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PART
I
Throughout
this Annual Report on Form 10-K, references to “we,” “our,” “us,” the “Company,” “Hillstream,”
or “Hillstream BioPharma” refer to Hillstream BioPharma, Inc., individually, or as the context requires, collectively with
its subsidiaries.
ITEM
1. BUSINESS
Overview
Hillstream
BioPharma is a pre-clinical biotechnology company developing novel therapeutic candidates targeting ferroptosis, an emerging new anti-cancer
mechanism resulting in iron mediated cell death (“IMCD”), and targeted immuno-oncology novel biologics, for the treatment
drug resistant cancers. Our most advanced product candidate, HSB-1216, is an IMCD inducer, targeting a variety of solid tumors. In a
clinical pilot study conducted at the University of Heidelberg, Germany, the active drug in HSB-1216 was found to reduce tumor burden
in treatment resistant cancers, including triple negative breast cancer (“TNBC”) and epithelial carcinomas. We utilize Quatramer™,
our proprietary tumor targeting platform, to enhance the uptake of HSB-1216 in the tumor microenvironment (“TME”) with an
extended duration of action and minimal off-target toxicity. Our goal is to submit an investigational new drug application (“IND”)
to the U.S. Food and Drug Administration (“FDA”) and initiate a clinical study with HSB-1216 in the second half of 2023;
however, no assurance can be provided that our IND will be accepted by the FDA in 2023, if at all. If our IND is accepted by the FDA,
our HSB-1216 clinical studies will focus on expanding upon the clinical pilot study conducted in Germany. If we are able to initiate
our clinical study with HSB-1216 in the second half of 2023, we anticipate that clinical data from such trial will be released either
late 2024 or early 2025.
The
discovery of regulated cell death processes, such as apoptosis and autophagy, has enabled novel target discovery for drug development.
Ferroptosis, a form of IMCD, is an emerging regulated cell death process which decreases intracellular iron or the Labile Iron Pool (“LIP”),
a known factor required for cell growth. Cancer cells promote increase in the LIP leading to unregulated cell growth and metabolism.
Decreasing the LIP, induces iron-led reactive-oxygen species (“ROS”) production and lipid peroxidation, two key hallmarks
of ferroptosis/IMCD, which lead to regulated cell death. HSB-1216 sequesters iron in the cytoplasm of cancer cells and decreases the
LIP, thereby inducing ferroptosis/IMCD, leading to regulated cell death. Areas of interest for the development of HSB-1216 are as a treatment
of solid tumors, including small cell lung cancer (“SCLC”), TNBC, uveal melanoma, glioblastoma multiforme, head and neck
squamous cell carcinoma and other drug resistant cancers with high unmet need.
Quatramer
is a tumor targeting platform which allows us to leverage and exploit key tumor targets and novel emerging pathways such as IMCD to facilitate
the delivery of potent drugs directly to the TME while sparing healthy tissue. By efficiently extending the circulation half-life, as
well as targeting delivery to the tumor site, Quatramer preferentially traps drugs in the TME. This emerging orthogonal anti-cancer approach
leverages a fundamental recognized mechanism of iron mediated tumor growth and metabolism. We are building a portfolio of long-acting,
potent anti-cancer drug candidates using our Quatramer platform.
The
Quatrabody™ provides an entry into development of next generation immune-oncology (“IO”) biologics including, bispecific
and trispecific antibodies, antibody-drug conjugates (“ADCs”), CAR-T, CAR-NKs among others. Quatrabodies capitalize on the
long half-life of tumor targeting Quatramers combined with Picobodies™ bovine-derived antibody “knob” domains which
have potential to access and bind more tightly to “undruggable” epitopes better than full sized antibodies. HSB-1940 is a
combination of programed cell death protein 1 (“PD-1”) targeting Picobodies bound to the surface of Quatramers. Quatrabodies
have the potential for delivering an increased drug payload to the tumor with a longer half-life while targeting novel “undruggable”
epitopes of well-established and validated IO targets such as PD-1.
Our
Product Candidates and Research Programs
We
are leveraging our proprietary technologies and developing multiple product candidates with differentiated profiles designed to address
rare and treatment resistant cancers, as shown below.
Figure
1: Pipeline Chart
We
intend to submit INDs to the FDA to gain approval to initiate clinical studies in the second half of 2023 for HSB-1216 and in 2025 for
both HSB-3215 and HSB-1940; however, no assurance can be provided that our INDs will be accepted by the FDA based on our anticipated
timeline, if at all.
Our
Lead Candidates
HSB-1216
HSB-1216,
our most advanced product candidate which we intend to prepare for advancement into the clinic for multiple high unmet need solid tumors,
is an IMCD inducer delivered using the Quatramer, our proprietary tumor targeting platform. We intend to submit an IND application to
the FDA and obtain clinical data to support our strategy in the second half of 2023; however, no assurance can be provided that our IND
will be accepted by the FDA in 2023, if at all. HSB-1216 exploits a key feature of certain tumors that rely on an excessive LIP inside
the cell to modify the dysregulated iron microenvironment of cancer. We have received orphan drug designation (“ODD”) in
SCLC and uveal melanoma for HSB-1216’s active drug. In a clinical pilot study conducted at the University of Heidelberg, Germany,
HSB-1216’s active drug was studied in seven patients with positive results in heavily pre-treated and therapy resistant cancers.
By design, HSB-1216 circulates systemically after an intravenous injection and concentrates in the TME of solid tumor masses. The localization
of HSB-1216 has been demonstrated in multiple in vivo pre-clinical models with pharmacodynamic signals showing significant decreases
in tumor size after weekly injections over time.
Figure
2: How Drug-resistant Persister Cancer Cells, Using Ferroptosis/IMCD, Hijack Intracellular Iron for Unregulated Growth and the Potential
Role of HSB-1216
HSB-1216’s
ability to target drug-resistant persister cancer cells has the potential to be used in cancer patients who have failed standard-of-care
for treatment resistant tumors without any approved therapies. We intend to submit an IND to the FDA for approval in the second half
of 2023 and, if such IND is timely submitted and approved, we anticipate clinical data either late 2024 or early 2025; however, no assurance
can be provided that our IND will be accepted by the FDA in 2023, if at all.
HSB-3215
HSB-3215,
our second product candidate, is an
anti-HER2 monoclonal antibody candidate.
The ErbB or HER family of cell surface proteins are some of the most well-known and validated oncology drug targets including ErbB2 or
HER2 (human epidermal growth factor receptor) and Erb3 or HER3. The family of antibodies and biologics against HER2 starting with HERCEPTIN®
(trastuzumab) approved in 1998 for breast cancer, one of the first few anti-cancer antibodies, as well as PERJETA®
(pertuzumab), KADCYLA® (ado-trastuzumab emtansine) and PHESGO® (Pertuzumab/trastuzumab/hyaluronidase) reported
2022 sales of greater than $8 billion for Roche/Genentech. Antibodies against HER2 and HER3 bind to different domains of the extracellular
portion of the proteins or epitopes with trastuzumab primarily binding the extracellular domain IV of HER2. HER2 is a validated tumor
antigen for antibody drug conjugates to treat HER2 positive cancers with two approved antibodies, Roche/Genentech’s KADCYLA®
and Daiichi Sankyo/AstraZeneca’s ENHERTU®.
Applied
Biomedical Science Institute (“ABSI”) has developed technology to target unique functional epitopes of the cancer targets
HER2 and HER3. Monoclonal antibodies being developed at ABSI are unique from the currently approved anti-HER2 antibodies. ABSI has granted
us an exclusive option to license technology from ABSI to develop HER2 and HER3 antibodies, including multi-specific and Quatramer-
based therapeutics incorporating portions of the antibodies. These antibodies could be incorporated into proprietary multi-format biologics
(bi- and tri-specific antibodies, ADCs (antibody drug conjugates), CAR-T and CAR-NKs, in Quatramers and Quatrabodies) against drug resistant
cancers including HER2-positive metastatic breast cancer, gastric cancer, lung cancer and ovarian cancer. The ABSI option terminates on March 24, 2023, unless extended by the parties.
HSB-1940
Our
third product candidate, HSB-1940, is a Quatrabody, a proprietary IO biologic,
in development targeting PD-1. We entered into a research collaboration and product license agreement with Minotaur Therapeutics, Inc.
(“Minotaur”) and a commercial license agreement with Taurus Biosciences, LLC (“Taurus”), for use of certain technology,
including OmniAb antibodies, to advance Picobodies™ against novel, undruggable epitopes in high-value validated IO targets
starting with PD-1.
The technologies of Hillstream and Minotaur will be combined under the license from
Taurus to discover, develop and advance biotherapeutics against high-value validated IO targets. Picobodies are bovine-derived antibody
“knob” domains comprised of cysteine-rich ultralong complementary determining region (“CDR”) H3 sequences of
30-40 amino acids weighing ~3-4 KDa, which have the potential to access challenging undruggable epitopes better than full size antibodies
can.
By
combining Quatramers, with their long half-life, coated with a PD-1 Picobody to create HSB-1940, we believe we can more efficiently target
novel epitopes with greater binding affinity than approved anti-PD-1 antibodies. We further believe that the development of HSB-1940
is a step toward enabling us to enter the rapidly growing IO market with additional targets thereafter.
Our
Other Product Candidates
We
intend to further develop our pipeline with novel bispecific monoclonal antibodies. These bispecific antibodies are planned to simultaneously
bind to two different antigens or to two different epitopes on the same antigen. Whether two different antigens or two epitopes on the
same antigen, the bispecific antibody could bind its targets either on the same cell (cis) or on to different cells (trans).
Our strategy involves targeting PD-1 combined with a known, validated undisclosed antigen (HSB-9646) or using HER2 instead of PD-1 (HSB-0059),
while naturally occurring antibodies typically only target one epitope on one antigen. At this time, we have de-prioritized the expenditures
and related activities associated with TridentAI, HSB-510, HSB-114 and HSB-888.
Research
Programs
Our
technology platform enables us to generate a pipeline of early-stage product candidates spanning multiple targets in oncology utilizing
diverse payloads to treat rare and treatment resistant tumors. While the payload in our most advanced product candidate, HSB-1216, is
novel, and has pilot human data in multiple solid tumors, any solid tumor or non-oncologic disease requiring delivery of a peptide, protein
or biologic is conceivably a candidate for our Quatramer technology. Our early-stage product candidates such as HSB-3215 and HSB-1940
are focused on rare and treatment resistant diseases; however, we believe our technology could potentially deliver meaningful benefit
across a wide range of oncologic and viral diseases. We have tested several peptides, nucleic acids, proteins, small molecules and antibody
constructs against multiple targets.
Our
Platform Technologies
Quatramer
Technology
A
key aspect of oncology treatment is that effective anticancer agents do not penetrate the tumor bed in order to kill cancer cells due
to the limitation of the microenvironment of the tumor. The TME is protected by stromal tissue comprised of multiple layers of collagen,
proteoglycans, hyaluronans and laminin layers shielding the tumor from the deployment of traditional treatments, including chemotherapy
(novel small molecule and immunotherapies). Parts of the tumor create an environment to survive despite reduced nutrient sources whereby
hypoxic regions of the tumor continue to thrive by incorporating a shift in metabolism, including iron dysregulation. Any drug that reaches
the tumor is effluxed out of the cell by transporter pumps upregulated by the cancer cells rendering any such drug that reaches the tumor
ineffective. The TME continues to thrive by the inability of immune cells normally designed to infiltrate and kill the tumor made ineffective
by a reduction in their ability to activate their killing effect of the cancer.
Figure
3: Quatramer Tumor Targeting Platform with Versatile Payload Delivery
Our
proprietary Quatramer technology overcomes the limitations that have hampered development of nanoscale and liposome derived products
as cancer therapeutics. Limitations include, but are not limited to, drug efflux, toxicity, eluding phagocytosis, physiological barrier
penetrance and immune responses. Our Quatramer technology incorporates a therapeutic payload and is designed to be tunable while having
a prolonged circulation within the blood, allowing a targeting of diseased tissue or cells, while providing a controlled and timely release
of the therapeutic payload.
Characteristics
of our Quatramer technology include:
● |
Prolonged
circulation: the stealth nature of Quatramer allows for a prolonged circulation time resulting in accumulation at the site of
disease prior to being cleared. |
|
|
● |
Targeted:
the size, shape and surface of Quatramer allows it to escape via gaps in the blood vessels in the TME allowing for release of the
payload directly into cancerous cells. |
|
|
● |
Blocks
drug efflux: Quatramer composition offers reversal of p-glycoprotein mediated drug resistance in cells via generation of poloxamers
(breakdown products comprised of small co-polymers). |
|
|
● |
Tunability:
Quatramer physicochemical characterization allows for optimizing size, shape and surface chemistry based on payload characteristics
to render enhanced permeation and retention into the TME. |
|
|
● |
Ease
of manufacturing: large scale production efficiency and analysis for uniform chemistry, manufacturing and control capability
at lower costs. |
|
|
● |
Established
regulatory path: chemical compositions listed in the FDA Inactive Ingredients Database with known profile. |
|
|
● |
Payload
versatility and flexibility: combined with the tunability of Quatramer, the technology allows for a variety of delivery payloads
including peptides, small molecules, nucleic acids and antibodies with the added flexibility of dual-loaded payload therapeutics. |
|
|
● |
Biodegradable:
Quatramers ultimately breakdown into known metabolites such as lactic acid and ethanol. |
Quatrabody
Technology
Quatrabodies
combine the benefits of tumor targeting and long half-life of Quatramers with novel Picobodies to enter into development of next generation
IO therapeutics. Quatrabodies capitalize on the knob domains from bovine-derived antibodies which have the potential to access “undruggable”
epitopes on validated tumor targets better than full sized antibodies. Picobodies are the smallest known antibody fragment, comprised
of ultra-long CDR H3 sequences of 30-40 amino acids rich with cysteines that create tightly folded structures capable of binding recessed
epitopes.
Figure
4: Quatrabodies Combine Quatramers’ Tumor Targeting and Long Half-Life with Knobs, the Smallest Known Antibody Fragments, Targeting
Undruggable Epitopes
Antibodies
derived from mouse or human sources use the surface formed by CDRs on the variable regions of the heavy chain/light chain heterodimer,
which typically forms a relatively flat binding surface. Bovine’s ultralong CDR-H3 regions form an independently folding mini-domain,
which protrudes far out from the surface of the antibody and forms a “stalk and knob” structure which is diverse in both
its sequence and disulfide patterns. The “knob” (Picobody) component can be expressed as an independent antigen binding domain.
At ~4-6 kDa, these are three times smaller than a camelid “nanobody” and are the smallest known antibody fragment. These
atypical antigen binding sites of bovines potentially provide the ability to interact with different antigenic determinants, particularly
recessed or concave surfaces, compared to traditional antibodies.
Our
Key Programs: HSB-1216, HSB-3215 and HSB-1940
We
have leveraged our proprietary technologies and are developing multiple product candidates with differentiated profiles designed to address
rare and treatment resistant cancers. Our HSB-1216 product candidate is an IMCD inducer delivered by our proprietary Quatramer platform.
We intend to submit an IND to the FDA to gain approval to initiate clinical studies in the second half of 2023 and, if such IND is timely
submitted and approved, we anticipate initial data will be released either late 2024 or early 2025; however, no assurance can be provided
that our IND will be accepted by the FDA in 2023, if at all. We intend to submit an IND for HSB-3215 (anti-HER2 antibody with novel conformational
epitopes) and HSB-1940 (our first Quatrabody targeting PD-1), subject to successfully completing pre-clinical identification and characterization
as well as IND enabling studies in 2024.
HSB-1216:
Our Novel Iron-Medicated Cell Death Inducer
Iron,
an important factor of many organisms, satisfies an assortment of vital living processes including DNA replication, protein synthesis
and cellular respiration, essential for normal growth and propagation. However, iron also produces ROS via a chemical process in which
there is a catalytic decomposition of hydrogen peroxide by ferrous ions, known as the Fenton reaction. This process may cause damage
to the membrane lipid and DNA caused by ROS, known as lysosomal membrane permeabilization (“LMP”) rupturing and killing the
cell by spilling its contents into the surrounding microenvironment and causing degradation in the surrounding extracellular milieu.
Emerging evidence suggests iron may have a twofold role on cells, both stimulating cell growth and causing cell death, particularly a
new form named ferroptosis, first described by the accumulation of iron-dependent lipid peroxides.
Figure
5: Role of Iron in Growth of Drug-Resistant Persister Cancer Cells and Mechanism of Action of HSB-1216
Research
that has been published by us with respect to the active drug of HSB-1216 targeting chemotherapy resistant tumors suggests that it sequesters
iron in the lysosomes of resistant tumor cells causing LMP of hard-to-treat cancer cells known as persister cells causing them to rupture
and stop replicating. We believe an area of high interest for the development of HSB-1216 could be SCLC or TNBC or other rare cancers
with high unmet need.
Figure
6: HSB-1216 – Ferroptosis/IMCD Mechanism of Action: Shifting the Intracellular Redox Balance
One
of the standard limitations to achieving successful cancer therapies is the manifestation of multidrug resistance (“MDR”)
which is a cross-resistance to many commonly used drugs after repeat dosing. Extensive evidence to this point has shown that the mechanisms
related to tumor MDR are complex and there is an urgent need to decipher the nuances of this phenomenon and discover new agents capable
of evading resistance which can be applied to a clinical strategy in cancer. MDR can be developed by various ATP-binding cassette (“ABC”)
transporters, including the well characterized ABCB1, also known as p-glycoprotein, which has been shown to be an important protein of
the cell membrane and can transport a variety of molecules across extra- and intra-cellular membranes. The protein is an adenosine
triphosphate (“ATP”) dependent drug efflux pump that transports foreign substances out of the cell including drugs
and xenobiotics with broad substrate specificity. HSB-1216’s active drug has been shown to block this ABC transporter in numerous
studies as evidenced by drug efflux assays in MDR cell lines overexpressing these proteins by inducing a conformational change on the
transporter protein itself rendering it ineffective. Furthermore, the byproduct of the Quatramer bio-degradable process results in formation
of poloxamers which blocks the p-glycoprotein transporter system. This evidence may also allow other traditional chemotherapies, such
as paclitaxel which is highly effected by these transporters, to stay in the cell and elicit anti-tumor effects in combination with HSB-1216.
HSB-1216
in Oncology Indications
Our
drug candidate, HSB-1216, has novel characteristics which may benefit patients with hard-to-treat recurrent tumors, such as TNBC in a
number of ways. HSB-1216’s active drug, traditionally used as an anti-coccidial drug in livestock and poultry, has been shown to
possess anti-cancer effects in a chemical screen on the basis that it has more than 100-fold potency compared to paclitaxel, a commonly
used FDA-approved anti-cancer drug. The active compound is a monocarboxylic polyether compound first isolated from Streptomyces albus
strain (Strain No. 80614) shown to eliminate self-renewing cancer cells which may remain dormant or undetectable in the presence
of traditional chemotherapeutics, such as paclitaxel or other agents commonly used as first-line agents in a variety of tumors. Salinomycin
alone could not be advanced further after its discovery as an anti-cancer agent for a variety reasons, including a short half-life along
with a relatively narrow therapeutic index and potential toxicities. Subsequently, other groups have shown cytotoxicity of the compound
on human neuronal cells showing it had an increase on cytosolic Na+ concentrations consequently resulting in elevated cytosolic
Ca2+. In addition, overdose or accidental ingestion of similar compounds has shown undesirable effects in cats, dogs, pigs,
horses, as well as humans. These results and other data from third parties suggest it may
be prudent to develop tissue-specific strategies to deliver the drug and prevent neuro-specific adverse events and capitalize on the
specific mechanisms of HSB-1216’s active drug.
Clinical
Data with HSB-1216’s Active Drug
For
several reasons, HSB-1216’s active drug was not established as a human drug due to several reports published by third parties in
the past decades which reveal considerable toxicity in mammals such as horses, pigs, cats and alpacas after accidental oral ingestion
or inhalation. It has been relegated to use in livestock as a coccidiostat and growth promoter. The European Food Safety Authority has
declared an acceptable daily intake of 5 µg/kg. Based on these findings, the compound
was therapeutically used in a “first-in-man” clinical pilot study conducted at the University of Heidelberg, Germany, with
a cohort of 7 patients with metastatic breast, ovarian and head and neck cancers in which tumor and metastatic regression were observed
clinically in 4 patients with metastatic breast cancer, 1 patient with metastatic ovarian cancer, and 2 patients with squamous cell carcinoma
(1 of the head and neck and the other of the vulva). Administration of 200- 250 μg·kg−1 of active drug
intravenously every second day for three weeks in these patients resulted in partial regression of tumor metastasis. Intravenous active
drug therapy resulted in tachycardia and mild tremor for 30-60 minutes after administration but lacked side effects observed with conventional
chemotherapeutic drugs, such as myelosuppression, neutropenia, alopecia, nausea and vomiting, or gastrointestinal, thromboembolic, and
neurological side effects. Only 2 of the 7 cases are described in the publication relating to this trial, both of which are detailed
below showing that these promising results inducing cancer regression of heavily pretreated and therapy-resistant tumor types may define
HSB-1216’s active drug to have novel effects as a clinically significant anticancer agent.
