Our common stock is listed on the Nasdaq Capital
Market under the ticker symbol “CTXR.” On April 25, 2019, the last reported closing price of our common stock on the
Nasdaq Capital Market was $1.06.
RISK
FACTORS
Investing
in our common stock includes a high degree of risk. Prior to making a decision about investing in our common stock, you should
consider carefully the specific factors discussed below, together with all of the other information contained in and incorporated
by reference into this prospectus. If any of the following risks actually occurs, our business, financial condition, results of
operations and future prospects would likely be materially and adversely affected. This could cause the market price of our common
stock to decline and could cause you to lose all or part of your investment.
Risks
related to our Business and our Industry
We
have a history of net losses and expect to incur losses for the foreseeable future. We may never generate revenues or, if we are
able to generate revenues, achieve profitability.
We
were formed as a limited liability company in 2007 and since our inception have incurred a net loss in each of our previous operating
years. Our ability to become profitable depends upon our ability to obtain marketing approval for and generate revenues from sales
of our product candidates. We have been focused on product development and have not generated any revenues to date. We have incurred
losses in each period of our operations, and we expect to continue to incur losses for the foreseeable future. These losses are
likely to continue to adversely affect our working capital, total assets and shareholders’ equity (deficit). The process
of developing our products requires significant clinical, development and laboratory testing and clinical trials. In addition,
commercialization of our product candidates will require that we obtain necessary regulatory approvals and establish sales, marketing
and manufacturing capabilities, either through internal hiring or through contractual relationships with others. We expect to
incur substantial losses for the foreseeable future as a result of anticipated increases in our research and development costs,
including costs associated with conducting preclinical testing and clinical trials, and regulatory compliance activities. We incurred
net losses of $12,536,638, $10,384,953, and $8,295,698 for the years ended September 30, 2018, 2017 and 2016, respectively, and
$3,874,730 for the three months ended December 31, 2018. At December 31, 2018, we had stockholders’ equity of $24,178,203
and an accumulated deficit of $44,132,568. Our net cash used for operating activities was $11,318,138, $7,971,205, and $5,900,421
for the years ended September 30, 2018, 2017 and 2016, respectively, and $2,158,530 for the three months ended December 31, 2018.
Our
ability to generate revenues and achieve profitability will depend on numerous factors, including success in:
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developing
and testing product candidates;
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receiving
regulatory approvals for our product candidates;
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commercializing
our product candidates;
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manufacturing
commercial quantities of our product candidates at acceptable cost levels; and
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establishing
a favorable competitive position for our product candidates.
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Many
of these factors will depend on circumstances beyond our control. We cannot assure you that any of our products will be approved
by the FDA, that we will successfully bring any product to market or, if so, that we will ever become profitable.
There
is substantial doubt about our ability to continue as a going concern.
Currently,
we do not have sufficient capital to continue our operations after the third fiscal quarter of 2019. You should not rely on our
consolidated balance sheet as an indication of the amount of proceeds that would be available to satisfy claims of creditors,
and potentially be available for distribution to shareholders, in the event of liquidation.
Our
audited consolidated financial statements included within have been prepared assuming that we will continue as a going concern
and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets,
or the amounts and classification of liabilities that may result if we do not continue as a going concern. We have concluded that
substantial doubt about our ability to continue as a going concern exists and our auditors have made reference to this in their
audit report on our audited consolidated financial statements for the year ended September 30, 2018.
We
need to secure additional financing.
We
anticipate that we will incur operating losses for the foreseeable future. We have received gross proceeds of approximately $40.9
million from our public and private placement offerings through April 2019. Additionally, in connection with the acquisition of
LMB our Executive Chairman, Leonard Mazur, made an equity investment of $3.0 million in March 2016. Mr. Mazur has also loaned
us $4,710,000 pursuant to convertible promissory notes. On August 8, 2017, these notes and accrued interest of $76,240 were converted
into 1,547,067 shares of common stock at a price of $3.09 per share as part of an underwritten public offering which closed on
the same date.
The
amount and timing of our future funding requirements will depend on many factors, including, but not limited to:
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the
rate of progress and cost of our trials and other product development programs for our product candidates;
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the
costs and timing of obtaining licenses for additional product candidates or acquiring other complementary technologies;
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the
timing of any regulatory approvals of our product candidates;
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the
costs of establishing sales, marketing and distribution capabilities; and
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the
status, terms and timing of any collaborative, licensing, co-promotion or other arrangements.
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We
will need to access the capital markets in the future for additional capital for research and development and for operations.
Traditionally, pharmaceutical companies have funded their research and development expenditures through raising capital in the
equity markets. Declines and uncertainties in these markets over the past several years have severely restricted raising new capital
and have affected companies’ ability to continue to expand or fund existing research and development efforts. If these economic
conditions continue or become worse, our future cost of equity or debt capital and access to the capital markets could be adversely
affected. If we are not successful in securing additional financing, we may be required to delay significantly, reduce the scope
of or eliminate one or more of our research or development programs, downsize our general and administrative infrastructure, or
seek alternative measures to avoid insolvency, including arrangements with collaborative partners or others that may require us
to relinquish rights to certain of our technologies or product candidates.
We
are a late-stage development company with an unproven business strategy and may never achieve commercialization of our therapeutic
products or profitability.
Our
strategy of using collaborative partners to assist us in the development of our therapeutic products is unproven. Our success
will depend upon our ability to enter into additional collaboration agreements on favorable terms and to select an appropriate
commercialization strategy for each product candidate that we and our collaborators choose to pursue. If we are not successful
in implementing our strategy to commercialize our product candidates, we may never achieve, maintain or increase profitability.
Our ability to successfully commercialize any of our products or product candidates will depend, among other things, on our ability
to:
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successfully
complete pre-clinical and clinical trials for our product candidates;
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produce,
through a validated process, sufficiently large quantities of our drug compound(s) to permit successful commercialization
of our product candidates;
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receive
marketing approvals from the FDA and similar foreign regulatory authorities for our product candidates;
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establish
commercial manufacturing arrangements with third-party manufacturers for our product candidates;
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build
and maintain strong sales, distribution and marketing capabilities sufficient to launch commercial sales of any approved products
or establish collaborations with third parties for such commercialization;
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secure
acceptance of any approved products from physicians, health care payers, patients and the medical community; and
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manage
our spending as costs and expenses increase due to clinical trials, regulatory applications and development and commercialization
activities.
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There
are no guarantees that we will be successful in completing these tasks. If we are unable to successfully complete these tasks,
we may not be able to commercialize any of our product candidates in a timely manner, or at all, in which case we may be unable
to generate sufficient revenues to sustain and grow our business. If we experience unanticipated delays or problems, our development
costs could substantially increase and our business, financial condition and results of operations will be adversely affected.
We
face significant risks in our product candidate development efforts.
