed for patients with CKD.
CLN-508: Trial CLN-508 evaluated
the effects of co-administration of 400 mg amiodarone with either 50 mg tecarfarin or 17.5 mg warfarin in 19 healthy
volunteers, nine on tecarfarin and 10 on warfarin. Amiodarone, a drug used to treat irregular heartbeat, is a moderately potent inhibitor
of CYP2C9 metabolism and is frequently used as a treatment for AFib in combination with warfarin. The effects of amiodarone on the pharmacokinetics
of warfarin and tecarfarin showed that the exposure was increased to about the same extent for both drugs. The exposure of R-warfarin increased
by 27% and the exposure for S-warfarin increased by 38%. The exposure of tecarfarin increased by approximately 31%. These changes
in exposure did not result in any changes in INR in either the tecarfarin or the warfarin cohorts and demonstrated that tecarfarin behaved
similarly to warfarin when administered in combination with amiodarone.
An Open-label, Phase 1, Sequential
Cohort, Single-Dose Escalation Study to Assess the Safety and Tolerability of Tecarfarin (ATI-5923) in Healthy Chinese Volunteers
Study Protocol: LP-HK-001 completed in July 2019
This was an open-label, phase 1, sequential
cohort, single-dose escalation study conducted in China to assess the safety and tolerability of tecarfarin (ATI-5923) in healthy
Chinese volunteers. The study site enrolled up to a total of 40 subjects. Ten (10) healthy Chinese subjects received tecarfarin
(ATI-5923) at each dose level (i.e., 10 mg, 20 mg, 30 mg and 40 mg).
The safety assessment results of this study were
consistent with the results of CLN-501 study, and there was no safety risk after single dose administration of 10mg~40mg tecarfarin.
AEs with higher incidence rate included headache and dizziness, and such AEs were graded as mild in severity. Tecarfarin showed a promising
safety and tolerability profile in Chinese subjects.
Based on the results in this open-labelled, single-dose escalation,
phase 1 study of tecarfarin, the following conclusions were made:
Single dose administration of tecarfarin in dose
level ranging from 10 mg to 40 mg had no clinically significant effect on coagulation function. However, a slightly increasing
trend in INR and PT values were observed with dose escalation. A slightly decreasing trend in coagulation factors II, VII and X
were observed with dose escalation. Tecarfarin showed a promising safety and tolerability profile in Chinese subjects. The results of
this study warrant further multiple-dose pharmacokinetic studies in the Chinese population. We do not believe we can extrapolate
this data to other populations, including the United States, but other trials were performed in the U.S.
A Multiple-Dose, Safety and Tolerability
PK/PD Study of Tecarfarin in Healthy Chinese Volunteers
Study Protocol: ZK-TEK-201905 completed
in January 2021
This was a multiple-dose phase 1 pharmacokinetic-pharmacodynamic study
conducted in China to assess the safety and tolerability of tecarfarin in healthy Chinese volunteers. The study site enrolled up to a
total of 40 subjects. Ten (10) healthy Chinese subjects received tecarfarin once-daily on fasting every morning for 14 days
at each dose level (i.e., 10 mg, 20 mg, 30 mg and 40 mg).
Tecarfarin was well tolerated in Chinese volunteers
without serious adverse events in both single ascending dose and multiple ascending dose (“MAD”) studies. There was only
one treatment related adverse event (hematochezia) that resulted in early withdrawal in the MAD 40mg cohort. Exposure levels of tecarfarin
were generally dose proportional.
Summary of Tecarfarin Clinical Trials
Clinical and preclinical trials of tecarfarin
have demonstrated lack of drug-to-drug interactions with tecarfarin, predictable clearance that is independent of CYP450 blood clotting
factors and any genetic variation in these factors, and the lack of impact of kidney function on clearance of tecarfarin. In the largest
and longest of the clinical trials, EMBRACE-AC, tecarfarin and warfarin were found to have similar major and overall bleeding risks.
In EMBRACE-AC, warfarin-treated patients had five thrombotic events, while there were no such events among tecarfarin-treated patients.
When thrombotic and major bleeding events were combined, a trend favoring tecarfarin over warfarin was seen (five tecarfarin patients
(1.6%) compared to 11 warfarin patients (3.6%)). We will conduct further studies and intend to submit this data to FDA in the NDA.
Upcoming Pivotal Phase 3 Trial: CLN-515
(ACTOR AF)
In the second half of 2023, we intend to commence
our Phase 3, randomized, double-blind, placebo-controlled study of tecarfarin in subjects with ESRD and AFib not currently
treated with chronic oral anticoagulation. The study will assess the safety and efficacy of evaluate the efficacy and safety of tecarfarin
(target INR 2.0-3.0) in subjects with ESRD (stage 5 — eGFR < 15 mL/min/1.73 mm2) and AFib. Subjects must have chronic paroxysmal,
persistent or permanent AFib documented. All subjects will undergo genetic testing for VKORC1 prior to randomization, which will also
be used for stratification at the time of randomization. Subjects will be randomly assigned to receive either blinded tecarfarin or placebo
in a 1:1 ratio. Approximately 540 subjects (270 per arm) will be enrolled in the study.
An enrollment period of 15 months is anticipated.
A 10% dropout rate (48 subjects) is anticipated resulting in 492 evaluable subjects. All subjects enrolled in the study will remain on
study drug until the last subject enrolled completes a minimum of 12 months of therapy or until the required number of adjudicated
major adverse cardiovascular events (death, ischemic stroke, pulmonary embolus, and/or myocardial infarction) have been obtained, whichever
is later. The primary efficacy assessment is time to first major adverse cardiovascular event, or MACE. There will be approximately
125 study sites in the United States and Canada, with other trial sites to be determined. Based upon internal statistical projections,
assuming the Phase 3 clinical trial is powered at 80%, the study is expected to demonstrate a treatment effect of 25%.
![](https://content.edgar-online.com/edgar_conv_img/2023/03/30/0001213900-23-024260_image_007.jpg)
Sub-License
Lee’s Pharmaceutical Holdings Limited
License
In September 2015, China Cardiovascular
Focus Ltd., a wholly owned subsidiary of Lee’s Pharmaceutical Holdings Limited, or LPH, entered into an agreement (the “LPH
License”) with Armetheon for the license, development and commercialization of our tecarfarin compound in China, Hong Kong,
Macau, Taiwan and Thailand (the “Territory”). In October 2017, Armetheon merged with Espero BioPharma, Inc., or Espero.
The assets owned by Espero were assigned to HESP LLC in a court-approved assignment for the benefit of creditors. On April 1,
2022 we acquired from HESP LLC, pursuant to an asset purchase agreement, the assets related to tecarfarin, including the LPH License.
Under the terms of the LPH License, LPH provided a non-refundable up-front payment of $1 million and agreed, during the
term of the agreement, not to develop, manufacture or commercialize a competitive product in the Territory. Conversely, we agreed not
to develop, manufacture or commercialize a competitive product in the Territory. If all potential development, regulatory and commercial
milestones under the LPH License are met, we are entitled to receive payments of approximately $52.0 million. In addition, we are
also entitled to receive royalties between 9% to 15% of the net sales of tecarfarin in certain specified markets. The LPH License expires
on a country-by-country basis within the Territory, upon the latest of the expiration of the last intellectual property covering
the tecarfarin compound in such country of the Territory, or the twelfth anniversary of the first commercial sale of tecarfarin in such
country of the Territory.
Manufacturing
We do not have a manufacturing infrastructure
and do not intend to develop one. We intend to contract with third parties for the production and packaging of our products and product
candidates. With respect to tecarfarin, we are negotiating a contract with a third-party contract pharmaceutical manufacturer to
perform the work necessary to develop a validated manufacturing process and to scale up for commercial production. However, we have not
entered into any long-term supply agreements or commercialization partnership with these vendors. We anticipate that certain of
the manufacturing sites for our products and product candidates may be in locations outside of the U.S.
While the drug substances used in our product
candidate are manufactured by more than one supplier, the number of manufacturers is limited. In the event it is necessary or advisable
to acquire supplies from an alternative supplier, we might not be able to obtain them on commercially reasonable terms, if at all. It
could also require significant time and expense to redesign our manufacturing processes to work with another company. If approved by
the FDA, we anticipate that we will be able to enter into agreements with suppliers to formulate and distribute tecarfarin on commercially
reasonable terms.
Sales and Marketing
If any of our product candidates are approved
by the FDA or other regulatory authorities, we intend to commercialize our products by leveraging our existing commercial infrastructure
and hiring and training a small and dedicated cardiorenal salesforce to commercialize our products in the U.S., and possibly other major
markets. In addition, we anticipate entering into a variety of distribution agreements and commercial partnerships in those territories
where we do not establish an internal sales force, including if we expand outside of the U.S. We expect that our specialized commercial
cardiovascular team would be comprised of experienced marketing and sales management professionals.
Market Opportunity
Based upon data of untreated patients with ESRD
and AFib (40,823) and orphan drug pricing of $65 per day (or $23,400 annually) derived from a 2019 study commissioned by us (adjusted
for inflationary increases in the per day pricing), and assuming that we receive FDA approval of tecarfarin, we estimate that the
annual U.S. market revenue potential for tecarfarin is approximately $1 billion.
Competition
There have been several randomized trials to
definitively assess the treatment effects of apixaban compared with VKAs in the population dependent on dialysis. The RENAL-AF (Trial
to Evaluate Anticoagulation Therapy in Hemodialysis Patients With Atrial Fibrillation) was terminated early in 2019 by its sponsor. In
addition, the AXADIA study (Compare Apixaban and Vitamin-K Antagonists in Patients With Atrial Fibrillation and End-Stage Kidney
Disease), which is currently recruiting patients, will randomize patients to apixaban 2.5 mg twice daily versus phenprocoumon. The
randomization of study drug and blinded event adjudication in these trials will help to minimize bias and confounding, and will better
elucidate the risks and benefits of standard versus low-dose apixaban. Neither of these trials are adequately powered to address
the important questions relating to intracerebral hemorrhage.
The development and commercialization of new
drugs is highly competitive. We face competition with respect to developing our current product candidate, and we will face competition
with respect to any products that we may seek to develop or commercialize in the future, from major pharmaceutical companies, specialty
pharmaceutical companies and biotechnology companies worldwide. We are seeking to develop tecarfarin as a marketable VKA, once-daily OAC
for chronic anticoagulation, and we are seeking to develop as a marketable oral drug for the treatment and prevention of refractory AFib.
If we succeed in developing the lead indication or additional indications, we will face substantial competition. Existing anticoagulant
treatments for thrombosis include warfarin and NOACs such as Pradaxa (dabigatran), Xarelto (rivaroxaban), Eliquis (apixaban) and Savaysa
(edoxaban) for specific indications. The entry of the first generic NOACs, starting with Boehringer Ingelheim’s loss of U.S., Japanese
and Canadian patent protection for Pradaxa (dabigatran) in November 2018 and the remaining NOACs by 2024, could increase competition
and reduce the total dollars spent on the treatment of thrombosis, as a result of lower generic drug pricing. The next generation of
anticoagulants in development, Factor XI inhibitors, are currently in Phase 2 studies.
Many of these named products are marketed by
some of the largest and most successful pharmaceutical companies worldwide. The companies that market these products have substantially
more resources than we do and substantially more experience developing and marketing pharmaceuticals. We may not be able to successfully
compete with these existing products. Potential competitors also include academic institutions, government agencies and other public
and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research,
development, manufacturing and commercialization of competing drugs and potentially competing drugs. Our competitors are developing or
may be attempting to develop therapeutics for our target indications.
Factors affecting competition in these markets
include the financial, research and development, testing, and marketing strengths of individual competitors, trends in industry consolidation,
consumers’ product options, product quality, price, technology, reputation, customer service capabilities and access to market
partners and customers. Eliquis is manufactured and distributed by Bristol Myers Squibb, amiodarone is manufactured and distributed by
several companies, including Sanofi, Baxter, and Pfizer, Pradaxa is manufactured and distributed by Boehringer Ingelheim, Xarelto is
manufactured and distributed by Janssen Pharmaceuticals, and Savaysa is manufactured and distributed by Daiichi Sankyo. Each of these
organizations has a long operating history, extensive resources, strong brand recognition and large customer base. As a result, we expect
they will be able to devote greater resources than we can to the manufacture, promotion and sale of their products, receive greater resources
and support than we will from market partners and independent distributors, initiate and withstand substantial price competition, and
take advantage more readily than we could of acquisition and other strategic market opportunities. In addition, these or other organizations
could succeed in developing new products that perform better or more cost-effectively than our products and product candidates in
their respective markets. Moreover, changes in health trends, diet or other factors could substantially reduce the commercial attractiveness
or viability of anti-anginal, anticoagulant, anti-arrhythmic and anti-platelet products.
The high level of competition in these markets
could result in pricing pressure, reduced margins, the inability of our product candidates to achieve market acceptance and other impediments
to commercial success. As a result, there can be no assurance that we will be able to complete the development of competitive products
and commercialize them on a competitive basis.
Mergers and acquisitions in the pharmaceutical,
biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors.
Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with
large and established companies. These companies compete with us in recruiting and retaining qualified scientific and management personnel,
establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to,
or necessary for, our programs.
Intellectual Property
Our success will significantly depend upon our
ability to obtain and maintain patent and other intellectual property and proprietary protection for our drug candidates, including market
and data exclusivity granted by regulatory agencies and composition-of-matter, dosage and formulation patents, as well as patent and
other intellectual property and proprietary protection for our novel biological discoveries and other important technology inventions
and know-how. In addition to patents, we rely upon unpatented trade secrets, know-how, and continuing technological innovation to develop
and maintain our competitive position. We protect our proprietary information, in part, using confidentiality agreements with our commercial
partners, collaborators, employees and consultants and invention assignment agreements with our employees. We also have confidentiality
agreements or invention assignment agreements with our commercial partners and selected consultants. Despite these measures, any of our
intellectual property and proprietary rights could be challenged, invalidated, circumvented, infringed or misappropriated, or such intellectual
property and proprietary rights may not be sufficient to permit us to take advantage of current market trends or otherwise to provide
competitive advantages. For more information, please see “Risk Factors — Risks Related to Our Intellectual Property.”
We have two issued U.S. patents directed
to tecarfarin. The expiration dates of the patents are 2024 for both our composition of matter patent and our method of treatment patent,
not including any possible patent term extension. Foreign patents corresponding to the tecarfarin patents expire in 2025. If our patents
expire, we may not be able to adequately protect our intellectual property, and competitors may be able to erode or negate any competitive
advantage we may have, which could harm our business and ability to achieve profitability.
However, in the U.S., the term of a patent covering
an FDA-approved drug may be eligible for a patent term extension under the Hatch-Waxman Act as compensation for the loss of
patent term during the FDA regulatory review process. The period of extension may be up to five years beyond the expiration of the
patent, but cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval. Only one
patent among those eligible for an extension may be extended. 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 United States 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.
Provisions are available in certain other jurisdictions to extend the term of a patent that covers an approved drug or to provide data
exclusivity. For example, data exclusivity in the EU may be available for 10 years from approval and in Japan for eight years
from approval. It is possible that issued U.S. patents covering tecarfarin may be entitled to patent term extensions. If our product
candidates receive FDA approval, we intend to apply for patent term extensions, if available, to extend the term of patents that cover
the approved product candidates. We also intend to seek patent term extensions in any jurisdictions where they are available, however,
there is no guarantee that the applicable authorities, including the FDA, will agree with our assessment of whether such extensions should
be granted, and even if granted, the length of such extensions.
The following is a list of our U.S. and
foreign patents:
Tecarfarin Patents |
Country | |
Patent No. (Application No.) | |
Grant Date | |
Type of Patent Protection | |
Expiration Date |
U.S.A. | |
| 7666902 | |
02/23/2010 | |
Method of treatment | |
April 8, 2024 |
U.S.A. | |
| 7253208 | |
08/07/2007 | |
Composition of matter | |
April 8, 2024 |
U.S.A. | |
| 7285671 | |
10/23/2007 | |
Composition
of matter (chloro derivative)(1) | |
April 8, 2024 |
Australia | |
| 2005233614 | |
7/12/2012 | |
Composition of matter | |
April 8, 2025 |
Austria | |
| 1735296 | |
12/9/2009 | |
Composition of matter | |
April 8, 2025 |
Belgium | |
| 1735296 | |
12/9/2009 | |
Composition of matter | |
April 8, 2025 |
Belgium | |
| 2161261 | |
8/28/2013 | |
Use | |
April 8, 2025 |
Brazil | |
| PI0508392-3 | |
| |
Composition of matter | |
April 8, 2025 |
Canada | |
| 2559568 | |
5/28/2013 | |
Composition of matter | |
April 8, 2025 |
China | |
| 1950353-B
(200580012074.6) | |
6/1/2011 | |
Composition of matter | |
April 8, 2025 |
Cyprus | |
| 1735296 | |
12/9/2009 | |
Composition of matter | |
April 8, 2025 |
Denmark | |
| 1735296 | |
12/9/2009 | |
Composition of matter | |
April 8, 2025 |
Denmark | |
| 2161261 | |
8/28/2013 | |
Use | |
April 8, 2025 |
Europe | |
| 1735296
(05733799.0) | |
12/9/2009 | |
Composition of matter | |
April 8, 2025 |
Europe | |
| 2161261
(09175606.4) | |
8/28/2013 | |
Use | |
April 8, 2025 |
Finland | |
| 1735296 | |
12/9/2009 | |
Composition of matter | |
April 8, 2025 |
Finland | |
| 2161261 | |
8/28/2013 | |
Use | |
April 8, 2025 |
France | |
| 1735296 | |
12/9/2009 | |
Composition of matter | |
April 8, 2025 |
France | |
| 2161261 | |
8/28/2013 | |
Use | |
April 8, 2025 |
Germany | |
| 602005018181.4 | |
12/9/2009 | |
Composition of matter | |
April 8, 2025 |
Germany | |
| 602005041073.2 | |
8/28/2013 | |
Use | |
April 8, 2025 |
Great Britain | |
| 1735296 | |
12/9/2009 | |
Composition of matter | |
April 8, 2025 |
Great Britain | |
| 2161261 | |
8/28/2013 | |
Use | |
April 8, 2025 |
Greece | |
| 3071104 | |
12/9/2009 | |
Composition of matter | |
April 8, 2025 |
Hong Kong | |
| 1105200 | |
3/9/2012 | |
Composition of matter | |
April 8, 2025 |
Hong Kong | |
| 1138265 | |
5/23/2014 | |
Use | |
April 8, 2025 |
India | |
| 250594
(2793/KOLNP/2006) | |
1/11/2012 | |
Composition of matter | |
April 8, 2025 |
Ireland | |
| 1735296 | |
12/9/2009 | |
Composition of matter | |
April 8, 2025 |
Ireland | |
| 2161261 | |
8/28/2013 | |
Use | |
April 8, 2025 |
Israel | |
| 178122 | |
5/4/2013 | |
Composition of Matter | |
April 8, 2025 |
Italy | |
| 502010901815570 | |
12/9/2009 | |
Composition of matter | |
April 8, 2025 |
Italy | |
| 502013902212109 | |
8/28/2013 | |
Use | |
April 8, 2025 |
Japan | |
| 5036532 | |
7/13/2012 | |
Composition of matter | |
April 8, 2025 |
Luxembourg | |
| 1735296 | |
12/9/2009 | |
Composition of matter | |
April 8, 2025 |
Luxembourg | |
| 2161261 | |
8/28/2013 | |
Use | |
April 8, 2025 |
Mexico | |
| 274321
(PA/a/2006/011637) | |
3/3/2010 | |
Composition of matter | |
April 8, 2025 |
Monaco | |
| 1735296 | |
12/9/2009 | |
Composition of matter | |
April 8, 2025 |
Monaco | |
| 2161261 | |
8/28/2013 | |
Use | |
April 8, 2025 |
(1) | This patent is not directed to tecarfarin, but rather
is a derivative of tecarfarin. |
Country | |
Patent No. (Application No.) | |
Grant Date | |
Type of Patent Protection | |
Expiration Date |
Netherlands | |
| 1735296 | |
12/9/2009 | |
Composition of matter | |
April 8, 2025 |
Netherlands | |
| 2161261 | |
8/28/2013 | |
Use | |
April 8, 2025 |
Norway | |
| 338837 | |
10/24/2016 | |
Composition of matter | |
April 8, 2025 |
Philippines | |
| 1-2006-501866 | |
11/19/2010 | |
Composition of matter | |
April 8, 2025 |
Portugal | |
| 1735296 | |
12/9/2009 | |
Composition of matter | |
April 8, 2025 |
Russia | |
| 2335501-C2 | |
10/10/2008 | |
Composition of matter | |
April 8, 2025 |
Russia | |
| 2495034-C2 | |
10/10/2013 | |
Method of Treatment | |
April 8, 2025 |
South Africa | |
| 2006/07667 | |
11/28/2007 | |
Composition of matter | |
April 8, 2025 |
South Korea | |
| 10-1203124 | |
11/14/2012 | |
Composition of matter | |
April 8, 2025 |
Spain | |
| 1735296 | |
12/9/2009 | |
Composition of matter | |
April 8, 2025 |
Spain | |
| 09175606.4 | |
8/28/2013 | |
Use | |
April 8, 2025 |
Sweden | |
| 1735296 | |
12/9/2009 | |
Composition of matter | |
April 8, 2025 |
Sweden | |
| 2161261 | |
8/28/2013 | |
Use | |
April 8, 2025 |
Switzerland | |
| 1735296 | |
12/9/2009 | |
Composition of matter | |
April 8, 2025 |
Switzerland | |
| 2161261 | |
8/28/2013 | |
Use | |
April 8, 2025 |
Data Exclusivity
If tecarfarin is approved by the FDA, we expect
to receive five years of data exclusivity, often referred to as new chemical entity exclusivity, for our tecarfarin NDA, so long as FDA
has not approved a drug containing the same active moiety as tecarfarin. It is possible that the FDA may disagree with our position and
not approve tecarfarin or grant new chemical exclusivity to our NDA for tecarfarin. Assuming the FDA approves tecarfarin and new chemical
entity exclusivity is granted, during the five-year period, no generic applicant can file an abbreviated drug application referencing
our NDA for tecarfarin, unless the generic applicant challenges a patent listed in the FDA Orange Book for the referenced NDA, in which
case the generic applicant can file after four years. If the patent is asserted against the generic applicant within 45 days of receipt
of a required notice letter by the generic applicant, the generic abbreviated drug application cannot be approved by FDA for up to thirty
months.