Thirty
months prior to treatment with the HSB-1216’s active drug, a 40-year-old female patient was diagnosed with unilateral ductal breast
carcinoma (post-mastectomy and axillary lymph node dissection) and subsequently experienced a recurrence of the subcutaneous multifocal
thoracic tumor that was ER, PR, and HER2 negative (i.e., “triple negative”) with vertebral bone metastasis. After all therapeutic
options were exhausted, experimental treatment with HSB-1216’s active drug was recommended. The patient received 12 systemic administrations
of intravenous (“IV”) treatment at a dose of 200 µg·kg-1 given every other day. After 12 cycles,
there was a marked regression of the subcutaneous thoracic metastases (Figure 7). A biopsy of the metastatic tissue, as investigated
by molecular histopathology, demonstrated that approximately 85% of the cells had undergone apoptosis. Additionally, serum levels of
the tumor marker Ca 15-3 decreased from 14.3 U/mL before therapy to 7.2 U/mL after therapy. Similarly, serum levels of Carcinoembryonic
antigen, another tumor marker, declined from 50.8 ng/mL to 15.5 ng/mL posttreatment. These results demonstrate that the drug was not
only able to kill hard-to-treat cancers, but also more differentiated tumor cells and more importantly, highly indolent tumor cells displaying
efficient mechanisms of resistance to cytotoxic drugs, radiation, and induction of apoptosis.
Figure
7: Clinical Pilot Study
In
a second case study, 18 months prior to treatment with HSB-1216’s active drug, an 82-year-old female patient was diagnosed with
advanced and metastatic (pelvic lymphatic metastasis) squamous cell carcinoma of the vulva (after radical vulvectomy and bilateral lymph
node dissection). Given a poor therapeutic response to existing treatments at the time and exhaustion of therapeutic options, experimental
treatment of HSB-1216’s active drug in combination with erlotinib was recommended for this patient. The patient received 14 IV
administrations of the drug at a dose of 200 µg·kg-1 given every other day plus erlotinib 150 mg daily for 30
days. Significant tumor regression was observed 30 days after combination therapy, based on clinical inspection of the tumor, as well
as decreased serum level of squamous cell carcinoma (“SCC”) antigen from 11.3 ng/mL before combination therapy to 0.13 ng/mL
after therapy. Three months post-treatment, SCC levels increased to 3.2 ng/mL, and clinical inspection demonstrated significant tumor
progression.
After
experiencing numerous marked adverse effects with erlotinib (including fatigue, anorexia, nausea, and inappetence), the patient refused
further treatment with erlotinib and was retreated with HSB-1216’s active drug as monotherapy. The patient received 12 IV administrations
at a dose of 200 µg·kg-1 given every other day, which resulted in no progression and stable disease for 2 weeks,
4 weeks, and 4 months post-treatment, based on clinical inspection of the local tumor and no marked changes in SCC.
Figure
8: 2012 - Human Serum Levels of the Tumor Marker in Squamous Cell Carcinoma in vitro
These
results demonstrate that the drug is able to induce partial clinical regression of heavily pretreated and therapy-resistant cancers,
particularly in combination with novel tumor-targeted drugs.
HSB-1216
Pre-Clinical Data
HSB-1216’s
active drug has been shown to target elusive cancer cells in different types of human cancers, including gastric cancer, lung adenocarcinoma,
osteosarcoma, colorectal cancer, squamous cell carcinoma, and prostate, suggesting that the drug may be effective against side populations
of many types of human cancers. The drug is able to enhance the cytotoxic effects of conventional chemotherapeutics and novel tumor-targeted
drugs in regular cancer cells, potentially playing a central role for HSB-1216-based combination therapies in the future treatment of
cancer.
Figure
9: HSB-1216 Inhibits Tumor Growth in Mouse Model of SCLC
According
to the National Cancer Institute’s Surveillance, Epidemiology and End Results, there are anticipated to be more than 230,000 new
cases of lung cancer in the United States in 2021, and according to the American Cancer Society, SCLC comprises approximately
10-15% of all lung cancers.
Although SCLC is responsive to chemotherapy, recurrence occurs rapidly, with less than 7% of patients surviving over five years. SCLC
has shown to be responsive to immunotherapy with approximately one-third of patients responding
to PD-1/PD-L1 therapy and achieving a median overall survival of approximately eight months.
The need to rapidly advance therapeutics is an urgent, unmet medical need in these recurrent cases. In one pre-clinical mouse model of
SCLC conducted by a third party in Asia, both HSB-1216’s active drug as well as HSB-1216 showed no antitumor activity in vivo,
believed to be due to lab dilution errors of the test articles. The same articles showed marked antitumor activity in a tumor sphere
model owing to the potent effects of both compounds. Our previous studies with HSB-1216 has shown a profound inhibition of tumor growth
as a once-weekly injectable product in a nude mouse xenograft models utilizing an N-H69 SCLC cell line, with three 5 mg/kg doses administered
over three weeks when compared to placebo.
Figure
10: HSB-1216 is 2x-4x More Potent Against Chemo-Resistant SCLC Cell in vitro
HSB-1216
is two to four times more potent in chemoresistant SCLC. Using chemoresistant cell lines for SCLC (NCI-H69AR), our approach demonstrates
an increased potency of our compound using our Quatramer formulation when compared to standard-of-care therapies for these resistant
tumor types.
HSB-1216
Clinical Plan in Solid Tumors
We
intend to submit an IND for our HSB-1216 product candidate for solid tumors to the FDA in the second half of 2023, and, if approved,
we plan to conduct a Phase 1 clinical trial to obtain human pharmacokinetic data and dose optimization data on our formulation
thereafter; however, no assurance can be provided that our IND will be accepted by the FDA in 2023, if at all. Based on the data
obtained from pre-clinical studies, we believe a Phase 1 basket trial can be conducted in the US with HSB-1216 where there are
limited therapies. Even with the advent of immune checkpoint inhibitors (“ICIs”), there remains a large patient
population which either does not benefit from allowing HSB-1216 to potentially prolong survival in ICI failures as well as recurrent
disease patients.
HSB-3215:
The
ErbB or HER family of cell surface proteins are some of the most well-known and validated oncology drug targets including ErbB2 or HER2
(human epidermal growth factor receptor) and Erb3 or HER3. The family of antibodies and biologics against HER2 starting with HERCEPTIN®
(trastuzumab) approved in 1998 for breast cancer, one of the first few anti-cancer antibodies, as well as PERJETA®
(pertuzumab), KADCYLA® (ado-trastuzumab emtansine) and PHESGO® (Pertuzumab/trastuzumab/hyaluronidase) reported
2022 sales of greater than $8 billion for Roche/Genentech. Antibodies against HER2 and HER3 bind to different domains of the extracellular
portion of the proteins or epitopes with trastuzumab primarily binding the extracellular domain IV of HER2. HER2 is a validated tumor
antigen for antibody drug conjugates to treat HER2 positive cancers with two approved antibodies, Roche/Genentech’s KADCYLA®
and Daiichi Sankyo/AstraZeneca’s ENHERTU®.
Figure
11: Anti-ErbB2 (HER2) and Anti-ErbB3 (HER3) Antibodies
HSB-1940:
Combining
Quatramers with their long half-life coated with a PD-1 Picobody to create HSB-1940, we believe we can more efficiently target novel
epitopes with greater binding affinity than approved biologics. We further believe that targeting PD-1 is a step toward enabling us to
enter the rapidly growing IO therapeutics market with additional IO targets such as programed death- ligand 1 (“PD-L1”),
HER-2 and trophoblast cell surface antigen 2 (“TROP-2”).
Antibodies
derived from mouse or human sources use the surface formed by CDRs on the variable regions of the heavy chain (VH)/light chain
(VL) heterodimer typically forming a relatively flat binding surface which then binds the target protein. Alternative species,
particularly camelids and bovines, provide a paradigm for antigen recognition through novel domains which form the antigen binding site.
However, for camelids, heavy chain antibodies bind antigen with only a single heavy chain variable region (VH), in the absence
of light chains. Meanwhile, in bovines, ultralong CDR-H3 regions form an independently folding mini-domain, which protrudes far out from
the surface of the antibody and forms a “stalk and knob” structure. The “knob” is diverse in its structure, small
size and weight, sequence and disulfide patterns. The “knob” (Picobody) component can be expressed as an independent antigen
binding domain with three times smaller size (~4-6 kDa) than a camelid “nanobody” making it the smallest known antibody fragment.
These atypical antigen binding sites of bovines potentially provide the ability to interact with different antigenic determinants or
epitopes, particularly recessed or concave surfaces, compared to traditional full-length mouse or human antibodies.
Figure
12: Quatrabodies Combine Unique Features of the Knob Domain of Bovine-derived Antibodies with Quatramers’ Long Half-life
Iron
Mediated Cell Death Inducer Analogues Program
In
December 2019, we acquired intellectual property and data related to analogues of HSB-1216’s active drug with varying molecular
constructs with increased efficacy against a subgroup of tumors consisting of breast, pancreatic and prostate cancers. Several lead analogues
have demonstrated increased potency when compared to HSB-1216’s active drug, whereby the increased potency of these compounds is
expected to have ferroptotic effects greater than HSB-1216’s active drug at micro-dosage levels, creating an increased therapeutic
index as novel small molecules. We expect to develop these advanced compounds as follow-on therapeutics to HSB-1216 to treat a variety
of high unmet needs, including orphan cancers, which are sensitive to the ferroptotic pathway.
Quatramer
Technology
Overview
Our
proprietary Quatramer technology is based on know-how and permits manufacture of uniform size polymer aggregates that can be packaged
and tuned specifically to interact with pharmaceutical drugs, biological molecules and/or combinations of molecules to bypass delivery
problems. The system is biocompatible and can be tailored to form therapeutics which solubilize the drug in aqueous media such as human
plasma and blood which dramatically increases the amount of drug available at the disease site while administering a lower dose.
Our
studies have shown that targeted delivery of drugs to a site of action, including tumors, is directly related to the length of time of
a circulating therapeutic in the bloodstream. This is an expected outcome as most drug delivery formulations delivering payloads to sites
of action are cleared extremely rapidly by the reticuloendothelial system (“RES”) in the liver. The stealth nature of our
technology allows for a prolonged circulation time whereby there is accumulation at the site of disease prior to being cleared.
Figure
13: “Leaky” Tumor Vasculature Allows Quatramers to Selectively Accumulate in the TME
The
size, shape and surface of our Quatramer allows it to escape via gaps in the blood vessels in the TME allowing for release of the payload
directly into cancerous cells. Furthermore, the system functions as a “peeling onion” in coordinated and precise acidic versus
basic conditions depending on the TME as well as inside cancerous cells. Certain portions of the technology release a payload due to
its own physicochemical characteristics while the core of the Quatramer system would release a different payload depending on its own
chemical and physical properties. This type of a profile for certain of our Quatramer therapeutics, particularly our combination products,
are specifically designed to cleave or disperse in response to external stimuli causing internal changes for delivery and is a designed
approach to our size tunable vehicles.
Figure
14: Quatramer Platform – Intracellular Payload Delivery and Disintegration
This
designed size tunable feature of certain of our Quatramer compositions offer further advantages, as certain cleaved materials create
a reversal of drug resistance in cells. Drug resistance can be classified into two categories:
de novo resistance or acquired resistance. Cancer patients that exhibit de novo resistance do not respond to chemotherapy
from the start. However, in acquired resistance, the cancer cells initially respond to a drug but eventually acquire resistance to it
and the cells might also show cross-resistance to other structurally and mechanistically unrelated drugs, a phenomenon commonly known
as MDR whereby treatment regimens that combine multiple agents with different targets are no longer effective. Our Quatramer technology
circumvents this phenomenon upon cleavage of the payload from the system, whereby the remnants of the system, such as certain hydrophobic
chains flanked by hydrophilic chains which are not related to therapeutic efficacy, cause drug efflux pump blockage and allow the payload
to continue to be effective in MDR cellular systems both in vitro and in vivo.
Quatramer
physicochemical characterization allows for optimizing size, shape and surface chemistry based on payload characteristics to render enhanced
permeation and retention into the TME. Our scientific know-how and scientific expertise in developing Quatramer based therapeutics has
led to understanding the optimal conditions for encapsulating therapeutics of different physicochemical characteristics into our proprietary
delivery, and the combination of multiple materials used varies depending on the drug itself, causing a highly specific tunability platform
that can be scaled. The proprietary know-how behind our Quatramer structures with multiple layering allows for therapeutics of different
levels of hydrophilicity and hydrophobicity to interact within aqueous mediums of varied acid-base conditions, including human serum
and blood. The importance of the Quatramer structure extends the certain aspects of the core and thereby has the capacity to increase
drug uptake and sustain its release over long periods of time, including over many days and weeks in both in vitro and in vivo
systems.
Our
Quatramer technology has been designed to be a scalable process with production efficiency whereby the analysis of the output of a designed
chemistry, manufacturing and controls system creates a predictable and uniform product with controllable capability and cost efficiency.
Chemical compositions listed in the FDA Inactive Ingredients Database with known profile. Combined with the tunability of Quatramer,
the technology allows for a variety of delivery payloads including peptides, small molecules, nucleic acids and antibodies with the added
flexibility of dual-loaded payload therapeutics. The payload diversity and flexibility of the system coupled with its numerous advantages
allows for a targeted system with prolonged circulation time, which takes advantage of an efficient EPR effect with numerous mechanistic
features deployed at various conditions with the TME as well as in intracellular environments, which makes the methodology of Quatramer
therapeutics, a highly advantageous platform to deliver low doses of therapeutics directly to tumors.
Quatrabody
Technology:
Quatramer™,
a proprietary tumor targeting platform, with their long
half-life are coated with a Picobody™ to create unique IO antibodies. Picobodies are
antibody “knob” domains comprised of cysteine-rich ultralong CDR H3 sequences of 30-40 amino acids, which have the potential
to access challenging epitopes better than full size antibodies can. We believe we may be able to more efficiently target novel
epitopes with greater binding affinity than approved biologics. Targeting PD-1, PDL-1, HER-2 and TROP-2 is a step toward enabling us
to enter the rapidly growing IO markets.
Figure
15: Bovine Antibody “Knob” Peptides are the Smallest Independent Antigen Binding Domain
Figure
16: Comparison of Dissociation Constants Amongst Leading PD-1 Antibodies
Figure
17: The Unique and Differentiated Binding Sites for Approved Anti-PD-1 Antibodies
Figure
18: Depiction of Human Antibody, Bovine Knob and the Quatrabody
Our
Strategy
Our
goal is to disrupt the biotechnology landscape by developing novel therapeutics by leveraging our targeted-delivery Quatramer platform-based
therapeutic to address significant unmet medical needs, with a focus on treatments for cancer. We believe that our technology has the
potential to generate differentiated products that have the potential to treat rare and treatment resistant tumors.
Our
business strategy includes:
● |
Developing
drug candidate, HSB-1216, in solid tumors. |
Data
from a clinical pilot study conducted at the University of Heidelberg, Germany, led us to progress HSB-1216 into IND-enabling studies
with the goal of submitting an IND to the FDA in 2023. These IND-enabling trials are pre-clinical in nature and include toxicology and
pharmacokinetic profiling as well as bioanalytical assay development. After discussions with the FDA, we expect to use the 505(b)(1)
FDA approval pathway and conduct a Phase 1 trial to obtain initial pharmacokinetic and dosing information in patients. We intend to evaluate
the development of HSB-1216 in other high-unmet need oncology indications, including certain brain, breast and prostate cancers, and
in combination with other cancer therapies.
● |
Developing
drug candidate, HSB-3215 |
The
ErbB family of cell surface proteins
are some of the most well-known and validated oncology drug targets including ErbB2 or HER2 (human epidermal growth factor receptor) and
Erb3 or HER3. Antibodies against HER2 and HER3 bind to different domains of the extracellular portion of the proteins or epitopes with
trastuzumab primarily binding the extracellular domain IV of HER2. HER2 is a validated tumor antigen for antibody drug conjugates to treat
HER2 positive cancers with two approved antibodies, Roche/Genentech’s KADCYLA® and Daiichi Sankyo/AstraZeneca’s
ENHERTU®. Monoclonal antibodies being developed at ABSI are unique from the currently approved anti-HER2 antibodies. ABSI
has granted us an exclusive option to license certain of its proprietary technology which will allow us to develop HER2 and HER3 antibodies,
including multi-specific and Quatramer- based therapeutics incorporating portions of the antibodies. The ABSI option terminates on March 24, 2023, unless extended by the parties.
● |
Developing
drug candidate, HSB-1940 |
The
Quatrabody™ provides an entry into next generation of IO biologics including, bispecific and trispecific antibodies, ADCs, CAR-T,
CAR-NKs and others. Quatrabodies capitalize on the long half-life of tumor targeting Quatramers, combined with Picobodies™, bovine-derived
antibody “knob” domains which have potential to access and bind more tightly to “undruggable” epitopes better
than full sized antibodies. HSB-1940 is a combination of the Quatramer and PD-1 targeting Picobodies. Quatrabodies have the potential
for delivering an increased drug payload to the tumor with a longer half-life while targeting novel “undruggable” epitopes
of well-known and validated IO targets such as PD-1.
● |
Leveraging
our novel platform to develop a pipeline of high value Quatramer leads. |
The
tunability of our technology allows us to efficiently expand our pipeline of Quatramer, both on our own and in collaboration with others,
through various combinations of targeted DNA encoded for anti-tumor cytokines and therapeutic payloads, which enables us to move into
other areas of oncology, including IO whereby we could potentially increase the effectiveness of immune checkpoint inhibitors (“ICIs”).
● |
Developing
and commercializing Quatramer in collaboration with leading pharmaceutical companies. |
In
addition to our internal development programs, we actively seek opportunities to collaborate with recognized biopharmaceutical companies
to develop Quatramer incorporating therapeutic payloads from their proprietary product portfolios. We intend to establish collaborations
with industry leaders and strategic pharmaceutical organizations.
● |
Commercializing
proprietary Quatramer based products, including HSB-1216, directly in the United States and with collaborators outside the United
States. |
We
own HSB-1216 and our other proprietary pipeline and expect to maintain similar rights with respect to other proprietary Quatramer we
develop. Following FDA approval in the United States, we may partner with a larger biopharmaceutical company as well as potentially build
a focused oncology sales organization to market Quatramer-based therapeutics. Outside of the United States, we intend to rely on collaborators
to commercialize proprietary approved Quatramer.
● |
Continuing
to extend and protect our product technology and Quatramer through our intellectual property portfolio. |
We
seek to protect our novel platform through U.S. and international patents as well as know-how and trade secrets relating to the design
and manufacturing of our technology. We expect to continue to file patent applications as we apply our technology to new targets and
therapeutic payloads. In addition, we believe the heightened regulatory requirements for generics of this technology may strengthen the
protection afforded by our intellectual property portfolio.
Our
Team
Our
Chief Executive Officer and directors have extensive scientific, drug development, and commercialization experience across pertinent
disciplines including oncology; small molecule, peptide and antibody drug manufacturing and quality; clinical drug development, and commercialization.
Our Chief Executive Officer and directors have held various research, clinical development, artificial intelligence, strategy, corporate
development and operational positions at large biopharmaceutical companies,
public biotechnology companies, and universities having worked at companies such as DuPont Merck
Pharmaceuticals, Amgen Inc., Exelixis, Inc., Salix Pharmaceuticals, Inc., Global Cancer Research Institute, Sanofi and UCLA School of
Medicine. Our Chief Executive Officer and directors have been involved in the discovery, development, manufacturing and commercialization
of multiple marketed products across various therapeutic areas, including, but not limited to, Cabometyx® (cabozantinib),
Remicade® (infliximab) and Clolar® (clofarabine).
Competition
The
pharmaceutical and biotechnology industries are characterized by rapidly advancing technologies, intense competition, and a strong emphasis
on proprietary products and intellectual property. We face competition from major
multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical companies, emerging and start-up
companies, universities and other research institutions both in the United States and internationally. Any drug candidates that we successfully
develop and commercialize will compete with existing therapies and new therapies that may become available in the future.
Many
of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, pre-clinical
testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. 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. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel
and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary
to, or necessary for, our programs. Earlier stage companies, such as smaller discovery phase biotechnology companies, may also prove
to be significant competitors, particularly through collaborative arrangements with large and established companies. Some of our competitors
include BridgeBio Pharma, Inc. (Ferro Therapeutic, Inc.), Kojin Therapeutics, Inc., Bayer AG, Moderna Inc., Roche/Genentech, Daiichi
Sankyo/Astra Zeneca, Merck, Bristol-Myers Squibb and Takeda Pharmaceutical Company.
Our
commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are more effective,
have fewer or less severe side effects, are more convenient or are less expensive than any products that we may develop. Our competitors
also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours. In addition, our
ability to compete may be affected in many cases by insurers or other third-party payers seeking to encourage the use of generic products.
Generic products are currently on the market, including the therapeutics payload in HSB-1216, for the indications that we are pursuing,
and additional products are expected to become available on a generic basis over the coming years. If our drug candidates achieve marketing
approval, we expect that they will be priced at a significant premium over competitive generic products.
The
most common methods of treating patients with cancer are surgery, radiation and drug therapy, including chemotherapy and targeted drug
therapy. There are a variety of available drug therapies marketed for solid tumors. In many cases, these drugs are administered in combination
to enhance efficacy. Some of these drugs are branded and subject to patent protection, and others are available on a generic basis, including
drugs in the same therapeutic class as the payloads contained in HSB-1216.