Our
business depends on the successful development and commercialization of our product candidates. We are not permitted to market
any of our product candidates in the United States until we receive approval of an NDA from the FDA, or in any foreign jurisdiction
until we receive the requisite approvals from such jurisdiction. The process of developing new drugs and/or therapeutic products
is inherently complex, unpredictable, time-consuming, expensive and uncertain. We must make long-term investments and commit significant
resources before knowing whether our development programs will result in drugs that will receive regulatory approval and achieve
market acceptance. Product candidates that appear to be promising at all stages of development may not reach the market for a
number of reasons that may not be predictable based on results and data of the clinical program. Product candidates may be found
ineffective or may cause harmful side effects during clinical trials, may take longer to progress through clinical trials than
had been anticipated, may not be able to achieve the pre-defined clinical endpoints due to statistical anomalies even though clinical
benefit may have been achieved, may fail to receive necessary regulatory approvals, may prove impracticable to manufacture in
commercial quantities at reasonable cost and with acceptable quality, or may fail to achieve market acceptance.
We
cannot predict whether or when we will obtain regulatory approval to commercialize our product candidates that are under development
and we cannot, therefore, predict the timing of any future revenues from these product candidates, if any. The FDA has substantial
discretion in the drug approval process, including the ability to delay, limit or deny approval of a product candidate for many
reasons. For example, the FDA:
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could
determine that we cannot rely on Section 505(b)(2) for Mino-Lok or Hydro-Lido or any future product candidates;
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could
determine that the information provided by us was inadequate, contained clinical deficiencies or otherwise failed to demonstrate
the safety and effectiveness of any of our product candidates for any indication;
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may
not find the data from clinical trials sufficient to support the submission of an NDA or to obtain marketing approval in the
United States, including any findings that the clinical and other benefits of our product candidates outweigh their safety
risks;
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may
disagree with our trial design or our interpretation of data from preclinical studies or clinical trials, or may change the
requirements for approval even after it has reviewed and commented on the design for our trials;
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may
determine that we have identified the wrong reference listed drug or drugs or that approval of our Section 505(b)(2) application
for any of our product candidates is blocked by patent or non-patent exclusivity of the reference listed drug or drugs;
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may
identify deficiencies in the manufacturing processes or facilities of third-party manufacturers with which we enter into agreements
for the manufacturing of our product candidates;
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may
approve our product candidates for fewer or more limited indications than we request, or may grant approval contingent on
the performance of costly post-approval clinical trials;
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may
change its approval policies or adopt new regulations that could adversely impact our product candidate development programs;
or
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may
not approve the labeling claims that we believe are necessary or desirable for the successful commercialization of our product
candidates.
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Any
failure to obtain regulatory approval of our product candidates would significantly limit our ability to generate revenues, and
any failure to obtain such approval for all of the indications and labeling claims we deem desirable could reduce our potential
revenues.
The
results of pre-clinical studies and completed clinical trials are not necessarily predictive of future results, and our current
product candidates may not have favorable results in later studies or trials.
Pre-clinical
studies and Phase 1 and Phase 2 clinical trials are not primarily designed to test the efficacy of a product candidate in the
general population, but rather to test initial safety, to study pharmacokinetics and pharmacodynamics, to study limited efficacy
in a small number of study patients in a selected disease population, and to identify and attempt to understand the product candidate’s
side effects at various doses and dosing schedules. Success in pre-clinical studies or completed clinical trials does not ensure
that later studies or trials, including continuing pre-clinical studies and large-scale clinical trials, will be successful nor
does it predict future results. Favorable results in early studies or trials may not be repeated in later studies or trials, and
product candidates in later stage trials may fail to show acceptable safety and efficacy despite having progressed through earlier
trials. In addition, the placebo rate in larger studies may be higher than expected. We may be required to demonstrate through
large, long-term outcome trials that our product candidates are safe and effective for use in a broad population prior to obtaining
regulatory approval.
There
is typically a high rate of attrition from the failure of product candidates proceeding through clinical trials. In addition,
certain subjects in our clinical trials may respond positively to placebo treatment - these subjects are commonly known as “placebo
responders” - making it more difficult to demonstrate efficacy of the test drug compared to placebo. This effect is likely
to be observed in the treatment of hemorrhoids.
If
any of our product candidates fail to demonstrate sufficient safety and efficacy in any clinical trial, we will experience potentially
significant delays in, or may decide to abandon development of that product candidate. If we abandon or are delayed in our development
efforts related to any of our product candidates, we may not be able to generate any revenues, continue our operations and clinical
studies, or become profitable. Our reputation in the industry and in the investment community would likely be significantly damaged.
Further, it might not be possible for us to raise funds in the public or private markets, and our stock price would likely decrease
significantly.
If
we are unable to file for approval of Mino-Lok or Hydro-Lido under Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act
or if we are required to generate additional data related to safety and efficacy in order to obtain approval of Mino-Lok under
Section 505(b)(2), we may be unable to meet our anticipated development and commercialization timelines.
Our
current plans for filing additional NDAs for our product candidates include efforts to minimize the data we will be required to
generate in order to obtain marketing approval for our additional product candidates and therefore possibly reduce the time and
cost of development of a product candidate and obtain a shortened review period for the application. The timeline for filing and
review of our planned NDA for each of Mino-Lok and Hydro-Lido is based upon our plan to submit each such NDA under Section 505(b)(2)
of the Federal Food, Drug and Cosmetic Act, wherein we will rely in part on data in the public domain or elsewhere. Depending
on the data that may be required by the FDA for approval, some of the data may be related to products already approved by the
FDA. If the data relied upon is related to products already approved by the FDA and covered by third-party patents we would be
required to certify that we do not infringe the listed patents or that such patents are invalid or unenforceable. As a result
of the certification, the third party would have 45 days from notification of our certification to initiate an action against
us. In the event that an action is brought in response to such a certification, the approval of our NDA could be subject to a
stay of up to 30 months or more while we defend against such a suit. Approval of any product candidate under Section 505(b)(2)
may therefore be delayed until patent exclusivity expires or until we successfully challenge the applicability of those patents
applicable to our product candidates. Alternatively, we may elect to generate sufficient additional clinical data so that we no
longer rely on data which triggers a potential stay of the approval of any product candidate. Even if no exclusivity periods apply
to an application under Section 505(b)(2), the FDA has broad discretion to require us to generate additional data on the safety
and efficacy of our product candidates to supplement third-party data on which we may be permitted to rely. In either event, we
could be required, before obtaining marketing approval for such product candidate, to conduct substantial new research and development
activities beyond those we currently plan to engage in order to obtain approval of that product candidate. Such additional new
research and development activities would be costly and time consuming.