Government Regulation
The process of obtaining regulatory approvals
and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of
substantial time and financial resources. Failure to comply with the applicable requirements at any time during the product development
process, approval process or after approval, may subject an applicant to administrative or judicial sanctions. These sanctions could
include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold, warning or untitled letters,
product recalls or withdrawals from the market, product seizures, total or partial suspension of production or distribution, injunctions,
fines, refusals of government contracts, restitution, disgorgement, or civil or criminal penalties.
Product development and marketing activities
are subject to extensive regulation by various government authorities, including the FDA, other federal, state and local agencies and
comparable regulatory authorities in other countries, which regulate the design, research, clinical and non-clinical development,
testing, manufacturing, storage, distribution, import, export, labeling, advertising and marketing of pharmaceutical products and devices.
Generally, before a new drug can be sold, considerable data demonstrating its quality, safety and efficacy must be obtained, organized
into a format specific to each regulatory authority, submitted for review and approved by the regulatory authority. The data are often
generated in two distinct development states: pre-clinical and clinical.
Among other matters, U.S. and foreign anti-corruption,
anti-money laundering, export control, sanctions, and other trade laws and regulations, which are collectively referred to as Trade
Laws, prohibit companies and their employees, agents, clinical research organizations, legal counsel, accountants, consultants, contractors,
and other partners from authorizing, promising, offering, providing, soliciting, or receiving directly or indirectly, corrupt or improper
payments or anything else of value to or from recipients in the public or private sector. Violations of Trade Laws can result in substantial
criminal fines and civil penalties, imprisonment, the loss of trade privileges, debarment, tax reassessments, breach of contract and
fraud litigation, reputational harm, and other consequences. We have direct or indirect interactions with officials and employees of
government agencies or government-affiliated hospitals, universities, and other organizations. We also expect our non-U.S. activities
to increase in time. We plan to engage third parties for clinical trials and/or to obtain necessary permits, licenses, patent registrations,
and other regulatory approvals and we can be held liable for the corrupt or other illegal activities of our personnel, agents, or partners,
even if we do not explicitly authorize or have prior knowledge of such activities.
Development of Drugs in the United States
Pharmaceutical products must be approved by the
FDA before they may be legally marketed in the United States. Pharmaceutical product development for a new product or certain changes
to an approved product in the U.S. typically involves pre-clinical laboratory and animal tests, the submission to the FDA of
an investigational new drug application, 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.
The pre-clinical development stage generally
involves synthesizing the active component, developing the formulation and determining the manufacturing process, as well as carrying
out non-human toxicology, pharmacology and drug metabolism trials that support subsequent clinical testing. These pre-clinical laboratory
and animal tests must comply with federal regulations and requirements, including the FDA’s good laboratory practices regulations.
A drug’s sponsor must submit the result of the pre-clinical tests, together with manufacturing information, analytical data
and any available clinical data or literature and a proposed clinical protocol to the FDA as part of an IND application. 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.
Clinical trials involve the administration of
the investigational new drug to healthy volunteers or patients under the supervision of a qualified investigator. Clinical trials must
be conducted (i) in compliance with federal regulations, including good clinical practices, or GCPs, an international standard meant
to protect the rights and health of patients and to define the roles of clinical trial sponsors, administrators and monitors; and (ii) under
protocols detailing the objectives of the trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be
evaluated. Each protocol involving testing on U.S. patients and subsequent protocol amendments must be submitted to the FDA as part
of the IND.
Clinical trials to support NDAs for marketing
approval can generally be divided into three sequential phases that may overlap, Phase 1, Phase 2 and Phase 3 clinical
trials. In Phase 1, generally, small numbers of healthy volunteers are initially exposed to single escalating doses and then multiple
escalating doses of the product candidate. The primary purpose of these trials is to assess the metabolism, pharmacologic action and
general safety of the drug. Phase 2 trials typically involve trials in disease-affected patients to determine the dose required
to produce the desired benefits, common short-term side effects and risks. Phase 2 trials are typically well-controlled, closely
monitored, and conducted in a relatively small number of patients, usually involving no more than several hundred patients. Phase 3
trials are intended to gather the additional information about effectiveness and safety in a larger number of patients, typically at
geographically dispersed clinical trial sites, that is needed to evaluate the overall benefit-risk relationship of the drug and
to provide an adequate basis for physician labeling. Phase 3 trials usually include from several hundred to several thousand patients
and are closely controlled and monitored. In many cases, the FDA requires two adequate and well-controlled Phase 3 clinical
trials to demonstrate the efficacy of the drug. A single Phase 3 trial with other confirmatory evidence may be sufficient in some
instances. In addition to these Phase 1-3 trials, other trials may be conducted to gather additional safety, pharmacokinetic
and pharmacodynamic information. Pharmaceutical products with active ingredients that are the same as or similar to those already approved
by the FDA may have more streamlined development programs than new chemical entities.
The FDA may order the temporary, or permanent,
discontinuation of a clinical trial at any time, or impose other sanctions, if it believes that the clinical trial either is not being
conducted in accordance with FDA requirements or presents an unacceptable risk to the clinical trial patients. Trials must be conducted
in accordance with GCPs and reporting of study progress and any adverse experiences is required. The study protocol and informed consent
information for patients in clinical trials must also be submitted to an institutional review board, or IRB, responsible for overseeing
trials at particular sites and protecting human research trial patients. An independent institutional review
board may also suspend or terminate a trial once
initiated, for failure to comply with the IRB’s requirements, or may impose other conditions. Accordingly, we cannot be sure that
submission of an IND, will result in the FDA allowing clinical trials to begin, or that once begun, issues will not arise that could
cause the trial to be suspended or terminated.
Post-approval trials, sometimes referred
to as Phase 4 clinical trials, may be conducted after initial marketing approval. Sometimes, these trials are used to gain additional
experience from the treatment of patients in the intended therapeutic condition. In certain instances, the FDA may mandate the performance
of Phase 4 trials. In other situations, post-approval trials aim to gain additional indications for a medication.
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.
Review and Approval in the United States
Following Phase 3 trial completion, data
are analyzed to determine safety and efficacy, with any final such determination to be made by the FDA. Data are then submitted
to the FDA in an NDA, along with proposed labeling for the product and information about the manufacturing and testing processes and
facilities that will be used to ensure product quality. The cost of preparing and submitting an NDA is substantial. Manufacturers may
be assessed up to five program fees for a fiscal year for prescription drug products identified in a single approved NDA. These
fees are typically increased annually. In the United States, FDA approval of an NDA must be obtained before marketing a new drug.
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 the
application 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 NDAs. Most applications for standard review drug products are reviewed
within 10 to 12 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 the 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 recommendations of advisory committees, 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 may conduct a pre-approval inspection
of the manufacturing facilities for the new product to determine whether they comply with current good manufacturing practice requirements.
The FDA will not approve the product unless compliance with current good manufacturing practices, or GMPs, 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.
Pediatric Information
Under the Pediatric Research Equity Act, or PREA,
NDAs or supplements to NDAs must contain data to assess the safety and effectiveness of the drug for the claimed indications in all relevant
pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the drug is safe and effective.
The FDA may grant full or partial waivers, or deferrals, for submission of data. Unless otherwise required by regulation, PREA does not
apply to any drug for an indication for which orphan designation has been granted.
The Best Pharmaceuticals for Children Act, or
BPCA, provides NDA holders a six-month extension of any exclusivity — patent or non-patent — for
a drug if certain conditions are met. Conditions for exclusivity include the FDA’s determination that information relating to the
use of a new drug in the pediatric population may produce health benefits in that population, the FDA’s written request for pediatric
studies, and the applicant’s agreeing to perform, and reporting on, the requested studies within the statutory timeframe. Applications
under the BPCA are treated as priority applications, with all of the benefits that designation confers.
Orphan Drug Designation
Under the Orphan Drug Act, the FDA may grant
orphan drug designation to a drug intended to treat a rare disease or condition, which is generally a disease or condition that affects
fewer than 200,000 individuals in the United States. Orphan product designation must be requested before submitting an NDA. After
the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by
the FDA. Orphan product designation does not convey any advantage in or shorten the duration of regulatory review and approval process.
It also does not suggest FDA approval or exclusivity. The first NDA applicant to receive FDA approval for a particular active ingredient
to treat a particular disease with FDA orphan drug designation is entitled to a seven-year exclusive marketing period in the U.S. for
that product, for that indication. In addition to the potential period of exclusivity, orphan designation makes a company eligible for
grant funding of up to $500,000 per year for four years to defray costs of clinical trial expenses, tax credits for clinical research
expenses and potential exemption from the FDA application user fee.
Orphan drug exclusivity means the FDA may not
approve any other applications to market the same drug for the same indication for seven years, except in limited circumstances,
such as (i) the drug’s orphan designation is revoked; (ii) its marketing approval is withdrawn; (iii) the orphan
exclusivity holder consents to the approval of another applicant’s product; (iv) the orphan exclusivity holder is unable to
assure the availability of a sufficient quantity of drug; or (v) a showing of clinical superiority to the product with orphan exclusivity
by a competitor product. Orphan drug exclusivity does not prevent the FDA from approving a different drug for the same disease or condition,
or the same drug for a different disease or condition. If a drug designated as an orphan product receives marketing approval for an indication
broader than what is designated, it may not be entitled to orphan drug exclusivity. There has been recent litigation concerning FDA’s
interpretation of the orphan drug exclusivity provisions.
Accelerated Approval
There are a variety of pathways under which applicants
may seek expedited approval from FDA, including Fast Track, breakthrough therapy, priority review and accelerated approval. Fast Track
is a process designed to facilitate the development and expedite the review of investigational drugs to treat serious conditions and
fill an unmet medical need. Drugs that receive Fast Track designation may be eligible for more frequent communications and meetings with
the FDA to discuss the drug’s development plan, including the design of the proposed clinical trials, use of biomarkers and the
extent of data needed to support approval. Drugs with Fast Track designation may also qualify for accelerated approval and priority review
of new drug applications if relevant criteria are met. However, 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.
The FDA accelerated approval program provides
for early approval of drugs based on a drug on a clinical trial(s) showing that the drug meets a surrogate or an intermediate clinical
endpoint rather than a clinical benefit endpoint. Accelerated approval is possible for drugs for serious conditions that fill an unmet
medical need. Under priority review, the FDA reviews an application in six months rather than ten months after it is accepted for filing.
A surrogate endpoint used for accelerated approval
is a marker, such as a laboratory measurement, that is thought to predict clinical benefit, but is not itself a measure of clinical benefit.
Likewise, an intermediate clinical endpoint is a measure of a therapeutic effect that is considered reasonably likely to predict the
clinical benefit of a drug, such as an effect on irreversible morbidity and mortality. Because it sometimes can take many years
for a drug trial to show a clinical benefit, the use of a surrogate endpoint or an intermediate clinical endpoint can significantly shorten
the time required to complete clinical trials and obtain FDA approval.
If a drug receives an accelerated approval, the
company that sponsored the application must conduct a post-approval trial to confirm the anticipated clinical benefit. These trials
are known as Phase 4 or post-approval confirmatory trials. If the confirmatory trial shows that the drug actually provides
a clinical benefit, then the FDA grants traditional approval for the drug. 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 drug candidates approved under accelerated regulations are subject to prior review by the FDA. If
the confirmatory trial does not show that the drug provides clinical benefit, FDA has regulatory procedures in place that could lead
to removing the drug from the market.
Drug Development in Europe
In the European Union, our future products may
also be subject to extensive regulatory requirements. Similar to the United States, the marketing of medicinal products is subject
to the granting of marketing authorizations by regulatory agencies. Also, as in the United States, the various phases of pre-clinical and
clinical research in the European Union are subject to significant regulatory controls.
Review and Approval in the European Union
In the European Union, approval of new medicinal
products can be obtained through one of three processes: the mutual recognition procedure, the centralized procedure and the decentralized
procedure. We intend to determine which process we will follow, if any, in the future.
Mutual Recognition Procedure: An applicant
submits an application in one European Union member state, known as the reference member state. Once the reference member state has granted
the marketing authorization, the applicant may choose to submit applications in other concerned member states, requesting them to mutually
recognize the marketing authorizations already granted. Under this mutual recognition process, authorities in other concerned member
states have 55 days to raise objections, which must then be resolved by discussion among the concerned member states, the reference
member state and the applicant within 90 days of the commencement of the mutual recognition procedure. If any disagreement remains,
all considerations by authorities in the concerned member states are suspended and the disagreement is resolved through an arbitration
process. The mutual recognition procedure results in separate national marketing authorizations in the reference member state.
Centralized Procedure: This procedure
is currently mandatory for products developed by means of a biotechnological process and optional for new active substances and other
“innovative medicinal products with novel characteristics.” Under this procedure, an application is submitted to the European
Agency for the Evaluation of Medical Products. Two European Union member states are appointed to conduct an initial evaluation of each
application. These countries each prepare an assessment report that is then used as the basis of a scientific opinion of the Committee
on Proprietary Medical Products. If this opinion is favorable, it is sent to the European Commission, which drafts a decision. After
consulting with the member states, the European Commission adopts a decision and grants a marketing authorization, which is valid throughout
the European Union and confers the same rights and obligations in each of the member states as a marketing authorization granted by that
member state.
Decentralized Procedure: The most recently
introduced of the three processes for obtaining approval of new medicinal processes in the European Union, the decentralized procedure
is similar to the mutual recognition procedure described above, but with differences in the timing that key documents are provided to
concerned member states by the reference member state, the overall timing of the procedure and the possibility of, among other things,
“clock stops” during the procedure.
Post-Marketing Requirements
Following approval of a new product, a pharmaceutical
company and the approved product are subject to continuing regulation by the FDA and other regulatory authorities, including, among other
things, monitoring and recordkeeping activities, reporting to applicable regulatory authorities of adverse experiences with the product,
providing the regulatory authorities with updated safety and efficacy information, product sampling and distribution requirements, and
complying with promotion and advertising requirements, which include, among others, standards for direct-to-consumer advertising,
restrictions on promoting drugs for uses or in patient populations not described in the drug’s approved labeling (known as “off-label use”),
and limitations on industry-sponsored scientific and educational activities. Although physicians may prescribe legally available
drugs for off-label uses, drugs may be marketed only for the approved indications and in accordance with the provisions of the approved
labeling. Modifications or enhancements to the products or labeling or changes of site of manufacture are often subject to the approval
of the FDA and other regulators, which may or may not be received or may result in a lengthy review process. The FDA regulations require
the products be manufactured in specific approved facilities and in accordance with current good manufacturing practices, and NDA holders
must list their products and register their manufacturing establishments with the FDA. These regulations also impose certain organizational,
procedural and documentation requirements with respect to manufacturing and quality assurance activities. Drug manufacturers and other
entities involved in the manufacture and distribution of approved drugs are subject to periodic unannounced inspections by the FDA and
certain state agencies for compliance with current good manufacturing practice and other laws. NDA holders using contract manufacturers,
laboratories or packagers are responsible for the selection and monitoring of qualified firms. These firms are subject to inspections
by the FDA at any time, and the discovery of violative conditions could result in enforcement actions that interrupt the operation of
any such facilities or the ability to distribute products manufactured, processed or tested by them.
Other Regulatory Matters
Manufacturing, sales, promotion and other activities
following product approval are also subject to regulation by numerous regulatory authorities in addition to the FDA, including, in the
United States, the Centers for Medicare & Medicaid Services, or CMS, other divisions of the Department of Health and Human
Services, the Drug Enforcement Administration, the Consumer Product Safety Commission, the Federal Trade Commission, the Occupational
Safety & Health Administration, the Environmental Protection Agency, and state and local governments. These laws and regulations
include:
| ● | The federal healthcare
program anti-kickback law which prohibits, among other things, persons from soliciting,
receiving or providing remuneration, directly or indirectly, to induce either the referral
of an individual, for an item or service or the purchasing or ordering of a good or service,
for which payment may be made under federal healthcare programs such as the Medicare and
Medicaid programs; |
| ● | Federal false
claims laws which prohibit, among other things, individuals or entities from knowingly presenting,
or causing to be presented, claims for payment from Medicare, Medicaid, or other government
reimbursement programs that are false or fraudulent. The government may assert that a claim
including items or services resulting from a violation of the federal healthcare program
anti-kickback law or related to off-label promotion constitutes a false or fraudulent
claim for purposes of the federal false claims laws; |
| ● | The Federal Physician
Payments Sunshine Act within the Affordable Care Act, or the ACA, and its implementing regulations,
require that certain manufacturers of drugs, devices, biological and medical supplies for
which payment is available under Medicare, Medicaid or the Children’s Health Insurance
Program (with certain exceptions) to report on an annual basis information related to certain
payments or other transfers of value made or distributed to physicians and teaching hospitals,
or to entities or individuals at the request of, or designated on behalf of, the physicians
and teaching hospitals and certain ownership and investment interests held by physicians
and their immediate family members, with the information made publicly available on a searchable
website; and |
| ● | The Health Insurance
Portability and Accountability Act, or HIPAA, as amended by the Health Information Technology
for Economic and Clinical Health Act, or HITECH, and its implementing regulations, imposes
certain requirements relating to the privacy, security and transmission of individually identifiable
health information. Among other things, HITECH makes HIPAA’s privacy and security standards
directly applicable to “business associates” — independent contractors
or agents of covered entities that receive or obtain protected health information in connection
with providing a service on behalf of a covered entity. HITECH also created four new tiers
of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly
applicable to business associates and possibly other persons, and gave state attorneys general
new authority to file civil actions for damages or injunctions in federal courts to enforce
the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing
federal civil actions. |
| ● | Applicable child-resistant packaging
requirements under the U.S. Poison Prevention Packaging Act. |
| ● | The Lanham Act
and federal antitrust laws. |
| ● | State law equivalents
of each of the above federal laws, such as anti-kickback and false claims laws, which
may apply to items or services reimbursed by any third-party payer, including commercial
insurers, and state laws governing the privacy and security of health information in certain
circumstances, many of which differ from each other in significant ways and often are not
preempted by federal laws, thus complicating compliance efforts. In addition, several states
now require prescription drug companies to report expenses relating to the marketing and
promotion of drug products and to report gifts and payments to individual physicians in these
states. Other states prohibit various other marketing-related activities, and still
other states require the posting of information relating to clinical studies and their outcomes.
In addition, California, Connecticut, Massachusetts and Nevada require pharmaceutical companies
to implement compliance programs and/or marketing codes. Several additional states are considering
similar proposals. Compliance with these laws is difficult and time consuming, and companies
that do not comply with these state laws face civil penalties. |
Distribution of pharmaceutical products is subject
to additional requirements and regulations, including extensive record-keeping, licensing, traceability, and storage and security requirements
intended to prevent the unauthorized sale of pharmaceutical products.
Third-Party Payer Coverage and Reimbursement
Significant uncertainty exists as to the coverage
and reimbursement status of any of our drug candidates that ultimately may obtain regulatory approval. In both the United States
and foreign markets, our ability to commercialize our product candidates successfully, and to attract commercialization partners for
our product candidates, depends in significant part on the availability of adequate financial coverage and reimbursement from third-party payers,
including, in the United States, governmental payers such as the Medicare and Medicaid programs, managed care organizations, and
private health insurers. Medicare is a federally funded program managed by the CMS, through local fiscal intermediaries and carriers
that administer coverage and reimbursement for certain healthcare items and services furnished to the elderly and disabled. Medicaid
is an insurance program for certain categories of patients whose income and assets fall below state defined levels and who are otherwise
uninsured that is both federally and state funded and managed by each state. The federal government sets general guidelines for Medicaid
and each state creates specific regulations that govern its individual program. Each payer has its own process and standards for determining
whether it will cover and reimburse a procedure or particular product. Private payers often rely on the lead of the governmental payers
in rendering coverage and reimbursement determinations. Therefore, achieving favorable CMS coverage and reimbursement is usually a significant
gating issue for successful introduction of a new product. The competitive position of some of our products will depend, in part, upon
the extent of coverage and adequate reimbursement for such products and for the procedures in which such products are used. Prices at
which we or our customers seek reimbursement for our products can be subject to challenge, reduction or denial by the government and
other payers.