Many
of these approved drugs are well established therapies and are widely accepted by physicians, patients and third-party payers. In general,
although there has been considerable progress over the past few decades in the treatment of solid tumors and the currently marketed therapies
provide benefits to many patients, these therapies all are limited to some extent in their efficacy and frequency of adverse events,
and none of them are successful in treating all patients. As a result, the level of morbidity and mortality from solid tumor cancers
remains high.
There
are also a number of products in clinical development to treat solid tumors including, but not limited to, Loxo Oncology (LOXO-292),
Bristol-Myers Squibb (BMS-986016 and nivolumab) Mersana / GlaxoSmithKline (XMT-2056), Zymeworks (zenidatamab) and Eli Lilly & Co
(sintilimab) in addition to those products already on the market such as Merck & Co Inc. (Keytruda), Bristol-Myers Squibb Co. (Opdivo),
AbbVie Inc. (Imbruvica), Roche Group (Tecentiq), Regeneron Pharmaceuticals, Inc. (Libtayo). The products in development may provide efficacy,
safety, convenience and other benefits that are not provided by currently marketed therapies. As a result, they may provide significant
competition for our product candidates for which we obtain marketing approval.
Manufacturing
We
do not own or operate any facilities in which we can formulate or manufacture our product candidates. We intend to rely on contract manufacturers
to produce all materials required to conduct pre-clinical studies and clinical trials under current good manufacturing practice (“cGMP”),
with oversight of these activities by our management team. We have identified alternate sources of supply and other contract manufacturers
that can produce materials for our pre-clinical and clinical trial requirements on a timely basis. However, if an existing or future
contract manufacturer fails to deliver on schedule, or at all, it may delay or interrupt the development process for our product candidates
which may have an adverse effect on our operating results and estimated timelines.
Intellectual
Property
The
intellectual property that is available to us is important for our business, and we strive to protect it, including by obtaining, maintaining, defending, and enforcing patent protection in the United States and internationally for our proprietary technology, improvements, platforms, products and components
thereof, novel biological discoveries, new therapeutic approaches and potential indications, and other inventions that are important
to our business. For our product candidates, generally we initially pursue patent protection covering compositions of matter,
methods of production, and methods of use. Throughout the development of our product candidates and technologies, we will seek to
identify additional means of obtaining patent protection.
As
of March 10, 2023, our patent portfolio includes 11 patent families. These
families include 14 issued patents and 43 pending applications related generally to our polymeric nanoparticle technologies, methods of
making our polymeric nanoparticle technologies, and methods of using our polymeric nanoparticles therapeutically (e.g., for delivery
of therapeutic compounds). Specifically, our patent portfolio currently includes four issued U.S. patents, and ten granted patents
in foreign jurisdictions, as well as six pending applications in the U.S. and 37 abroad. Patent protection for the earliest-filed family
is expected to expire in 2033, absent any applicable patent term adjustments or extensions, with more recently-filed families expiring
approximately between 2033 and 2042. We may file other patent applications in the future.
The
term of individual patents depends upon the legal term for patents in the countries in which they are obtained. In most countries, including
the U.S., the patent term is 20 years from the earliest filing date of a non-provisional patent application. In the U.S., the term of
a patent may be lengthened by patent term adjustment (“PTA”), which compensates a patentee for administrative delays by the
U.S. Patent and Trademark Office (“USPTO”) in examining and granting a patent or the term of a patent may be shortened if a patent is terminally disclaimed over an earlier
filed patent. The term of a patent that covers a drug or biological product may also be eligible for patent term extension (“PTE”)
after FDA approval for a portion of the term effectively lost as a result of the FDA regulatory review period, subject to certain limitations
and provided statutory and regulatory requirements are met. PTE can be for no more than five years, typically only one patent per approved
product can be extended, the extension cannot extend the total patent term beyond 14 years from approval, and only those claims covering
the approved drug, a method for using it or a method for manufacturing it may be extended. In addition, the length of the adjustment
or extension granted could be less than that requested, and we may not receive the full PTA or PTE available if we fail to exercise due
diligence during the testing phase or regulatory review process, fails to apply within applicable deadlines, fails to apply prior to
expiration of relevant patents, or otherwise fails to satisfy applicable requirements.
As
with many biotechnology and pharmaceutical companies, our ability to maintain and solidify our proprietary and intellectual property
position for our products will depend on our success in obtaining effective patent claims and enforcing those patent claims. However,
our owned pending patent applications, and any patent applications that may be filed in the future or licensed from third parties, may
not result in issuance. The breadth of claims that may be allowed or enforced in our patents also cannot be predicted. Any of our issued
patents or patents obtained in the future may be challenged, invalidated, infringed or circumvented. In addition, because of the extensive
time required for clinical development and regulatory review of a therapeutic product that may be developed, it is possible that, before
any of our products can be commercialized, any related patent may expire or remain in force for only a short period following commercialization,
thereby limiting the protection such patent would afford the respective product and any competitive advantage such patent may provide.
We
have filed an intent-to-use U.S. trademark application for “HILLSTREAM
BIOPHARMA” (for “Pharmaceutical preparations for use in cancer treatment and therapies”) in International class 5. We
have filed an intent-to-use U.S. trademark application for “QUATRAMER” and QUATRABODY (both for “Nano particle technologies
and nanoparticle technologies for cancer therapy and treatment, namely, drug delivery agents in the form of nanoparticles that provide
controlled release of active ingredients for a wide variety of pharmaceuticals for the treatment of cancer”) in International class
5. We also hold a pending U.S. trademark application for HILLSTREAM BIOPHARMA, claiming use of the mark for “Research and development
in the field of oncology” in International class 42.
Minotaur
Research and Collaboration Agreement and Taurus License Agreement
Hillstream has entered into a research collaboration and product license
agreement with Minotaur and a commercial license agreement with Taurus for use of certain technology, including OmniAb antibodies, to
advance Picobodies against novel, unreachable and undruggable epitopes in high-value validated targets starting with PD-1. The research
and collaboration agreement and product license agreement is for the development of proprietary targeted biologics, Knob Quatrabodies™
(HSB-1940), against PD-1.
The
technologies of Hillstream and Minotaur will be combined under the license
from Taurus to discover, develop and advance biotherapeutics against high-value validated IO targets. Picobodies are bovine-derived antibody
“knob” domains comprised of cysteine-rich ultralong CDR H3 sequences of 30-40 amino acids weighing ~3-4KDa, which have the
potential to access challenging epitopes better than full size antibodies can.
By
combining Quatramers with their long half-life coated with a PD-1 Picobody™
to create HSB-1940, Hillstream believes it could more efficiently target novel epitopes with greater binding affinity than approved
anti-PD-1 antibodies. We further believe that the development of HSB-1940 is a step toward enabling us to enter the rapidly growing IO
market with additional targets thereafter.
Applied
Biomedical Research Institute Option Agreement
ABSI has developed technology to target unique functional epitopes of the cancer
targets HER2 and HER3. Monoclonal antibodies being developed at ABSI are unique from the currently approved anti-HER2 antibodies. ABSI
has granted us an exclusive option to license technology to develop HER2 and HER3 antibodies, including multi-specific and Quatramer-based
therapeutics incorporating portions of the antibodies. These antibodies could be incorporated into proprietary multi-format biologics
(bi- and tri-specific antibodies, ADCs (antibody drug conjugates), CAR-T and CAR-NKs, in Quatramers and Quatrabodies) against drug resistant
cancers including HER2-positive metastatic breast cancer, gastric cancer, lung cancer and ovarian cancer. The ABSI option terminates on March 24, 2023, unless extended by the parties.
Government
Regulations
Governmental
authorities in the U.S. and other countries extensively regulate the research, development, testing, manufacture, labeling,
promotion, advertising, distribution and marketing of pharmaceutical products such as those being developed by us. In the U.S., the
FDA regulates such products under the Federal Food, Drug, and Cosmetic Act (“FsDCA”) and its implementing regulations.
Failure to comply with applicable FDA requirements, both before and after approval, may subject us to administrative and judicial
sanctions, such as a delay in approving or refusal by the FDA to approve pending applications, warning or untitled letters, product
recalls, product seizures, total or partial suspension of production or distribution, injunctions and/or criminal
prosecution.
U.S.
Food and Drug Administration Regulation
United
States Drug Development
In
the United States, the FDA regulates drugs, medical devices and combinations of drugs and devices, or combination products, under
the FDCA and its implementing regulations. Drugs are also subject to other federal, state and local statutes and regulations. The
process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes
and regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S.
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, among other actions, the FDA’s refusal to approve pending
applications, withdrawal of an approval, a clinical hold, untitled or warning or untitled letters, requests for voluntary 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. Any agency or judicial
enforcement action could have a material adverse effect on us.
The
process required by the FDA before a drug may be marketed in the United States generally involves the following:
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completion
of extensive pre-clinical laboratory tests, animal studies and formulation studies in accordance with applicable regulations, including
the FDA’s Good Laboratory Practice regulations; |
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submission
to the FDA of an IND, which must become effective before human clinical trials may begin; |
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performance
of adequate and well-controlled human clinical trials in accordance with an applicable IND and clinical study related regulations,
referred to as Good Clinical Practice (“GCP”), to establish the safety and efficacy of the proposed drug for its proposed
indication; |
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submission
to the FDA of a new drug application (“NDA”); |
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satisfactory
completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the product, or components thereof,
are produced to assess compliance with the FDA’s cGMP requirements; |
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potential
FDA audit of the clinical trial sites that generated the data in support of the NDA; and |
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FDA
review and approval of the NDA prior to any commercial marketing or sale. |
Once
a pharmaceutical product candidate is identified for development, it enters the pre-clinical testing stage. Pre-clinical tests include
laboratory evaluations of product chemistry, toxicity, formulation and stability, as well as animal studies. An IND sponsor must submit
the results of the pre-clinical tests, together with manufacturing information, analytical data and any available clinical data or literature,
to the FDA as part of the IND. The sponsor must also include a protocol detailing, among other things, the objectives of the initial
clinical trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated if the initial clinical
trial lends itself to an efficacy evaluation. Some pre-clinical testing may continue even after the IND is submitted. The IND automatically
becomes effective 30 days after receipt by the FDA, unless the FDA raises concerns or questions related to a proposed clinical trial
and places the trial on a clinical hold within that 30-day period. In such a case, the IND sponsor and the FDA must resolve any outstanding
concerns before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during clinical trials
due to safety concerns or non-compliance and may be imposed on all drug products within a certain class of drugs. The FDA also can impose
partial clinical holds, for example, prohibiting the initiation of clinical trials of a certain duration or for a certain dose.
All
clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations. These
regulations include the requirement that all research subjects provide informed consent in writing before their participation in any
clinical trial. Further, an institutional review board (“IRB”) must review and approve the plan for any clinical trial before
it commences at any institution, and the IRB must conduct continuing review and reapprove the study at least annually. An IRB considers,
among other things, whether the risks to individuals participating in the clinical trial are minimized and are reasonable in relation
to anticipated benefits. The IRB also approves the information regarding the clinical trial and the consent form that must be provided
to each clinical trial subject or his or her legal representative and must monitor the clinical trial until completed.
Each
new clinical protocol and any amendments to the protocol must be submitted for FDA review, and to the IRBs for approval. Protocols detail,
among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria, and the parameters
to be used to monitor subject safety.
Human
clinical trials are typically conducted in three sequential phases that may overlap or be combined:
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Phase
1. The product is initially introduced into a small number of healthy human subjects or patients and tested for safety, dosage tolerance,
absorption, metabolism, distribution and excretion and, if possible, to gain early evidence on effectiveness. In the case of some
products for severe or life-threatening diseases, especially when the product is suspected or known to be unavoidably toxic, the
initial human testing may be conducted in patients. |
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Phase
2. Involves clinical trials in a limited patient population to identify possible adverse effects and safety risks, to preliminarily
evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage and schedule. |
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Phase
3. Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population at geographically
dispersed clinical trial sites. These clinical trials are intended to establish the overall risk/benefit relationship of the product
and provide an adequate basis for product labeling. |
Post-approval
trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These studies are used to
gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, the FDA may mandate
the performance of Phase 4 trials. Companies that conduct certain clinical trials also are required to register them and post the results
of completed clinical trials on a government-sponsored database, www.clinicaltrials.gov, in the United States, within certain
timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.
Progress
reports detailing the results of the clinical trials, among other information, must be submitted at least annually to the FDA, and written
IND safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events, findings from other
studies that suggest a significant risk to humans exposed to the product, findings from animal or in vitro testing that suggest a significant
risk to human subjects, and any clinically important increase in the rate of a serious suspected adverse reaction over that listed in
the protocol or investigator brochure. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified
period, if at all. The FDA or the clinical trial sponsor may suspend or terminate a clinical trial at any time on various grounds, including
a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate
approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements
or if the product has been associated with unexpected serious harm to patients. Additionally, some clinical trials are overseen by an
independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee.
This group provides authorization for whether a trial may move forward at designated check points based on access to certain data from
the study. The clinical trial sponsor may also suspend or terminate a clinical trial based on evolving business objectives and/or competitive
climate.
Concurrent
with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry
and physical characteristics of the product and finalize a process for manufacturing the product in commercial quantities in accordance
with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate
and, among other things, the manufacturer must develop methods for testing the identity, strength, quality and purity of the final product.
Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the product
candidate does not undergo unacceptable deterioration over its shelf life.
NDA
and FDA Review Process
The
results of product development, pre-clinical studies and clinical trials, along with descriptions of the manufacturing process, analytical
tests conducted on the drug, proposed labeling and other relevant information, are submitted to the FDA as part of an NDA, which request
approval to market a new drug product. The submission of an NDA is subject to the payment of a substantial user fee, and the sponsor
of an approved NDA is also subject to an annual program user fee; although a waiver of such fee may be obtained under certain limited
circumstances. For example, the agency will waive the application fee for the first human drug application that a small business or its
affiliate submits for review.
The
FDA reviews all NDAs submitted before it accepts them for filing and may request additional information rather than accepting an NDA
for filing. The FDA typically makes a decision on accepting an NDA for filing within 60 days of receipt. The decision to accept the NDA
for filing means that the FDA has made a threshold determination that the application is sufficiently complete to permit a substantive
review. Under the goals and policies agreed to by the FDA under the Prescription Drug User Fee Act (“PDUFA”), the FDA’s
goal to complete its substantive review of a standard NDA and respond to the applicant is ten months from the receipt of the NDA. The
FDA does not always meet its PDUFA goal dates, and the review process is often significantly extended by FDA requests for additional
information or clarification and may go through multiple review cycles.
After
the NDA submission is accepted for filing, the FDA reviews the NDA to determine, among other things, whether the proposed product is
safe and effective for its intended use, and whether the product is being manufactured in accordance with cGMP to assure and preserve
the product’s identity, strength, quality and purity. The FDA may 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 and under what conditions. The FDA is not
bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. The FDA
will likely re-analyze the clinical trial data, which could result in extensive discussions between the FDA and us during the review
process. The review and evaluation of an NDA by the FDA is extensive and time consuming and may take longer than originally planned to
complete, and we may not receive a timely approval, if at all.
Before
approving an NDA, the FDA will conduct a pre-approval inspection of the manufacturing facilities for the new product to determine whether
they comply with cGMP. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are
in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. In addition,
before approving an NDA, the FDA may also audit data from clinical trials to ensure compliance with GCP requirements. After the FDA evaluates
the application, manufacturing process and manufacturing facilities, it may issue an approval letter or a Complete Response Letter. An
approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. A Complete
Response Letter indicates that the review cycle of the application is complete and the application will not be approved in its present
form. A Complete Response Letter describes specific deficiencies in the NDA identified by the FDA. The Complete Response Letter may require
additional clinical data and/or an additional pivotal Phase 3 clinical trial(s), and/or other significant and time-consuming requirements
related to clinical trials, nonclinical studies or manufacturing. If a Complete Response Letter is issued, the applicant may either resubmit
the NDA, addressing all the deficiencies identified in the letter, or withdraw the application. Even if such data and information are
submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. Data obtained from clinical trials
are not always conclusive, and the FDA may interpret data differently than we interpret the same data.
There
is no assurance that the FDA will ultimately approve a product for marketing in the United States, and we may encounter significant difficulties
or costs during the review process. If a product receives marketing approval, the approval may be significantly limited to specific diseases
and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. Further, the
FDA may require that certain contraindications, warnings or precautions be included in the product labeling or may condition the approval
of the NDA on other changes to the proposed labeling, development of adequate controls and specifications, or a commitment to conduct
post-market testing or clinical trials and surveillance to monitor the effects of approved products. For example, the FDA may require
Phase 4 clinical trials to further assess drug safety and effectiveness and may require testing and surveillance programs to monitor
the safety of approved products that have been commercialized. The FDA may also place other conditions on approvals, including the requirement
for a REMS to assure the safe use of the drug. If the FDA concludes a Risk Evaluation and Mitigation Strategy (“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, or elements to assure safe use, such as restricted distribution
methods, patient registries and other risk minimization tools. Any of these limitations on approval or marketing could restrict the commercial
promotion, distribution, prescription or dispensing of products. Product approvals may be withdrawn for non-compliance with regulatory
requirements or if problems occur following initial marketing.
ITEM
1A. RISK FACTORS.
An
investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors and the other
information in this Annual Report on Form 10-K before investing in our common stock. Our business and results of operations could be
seriously harmed by any of the following risks. The risks set out below are not the only risks we face. Additional risks and uncertainties
not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition
and/or operating results. If any of the following events occur, our business, financial condition and results of operations could be
materially adversely affected. In such case, the value and trading price of our common stock could decline, and you may lose all or part
of your investment.
Risks
Related to Our Financial Position and Need for Additional Capital
We
have a limited operating history, which may make it difficult to evaluate our current business and predict our future performance.
We
are a clinical-stage biopharmaceutical company with a limited operating history upon which you can evaluate our business and prospects.
We commenced operations in 2017, have no products approved for commercial sale and have not generated any revenue. Drug development is
a highly uncertain undertaking and involves a substantial degree of risk. Since our inception, we have spent the first three years developing
and refining our Quatramer technology, and since 2019, we have focused our efforts on advancing the development of our product candidate,
HSB-1216, and most recently HSB-3215 and HSB-1940.
Our
Quatramer technology is new and unproven. We have not yet commenced human clinical trials for any of our product candidates, nor have
we demonstrated an ability to initiate or successfully complete any large-scale or pivotal clinical trials, obtain marketing approvals,
manufacture a commercial-scale product or arrange for a third party to do so on our behalf, or conduct sales and marketing activities
necessary for successful product commercialization. As a result, it may be more difficult for you to accurately predict our likelihood
of success and viability than it could be if we had a longer operating history.
We
intend to submit INDs to the FDA to gain approval to initiate clinical studies in the second half of 2023 for HSB-1216 and in 2025 for
both HSB-3215 and HSB-1940; however, no assurance can be provided that our INDs will be accepted by the FDA based on our anticipated
timeline, if at all. Our other programs are in pre-clinical discovery and research stages. As a result, we expect that it will take several
years, if ever, before we have a commercialized product and generate revenue from product sales. Even if we succeed in receiving marketing
approval for and commercializing one or more of our product candidates, we expect that we will continue to incur substantial research
and development and other expenses in order to discover, develop and market additional potential products.
Finding
appropriate biomarkers for our potential drug candidates could limit our commercialization prospects and cause our losses to continue.
Any
biomarker discovery or drug development that we are conducting may not be successful in identifying biomarkers that have commercial value
for our products or therapeutic utility. Platforms may initially show promise in identifying potential biomarkers for our drug candidates,
yet fail to stratify patients for clinical development or commercialization for a number of reasons, including, but not limited to:
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research
programs to identify new biomarkers will require substantial technical, financial and human resources, and we may be unsuccessful
in our efforts to identify biomarkers. If we are unable to identify suitable biomarkers for pre-clinical and clinical development,
our ability to stratify patients could be compromised, which could result in significant harm to our financial position and adversely
impact our stock price; |
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identified
biomarkers may not demonstrate correlation to efficacy, safety or tolerability; |
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available
data that seeks to correlate genomic or biomarker signatures with certain cancers may be influenced by the race of the patient which
may limit the efficacy of our drug candidates; |
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the
regulatory pathway for the biomarkers may be too complex, expensive or otherwise difficult to navigate successfully; and |
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competitors
may develop alternative approaches that render our potential biomarkers non-competitive or less attractive. |
We
expect to continue to incur losses for the foreseeable future, and we expect these losses to increase as we continue our development
of, and seek regulatory approvals for, our product candidates, and begin to commercialize approved drugs, if any. Typically, it takes
many years to develop a new drug from the time it is discovered to when it is available for treating patients. We may encounter unforeseen
expenses, difficulties, complications, delays and other unknown factors that may increase our expenses and adversely affect our ability
to generate revenue. The size of our future net losses will depend, in part, on our ability to manage these aspects of our business.
We
have incurred significant losses since inception, we expect to incur losses in the future and we may not be able to generate sufficient
revenue to achieve and maintain profitability.
We
have never been profitable and have incurred significant losses in each year since inception. For the years ended December 31, 2022 and
2021 we reported a net loss of $8.5 million and $2.2 million, respectively. As of December 31, 2022, we had an accumulated deficit of
$15.4 million. We have funded our operations primarily with proceeds from the sale of our equity and debt securities.