We
may not be able to obtain shortened review of our applications where available, and in any event the FDA may not agree that any
of our product candidates qualify for marketing approval. If we are required to generate additional data to support approval,
we may be unable to meet our anticipated development and commercialization timelines, may be unable to generate the additional
data at a reasonable cost, or at all, and may be unable to obtain marketing approval of that product candidate. In addition, notwithstanding
the approval of many products by the FDA pursuant to Section 505(b)(2), over the last few years, some pharmaceutical companies
and others have objected to the FDA’s interpretation of Section 505(b)(2). If the FDA changes its interpretation of Section
505(b)(2), or if the FDA’s interpretation is successfully challenged in court, this could delay or even prevent the FDA
from approving any Section 505(b)(2) application that we submit.
Even
if we receive regulatory approval to commercialize our product candidates, post-approval marketing and promotion of products is
highly regulated by the FDA, and marketing campaigns which violate FDA standards may result in adverse consequences including
regulatory enforcement action by the FDA as well as follow-on actions filed by consumers and other end-payers, which could result
in substantial fines, sanctions and damage awards against us, any of which could harm our business.
Post-approval
marketing and promotion of drugs, standards and regulations for direct-to-consumer advertising, dissemination of off-label product
information, industry-sponsored scientific and educational activities and promotional activities via the Internet are heavily
scrutinized and regulated by the FDA. Drugs may only be marketed for approved indications and in accordance with provisions of
the FDA approved labels. Failure to comply with such requirements may result in adverse publicity, warning letters issued by the
FDA, and civil or criminal penalties.
In
the event the FDA discovers post-approval violations, we could face penalties in the future including the FDA’s issuance
of a cease and desist order, impounding of our products, and civil or criminal penalties. As a follow-on to such governmental
enforcement activities, consumers and other end-payers of the product may initiate action against us claiming, among other things,
fraudulent misrepresentation, unfair competition, violation of various state consumer protection statues and unjust enrichment.
If the plaintiffs in such follow-on actions are successful, we could be subject to various damages, including compensatory damages,
treble damages, punitive damages, restitution, disgorgement, prejudgment and post-judgment interest on any monetary award, and
the reimbursement of the plaintiff’s legal fees and costs, any of which could have an adverse effect on our revenue, business,
financial condition and prospects.
Even
if we receive regulatory approval to commercialize a product candidate, our ability to generate revenues from any resulting product
will be subject to a variety of risks, many of which are out of our control.
Even
if one of our product candidates obtain regulatory approval, the product may not gain market acceptance among physicians, patients,
healthcare payers or the medical community. The indication may be limited to a subset of the population or we may implement a
distribution system and patient access program that is limited. Coverage and reimbursement of our product candidates by third-party
payers, including government payers, generally is also necessary for optimal commercial success. We believe that the degree of
market acceptance and our ability to generate revenues from any approved produce candidate or acquired product will depend on
a number of factors, including:
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prevalence
and severity of any side effects;
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results
of any post-approval studies of the drug;
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potential
or perceived advantages or disadvantages over alternative treatments including generics;
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the
relative convenience and ease of administration and dosing schedule;
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availability
of coverage and reimbursement from government and other third-party payers;
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the
willingness of patients to pay out of pocket in the absence of government or third-party coverage;
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product
labeling or product insert requirements of the FDA or other regulatory authorities;
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strength
of sales, marketing and distribution support;
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price
of any future drugs, if approved, both in absolute terms and relative to alternative treatments;
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the
effectiveness of our or any future collaborators’ sales and marketing strategies;
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the
effect of current and future healthcare laws on our product candidates;
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patient
access programs that require patients to provide certain information prior to receiving new and refill prescriptions; and
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requirements
for prescribing physicians to complete certain educational programs for prescribing drugs.
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If
approved, any product candidate may fail to achieve market acceptance or generate significant revenue to achieve or sustain profitability.
In addition, our efforts to educate the medical community and third-party payers on the benefits of any product candidate may
require significant resources and may never be successful.
Even
if approved for marketing by applicable regulatory bodies, we will not be able to create a market for any of our products if we
fail to establish marketing, sales and distribution capabilities, or fail to enter into arrangements with third parties.
Our
strategy with our product candidates is to outsource to third parties, all or most aspects of the product development process,
as well as marketing, sales and distribution activities. Currently, we do not have any sales, marketing or distribution capabilities.
In order to generate sales of any product candidates that receive regulatory approval, we must either acquire or develop an internal
marketing and sales force with technical expertise and with supporting distribution capabilities or make arrangements with third
parties to perform these services for us. The acquisition or development of a sales and distribution infrastructure would require
substantial resources, which may divert the attention of our management and key personnel and defer our product development efforts.
To the extent that we enter into marketing and sales arrangements with other companies, our revenues will depend on the efforts
of others. These efforts may not be successful. If we fail to develop sales, marketing and distribution channels, or enter into
arrangements with third parties, we will experience delays in product sales and incur increased costs.
The
markets in which we operate are highly competitive and we may be unable to compete successfully against new entrants or established
companies.
Competition
in the pharmaceutical and medical products industries is intense and is characterized by costly and extensive research efforts
and rapid technological progress. We are aware of several pharmaceutical companies also actively engaged in the development of
therapies for at least some of the same conditions we are targeting. Many of these companies have substantially greater research
and development capabilities as well as substantially greater marketing, financial and human resources than we do. In addition,
many of these companies have significantly greater experience than us in undertaking pre-clinical testing, human clinical trials
and other regulatory approval procedures. Our competitors may develop technologies and products that are more effective than those
we are currently marketing or researching and developing. Such developments could render our product candidates, if approved,
less competitive or possibly obsolete. We are also competing with respect to marketing capabilities and manufacturing efficiency,
areas in which we have no current capabilities and in which we have limited experience. Mergers, acquisitions, joint ventures
and similar events may also significantly increase the competition we face. In addition, new developments, including the development
of other drug technologies and methods of preventing the incidence of disease, occur in the pharmaceutical and medical technology
industries at a rapid pace. These developments may render our products and product candidates obsolete or noncompetitive. Compared
to us, many of our potential competitors have substantially greater:
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research
and development resources, including personnel and technology;
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regulatory
resources, experience and expertise;
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product
candidate development and clinical trial resources and experience;
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product
sourcing, sales and marketing resources and experience;
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experience
and expertise in exploitation of intellectual property rights; and
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access
to strategic partners and capital resources.
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As
a result of these factors, our competitors may obtain regulatory approval of their products more rapidly than we can or may obtain
patent protection or other intellectual property rights that limit our ability to develop or commercialize our product candidates.
Our competitors may also develop drugs or surgical approaches that are more effective, more useful and less costly than ours and
may also be more successful in manufacturing and marketing their products. In addition, our competitors may be more effective
than us in commercializing their products and as a result, our business and prospects might be materially harmed.
Physicians
and patients might not accept and use any of our products for which regulatory approval is obtained.