The United States Congress and state legislatures
may, from time to time, propose and adopt initiatives aimed at cost containment, which could impact our ability to sell our products
and product candidates profitably. For example, in the first quarter of 2018, President Trump signed a law requiring pharmaceutical companies
to pay for a substantially larger percentage of the coverage gap, or the so-called “donut hole,” between regular and
catastrophic Medicare Part D prescription drug coverage, a change that is estimated to have a multi-billion-dollar effect on
brand-name drug companies. Additional changes could be made in the future to governmental healthcare programs and many other laws
that could significantly impact the success of our products.
The cost of pharmaceuticals continues to generate
substantial governmental and third-party payer interest. We expect that the pharmaceutical industry will experience pricing pressures
due to the trend toward managed healthcare, the increasing influence of managed care organizations and additional legislative proposals.
Our results of operations could be adversely affected by current and future healthcare reforms.
Some third-party payers also require pre-approval of
coverage for new or innovative devices or drugs before they will reimburse healthcare providers that use such drugs. While we cannot
predict whether any proposed cost-containment measures will be adopted or otherwise implemented in the future, the announcement
or adoption of these proposals could have a material adverse effect on our ability to obtain adequate prices for our products and product
candidates and operate profitably.
In addition, in some foreign countries, the proposed
pricing for a drug must be approved before it may be lawfully marketed. The requirements governing drug pricing vary widely from country
to country. For example, the European Union provides options for its member states to restrict the range of medicinal products for which
their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. A member
state may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability
of the company placing the medicinal product on the market. There can be no assurance that any country that has price controls or reimbursement
limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products. Historically,
products launched in the European Union do not follow price structures of the United States and generally tend to be significantly
lower.
Trade Laws
Among other matters, U.S. and foreign anti-corruption,
anti-money laundering, export control, sanctions, and other trade laws and regulations, which are collectively referred to as Trade
Laws, prohibit companies and their employees, agents, clinical research organizations, legal counsel, accountants, consultants, contractors,
and other partners from authorizing, promising, offering, providing, soliciting, or receiving directly or indirectly, corrupt or improper
payments or anything else of value to or from recipients in the public or private sector. Violations of Trade Laws can result in substantial
criminal fines and civil penalties, imprisonment, the loss of trade privileges, debarment, tax reassessments, breach of contract and
fraud litigation, reputational harm, and other consequences. We have direct or indirect interactions with officials and employees of
government agencies or government-affiliated hospitals, universities, and other organizations. We also expect our non-U.S. activities
to increase in time. We plan to engage third parties for clinical trials and/or to obtain necessary permits, licenses, patent registrations,
and other regulatory approvals and we can be held liable for the corrupt or other illegal activities of our personnel, agents, or partners,
even if we do not explicitly authorize or have prior knowledge of such activities.
Human Capital-Employees
As of March 28, 2023, we had three full-time employees as well
as several independent contractors. Our employees are not represented by labor unions or covered by collective bargaining agreements.
We consider our relationship with our employees to be good.
Our Corporate Background and Information
We were incorporated as a Delaware corporation
on January 25, 2022 and secured the rights to tecarfarin on April 1, 2022 via an asset purchase agreement (the “Asset Purchase
Agreement”) from HESP LLC. HESP LLC acquired the assets of Espero BioPharma, Inc., or Espero, from Horizon Technology Finance Corporation
and Horizon Credit II LLC (collectively, Horizon), a secured lender of Espero, including tecarfarin and the other assets of Espero in
an assignment for the benefit of creditors. Quang Pham, our Chief Executive Officer, was the Chief Executive Officer of Espero and consultant
to HESP LLC from July 2020 to December 2021.
Our principal executive offices are located at
822 A1A North, Suite 306, Ponte Vedra, Florida 32082, and our telephone number is (904) 300-0701. Our website address is www.cadrenal.com.
The information contained on, or that can be accessed through, our website is not incorporated by reference into this prospectus, and
you should not consider any information contained on, or that can be accessed through, our website as part of this prospectus or in deciding
whether to purchase our common stock.
Available Information
Our website address
is www.cadrenal.com. We will file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K,
proxy statements and other materials with the SEC. We are subject to the informational requirements of the Exchange Act and will file
or furnish reports, proxy statements and other information with the SEC. Such reports and other information filed by the Company with
the SEC are available free of charge on our website at http://cadrenal.com/investors/SEC filings. Information contained on, or that can
be accessed through, our website is not incorporated by reference into this Annual Report, and you should not consider information on
our website to be part of this Annual Report.
The SEC also maintains
a website that contains reports, proxy and information statements and other information regarding issuers that file electronically with
the SEC at www.sec.gov.
Implications of Being an Emerging Growth Company
and a Smaller Reporting Company
We qualify as an “emerging growth company”
as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. For as long as we remain an emerging growth company,
we may take advantage of specified reduced reporting requirements and other burdens that are otherwise applicable generally to other
public companies. These provisions include, but are not limited to:
| ● | Reduced obligations
with respect to financial data, including presenting only two years of audited financial
statements and selected financial data, and only two years of related Management’s
Discussion and Analysis of Financial Condition and Results of Operations disclosure in our
initial registration statement; |
| ● | an exemption from
the auditor attestation requirement in the assessment of our internal control over financial
reporting pursuant to the Sarbanes-Oxley Act of 2002, as amended; |
| ● | reduced disclosure
about executive compensation arrangements in our periodic reports, registration statements
and proxy statements; and |
| ● | exemptions from
the requirements to seek non-binding advisory votes on executive compensation or stockholder
approval of any golden parachute arrangements. |
We may take advantage of some or all of these
provisions until we are no longer an emerging growth company. We will remain an emerging growth company until the earliest of (i) the
last day the fiscal year following the fifth anniversary of the completion of our initial public offering, (ii) the last day of the first
fiscal year in which our annual gross revenues exceed $1.235 billion, (iii) the date on which we have, during the immediately preceding
three-year period, issued more than $1.0 billion in non-convertible debt securities and (iv) the date on which we are deemed to be a
large accelerated filer under the rules of the SEC, or the SEC. We may choose to take advantage of some but not all of these reduced
burdens. For example, we have taken advantage of the reduced reporting requirements with respect to disclosure regarding our executive
compensation arrangements, have presented only two years of audited financial statements and only two years of related “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” disclosure in this prospectus, and have taken advantage
of the exemption from auditor attestation on the effectiveness of our internal control over financial reporting. To the extent that we
take advantage of these reduced burdens, the information that we provide stockholders may be different than you might obtain from other
public companies in which you hold equity interests.
In addition, the JOBS Act permits emerging growth
companies to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public
companies. We have elected to use this extended transition period. As a result of this election, our timeline to comply with new or revised
accounting standards will in many cases be delayed as compared to other public companies that are not eligible to take advantage of this
election or have not made this election. Therefore, our financial statements may not be comparable to those of companies that comply
with the public company effective dates for these accounting standards.
We are also a “smaller reporting company”
as defined in the Securities Exchange Act of 1934, as amended, or the Exchange Act, and have elected to take advantage of certain of
the scaled disclosures available to smaller reporting companies. To the extent that we continue to qualify as a “smaller reporting
company” as such term is defined in Rule 12b-2 under the Exchange Act, after we cease to qualify as an emerging growth company,
certain of the exemptions available to us as an “emerging growth company” may continue to be available to us as a “smaller
reporting company,” including exemption from compliance with the auditor attestation requirements pursuant to SOX and reduced disclosure
about our executive compensation arrangements. We will continue to be a “smaller reporting company” until we have $250 million
or more in public float (based on our Common Stock) measured as of the last business day of our most recently completed second fiscal
quarter or, in the event we have no public float (based on our Common Stock) or a public float (based on our Common Stock) that is less
than $700 million, annual revenues of $100 million or more during the most recently completed fiscal year.
Item 1A. Risk Factors.
Investors should
carefully consider the risks described below before deciding whether to invest in our securities. If any of the following risks actually
occur, our business, financial condition or results of operations could be adversely affected. In such case, the trading price of our
common stock could decline and you could lose all or part of your investment. Our actual results could differ materially from those anticipated
in the forward-looking statements made throughout this Annual Report a result of different factors, including the risks we face described
below.
Risks Related to Our Financial Position and
Need for Capital
We are a clinical development biopharmaceutical
company with a limited operating history.
We are a recently formed company and have had
limited operations to date. We have to complete clinical trials and receive regulatory approval of new drug applications, or NDAs, before
commercial sales of our product candidates can commence. The likelihood of success of our business plan must be considered in light of
the problems, substantial expenses, difficulties, complications and delays frequently encountered in connection with building and expanding
clinical development pharmaceutical businesses and the regulatory and competitive environment in which we operate. Pharmaceutical product
development is a highly speculative undertaking, involves a substantial degree of risk and is a capital-intensive business.
Accordingly, you should consider our prospects
in light of the costs, uncertainties, delays and difficulties frequently encountered by companies in the later stage of development,
especially clinical pharmaceutical companies such as ours. Potential investors should carefully consider the risks and uncertainties
that a company with a limited operating history will face. In particular, potential investors should consider that we cannot assure you
that we will be able to:
| ● | successfully complete
the clinical trials necessary to obtain regulatory approval for the marketing of our product
candidate, tecarfarin; |
| ● | secure acceptance
of our product candidate in the medical community and with third-party payors and consumers; |
| ● | if approved for
commercial sale, launch commercial sales of our product candidate, whether alone or in collaboration
with others; |
| ● | successfully build
an internal sales force meeting our requirements for the marketing and sale of our product
candidate, tecarfarin; |
| ● | successfully manufacture
our clinical product and establish commercial drug supply; |
| ● | secure market
exclusivity and/or adequate intellectual property protection for our product candidate; |
| ● | attract and retain
an experienced management, board and scientific advisory team; |
| ● | successfully implement
or execute our current business plan, and we cannot assure you that our business plan is
sound; and |
| ● | raise sufficient
funds in the capital markets to effectuate our business plan. |
If we cannot successfully execute any one of
the foregoing, our business may not succeed and your investment will be adversely affected.
We have a limited operating history upon
which to evaluate our ability to commercialize our product candidate.
We are a development-stage company and our success
is dependent upon our ability to obtain regulatory approval for and commercialize our product candidate, tecarfarin, and we have not
demonstrated an ability to perform the functions necessary for the approval or successful commercialization of any product candidate.
We have yet to demonstrate our ability to overcome the risks frequently encountered in our industry and are still subject to many of
the risks common to such enterprises, including our ability to implement our business plan, market acceptance of our proposed business
and lead product, under-capitalization, cash shortages, limitations with respect to personnel, financing and other resources, competition
from better funded and experienced companies, and uncertainty of our ability to generate revenues. In fact, though individual team members
have experience running clinical trials and our Chief Executive Officer has been involved with the development of tecarfarin for five
years, as a company we have yet to prove that we can successfully run a clinical trial. There is no assurance that our activities will
be successful or will result in any revenues or profit, and the likelihood of our success must be considered in light of the stage of
our development. In addition, no assurance can be given that we will be able to consummate our business strategy and plans, or that financial,
technological, market, or other limitations may force us to modify, alter, significantly delay, or significantly impede the implementation
of such plans. We have insufficient results for investors to use to identify historical trends. Investors should consider our prospects
in light of the risk, expenses and difficulties we will encounter as an early stage company. Our revenue and income potential is unproven
and our business model is continually evolving. We are subject to the risks inherent to the operation of a new business enterprise, and
cannot assure you that we will be able to successfully address these risks.
We have a history of operating losses and
expect to continue to incur substantial losses for the foreseeable future. We may never become profitable or, if achieved, be able to
sustain profitability.
To date, we have not generated any revenue from
operations and we expect to continue to incur significant operating losses in connection with the development and sale of tecarfarin.
We may continue to incur operating losses until such time, if ever, as we are able to achieve sufficient levels of revenue from operations.
Our ability to achieve profitability will depend on regulatory approval of our product candidate and if approved, the market acceptance
of our product offering and our capacity to develop, introduce and sell our product to our targeted markets. There can be no assurance
that we will ever generate significant sales or achieve profitability. Accordingly, the extent of future losses and the time required
to achieve profitability, if ever, cannot be predicted at this point.
Even if we succeed in developing and commercializing
one or more product candidates, we expect to incur substantial losses for the foreseeable future and may never become profitable. We
also expect to continue to incur significant operating and capital expenditures and anticipate that our expenses will increase substantially
in the foreseeable future as we:
| ● | continue to undertake
the pivotal clinical trial for our product candidate; |
| ● | seek regulatory
approvals for our product candidate; |
| ● | implement additional
internal systems and infrastructure; and |
| ● | hire additional
personnel. |
We may not be able to generate revenue or achieve
profitability in the future. Our failure to achieve or maintain profitability would likely negatively impact the value of our securities
and could prevent us from continuing as a going concern.
Even if we can secure such arrangements, we may
continue to have obligations and expenses that exceed the revenue generated by these marketed products. In addition, we could incur significant
development and other expenses if we were to make alterations to the manufacturing process for tecarfarin, for preparation and submission
of a supplemental NDA for such alterations, if required by the FDA, and in connection with the launch of tecarfarin, if approved. Further,
as we pursue FDA approval for tecarfarin, we expect that our research and development expenses will continue to increase significantly
as we advance our pivotal Phase 3 clinical trial.
Our cash and the proceeds of our initial
public offering will only fund our operations for a limited time, and we will need to raise additional capital to fund our planned pivotal
Phase 3 clinical trial and to support our development and commercialization efforts for our product candidate, tecarfarin.
If we do not succeed in raising additional funds on
acceptable terms, we will be unable to commence our planned Phase 3 pivotal clinical trial or obtain approval of our product candidate
from the FDA and other regulatory authorities. In addition, we could be forced to delay, discontinue or curtail product development, forego
sales and marketing efforts, and forego licensing in attractive business opportunities. We estimate that we will require a total of $45
million for the completion of our planned pivotal Phase 3 clinical trial and other expenditures that we will need to incur in order to
file our NDA. We intend to use approximately $3 million of the proceeds from our initial public offering to fund CMC preparation, research
and development and other trial preparation expenses required for the initiation of our planned pivotal Phase 3 clinical trial, therefore,
we will require at least $42 million of additional funding to enroll patients and complete our first Phase 3 clinical trial. Additionally,
we estimate that we will require $13 million for general and administrative expenses anticipated to be incurred over the next three years.
We will also need to raise additional capital
to expand our business to meet our long-term business objectives.
We believe that our existing cash, which includes
the net proceeds from our initial public offering will be sufficient in the aggregate to meet our anticipated cash requirements for at
least the next twelve months. We will, however, require additional financing as we continue to execute our business strategy, including
that we will require additional funds for the initiation of enrollment of patients and completion of the planned pivotal Phase 3 trial.
Our liquidity may be negatively impacted as a result of a research and development cost increases in addition to general economic and
industry factors. We anticipate that, to the extent that we require additional liquidity, it will be funded through the incurrence of
other indebtedness, additional equity financings or a combination of these potential sources of liquidity. In addition, we may raise
additional funds to finance future cash needs through grant funding and/or corporate collaboration and licensing arrangements. If we
raise additional funds by issuing equity securities or convertible debt, our stockholders will experience dilution. Debt financing, if
available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting
our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise
additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish valuable rights
to our products, future revenue streams or product candidates or to grant licenses on terms that may not be favorable to us. The covenants
under future credit facilities may limit our ability to obtain additional debt financing. We cannot be certain that additional funding
will be available on acceptable terms, or at all. Any failure to raise capital in the future could have a negative impact on our financial
condition and our ability to pursue our business strategies.
Our present and future capital requirements will
depend on many factors, including:
| ● | the outcome, timing
and cost of our Phase 3 clinical trial to obtain regulatory approval for tecarfarin in the
United States; |
| ● | the degree and
rate of market adoption of our products, if approved; |
| ● | the emergence
of new, competing technologies and products; |
| ● | the costs of R&D
activities we undertake to develop new products and indications; |
| ● | the costs of commercialization
activities, including sales, marketing and manufacturing; |
| ● | the costs of building
an internal sales force meeting our requirements for the marketing and sale of our product
candidates, if approved; |
| ● | our ability to
collaborate with third parties on the development and commercialization of our product candidates
and products; |
| ● | the level of working
capital required to support our growth; and |
| ● | our need for additional
personnel, information technology or other operating infrastructure to support our growth
and operations as a public company. |
We do not currently have any arrangements or
credit facilities in place as a source of funds, and there can be no assurance that we will be able to raise sufficient additional capital
on acceptable terms, or at all. We anticipate that the additional funding we require will be funded through the incurrence of other indebtedness,
additional equity financings or a combination of these potential sources of liquidity We may seek additional capital through a combination
of private and public equity offerings, debt financings and strategic collaborations. Debt financing, if obtained, may involve agreements
that include covenants limiting or restricting our ability to take specific actions, including issuing shares of our common stock or
other securities and incurring additional debt, and could increase our expenses and require that our assets secure such debt. Equity
financing, if obtained, could result in dilution to our then existing stockholders and/or require such stockholders to waive certain
rights and preferences. If such financing is not available on satisfactory terms, or is not available at all, we may be required to delay,
scale back or eliminate the development of business opportunities and our operations and financial condition may be materially adversely
affected. We can provide no assurances that any additional sources of financing will be available to us on favorable terms, if at all.
In addition, if we are unable to secure sufficient capital to fund our operations, we might have to enter into strategic collaborations
that could require us to share commercial rights to our products or product candidates with third parties in ways that we currently do
not intend or on terms that may not be favorable to us. If we choose to pursue additional indications and/or geographies for any of our
products or product candidates or otherwise expand more rapidly than we presently anticipate, we may also need to raise additional capital
sooner than expected.
Risks Related to Product Development, Regulatory
Approval, Manufacturing and Commercialization
Our business is dependent upon the success
of our investigational product candidate, tecarfarin, which requires additional clinical testing before we can seek regulatory approval
and potentially launch commercial sales. We do not own any other product candidates or have any other products in clinical development.
Our business and future success depends upon
our ability to obtain regulatory approval of and then successfully commercialize our product candidate, tecarfarin. Tecarfarin is in
late clinical stage development. Our main focus and the investment of a significant portion of our efforts and financial resources is
expected to be in the development of our only product candidate, tecarfarin, for which we are currently planning a Phase 3 clinical trial
with approximately 492 patients in the United States. We believe that the proceeds from our initial public offering will not provide
us with sufficient funds to initiate or complete this pivotal Phase 3 clinical trial. Even though we are pursuing a registration pathway
based on specific FDA input and guidance, there are many uncertainties known and unknown that may affect the outcome of the trial. These
include adequate patient enrollment, adequate supply of our product candidate, potential changes in the regulatory landscape, the results
of the trial being successful, and FDA acceptance of the data to support approval. We also rely on third parties to conduct the appropriate
clinical trials, and their failure to perform in accordance with applicable law would have a negative effect on our regulatory submission.
Our future success depends heavily on our ability
to successfully manufacture, develop, obtain regulatory approval, and commercialize tecarfarin, which may never occur. We currently generate
no revenues from our product candidate, and we may never be able to develop or commercialize a marketable drug.
All of our current data for our product
candidate are the results of clinical trials conducted by third parties and do not necessarily provide sufficient evidence that our products
are viable as potential pharmaceutical products.
We possess toxicology, pharmacokinetic, and other
preclinical data and clinical data on tecarfarin from studies and trials conducted several years ago by third parties. As of now, tecarfarin
has been tested in eleven clinical trials and is now in preparations to enter a pivotal Phase 3 trial. There is no guarantee that Phase
1 or Phase 2 results can or will be replicated by the pivotal Phase 3 study. Further, as the clinical trials were conducted by third
parties, and were completed prior to our ownership of the technology, we cannot be assured that such trials were conducted in compliance
with applicable statutes, rules, regulations and guidelines applicable to such trials. Although the FDA concurred with our recommended
endpoints in correspondence that it had with Espero in 2019, and Espero submitted the protocol we plan to use to FDA in 2019, we have
not received FDA input on our Phase 3 protocol. The FDA agreed in principle that “a single registration trial that combines these
populations may be acceptable.” However, there can be no assurance that the planned protocol will be accepted by FDA.
Previous clinical trials using tecarfarin have
had different trial designs, doses, parameters and endpoints than the planned Phase 3 clinical trial that is expected to serve as a basis
for approval of tecarfarin. We plan to use a fixed dose in future clinical trials that we believe provides good coverage given the dose
ranges tested clinically; however, it is possible that the dose selected will not be the optimal dose and so drug effects may be limited
or not be demonstrated sufficiently in clinical testing.
As all of our clinical trials to date were
conducted by third parties, we cannot be assured that such clinical trials were in compliance with applicable laws, rules and regulations.
We did not acquire tecarfarin until April of
2022, and do not have first-hand knowledge of how the Phase 1 and Phase 2 clinical trials were completed. As such, we cannot be assured
that such clinical trials were conducted in full compliance with applicable laws, rules and regulations. While we are not aware of any
issues in relation to such trials and the performance thereof, we cannot be assured that we may learn in the future that there was a
failure to abide by such laws, rules and regulations, which could potentially expose us to issues with regards to our Phase 3 clinical
trials or otherwise create risks unknown to us with regards to our technology.
Our efforts to develop our product candidate
may not generate data sufficient to support an application for regulatory approval.