We
expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. The net losses we incur
may fluctuate significantly from quarter to quarter such that a period-to-period comparison of our results of operations may not be a
good indication of our future performance. The size of our future net losses will depend, in part, on the rate of future growth of our
expenses and our ability to generate revenue. Our prior losses and expected future losses have had and will continue to have an adverse
effect on our working capital, our ability to achieve and maintain profitability and the performance of our stock.
Our
ability to generate revenue and achieve profitability depends significantly on our ability to achieve several milestones relating to
the discovery, development and commercialization of our product candidates.
Our
financial condition and operating results have varied significantly in the past and are expected to continue to fluctuate significantly
due to a variety of factors, many of which are beyond our control. Factors relating to our business that may contribute to these fluctuations
include:
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our
ability to continue our current research and development programs, including conducting laboratory, pre-clinical studies for product
candidates; |
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our
ability to initiate clinical trials for product candidates; |
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the
success of our clinical trials through all phases of clinical development; |
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delays
in the commencement, enrollment and timing of clinical trials; |
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our
ability to secure and maintain collaborations, licensing or other arrangements for the future development and/or commercialization
of our product candidates, as well as the terms of those arrangements; |
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our
ability to obtain, as well as the timeliness of obtaining, additional funding to develop our product candidates; |
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the
results of clinical trials or marketing applications for product candidates that may compete with our product candidates; |
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competition
from existing products or new products that may receive marketing approval; |
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potential
side effects of our product candidates that could delay or prevent approval or cause an approved drug to be taken off the market; |
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any
delays in regulatory review and approval of our product candidates; |
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our
ability to identify and develop additional product candidates; |
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the
ability of patients or healthcare providers to obtain coverage or sufficient reimbursement for our products; |
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our
ability, and the ability of third parties such as Clinical Research Organizations (“CROs”) to adhere to clinical study
and other regulatory requirements; |
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the
ability of third-party manufacturers to manufacture our product candidates and key ingredients needed to conduct clinical trials
and, if approved, successfully commercialize our products; |
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the
costs to us, and our ability as well as the ability of any third-party collaborators, to obtain, maintain and protect our intellectual
property rights; |
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costs
related to and outcomes of potential intellectual property litigation; |
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our
ability to adequately support future growth; |
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our
ability to attract and retain key personnel to manage our business effectively; and |
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our
ability to build our finance infrastructure and, to the extent required, improve our accounting systems and controls. |
Developing
new products and services is a speculative and risky endeavor. Products or services that initially show promise may fail to achieve the
desired results or may not achieve acceptable levels of analytical accuracy or clinical utility. We may need to alter our products in
development and repeat clinical studies before we identify a potentially successful product or service. Product development is expensive,
may take years to complete and can have uncertain outcomes. Failure can occur at any stage of the development. If, after development,
a product or service appears successful, we may, depending on the nature of the product or service, still need to obtain FDA and other
regulatory clearances, authorizations or approvals before we can market it. The FDA’s clearance, authorization or approval pathways
are likely to involve significant time, as well as additional research, development and clinical study expenditures. The FDA may not
clear, authorize or approve any future product or service we develop. Even if we develop a product or service that receives regulatory
clearance, authorization or approval, we would need to commit substantial resources to commercialize, sell and market it before it could
be profitable, and the product or service may never be commercially successful. Additionally, development of any product or service may
be disrupted or made less viable by the development of competing products or services.
New
potential products and services may fail any stage of development or commercialization and if we determine that any of our current or
future products or services are unlikely to succeed, we may abandon them without any return on our investment. If we are unsuccessful
in developing additional products or services, our potential for growth may be impaired.
In
cases where we are successful in obtaining regulatory approval to market one or more of our drug candidates, our revenue will be dependent,
in part, upon the size of the markets in the territories for which we gain regulatory approval, the accepted price for the product, the
ability to obtain coverage and reimbursement, and whether we own the commercial rights for that territory. If the number of our addressable
patients is not as significant as we estimate, the indication approved by regulatory authorities is narrower than we expect, or the treatment
population is narrowed by competition, physician choice or treatment guidelines, we may not generate significant revenue from sales of
such products, even if approved.
We
expect our research and development expenses to continue to be significant in connection with our continued investment in our ongoing
and planned clinical trials for our current product candidates and any future product candidates we may develop. Furthermore, if we obtain
regulatory approval for our product candidates, we expect to incur increased sales and marketing expenses. As a result, we expect to
continue to incur significant and increasing operating losses and negative cash flows for the foreseeable future. These losses have had
and will continue to have a material adverse effect on our stockholders’ equity, financial position, cash flows and working capital.
We
will require substantial additional funding. If we are unable to raise capital on favorable terms when needed, we could be forced to
curtail, delay or discontinue our research or drug development programs or any future commercialization efforts.
We
are currently advancing our lead product candidates, HSB-1216, HSB-3215 and HSB-1940, through pre-clinical stage development. Developing
cancer drugs is expensive and we expect our research and development expenses to increase substantially in connection with our ongoing
activities, particularly as we advance our product candidates in clinical studies.
As
of December 31, 2022, we had cash of $6.5 million; however, we will require additional capital to obtain regulatory approval for, and
to commercialize, our product candidates. Raising funds may present challenges. Even if we believe we have sufficient funds for our current
or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic considerations.
Any
additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to
develop and commercialize our product candidates. In addition, we cannot guarantee that future financing will be available in sufficient
amounts or on terms acceptable to us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights
of our stockholders and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may
cause the market price of our shares to decline. The sale of additional equity or convertible securities may dilute our stockholders.
The incurrence of indebtedness would result in increased fixed payment obligations, and we may be required to agree to certain restrictive
covenants, such as limitations on our ability to make certain dividends, incur additional debt, limitations on our ability to acquire,
sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our
business. We could also be required to seek funds through arrangements with collaborative partners or otherwise at an earlier stage than
otherwise would be desirable, and we may be required to relinquish rights to some of our technologies or product candidates or otherwise
agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results and prospects.
If
we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our
research or development programs or the commercialization of any product candidates or be unable to expand our operations or otherwise
capitalize on our business opportunities, as desired, which could materially affect our business, financial condition and results of
operations.
Management has performed an analysis and concluded
that there exists a substantial doubt about our ability to continue as a going concern. Separately, our independent registered public
accounting firm has also concluded there exists a substantial doubt about our ability to continue as a going concern, which may hinder
our ability to obtain future financing.
Our financial statements as of December 31, 2022 have been prepared under
the assumption that we will continue as a going concern for the next twelve months. Management has performed an analysis and concluded
that there exists a substantial doubt about our ability to continue as a going concern. Separately, our independent registered public
accounting firm included in its opinion for the year ended December 31, 2022 an explanatory paragraph referring to our recurring losses
from operations and expressing substantial doubt in our ability to continue as a going concern without additional capital becoming available.
Our ability to continue as a going concern is dependent upon our ability to obtain additional equity or debt financing, obtain government
grants, reduce expenditures and generate significant revenue. Our financial statements as of December 31, 2022 did not include any adjustments
that might result from the outcome of this uncertainty. The reaction of investors to the inclusion of a going concern statement by management
and our auditors, and our potential inability to continue as a going concern, in future years could materially adversely affect our share
price and our ability to raise new capital or enter into strategic alliances.
Risks
Related to the Discovery and Development of Our Product Candidates
We
are substantially dependent on the success of our product candidates, HSB-1216, HSB-3215 and HSB-1940, which are currently in pre-clinical
trials. If we are unable to complete development of, obtain approval for and commercialize HSB-1216, HSB-3215 and/or HSB-1940 for one
or more indications in a timely manner, our business may be harmed.
Our
future success is dependent on our ability to timely and successfully complete clinical trials, obtain marketing approval for and successfully
commercialize HSB-1216, HSB-3215 and HSB-1940, our product candidates which are in the pre-clinical stages of development.
We
have no products approved for sale. The success of our business, including our ability to finance our Company and generate any revenue
in the future, will primarily depend on the successful development, regulatory approval and commercialization of HSB-1216, HSB-3215 and
HSB-1940 as well as other product candidates, which may never occur.
In
the future, we may also become dependent on other product candidates that we may develop or acquire; however, no product candidates based
on our Quatramer technology have been tested in humans and given our early stage of development, it may be many years, if at all, before
we may be able to demonstrate the safety and efficacy of our product candidates to warrant approval for commercialization.
The
clinical and commercial success of our current and any future product candidates will depend on a number of factors, including the following:
● |
our
ability to raise any additional required capital on acceptable terms, or at all; |
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our
ability to complete IND-enabling studies and successfully submit an IND to the FDA; |
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timely
completion of our pre-clinical studies and clinical trials, which may be slower or cost more than we currently anticipate and will
depend substantially upon the performance of third-party contractors; |
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requirements
by the FDA or similar foreign regulatory agencies to conduct additional clinical trials or other studies beyond those planned to
support approval of our product candidates; |
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acceptance
of our proposed indications and primary endpoint assessments relating to the proposed indications of our product candidates by the
FDA and similar foreign regulatory authorities; |
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our
ability to consistently manufacture our product candidates on a timely basis; |
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our
ability, and the ability of any third parties with whom we contract, to remain in good standing with regulatory agencies and develop,
validate and maintain commercially viable manufacturing processes that are compliant with cGMP; |
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our
ability to demonstrate to the satisfaction of the FDA and similar foreign regulatory authorities the safety, efficacy and acceptable
risk-benefit profile of our product candidates; |
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the
prevalence, duration and severity of potential side effects or other safety issues experienced with our product candidates or future
approved products, if any; |
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the
timely receipt of necessary marketing approvals from the FDA and similar foreign regulatory authorities; |
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achieving
and maintaining, and, where applicable, ensuring that our third-party contractors achieve and maintain, compliance with our contractual
obligations and with all regulatory requirements applicable to our current and future product candidates or approved products, if
any; |
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our
ability to successfully develop a commercial strategy and thereafter commercialize our product candidates in the United States and
internationally, if approved for marketing, sale and distribution in such countries and territories, whether alone or in collaboration
with others; |
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the
availability of coverage and adequate reimbursement from managed care plans, private insurers, government payors (such as Medicare
and Medicaid) and other third-party payors for any of our product candidates that may be approved; |
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the
convenience of our treatment or dosing regimen; |
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acceptance
by physicians, payors and patients of the benefits, safety and efficacy of our product candidates, if approved, including relative
to alternative and competing treatments; |
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the
willingness of physicians, operators of hospitals and clinics and patients to utilize or adopt our cancer therapeutics approach; |
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patient
demand for our current or future product candidates, if approved; |
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our
ability to establish and enforce intellectual property rights in and to our product candidates; and |
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our
ability to avoid third-party patent interference, intellectual property challenges or intellectual property infringement claims. |
These
factors, many of which are beyond our control, could cause us to experience significant delays or an inability to obtain regulatory approvals
or commercialize our current or future product candidates. Even if regulatory approvals are obtained, we may never be able to successfully
commercialize our product candidates. Accordingly, we cannot provide assurances that we will be able to generate sufficient revenue through
the sale of our product candidates to continue our business or achieve profitability.
Our
Quatramer approach is based on novel ideas and technologies that are unproven and may not result in marketable products, which exposes
us to unforeseen risks and makes it difficult for us to predict the time and cost of product development and potential for regulatory
approval.
We
are using our Quatramer technology to develop product candidates to treat cancer. Our foundational science and product development approach
are based on our ability to target specified cells or tissues and converge a therapeutic payload at the site of disease to boost efficacy
while abating adverse effects on healthy tissue. We believe that this approach may offer an improved therapeutic effect by driving an
intense, focused attack selectively upon a patient’s tumor. However, this approach to treating cancer is novel and the clinical
research that results in a product candidate has had limited testing in humans. We are currently in the process of validating different
tumor-specific therapeutic product candidates. We may spend substantial funds attempting to develop these products with the Quatramer
approach and never succeed in developing a marketable therapeutic.
As
such, we cannot assure you that even if we are able to develop product candidates to treat cancer, such therapies would safely and effectively
treat cancers. We may spend substantial funds attempting to develop this approach and never succeed in developing a marketable therapeutic.
We are unable to predict when or if our drug candidates will prove effective or safe in humans or if we will obtain marketing approval.
Before obtaining marketing approval from regulatory authorities for the sale of any drug candidate, we must complete pre-clinical development
and then conduct extensive clinical trials to demonstrate the safety and efficacy of our drug candidates in humans. Clinical testing
is expensive, difficult to design and implement, can take many years to complete and is uncertain as to the outcome. A failure of one
or more clinical trials can occur at any stage of testing. The outcome of pre-clinical testing and early clinical trials may not be predictive
of the success of later clinical trials, and interim or preliminary results of a clinical trial do not necessarily predict final results.
In particular, the small number of patients in our early clinical trials may make the results of these trials less predictive of the
outcome of later clinical trials.
We
may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to obtain
marketing approval or commercialize our drug candidates, including:
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regulators
or IRBs/ethics committees (“ECs”) may not authorize us or our investigators to commence a clinical trial or conduct a
clinical trial at a prospective trial site; |
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we
may experience delays in reaching, or fail to reach, agreement on acceptable clinical trial contracts or clinical trial protocols
with prospective trial sites; |
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clinical
trials for our drug candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to
conduct additional clinical trials, delay clinical trials or abandon product development programs; |
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the
number of patients required for clinical trials for our drug candidates may be larger than we anticipate, enrollment in these clinical
trials may be slower than we anticipate, participants may drop out of these clinical trials at a higher rate than we anticipate or
the duration of these clinical trials may be longer than we anticipate; |
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competition
for clinical trial participants from investigational and approved therapies may make it more difficult to enroll patients in our
clinical trials; |
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we
or third-party collaborators may fail to obtain the clearance or approval of companion diagnostic tests, if required, on a timely
basis, or at all; |
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our
third-party contractors may fail to meet their contractual obligations to us in a timely manner, or at all, or may fail to comply
with regulatory requirements; |
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we
may have to suspend or terminate clinical trials for our drug candidates for various reasons, including a finding that the participants
are being exposed to unacceptable health risks; |
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our
drug candidates may have undesirable or unexpected side effects or other unexpected characteristics, causing us or our investigators,
regulators or IRBs/ECs to suspend or terminate the trials; |
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the
cost of clinical trials for our drug candidates may be greater than we anticipate; |
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the
supply or quality of our drug candidates or other materials necessary to conduct clinical trials for our drug candidates may be insufficient
or inadequate and result in delays or suspension of our clinical trials; and |
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we
or a diagnostic development partner may fail to receive regulatory approval of a companion diagnostic for use with a marketed product. |
Our
product development costs will increase if we experience delays in pre-clinical studies or clinical trials or in obtaining marketing
approvals. We do not know whether any of our planned pre-clinical studies or clinical trials will begin on a timely basis or at all,
will need to be restructured or will be completed on schedule, or at all. For example, the FDA may place a partial or full clinical hold
on any of our clinical trials for a variety of reasons.
Significant
pre-clinical or clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our
drug candidates or allow our competitors to bring products to market before we do and impair our ability to successfully commercialize
our drug candidates and may harm our business and results of operations.
Any
delays in the commencement or completion, or termination or suspension, of our ongoing, planned or future clinical trials could result
in increased costs to us, delay or limit our ability to generate revenue and adversely affect our commercial prospects.
Before
we can initiate clinical trials of a drug candidate in any indication, we must submit the results of pre-clinical studies to the FDA
along with other information, including information about the drug candidate’s chemistry, manufacturing and controls and our proposed
clinical trial protocol, as part of an IND or similar regulatory filing.
Before
obtaining marketing approval from the FDA for the sale of our product candidate in any indication, we must conduct extensive clinical
studies to demonstrate safety and efficacy. Clinical testing is expensive, time consuming and uncertain as to outcome. In addition, we
expect to rely in part on pre-clinical, clinical and quality data generated by our CROs and other third parties for regulatory submissions
for our drug candidates. While we have or will have agreements governing these third parties’ services, we have limited influence
over their actual performance. If these third parties do not make data available to us, or, if applicable, make regulatory submissions
in a timely manner, in each case pursuant to our agreements with them, our development programs may be significantly delayed and we may
need to conduct additional studies or collect additional data independently. In either case, our development costs would increase. We
still need to receive FDA clearance of our IND for HSB-1216, HSB-3215 and HSB-1940 before we can begin clinical trials and would require
the same acceptance by the FDA prior to initiating any clinical trials in the United States for any of our other drug candidates. The
FDA may require us to conduct additional pre-clinical studies for any drug candidate before it allows us to initiate clinical trials
under any IND, which may lead to additional delays and increase the costs of our pre-clinical development programs.
Any
delays in the commencement or completion of our ongoing, planned or future clinical trials could significantly affect our product development
costs. We do not know whether our planned trials will begin on time or at all, or be completed on schedule, if at all. The commencement
and completion of clinical trials can be delayed for a number of reasons, including delays related to:
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the
FDA disagreeing as to the design or implementation of our clinical trials or with our recommended dose for any of our pipeline programs; |
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obtaining
FDA authorization to commence a trial or reaching a consensus with the FDA on trial design; |
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failing
to obtain regulatory clearance or approval of companion diagnostics we may use to identify patients for enrollment in our clinical
trials; |
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any
failure or delay in reaching an agreement with CROs and clinical trial sites, the terms of which can be subject to extensive negotiation
and may vary significantly among different CROs and trial sites; |
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obtaining
approval from one or more IRBs/ECs; |
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IRBs/ECs
refusing to approve, suspending or terminating the trial at an investigational site, precluding enrollment of additional subjects,
or withdrawing their approval of the trial; |
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changes
to clinical trial protocol; |
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clinical
sites deviating from trial protocol or dropping out of a trial; |
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failing
to manufacture or obtain sufficient quantities of drug candidate or, if applicable, combination therapies for use in clinical trials; |
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patients
failing to enroll or remain enrolled in our trials at the rates we expect, or failing to return for post-treatment follow-ups; |
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patients
choosing an alternative treatment, or participating in competing clinical trials; |
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lack
of adequate funding to continue clinical trials; |
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patients
experiencing severe or unexpected drug-related adverse effects; |
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occurrence
of serious adverse events in trials of the same class of agents conducted by other companies; |
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selecting
or being required to use clinical end points that require prolonged periods of clinical observation or analysis of the resulting
data; |
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a
facility manufacturing our drug candidates or any of their components being ordered by the FDA to temporarily or permanently shut
down due to violations of cGMP regulations or other applicable requirements, or infections or cross-contaminations of drug candidates
in the manufacturing process; |
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any
changes to our manufacturing process that may be necessary or desired; |
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third-party
clinical investigators losing the licenses or permits necessary to perform our clinical trials, not performing our clinical trials
on our anticipated schedule or consistent with the clinical trial protocol GCP or other regulatory requirements; |
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us,
or our third-party contractors not performing data collection or analysis in a timely or accurate manner or improperly disclosing
data prematurely or otherwise in violation of a clinical trial protocol; or |
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third-party
contractors becoming debarred or suspended or otherwise penalized by the FDA or other government or regulatory authorities for violations
of regulatory requirements, in which case we may need to find a substitute contractor, and we may not be able to use some or all
of the data produced by such contractors in support of our marketing applications. |
We
could also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs/ECs of the institutions in which such trials
are being conducted, by a Data Safety Monitoring Board for such trial or by the FDA. Such authorities may impose such a suspension or
termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or
our clinical protocols, inspection of the clinical trial operations or trial site by the FDA resulting in the imposition of a clinical
hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a pharmaceutical, changes in governmental
regulations or administrative actions or lack of adequate funding to continue the clinical trial. In addition, changes in regulatory
requirements and policies may occur, and we may need to amend clinical trial protocols to comply with these changes. Amendments may require
us to resubmit our clinical trial protocols to IRBs/ECs for reexamination, which may impact the costs, timing or successful completion
of a clinical trial.
Certain
of our scientific advisors or consultants who receive compensation from us are investigators for our clinical trial. Under certain circumstances,
we may be required to report some of these relationships to the FDA. Although we believe our existing relationships are within the FDA’s
guidelines, the FDA may conclude that a financial relationship between us and a principal investigator has created a conflict of interest
or otherwise affected interpretation of the study. The FDA may therefore question the integrity of the data generated at the applicable
clinical trial site and the utility of the clinical trial itself may be jeopardized. This could result in a delay in approval, or rejection,
of our marketing applications by the FDA and may ultimately lead to the denial of marketing approval of our product candidates. If we
experience delays in the completion of, or termination of, any clinical trial of our drug candidates, the commercial prospects of such
drug candidate will be harmed, and our ability to generate product revenues will be delayed. Moreover, any delays in completing our clinical
trials will increase our costs, slow down our development and approval process and jeopardize our ability to commence product sales and
generate revenues which may harm our business, financial condition, results of operations and prospects significantly.
The
outcome of pre-clinical testing and early clinical trials may not be predictive of the success of later clinical trials, and the results
of our clinical trials may not satisfy the requirements of the FDA, European Medicines Agency (“EMA”) or other comparable
foreign regulatory authorities.