Even
if the FDA approves one of our product candidates, physicians and patients might not accept and use it. Acceptance and use of
our approved products will depend upon a number of factors, including:
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perceptions
by members of the health care community, including physicians, about the safety and effectiveness of our products;
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cost-effectiveness
of our product relative to competing products or therapies;
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availability
of reimbursement for our product from government or other healthcare payers; and
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effective
marketing and distribution efforts by us and/or our licensees and distributors, if any.
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If
our current product candidates are approved, we expect their sales to generate substantially all of our revenues for the foreseeable
future, and as a result, the failure of these products to find market acceptance would harm our business and would require us
to seek additional financing.
Our
two product candidates, Mino-Lok and Hydro-Lido, are combination products consisting of components that have each been separately
approved by the FDA for other indications and which are commercially available and marketed by other companies. Our approval under
505(b)(2), if received, would not preclude physicians, pharmacists and patients from obtaining individual drug products and titrating
the dosage of these drug products as close to our approved dose as possible.
Our
Hydro-Lido product candidate for the treatment of hemorrhoids is a combination product consisting of two drugs, hydrocortisone
and lidocaine, that have each been separately approved by the FDA for other indications and which are commercially available and
marketed by other companies. Hydrocortisone creams are available from strengths ranging from 0.5% to 2.5% and lidocaine creams
are also available in strengths up to 5%. From our market analysis and discussions with a limited number of physicians, we know
that patients sometimes obtain two separate cream products and co-administer them as prescribed, giving them a combination treatment
which could be very similar to what we intend to study and seek approval for. As a branded, FDA-approved product with safety and
efficacy data, we intend to price our product substantially higher than the generically available individual creams. We will then
have to convince third-party payers and pharmacy benefit managers of the advantages of our product and justify our premium pricing.
We may encounter resistance from these entities and will then be dependent on patients’ willingness to pay the premium and
not seek alternatives. In addition, pharmacists often suggest lower cost prescription treatment alternatives to both physicians
and patients. Our 505(b)(2) approval and the market exclusivity we may receive will not guarantee that such alternatives will
not exist, that substitution will not occur, or that there will be immediate acceptance to our pricing by payer formularies.
Our
Mino-Lok solution contains minocycline, disodium ethylenediaminetetraacetic acid (edetate), and ethyl alcohol, all of which have
been separately approved by the FDA for other indications, or are used as excipients in other parenteral products.
We
have not yet determined a regulatory pathway for Mino-Wrap, which we in-licensed in January 2019.
Our
ability to generate product revenues will be diminished if any of our approved products sell for inadequate prices or patients
are unable to obtain adequate levels of reimbursement.
Our
ability to commercialize our product candidates, alone or with collaborators, will depend in part on the extent to which reimbursement
will be available from:
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government
and health administration authorities;
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private
health maintenance organizations and health insurers; and
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other
healthcare payers.
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Significant
uncertainty exists as to the reimbursement status of newly approved healthcare products. Healthcare payers, including Medicare,
are challenging the prices charged for medical products and services. Government and other healthcare payers increasingly attempt
to contain healthcare costs by limiting both coverage and the level of reimbursement for drugs. Even if our product candidates
are approved by the FDA, insurance coverage might not be available, and reimbursement levels might be inadequate, to cover our
products. If government and other healthcare payers do not provide adequate coverage and reimbursement levels for our products,
once approved, market acceptance of such products could be reduced. Proposals to modify the current health care system in the
U.S. to improve access to health care and control its costs are continually being considered by the federal and state governments.
In March 2010, the U.S. Congress passed landmark healthcare legislation. Portions of this legislation have been repealed recently
and members of the U.S. Congress and some state legislatures continue to seek to overturn at least some remaining portions of
the legislation and we expect they will continue to review and assess this legislation and possibly alternative health care reform
proposals. We cannot predict what impact on federal reimbursement policies this legislation will have in general or on our business
specifically. We cannot predict whether new proposals will be made or adopted, when they may be adopted or what impact they may
have on us if they are adopted.
Health
administration authorities in countries other than the U.S. may not provide reimbursement for our products at rates sufficient
for us to achieve profitability, or at all. Like the U.S., these countries have considered health care reform proposals and could
materially alter their government-sponsored health care programs by reducing reimbursement rates. Any reduction in reimbursement
rates under Medicare or foreign health care programs could negatively affect the pricing of our products. If we are not able to
charge a sufficient amount for our products, then our margins and our profitability will be adversely affected.
We
rely exclusively on third parties to formulate and manufacture our product candidates.
We
do not have and do not intend to establish our own manufacturing facilities. Consequently, we lack the physical plant to formulate
and manufacture our own product candidates, which are currently being manufactured entirely by a commercial third party. If any
additional product candidate we might develop or acquire in the future receives FDA approval, we will rely on one or more third-party
contractors to manufacture our products. If, for any reason, we become unable to rely on our current source or any future source
to manufacture our product candidates, either for clinical trials or, for commercial quantities, then we would need to identify
and contract with additional or replacement third-party manufacturers to manufacture compounds for preclinical, clinical and commercial
purposes. We might not be successful in identifying additional or replacement third-party manufacturers, or in negotiating acceptable
terms with any that we do identify. If we are unable to secure and maintain third-party manufacturing capacity, the development
and sales of our products and our financial performance might be materially affected.
In
addition, before any of our collaborators can begin to commercially manufacture our product candidates, each must obtain regulatory
approval of the manufacturing facility and process. Manufacturing of drugs for clinical and commercial purposes must comply with
the FDA’s Current Good Manufacturing Practices, or “cGMP,” and applicable non-U.S. regulatory requirements.
The cGMP requirements govern quality control and documentation policies and procedures. Complying with cGMP and non-U.S. regulatory
requirements will require that we expend time, money, and effort in production, recordkeeping, and quality control to assure that
the product meets applicable specifications and other requirements. Our contracted manufacturing facilities must also pass a pre-approval
inspection prior to FDA approval. Failure to pass a pre- approval inspection might significantly delay FDA approval of our products.
If any of our collaborators fails to comply with these requirements, we would be subject to possible regulatory action which could
limit the jurisdictions in which we are permitted to sell our products. As a result, our business, financial condition, and results
of operations might be materially harmed.
Our
reliance on a limited number of third-party manufacturers exposes us to the following risks:
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We
might be unable to identify manufacturers for commercial supply on acceptable terms or at all because the number of potential
manufacturers is limited and the FDA must approve any replacement contractor. This approval would generally require compliance
inspections. In addition, a new manufacturer would have to be educated in, or develop substantially equivalent processes for,
production of our products after receipt of FDA approval, if any;
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Our
third-party manufacturers might be unable to formulate and manufacture our products in the volume and of the quality required
to meet our clinical and commercial needs, if any;
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Our
contract manufacturers might not perform as agreed or might not remain in the contract manufacturing business for the time
required to supply our clinical trials or to successfully produce, store and distribute our products;
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Currently,
our contract manufacturer for our clinical supplies is foreign, which increases the risk of shipping delays and adds the risk
of import restrictions;
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Drug
manufacturers are subject to ongoing periodic unannounced inspection by the FDA and corresponding state agencies to ensure
strict compliance with cGMP and other government regulations and corresponding foreign standards. We do not have complete
control over third-party manufacturers’ compliance with these regulations and standards;
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If
any third-party manufacturer makes improvements in the manufacturing process for our products, we might not own, or might
have to share, the intellectual property rights to the innovation with our licensors;
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Operations
of our third-party manufacturers or suppliers could be disrupted by conditions unrelated to our business or operations, including
a bankruptcy of the manufacturer or supplier; and
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We
might compete with other companies for access to these manufacturers’ facilities and might be subject to manufacturing
delays if the manufacturers give other clients higher priority than us.