Despite the global burden of cardiovascular disease,
investment in cardiovascular drug development has stagnated over the past two decades, with relative underinvestment compared with other
therapeutic areas. The reasons for this trend are multifactorial, but of primary concern is the high cost of conducting cardiovascular
outcome trials in the current regulatory environment that demands a direct assessment of risks and benefits, using clinically meaningful
cardiovascular endpoints. In addition, clinical trials are difficult to design and implement, can take many years to complete and are
uncertain as to outcome. Success in early phases of pre-clinical and clinical trials does not ensure that later clinical trials will
be successful, and interim results of a clinical trial do not necessarily predict final results. For example, in the Phase 2/3 EMBRACE-AC
trial of tecarfarin conducted by ARYx Therapeutics, Inc., a predecessor company to Espero, tecarfarin did not reach statistical significance
on its primary endpoint, superiority to warfarin as measured by time in TTR. There is no guarantee that later trials, including ACTOR
AF, will reach statistical significance on their endpoints, or demonstrate superiority to warfarin or any other therapy. A failure of
one or more of clinical trials can occur at any stage of testing. Our product candidate may prove to have undesirable or unintended side
effects, toxicities or other characteristics that may preclude our obtaining regulatory approval or prevent or limit commercial use with
respect to one or all intended indications. In addition, we may experience other numerous unforeseen events during, or as a result of,
the clinical trial process that could delay or prevent our ability to continue development. Development stage risks include the following:
| ● | although we have
FDA minutes documenting Espero’s correspondence with the FDA regarding tecarfarin,
the FDA minutes are from 2019, are not binding on FDA, and our expectations regarding such
plans may be out of date and not be in line with current market dynamics and the FDA or comparable
foreign regulatory authorities or institutional review boards, or IRBs, may disagree with
the design or implementation of our clinical trial and refuse to let them proceed; |
| ● | we may not be
able to provide acceptable evidence of the safety and efficacy of our product candidates
or an acceptable benefit/risk profile for our product candidate; |
| ● | we may not be
able to successfully manufacture drug supplies for our clinical trial; |
| ● | the results of
our clinical trial may not be satisfactory or may not meet the level of statistical or clinical
significance required by the FDA, European Medicines Agency, or EMA, or other comparable
foreign regulatory authorities to demonstrate effectiveness; |
| ● | we may not be
able to determine the optimal dosing of our product candidates; and |
| ● | patients in our
clinical trial may suffer adverse effects that are deemed related to our product candidates,
leading us or regulatory authorities to stop clinical trial temporarily or permanently. |
If unacceptable safety concerns or other adverse
events arise in the development of a product candidate, our clinical trials could be suspended or terminated or the FDA or comparable
foreign regulatory authorities could order us to cease clinical trials or deny approval of such product candidate for any or all targeted
indications. Treatment-related side effects could also affect patient recruitment or the ability of enrolled subjects to complete the
trial or result in potential product liability claims. Inadequate training in recognizing or managing the potential side effects of a
product candidate could result in patient deaths. Any of these occurrences may harm our business, financial condition and prospects significantly.
Even if we successfully complete our clinical
trials, we may not receive regulatory approval for tecarfarin, and we may not be able to commercialize our product candidate and our
ability to generate revenue will be limited.
The research, testing, manufacturing, labeling,
packaging, storage, approval, sale, marketing, advertising and promotion, pricing, export, import and distribution of drug products are
subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries, which regulations
differ from country to country. We are not permitted to market our product candidate in the United States until we receive approval of
an NDA from the FDA and in non-U.S. markets until we receive the requisite approval from comparable regulatory agencies in such countries.
Of the large number of drugs in development, only a small number are submitted for approval to the FDA through an NDA and even fewer
are eventually approved for commercialization. In 2020 and 2021, the FDA approved only three new molecular entities to treat cardiovascular/vascular
diseases. We may not succeed at gaining regulatory approval, which would materially harm our business.
Receipt of necessary regulatory approval is subject
to a number of risks, including the following:
| ● | the data collected
from pre-clinical and clinical trials may not be sufficient to support the submission of
an NDA or other submission or to obtain regulatory approval in the United States or elsewhere; |
| ● | 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 |
| ● | the relevant laws,
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. |
We cannot guarantee that regulators will agree
with our assessment of the results of our clinical trials or that such trials will be considered by regulators to have shown safety or
efficacy of our product candidates. For example, while we currently intend to conduct future clinical trials of tecarfarin with a primary
endpoint of reduction of major cardiac adverse events (MACE), we cannot assure you that the FDA will consider it to be a clinically meaningful
endpoint. The FDA, EMA and other regulators have substantial discretion in the approval process and may refuse to accept any application
or may decide that our data are insufficient for approval and require additional clinical trials, or pre-clinical or other trials. In
addition, varying interpretations of the data obtained from pre-clinical and clinical testing could delay, limit or prevent regulatory
approval of a product candidate. Failure to obtain regulatory marketing approval for our product candidates in any indication will prevent
us from commercializing the product candidate, and our ability to generate revenue will be materially impaired.
The process of obtaining regulatory approvals
is expensive, often takes many years, if approval is obtained at all, and can vary substantially based upon, among other things, the
type, complexity and novelty of the product candidates involved, the jurisdiction in which regulatory approval is sought and the substantial
discretion of the regulatory authorities. Changes in regulatory review for a submitted product application may cause delays in approval
or rejection of an application. Regulatory approval obtained in one jurisdiction does not necessarily mean that a product candidate will
receive regulatory approval in all jurisdictions in which we may seek approval, but the failure to obtain approval in one jurisdiction
may negatively impact our ability to seek or gain approval in a different jurisdiction. 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
fail to receive applicable marketing approvals, our target market will be reduced and our ability to realize the full market potential
of tecarfarin or any future product candidates will be harmed.
Fast Track designation by the FDA may not
actually lead to a faster development or regulatory review or approval process, and does not assure FDA approval of our product candidate.
If a product candidate is intended for the treatment
of a serious or life-threatening condition and the product candidate demonstrates the potential to address unmet medical need for this
condition, the sponsor may apply for FDA Fast Track designation. However, a Fast Track designation does not ensure that the product candidate
will receive marketing approval or that approval will be granted within any particular timeframe. As a result, while we have received
Fast Track designation for tecarfarin for the prevention of systemic thromboembolism of cardiac origin in patients with ESRD and AFib,
we may not experience a faster development process, review or approval compared to conventional FDA procedures. In addition, the FDA
may withdraw Fast Track designation if it believes that the designation is no longer supported by data from our clinical development
program. Fast Track designation alone does not guarantee qualification for the FDA’s priority review procedures.
Even if we obtain regulatory approval,
we will still face ongoing regulatory requirements and tecarfarin may face future development and regulatory difficulties.
Even if we receive regulatory approval of tecarfarin
or any future product candidates, we will be subject to ongoing regulatory obligations, such as post market surveillance and current
good manufacturing practice (“GMP”) requirements, and continued regulatory review, which may result in significant additional
expense. We may also be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with
product candidates. In addition, third parties on whom we rely must comply with regulatory requirements, and any non-compliance on their
part may negatively impact our business, assuming we obtain regulatory authorization at all.
Any regulatory approvals that we receive for
product candidates will require surveillance to monitor the safety and efficacy of the product candidate. The FDA may also require a
Risk Evaluation and Mitigation Strategy (“REMS”) program in order to approve product candidates, which could entail requirements
for a medication guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution methods,
patient registries and other risk minimization tools. The FDA could also require a boxed warning, sometimes referred to as a Black Box
Warning on the product label to identify a particular safety risk, which could affect commercial efforts to promote and sell the product.
In addition, if the FDA or a comparable foreign regulatory authority approves product candidates, the manufacturing processes, labeling,
packaging, distribution, adverse event reporting, storage, advertising, promotion, import, export and recordkeeping for product candidates
will be subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing
information and reports, registration, as well as continued compliance with current GMPs and current good clinical practices (“GCPs”)
for any clinical trials that we conduct post-approval. We are also subject to certain user fees imposed by the regulatory agencies. Later
discovery of previously unknown problems with 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, among
other things:
| ● | import alerts
or automatic detentions; |
| ● | restrictions on
the marketing or manufacturing of product candidates, withdrawal of the product from the
market, or product recalls; |
| ● | fines, warning
letters or holds on clinical trials; |
| ● | refusal by the
FDA to approve pending applications or supplements to approved applications filed by us or
suspension or revocation of approvals; |
| ● | product seizure
or detention, or refusal to permit the import or export of product candidates; |
| ● | injunctions or
the imposition of civil or criminal penalties; and |
| ● | inability to obtain
government contracts. |
The FDA’s and other regulatory authorities’
policies may change, such as those required by the 21st Century Cures Act, and additional government regulations may be enacted
that could prevent, limit or delay regulatory approval of tecarfarin or any future product candidates. In addition, it is unclear what
changes, if any, the new presidential administration may bring. We cannot predict the likelihood, nature or extent of government regulation
that may arise from future legislation or administrative action, either in the United States or abroad. If we are slow or 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.
Clinical trials are very expensive, time-consuming
and difficult to design and implement.
As part of the regulatory process, we must conduct
clinical trials for each product candidate to demonstrate safety and efficacy to the satisfaction of the FDA and other regulatory authorities.
As we advance tecarfarin or any future product candidates we expect that our expenses will increase. The number and design of the clinical
trials that will be required varies depending upon product candidate, the condition being evaluated, current medical strategies and the
trial results themselves. Therefore, it is difficult to accurately estimate the cost of the clinical trials. Clinical trials are very
expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. The clinical trial
process is also time consuming. We estimate that clinical trials of product candidates including tecarfarin, will take at least several
years to complete. Furthermore, failure can occur at any stage of the trials, and we could encounter problems that cause us to abandon
or repeat clinical trials. The commencement and completion of clinical trials may be delayed or prevented by several factors, including:
| ● | unforeseen safety
issues; |
| ● | failure to determine
appropriate dosing; |
| ● | greater than anticipated
cost of our clinical trials; |
| ● | failure to demonstrate
effectiveness during clinical trials; |
| ● | slower than expected
rates of subject recruitment or difficulty obtaining investigators, particularly during COVID-19; |
| ● | subject drop-out
or discontinuation; |
| ● | import delays
of clinical trial materials; |
| ● | inability to monitor
subjects adequately during or after treatment; |
| ● | third party contractors,
including, without limitation, CROs and manufacturers, failing to comply with regulatory
requirements or meet their contractual obligations to us in a timely manner |
| ● | reaching agreements
with prospective CROs, and trial sites, both of which can be subject to extensive negotiation
and may vary significantly among different CROs and trial sites; |
| ● | insufficient or
inadequate supply or quality of product candidates or other necessary materials to conduct
our trials; |
| ● | potential additional
safety monitoring, or other conditions required by FDA or comparable foreign regulatory authorities
regarding the scope or design of our clinical trials, or other studies requested by regulatory
agencies; |
| ● | problems engaging
Institutional Review Boards (“IRBs”), to oversee trials or in obtaining and maintaining
IRB approval of studies; |
| ● | imposition of
clinical hold or suspension of our clinical trials by regulatory authorities; and |
| ● | inability or unwillingness
of medical investigators to follow our clinical protocols. |
In addition, we or the FDA may suspend or terminate
our clinical trials at any time if it appears that we are exposing participants to unacceptable health risks or if the FDA finds deficiencies
in our Investigational New Drug, or IND, submissions or the conduct of these trials. Therefore, we cannot predict with any certainty
when, if ever, future clinical trials will commence or be completed.
Delays in the enrollment of patients in
any or all of our clinical trials could increase our development costs and delay completion of our clinical trials and associated regulatory
submissions.
We may not be able to initiate or continue clinical
trials for our product candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these
trials as required by the FDA or other regulatory authorities. COVID-19 will likely make this even more challenging. Even if we are able
to enroll a sufficient number of patients in our clinical trials, if the pace of enrollment is slower than we expect, the development
costs for our product candidates may increase, and the completion of our trials may be delayed or our trials could become too expensive
to complete.
Even if approved, tecarfarin may not have
labeling that allows us to successfully commercialize it.
The commercial success of tecarfarin and any
of our future product candidates will depend in significant measure upon our ability to obtain approval from the FDA and other regulatory
authorities of labeling describing a product candidate’s expected features or benefits. Regulatory authorities may approve tecarfarin
for fewer or more limited indications than we request or may approve tecarfarin with labeling that does not include the labeling claims
necessary or desirable for the successful commercialization of that indication. Failure to achieve approval from the FDA or other regulatory
authorities of product labeling containing certain types of information on features or benefits of our products will prevent or substantially
limit our advertising and promotion of such features in order to differentiate our product candidates or any future product candidates
from those products already existing in the market. This may make it difficult or impossible to achieve commercial success.
If our product candidate is approved, our
success depends on our commercialization efforts, which may not be achieved. If we are unable to commercialize our product candidate,
or experience significant delays in doing so, our business could be materially harmed.
We will invest a significant portion of our efforts
and financial resources into the development and commercialization of tecarfarin. Product revenues from our product candidate, tecarfarin,
which will not be realized until after regulatory approval, if ever, will depend on the successful development, regulatory approval and
eventual commercialization of these product candidates. The success of our product candidate will depend on several factors, including
the following:
| ● | receipt of marketing
approvals for our product candidate from the FDA and similar regulatory authorities outside
the United States; |
| ● | obtaining product
indications, other labeling information and product attributes that are acceptable and attractive
to the medical community, third-party payors and patients; |
| ● | our ability to
manufacture product commercially at acceptable costs; |
| ● | establishing and
maintaining commercial manufacturing arrangements with third parties; |
| ● | successfully commercializing
our product candidate, if approved, whether alone or in collaboration with others; |
| ● | a continued acceptable
safety profile of the product candidate following approval; and |
| ● | obtaining, maintaining,
enforcing and defending intellectual property rights and claims and available product exclusivities. |
If we do not achieve one or more of these factors
in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize our product candidate,
which would materially harm our business. In addition, even if we obtain regulatory approvals for tecarfarin, the timing or scope of
any approval may prohibit or reduce our ability to commercialize tecarfarin successfully. For example, if the approval process takes
too long, we may miss market opportunities and give other companies the ability to develop competing products or establish market dominance.
Also, any regulatory approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render
tecarfarin not commercially viable. For example, regulatory authorities may grant approval contingent on the performance of costly post-marketing
clinical trials or, outside the U.S., they may not accept or approve the price we intend to charge for tecarfarin. Further, the FDA or
comparable foreign regulatory authorities may place conditions on approvals, such as risk management plans and Risk Evaluation and Mitigation
Strategies, or REMS, to assure the safe use of the drug. If the FDA concludes a REMS is needed, the sponsor of the NDA must submit a
proposed REMS; the FDA will not approve the NDA without an approved REMS, if required. A REMS could include medication guides, physician
communication plans, and/or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization
tools. The FDA may also require a REMS for an approved product when new safety information emerges. Any of these limitations on approval
or marketing could restrict the commercial promotion, distribution, prescription or dispensing of tecarfarin. Moreover, product approvals
may be withdrawn for non-compliance with regulatory standards or if problems occur following the initial marketing of the product. Any
of the foregoing scenarios could materially harm the commercial success of tecarfarin.
Our potential future product candidate,
tecarfarin, may fail to achieve the degree of market acceptance by physicians, patients, healthcare payors and others in the medical
community necessary for commercial success.
The commercial success of any potential future
product candidates, including tecarfarin, for which we may obtain marketing approval from the FDA or other regulatory authorities will
depend upon their acceptance by the medical community and third-party payors as clinically useful, cost-effective and safe. The degree
of market acceptance of any drug depends on a number of factors, such as:
| ● | effectively competing
with other therapies; |
| ● | the prevalence
and severity of any side effects; |
| ● | success of patients
in well-controlled clinical trials compared to real-world success of patients post FDA approval; |
| ● | our ability to
educate and increase physician awareness of the benefits of our products relative to competing
drugs; |
| ● | the willingness
of physicians and healthcare organizations to change their current treatment practices, especially
with respect to warfarin, a drug that is dominant in the market and with which physicians
and healthcare organizations have 60 years of familiarity; |
| ● | the willingness
of hospitals and hospital systems to include our product candidates as treatment options; |
| ● | efficacy and potential
advantages compared to alternative treatments; |
| ● | the price we charge
for our product candidates; |
| ● | interpretations
of the results of our clinical trials; |
| ● | the status of
our products on the formularies of third-party payers; |
| ● | convenience and
ease of administration compared to alternative treatments; |
| ● | the willingness
of the target patient population to try new therapies and of physicians to prescribe these
therapies; |
| ● | the willingness
of the target patient population to pay for our products, including co-pays under their health
coverage plans; |
| ● | the accuracy of
the international normalized ratio, or INR, testing and whether such testing can be conducted
at home or in a medical facility such as a doctor’s office. A prothrombin time, or
PT, is a test used to help detect and diagnose a bleeding disorder or excessive clotting
disorder; the INR is calculated from a PT result and is used to monitor how well an anticoagulant
medication such as tecarfarin is working to prevent thrombosis; |
| ● | the strength of
marketing and distribution support; and |
| ● | the availability
of third-party coverage and adequate reimbursement. |
The failure to attain market acceptance among
the medical community, patients and third-party payors may have an adverse impact on our operations and profitability.
We have never submitted an NDA to the FDA
or comparable applications to other regulatory authorities and we may not be successful in achieving approval of our product candidates.
We have never submitted an NDA to the FDA or
comparable applications to other regulatory authorities and expect to rely on consultants and third-party contract research organizations,
or CROs, with expertise in this area to assist us in this process. Securing FDA approval requires the submission of pre-clinical, clinical
and/or pharmacokinetic data, information about product manufacturing processes and inspection of facilities and supporting information
to the FDA for each therapeutic indication to establish a product candidate’s safety and efficacy for each indication. Regulatory
authorities in other jurisdictions impose similar requirements. If we are unable to successfully complete the approval process with the
FDA or comparable applications of other regulatory authorities, our business will not be successful.
Orphan Drug Designation does not translate
to approval and, even if we obtain FDA approval, we may not enjoy marketing exclusivity or other expected benefits.
Although we have been granted orphan drug designation
for tecarfarin, this does not mean FDA will approve the NDA. Even if we obtain FDA approval, we may not be able to obtain or maintain
orphan drug exclusivity for tecarfarin. We may not be the first to obtain marketing approval of tecarfarin designation for the orphan-designated
indication due to the uncertainties associated with developing pharmaceutical products. In addition, exclusive marketing rights in the
United States may be limited if we seek approval for an indication broader than the orphan-designated indication or may be lost if the
FDA later determines that the request for designation was materially defective or if we are unable to assure sufficient quantities of
the product to meet the needs of patients with the rare disease or condition. Further, even if we obtain orphan drug exclusivity for
a product, that exclusivity may not effectively protect the product from competition because different drugs with different active moieties
may be approved for the same condition, or the competitive product is otherwise outside the scope of exclusivity. Even after an orphan
drug is approved, the FDA can subsequently approve the same drug with the same active moiety for the same condition if the FDA concludes
that the later drug is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care
or the manufacturer of the product with orphan exclusivity is unable to maintain sufficient product quantity. Orphan drug designation
neither shortens the development time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or
approval process, nor does it prevent competitors from obtaining approval of the same product candidate for indications other than those
in which orphan drug designation have been granted.
After approval of tecarfarin, tecarfarin
will remain subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional risk
and expense.
Drug products remain subject to the jurisdiction
of the FDA and non-U.S. regulatory authorities after they have been approved. Even if we obtain regulatory approval of tecarfarin, the
FDA and other regulatory authorities may impose significant restrictions on its indicated uses or marketing or the conditions of approval,
or impose ongoing requirements for potentially costly and time-consuming post-approval trials, including Phase 4 clinical trials, and
post-market surveillance to monitor safety and efficacy. Our product candidate, if approved, as well as our marketed products are subject
to ongoing regulatory requirements governing the manufacturing, labeling, packaging, storage, distribution, safety surveillance, advertising,
promotion, sampling, recordkeeping and reporting of adverse events and other post-market information. These requirements include registration
with the FDA and continued compliance with current Good Manufacturing Practices requirements, or cGMPs, and current Good Clinical Practices
requirements, or GCPs, for any clinical trials that we conduct post-approval.
After approval, our products could be subject
to labeling and other restrictions and we may be required to withdraw from the market or be subject to penalties if we fail to comply
with regulatory requirements.
The product labeling, advertising and promotion
of our products and our product candidates, if approved, are subject to regulatory requirements and continuing regulatory review. Government
authorities, including the FDA and the Office of the Inspector General of the Department of Health and Human Services, or OIG, strictly
regulate the promotional claims and activities that may be made about prescription products. A drug product may not be promoted for uses
that are inconsistent with the product’s approved labeling. If we receive marketing approval for tecarfarin, physicians may nevertheless
legally prescribe our products to their patients in a manner that is inconsistent with the approved labeling. However, if we are found
to have promoted such off-label uses, we may become subject to significant liability and government fines. The federal government has
extracted very large settlements and levied very large civil and criminal fines against companies for alleged improper promotion, has
enjoined companies from engaging in off-label promotion, and made companies agree to onerous multi-year corporate integrity agreements.
The FDA has also requested that companies enter into consent decrees of permanent injunctions under which specified promotional conduct
is changed or curtailed. The occurrence of any event or penalty described above may inhibit our ability to commercialize our product
candidates and generate revenue. Adverse regulatory action, whether pre- or post-approval, can also potentially lead to product liability
claims and increase our product liability exposure.
We are subject, directly or indirectly,
to federal and state obligations and regulations applicable to our marketing practices. If we are unable to comply, or have not complied,
with such laws, we could face substantial penalties.