We
will be required to demonstrate with substantial evidence through well-controlled clinical trials that our product candidates are safe
and effective for use in a diverse population before we can seek marketing approvals for their commercial sale. Success in pre-clinical
studies and early-stage clinical trials does not mean that future clinical trials will be successful. Product candidates in later-stage
clinical trials may fail to demonstrate sufficient safety and efficacy to the satisfaction of the FDA, EMA and other comparable foreign
regulatory authorities despite having progressed through pre-clinical studies and early-stage clinical trials. Regulatory authorities
may also limit the scope of later-stage trials until we have demonstrated satisfactory safety, which could delay regulatory approval,
limit the size of the patient population to which we may market our product candidates, or prevent regulatory approval.
In
some instances, there can be significant variability in safety and efficacy results between different clinical trials of the same product
candidate due to numerous factors, including changes in trial protocols, differences in size and type of the patient populations, differences
in and adherence to the dose and dosing regimen and other trial protocols and the rate of dropout among clinical trial participants.
Patients treated with our product candidates may also be undergoing surgical, radiation and chemotherapy treatments and may be using
other approved products or investigational new drugs, which can cause side effects or adverse events that are unrelated to our product
candidates. As a result, assessments of efficacy can vary widely for a particular patient and from patient to patient and site to site
within a clinical trial. This subjectivity can increase the uncertainty of, and adversely impact, our clinical trial outcomes.
We
do not know whether any clinical trials we may conduct will demonstrate consistent or adequate efficacy and safety sufficient to obtain
approval to market any of our product candidates.
Interim,
topline and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data becomes
available, and are subject to audit and verification procedures that could result in material changes in the final data.
From
time to time, we may publicly disclose preliminary, interim or topline data from our clinical trials, such as the interim data from our
Phase 1 clinical trial of HSB-1216, HSB-3215 or HSB-1940. These interim updates are based on a preliminary analysis of then-available
data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related
to the particular study or trial. For example, we may report tumor responses in certain patients that are unconfirmed at the time and
which do not ultimately result in confirmed responses to treatment after follow-up evaluations. We also make assumptions, estimations,
calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully
evaluate all data. As a result, the topline results that we report may differ from future results of the same studies, or different conclusions
or considerations may qualify such results, once additional data have been received and fully evaluated. Topline data also remain subject
to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously
published. As a result, topline data should be viewed with caution until the final data are available. In addition, we may report interim
analyses of only certain endpoints rather than all endpoints. Interim data from clinical trials that we may complete are subject to the
risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available.
Adverse changes between interim data and final data could significantly harm our business and prospects. Further, additional disclosure
of interim data by us or by our competitors in the future could result in volatility in the price of our common stock.
In
addition, the information we choose to publicly disclose regarding a particular study or clinical trial is typically selected from a
more extensive amount of available information. You or others may not agree with what we determine is the material or otherwise appropriate
information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant with
respect to future decisions, conclusions, views, activities or otherwise regarding a particular product candidate or our business. If
the preliminary or topline data that we report differs from late, final or actual results, or if others, including regulatory authorities,
disagree with the conclusions reached, our ability to obtain approval for, and commercialize, HSB-1216, HSB-3215, or HSB-1940 or any
other product candidates may be harmed, which could harm our business, financial condition, results of operations and prospects.
If
we experience delays or difficulties in enrolling patients in our ongoing or planned clinical trials, our receipt of necessary regulatory
approval could be delayed or prevented.
We
may not be able to initiate or continue our ongoing or planned clinical trials for our product candidates if we are unable to identify
and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA. Patient enrollment is a significant
factor in the timing of clinical trials. Our ability to enroll eligible patients may be limited or may result in slower enrollment than
we anticipate.
Patient
enrollment may be affected if our competitors have ongoing clinical trials for programs that are under development for the same indications
as our product candidates, and patients who would otherwise be eligible for our clinical trials instead enroll in clinical trials of
our competitors’ programs. Patient enrollment for our current or any future clinical trials may be affected by other factors, including:
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size
and nature of the patient population; |
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severity
of the disease under investigation; |
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availability
and efficacy of approved drugs for the disease under investigation; |
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patient
eligibility criteria for the trial in question as defined in the protocol; |
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perceived
risks and benefits of the product candidate under study; |
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clinicians’
and patients’ perceptions as to the potential advantages of the product candidate being studied in relation to other available
therapies, including any new products that may be approved or other product candidates being investigated for the indications we
are investigating; |
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clinicians’
willingness to screen their patients for biomarkers to indicate which patients may be eligible for enrollment in our clinical trials; |
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patient
referral practices of physicians; |
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the
ability to monitor patients adequately during and after treatment; |
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proximity
and availability of clinical trial sites for prospective patients; and |
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the
risk that patients enrolled in clinical trials will drop out of the trials before completion or, because they may be late-stage cancer
patients and will not survive the full terms of the clinical trials. |
Our
inability to enroll a sufficient number of patients for our clinical trials would result in significant delays or may require us to abandon
one or more clinical trials altogether. Enrollment delays in our clinical trials may result in increased development costs for our product
candidates and jeopardize our ability to obtain marketing approval for the sale of our product candidates. Furthermore, even if we are
able to enroll a sufficient number of patients for our clinical trials, we may have difficulty maintaining participation in our clinical
trials through the treatment and any follow-up periods.
Furthermore,
no regulatory authority has granted approval for a cancer therapeutic based on a Quatramer approach. We may never receive approval to
market and commercialize any product candidate. Even if we obtain regulatory approval, the approval may be for targets, disease indications,
lines of therapy or patient populations that are not as broad as we intended or desired or may require labeling that includes significant
use or distribution restrictions or safety warnings.
We
have not previously submitted an NDA to the FDA or similar regulatory approval filings to comparable foreign authorities, for any product
candidate, and we cannot be certain that our product candidates will be successful in clinical trials or receive regulatory approval.
Further, any future product candidates may not receive regulatory approval even if they are successful in clinical trials. If we do not
receive regulatory approvals for our product candidates, we may not be able to continue our operations. Even if we successfully obtain
regulatory approvals to market a product candidate, our revenue will be dependent, in part, upon the size of the markets in the territories
for which we gain regulatory approval and have commercial rights. If the markets or patient subsets that we are targeting are not as
significant as we estimate, we may not generate significant revenues from sales of such products, if approved.
We
plan to seek regulatory approval to commercialize our product candidates both in the United States and in selected foreign countries.
While the scope of regulatory approval generally is similar in other countries, in order to obtain separate regulatory approval in other
countries we must comply with numerous and varying regulatory requirements of such countries regarding safety and efficacy. Other countries
also have their own regulations governing, among other things, clinical trials and commercial sales, as well as pricing and distribution
of our product candidates, and we may be required to expend significant resources to obtain regulatory approval and to comply with ongoing
regulations in these jurisdictions.
We
may be required to perform additional or unanticipated clinical trials to obtain approval or be subject to post-marketing testing requirements
to maintain regulatory approval. If our candidates prove to be ineffective, unsafe or commercially unviable, our entire technology platform
and pipeline would have little, if any, value, which would have a material and adverse effect on our business, financial condition, results
of operations and prospects.
HSB-1216,
HSB-3215 and HSB-1940 are novel technologies, making it difficult to predict the time, cost and potential success of these product candidates.
We have not yet been able to assess the safety and efficacy of any product candidates in humans. Our success depends on our ability to
develop and commercialize product candidates using our novel Quatramer technology. The novel nature of our technology makes it difficult
to accurately predict the developmental challenges we may face for product candidates as they proceed through research, pre-clinical
or greenhouse studies and clinical or field trials.
There
have been a limited number of clinical trials of products created with induced ferroptosis and reverse EMT, none of which has utilized
our Quatramer technology, and we believe no therapeutic product candidates created with induced ferroptosis and reverse EMT technology
have received marketing approval in the United States or Europe. Because our therapeutic research programs are all in research or pre-clinical
stages, we have not yet been able to assess the safety or efficacy of any product candidates in humans.
If
our product candidates do not achieve projected development milestones or commercialization in the announced or expected timeframes,
the further development or commercialization of such product candidates may be delayed, and our business may be harmed. Current or future
product candidates may not meet safety and efficacy requirements for continued development or ultimate approval in humans and may cause
significant adverse events or toxicities.
Adverse
side effects or other safety risks associated with our drug candidates could delay or preclude approval, cause us to suspend or discontinue
clinical trials or abandon further development, limit the commercial profile of an approved label, or result in significant negative
consequences following marketing approval, if any.
Results
of our planned clinical trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics.
Undesirable side effects caused by our drug candidates could result in the delay, suspension or termination of clinical trials by us
or the FDA for a number of reasons. Additionally, due to the high mortality rates of the cancers for which we are initially pursuing
development and the pretreated nature of many patients in our planned clinical trials of HSB-1216, a material percentage of patients
in these clinical trials may die during a trial, which could impact development of HSB-1216. If we elect or are required to delay, suspend
or terminate any clinical trial, the commercial prospects of our drug candidates will be harmed and our ability to generate product revenues
from this drug candidate will be delayed or eliminated. Serious adverse events observed in clinical trials could hinder or prevent market
acceptance of our drug candidates. Any of these occurrences may harm our business, prospects, financial condition and results of operations
significantly.
Moreover,
if our drug candidates are associated with undesirable side effects in clinical trials or have characteristics that are unexpected, we
may elect to abandon or limit their development to more narrow uses or subpopulations in which the undesirable side effects or other
characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective, which may limit the commercial expectations
for our drug candidates, if approved. We may also be required to modify our study plans based on findings in our clinical trials. Many
drugs that initially showed promise in early stage testing have later been found to cause side effects that prevented further development.
In addition, regulatory authorities may draw different conclusions or require additional testing to confirm these determinations.
It
is possible that as we test our drug candidates in larger, longer and more extensive clinical trials, including with different dosing
regimens, or as the use of our drug candidates becomes more widespread following any regulatory approval, illnesses, injuries, discomforts
and other adverse events that were observed in earlier trials, as well as conditions that did not occur or went undetected in previous
trials, will be reported by patients. If such side effects become known later in development or upon approval, if any, such findings
may harm our business, financial condition, results of operations and prospects significantly.
In
addition, if any of our drug candidates receive marketing approval, and we or others later identify undesirable side effects caused by
treatment with such drug, a number of potentially significant negative consequences could result, including:
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regulatory
authorities may withdraw approval of the drug; |
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we
may be required to recall a product or change the way the drug is administered to patients; |
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regulatory
authorities may require additional warnings on the label, such as a “black box” warning or a contraindication, or issue
safety alerts, Dear Healthcare Provider letters, press releases or other communications containing warnings or other safety information
about the product; |
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we
may be required to implement a REMS or create a medication guide outlining the risks of such side effects for distribution to patients; |
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additional
restrictions may be imposed on the marketing or promotion of the particular product or the manufacturing processes for the product
or any component thereof; |
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we
could be sued and held liable for harm caused to patients; |
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the
drug could become less competitive; and |
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our
reputation may suffer. |
Any
of these events could prevent us from achieving or maintaining market acceptance of our drug candidates, if approved, and could significantly
harm our business, financial condition, results of operations and prospects.
We
sometimes estimate, or may in the future estimate, the timing of the accomplishment of various scientific, clinical, manufacturing, regulatory
and other product development objectives. These milestones may include our expectations regarding the commencement or completion of scientific
studies or clinical trials, the submission of regulatory filings, the receipt of marketing approval or the realization of other commercialization
objectives.
The
achievement of milestones such as the timing of the accomplishment of various scientific, clinical, manufacturing, regulatory and other
product development objectives may be outside of our control. All of these milestones are based on a variety of assumptions, including
assumptions regarding capital resources, constraints and priorities, progress of and results from development activities and the receipt
of key regulatory approvals or actions, any of which may cause the timing of achievement of the milestones to vary considerably from
our estimates. If we or our collaborators fail to achieve announced milestones in the expected timeframes, the commercialization of our
product candidates may be delayed, our credibility may be undermined, our business and results of operations may be harmed, and the price
of our common stock may decline.
If
a product liability claim is successfully brought against us for uninsured liabilities, or such claim exceeds our insurance coverage,
we could be forced to pay substantial damage awards that could materially harm our business.
The
use of any of our existing or future product candidates in clinical trials and the sale of any approved pharmaceutical products may expose
us to significant product liability claims. We currently do not have product liability insurance coverage but we intend to obtain such
insurance. Such insurance coverage may not protect us against any or all of the product liability claims that may be brought against
us in the future. We may not be able to acquire or maintain adequate product liability insurance coverage at a commercially reasonable
cost or in sufficient amounts or scope to protect us against potential losses. In the event a product liability claim is brought against
us, we may be required to pay legal and other expenses to defend the claim, as well as uncovered damage awards resulting from a claim
brought successfully against us. In the event our product candidate is approved for sale by the FDA or other regulatory agency and commercialized,
we may need to substantially increase the amount of our product liability coverage. Defending any product liability claim or claims could
require us to expend significant financial and managerial resources, which could have an adverse effect on our business.
Our
current and future products may never achieve significant commercial market acceptance.
Our
success depends on the market’s confidence that we can provide therapeutic products that improve clinical outcomes, lower healthcare
costs and enable better biopharmaceutical development. Failure of our products, or those jointly developed with our collaborators, to
perform as expected could significantly impair our operating results and our reputation. We believe patients, clinicians, academic institutions
and biopharmaceutical companies are likely to be particularly sensitive to defects, errors, inaccuracies, delays and toxicities in or
associated with our products. Furthermore, inadequate performance of these products may result in lower confidence in our Quatramer platform
in general.
We
may not succeed in achieving significant commercial market acceptance for our current or future products due to a number of factors,
including:
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our
ability to demonstrate the clinical utility of our Quatramer platform and related products and their potential advantages over existing
drug products to academic institutions, biopharmaceutical companies and the medical community; |
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our
ability, and that of our collaborators, to secure and maintain FDA and other regulatory clearance, authorization or approval for
our products; |
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the
agreement by third-party payors to reimburse our products, the scope and extent of which will affect patients’ willingness
or ability to pay for our products and will likely heavily influence physicians’ decisions to recommend our products; |
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the
rate of adoption of our Quatramer platform and related products by academic institutions, clinicians, key opinion leaders, advocacy
groups and biopharmaceutical companies; and |
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the
impact of our investments in product innovation and commercial growth. |
Additionally,
our customers and collaborators may decide to decrease or discontinue their use of our products due to changes in their research and
development plans, failures in their clinical trials, financial constraints, the regulatory environment, negative publicity about our
products, competing products or the reimbursement landscape, all of which are circumstances outside of our control. We may not be successful
in addressing these or other factors that might affect the market acceptance of our products and Quatramer technology. Failure to achieve
widespread market acceptance of our Quatramer platform and related products would materially harm our business, financial condition and
results of operations.
Our
business may be adversely affected by the coronavirus pandemic.
The
outbreak of COVID-19 evolved into a global pandemic as COVID-19 spread to many regions of the world. The extent to which COVID-19 impacts
our business and operating results may continue to depend on future developments that are uncertain and cannot be accurately predicted,
including new information that may emerge concerning COVID-19, including variants, and the actions to contain COVID-19 or treat its impact,
among others.
In
the event that COVID-19 continues to spread, our business operations could be delayed or interrupted. For example, as a result of COVID-19,
we previously experienced delays from our manufacturers with respect to the shipping of our materials as well as delays in completion
of analytical testing as a result of the shelter-in-place order restrictions. In addition, in the event that COVID-19 continues to spread,
our research and development may be affected as a result of delays in study monitoring and data analysis; some participants and clinical
investigators may not be able to comply with clinical trial protocols; any quarantines or other travel limitations (whether voluntary
or required) may impede participant movement, affect sponsor access to study sites, or interrupt healthcare services, resulting in our
inability to conduct our research activities, including our clinical trials; and infections and deaths related to the pandemic may disrupt
the United States’ healthcare and healthcare regulatory systems which could divert healthcare resources away from, or materially
delay FDA review and/or approval of our product candidates.
The
spread of COVID-19, which caused a broad impact globally may have a material economic effect on our business. While the potential economic
impact brought by the pandemic may be difficult to assess or predict, it has already caused, and may result in further, disruption of
global financial markets, which may reduce our ability to access capital either at all or on favorable terms. In addition, a recession,
depression or other sustained adverse market event resulting from COVID-19 could materially and adversely affect our business and the
value of our common stock.
The
ultimate impact of the COVID-19 pandemic, or any other health epidemic, is highly uncertain and subject to change. We do not yet know
the full extent of potential delays or impacts on our business, our clinical trials, our research programs, healthcare systems or the
global economy as a whole. However, these effects could have a material impact on our operations.
We
may expend our limited resources to pursue a particular drug candidate or indication and fail to capitalize on drug candidates or indications
that may be more profitable or for which there is a greater likelihood of success.
Because
we have limited financial and managerial resources, we focus on research programs and drug candidates that we identify for specific indications.
As a result, we may forego or delay pursuit of opportunities with other drug candidates or for other indications that later prove to
have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products
or profitable market opportunities. Our spending on current and future research and development programs and drug candidates for specific
indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market
for a particular drug candidate, we may relinquish valuable rights to that drug candidate through collaboration, licensing or other royalty
arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to
such drug candidate.
We
may not be successful in our efforts to design additional potential drug candidates.
A
key element of our strategy is to apply our knowledge and our understanding of the structure, biology and activity of ferroptosis to
develop drug candidates. The therapeutic design and development activities that we are conducting may not be successful in developing
drug candidates that are useful in treating cancer or other diseases. Our research programs may initially show promise in identifying
potential drug candidates, yet fail to yield drug candidates for clinical development for a number of reasons, including:
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the
research methodology used may not be successful in identifying potential drug candidates; |
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potential
drug candidates may, on further study, be shown to have harmful side effects or other characteristics that indicate that they are
unlikely to be drugs that will obtain marketing approval or achieve market acceptance; or |
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potential
drug candidates may not be effective in treating their targeted diseases. |
Research
programs to identify and design new drug candidates require substantial technical, financial and human resources. We may choose to focus
our efforts and resources on a potential drug candidate that ultimately proves to be unsuccessful. If we are unable to identify and design
suitable drug candidates for pre-clinical and clinical development, we will not be able to obtain revenues from the sale of products
in future periods, which likely would result in significant harm to our financial position and adversely impact our stock price.
We
face significant competition, and if our competitors develop and market technologies or products more rapidly than we do or that are
more effective, safer or less expensive than the products we develop, our commercial opportunities will be negatively impacted.
The
biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis
on proprietary and novel products and product candidates. Our competitors have developed, are developing or may develop products, product
candidates and processes competitive with ours. Any product candidates that we successfully develop and commercialize will compete with
existing therapies and new therapies that may become available in the future. We believe that a significant number of products are currently
under development, and may become commercially available in the future, for the treatment of conditions for which we may attempt to develop
product candidates. In addition, our products may need to compete with drugs physicians use off-label to treat the indications for which
we seek approval. This may make it difficult for us to replace existing therapies with our products.
In
particular, there is intense competition in the field of oncology. We have competitors both in the United States and internationally,
including major multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical companies, emerging
and start-up companies, universities and other research institutions. We also compete with these organizations to recruit management,
scientists and clinical development personnel, which could negatively affect our level of expertise and our ability to execute our business
plan. We will also face competition in establishing clinical trial sites, enrolling subjects for clinical trials and in identifying and
in-licensing new product candidates.
Our
commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective,
have fewer side effects, are more convenient, have a broader label, are marketed more effectively, are more widely reimbursed or are
less expensive than any products that we may develop. Our competitors also may obtain marketing approval from the FDA, EMA or other comparable
foreign regulatory authorities for their products more rapidly than we may obtain approval for ours, which could result in our competitors
establishing a strong market position before we are able to enter the market. Even if the product candidates we develop achieve marketing
approval, they may be priced at a significant premium over competitive products if any have been approved by then, resulting in reduced
competitiveness. Technological advances or products developed by our competitors may render our technologies or product candidates obsolete,
less competitive or not economical. If we are unable to compete effectively, our opportunity to generate revenue from the sale of our
products we develop may be adversely affected.
We
are subject to healthcare laws and regulations.
Sales
of our product candidates, if approved, or any other future product candidate will be subject to healthcare regulation and enforcement
by the federal government and the states and foreign governments in which we might conduct our business. The healthcare laws and regulations
that may affect our ability to operate include the following:
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The
federal Anti-Kickback Statute makes it illegal for any person or entity to knowingly and willfully, directly or indirectly, solicit,
receive, offer, or pay any remuneration that is in exchange for or to induce the referral of business, including the purchase, order,
lease of any good, facility, item or service for which payment may be made under a federal healthcare program, such as Medicare or
Medicaid. The term “remuneration” has been broadly interpreted to include anything of value. |
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Federal
false claims and false statement laws, including the federal civil False Claims Act and the CMPL, prohibits, among other things,
any person or entity from knowingly presenting, or causing to be presented, for payment to, or approval by, federal programs, including
Medicare and Medicaid, claims for items or services, including drugs, that are false or fraudulent. |
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Health
Insurance Portability and Accountability Act of 1996 (“HIPAA”) created additional federal criminal statutes that prohibit
among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program,
including private third-party payors or making any false, fictitious or fraudulent statement in connection with the delivery of or
payment for healthcare benefits, items or services. |
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HIPAA,
as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 and their implementing regulations,
impose obligations on certain types of individuals and entities regarding the electronic exchange of information in common healthcare
transactions, as well as standards relating to the privacy and security of individually identifiable health information. |
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The Federal Food, Drug and Cosmetic Act, which governs the production,
sale, distribution, promotion and sampling of drugs, biologics and medical devices and prohibits, among other things, the adulteration
or misbranding of drugs, biologics and medical devices including marketing drug products for off-label use; |
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The federal Physician Payments Sunshine Act requires certain manufacturers
of 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 annually to the Centers for Medicare & Medicaid Services information related
to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors),
certain other healthcare professionals (such as physician assistants and nurse practitioners), and teaching hospitals, as well as ownership
and investment interests held by physicians and their immediate family members and applicable group purchasing organizations. |
Also,
many states have similar laws and regulations, such as anti-kickback and false claims laws that may be broader in scope and may
apply regardless of payor, in addition to items and services reimbursed under Medicaid and other state programs. Additionally, we
may be subject to state laws that require pharmaceutical companies to comply with the federal government’s and/or
pharmaceutical industry’s voluntary compliance guidelines, state laws that require drug manufacturers to report information
related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures and state
laws requiring the registration of sales representatives, as well as state and foreign laws governing the privacy and security of
health information, many of which differ from each other in significant ways and often are not preempted by HIPAA.