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Each
of these risks could delay our clinical trials or the approval, if any, of our product candidates by the FDA or any foreign regulatory
agency or the commercialization of our product candidates and could result in higher costs or deprive us of potential product
revenues. As a result, our business, financial condition, and results of operations might be materially harmed.
We
are and will be dependent on third-party contract research organizations to conduct all of our future human trials.
We
are and will be dependent on third-party research organizations to conduct all of our human trials with respect to our product
candidates, including those that we may develop in the future. If we are unable to obtain any necessary testing services on acceptable
terms, we may not complete our product development efforts in a timely manner. If we rely on third parties for human trials, we
may lose some control over these activities and become too dependent upon these parties. These third parties may not complete
testing activities on schedule or when we so request. We may not be able to secure and maintain suitable research organizations
to conduct our human trials. We are responsible for confirming that each of our clinical trials is conducted in accordance with
our general plan and protocol. Moreover, the FDA and foreign regulatory agencies require us to comply with regulations and standards,
commonly referred to as good clinical practices, for conducting, recording and reporting the results of clinical trials to assure
that data and reported results are credible and accurate and that the trial participants are adequately protected. Our reliance
on third parties does not relieve us of these responsibilities and requirements. If these third parties do not successfully carry
out their contractual duties or regulatory obligations or meet expected deadlines, if the third parties need to be replaced or
if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory
requirements or for other reasons, our preclinical development activities or clinical trials may be extended, delayed, suspended
or terminated, and we may not be able to obtain regulatory approval for our future product candidates.
Any
termination or breach by or conflict with our strategic partners or licensees could harm our business
.
If
we or any of our collaborators or licensees fail to renew or terminate any of our collaboration or license agreements or if either
party fails to satisfy its obligations under any of our collaboration or license agreements or complete them in a timely manner,
we could lose significant sources of revenue, which could result in volatility in our future revenue. In addition, our agreements
with our collaborators and licensees may have provisions that give rise to disputes regarding the rights and obligations of the
parties. These and other possible disagreements could lead to termination of the agreement or delays in collaborative research,
development, supply or commercialization of certain products, or could require or result in litigation or arbitration. Any such
conflicts with our collaborators could reduce our ability to obtain future collaboration agreements and could have a negative
impact on our relationship with existing collaborators, adversely affecting our business and revenues. Finally, any of our collaborations
or license agreements may prove to be unsuccessful.
We
might seek to grow and develop our business through acquisitions of or investment in new or complementary businesses, products
or technologies, and the failure to manage these acquisitions or investments, or the failure to integrate them with our existing
business, could have a material adverse effect on us.
We
might consider opportunities to acquire or invest in other technologies, products and businesses that might enhance our capabilities
or complement our current product candidates. For example, we recently in-licensed exclusive worldwide rights to Mino-Wrap that
we intend to develop as a treatment to reduce infections associated with breast implants following breast reconstructive surgeries.
Potential
and completed acquisitions and strategic investments involve numerous risks, including potential problems or issues associated
with the following:
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assimilating
the purchased technologies, products or business operations;
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maintaining
uniform standards, procedures, controls and policies;
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unanticipated
costs associated with the acquisition or investment;
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diversion
of our management’s attention from our preexisting business;
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maintaining
or obtaining the necessary regulatory approvals or complying with regulatory standards; and
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adverse
effects on existing business operations.
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We
have no current commitments with respect to any acquisition or investment in other technologies or businesses. We do not know
if we will identify suitable acquisitions, whether we will be able to successfully complete any acquisitions, or whether we will
be able to successfully integrate any acquired product, technology or business into our business or retain key personnel, suppliers
or collaborators.
Our
ability to successfully develop our business through acquisitions would depend on our ability to identify, negotiate, complete
and integrate suitable target businesses or technologies and obtain any necessary financing. These efforts could be expensive
and time consuming and might disrupt our ongoing operations. If we are unable to efficiently integrate any acquired business,
technology or product into our business, our business and financial condition might be adversely affected.
If
we are unable to retain or hire additional qualified personnel, our ability to grow our business might be harmed.
We
utilize the services of a clinical management team on part-time basis to assist us in managing our ongoing Phase 2 and Phase 3
trials and intend to do so for future trials. While we believe this will provide us with sufficient staffing for our current and
future development efforts, we will need to hire or contract with additional qualified personnel with expertise in preclinical
testing, clinical research and testing, government regulation, formulation and manufacturing and sales and marketing in connection
with the continued development, regulatory approval and commercialization of our product candidates. We compete for qualified
individuals with numerous pharmaceutical and biopharmaceutical companies, universities and other research institutions. Competition
for these individuals is intense, and we cannot be certain that our search for such personnel will be successful. Attracting and
retaining qualified personnel will be critical to our success. In addition, we may be unable to attract and retain those qualified
officers, directors and members of board committees required to provide for effective management. If we are unable to attract
and retain qualified employees, officers and directors, the management and operation of our business could be adversely affected.
We
expect to need to increase the size of our organization to further develop our product candidates, and we may experience difficulties
in managing growth.
We
will need to manage our anticipated growth and increased operational activity. Our personnel, systems and facilities currently
in place may not be adequate to support this future growth. Our need to effectively execute our growth strategy will require that
we:
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manage
our regulatory trials effectively;
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attract
and motivate sufficient numbers of talented employees;
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manage
our internal development efforts effectively while complying with our contractual obligations to licensors, licensees, contractors,
collaborators and other third parties;
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develop
internal sales and marketing capabilities or establish collaborations with third parties with such capabilities;
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commercialize
our product candidates; and
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improve
our operational, financial and management controls, reporting systems and procedures.
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This
planned future growth could place a strain on our administrative and operational infrastructure and may require our management
to divert a disproportionate amount of its attention away from our day-to-day activities. We may not be able to effectively manage
the expansion of our operations or recruit and train additional qualified personnel, which may result in weaknesses in our infrastructure,
and give rise to operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining
employees. We may not be able to make improvements to our management information and control systems in an efficient or timely
manner and may discover deficiencies in existing systems and controls. If our management is unable to effectively manage our expected
growth, our expenses may increase more than expected, our ability to generate or increase our revenues could be reduced and we
may not be able to implement our business strategy. Our future financial performance and our ability to compete effectively will
depend, in part, on our ability to effectively manage any future growth.