Our marketing and sales operations are subject
to various federal and state fraud and abuse laws, including, without limitation, the federal and state anti-kickback statutes and false
claims laws. With respect to sales and marketing activities by us or any future partner, advertising and promotional materials must comply
with FDA rules in addition to other applicable federal, state and local laws in the United States and similar legal requirements in other
countries. We also are subject, directly or indirectly through our customers and partners, to various fraud and abuse laws, including,
without limitation, the U.S. Federal Healthcare Program Anti-Kickback Statute, U.S. False Claims Act, and similar state laws, which impact,
among other things, most of our interactions with customers, including our proposed sales, marketing, and scientific/educational grant
programs. We are also subject to complex laws and regulation regarding reporting and payment obligations as a result of our participation
in the U.S. Medicaid Drug Rebate Program, the Federal Supply Schedule of the U.S. Department of Veterans Affairs, and other government
drug programs. All of these activities are also potentially subject to U.S. federal and state consumer protection and unfair competition
laws. Similar requirements exist in many of these areas in other countries. If investigated, we could be forced to incur substantial
expense responding to the investigation and defending our actions. If unsuccessful in our defense, we could be found to be in violation
and subject to substantial fines and penalties,
We currently do not have an agreement with
a third-party manufacturer for the production of tecarfarin and intend to rely upon third parties to produce our product candidate.
We currently do not have an agreement with any
third-party manufacturers for the production of tecarfarin and there can be no assurance that we will be able to enter into an agreement
on acceptable terms. If an agreement is not entered into, we may experience longer manufacturing lead times for any purchase orders we
place with a manufacturer under purchase orders. We intend to rely on third-party manufacturers to produce tecarfarin for our clinical
studies who are expected to purchase materials from third-party vendors and transport the materials necessary to produce tecarfarin,
such as the required reagents and containers. If a third-party manufacturer was to experience any prolonged disruption for our manufacturing,
or face enforcement scrutiny by regulatory authorities, we could be forced to seek additional third-party manufacturing contracts, thereby
increasing our development costs and negatively impacting our timelines and any commercialization costs. If we change manufacturers at
any point during the development process or after approval of a product candidate, we will be required to demonstrate comparability between
the product manufactured by the old manufacturer and the product manufactured by the new manufacturer. If we are unable to do so, we
may need to conduct additional clinical trials with product manufactured by the new manufacturer, thereby delaying our NDA submission
or approval.
If the manufacturer upon which we rely
fails to comply with stringent regulations, we may face delays in the development and commercialization of, or be unable to meet demand
for, our product candidates and may lose potential revenues.
Any problems or delays our contract manufacturers
experience in preparing for commercial-scale manufacturing of a product candidate or component may result in a delay in product development
timelines and FDA or comparable foreign regulatory authority approval of the product candidate or may impair our ability to manufacture
commercial quantities or such quantities at an acceptable cost and quality, which could result in the delay, prevention, or impairment
of clinical development and commercialization of our product candidates and may materially harm our business, financial condition, results
of operations, stock price and prospects.
In addition, manufacturers of drug products and
their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance
with cGMP requirements relating to quality control, quality assurance and corresponding maintenance of records and documents. Although
we do not have day-to-day control over our contract manufacturers’ compliance with these requirements, we are responsible for ensuring
compliance with such requirements. Our failure, or the failure of our contract manufacturers, to comply with applicable regulations could
result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal
of approvals, revocation of licenses, seizures or recalls of product candidates, operating restrictions and criminal prosecutions, any
of which would significantly and adversely affect supplies of our product candidates and our business. If a contract manufacturer’s
facilities do not pass a pre-approval inspection or do not have a cGMP compliance status acceptable to the FDA or a comparable foreign
regulatory authority, our product candidate will not be approved.
In addition, application holders must obtain
FDA approval for product and manufacturing changes, depending on the nature of the change. Moreover, in the United States, the distribution
of product samples to physicians must comply with the requirements of the U.S. Prescription Drug Marketing Act. In addition, our marketed
products will have to comply with the Drug Supply Chain Security Act of 2013, which requires drug companies to enable electronic tracking
of their products though the U.S. supply chain.
Any deviations from regulatory requirements may
also require remedial measures that may be costly and/or time-consuming for us or a third-party to implement and that may include the
temporary or permanent suspension of a clinical trial or the temporary or permanent closure of a facility. Any such remedial measures
imposed upon us or third parties with whom we contract could materially harm our business. Any delays in obtaining products or product
candidates that comply with the applicable regulatory requirements may result in delays to product approvals, and commercialization.
It may also require that we conduct additional trials.
We face substantial competition, which
may result in others discovering, developing or commercializing competing products more successfully than we do, or, perhaps obtaining
approval before our product and, potentially delaying our approval.
The development and commercialization of new
drugs is highly competitive. We face competition with respect to developing our current product candidates, and we will face competition
with respect to any products that we may seek to develop or commercialize in the future, from major pharmaceutical companies, specialty
pharmaceutical companies and biotechnology companies worldwide. We are seeking to develop tecarfarin as a marketable VKA, once-daily
OAC designed to treat and prevent thrombosis for ESRD patients with AFib. If we succeed in developing tecarfarin, we shall face substantial
competition. Traditionally, the drug of choice for CKD/ESRD patients has been warfarin. The reasoning for such therapy is that warfarin
undergoes extensive hepatic metabolism into inactive compounds, theoretically posing less risk to the renally impaired patient. Randomized
trials to date of apixaban versus warfarin for AFib excluded patients with severe and end-stage kidney disease, calculated creatinine
clearance <25 mL per minute. The FDA cautiously extended apixaban use to patients with ESRD on hemodialysis based on limited pharmacokinetic
data by 8 subjects. Additionally, the lower limit for creatinine clearance has been adjusted for rivaroxaban for stroke prevention in
AFib, thereby permitting use in the ESRD population. The remaining two DOACs, dabigatran and edoxaban, are approved for use with dosage
adjustment in moderate-severe CKD for stroke prevention. However, the net benefit of anticoagulation with apixaban or warfarin in the
ESRD population is controversial.
In 2019, RENal Hemodialysis Patients Allocated
Apixaban Versus Warfarin in Atrial Fibrillation (RENAL-AF) Randomized Clinical Trial was terminated early by the sponsor.
AXADIA is an investigator-driven, prospective,
parallel-group, single country, multi-center phase IIIb trial to assess the safety of apixaban versus the VKA phenprocoumon in patients
with non-valvular AFib and ESRD on hemodialysis treatment. The trial will be conducted in about 25-30 sites in Germany with an estimated
completion date of July 2023.
Strategies for the Management of Atrial Fibrillation
in patients Receiving Dialysis (SAFE-D) is a pilot trial in Toronto, Canada to evaluate the feasibility of conducting a randomized controlled
trial comparing anticoagulation strategies in patients with AFib receiving dialysis (either hemodialysis or peritoneal dialysis). The
trial was estimated to have been completed by December 31, 2022 (final data collection date for primary outcome measure).
Many of these named products are marketed by
some of the largest and most successful pharmaceutical companies. The companies that market these products have substantially more resources
than we do and substantially more experience developing and marketing pharmaceuticals. We may not be able to successfully compete with
these existing products. Potential competitors also include academic institutions, government agencies and other public and private research
organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing
and commercialization of competing drugs and potentially competing drugs. Our competitors are or may be attempting to develop therapeutics
for our target indications.
Factors affecting competition in these markets
include the financial, research and development, testing, and marketing strengths of individual competitors, trends in industry consolidation,
consumers’ product options, product quality, price and technology, reputation, customer service capabilities and access to market
partners and customers. Eliquis is manufactured and distributed by Bristol Myers Squibb, amiodarone is manufactured and distributed by
several companies including Sanofi, Baxter, and Pfizer, Pradaxa is manufactured and distributed by Boehringer Ingelheim, Xarelto is manufactured
and distributed by Janssen Pharmaceuticals, and Savaysa is manufactured and distributed by Daiichi Sankyo. Each of these organizations
has a long operating history, extensive resources, strong brand recognition and large customer bases. As a result, we expect they will
be able to devote greater resources than we can to the manufacture, promotion and sale of their products; receive greater resources and
support than we will from market partners and independent distributors; initiate and withstand substantial price competition; and take
advantage more readily than we could of acquisition and other strategic market opportunities. In addition, these or other organizations
could succeed in developing new products that perform better or more cost-effectively than our products and product candidates in their
respective markets. Moreover, changes in health trends, diet or other factors could substantially reduce the commercial attractiveness
or viability of the markets for anti-anginal, anticoagulant, anti-arrhythmic and anti-platelet products.
The high level of competition in these markets
could result in pricing pressure, reduced margins, the inability of our product candidates to achieve market acceptance and other impediments
to commercial success. As a result, there can be no assurance that we will be able to complete the development of competitive products
and commercialize them on a competitive basis.
Mergers and acquisitions in the pharmaceutical,
biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors.
Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large
and established companies. These companies compete with us in recruiting and retaining qualified scientific and management personnel,
establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to,
or necessary for, our programs.
If serious adverse effects are identified
with respect to any of our product candidates or any of our approved products, we may need to modify or abandon our development of that
product candidate, discontinue sale of an approved product, or change our labeling to reflect new safety risks.
It is impossible to guarantee when, or if, any
of our product candidates will prove safe enough to receive regulatory approval. It is impossible to guarantee that safety issues that
may arise during development will not significantly decrease the commercial potential of our product candidates. In addition, there can
be no assurance that our clinical trials will identify all relevant safety issues. Known or previously unidentified adverse effects can
adversely affect regulatory approvals or marketing of approved products. In such an event, we might need to abandon marketing efforts
or development of that product or product candidate or enter into a partnership to continue development.
Serious adverse events have occurred in the clinical
trials of our product candidate. For example, major hemorrhages occurred in 1.6% of the blinded tecarfarin patients randomized in the
EMBRACE-AC trial. We expect that additional patients will experience serious adverse events in our future clinical trials and during
marketing if our products are approved. Design features of ACTOR AF, such as using a smaller number of patients and using MACE clinical
outcomes as an endpoint, may produce results that show an imbalance in adverse events between treatment groups, when no such imbalance
truly exists, or may not permit an assessment of the risk of rare events (due to the overall reduced size of the safety database), either
of which could lead the FDA to require additional studies to demonstrate the safety of tecarfarin.
If a regulatory agency discovers adverse events
of unanticipated severity or frequency it may impose restrictions on that product or us, including requiring withdrawal of the product
from the market. Among other legal and administrative actions, a regulatory agency may:
| ● | mandate modifications
to product labelling or promotional materials or require us to provide corrective information
to healthcare practitioners; |
| ● | withdraw any regulatory
approvals; |
| ● | place any ongoing
clinical trials on clinical hold; |
| ● | refuse to approve
pending applications or supplements to approved applications filed by us, our partners or
our potential future partners; |
| ● | impose restrictions
on operations, including costly new manufacturing, licensing or packaging requirements; or |
| ● | seize or detain
products or require a product recall. |
In addition, the occurrence of any of the foregoing,
even if promptly remedied, could (1) negatively impact the perception of us or the relevant product among the medical community, patients
or third-party payors and (2) result in product liability litigation that could result in the company paying substantial amounts of money
in settlements or verdicts.
Recently enacted and future legislation
may increase the difficulty and cost for us to obtain marketing approval of and commercialize tecarfarin and affect the prices we may
obtain.
In the United States and some foreign 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 for tecarfarin, restrict or regulate post-approval activities and affect our ability to profitably sell tecarfarin.
Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities
for pharmaceutical products. We do not know whether additional legislative changes will be enacted, or whether the FDA regulations, guidance
or interpretations will be changed, or what the impact of such changes on the marketing approvals of tecarfarin, if any, may be. In addition,
increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as
well as subject us to more stringent product labeling and post-marketing testing and other requirements.
In the United States, under the Medicare Modernization
Act, or MMA, Medicare Part D provides coverage to the elderly and disabled for outpatient prescription drugs by approving and subsidizing
prescription drug plans offered by private insurers. The MMA also authorizes Medicare Part D prescription drug plans to use formularies
where they can limit the number of drugs that will be covered in any therapeutic class. The Part D plans use their formulary leverage
to negotiate rebates and other price concessions from drug manufacturers. Also under the MMA, Medicare Part B provides coverage to the
elderly and disabled for physician-administered drugs on the basis of the drug’s average sales price, a price that is calculated
according to regulatory requirements and that the manufacturer reports to Medicare quarterly.
Both Congress and the Centers for Medicare &
Medicaid Services, or CMS, the agency that administers the Medicare program, from time to time consider legislation, regulations, or
other initiatives to reduce drug costs under Medicare Parts B and D. For example, under the 2010 Affordable Care Act, drug manufacturers
are required to provide a 50% discount on prescriptions for branded drugs filled while the beneficiary is in the Medicare Part D coverage
gap, also known as the “donut hole.” The Bipartisan Budget Act of 2018 increased the manufacturer’s subsidy under the
program from 50% to 70% of the negotiated price, beginning in 2019. There have been legislative proposals to repeal the “non-interference”
provision of the MMA to allow CMS to leverage the Medicare market share to negotiate larger Part D rebates. Further cost reduction efforts
could decrease the coverage and price that we receive for tecarfarin and could seriously harm our business. Private payors often follow
Medicare coverage policy and payment limitations in setting their own reimbursement rates, and any reduction in reimbursement under the
Medicare program may result in a similar reduction in payments from private payors.
The 2010 Affordable Care Act is intended to broaden
access to health Insurance and reduce or constrain the growth of healthcare spending. Further, the Affordable Care Act imposes a significant
annual fee on companies that manufacture or import branded prescription drug products. It also increased the amount of the rebates drug
manufacturers must pay to state Medicaid programs, required that Medicaid rebates be paid on managed Medicaid utilization, and increased
the additional rebate on “line extensions” (such as extended-release formulations) of solid oral dosage forms of branded
products. The law also contains substantial provisions affecting fraud and abuse compliance and transparency, which may require us to
modify our business practices with healthcare practitioners, and incur substantial costs to ensure compliance.
Many members of the Republican Party have consistently
opposed the Affordable Care Act since it was signed. Efforts to repeal the Act have been attempted numerous times and some portions of
the Act have been amended in 2017 and 2018. It is unclear whether further amendments or repeal will be effectuated and what the effect
on the healthcare sector will be. In addition to potential changes to the Affordable Care Act, there are indications that the Medicaid
and Medicare programs may be restructured, which could lead to revisions in coverage and reimbursement of prescription drugs. While we
are unable to predict what legislation, if any, may potentially be enacted, to the extent that future changes affect how our product
candidates could be paid for and/or reimbursed by the government and private payers, our business could be adversely affected.
In addition, other legislative changes have been
proposed and adopted in the United States since the Affordable Care Act was enacted. For example, the Budget Control Act of 2011 included,
among other things, provisions that have led to 2% across-the-board reductions in Medicare payment amounts. Several states have adopted
or are considering adopting laws that require pharmaceutical companies to provide notice prior to raising prices and to justify price
increases. We expect that additional healthcare reform measures will be adopted in the future, any of which could limit the amounts that
federal and state governments will pay for healthcare products and services, and in turn could significantly reduce the projected value
of certain development projects and reduce our profitability.
If we market any of our products in a manner
that violates healthcare fraud and abuse laws, or if we violate government price reporting laws, we may be subject to civil or criminal
penalties.
The FDA and other government authorities enforce
laws and regulations that require that the promotion of pharmaceutical products be consistent with the approved prescribing information.
While physicians may prescribe an approved product for a so-called “off-label” use under the practice of medicine, it is
unlawful for a pharmaceutical company to promote its products in a manner that is inconsistent with its approved label and any company
which engages in such conduct may be subject to significant liability. Similarly, industry codes in the European Union and other foreign
jurisdictions prohibit companies from engaging in off-label promotion and regulatory agencies in various countries enforce violations
of the code with civil penalties. While we intend to ensure that our promotional materials are consistent with our label, regulatory
agencies may disagree with our assessment and may issue untitled letters, warning letters or may institute other civil or criminal enforcement
proceedings. In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal healthcare
fraud and abuse laws have been applied in recent years to restrict certain marketing practices in the pharmaceutical industry. These
laws include the U.S. Federal Healthcare Program Anti-Kickback Statute, U.S. False Claims Act and similar state laws. Because of the
breadth of these laws and the narrowness of the safe harbors, it is possible that some of our business activities could be subject to
challenge under one or more of these laws.
The U.S. Federal Healthcare Program Anti-Kickback
Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce, or in
return for, purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable
under Medicare, Medicaid or other federally financed healthcare programs. This statute has been interpreted broadly to apply to arrangements
between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers on the other. Although there
are several statutory exemptions and regulatory safe harbors protecting certain common activities from prosecution, the exemptions and
safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchasing or recommending may
be subject to scrutiny if they do not qualify for an exemption or safe harbor. Our practices may not, in all cases, meet all of the criteria
for safe harbor protection from anti-kickback liability. Moreover, recent health care reform legislation has strengthened these laws.
For example, the Affordable Care Act, among other things, amends the intent requirement of the U.S. Federal Healthcare Program Anti-Kickback
Statute and criminal health care fraud statutes; a person or entity no longer needs to have actual knowledge of this statute or specific
intent to violate it. In addition, the Affordable Care Act provides that the government may assert that a claim including items or services
resulting from a violation of the U.S. Federal Healthcare Program Anti-Kickback Statute constitutes a false or fraudulent claim for purposes
of the U.S. False Claims Act. Federal false claims laws, including the U.S. False Claims Act, impose criminal and civil penalties, including
through civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented,
to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal
an obligation to pay money to the federal government.
Over the past few years, pharmaceutical and other
healthcare companies have been prosecuted under these laws for a variety of alleged promotional and marketing activities, such as: allegedly
providing free trips, free goods, sham consulting fees and grants and other monetary benefits to prescribers; reporting to pricing services
inflated average wholesale prices that were then used by federal programs to set reimbursement rates; engaging in off-label promotion
that caused claims to be submitted to Medicare or Medicaid for non-covered, off-label uses; using a charity as an illegal conduit to
cover the copays of Medicare patients; and submitting inflated best price information to the Medicaid Drug Rebate Program to reduce liability
for Medicaid rebates.
Other restrictions under applicable U.S. federal
and state healthcare laws and regulations may include the following:
| ● | the federal Health
Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil
liability for, among other things, knowingly and willfully executing or attempting to execute
a scheme to defraud any healthcare benefit program or making false statements relating to
healthcare matters; |
| ● | HIPAA, as amended
by the Health Information Technology for Economic and Clinical Health, or HITECH, Act and
its implementing regulations, also imposes obligations, including mandatory contractual terms,
on certain types of people and entities with respect to safeguarding the privacy, security
and transmission of individually identifiable health information; |
| ● | the federal Physician
Payment Sunshine Act requires applicable manufacturers of covered drugs, devices, biologics,
and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s
Health Insurance Program, with specific exceptions, to report payments and other transfers
of value to physicians and teaching hospitals, as well as certain ownership and investment
interests held by physicians and their immediate family, which includes annual data collection
and reporting obligations; and |
| ● | analogous state
and foreign laws and regulations, such as state anti-kickback and false claims laws, may
apply to sales or marketing arrangements and claims involving healthcare items or services
reimbursed by non-governmental third-party payors, including private insurers. |
Some state laws require pharmaceutical companies
to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by
the federal government and may require drug manufacturers to report information related to payments and other transfers of value to physicians
and other healthcare providers or marketing expenditures to federal and state agencies. State and foreign laws also govern the privacy
and security of health information in some circumstances, many of which differ from each other in significant ways and often are not
preempted by HIPAA, thus complicating compliance efforts. Tracking and reporting may be burdensome and require a significant expenditure
to comply with applicable requirements.
Our ability to generate product revenues
will be diminished if our products sell for inadequate prices or patients are unable to obtain adequate levels of reimbursement.
Our ability to commercialize our products, alone
or with collaborators, will depend in part on the extent to which reimbursement will be available from:
| ● | government and
health administration authorities; |
| ● | private health
maintenance organizations and health insurers; and |
| ● | other healthcare
payers. |
Patients generally expect that products such
as ours are covered and reimbursed by third-party payors for all or part of the costs and fees associated with their use. If such products
are not covered and reimbursed then patients may be responsible for the entire cost of the product, which can be substantial. Therefore,
health care providers generally do not prescribe products that are not covered and reimbursed by third-party payors in order to avoid
subjecting their patients to such financial liability. The existence of adequate coverage and reimbursement for the products by government
and private insurance plans is central to the acceptance of tecarfarin and any future products we provide.
During the past several years, third-party payors
have undertaken cost-containment initiatives including different payment methods, monitoring health care expenditures, and anti-fraud
initiatives. For some governmental programs, such as Medicaid, coverage and reimbursement differ from state to state, and some state
Medicaid programs may not pay an adequate amount for tecarfarin or any of our other products or may make no payment at all. Furthermore,
the health care industry in the United States has experienced a trend toward cost containment as government and private insurers seek
to control health care costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Therefore,
we cannot be certain that our services will be reimbursed at a level that is sufficient to meet our costs.
Obtaining coverage and reimbursement approval
of a product from a government or other third-party payor is a time-consuming and costly process that could require us to provide to
the payor supporting scientific, clinical and cost-effectiveness data for the use of our products. Even if we obtain coverage for a given
product, the resulting reimbursement payment rates might not be adequate for us to achieve or sustain profitability or may require co-payments
that patients find unacceptably high. Patients are unlikely to use tecarfarin or any future product candidates unless coverage is provided
and reimbursement is adequate to cover a significant portion of the cost of tecarfarin or any future product candidates.