The
laws and regulations applicable to our business are complex, changing and often subject to varying interpretations. As a result, we
may not be able to adhere to all applicable laws and regulations. Any violation or alleged violation of any of these laws or
regulations by us could have a material adverse effect on our business, financial condition, cash flows and results of operations.
We may be a party to various lawsuits, demands, claims, qui tam suits, third-party complaints to the FDA, government
investigations and audits, of which any could result in, among other things, substantial financial penalties or awards against us,
reputational harm, termination of relationships or contracts related to our business, mandated refunds, substantial payments made by
us, required changes to our business practices, exclusion from future participation in Medicare and other healthcare programs and
possible criminal penalties.
If
we are found in violation of applicable laws or regulations, we could suffer severe consequences that would have a material adverse effect
on our business, results of operations, financial condition, cash flows, reputation and stock price, including:
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suspension
or termination of our participation in federal healthcare programs; |
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criminal
or civil liability, fines, damages or monetary penalties for violations of healthcare fraud and abuse laws, including the federal
False Claims Act, CMPL, and Anti-Kickback Statute; |
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enforcement
actions by governmental agencies or claims for monetary damages by patients under federal or state patient privacy laws, including
HIPAA; |
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repayment
of amounts received in violation of law or applicable payment program requirements, and related monetary penalties; |
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mandated
changes to our practices or procedures that materially increase operating expenses; |
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imposition
of corporate integrity agreements that could subject us to ongoing audits and reporting requirements as well as increased scrutiny
of our business practices; |
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termination
of various relationships or contracts related to our business; and |
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harm
to our reputation which could negatively affect our business relationships, decrease our ability to attract or retain patients and
physicians, decrease access to new business opportunities and impact our ability to obtain financing, among other things. |
Responding
to lawsuits and other proceedings as well as defending ourselves in such matters will continue to require management’s attention
and cause us to incur significant legal expense. It is also possible that criminal proceedings may be initiated against us or individuals
in our business in connection with investigations by the federal government.
Furthermore,
to the extent that our product is sold in a foreign country, we may be subject to similar foreign laws.
If
we are unable to effectively adapt to changes in the healthcare industry, including changes to laws and regulations regarding or affecting
the U.S. healthcare reform, our business may be harmed.
Federal,
state and local legislative bodies frequently pass legislation and promulgate regulations relating to healthcare reform or that affect
the healthcare industry. We anticipate that there will continue to be increased government oversight and regulation of the healthcare
industry in the future. We cannot predict the ultimate content, timing or effect of any new healthcare legislation or regulations, nor
is it possible at this time to estimate the impact of potential new legislation or regulations on our business. It is possible that future
legislation enacted by Congress or state legislatures, or regulations promulgated by regulatory authorities at the federal or state level,
could adversely affect our business.
The
FDA and other regulatory agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and if we are
found to have improperly promoted off-label uses of our drugs or drug candidates, if approved, we may become subject to significant liability.
If
we are found to have improperly promoted off-label uses of our drugs or drug candidates, we may become subject to significant liability.
The FDA and other regulatory agencies strictly regulate the promotional claims that may be made about prescription drug products, such
as our drug candidates. In particular, a drug may not be promoted for uses that are not approved by the FDA or such other regulatory
agencies as reflected in the drug’s approved labeling. If we receive marketing approval for our drug candidates for our proposed
indications, physicians may nevertheless use our drugs for their patients in a manner that is inconsistent with the approved label. However,
if we are found to have promoted our drugs for any off-label uses, the federal government could levy civil, criminal and/or administrative
penalties, and seek fines against us. The FDA or other regulatory authorities could also request that we enter into a consent decree
or a corporate integrity agreement, or seek a permanent injunction against us under which specified promotional conduct is monitored,
changed or curtailed. If we cannot successfully manage the promotion of our drug candidates, we could become subject to significant liability,
which would materially adversely affect our business and financial condition.
We
may not be able to obtain or maintain Fast Track designation or accelerated approval for our drug candidates.
If
a drug is intended for the treatment of a serious condition and nonclinical or clinical data demonstrate the potential to address unmet
medical need for this condition, a drug sponsor may apply for FDA Fast Track designation. If we seek Fast Track designation for a drug
candidate, we may not receive it from the FDA. However, even if we receive Fast Track designation, Fast Track designation does not ensure
that we will receive marketing approval or that approval will be granted within any particular time frame. We may not experience a faster
development or regulatory review or approval process with Fast Track designation 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.
We
may not be able to obtain or maintain orphan drug designation or exclusivity for our drug candidates.
Regulatory
authorities in some jurisdictions, including the United States, may designate drugs for relatively small patient populations as “orphan
drugs.” Under the Orphan Drug Act, the FDA may designate a drug candidate as an orphan drug if it is intended to treat a rare disease
or condition, which is generally defined as a patient population of fewer than 200,000 individuals in the United States, or if the disease
or condition affects more than 200,000 individuals in the United States and there is no reasonable expectation that the cost of developing
and making a drug product available in the United States for the type of disease or condition will be recovered from sales of the product.
ODD
entitles a party to financial incentives, such as opportunities for grant funding towards clinical trial costs, tax advantages and user-fee
waivers. Additionally, if a product that has orphan designation subsequently receives the first FDA approval for the disease or condition
for which it has such designation, the product is entitled to orphan drug exclusivity. This means that the FDA may not approve any other
applications to market the same drug or biological product for the same indication for seven years, except in certain circumstances,
including proving clinical superiority (i.e., another product is safer, more effective or makes a major contribution to patient care)
to the product with orphan exclusivity. Competitors, however, may receive approval of different products for the indication for which
the orphan product has exclusivity, or obtain approval for the same product but for a different indication than that for which the orphan
product has exclusivity. 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.
A
Breakthrough Therapy designation by the FDA for our drug candidates may not lead to a faster development or regulatory review or approval
process, and it does not increase the likelihood that our drug candidates will receive marketing approval.
Designation
as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe one of our drug candidates meets the criteria
for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. Even if we receive
Breakthrough Therapy designation, the receipt of such designation for a drug candidate may not result in a faster development process,
review or approval compared to drugs considered for approval under conventional FDA procedures and does not assure ultimate approval
by the FDA. In addition, even if one or more of our drug candidates qualify as breakthrough therapies, the FDA may later decide that
the drugs no longer meet the conditions for qualification or decide that the time period for FDA review or approval will not be shortened.
We may seek a breakthrough therapy designation for some of our drug candidates. A breakthrough therapy is defined as a drug that is intended,
alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical
evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant
endpoints, such as substantial treatment effects observed early in clinical development. For drugs and biologics that have been designated
as breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient
path for clinical development while minimizing the number of patients placed in ineffective control regimens. Drugs designated as breakthrough
therapies by the FDA are also eligible for accelerated approval.
Risks
Related to Our Reliance on Third Parties
We
rely on third parties to conduct our pre-clinical studies and clinical trials. If these third parties do not successfully perform their
contractual and regulatory duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our
drug candidates and our business could be substantially harmed.
We
do not have the ability to independently conduct all aspects of our pre-clinical testing or clinical trials. As a result, we have relied
upon and plan to continue to rely upon third-party medical institutions, clinical investigators, contract laboratories and other third
party CROs to monitor and manage data for our ongoing pre-clinical and clinical programs. We rely on these parties for the execution
of our pre-clinical studies and clinical trials, and control only certain aspects of their activities. Nevertheless, we are responsible
for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory, and scientific standards,
and our reliance on the CROs does not relieve us of our regulatory responsibilities. We and our CROs are required to comply with current
GCP, which are regulations and guidelines enforced by the FDA, the Competent Authorities of the Member States of the European Economic
Area and comparable foreign regulatory authorities for all of our drugs in clinical development.
Regulatory
authorities enforce these current GCP through periodic inspections of trial sponsors, principal investigators and trial sites. If we
or any of our CROs fail to comply with applicable GCP, the clinical data generated in our clinical trials may be deemed unreliable and
the FDA, the EMA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our
marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine
that any of our clinical trials comply with GCP regulations. In addition, our clinical trials must be conducted with products produced
under cGMP. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval
process.
If
any of our relationships with these third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs or
to do so on commercially reasonable terms. In addition, our CROs are not our employees, and except for remedies available to us under
our agreements with such CROs, we cannot control whether or not they devote sufficient time and resources to our on-going clinical, nonclinical
and pre-clinical or clinical programs. If CROs do not successfully carry out their contractual duties or obligations or meet expected
deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure
to adhere to our clinical protocols, regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated
and we may not be able to obtain regulatory approval for or successfully commercialize our drug candidates. As a result, our results
of operations and the commercial prospects for our drug candidates would be harmed, our costs could increase and our ability to generate
revenues could be delayed.
Many
of the third parties with whom we contract may also have relationships with other commercial entities, including our competitors, for
whom they may also be conducting clinical trials or other drug development activities that could harm our competitive position. If the
third parties conducting our pre-clinical studies or 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 their failure to adhere to our clinical trial protocols or to GCP, or for any
other reason, we may need to enter into new arrangements with alternative third parties. Switching or adding additional CROs involves
additional cost and requires management time and focus. In addition, there is a natural transition period when a new CRO commences work.
As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines. Though we carefully
manage our relationships with our CROs, there can be no assurance that we will not encounter similar challenges or delays in the future
or that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects.
Manufacturing
pharmaceutical products is complex and subject to product loss for a variety of reasons. We contract with third parties for the manufacture
of our drug candidates for pre-clinical testing and clinical trials and expect to continue to do so for commercialization. This reliance
on third parties increases the risk that we will not have sufficient quantities of our drug candidates or products or such quantities
at an acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts.
We
do not have any manufacturing facilities. We produce very small quantities of small molecules for evaluation in our research programs
in our laboratory. We rely, and expect to continue to rely, on third parties for the manufacture of our drug candidates for pre-clinical
and clinical testing, as well as for commercial manufacture if any of our drug candidates obtain marketing approval. This reliance on
third parties increases the risk that we will not have sufficient quantities of our drug candidates or products or such quantities at
an acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts.
We
may be unable to establish any agreements with third-party manufacturers or to do so on favorable terms. Even if we are able to establish
agreements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including:
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reliance
on the third party for regulatory, compliance and quality assurance; |
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operations
of our third-party manufacturers or suppliers could be disrupted by conditions unrelated to our business or operations, including
the bankruptcy of the manufacturer or supplier or the issuance of an FDA Form 483 notice or warning letter; |
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the
possible breach of the manufacturing agreement by the third party; |
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the
possible misappropriation of our proprietary information, including our trade secrets and know how; |
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the
possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us; |
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carrier
disruptions or increased costs that are beyond our control; and |
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failure
to deliver our drugs under specified storage conditions and in a timely manner. |
We
have only limited supply arrangements in place with respect to our drug candidates, and these arrangements do not extend to commercial
supply. We acquire many key materials on a purchase order basis. As a result, we do not have long-term committed arrangements with respect
to our drug candidates and other materials. If we obtain marketing approval for any of our drug candidates, we will need to establish
an agreement for commercial manufacture with a third party; however, no assurance can be provided that we will be able to enter into
a commercial manufacture agreement on reasonable terms, if at all.
Third-party
manufacturers may not be able to comply with cGMP or similar regulatory requirements outside of the United States. Our failure, or the
failure of our third-party manufacturers and suppliers, 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, license revocation,
seizures or recalls of drug candidates or products, operating restrictions and criminal prosecutions, any of which could significantly
and adversely affect supplies of our products. In addition, our third-party manufacturers and suppliers are subject to numerous environmental,
health and safety laws and regulations, including those governing the handling, use, storage, treatment and disposal of waste products,
and failure to comply with such laws and regulations could result in significant costs associated with civil or criminal fines and penalties
for such third parties. Based on the severity of regulatory actions that may be brought against these third parties in the future, our
clinical or commercial supply of drug and packaging and other services could be interrupted or limited, which could harm our business.
Our
drug candidates and any products that we may develop may compete with other drug candidates and products for access to manufacturing
facilities. As a result, we may not obtain access to these facilities on a priority basis or at all. There are a limited number of manufacturers
that operate under cGMP and that may be capable of manufacturing our product candidates.
As
we prepare for later-stage clinical trials and potential commercialization, we will need to take steps to increase the scale of production
of our drug candidates. Even minor deviations from normal manufacturing processes could result in reduced production yields, product
defects and other supply disruptions. If microbial, viral or other contaminations are discovered in our drug candidates or in the manufacturing
facilities in which our drug candidates are made, such manufacturing facilities may need to be closed for an extended period of time
to investigate and remedy the contamination.
Any
performance failure on the part of our existing or future manufacturers could delay clinical development or marketing approval. We do
not currently have arrangements in place for redundant supply or a second source for bulk drug substance. If our current contract manufacturers
for pre-clinical and clinical testing cannot perform as agreed, we may be required to replace such manufacturers. Although we believe
that there are several potential alternative manufacturers who could manufacture our drug candidates, we may incur added costs and delays
in identifying and qualifying any such replacement manufacturer or be able to reach agreement with any alternative manufacturer.
Our
current and anticipated future dependence upon others for the manufacture of our drug candidates or products may adversely affect our
future profit margins and our ability to commercialize any products that obtain marketing approval on a timely and competitive basis.
We
currently depend on a sole source supplier and manufacturer for the active ingredient in HSB-1216, the “knob” for HSB-1940
and the HER2 for HSB-3215 and the inability to obtain the active ingredient in HSB-1216, HSB-3215 and/or HSB-1940 as required could harm
our business.
We
currently source the active ingredient in HSB-1216, the “knob” for HSB-1940 and the HER2 for HSB-3215 from sole suppliers/manufacturers.
Although we believe that we can obtain the active ingredient in HSB-1216, the “knob” for HSB-1940 and the HER2 for HSB-3215
from other suppliers, supply shortages for these particular raw material may delay our clinical trials. If we are unable to procure the
active ingredient in HSB-1216, the “knob” for HSB-1940 and the HER2 for HSB-3215 as needed, our business may be harmed.
Our
failure to find third party collaborators to assist or share in the costs of drug development could materially harm our business, financial
condition and results of operations.
Our
strategy for the development and commercialization of our proprietary drug candidates may include the execution of collaborative arrangements
with third parties. Existing and future collaborators have significant discretion in determining the efforts and resources they apply
and may not perform their obligations as expected. Potential third-party collaborators include biopharmaceutical, pharmaceutical and
biotechnology companies, academic institutions and other entities. Third-party collaborators may assist us in:
● |
funding
research, pre-clinical development, clinical trials and manufacturing; |
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seeking
and obtaining regulatory approvals; and |
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successfully
commercializing any future drug candidates. |
If
we are not able to establish further collaboration agreements, we may be required to undertake drug development and commercialization
at our own expense. Such an undertaking may limit the number of drug candidates that we will be able to develop, significantly increase
our capital requirements and place additional strain on our internal resources. Our failure to enter into additional collaborations could
materially harm our business, financial condition and results of operations.
In
addition, our dependence on licensing, collaboration and other agreements with third parties may subject us to a number of risks. These
agreements may not be on terms that prove favorable to us and may require us to relinquish certain rights in our drug candidates. To
the extent we agree to work exclusively with one collaborator in a given area, our opportunities to collaborate with other entities could
be curtailed. Lengthy negotiations with potential new collaborators may lead to delays in the research, development or commercialization
of drug candidates. The decision by our collaborators to pursue alternative technologies or the failure of our collaborators to develop
or commercialize successfully any drug candidate to which they have obtained rights from us could materially harm our business, financial
condition and results of operations.
Russia
launched an invasion in Ukraine in February 2022, which may have a material adverse effect on our operations.
In
February 2022, Russia launched an invasion in Ukraine, and while it is difficult to estimate the impact of such invasion on the Company’s
business and financial position, such invasion could adversely impact the Company’s ability to, among other things, obtain raw
materials. In addition, the conflict involving Russia and Ukraine may impact our contract research organizations, clinical data management
organizations, and clinical investigators’ ability to conduct certain of our trials in Eastern European countries, and may prevent
us from obtaining data in these countries. This could negatively impact our clinical trials and/or analyses of clinical results, which
may increase our product development costs and materially harm our business.
Risks
Related to Commercialization of Our Drug Candidates
Even
if we are successful in completing all pre-clinical studies and clinical trials, we may not be successful in commercializing one or more
of our drug candidates.
Even
if we complete the necessary pre-clinical studies and clinical trials, the marketing approval process is expensive, time-consuming and
uncertain and may prevent us from obtaining approvals for the commercialization of some or all of our drug candidates. If we are not
able to obtain, or if there are delays in obtaining, required regulatory approvals, we will not be able to commercialize our drug candidates,
and our ability to generate revenue will be materially impaired.
Our
drug candidates and the activities associated with their development and commercialization, including their design, testing, manufacture,
safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, export and import are subject
to comprehensive regulation by the FDA and other regulatory agencies in the United States and by the EMA and similar regulatory authorities
outside of the United States. Failure to obtain marketing approval for a drug candidate will prevent us from commercializing the drug
candidate. We have not submitted an application for or received marketing approval for any of our drug candidates in the United States
or in any other jurisdiction.
We
have only limited experience in filing and supporting the applications necessary to gain marketing approvals and expect to rely on third-party
clinical research organizations or other third-party consultants or vendors to assist us in this process. Securing marketing approval
requires the submission of extensive pre-clinical and clinical data and supporting information to regulatory authorities for each therapeutic
indication to establish the drug candidate’s safety and efficacy. Securing marketing approval also requires the submission of information
about the drug manufacturing process to, and inspection of manufacturing facilities by, the regulatory authorities. Our drug candidates
may not be effective, may be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other
characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use. New cancer drugs frequently are
indicated only for patient populations that have not responded to an existing therapy or have relapsed. If any of our drug candidates
receives marketing approval, the accompanying label may limit the approved use of our drug in this way, which could limit sales of the
drug.
The
process of obtaining marketing approvals, both in the United States and abroad, is expensive, may take many years, if approval is obtained
at all, and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the drug candidates
involved. Changes in marketing approval policies during the development period, changes in or the enactment of additional statutes or
regulations, or changes in regulatory review for each submitted drug application, may cause delays in the approval or rejection of an
application. Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may
decide that our data is insufficient for approval and require additional pre-clinical, clinical or other studies. In addition, varying
interpretations of the data obtained from pre-clinical studies and clinical trials could delay, limit or prevent marketing approval of
a drug candidate. Any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments
that render the approved drug not commercially viable.
If
we are unable to develop satisfactory sales and marketing capabilities, we may not succeed in commercializing our drug candidates.
We
have no experience in marketing and selling drug products. We have not entered into arrangements for the sale and marketing of any of
our drug candidates.
There
are risks involved with establishing our own sales and marketing capabilities. For example, recruiting and training a sales force is
expensive and time-consuming and could delay any product launch. If the commercial launch of a drug candidate for which we recruit a
sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily
incurred these commercialization expenses. These efforts are expected to be costly, and our investment would be lost if we cannot retain
or reposition our sales and marketing personnel.
We
may seek to collaborate with a third party to market our drugs or may seek to market and sell our drugs by ourselves. If we seek to collaborate
with a third party, we cannot be sure that a collaborative agreement can be reached on terms acceptable to us.
We
cannot be sure that we will be able to acquire, or establish third party relationships to provide, any or all of these marketing and
sales capabilities. The establishment of a direct sales force or a contract sales force or a combination direct and contract sales force
to market our drugs will be expensive and time-consuming and could delay any drug launch. Further, we can give no assurances that we
may be able to maintain a direct and/or contract sales force for any period of time or that our sales efforts will be sufficient to generate
or to grow our revenues or that our sales efforts will ever lead to profits.
The
development and commercialization of pharmaceutical products are subject to extensive regulation, and we may not obtain regulatory approvals
for our drug candidates on a timely basis, or at all.
The
time required to obtain approval or other marketing authorizations by the FDA is unpredictable, and it typically takes many years following
the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities.
In addition, approval policies, regulations, and the type and amount of clinical data necessary to gain approval may change during the
course of a product candidate’s clinical development and may vary among jurisdictions. We have not obtained regulatory approval
for any product candidate, and it is possible that we may never obtain regulatory approval for any product candidates we may seek to
develop in the future. Neither we nor any current or future collaborator is permitted to market any drug product candidates in the United
States until we receive regulatory approval from the FDA.