Risks
Related to Our Regulatory and Legal Environment
We
are subject to extensive and costly government regulation.
Product
candidates and approved products such as ours are subject to extensive and rigorous domestic government regulation including regulation
by the FDA, the Centers for Medicare and Medicaid Services, other divisions of the U.S. Department of Health and Human Services,
the U.S. Department of Justice, state and local governments, and their respective foreign equivalents. The FDA regulates the research,
development, preclinical and clinical testing, manufacture, safety, effectiveness, record keeping, reporting, labeling, storage,
approval, advertising, promotion, sale, distribution, import, and export of pharmaceutical products. The FDA regulates small molecule
chemical entities, whether administered orally, topically or by injection, as drugs, subject to an NDA, under the Federal Food,
Drug, and Cosmetic Act. If our product candidates are to be marketed abroad, they will also be subject to extensive regulation
by foreign governments, whether or not they have obtained FDA approval. Such foreign regulation might be equally or more demanding
than corresponding U.S. regulation. Government regulation substantially increases the cost and risk of researching, developing,
manufacturing, and selling our products. The regulatory review and approval process, which includes preclinical testing and clinical
trials of each product candidate, is lengthy, expensive, and uncertain. Our collaborators or we must obtain and maintain regulatory
authorization to conduct clinical trials and approval for each product we intend to market, and the manufacturing facilities used
for the products must be inspected and meet legal requirements. Securing regulatory approval requires submitting extensive preclinical
and clinical data and other supporting information for each proposed therapeutic indication in order to establish the product’s
safety and efficacy for each intended use. The development and approval process might take many years, requires substantial resources,
and might never lead to the approval of a product. Even if we are able to obtain regulatory approval for a particular product,
the approval might limit the indicated medical uses for the product, limit our ability to promote, sell, and distribute the product,
require that we conduct costly post-marketing surveillance, and/or require that we conduct ongoing post-marketing studies. Material
changes to an approved product, such as, for example, manufacturing changes or revised labeling, might require further regulatory
review and approval. Once obtained, any approvals might be withdrawn, including, for example, if there is a later discovery of
previously unknown problems with the product, such as a previously unknown safety issue.
If
we, our collaborators, or our contract manufacturers fail to comply with applicable regulatory requirements at any stage during
the regulatory process, such noncompliance could result in, among other things, delays in the approval of applications or supplements
to approved applications; refusal of a regulatory authority, including the FDA, to review pending market approval applications
or supplements to approved applications; warning letters; fines; import and export restrictions; product recalls or seizures;
injunctions; total or partial suspension of production; civil penalties; withdrawals of previously approved marketing applications
or licenses; recommendations by the FDA or other regulatory authorities against governmental contracts; and/or criminal prosecutions.
We
might not obtain the necessary U.S. regulatory approvals to commercialize any product candidates.
We
cannot assure you that we will receive the approvals necessary to commercialize for sale any product candidates we are currently
developing or that we may acquire or develop in the future. We will need FDA approval to commercialize our product candidates
in the U.S. In order to obtain FDA approval of any product candidate, we must submit to the FDA an NDA demonstrating that the
product candidate is safe for humans and effective for its intended use. This demonstration requires significant research, pre-clinical
studies, and clinical trials. Satisfaction of the FDA’s regulatory requirements typically takes many years, depends upon
the type, complexity and novelty of the product candidate and requires substantial resources for research, development and testing.
We cannot predict whether our research and clinical approaches will result in additional drugs that the FDA considers safe for
humans and effective for their indicated uses. The FDA has substantial discretion in the product approval process and might require
us to conduct additional pre-clinical and clinical testing, perform post-marketing studies or otherwise limit or impose conditions
on any additional approvals we obtain. The approval process might also be delayed by changes in government regulation, future
legislation or administrative action or changes in FDA policy that occur prior to or during our regulatory review. Delays in obtaining
regulatory approvals might:
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delay
commercialization of, and our ability to derive product revenues from, our product candidates;
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impose
costly procedures on us; and
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diminish
any competitive advantages that we might otherwise enjoy.
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Even
if we comply with all FDA requests, the FDA might ultimately reject one or more of our NDAs. We cannot be sure that we will ever
obtain regulatory clearance for our product candidates. Failure to obtain FDA approval of our product candidates will severely
undermine our business by leaving us without saleable products, and therefore without any potential sources of revenues, until
another product candidate could be developed or obtained. There is no guarantee that we will ever be able to develop or acquire
any product candidate.
Following
any regulatory approval of any product candidates, we will be subject to ongoing regulatory obligations and restrictions, which
may result in significant expense and limit our ability to commercialize our potential drugs.
If
one of our product candidates is approved by the FDA or by a foreign regulatory authority, we will be required to comply with
extensive regulations for product manufacturing, labeling, packaging, adverse event reporting, storage, distribution, advertising,
promotion and record keeping. Regulatory approvals may also be subject to significant limitations on the indicated uses or marketing
of the products or to whom and how we may distribute our products. Even if U.S. regulatory approval is obtained, the FDA may still
impose significant restrictions on a drug’s indicated uses or marketing or impose ongoing requirements for potentially costly
post-approval studies. For example, the label ultimately approved for our products, if any, may include restrictions on use, including
restrictions based on level of obesity and duration of treatment. If so, we may be subject to ongoing regulatory obligations and
restrictions, which may result in significant expense and limit our ability to commercialize our products. The FDA could also
require a registry to track the patients utilizing the drug or implement a Risk Evaluation and Mitigation Strategy, or “REMS,”
that could restrict access to the drug, reduce our revenues and/or increase our costs. Potentially costly post-marketing clinical
studies may be required as a condition of approval to further substantiate safety or efficacy, or to investigate specific issues
of interest to the regulatory authority.
Manufacturers
of pharmaceutical products and their facilities are subject to continual review and periodic inspections by the FDA and other
regulatory authorities for compliance with cGMP regulations, which include requirements relating to quality control and quality
assurance as well as the corresponding maintenance of records and documentation. Further, regulatory agencies must approve these
manufacturing facilities before they can be used to manufacture our future approved products, if any, and these facilities are
subject to ongoing regulatory inspections. In addition, regulatory agencies subject a pharmaceutical product, its manufacturer
and the manufacturer’s facilities to continual review and inspections. The subsequent discovery of previously unknown problems
with a product, including adverse events of unanticipated severity or frequency, or problems with the facility where the product
is manufactured, may result in restrictions on the marketing of that product, up to and including, withdrawal of the product from
the market. If the manufacturing facilities of our suppliers fail to comply with applicable regulatory requirements, it could
result in regulatory action and additional costs to us. Failure to comply with applicable FDA and other regulatory requirements
may, either before or after product approval, if any, subject our company to administrative or judicially imposed sanctions, including:
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issuance
of Form 483 notices, warning letters and adverse publicity by the FDA or other regulatory agencies;
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imposition
of fines and other civil penalties due to product liability or other issues;
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injunctions,
suspensions or revocations of regulatory approvals;
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suspension
of any ongoing clinical trials;
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total
or partial suspension of manufacturing;
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delays
in commercialization;
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refusal
by the FDA to approve pending applications or supplements to approved applications filed by us or our collaborators;
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refusals
to permit medical products to be imported into or exported from the U.S.;
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restrictions
on operations, including costly new manufacturing requirements;
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product
recalls or seizures; and
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criminal
prosecutions.