We intend to seek approval to market tecarfarin
and future product candidates in both the United States and in selected foreign jurisdictions. If we obtain approval in one or more foreign
jurisdictions for tecarfarin or any future product candidates, we will be subject to rules and regulations in those jurisdictions. In
some foreign countries, particularly those in the European Union, the pricing of drugs is subject to governmental control. In these countries,
pricing negotiations with governmental authorities can take considerable time after obtaining marketing approval of a product candidate.
In addition, market acceptance and sales of product candidates will depend significantly on the availability of adequate coverage and
reimbursement from third-party payors for product candidates and may be affected by existing and future health care reform measures.
Third-party payors, whether domestic or foreign,
or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs. In both the United
States and certain foreign jurisdictions, there have been a number of legislative and regulatory changes to the health care system that
could impact our ability to sell our products profitably. In particular, in the Affordable Care Act, as amended by the Health Care and
Education Affordability Reconciliation Act, among other things, revised the methodology by which rebates owed by manufacturers to the
state and federal government for covered outpatient drugs, including product candidates, under the Medicaid Drug Rebate Program are calculated,
increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program, extended the Medicaid Drug
Rebate program to utilization of prescriptions of individuals enrolled in Medicaid managed care organizations, subjected manufacturers
to new annual fees and taxes for certain branded prescription drugs, and provided incentives to programs that increase the federal government’s
comparative effectiveness research.
There have been, and likely will continue to
be, legislative and regulatory proposals at the foreign, federal and state levels directed at broadening the availability of healthcare
and containing or lowering the cost of healthcare. We cannot predict the initiatives that may be adopted in the future, particularly
in light of the new presidential administration in the United States, and any proposed changes to healthcare laws that could potentially
affect our clinical development or regulatory strategy. The continuing efforts of the government, insurance companies, managed care organizations
and other payors of healthcare services to contain or reduce costs of healthcare and/or impose price controls may adversely affect:
| ● | the demand for
tecarfarin, or future product candidates, if we obtain regulatory approval; |
| ● | our ability to
set a price that we believe is fair for our products; |
| ● | our ability to
generate revenue and achieve or maintain profitability; |
| ● | the level of taxes
that we are required to pay; and |
| ● | the availability
of capital. |
Any reduction in reimbursement from Medicare,
Medicaid or other government programs may result in a similar reduction in payments from private payors, which may adversely affect our
future profitability.
We will rely on third parties and consultants
to conduct all of our clinical trials. If these third parties or consultants do not successfully carry out their contractual duties,
comply with regulatory requirements, or meet expected deadlines, we may be unable to obtain regulatory approval for any future product
candidates.
We will rely on medical institutions, clinical
investigators, contract laboratories, collaborative partners and other third parties, such as CROs, to conduct clinical trials on our
product candidates. The third parties with whom we may contract for execution of any of our future clinical trials may play a significant
role in the conduct of these trials and the subsequent collection and analysis of data. These third parties would not be our employees,
and except for contractual duties and obligations, we would have limited ability to control the amount or timing of resources that they
devote to any of our future programs. Although we may rely on these third parties to conduct our clinical trials, we would remain responsible
for ensuring that each of our preclinical trials and clinical trials is conducted in accordance with applicable legal requirements, the
investigational plan and the protocol. Moreover, whether we conduct trials ourselves or hire third parties to do so, the FDA and other
similar regulatory authorities require us to comply with GCPs when we conduct, monitor, record and report the results of clinical trials
to ensure that the data and results are scientifically credible and accurate, and that the trial subjects are adequately informed of
the potential risks of participating in clinical trials.
In addition, the execution of clinical trials,
and the subsequent compilation and analysis of the data produced, requires coordination among various parties. In order for these functions
to be carried out effectively and efficiently, it is imperative that these parties communicate and coordinate with one another. Moreover,
these third parties may also have relationships with other commercial entities, some of which may compete with us. If the third parties
or consultants conducting our clinical trials do not perform their contractual duties or obligations, experience work stoppages, do not
meet expected deadlines, terminate their agreements with us or need to be replaced, or if the quality or accuracy of the clinical data
they obtain is compromised due to the failure to adhere to our clinical trial protocols or GCPs, or for any other reason, we may need
to conduct additional clinical trials or enter into new arrangements with alternative third parties, which could be difficult, costly
or impossible, and our clinical trials may be extended, delayed or terminated or may need to be repeated. If any of the foregoing were
to occur, we may not be able to obtain, or may be delayed in obtaining, regulatory approval for and will not be able to, or may be delayed
in our efforts to, successfully commercialize any future product candidates being tested in such trials.
We currently have limited distribution,
marketing, support and sales capabilities and plan to rely on third-party distribution partners for the distribution, marketing, support
and sales of our products which could delay or limit our ability to generate revenue.
We plan to utilize third-party service providers
for the distribution and marketing and sales of our product candidates, if approved. Upon launch, we intend to promote utilizing third
party collaborations in addition to building our own commercial infrastructure in anticipation of the approval of tecarfarin. Reliance
on third-party service providers may prevent our direct control of key aspects of those critical functions including regulatory compliance,
import and export operations, supply chain security, warehousing and inventory management, distribution, contract administration, invoicing,
sales deductions administration, accounts receivable management and call center management. Any future distribution partners may hold
significant control over important aspects of the commercialization of our products, including market identification, regulatory compliance,
marketing methods, pricing, composition of sales force and promotional activities.
We may not be able to control the amount and
timing of resources that any future third-party distribution partners may devote to our products, or prevent any third-party from pursuing
the development of alternative technologies or products that compete with our products, except to the extent our contractual arrangements
protect us against such activities. Also, we may not be able to prevent any other third-party from withdrawing its support of our products.
If third-party service providers fail to comply
with applicable laws and regulations, fail to meet expected deadlines, encounter natural or other disasters at their facilities or otherwise
fail to perform their services to us in a satisfactory or predicted manner, or at all, our ability to deliver product to meet commercial
demand could be significantly impaired. In addition, we may use third parties to perform various other services for us relating to sample
accountability and regulatory monitoring, including adverse event reporting, safety database management and other product maintenance
services. If the quality or accuracy of the data maintained by these service providers is insufficient, our ability to continue to market
our products could be jeopardized or we could be subject to regulatory sanctions, and any indemnity we may receive from such third-party
service providers could be limited by such provider’s ability to pay and otherwise might not be sufficient to cover all losses
we may experience.
Our employees, independent contractors,
consultants, commercial partners and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory
standards and requirements.
We are exposed to the risk of employee fraud
or other illegal activity by our employees, independent contractors, consultants, commercial partners and vendors. Misconduct by these
parties could include intentional, reckless and/or negligent conduct that fails to: (i) comply with the laws of the FDA and other similar
foreign regulatory bodies; (ii) provide true, complete and accurate information to the FDA and other similar foreign regulatory bodies;
(iii) comply with manufacturing standards we have established; (iv) comply with healthcare fraud and abuse laws in the United States
and similar foreign fraudulent misconduct laws; or (v) report financial information or data accurately or to disclose unauthorized activities
to us. Any such misconduct or noncompliance could negatively affect the FDA’s review of our regulatory submission, including delaying
approval or disallowance of certain information to support the submission, and/or delay a federal or state healthcare programs or a commercial
insurer’s determination regarding the availability of future reimbursement for product candidates. If we obtain FDA approval of
any product candidates and begin commercializing those products in the United States, our potential exposure under such laws will increase
significantly, and our costs associated with compliance with such laws are also likely to increase. These laws may impact, among other
things, our current activities with principal investigators and research patients, as well as proposed and future sales, marketing and
education programs. In particular, the promotion, sales and marketing of healthcare items and services, as well as certain business arrangements
in the healthcare industry, are subject to extensive laws designed to prevent fraud, kickbacks, self-dealing and other abusive practices.
These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, structuring and commission(s),
certain customer incentive programs and other business arrangements generally. Activities subject to these laws also involve the improper
use of information obtained in the course of patient recruitment for clinical trials.
It is not always possible to identify and deter
employee misconduct, and the precautions we take to detect and prevent inappropriate conduct may not be effective in controlling unknown
or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure
to be in compliance with such laws or regulations. Efforts to ensure that our business arrangements will comply with applicable healthcare
laws may involve substantial costs. It is possible that governmental and enforcement authorities will conclude that our business practices
may not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws
and regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights,
those actions could have a significant impact on our business, including the imposition of civil, criminal and administrative penalties,
damages, disgorgement, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs,
contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could
adversely affect our ability to operate our business and our results of operations. In addition, the approval and commercialization of
any product candidates outside the United States will also likely subject us to foreign equivalents of the healthcare laws mentioned
above, among other foreign laws.
We intend to establish a sales force to
market our product candidates. If we are not successful in doing so, our ability to generate sales and profits will be limited.
Although certain of our employees have commercialization
experience, as a company we do not have an internal sales force and we currently have only limited commercial capabilities. We intend
to establish an internal specialty cardiorenal sales force for the promotion and sale of tecarfarin, if approved. Establishing a pharmaceutical
sales force is a difficult undertaking. Experienced and competent sales representatives and sales managers must be recruited, hired,
trained, assigned appropriate territories, managed and compensated in such a way that they can achieve success in selling products to
a sophisticated audience of healthcare professionals who frequently have little or no time to spend with sales personnel. In addition,
our prospective sales force must compete against the sales forces of some of the largest and most successful pharmaceutical companies
in the world, who will be promoting competing products. If we fail to hire and field a high-quality sales force, we may be unable to
generate expected revenues and profits.
In addition, there are significant expenses and
risks involved with establishing our own sales and marketing capabilities, including our ability to hire, retain and appropriately incentivize
qualified individuals, generate sufficient sales leads, provide adequate training to sales and marketing personnel, and effectively manage
a geographically dispersed sales and marketing team. Any failure or delay in the development of our internal sales, marketing and distribution
capabilities could delay any product launch, which would adversely impact the commercialization of our product candidates. For example,
if we recruit any sales representatives or establish marketing capabilities prior to commercial launch and the commercial launch is delayed
or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly,
and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.
In addition to our own internal sales force,
we may choose to collaborate with third parties that have direct sales forces and established distribution systems, either to augment
our own sales force and distribution systems or in lieu of our own sales force and distribution systems. If we are unable to enter into
such arrangements on acceptable terms or at all, we may not be able to successfully commercialize our product candidates. To the extent
we commercialize our product candidates by entering into agreements with third-party collaborators, we may have limited or no control
over the sales, marketing and distribution activities of these third parties, in which case our future revenues would depend heavily
on the success of the efforts of these third parties. If we are not successful in commercializing tecarfarin or any future product candidates,
either on our own or through collaborations with one or more third parties, our future product revenue will suffer and we could incur
significant additional losses.
We plan to rely on collaborations and license
arrangements with third parties to commercialize, market and promote our marketed products which may limit our ability to generate revenue
and adversely affect our profitability.
We plan to rely on collaboration and other agreements
with third parties with third parties with respect to our product candidates and future marketed products. Our current or any future
collaborations or license arrangements may not be successful. With respect to the product candidates we have licensed, including our
rights to tecarfarin in China, we depend upon collaborations with third parties to develop these product candidates in the licensed territories
and we will depend substantially upon third parties to commercialize these product candidates. If we are unable to maintain current collaborations
or enter into additional collaborations with established pharmaceutical or pharmaceutical service companies to provide the services we
need, we may not be able to successfully commercialize our products.
Our future growth depends, in part, on
our ability to penetrate foreign markets, where we would be subject to additional regulatory burdens and other risks and uncertainties.
Although our focus as this time is primarily
on the U.S. market, our future profitability will depend, in part, on our ability to commercialize tecarfarin in foreign markets for
which we intend to rely on collaborations with third parties. If we commercialize tecarfarin in foreign markets, we would be subject
to additional risks and uncertainties, including:
| ● | our customers’
ability to obtain reimbursement in foreign markets; |
| ● | our inability
to directly control commercial activities because we are relying on third parties; |
| ● | the burden of
complying with complex and changing foreign regulatory, tax, accounting and legal requirements; |
| ● | different medical
practices and customs in foreign countries affecting acceptance in the marketplace; |
| ● | import, export
and foreign licensing requirements; |
| ● | different packaging
and labeling requirements; |
| ● | longer accounts
receivable collection times; |
| ● | longer lead times
for shipping; |
| ● | language barriers
for technical training; |
| ● | differing and/or
reduced protection of intellectual property rights in some foreign countries; |
| ● | foreign currency
exchange rate fluctuations; and |
| ● | the interpretation
of contractual provisions governed by foreign laws in the event of a contract dispute. |
Foreign sales of tecarfarin could also be adversely
affected by the imposition of governmental controls, political and economic instability, trade restrictions and changes in tariffs, any
of which may adversely affect our results of operations.
The ongoing COVID-19 global health crisis
may impact our planned operations, including our pivotal Phase 3 clinical trial
In January 2020, the World Health Organization
declared a global pandemic for the novel strain of coronavirus, COVID-19. Since then, the COVID-19 coronavirus has spread to multiple
countries, including throughout the United States. We may experience disruptions as a result of the pandemic if the pandemic continues
or increases in severity, including:
| ● | unwillingness
of potential study participants to enroll in our pivotal Phase 3 clinical trial and/or visit
healthcare facilities; |
| ● | postponement of
enrollment in our pivotal Phase 3 clinical trial |
| ● | postponement of
the initiation of our pivotal Phase 3 clinical trial; |
| ● | diversion of healthcare
resources away from the conduct of clinical trials, including the diversion of hospitals
serving as our clinical trial sites and hospital staff supporting the conduct of our clinical
trial; |
| ● | interruption of
key clinical trial activities, such as clinical site visits by study participants and clinical
trial site monitoring, due to limitations on travel imposed or recommended by federal or
state governments, employers and others; |
| ● | limitations in
employee resources that would otherwise be focused on the conduct of our pivotal Phase 3
clinical trial, including because of sickness of employees or their families or the desire
of employees to avoid contact with large groups of people; |
| ● | delays in receiving
approval from local regulatory authorities to initiate our pivotal Phase 3 clinical trial; |
| ● | delays in clinical
sites receiving the supplies and materials needed to conduct our pivotal Phase 3 clinical
trial; |
| ● | interruption in
global shipping that may affect the manufacture and transport of clinical trial materials,
such as investigational drug product used in our clinical trial; |
| ● | changes in local
regulations as part of a response to the COVID-19 coronavirus outbreak which may require
us to change the ways in which our pivotal Phase 3 clinical trial is conducted, which may
result in unexpected costs, or to discontinue the clinical trial altogether; |
| ● | delays in necessary
interactions with local regulators, ethics committees and other important agencies and contractors
due to limitations in employee resources or forced furlough of government employees; and |
| ● | delay in the timing
of interactions with the FDA due to absenteeism by federal employees or by the diversion
of their efforts and attention to approval of other therapeutics or other activities related
to COVID-19. |
Our business and the business of the suppliers
of our clinical product candidate is expected to be materially and adversely affected by the pandemic. While we are currently not experiencing
material delays, such events could result in the delay or complete or partial closure of clinical trial sites or one or more manufacturing
facilities which could impact our supply of our clinical product candidate. In addition, it could impact economies and financial markets,
resulting in an economic downturn that could impact our ability to raise capital or slow down potential partnering relationships.
The effects of the governmental orders may negatively
impact productivity, disrupt our business and delay our pivotal Phase 3 clinical trial program and timelines, the magnitude of which
will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in
the ordinary course.
In addition, the COVID-19 outbreak could disrupt
our operations due to absenteeism by infected or ill members of management or other employees, or absenteeism by members of management
and other employees who elect not to come to work due to the illness affecting others in our office, or due to quarantines. The COVID-19
illness could also impact members of our Board of Directors resulting in absenteeism from meetings of the directors or committees of
directors, and making it more difficult to convene the quorums of the full Board of Directors or its committees needed to conduct meetings
for the management of our affairs.
The global outbreak of the virus continues to
rapidly evolve. The extent to which the virus may continue to impact our business and clinical trials will depend on future developments,
which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration
of the outbreak, travel restrictions and social distancing in the United States, business closures or business disruptions and the effectiveness
of actions taken in the United States and other countries to contain and treat the disease. We do not yet know the full extent of potential
delays or impacts on our business, operations, or the global economy as a whole. While the spread of COVID-19 may eventually be contained
or mitigated, there is no guarantee that a future outbreak of this or any other widespread epidemics will not occur, or that the global
economy will recover, either of which could seriously harm our business.
While we are currently not experiencing any delays,
we may in the future experience delays. These delays may result in the need for trials to be redesigned and may impact whether they will
be completed on schedule, if at all. Clinical trials can be delayed for a variety of reasons, including the COVID-19 pandemic, delays
in obtaining regulatory approval to commence a clinical trial, in securing clinical trial agreements with prospective sites with acceptable
terms, in obtaining institutional review board approval to conduct a clinical trial at a prospective site, in recruiting patients to
participate in a clinical trial or in obtaining sufficient supplies of clinical trial materials. Manufacturing considerations for clinical
development candidates may include an expected several month lead time following a decision to commence any clinical trial(s) and capacity
considerations of our third-party contract manufacturers to provide clinical supply of our product candidates could cause delays in clinical
trials. Furthermore, due to the COVID-19 pandemic, many manufacturers have been prioritizing the manufacture of COVD-19 related products,
increasing the manufacturing lead times for non-COVID-19 related products. Many factors affect patient enrollment, including the size
of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the clinical trial, competing clinical
trials and new drugs approved for the conditions we are investigating. Clinical investigators will need to decide whether to offer their
patients enrollment in clinical trials of our product candidates versus treating these patients with commercially available drugs that
have established safety and efficacy profiles. Any delays in completing our clinical trials will increase our costs, slow down our product
development and timeliness and approval process and delay our ability to generate revenue.
Compliance with governmental regulations
regarding the treatment of animals used in research could increase our operating costs, which would adversely affect the commercialization
of our products.
The Animal Welfare Act, or AWA, is the federal
law that covers the treatment of certain animals used in research. Currently, the AWA imposes a wide variety of specific regulations
that govern the humane handling, care, treatment and transportation of certain animals by producers and users of research animals, most
notably relating to personnel, facilities, sanitation, cage size, and feeding, watering and shipping conditions. Third parties with whom
we contract are subject to registration, inspections and reporting requirements under the AWA. Furthermore, some states have their own
regulations, including general anti-cruelty legislation, which establish certain standards in handling animals. Comparable rules, regulations,
and or obligations exist in many foreign jurisdictions. If we or our contractors fail to comply with regulations concerning the treatment
of animals used in research, we may be subject to fines and penalties and adverse publicity, and our operations could be adversely affected.
General Company-Related Risks
If we fail to attract and keep senior management
and key scientific personnel, we may be unable to successfully develop tecarfarin or any future product candidates, conduct our clinical
trials and commercialize our product candidates or any future products we develop.
Our management team has expertise in many different
aspects of fundraising, drug development and commercialization. We believe that our future success is highly dependent upon the contributions
of our senior management, particularly Quang Pham, our Chief Executive Officer. We do not have an insurance policy on the life of our
Chief Executive Officer and we do not have “key person” life insurance policies for any of our other officers or advisors.
The loss of services of any of these individuals could delay or prevent the successful development of our product pipeline, completion
of our planned clinical trials or the commercialization of tecarfarin or any other future products we develop, which could adversely
affect our operating results.
We will need to hire additional personnel, including
experienced marketing and sales representatives, as we expand our clinical development and commercial activities. We could experience
difficulties attracting and retaining qualified employees in the future. For example, competition for qualified personnel in the pharmaceuticals
field is intense due to the limited number of individuals who possess the skills and experience required by our industry. Other pharmaceutical
companies with which we compete for qualified personnel have greater financial and other resources, different risk profiles, and a longer
history in the industry than we do. They also may provide more diverse opportunities and better chances for career advancement. Some
of these characteristics may be more appealing to high-quality candidates than what we have to offer. We may not be able to attract and
retain quality personnel on acceptable terms, or at all. In addition, to the extent we hire personnel from competitors, we may be subject
to allegations that they have been improperly solicited or that they have divulged proprietary or other confidential information or that
their former employers own their research output. If we are unable to continue to attract and retain high-quality personnel, the rate
and success at which we can develop and commercialize product candidates could be limited.
We will need to increase the size of our
organization, and we may experience difficulties in managing this growth.
As of March 27, 2023, we had three employees
who work full-time as well as several independent contractors. We will need to continue to expand our managerial, operational, finance
and other resources to manage our operations, commercialize tecarfarin or any other product candidates, if approved, and continue our
development activities. Our management and personnel systems and facilities currently in place may not be adequate to support this future
growth. Our need to effectively execute our growth strategy requires that we:
| ● | manage any of
our future clinical trials effectively; |
| ● | identify, recruit,
retain, incentivize and integrate additional employees; |
| ● | manage our internal
development efforts effectively while carrying out our contractual obligations to third parties;
and |
| ● | continue to improve
our operational, financial and management controls, reporting systems and procedures. |
Due to our limited financial resources and our
limited experience in managing a company with such anticipated growth, we may not be able to effectively manage the expansion of our
operations or recruit and train additional qualified personnel. The physical expansion of our operations may lead to significant costs
and may divert our management and business development resources. Any inability to manage growth could delay the execution of our development
and strategic objectives or disrupt our operations.