Prior
to obtaining approval to commercialize any drug product candidate in the United States, we must demonstrate with substantial evidence
from well-controlled clinical trials, and to the satisfaction of the FDA, that such product candidates are safe, pure and effective for
their intended uses. Results from pre-clinical studies and clinical trials can be interpreted in different ways. Even if we believe the
pre-clinical or clinical data for our product candidates are promising, such data may not be sufficient to support approval by the FDA.
The FDA may also require us to conduct additional pre-clinical studies or clinical trials for our product candidates either prior to
or after approval, or it may object to elements of our clinical development programs.
Our
product candidates could fail to receive regulatory approval for many reasons, including the following:
● |
the
FDA may disagree with the design or implementation of our clinical trials; |
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● |
we
may be unable to demonstrate to the satisfaction of the FDA that a product candidate is safe and effective for its proposed indication; |
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the
results of clinical trials may not meet the level of statistical significance required by the FDA for approval; |
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● |
we
may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks; |
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the
FDA may fail to approve the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical
and commercial supplies; and |
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the
approval policies or regulations of the FDA may significantly change in a manner rendering our clinical data insufficient for approval. |
Of
the large number of products in development, only a small percentage successfully complete the FDA approval processes and are commercialized.
The lengthy approval and marketing authorization process as well as the unpredictability of future clinical trial results may result
in our failing to obtain regulatory approval and marketing authorization to market our product candidates, which would significantly
harm our business, financial condition, results of operations and prospects.
We
have invested a significant portion of our time and financial resources in the development of our pre-clinical product candidates. Our
business is dependent on our ability to successfully complete pre-clinical and clinical development, obtain regulatory approval for,
and, if approved, successfully commercialize HSB-1216, HSB-3215 and HSB-1940, and any future product candidates in a timely manner.
Even
if we eventually complete clinical testing and receive approval for HSB-1216, HSB-3215, and HSB-1940, and any future product candidates,
the FDA, may grant approval or other marketing authorization contingent on the performance of costly additional clinical trials, including
post-marketing clinical trials. The FDA, also may approve or authorize for marketing a product candidate for a more limited indication
or patient population than we originally request, and the FDA may not approve or authorize the labeling that we believe is necessary
or desirable for the successful commercialization of a product candidate. Any delay in obtaining, or inability to obtain, applicable
regulatory approval or other marketing authorization would delay or prevent commercialization of that product candidate and would materially
adversely impact our business and prospects.
In
addition, the FDA may change their policies, issue additional regulations or revise existing regulations, or take other actions, which
may prevent or delay approval of our future products under development on a timely basis. Such policy or regulatory changes could impose
additional requirements upon us that could delay our ability to obtain approvals, increase the costs of compliance or restrict our ability
to maintain any marketing authorizations we may have obtained.
Failure
to obtain marketing approval in foreign jurisdictions would prevent our drug candidates from being marketed abroad.
In
order to market and sell our drugs in the European Union and many other foreign jurisdictions, we or our potential third-party collaborators
must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies
among countries and can involve additional testing. The time required to obtain approval may differ substantially from that required
to obtain FDA marketing approval. The regulatory approval process outside of the United States generally includes all of the risks associated
with obtaining FDA approval. In addition, in many countries outside of the United States, it is required that the drug be approved for
reimbursement before the drug can be approved for sale in that country. We or our potential third-party collaborators may not obtain
approvals from regulatory authorities outside of the United States on a timely basis, if at all. Approval by the FDA does not ensure
approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside of the United
States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. However, a failure or delay
in obtaining regulatory approval in one country may have a negative effect on the regulatory process in other countries. We may not be
able to file for marketing approvals and may not receive necessary approvals to commercialize our drugs in any market.
Any
drug candidate that we obtain marketing approval for could be subject to post-marketing restrictions or withdrawal from the market and
we may be subject to substantial penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems
with our drugs, when and if any of them are approved.
While
it is possible that one or more of our drug candidates may require a companion diagnostic to select the patients who will likely respond
to a cancer therapy involving one of our drug candidates as a condition of approval, it is too early in our drug candidates development
to identify which drug candidate, if any, would require a companion diagnostic. According to FDA guidance, if the FDA determines that
a companion diagnostic device is essential to the safe and effective use of a novel therapeutic drug or indication, the FDA generally
will not approve the therapeutic drug or new therapeutic drug indication if the companion diagnostic is not also approved or cleared
for that indication. Under the FDCA, companion diagnostics are regulated as medical devices, and the FDA has generally required companion
diagnostics intended to select the patients who will respond to cancer treatment to obtain Premarket Approval (“PMA”) for
the diagnostic. The PMA process, including the gathering of clinical and pre-clinical data and the submission to and review by the FDA,
involves a rigorous premarket review during which the applicant must prepare and provide the FDA with reasonable assurance of the device’s
safety and effectiveness and information about the device and its components regarding, among other things, device design, manufacturing
and labeling. A PMA is not guaranteed and may take considerable time, and the FDA may ultimately respond to a PMA submission with a “not
approvable” determination based on deficiencies in the application and require additional clinical trial or other data that may
be expensive and time-consuming to generate and that can substantially delay approval. As a result, if we are required by the FDA to
obtain approval of a companion diagnostic for a therapeutic drug candidate, and we do not obtain or there are delays in obtaining FDA
approval of a diagnostic device, we may not be able to commercialize the drug candidate on a timely basis or at all and our ability to
generate revenue will be materially impaired.
Any
drug candidate for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling,
advertising and promotional activities for such drug, will be subject to continual requirements of and review by the FDA and other regulatory
authorities. These requirements include submissions of safety and other post-marketing information and reports, registration and listing
requirements, cGMP requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records
and documents, requirements regarding the distribution of samples to physicians and recordkeeping. Even if marketing approval of a drug
candidate is granted, the approval may be subject to limitations on the indicated uses for which the drug may be marketed or to the conditions
of approval, including the requirement to implement a REMS. New cancer drugs frequently are indicated only for patient populations that
have not responded to an existing therapy or have relapsed. If any of our drug candidates receives marketing approval, the accompanying
label may limit the approved use of our drug in this way, which could limit sales of the drug.
The
FDA may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy
of the drug, including the adoption and implementation of REMS. The FDA and other agencies, including the DOJ, closely regulate and monitor
the post-approval marketing and promotion of drugs to ensure they are marketed and distributed only for the approved indications and
in accordance with the provisions of the approved labeling. The FDA and DOJ impose stringent restrictions on manufacturers’ communications
regarding off-label use, and if we do not market our drugs for their approved indications, we may be subject to enforcement action for
off-label marketing. Violations of the FDCA and other statutes, including the False Claims Act, relating to the promotion and advertising
of prescription drugs may lead to investigations and enforcement actions alleging violations of federal and state healthcare fraud and
abuse laws, as well as state consumer protection laws. In addition, later discovery of previously unknown adverse events or other problems
with our drugs, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may have various consequences,
including:
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restrictions
on such drugs, manufacturers or manufacturing processes; |
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restrictions
and warnings on the labeling or marketing of a drug; |
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restrictions
on drug distribution or use; |
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requirements
to conduct post-marketing studies or clinical trials; |
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warning
letters or untitled letters; |
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withdrawal
of the drugs from the market; |
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refusal
to approve pending applications or supplements to approved applications that we submit; |
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recall
of drugs; |
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fines,
restitution or disgorgement of profits or revenues; |
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suspension
or withdrawal of marketing approvals; |
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damage
to relationships with any potential collaborators; |
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unfavorable
press coverage and damage to our reputation; |
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refusal
to permit the import or export of our drugs; |
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drug
seizure; |
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injunctions
or the imposition of civil or criminal penalties; or |
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litigation
involving patients using our drugs. |
Healthcare
Reform in the United States.
In
the United States, there have been, and continue to be, a number of legislative and regulatory changes and proposed changes to the healthcare
system that could affect the future results of pharmaceutical manufactures’ operations. In particular, there have been and continue
to be a number of initiatives at the federal and state levels that seek to reduce healthcare costs. On the federal level, the ACA was
enacted in March 2010, and included measures to significantly change the way healthcare is financed by both governmental and private
insurers. Among the provisions of the ACA that have been of greatest importance to the pharmaceutical and biotechnology industry are
the following:
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an
annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents, apportioned
among these entities according to their market share in certain government healthcare programs; |
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implementation
of the federal physician payment transparency requirements, sometimes referred to as the “Physician Payments Sunshine Act”; |
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a
licensure framework for follow-on biologic products; |
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creation
of Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness
research, along with funding for such research; |
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establishment
of a Center for Medicare Innovation at the Centers for Medicare & Medicaid Services to test innovative payment and service delivery
models to lower Medicare and Medicaid spending, potentially including prescription drug spending; |
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an
increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program, to 23.1% and 13% of the
average manufacturer price for most branded and generic drugs, respectively and capped the total rebate amount for innovator drugs
at 100% of the Average Manufacturer Price; |
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adoption
of methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for certain drugs and
biologics, including our product candidates, that are inhaled, infused, instilled, implanted or injected; |
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extension
of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed
care organizations; |
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expansion
of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals
and by adding new mandatory eligibility categories for individuals with income at or below 133% of the federal poverty level, thereby
potentially increasing manufacturers’ Medicaid rebate liability; |
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creation
of a Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated
prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s
outpatient drugs to be covered under Medicare Part D; and |
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expansion
of the entities eligible for discounts under the Public Health program. |
Although
there have been legal and political challenges to certain aspects of the ACA, the Biden Administration has affirmed support for the law,
entered its own executive orders to enforce and strengthen it, and committed to examining and, where appropriate, reversing contrary
Trump Administration policies. The Tax Cuts and Jobs Act of 2017 includes a provision repealing, effective January 1, 2019, the tax-based
shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part
of a year that is commonly referred to as the “individual mandate.”
Because
of the volatility surrounding the implementation and enforcement of the ACA since its passage, and at this time, the full effect that
the ACA would have on a pharmaceutical manufacturer remains unclear. This uncertainty is heightened by President Biden’s January
28, 2021 Executive Order on Strengthening Medicaid and the Affordable Care Act which indicates that the Biden Administration may significantly
modify the ACA and further reform the ACA and other federal programs in manner that may impact our operations. The Biden Administration
has indicated that a goal of its administration is to expand and support Medicaid and the ACA and to make high-quality healthcare accessible
and affordable. The potential increase in patients covered by government funded insurance may impact our pricing. Further, it is possible
that the Biden Administration may further increase scrutiny of drug pricing.
Additionally,
in December 2019, a federal appeals court held that the individual mandate portion of the ACA was unconstitutional and left open the
question whether the remaining provisions of the ACA would be valid without the individual mandate. However, on appeal, the Supreme Court
ruled in June 2021 that the parties challenging the law lacked standing, leaving the ACA in place. It is unclear how any other potential
litigation challenging the ACA and the healthcare reform measures of the Biden administration will impact the ACA. We cannot predict
the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action,
either in the United States or abroad. We expect that additional state and federal health care reform measures will be adopted in the
future, any of which could limit the amounts that federal and state governments will pay for health care products and services.
Moreover,
prescription drug pricing has been a recent focus of federal policymaking. The Trump Administration issued a series of executive orders
and rules related to prescription drug pricing, including executive orders in July and September 2020 focused on reducing drug prices
and rules in November 2020 establishing a ‘Most Favored Nation’ rule tying Medicare Part B drug pricing to prices in other
countries, as well as a rule effectively banning rebates from Medicare Part D. The Biden Administration has indicated that lowering prescription
drug prices is a priority for the Biden Administration as well.
Further,
there is uncertainty surrounding the applicability of the biosimilars provisions under the ACA. The FDA has issued several guidance documents,
but no implementing regulations, on biosimilars. A number of biosimilar applications have been approved over the past few years. The
regulations that are ultimately promulgated and their implementation are likely to have considerable impact on the way pharmaceutical
manufacturers conduct their business and may require changes to current strategies. A biosimilar is a biological product that is highly
similar to an approved drug notwithstanding minor differences in clinically inactive components, and for which there are no clinically
meaningful differences between the biological product and the approved drug in terms of the safety, purity, and potency of the product.
Individual
states have become increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and
biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access,
and marketing cost disclosure and transparency measures, and to encourage importation from other countries and bulk purchasing. Legally
mandated price controls on payment amounts by third-party payors or other restrictions could harm a pharmaceutical manufacturer’s
business, results of operations, financial condition and prospects. In addition, regional healthcare authorities and individual hospitals
are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription
drug and other healthcare programs. This could reduce ultimate demand for certain products or put pressure product pricing, which could
negatively affect a pharmaceutical manufacturer’s business, results of operations, financial condition and prospects.
In
addition, given recent federal and state government initiatives directed at lowering the total cost of healthcare, Congress and state
legislatures will likely continue to focus on healthcare reform, the cost of prescription drugs and biologics and the reform of the Medicare
and Medicaid programs. While no one cannot predict the full outcome of any such legislation, it may result in decreased reimbursement
for drugs and biologics, which may further exacerbate industry-wide pressure to reduce prescription drug prices. This could harm a pharmaceutical
manufacturer’s ability to generate revenue. Increases in importation or re-importation of pharmaceutical products from foreign
countries into the United States could put competitive pressure on a pharmaceutical manufacturer’s ability to profitably price
products, which, in turn, could adversely affect business, results of operations, financial condition and prospects. A pharmaceutical
manufacturer might elect not to seek approval for or market products in foreign jurisdictions in order to minimize the risk of re-importation,
which could also reduce the revenue generated from product sales. It is also possible that other legislative proposals having similar
effects will be adopted.
Furthermore,
regulatory authorities’ assessment of the data and results required to demonstrate safety and efficacy can change over time and
can be affected by many factors, such as the emergence of new information, including on other products, changing policies and agency
funding, staffing and leadership. We cannot be sure whether future changes to the regulatory environment will be favorable or unfavorable
to our business prospects. For example, average review times at the FDA for marketing approval applications can be affected by a variety
of factors, including budget and funding levels and statutory, regulatory and policy changes.
If
we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur
costs that could harm our business.
We
are subject to numerous foreign, federal, state and local environmental, health and safety laws and regulations, including those governing
laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve
the use of hazardous and flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste
products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination
or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held
liable for any resulting damages, and any liability could exceed our resources, including any available insurance.
In
addition, our leasing and operation of real property may subject us to liability pursuant to certain of these laws or regulations. Under
existing U.S. environmental laws and regulations, current or previous owners or operators of real property and entities that disposed
or arranged for the disposal of hazardous substances may be held strictly, jointly and severally liable for the cost of investigating
or remediating contamination caused by hazardous substance releases, even if they did not know of and were not responsible for the releases.
We
could incur significant costs and liabilities which may adversely affect our financial condition and operating results for failure to
comply with such laws and regulations, including, among other things, civil or criminal fines and penalties, property damage and personal
injury claims, costs associated with upgrades to our facilities or changes to our operating procedures, or injunctions limiting or altering
our operations.
Although
we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting
from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain
insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal
of biological, hazardous or radioactive materials.
In
addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations.
These current or future laws and regulations, which are becoming increasingly more stringent, may impair our research, development or
production efforts. Our failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.
Risks
Related to Our Intellectual Property
If
we do not obtain patent term extension for any drug candidates we may develop, our business may be materially harmed.
In
the United States, depending upon the timing, duration, and specifics of any FDA marketing approval of a drug candidate, the patent term
of a patent that covers an FDA-approved drug may be eligible for limited patent term extension, which permits patent term restoration
as compensation for the patent term lost during the FDA regulatory review process. The Drug Price Competition and Patent Term Restoration
Act of 1984, also known as the Hatch-Waxman Act, permits a patent term extension of up to five years beyond the expiration of the patent.
The length of the patent term extension is related to the length of time the drug is under regulatory review. Patent term extension cannot
extend the remaining term of a patent beyond a total of 14 years from the date of drug approval, and only one patent applicable to an
approved drug may be extended and only those claims covering the approved drug, a method for using it, or a method for manufacturing
it may be extended. Similar provisions are available in Europe and other non-United States jurisdictions to extend the term of a patent
that covers an approved drug. While, in the future, if and when our drug candidates receive FDA approval, we expect to apply for patent
term extensions on patents covering those drug candidates, there is no guarantee that the applicable authorities will agree with our
assessment of whether such extensions should be granted, and even if granted, the length of such extensions. We may not be granted an
extension because of, for example, failing to exercise due diligence during the testing phase or regulatory review process, failing to
apply within applicable deadlines, failing to apply prior to expiration of the relevant patents, or otherwise failing to satisfy applicable
requirements. If we are unable to obtain any patent term extension or the term of any such extension is less than we request, our competitors
may obtain approval of competing drugs following the expiration of our patent rights, and our business, financial condition, results
of operations, and prospects could be materially harmed.
Changes
to patent laws in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing our ability
to protect our drugs.
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. Changes in either the patent laws or interpretation of the patent laws in the United States could increase
the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents. Recent
patent reform legislation in the United States and other countries, including the Leahy-Smith America Invents Act (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. For example, the Leahy-Smith Act allows
third-party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent
by USPTO administered post-grant proceedings, including post-grant review, inter parties review, and derivation proceedings. In addition,
the Leahy-Smith Act has transformed the U.S. patent system from a “first-to-invent” system to a “first-to-file”
system in which, assuming that other requirements for patentability are met, the first inventor to file a patent application will be
entitled to the patent on an invention regardless of whether a third party was the first to invent the claimed invention.
In
addition, the patent positions of companies in the development and commercialization of biologics and pharmaceuticals are particularly
uncertain. Recent U.S. Supreme Court and Federal Circuit rulings have narrowed the scope of patent protection available in certain circumstances
and weakened the rights of patent owners in certain situations. This combination of events has created uncertainty with respect to the
validity and enforceability of patents once obtained. Depending on future actions by the U.S. Congress, the federal courts, and the USPTO,
the laws and regulations governing patents could change in unpredictable ways that could have a material adverse effect on our patent
rights and our ability to protect, defend and enforce our patent rights in the future.
We
or our future licensors may become involved in lawsuits to protect or enforce our patent or other intellectual property rights, which
could be expensive, time-consuming and unsuccessful.
Competitors
and other third parties may infringe, misappropriate or otherwise violate our or our future licensors’ issued patents or other
intellectual property. As a result, we or our licensors may need to file infringement, misappropriation or other intellectual property
related claims, which can be expensive and time-consuming. Any claims we assert against perceived infringers could provoke such parties
to assert counterclaims against us alleging that we infringe, misappropriate or otherwise violate their intellectual property. In addition,
in a patent infringement proceeding, such parties could counterclaim that the patents we or our licensors have asserted are invalid or
unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace.
Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty,
obviousness, or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution
of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution. Third parties may institute
such claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include
re-examination, post-grant review, inter parties review, interference proceedings, derivation proceedings, and equivalent proceedings
in foreign jurisdictions (e.g., opposition proceedings).
An
adverse result in any such proceeding could put one or more of our owned or in-licensed patents at risk of being invalidated or interpreted
narrowly, and could put any of our owned or in-licensed patent applications at risk of not yielding an issued patent. A court may also
refuse to stop the third party from using the technology at issue in a proceeding on the grounds that our owned or in-licensed patents
do not cover such technology. 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 or trade secrets could be compromised by disclosure during this
type of litigation. Any of the foregoing could allow such third parties to develop and commercialize competing technologies and products
and have a material adverse impact on our business, financial condition, results of operations, and prospects.
Third
parties may initiate legal proceedings alleging that we are infringing, misappropriating or otherwise violating their intellectual property
rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.
Our
commercial success depends upon our ability, and the ability of our collaborators, to develop, manufacture, market and sell our drug
candidates and use our proprietary technologies without infringing, misappropriating or otherwise violating the intellectual property
and proprietary rights of third parties. There is considerable patent and other intellectual property litigation in the pharmaceutical
and biotechnology industries. We may become party to, or threatened with, adversarial proceedings or litigation regarding intellectual
property rights with respect to our technology and drug candidates, including interference proceedings, post grant review, inter parties
review, and derivation proceedings before the USPTO and similar proceedings in foreign jurisdictions such as oppositions before the European
Patent Office.
The
legal threshold for initiating litigation or contested proceedings is low, so that even lawsuits or proceedings with a low probability
of success might be initiated and require significant resources to defend. Litigation and contested proceedings can also be expensive
and time-consuming, and our adversaries in these proceedings may have the ability to dedicate substantially greater resources to prosecuting
these legal actions than we can. The risks of being involved in such litigation and proceedings may increase if and as our drug candidates
near commercialization and as we gain the greater visibility associated with being a public company. Third parties may assert infringement
claims against us based on existing patents or patents that may be granted in the future, regardless of merit. We may not be aware of
all such intellectual property rights potentially relating to our technology and drug candidates and their uses. Thus, we do not know
with certainty that our technology and drug candidates, or our development and commercialization thereof, do not and will not infringe,
misappropriate or otherwise violate any third party’s intellectual property.