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In
addition, the law or regulatory policies governing pharmaceutical products may change. New statutory requirements may be enacted
or additional regulations may be enacted that could prevent or delay regulatory approval of our product candidates. Contract manufacturing
organizations, or “CMOs,” and their vendors or suppliers may also face changes in regulatory requirements from governmental
agencies in the U.S. and other countries. We cannot predict the likelihood, nature, extent or effects of government regulation
that may arise from future legislation or administrative action, either in the U.S. or elsewhere. If we are not able to maintain
regulatory compliance, we might not be permitted to market any future approved products and our business could suffer.
We
could be forced to pay substantial damage awards if product liability claims that may be brought against us are successful.
The
use of any of our product candidates in clinical trials, and the sale of any approved products, may expose us to liability claims
and financial losses resulting from the use or sale of our products. We have obtained limited product liability insurance coverage
for our clinical trials of $2.0 million per occurrence and in the aggregate, subject to a deductible of $50,000 per occurrence.
There can be no assurance that our existing insurance coverage will extend to any other products in the future. Any product liability
insurance coverage may not be sufficient to satisfy all liabilities resulting from product liability claims. A successful claim
may prevent us from obtaining adequate product liability insurance in the future on commercially desirable terms, if at all. Even
if a claim is not successful, defending such a claim would be time consuming and expensive, may damage that product’s and
our reputations in the marketplace, and would likely divert management’s attention, any of which could have a material adverse
effect on our company.
Risks
Related to our Intellectual Property
Our
business depends on protecting our intellectual property.
If
we do not obtain protection for our intellectual property rights, our competitors might be able to take advantage of our research
and development efforts to develop competing products. Our success, competitive position and future revenues, if any, depend in
part on our ability and the abilities of our licensors to obtain and maintain patent protection for our products, methods, processes
and other technologies, to preserve our trade secrets, to prevent third parties from infringing on our proprietary rights and
to operate without infringing the proprietary rights of third parties. We anticipate filing additional patent applications both
in the U.S. and in other countries, as appropriate. However, the patent process is subject to numerous risks and uncertainties,
and there can be no assurance that we will be successful in protecting our products by obtaining and defending patents. These
risks and uncertainties include the following:
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Our
patent rights might be challenged, invalidated, or circumvented, or otherwise might not provide any competitive advantage;
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Our
competitors, many of which have substantially greater resources than we do and many of which might make significant investments
in competing technologies, might seek, or might already have obtained, patents that will limit, interfere with, or eliminate
our ability to make, use, and sell our potential products either in the U.S. or in international markets;
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Countries
other than the U.S. might have less restrictive patent laws than those upheld by U.S. courts, allowing foreign competitors
the ability to exploit these laws to create, develop, and market competing products; and
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As
a matter of public policy regarding worldwide health concerns, there might be significant pressure on the U.S. government
and other international governmental bodies to limit the scope of patent protection both inside and outside the U.S. for disease
treatments that prove successful.
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In
addition, the U.S. Patent and Trademark Office and patent offices in other jurisdictions have often required that patent applications
concerning pharmaceutical and/or biotechnology-related inventions be limited or narrowed substantially to cover only the specific
innovations exemplified in the patent application, thereby limiting the scope of protection against competitive challenges. Thus,
even if we or our licensors are able to obtain patents, the patents might be substantially narrower than anticipated.
Because
the time period from filing a patent application to the issuance, if ever, of the patent is often more than three years and because
any regulatory approval and marketing for a pharmaceutical product often occurs several years after the related patent application
is filed, the resulting market exclusivity afforded by any patent on our drug candidates and technologies will likely be substantially
less than 20 years. In the United States, the European Union and some other jurisdictions, patent term extensions are available
for certain delays in either patent office proceedings or marketing and regulatory approval processes. However, due to the specific
requirements for obtaining these extensions, there is no assurance that our patents will be granted extensions even if we encounter
significant delays in patent office proceedings or marketing and regulatory approval.
Patent
and other intellectual property protection is crucial to the success of our business and prospects, and there is a substantial
risk that such protections will prove inadequate. Our business and prospects will be harmed if these protections prove insufficient.
We
rely on trade secret protections through confidentiality agreements with our employees, customers and other parties, and the breach
of these agreements could adversely affect our business and prospects.
We
rely on trade secrets, which we seek to protect, in part, through confidentiality and non-disclosure agreements with our employees,
collaborators, suppliers, and other parties. There can be no assurance that these agreements will not be breached, that we would
have adequate remedies for any such breach or that our trade secrets will not otherwise become known to or independently developed
by our competitors. We might be involved from time to time in litigation to determine the enforceability, scope and validity of
our proprietary rights. Any such litigation could result in substantial cost and divert management’s attention from our
operations.
If
we infringe the rights of third parties we might have to forego developing and/or selling any approved products, pay damages,
or defend against litigation.
If
our product candidates, methods, processes and other technologies infringe the proprietary rights of other parties, we could incur
substantial costs and we might have to:
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obtain
licenses, which might not be available on commercially reasonable terms, if at all;
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abandon
an infringing product candidate;
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redesign
our products or processes to avoid infringement;
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stop
using the subject matter claimed in the patents held by others;
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pay
damages; and/or
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defend
litigation or administrative proceedings which might be costly whether we win or lose, and which could result in a substantial
diversion of our financial and management resources.
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Any
of these events could substantially harm our earnings, financial condition and operations.
Risks
Related to Our Securities
Our
failure to meet the continued listing requirements of Nasdaq could result in a delisting of our common stock and warrants.
Our
common stock and warrants are currently listed on the Nasdaq Capital Market, or “Nasdaq.” If we fail to satisfy the
continued listing requirements of Nasdaq, such as the corporate governance requirements or the minimum closing bid price requirement,
Nasdaq may take steps to delist our common stock and warrants. Such a delisting would likely have a negative effect on the price
of our common stock and warrants and would impair your ability to sell or purchase our common stock and warrants when you wish
to do so. In addition, we could face significant material adverse consequences, including:
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a
limited availability of market quotations for our securities;
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a
limited amount of news and analyst coverage for us; and
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a
decreased ability to issue additional securities or obtain additional financing in the future.