If product liability lawsuits are brought
against us, we may incur substantial liabilities and may be required to limit commercialization of any future products we develop.
We face an inherent risk of product liability
as a result of the clinical testing of tecarfarin and any of our future product candidates. We will face further risk if we commercialize
tecarfarin or any of our product candidates. For example, we may be sued if any product we sell or any product we develop allegedly causes
injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims
may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence,
strict liability and a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully
defend ourselves against product liability claims, we may incur substantial losses or be required to limit commercialization of our products.
Even a successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome,
liability claims may result in:
| ● | decreased demand
for our product candidates or products we develop, including tecarfarin; |
| ● | termination of
clinical trial sites or entire trial programs; |
| ● | injury to our
reputation and significant negative media attention; |
| ● | withdrawal of
clinical trial participants or cancellation of clinical trials; |
| ● | significant costs
to defend the related litigation; |
| ● | a diversion of
management’s time and our resources; |
| ● | substantial monetary
awards to trial participants or patients; |
| ● | regulatory investigations,
product recalls, withdrawals or labeling, marketing or promotional restrictions; |
| ● | the inability
to commercialize any products we develop; and |
| ● | a decline in our
share price. |
Our inability to obtain and maintain sufficient
product liability insurance at an acceptable cost and scope of coverage to protect against potential product liability claims could prevent
or inhibit the commercialization of tecarfarin or any future products that we develop. We currently carry product liability insurance
covering our marketed products and our clinical trials. Although we maintain such insurance, any claim that may be brought against us
could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in
excess of the limits of our insurance coverage. Our insurance policies also have various exclusions and deductibles, and we may be subject
to a product liability claim for which we have no coverage. We will have to pay any amounts awarded by a court or negotiated in a settlement
that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient
capital to pay such amounts. Moreover, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient
amounts to protect us against losses. If and when we obtain approval for marketing tecarfarin, we intend to expand our insurance coverage
to include the sale of tecarfarin, however, we may be unable to obtain this liability insurance on commercially reasonable terms.
Our business and operations would suffer
in the event of computer system failures.
Despite the implementation of security measures,
our internal computer systems, and those of third parties on which we rely, are vulnerable to damage from computer viruses, malware,
natural disasters, terrorism, war, telecommunication and electrical failures, cyber-attacks or cyber-intrusions over the internet, attachments
to emails, persons inside our organization, or persons with access to systems inside our organization. The risk of a security breach
or disruption, particularly through cyber-attacks or cyber-intrusions, including by computer hackers, foreign governments, and cyber-terrorists,
has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.
If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our current or
future product development programs. For example, the loss of clinical trial data from completed or any future ongoing or planned clinical
trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data.
To the extent that any disruption or security breach was to result in a loss of or damage to our data or applications, or inappropriate
disclosure of confidential or proprietary information, we could incur material legal claims and liability, damage to our reputation,
and the further development of our product candidates could be delayed.
Any failure to maintain the security of
information relating to our patients, customers, employees and suppliers, whether as a result of cybersecurity attacks or otherwise,
could expose us to litigation, government enforcement actions and costly response measures, and could disrupt our operations and harm
our reputation.
In connection with the pre-clinical and clinical
development, sales and marketing of our products and services, we may from time to time transmit confidential information. We also have
access to, collect or maintain private or confidential information regarding our clinical trials and the patients enrolled therein, employees,
and suppliers, as well as our business. Cyberattacks are rapidly evolving and becoming increasingly sophisticated. It is possible that
computer hackers and others might compromise our security measures, or security measures of those parties that we do business with now
or in the future, and obtain the personal information of patients in our clinical trials, vendors, employees and suppliers or our business
information. A security breach of any kind, including physical or electronic break-ins, computer viruses and attacks by hackers, employees
or others, could expose us to risks of data loss, litigation, government enforcement actions, regulatory penalties and costly response
measures, and could seriously disrupt our operations. Any resulting negative publicity could significantly harm our reputation, which
could cause us to lose market share and have an adverse effect on our results of operations.
We may acquire other businesses or form
joint ventures or make investments in other companies or technologies that could harm our operating results, dilute our stockholders’
ownership, increase our debt or cause us to incur significant expense.
As part of our business strategy, we may pursue
acquisitions of businesses and assets. We also may pursue strategic alliances and joint ventures that leverage our technology and industry
experience to expand our offerings or other capabilities. Though certain company personnel have business development and corporate transaction
experience, including with licensing, mergers and acquisitions, and strategic partnering, as a company we have no experience with acquiring
other companies and limited experience with forming strategic alliances and joint ventures. We may not be able to find suitable partners
or acquisition candidates, and we may not be able to complete such transactions on favorable terms, if at all. If we make any acquisitions,
we may not be able to integrate these acquisitions successfully into our existing business, and we could assume unknown or contingent
liabilities. Any future acquisitions also could result in significant write-offs or the incurrence of debt and contingent liabilities,
any of which could have a material adverse effect on our financial condition, results of operations and cash flows. Integration of an
acquired company also may disrupt ongoing operations and require management resources that would otherwise focus on developing our existing
business. We may experience losses related to investments in other companies, which could have a material negative effect on our results
of operations. We may not identify or complete these transactions in a timely manner, on a cost-effective basis, or at all, and we may
not realize the anticipated benefits of any acquisition, technology license, strategic alliance or joint venture.
To finance any acquisitions or joint ventures,
we may choose to issue shares of our common stock as consideration, which would dilute the ownership of our stockholders. If the price
of our common stock is low or volatile, we may not be able to acquire other companies or fund a joint venture project using our stock
as consideration. Alternatively, it may be necessary for us to raise additional funds for acquisitions through public or private financings.
Additional funds may not be available on terms that are favorable to us, or at all.
Declining general economic or business
conditions may have a negative impact on our business.
Continuing concerns over U.S. health care reform
legislation and energy costs, geopolitical issues, the availability and cost of credit and government stimulus programs in the United
States and other countries have contributed to increased volatility and diminished expectations for the global economy. These factors,
combined with low business and consumer confidence, could precipitate an economic slowdown and recession. Additionally, political changes
in the U.S. and elsewhere in the world have created a level of uncertainty in the markets. If the economic climate does not improve or
deteriorate, our business, as well as the financial condition of our suppliers and our third-party payors, could be adversely affected,
resulting in a negative impact on our business, financial condition and results of operations.
Further, due to increasing inflation, operating
costs for many businesses have increased and, in the future, could impact demand or pricing manufacturing of our drug candidates or services
providers, employee wages. Inflation rates, particularly in the United States, have increased recently to levels not seen in years,
and increased inflation may result in increases in our operating costs (including our labor costs), reduced liquidity and limits on our
ability to access credit or otherwise raise capital. In addition, the Federal Reserve has raised, and may again raise, interest rates
in response to concerns about inflation, which coupled with reduced government spending and volatility in financial markets may have the
effect of further increasing economic uncertainty and heightening these risks.
Actual events involving reduced or limited liquidity,
defaults, non-performance or other adverse developments that affect financial institutions or other companies in the financial services
industry or the financial services industry generally, or concerns or rumors about any events of these kinds, have in the past and may
in the future lead to market-wide liquidity problems. For example, on March 10, 2023, Silicon Valley Bank, was closed by the California
Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation as receiver. Although
we did not have any cash or cash equivalent balances on deposit with Silicon Valley Bank, uncertainty and liquidity concerns in the broader
financial services industry remain and the failure of Silicon Valley Bank and its potential near- and long-term effects on the biotechnology
industry and its participants such as our vendors, suppliers, and investors, may also adversely affect our operations and stock price.
We are actively monitoring the effects these disruptions
and increasing inflation could have on our operations.
These conditions make it extremely difficult for
us to accurately forecast and plan future business activities.
Risks Related to Our Intellectual Property
If we are unable to obtain and maintain
sufficient exclusivity and/or patent protection for our product candidates, or if the scope of the exclusivity or patent protection is
not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to commercialize
our product candidates successfully may be adversely affected.
Our success depends in large part on our ability
to obtain and maintain exclusivity for our proprietary product candidates through market and data exclusivity granted by regulatory agencies
in the United States and other countries with respect to our proprietary product candidates as well as through patent protection. If we
do not adequately protect our intellectual property, competitors may be able to erode or negate any competitive advantage we may have,
which could harm our business and ability to achieve profitability. To protect our proprietary position, we file patent applications in
the United States and abroad related to our novel product candidates that are important to our business. The patent application and approval
process are expensive and time-consuming. We may not be able to file and prosecute all necessary or desirable patent applications at a
reasonable cost or in a timely manner.
The patent position of pharmaceutical companies
generally is highly uncertain. No consistent policy regarding the breadth of claims allowed in pharmaceutical patents has emerged to date
in the United States or in many foreign jurisdictions. In addition, the determination of patent rights with respect to pharmaceutical
compounds commonly involves complex legal and factual questions, which has in recent years been the subject of much litigation. As a result,
the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain.
Assuming the other requirements for patentability
are met, currently, the first to file a patent application is generally entitled to the patent. However, prior to March 16, 2013, in the
United States, the first to invent was entitled to the patent. 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 be certain that we were the first to make the inventions claimed in our
patents, or that we were the first to file for patent protection of such inventions.
Moreover, because the issuance of a patent is
not conclusive as to its inventorship, scope, validity or enforceability, our patents may be challenged in the courts or patent offices
in the United States and abroad. For example, we may be subject to a third-party preissuance submission of prior art to the U.S. Patent
and Trademark Office, or USPTO, or become involved in post-grant review procedures, oppositions, derivations, reexaminations, inter
partes review or interference proceedings, in the United States or elsewhere, challenging our patent rights or the patent rights of
others. An adverse determination in any such challenges may result in loss of exclusivity 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 products, or limit the duration of the patent protection of our technology and products. In addition, given the amount
of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might
expire before or shortly after such candidates are commercialized.
Our future patent applications may not result
in patents being issued which protect our product candidates, in whole or in part, or which effectively prevent others from commercializing
competitive products. 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. In addition, the laws of foreign countries may not
protect our rights to the same extent or in the same manner as the laws of the United States. For example, European patent law restricts
the patentability of methods of treatment of the human body more than United States law does.
Even if our patent applications issue as patents,
they may not issue in a form that will provide us with any meaningful protection, prevent competitors from competing with us or otherwise
provide us with any competitive advantage. Our competitors may be able to circumvent our patents by developing similar or alternative
technologies or products in a non-infringing manner. Our competitors may also seek approval to market their own products similar to or
otherwise competitive with our products. Alternatively, our competitors may seek to market generic versions of any approved products by
submitting ANDAs to the FDA in which they claim that patents owned or licensed by us are invalid, unenforceable or not infringed. In these
circumstances, we may need to defend or assert our patents, or both, including by filing lawsuits alleging patent infringement. In any
of these types of proceedings, a court or other agency with jurisdiction may find our patents invalid or unenforceable, or that our competitors
are competing in a non-infringing manner. Thus, even if we have valid and enforceable patents, these patents still may not provide protection
against competing products or processes sufficient to achieve our business objectives.
Depending upon the timing, duration and conditions
of FDA marketing approval of our product candidates, one or more of our U.S. patents may be eligible for limited patent term extension
under the Hatch-Waxman Act. The Hatch-Waxman Act permits a patent term extension of up to five years for a patent covering an approved
product as compensation for effective patent term lost during product development and the FDA regulatory review process. However, we may
not receive an extension if we fail to apply within applicable deadlines, fail to apply prior to expiration of relevant patents or otherwise
fail to satisfy applicable requirements. Moreover, the length of the extension could be less than we request. If we are unable to obtain
patent term extension or the term of any such extension is less than we request, the period during which we can enforce our patent rights
for that product will be shortened compared to expectations and our competitors may obtain approval to market competing products sooner.
As a result, our revenue from applicable products could be reduced, possibly materially. Further, if this occurs, our competitors may
take advantage of our investment in development and trials by referencing our clinical and preclinical data and launch their product earlier
than might otherwise be the case.
To date, we have not engaged intellectual
property counsel to conduct a freedom to operate analysis.
While we have engaged intellectual property counsel
to assist in protecting our patent ownership rights, to date, we have not had intellectual property counsel conduct a freedom to operate
analysis regarding our tecarfarin product. As a result, we cannot be certain that we will not be exposed to third party legal claims,
liabilities and/or litigation actions when we seek to develop, make and market products using our tecarfarin technology.
We may become involved in lawsuits to protect
or enforce our patents or other intellectual property, which could be expensive, time consuming and unsuccessful.
Competitors may infringe our patents, trademarks,
copyrights 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 divert the time and attention of our management and scientific personnel. Any claims we
assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that we infringe their patents,
in addition to counterclaims asserting that our patents are invalid or unenforceable, or both. In any patent infringement proceeding,
there is a risk that a court will decide that a patent of ours is invalid or unenforceable, in whole or in part, and that we do not have
the right to stop the other party from using the invention at issue. There is also a risk that, even if the validity of such patents is
upheld, the court will construe the patent’s claims narrowly or decide that we do not have the right to stop the other party from
using the invention at issue on the grounds that our patent claims do not cover the invention. An adverse outcome in a litigation or proceeding
involving our patents could limit our ability to assert our patents against those parties or other competitors, and may curtail or preclude
our ability to exclude third parties from making and selling similar or competitive products. Any of these occurrences could adversely
affect our competitive business position, business prospects and financial condition.
Similarly, if we assert trademark infringement
claims, a court may determine that the marks we have asserted are invalid or unenforceable, or that the party against whom we have asserted
trademark infringement has superior rights to the marks in question. In this case, we could ultimately be forced to cease use of such
trademarks.
Even if we establish infringement, the court may
decide not to grant an injunction against further infringing activity and instead award only monetary damages, which may or may not be
an adequate remedy. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation,
there is a risk that some of our confidential information could be compromised by disclosure during litigation. There could also be public
announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive
these results to be negative, it could have a material adverse effect on the price of shares of our common stock. Moreover, there can
be no assurance that we will have sufficient financial or other resources to file and pursue such infringement claims, which typically
last for years before they are concluded. Even if we ultimately prevail in such claims, the monetary cost of such litigation and the diversion
of the attention of our management and scientific personnel could outweigh any benefit we receive as a result of the proceedings.
If we are sued for infringing intellectual
property rights of third parties, such litigation could be costly and time consuming and could prevent or delay us from developing or
commercializing our product candidates.
Our commercial success depends, in part, on our
ability to develop, manufacture, market and sell our product candidates without infringing the intellectual property and other proprietary
rights of third parties. If any third-party patents or patent applications are found to cover our product candidates or their methods
of use, we may not be free to manufacture or market our product candidates as planned without obtaining a license, which may not be available
on commercially reasonable terms, or at all.
There is a substantial amount of intellectual
property litigation in the pharmaceutical industry, and we may become party to, or threatened with, litigation or other adversarial proceedings
regarding intellectual property rights with respect to our product candidates, including interference and other administrative proceedings
before the USPTO. Third parties may assert infringement claims against us based on existing or future intellectual property rights. The
outcome of intellectual property litigation is subject to uncertainties that cannot be adequately quantified in advance. The pharmaceutical
industry has produced a significant number of patents, and it may not always be clear to industry participants, including us, which patents
cover various types of products or methods of use. The coverage of patents is subject to interpretation by the courts, and the interpretation
is not always uniform. If we were sued for patent infringement, we would need to demonstrate that our product candidates, products or
methods either do not infringe the patent claims of the relevant patent or that the patent claims are invalid or unenforceable, and we
may not be able to do this. In the United States, proving invalidity (except in proceedings before the USPTO) requires a showing of clear
and convincing evidence to overcome the presumption of validity enjoyed by issued patents. Even if we are successful in these proceedings,
we may incur substantial costs and the time and attention of our management and scientific personnel could be diverted in pursuing these
proceedings, which could significantly harm our business and operating results. In addition, we may not have sufficient resources to bring
these actions to a successful conclusion.
If we are found to infringe a third-party’s
intellectual property rights, we could be forced, including by court order, to cease developing, manufacturing or commercializing the
infringing product candidate or product. Alternatively, we may be required to obtain a license from such third-party in order to use the
infringing technology and continue developing, manufacturing or marketing the infringing product candidate. 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. In addition, we could be found liable for monetary damages,
including treble damages and attorney’’ fees if we are found to have willfully infringed a patent. A finding of infringement
could prevent us from commercializing our product candidates 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.
Changes to the patent law in the United
States and other jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our products.
As is the case with other pharmaceutical companies,
our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the pharmaceutical
industry involves both technological and legal complexity and is therefore costly, time consuming and inherently uncertain. Recent patent
reform legislation in the United States and other countries, including the Leahy-Smith America Invents Act, or the Leahy-Smith Act, signed
into law in September 2011, could increase those uncertainties and costs. 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, redefine prior art and provide more
efficient and cost-effective avenues for competitors to challenge the validity of patents. In addition, the Leahy-Smith Act has transformed
the U.S. patent system into a “first to file” system. The first-to-file provisions, however, only became effective in March
2013. Accordingly, it is not yet 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 make it more difficult to obtain patent protection for our inventions and increase the uncertainties
and costs surrounding the enforcement or defense of our or our collaboration partner’’ issued patents, all of which could
harm our business, results of operations and financial condition.
The U.S. Supreme Court has ruled on several patent
cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent
owners in certain situations. Additionally, there have been recent proposals for additional changes to the patent laws of the United States
and other countries that, if adopted, could impact our ability to enforce our proprietary technology. Depending on future actions by the
U.S. Congress, the U.S. courts, the USPTO and the relevant law-making bodies in other countries, 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.
Obtaining and maintaining our patent protection
depends on compliance with various procedural, document submissions, fee payment and other requirements imposed by governmental patent
agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.
Periodic maintenance fees on any issued patent
are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patent. The USPTO and various foreign
governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during
the patent application process. While an inadvertent lapse can, in many cases, be cured by payment of a late fee or by other means in
accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or
patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could
result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions
within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. If we fail to maintain
the patents and patent applications covering our product candidates, our competitive position would be adversely affected.
We may not be able to enforce our intellectual
property rights throughout the world.
Filing, prosecuting and defending patents on our
product candidates in all countries throughout the world would be prohibitively expensive. The requirements for patentability may differ
in certain countries, particularly in developing countries. Competitors may use our technologies in jurisdictions where we have not obtained
patent protection to develop their own products and, further, may export otherwise infringing products to territories where we may obtain
patent protection, but where patent enforcement is not as strong as that in the United States. These products may compete with our products
in jurisdictions where we do not have any issued or licensed patents or where any future patent claims or other intellectual property
rights may not be effective or sufficient to prevent them from competing with us.
Moreover, our ability to protect and enforce our
intellectual property rights may be adversely affected by unforeseen changes in foreign intellectual property laws. Additionally, laws
of some countries outside of the United States and Europe do not afford intellectual property protection to the same extent as the laws
of the United States and Europe. Many companies have encountered significant problems in protecting and defending intellectual property
rights in certain foreign jurisdictions. This could make it difficult for us to stop the infringement of our patents or the misappropriation
of our other intellectual property rights. For example, many foreign countries have compulsory licensing laws under which a patent owner
must grant licenses to third parties. Consequently, we may not be able to prevent third parties from practicing our inventions in certain
countries outside the United States and Europe. Competitors may use our technologies in jurisdictions where we have not obtained patent
protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection,
if our ability to enforce our patents to stop infringing activities is inadequate. These products may compete with our products, and our
patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
Proceedings to enforce our patent rights in foreign
jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and resources from other aspects of
our business. Furthermore, while we intend to protect our intellectual property rights in major markets for our products, we cannot ensure
that we will be able to initiate or maintain similar efforts in all jurisdictions in which we may wish to market our products. Accordingly,
our efforts to protect our intellectual property rights in such countries may be inadequate.
Patent terms may be inadequate to protect
our competitive position on our products for an adequate amount of time.
Given the amount of time required for the development,
testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such
candidates are commercialized. With respect to tecarfarin, we have two issued U.S. patents directed to tecarfarin. The expiration dates
of the patents are 2024 for both a composition of matter patent and a method of treatment patent. We expect to seek extensions of patent
terms in the United States and, if available, in other countries where we are prosecuting patents. In the United States, the Drug Price
Competition and Patent Term Restoration Act of 1984 permits a patent term extension of up to five years beyond the normal expiration of
the patent, which is limited to the approved indication (or any additional indications approved during the period of extension). However,
the applicable authorities, including the FDA and the USPTO in the United States, and any equivalent regulatory authority in other countries,
may not agree with our assessment of whether such extensions are available, and may refuse to grant extensions to our patents, or may
grant more limited extensions than we request. If this occurs, our competitors may be able to take advantage of our investment in development
and clinical trials by referencing our clinical and preclinical data and launch their product earlier than might otherwise be the case.
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.
We anticipate that many of the people that we
expect to hire as employees, including our one current employee, were previously employed at other pharmaceutical companies. Some of these
employees may have executed proprietary rights, non-disclosure and non-competition agreements, or similar agreements, in connection with
such previous employment. 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 we or these employees have used or disclosed intellectual property, including trade
secrets or other proprietary information, of any such third-party. Litigation may be necessary to defend against such claims. If we fail
in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel or
sustain damages. Such intellectual property rights could be awarded to a third-party, and we could be required to obtain a license from
such third-party to commercialize our technology or products. Such a license may not be available on commercially reasonable terms or
at all. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction
to management.