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In
the event of a delisting, we would take actions to restore our compliance with Nasdaq’s listing requirements, but we can
provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market
price or improve the liquidity of our common stock, prevent our common stock from dropping below the Nasdaq minimum bid price
requirement or prevent future non-compliance with Nasdaq’s listing requirements.
If
our common stock were delisted and determined to be a “penny stock,” a broker-dealer may find it more difficult to
trade our common stock and an investor may find it more difficult to acquire or dispose of our common stock in the secondary market.
If
our common stock were removed from listing with Nasdaq, it may be subject to the so-called “penny stock” rules. The
SEC has adopted regulations that define a “penny stock” to be any equity security that has a market price per share
of less than $5.00, subject to certain exceptions, such as any securities listed on a national securities exchange. For any transaction
involving a “penny stock,” unless exempt, the rules impose additional sales practice requirements on broker-dealers,
subject to certain exceptions. If our common stock were delisted and determined to be a “penny stock,” a broker-dealer
may find it more difficult to trade our common stock and an investor may find it more difficult to acquire or dispose of our common
stock on the secondary market.
If
we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or
detect fraud. Consequently, shareholders could lose confidence in our financial reporting and this may decrease the trading price
of our common stock.
We
are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the “Exchange Act,”
Sarbanes-Oxley Act of 2002, or “SOX,” and Nasdaq rules and regulations. SOX requires, among other things, that we
maintain effective disclosure controls and procedures and internal control over financial reporting. We perform system and process
evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of
our internal controls over financial reporting in our Annual Report on Form 10-K filing for that year, as required by Section
404 of SOX. We previously had identified material weaknesses in our internal control over financial reporting related to ineffective
separation of duties due to our limited finance staff, our reliance on consultants to assist with the financial reporting function
and a lack of documented policies and procedures, which weaknesses were reported in fiscal 2016 and 2017. While we remediated
these material weaknesses as of September 30, 2018, such that management has determined that our internal controls over financial
reporting were effective as of that date, we cannot assure that, in the future, a material weakness or significant deficiency
will not exist or otherwise be discovered. If that were to happen, it could harm our operating results and cause shareholders
to lose confidence in our reported financial information. Any such loss of confidence would have a negative effect on the trading
price of our securities.
The
price of our securities may become volatile, which could lead to losses by shareholders and costly securities litigation.
The
trading price of our securities is likely to be highly volatile and could fluctuate in response to factors such as:
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actual
or anticipated variations in our operating results;
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announcements
of developments by us or our competitors;
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the
completion and/or results of our clinical trials;
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regulatory
actions regarding our product candidates or any approved products;
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announcements
by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
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adoption
of new accounting standards affecting our industry;
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additions
or departures of key personnel;
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introduction
of new products by us or our competitors;
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sales
of our common stock or other securities in the open market or in private placements; and
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other
events or factors, many of which are beyond our control.
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The
stock market is subject to significant price and volume fluctuations. In the past, following periods of volatility in the market
price of a company’s securities, securities class action litigation has often been initiated against such a company. Any
such litigation initiated against us, whether or not successful, could result in substantial costs and diversion of our management’s
attention and resources, which could harm our business and financial condition.
You
may experience dilution of your ownership interests because of the future issuance of additional shares of our common stock or
securities convertible into common stock.
In
the future, to finance our operations, including possible acquisitions or strategic transactions, we may issue equity securities,
resulting in the dilution of the ownership interests of our present stockholders. We are currently authorized to issue an aggregate
of 200,000,000 shares of common stock and 10,000,000 shares of preferred stock. As of April 9, 2019, there were 22,075,781 shares
of common stock outstanding, 12,871,623 shares underlying warrants with a weighted average exercise price of $2.604 per share,
1,646,039 shares underlying options with a weighted average exercise price of $4.252 per share, and 100,667 underlying unit purchase
options to purchase shares of common stock and warrants at an exercise price of $9.00 per unit. We may also issue additional shares
of our common stock or other securities that are convertible into or exercisable for common stock in connection with hiring or
retaining employees, or for other business purposes. The future issuance of any such additional shares of common stock or common
stock equivalents may create downward pressure on the trading price of our common stock.
The
common stock is controlled by insiders.
As
of April 9, 2019, our executive officers and directors beneficially owned approximately 56.2% of our outstanding shares of common
stock. Such concentrated control of our company may adversely affect the price of our common stock. If you acquire common stock,
you may have no effective voice in the management of our company. Sales by our directors and executive officers or their affiliates,
along with any other market transactions, could adversely affect the market price of our common stock.
We
do not intend to pay dividends for the foreseeable future.
We
have paid no dividends on our common stock to date and we do not anticipate that any dividends will be paid to holders of our
common stock in the foreseeable future. While our future dividend policy will be based on the operating results and capital needs
of the business, it is currently anticipated that any earnings will be retained to finance our future expansion and for the implementation
of our business plan. The lack of a dividend can further affect the market value of our stock, and could significantly affect
the value of any investment in our company.
Our
Certificate of Incorporation allows for our Board of Directors to create new series of preferred stock without further approval
by our stockholders, which could adversely affect the rights of the holders of the common stock.
Our
Board of Directors has the authority to issue up to 10,000,000 shares of preferred stock and to fix and determine the relative
rights and preferences of any such preferred stock without further stockholder approval. As a result, our Board of Directors could
authorize the issuance of a series of preferred stock that would grant preferential rights to our assets upon liquidation, the
right to receive dividend payments before dividends are distributed to the holders of common stock and the right to the redemption
of the preferred shares, together with a premium, prior to the redemption of the common stock. In addition, our Board of Directors
could authorize the issuance of a series of preferred stock that has greater voting power than the common stock or that is convertible
into our common stock, which could decrease the relative voting power of the common stock or result in dilution to our existing
stockholders.
There
is not an active liquid trading market for our common stock.
While
our common stock is listed on the Nasdaq Capital Market, there has not been a regular active trading market in our common stock,
and we cannot give any assurance that an active trading market will develop. If an active market for our common stock were to
develop, there is a significant risk that the stock price could fluctuate dramatically in the future in response to any of the
following factors, some of which are beyond our control:
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the
results of our preclinical and clinical trials;
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announcements
by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;
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general
economic slowdowns;
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issuances
by us or resales by others of large amounts of our common stock;
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variations
in our quarterly operating results; and
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announcements
that our revenue or income are below analysts’ expectations.
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Sales
of a substantial number of shares of our common stock in the public market, or the perception such sales may occur, could cause
the market price of shares of our common stock to fall.
Sales
of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception
in the market of such sales or that the holders of a large number of shares intend to sell shares, could reduce the market price
of our shares of our common stock. As of April 9, 2019, we had 22,075,781 shares of common stock outstanding. This includes registered
shares of common stock as well as 5,002,573 shares of our common stock which are available for resale under Rule 144 of the Securities
Act of 1933, as amended, or the “Securities Act.”