In addition, while we typically require our employees,
consultants 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, which may result in claims by or against us related to the ownership of such 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. Even
if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction
to our senior management and scientific personnel.
Risks Related to Ownership of Our Common Stock
An active public trading market for our
common stock may not be maintained.
Prior to our initial public offering consummated
on January 24, 2023, there was no public market or active private market for trading shares of our common stock. Our common stock is currently
traded on the Nasdaq Capital Market, but we can provide no assurance that we will be able to maintain an active trading market. The lack
of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable.
The lack of an active market may also reduce the price of shares of common stock. An inactive market may impair our ability to raise capital
by selling shares and our ability to use our capital stock to acquire other companies or technologies. We cannot predict the prices at
which our common stock will trade.
We cannot be assured that we will be able
to maintain our listing on the Nasdaq Capital Market.
Our securities are listed on The Nasdaq Capital
Market, a national securities exchange. We cannot be assured that we will continue to comply with the rules, regulations or requirements
governing the listing of our common stock on Nasdaq or that our securities will continue to be listed on Nasdaq in the future. If Nasdaq
should determine at any time that we fail to meet Nasdaq requirements, we may be subject to a delisting action by Nasdaq.
If Nasdaq delists our securities from trading
on its exchange at some future date, we could face significant material adverse consequences, including:
| ● | a limited availability of market quotations for our securities; |
| ● | reduced liquidity with respect to our securities; |
| ● | a determination that our common stock is a “penny stock”
which will require brokers trading in our ordinary shares to adhere to more stringent rules, possibly resulting in a reduced level of
trading activity in the secondary trading market for our ordinary shares; |
| ● | a limited amount of news and analyst coverage for our company;
and |
| ● | a decreased ability to issue additional securities or obtain
additional financing in the future. |
Our stock price has fluctuated in the past,
has recently been volatile and may be volatile in the future, and as a result, investors in our common stock could incur substantial losses.
Investors should consider an investment in our common stock risky and invest only if they can withstand a significant loss and
wide fluctuations in the market value of their investment. Investors who purchase our common stock may not be able to sell their shares
at or above the purchase price. Our stock price has been volatile and may be volatile in the future. In addition, the ongoing COVID-19
pandemic has caused broad stock market and industry fluctuations. The stock market in general and the market for biotechnology 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 experience losses on their investment in our common stock. Some of the factors that may
cause the market price of our common stock to fluctuate include:
| ● | adverse results or delays in our clinical trials; |
| ● | the timing or delay of achievement of our clinical, regulatory,
partnering and other milestones, such as the commencement of clinical development, the completion of a clinical trial, the receipt of
regulatory approval or the establishment or termination of a commercial partnership for one or more of our product candidates; |
| ● | announcement of FDA approval or non-approval of our product
candidates or delays in the FDA review process; |
| ● | actions taken by regulatory agencies with respect to our
product candidates, our clinical trials or our sales and marketing activities; |
| ● | the commercial success of any product approved by the FDA
or its foreign counterparts; |
| ● | regulatory developments in the United States and foreign
countries; |
| ● | changes in the structure of healthcare payment systems; |
| ● | any intellectual property infringement lawsuit involving
us; |
| ● | announcements of technological innovations or new products
by us or our competitors; |
| ● | market conditions for the biotechnology or pharmaceutical
industries in general; |
| ● | changes in financial estimates or recommendations by securities
analysts; |
| ● | sales of large blocks of our common stock; |
| ● | sales of our common stock by our executive officers, directors
and significant stockholders; |
| ● | direct sales of our common stock through financing arrangements; |
| ● | restatements of our financial results and/or material weaknesses
in our internal controls; |
| ● | the loss of any of our key scientific or management personnel;
and |
| ● | announcements regarding the ongoing exploration of the strategic
options available to us. |
The stock markets in general, and the markets
for biotechnology stocks in particular, have experienced extreme volatility and price and volume fluctuations that have often been unrelated
or disproportionate to the operating performance of particular companies. These broad market and industry factors may seriously harm the
market price of our common stock, regardless of our operating performance. In the past, class action litigation has often been instituted
against companies whose securities have experienced periods of volatility in market price. Any such litigation brought against us could
result in substantial costs, which would hurt our financial condition and results of operations, divert management’s attention and
resources, and possibly delay our clinical trials or commercialization efforts.
If financial or industry analysts do not
publish research or reports about our business or if they issue inaccurate or unfavorable commentary or downgrade our common stock, our
stock price and trading volume could decline.
The trading market for our common stock will be
influenced by the research and reports that industry or financial analysts publish about us or our business. We do not control these analysts
or the content and opinions included in their reports. As a new public company, we may be slow to attract research coverage, and the analysts
who publish information about our common stock will have had relatively little experience with our company, which could affect their ability
to accurately forecast our results and make it more likely that we fail to meet their estimates. In the event we obtain industry or financial
analyst coverage, if any of the analysts who cover us issue an inaccurate or unfavorable opinion regarding our stock price, our stock
price would likely decline. In addition, the stock prices of many companies in the biopharmaceutical industry have declined significantly
after those companies have failed to meet, or often times failed to exceed, the financial guidance publicly announced by the companies
or the expectations of analysts. If our financial results fail to meet, or significantly exceed, our announced guidance or the expectations
of analysts or public investors, analysts could downgrade our common stock or publish unfavorable research about us. If one or more of
these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets,
which in turn could cause our stock price or trading volume to decline.
Our officers, directors, and principal stockholders
exercise significant control over our Company, and may be able to control our management and operations, acting in their best interests
and not necessarily those of other stockholders.
Our executive officers, directors and principal
stockholders who beneficially own more than 5% or more of our outstanding common stock, in the aggregate, beneficially own shares representing
approximately 70.1% of our outstanding capital stock. Quang Pham, our Chief Executive Officer, beneficially owns 54.15% of our outstanding
capital stock. As a result, Mr. Pham alone and together with these other stockholders, acting together, may be able to significantly influence
any matters requiring approval by our stockholders, including the election of directors, the approval of mergers or other business combination
transactions. The interests of this group of stockholders may not always coincide with our interests or the interests of other stockholders.
The significant concentration of stock ownership may adversely affect the trading price of our common stock due to the perception that
conflicts of interest may exist or arise. Therefore, you should not invest in reliance on your ability to have any control over our company.
As a “controlled company” under
the rules of the Nasdaq Capital Market, we may choose to exempt our company from certain corporate governance requirements that could
have an adverse effect on our public stockholders.
We are a “controlled company” as defined
under the Nasdaq Stock Market Rules, because Quang Pham, our Chief Executive Officer and principal stockholder, beneficially owns 54.15%
of our common shares and will be able to exercise 54.15% of the total voting power of our issued and outstanding shares.
As long as Mr. Pham individually owns at least
50% of the voting power of our company, we are a “controlled company” as defined under Nasdaq Listing Rules. For so long as
we are a controlled company under that definition, we are permitted to elect to rely, and may rely, on certain exemptions from corporate
governance rules, including:
| ● | an exemption from the rule that a majority of our board of
directors must be independent directors; |
| ● | an exemption from the rule that the compensation of our CEO
must be determined or recommended solely by independent directors; and |
| ● | an exemption from the rule that our director nominees must
be selected or recommended solely by independent directors. |
As a result, you may not have the same protection
afforded to stockholders of companies that are subject to these corporate governance requirements.
Although we do not intend to rely on the “controlled
company” exemption under the Nasdaq listing rules, we could elect to rely on this exemption in the future. If we elect to rely on
the “controlled company” exemption, a majority of the members of our board of directors might not be independent directors
and our nominating and corporate governance and compensation committees might not consist entirely of independent directors.
Future sales of common stock by our officers
and directors and principal stockholders or others of our common stock, or the perception that such sales may occur, could depress the
market price of our common stock.
Sales of a substantial number of shares of our
common stock, particularly sales by our directors, executive officers and principal stockholders could adversely affect the market price
of our common stock and may make it more difficult to sell common stock at a time and price that you deem appropriate.
All of the shares of common stock sold in our
initial public offering and the shares of our common stock by the selling stockholders in the resale offering will be freely tradable
without restrictions or further registration under the Securities Act of 1933, as amended, or the Securities Act, except for any shares
held by our affiliates as defined in Rule 144 under the Securities Act.
A substantial majority our outstanding shares
of common stock are currently restricted from resale as a result of market standoff and “lock-up” agreements. These shares
will become available to be sold 181 days after January 19, 2023, with respect to shareholders holding 1% of more of our outstanding securities
prior to consummation of our initial public offering and 366 days after January 19, 2023, with respect to directors and executive officers.
Shares held by directors, executive officers and other affiliates will be subject to volume limitations under Rule 144 under the Securities
Act and various vesting agreements. In addition, the underwriters may, in their sole discretion, release all or some portion of the shares
subject to market standoff or lock-up agreements prior to the expiration of the lock-up period. Sales of a substantial number of such
shares upon expiration of the market standoff and lock-up agreements, or the perception that such sales may occur, or early release of
these agreements, could cause our market price to fall or make it more difficult for you to sell your common stock at a time and price
that you deem appropriate.
We have registered the offer and sale of shares
of common stock that have been issued or reserved for future issuance under our equity compensation plans on a Form S-8 registration statement.
As a result, such shares can be freely sold in the public market upon issuance, subject to the market standoff or lock-up agreements or
unless they are held by “affiliates,” as that term is defined in Rule 144 of the Securities Act. If the holders of these shares
choose to sell a large number of shares, they could adversely affect the market price for our common stock.
We may also issue shares of our common stock or
securities convertible into shares of our common stock from time to time in connection with a financing, acquisition, investment or otherwise.
Any such issuance could result in substantial dilution to our existing stockholders and cause the trading price of our common stock to
decline.
Anti-takeover provisions in our charter
documents, and under Delaware law, could make an acquisition of our company more difficult, limit attempts by our stockholders to replace
or remove our current management and limit the market price of our common stock.
Provisions in our amended and restated certificate
of incorporation and amended and restated bylaws may have the effect of delaying or preventing a change of control or changes in our management.
Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that:
| ● | authorize our board of directors to issue, without further
action by the stockholders, shares of undesignated preferred stock with terms, rights, and preferences determined by our board of directors
that may be senior to our common stock; |
| ● | require that any action to be taken by our stockholders be
effected at a duly called annual or special meeting and not by written consent; |
| ● | specify that special meetings of our stockholders can be
called only by our board of directors, the chairperson of our board of directors, or our Chief Executive Officer; |
| ● | establish an advance notice procedure for stockholder proposals
to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors; |
| ● | prohibit cumulative voting in the election of directors; |
| ● | establish that our board of directors is divided into three
classes — Class I, Class II, and Class III — with each class serving staggered three-year terms; |
| ● | provide that, so long as our board of directors is classified,
directors may only be removed for cause; |
| ● | provide that vacancies on our board of directors may be filled
only by a majority of directors then in office, even though less than a quorum; and |
| ● | require the approval of our board of directors or the holders
of two-thirds of our outstanding shares of voting stock to amend our bylaws and certain provisions of our certificate of incorporation. |
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, which is responsible for appointing the members of our management. In addition, we are governed by the provisions
of Section 203 of the Delaware General Corporation Law, which generally, subject to certain exceptions, prohibits a Delaware corporation
from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years
following the date on which the stockholder became an “interested” stockholder. Any of the foregoing provisions could limit
the price that investors might be willing to pay in the future for shares of our common stock, and they could deter potential acquirers
of our company, thereby reducing the likelihood that you would receive a premium for your shares of our common stock in an acquisition.
Our amended and restated certificate of
incorporation and amended and restated bylaws provide that the Court of Chancery of the State of Delaware or the federal district court
for the District of Delaware is the exclusive forum for certain disputes between us and our stockholders, which could result in increased
costs for our stockholders to bring a claim and could limit our stockholders’ ability to obtain a favorable judicial forum for disputes
with us or our directors, officers or employees.
Our amended and restated certificate of incorporation
and amended and restated bylaws provide that, unless the Company consents in writing to the selection of an alternative forum, the Court
of Chancery of the State of Delaware (or, in the event that the Court of Chancery does not have jurisdiction, the federal district court
for the District of Delaware or other state courts of the State of Delaware) is the exclusive forum for (i) any derivative action or proceeding
brought on our behalf; (ii) any action asserting a claim of breach of fiduciary duty owed by, any director, officer, employee or agent
of the Company to the Company or our stockholders; (iii) any action asserting a claim arising pursuant to any provision of the Delaware
General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws; or (iv) any action
asserting a claim against us or any director, officer of employee that is governed by the internal affairs doctrine of the law of the
State of Delaware; provided that, if and only if the Court of Chancery of the State of Delaware dismisses any such action for lack of
subject matter jurisdiction, or the Company consents in writing to the selection of an alternative forum, such action may be brought in
another state or federal court sitting in the State of Delaware. Our amended and restated certificate of incorporation and amended and
restated bylaws also provide that the federal district courts of the United States of America is the exclusive forum for the resolution
of any complaint asserting a cause of action arising under the Securities Act. Notwithstanding the foregoing, the exclusive forum provision
will not apply to claims brought to enforce any liability or duty created by the Exchange Act. Nothing in our amended and restated certificate
of incorporation or amended and restated bylaws preclude stockholders that assert claims under the Exchange Act from bringing such claims
in state or federal court, subject to applicable law.
We believe these provisions may benefit us by
providing increased consistency in the application of Delaware law and federal securities laws by chancellors and judges, as applicable,
particularly experienced in resolving corporate disputes, efficient administration of cases on a more expedited schedule relative to other
forums and protection against the burdens of multi-forum litigation. However, this choice of forum provision could result in increased
costs for our stockholders to bring a claim and could may limit a stockholder’s ability to bring a claim in a judicial forum that
it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits
with respect to such claims, although our stockholders will not be deemed to have waived our compliance with federal securities laws and
the rules and regulations thereunder. Furthermore, the enforceability of similar choice of forum provisions in other companies’
certificates of incorporation has been challenged in legal proceedings, and it is possible that a court could find these types of provisions
to be inapplicable or unenforceable. While the Delaware courts have determined that such choice of forum provisions are facially valid,
a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions, and there
can be no assurance that such provisions will be enforced by a court in those other jurisdictions. If a court were to find the choice
of forum provision that is contained in our amended and restated certificate of incorporation and amended and restated bylaws to be inapplicable
or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could
adversely affect our business and financial condition.
Claims for indemnification by our directors
and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available
to us.
Our amended and restated bylaws, provide that
we will indemnify our directors and executive officers, in each case to the fullest extent permitted by Delaware law.
In addition, as permitted by Section 145 of the
DGCL, our amended and restated bylaws and the indemnification agreements that we have entered into with each of our current executive
officers and intend to enter into with our directors and certain other officers, among other things provide that:
| ● | We will indemnify our directors and executive officers for
serving us in those capacities, or for serving as a director, officer, employee or agent of other business enterprises at our request,
to the fullest extent permitted by Delaware law. Delaware law provides that we may indemnify such person if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to our best interest and, with respect to any criminal
proceeding, had no reasonable cause to believe such person’s conduct was unlawful. |
| ● | We may, in our discretion, indemnify employees and agents
in those circumstances where indemnification is permitted by applicable law. |
| ● | We will be required to advance expenses, as incurred, to
our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay
such advances if it is ultimately determined that such person is not entitled to indemnification. |
| ● | The rights conferred in our bylaws will not be exclusive.
We may not retroactively amend our bylaw provisions to reduce our indemnification obligations to directors, officers, employees and agents. |
As a result, claims for indemnification by our
directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of
money available to us.
We do not intend to pay dividends in the
foreseeable future. As a result, your ability to achieve a return on your investment will depend on appreciation in the price of our common
stock.
We have never declared or paid any cash dividends
on our common stock. We currently intend to retain all available funds and any future earnings for use in the operation of our business
and do not anticipate paying any dividends on our common stock in the foreseeable future. Any determination to pay dividends in the future
will be at the discretion of our board of directors. Consequently, your only opportunity to achieve a return on your investment in our
company will be if the market price of our common stock appreciates and you sell your shares at a profit. There is no guarantee that the
price of our common stock that will prevail in the market will ever exceed the price that you pay. For additional information about our
dividend policy, see the section entitled “Dividend policy” elsewhere in this prospectus.
Certain members of our management team have
limited experience managing a public company.
Some of the members of our management team have
limited experience managing a publicly traded company, interacting with public company investors, and complying with laws pertaining to
public companies. Our management team may not successfully or efficiently manage our transition to being a public company subject to significant
regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and
investors. These new obligations and constituents will require significant attention from our senior management and could divert their
attention away from the day-to-day management of our business, which could adversely affect our business, financial condition, and operating
results.
We have incurred significant increased costs
as a result of operating as a public company, and our management is required to devote substantial time to compliance initiatives.
As a public company, we have incurred and will
continue to incur legal, accounting and other expenses that we did not incur as a private company. We are subject to the reporting requirements
of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and are required to comply with the applicable requirements of
the Sarbanes-Oxley Act of 2002, or SOX, and the Dodd-Frank Wall Street Reform and Consumer Protection Act, or Dodd-Frank. The listing
requirements of the Nasdaq Stock Market, and the rules of the SEC require that we satisfy certain corporate governance requirements. Our
management and other personnel are required to devote a substantial amount of time to ensure that we comply with all of these requirements.
Moreover, the reporting requirements, rules and regulations have increased our legal and financial compliance costs and will make some
activities more time-consuming and costly. Any changes we make to comply with these obligations may not be sufficient to allow us to satisfy
our obligations as a public company on a timely basis, or at all. These reporting requirements, rules and regulations, coupled with the
increase in potential litigation exposure associated with being a public company, could also make it more difficult for us to attract
and retain qualified persons to serve on our board of directors or board committees or to serve as executive officers, or to obtain certain
types of insurance, including directors’ and officers’ insurance, on acceptable terms.
As a public company, we will be required to maintain
internal control over financial reporting and to report any material weaknesses in such internal controls. Beginning with the second annual
report on Form 10-K that we will be required to file with the SEC, Section 404 requires an annual management assessment of the effectiveness
of our internal control over financial reporting. The rules governing the standards that must be met for management to assess our internal
control over financial reporting are complex and require significant documentation, testing, and possible remediation.
To date, we have not identified any material weaknesses
in our review of our internal controls for the purpose of providing the reports required by these rules. In the future, if we identify
material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404
of the Sarbanes-Oxley Act in a timely manner, or if we are unable to assert that our internal control over financial reporting is effective,
investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could
decline, and we could also become subject to investigations by the stock exchange on which our common stock is listed, the SEC or other
regulatory authorities, which could require additional financial and management resources. In addition, as a public company we will be
required to file accurate and timely quarterly and annual reports with the SEC under the Exchange Act. Any failure to report our financial
results on an accurate and timely basis could result in sanctions, lawsuits, delisting of our shares from Nasdaq or other adverse consequences
that would materially harm our business and reputation.
For so long as we remain an emerging growth company
as defined in the JOBS Act, we intend to take advantage of certain exemptions from various reporting requirements that are applicable
to public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor
attestation requirements of Section 404. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal
year (i) following the fifth anniversary of the completion of our initial public offering, (ii) in which we have total annual gross revenue
of at least $1.235 billion, or (iii) in which we are deemed to be a large accelerated filer, which means the market value of our common
stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th, and (2) the date on which we have issued
more than $1.0 billion in non-convertible debt during the prior three-year period.
We are an emerging growth company and we
cannot be certain if (i) the reduced disclosure requirements or (ii) extended transition periods for complying with new or revised accounting
standards applicable to emerging growth companies will make our common stock less attractive to investors. In addition, as a smaller reporting
company we will also have reduced disclosure requirements.
We qualify as an emerging growth company. Under
the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply
to private companies. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent
to the enactment of the JOBS Act until such time as those standards apply to private companies. We have elected to use this extended transition
period for complying with new or revised accounting standards that have different effective dates for public and private companies until
the earlier of the date we (i) are no longer an emerging growth company, or (ii) affirmatively and irrevocably opt out of the extended
transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with
new or revised accounting pronouncements as of public company effective dates.
In addition, for as long as we continue to be
an emerging growth company, we intend to take advantage of certain exemptions from various reporting requirements that are applicable
to other public companies including, but not limited to, reduced disclosure obligations regarding executive compensation in our periodic
reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and
stockholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock
less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may
be a less active trading market for our common stock and our stock price may be more volatile.
We are also a “smaller reporting company”
as defined in the Securities Exchange Act of 1934, as amended, or the Exchange Act, and have elected to take advantage of certain of the
scaled disclosures available to smaller reporting companies. To the extent that we continue to qualify as a “smaller reporting company”
as such term is defined in Rule 12b-2 under the Exchange Act, after we cease to qualify as an emerging growth company, certain of the
exemptions available to us as an “emerging growth company” may continue to be available to us as a “smaller reporting
company,” including exemption from compliance with the auditor attestation requirements pursuant to SOX and reduced disclosure about
our executive compensation arrangements. We will continue to be a “smaller reporting company” until we have $250 million or
more in public float (based on our Common Stock) measured as of the last business day of our most recently completed second fiscal quarter
or, in the event we have no public float (based on our Common Stock) or a public float (based on our Common Stock) that is less than $700
million, annual revenues of $100 million or more during the most recently completed fiscal year.