Even
if we believe that third party intellectual property claims are without merit, there is no assurance that a court would find in our favor
on questions of misappropriation, infringement, validity, enforceability, or priority. A court of competent jurisdiction could hold these
third-party patents are valid, enforceable, and infringed, which could materially and adversely affect our ability to commercialize any
technology or drug candidate covered by the asserted third-party patents. In order to successfully challenge the validity of any such
U.S. patent in federal court, we would need to overcome a presumption of validity. As this burden is a high one requiring us to present
clear and convincing evidence as to the invalidity of any such U.S. patent claim, there is no assurance that a court of competent jurisdiction
would invalidate the claims of any such U.S. patent.
If
we are found to infringe, misappropriate or otherwise violate a third party’s intellectual property rights, we could be required
to obtain a license from such third party to continue developing, manufacturing and marketing our technology and drug candidates. 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 and other third parties access to the same technologies licensed to us and
could require us to make substantial licensing and royalty payments. We could be forced, including by court order, to cease developing,
manufacturing and commercializing the infringing technology or drug. In addition, we could be found liable for significant monetary damages,
including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent or other intellectual property
right and could be forced to indemnify our collaborators or others. A finding of infringement could prevent us from commercializing our
drug candidates or force us to cease some of our business operations, which could materially harm our business. In addition, we may be
forced to redesign our drug candidates, seek new regulatory approvals and indemnify third parties pursuant to contractual agreements.
Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar material adverse
effect on our business, financial condition, results of operations, and prospects.
Intellectual
property litigation or other legal proceedings relating to intellectual property could cause us to spend substantial resources and distract
our personnel from their normal responsibilities.
Even
if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant
expenses and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public
announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors
perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation or
proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future
sales, marketing or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings
adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because
of their greater financial resources and may also have an advantage in such proceedings due to their more mature and developed intellectual
property portfolios. Uncertainties resulting from the initiation and continuation of intellectual property litigation or other proceedings
could compromise our ability to compete in the marketplace.
If
we fail to comply with our obligations in our future intellectual property licenses and funding arrangements with third parties, we could
lose rights that are important to our business.
We
may be party to license and funding agreements that impose diligence, development and commercialization timelines, milestone payment,
royalty, insurance and other obligations on us. If we fail to comply with such obligations, our counterparties may have the right to
terminate our agreements or require us to grant them certain rights. Such an occurrence could materially adversely affect the value of
any drug candidate being developed under any such agreement. Termination of these agreements or reduction or elimination of our rights
under these agreements may result in our having to negotiate new or reinstated agreements with less favorable terms, or cause us to lose
our rights under these agreements, including our rights to important intellectual property or technology, which would have a material
adverse effect on our business, financial condition, results of operations, and prospects.
Additionally,
these and other license agreements may not provide exclusive rights to use the licensed intellectual property and technology in all relevant
fields of use and in all territories in which we may wish to develop or commercialize our technology and drugs in the future. As a result,
we may not be able to prevent competitors from developing and commercializing competitive products and technology in fields of use and
territories not included in such agreements. In addition, we may not have the right to control the preparation, filing, prosecution,
maintenance, enforcement, and defense of patents and patent applications covering the technology that we may license from third parties.
Therefore, we cannot be certain that these patents and patent applications will be prepared, filed, prosecuted, maintained, and defended
in a manner consistent with the best interests of our business. If our licensors fail to prosecute, maintain, enforce, and defend such
patents, or lose rights to those patents or patent applications, the rights we have licensed may be reduced or eliminated, and our right
to develop and commercialize any of our drugs that are the subject of such licensed rights could be adversely affected.
We
may need to obtain additional licenses from others to advance our research or allow commercialization of our drug candidates. It is possible
that we may be unable to obtain additional licenses at a reasonable cost or on reasonable terms, if at all, or such licenses may be non-exclusive.
The licensing or acquisition of third-party intellectual property rights is a competitive area, and several more established companies
may pursue strategies to license or acquire third-party intellectual property rights that we may consider attractive or necessary. These
established companies may have a competitive advantage over us due to their size, capital resources and greater clinical development
and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license
rights to us. We also may be unable to license or acquire third-party intellectual property rights on terms that would allow us to make
an appropriate return on our investment or at all.
If
we are unable to obtain rights to required third-party intellectual property rights or maintain the existing intellectual property rights
we have, we may be required to expend significant time and resources to redesign our technology, drug candidates, or the methods for
manufacturing them or to develop or license replacement technology, all of which may not be feasible on a technical or commercial basis.
If we are unable to do so, we may be unable to develop or commercialize the affected technology and drug candidates, which could harm
our business, financial condition, results of operations, and prospects significantly.
Disputes
may arise regarding intellectual property subject to a licensing agreement, including:
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the
scope of rights granted under the license agreement and other interpretation related issues; |
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the
extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing
agreement; |
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the
sublicensing of patent and other rights under our collaborative development relationships; |
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our
diligence obligations under the license agreement and what activities satisfy those diligence obligations; |
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the
inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors
and us and our partners; and |
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the
priority of invention of patented technology. |
In
addition, any agreements under which we license intellectual property or technology from third parties may be complex, and certain provisions
in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may
arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology or increase what
we believe to be our financial or other obligations under the relevant agreement, either of which could have a material adverse effect
on our business, financial condition, results of operations, and prospects. Moreover, if disputes over intellectual property that we
have licensed prevent or impair our ability to maintain our current licensing arrangements on commercially acceptable terms, we may be
unable to successfully develop and commercialize the affected technology and drug candidates, which could have a material adverse effect
on our business, financial conditions, results of operations, and prospects.
Our
future licensors may rely on third-party consultants or collaborators or on funds from third parties such that our licensors are not
the sole and exclusive owners of the patents and patent applications we in-licensed. If other third parties have ownership rights to
our in-licensed patents, they may be able to license such patents to our competitors, and our competitors could market competing products
and technology. This could have a material adverse effect on our competitive position, business, financial conditions, results of operations,
and prospects.
In
spite of our best efforts, our future licensors might conclude that we have materially breached our license agreements and might therefore
terminate our license agreements, thereby removing our ability to develop and commercialize drug candidates and technology covered by
such agreements. If these in-licenses are terminated, or if the underlying intellectual property fails to provide the intended exclusivity,
competitors would have the freedom to seek regulatory approval of, and to market, products and technologies identical to ours. This could
have a material adverse effect on our competitive position, business, financial conditions, results of operations, and prospects.
We
may not be able to protect our intellectual property and proprietary rights throughout the world.
Filing,
prosecuting, and defending patents on drug candidates in all countries throughout the world would be prohibitively expensive, and the
laws of foreign countries may not protect our rights to the same extent as the laws of the United States. Consequently, we may not be
able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing
products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions
where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to
territories where we have patent protection or licenses but enforcement is not as strong as that in the United States. 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.
Many
companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The
legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets,
and other intellectual property protection, particularly those relating to pharmaceutical products, which could make it difficult for
us to stop the infringement of our patents or marketing of competing products in violation of our intellectual property and proprietary
rights generally. Proceedings to enforce our intellectual property and proprietary rights in foreign jurisdictions could result in substantial
costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or
interpreted narrowly, could put our patent applications at risk of not issuing, and could provoke third parties to assert claims against
us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful.
Accordingly, our efforts to enforce our intellectual property and proprietary rights around the world may be inadequate to obtain a significant
commercial advantage from the intellectual property that we develop or license.
Many
countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition,
many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent
owner may have limited remedies, which could materially diminish the value of such patent. If we or any of our licensors is forced to
grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired, and
our business, financial condition, results of operations, and prospects may be adversely affected.
Risks
Related to Managing Our Business and Operations
We
may encounter difficulties in managing our growth, which could adversely affect our operations.
As
of March 10, 2023, we had 1 full-time employee and 1 part-time employee. As our clinical development and commercialization plans and
strategies develop, we will need to expand our managerial, clinical, regulatory, sales, marketing, financial, development, manufacturing
and legal capabilities or contract with third parties to provide these capabilities for us. As our operations expand, we expect that
we will need to manage additional relationships with various strategic collaborators, suppliers and other third parties. Our future growth
would impose significant added responsibilities on members of management, including:
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identifying,
recruiting, integrating, maintaining and motivating additional employees; |
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managing
our development and commercialization efforts effectively, including the clinical and FDA review process for our product candidates,
while complying with our contractual obligations to contractors and other third parties; and |
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improving
our operational, financial and management controls, reporting systems and procedures. |
Our
ability to continue to develop and, if approved, commercialize our product candidates will depend, in part, on our ability to effectively
manage any future growth. Our management may also have to divert a disproportionate amount of its attention away from day-to-day activities
in order to devote a substantial amount of time to managing these growth activities.
We
currently rely, and for the foreseeable future will continue to rely, in substantial part on certain independent organizations, advisors
and consultants to provide certain services, including contract manufacturers and companies focused on research and development and discovery
activities. There can be no assurance that the services of independent organizations, advisors and consultants will continue to be available
to us on a timely basis when needed, or that we can find qualified replacements. In addition, if we are unable to effectively manage
our outsourced activities or if the quality, accuracy or quantity of the services provided is compromised for any reason, our clinical
trials may be extended, delayed or terminated, and we may not be able to obtain, or may be substantially delayed in obtaining, regulatory
approval of our product candidates or otherwise advance our business. There can be no assurance that we will be able to manage our existing
consultants or find other competent outside contractors and consultants on economically reasonable terms, or at all.
If
we are not able to effectively expand our organization by hiring new employees and expanding our groups of consultants and contractors,
we may not be able to successfully implement the tasks necessary to further develop and commercialize our product candidates and, accordingly,
may not achieve our research, development and commercialization goals.
We
may acquire additional technology and complementary businesses in the future. Acquisitions involve many risks, any of which could materially
harm our business, including the diversion of management’s attention from core business concerns, failure to effectively exploit
acquired technologies, failure to successfully integrate the acquired business or realize expected synergies or the loss of key employees
from either our business or the acquired businesses.
Our
internal computer systems, or those of our collaborators or other contractors or consultants, may fail or suffer security breaches, which
could result in a material disruption of our product development programs.
Our
internal computer systems and those of our current and any future collaborators and other contractors or consultants are vulnerable to
damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. While
we have not experienced any such material system failure, accident or security breach to date, if such an event were to occur and cause
interruptions in our operations, it could result in a disruption of our development programs and our business operations, whether due
to a loss of our trade secrets or other proprietary information or other similar disruptions. For example, the loss of clinical trial
data from future 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 were to result in a loss of, or damage to, our data or applications,
or inappropriate disclosure of confidential or proprietary information, we could incur liability, our competitive position could be harmed
and the further development and commercialization of our product candidates could be delayed.
We
could be subject to risks caused by misappropriation, misuse, leakage, falsification or intentional or accidental release or loss of
information maintained in the information systems and networks of our company and our vendors, including personal information of our
employees and study subjects, and company and vendor confidential data. In addition, outside parties may attempt to penetrate our systems
or those of our vendors or fraudulently induce our personnel or the personnel of our vendors to disclose sensitive information in order
to gain access to our data and/or systems. We may experience threats to our data and systems, including malicious codes and viruses,
phishing and other cyberattack. The number and complexity of these threats continue to increase over time. If a material breach of, or
accidental or intentional loss of data from, our information technology systems or those of our vendors occurs, the market perception
of the effectiveness of our security measures could be harmed and our reputation and credibility could be damaged. We could be required
to expend significant amounts of money and other resources to repair or replace information systems or networks. In addition, we could
be subject to regulatory actions and/or claims made by individuals and groups in private litigation involving privacy issues related
to data collection and use practices and other data privacy laws and regulations, including claims for misuse or inappropriate disclosure
of data, as well as unfair or deceptive practices. Although we develop and maintain systems and controls designed to prevent these events
from occurring, and we have a process to identify and mitigate threats, the development and maintenance of these systems, controls and
processes is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become
increasingly sophisticated. Moreover, despite our efforts, the possibility of these events occurring cannot be eliminated entirely. As
we outsource more of our information systems to vendors, engage in more electronic transactions with payors and patients, and rely more
on cloud-based information systems, the related security risks will increase and we will need to expend additional resources to protect
our technology and information systems. In addition, there can be no assurance that our internal information technology systems or those
of our third-party contractors, or our consultants’ efforts to implement adequate security and control measures, will be sufficient
to protect us against breakdowns, service disruption, data deterioration or loss in the event of a system malfunction, or prevent data
from being stolen or corrupted in the event of a cyberattack, security breach, industrial espionage attacks or insider threat attacks
which could result in financial, legal, business or reputational harm.
Our
current operations are concentrated in one location, and we or the third parties upon whom we depend may be adversely affected by earthquakes
or other natural disasters and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster,
including earthquakes, outbreak of disease or other natural disasters.
Any
unplanned event, such as flood, fire, explosion, earthquake, extreme weather condition, medical epidemics, power shortage, telecommunication
failure or other natural or manmade accidents or incidents that result in us being unable to fully utilize our facilities, or the manufacturing
facilities of our third-party contract manufacturers, may have a material and adverse effect on our ability to operate our business,
particularly on a daily basis, and have significant negative consequences on our financial and operating conditions. Loss of access to
these facilities may result in increased costs, delays in the development of our product candidates or interruption of our business operations.
Earthquakes or other natural disasters could further disrupt our operations, and have a material and adverse effect on our business,
financial condition, results of operations and prospects. If a natural disaster, power outage or other event occurred that prevented
us from using all or a significant portion of our headquarters, that damaged critical infrastructure, such as our research facilities
or the manufacturing facilities of our third-party contract manufacturers, or that otherwise disrupted operations, it may be difficult
or, in certain cases, impossible, for us to continue our business for a substantial period of time.
The
disaster recovery and business continuity plans we have in place may prove inadequate in the event of a serious disaster or similar event.
We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which, could
have a material adverse effect on our business. As part of our risk management policy, we maintain insurance coverage at levels that
we believe are appropriate for our business. However, in the event of an accident or incident at these facilities, we cannot assure you
that the amounts of insurance will be sufficient to satisfy any damages and losses. If our facilities, or the manufacturing facilities
of our third-party contract manufacturers, are unable to operate because of an accident or incident or for any other reason, even for
a short period of time, any or all of our research and development programs may be harmed.
Unfavorable
global economic conditions could adversely affect our business, financial condition or results of operations.
Our
results of operations could be adversely affected by general conditions in the global economy and in the global financial markets. Portions
of our future clinical trials may be conducted outside of the United States and unfavorable economic conditions resulting in the weakening
of the U.S. dollar would make those clinical trials more costly to operate. Furthermore, the most recent global financial crisis caused
extreme volatility and disruptions in the capital and credit markets. A severe or prolonged economic downturn could result in a variety
of risks to our business, including a reduced ability to raise additional capital when needed on acceptable terms, if at all. A weak
or declining economy or international trade disputes could also strain our suppliers, some of which are located outside of the United
States, possibly resulting in supply disruption. Any of the foregoing could harm our business and we cannot anticipate all of the ways
in which the current economic climate and financial market conditions could adversely impact our business.
The
increasing use of social media platforms presents new risks and challenges.
Social
media is increasingly being used to communicate about our clinical development programs and the diseases our therapeutics are being developed
to treat, and we intend to utilize appropriate social media in connection with our commercialization efforts following approval of our
product candidates, if any. Social media practices in the biopharmaceutical industry continue to evolve and regulations and regulatory
guidance relating to such use are evolving and not always clear. This evolution creates uncertainty and risk of noncompliance with regulations
applicable to our business, resulting in potential regulatory actions against us, along with the potential for litigation related to
off-label marketing or other prohibited activities. For example, patients may use social media channels to comment on their experience
in an ongoing blinded clinical trial or to report an alleged adverse event. When such disclosures occur, there is a risk that trial enrollment
may be adversely impacted, we fail to monitor and comply with applicable adverse event reporting obligations or that we may not be able
to defend our business or the public’s legitimate interests in the face of the political and market pressures generated by social
media due to restrictions on what we may say about our product candidates. There is also a risk of inappropriate disclosure of sensitive
information or negative or inaccurate posts or comments about us on any social networking website. If any of these events were to occur
or we otherwise fail to comply with applicable regulations, we could incur liability, face regulatory actions or incur other harm to
our business.
The
estimates of market opportunity and forecasts of market growth included in this Annual Report on Form 10-K may prove to be inaccurate,
and even if the markets in which we compete achieve the forecasted growth, our business may not grow at similar rates, or at all.
Market
opportunity estimates and growth forecasts included in this Annual Report on Form 10-K are subject to significant uncertainty and are
based on assumptions and estimates which may not prove to be accurate. The estimates and forecasts included in this Annual Report on
Form 10-K relating to size and expected growth of our target market may prove to be inaccurate. Even if the markets in which we compete
meet the size estimates and growth forecasts included in this Annual Report on Form 10-K, our business may not grow at similar rates,
or at all. Our growth is subject to many factors, including our success in implementing our business strategy, which is subject to many
risks and uncertainties.
Our
employees, independent contractors, consultants, commercial partners, collaborators 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, collaborators and vendors. Misconduct by these parties could include intentional, reckless and/or negligent conduct that fails
to comply with the laws of the FDA and other similar foreign regulatory bodies, provide true, complete and accurate information to the
FDA and other similar foreign regulatory bodies, comply with manufacturing standards we have established, comply with healthcare fraud
and abuse laws in the United States and similar foreign fraudulent misconduct laws, or report financial information or data accurately
or to disclose unauthorized activities to us. If we obtain FDA approval of any of our 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 will also 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. Although we have adopted a code of business
conduct and ethics, it is not always possible to identify and deter misconduct by our employees, independent contractors, consultants,
commercial partners and vendors, and the precautions we take to detect and prevent this activity 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 comply with these laws or regulations. If any actions are instituted against us and we are not successful in defending ourselves
or asserting our rights, those actions could result in the imposition of civil, criminal and administrative penalties, damages, monetary
fines, imprisonment, disgorgement, possible exclusion from participation in government healthcare programs, additional reporting obligations
and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with
these laws, contractual damages, reputational harm, diminished profits and future earnings and the curtailment of our operations.
Failure
to comply with health and data protection laws and regulations could lead to government enforcement actions (which could include civil
or criminal penalties), private litigation and/or adverse publicity and could negatively affect our operating results and business.
We
and any potential collaborators may be subject to federal, state and foreign data protection laws and regulations (i.e., laws and regulations
that address privacy and data security). In the United States, numerous federal and state laws and regulations, including federal health
information privacy laws, state data breach notification laws, state health information privacy laws and federal and state consumer protection
laws (e.g., Section 5 of the Federal Trade Commission Act), that govern the collection, use, disclosure and protection of health-related
and other personal information could apply to our operations or the operations of our collaborators. In addition, we may obtain health
information from third parties (including research institutions from which we obtain clinical trial data) that are subject to privacy
and security requirements under HIPAA, as amended by HITECH. Depending on the facts and circumstances, we could be subject to criminal
penalties if we knowingly obtain, use, or disclose individually identifiable health information maintained by a HIPAA-covered entity
in a manner that is not authorized or permitted by HIPAA.
International
data protection laws, including, but not limited to, Regulation 2016/679, known as the General Data Protection Regulation (“GDPR”)
may also apply to health-related and other personal information obtained outside of the United States. The GDPR went into effect on May
25, 2018. The GDPR introduced new data protection requirements in the European Union, as well as potential fines for noncompliant companies.
The regulation imposes numerous new requirements for the collection, use and disclosure of personal information, including more stringent
requirements relating to consent and the information that must be shared with data subjects about how their personal information is used,
the obligation to notify regulators and affected individuals of personal data breaches, extensive new internal privacy governance obligations
and obligations to honor expanded rights of individuals in relation to their personal information (e.g., the right to access, correct
and delete their data). In addition, the GDPR includes restrictions on cross-border data transfer. The GDPR will increase our responsibility
and liability in relation to personal data that we process, and we may be required to put in place additional mechanisms to ensure compliance
with the new EU data protection rules. In addition, as a result of the United Kingdom’s vote in favor of exiting the EU, often
referred to as Brexit, the United Kingdom’s Data Protection Act of 2018, as amended, may apply to health-related and other personal
information obtained outside of the United States.
Compliance
with U.S. and international data protection laws and regulations could require us to take on more onerous obligations in our contracts,
restrict our ability to collect, use and disclose data, or in some cases, impact our ability to operate in certain jurisdictions. Failure
to comply with U.S. and international data protection laws and regulations could result in government enforcement actions (which could
include civil, criminal, and administrative penalties), private litigation and/or adverse publicity and could negatively affect our operating
results and business. Moreover, clinical trial subjects about whom we or our potential collaborators obtain information, as well as the
providers who share this information with us, may contractually limit our ability to use and disclose the information. Claims that we
have violated individuals’ privacy rights, failed to comply with data protection laws, or breached our contractual obligations,
even if we are not found liable, could be expensive and time consuming to defend and could result in adverse publicity that could harm
our business.
Changes
in U.S. tax law could adversely affect our financial condition and results of operations.
The
rules dealing with U.S. federal, state, and local income taxation are constantly under review by persons involved in the legislative
process and by the Internal Revenue Service and the U.S. Treasury Department. Changes to tax laws (which changes may have retroactive
application) could adversely affect us or holders of our common stock. In recent years, many such changes have been made and changes
are likely to continue to occur in the future. Future changes in U.S. tax laws could have a material adverse effect on our business,
cash flow, financial condition or results of operations. We urge investors to consult with their legal and tax advisors regarding the
implications of potential changes in U.S. tax laws on an investment in our common stock.
Risks
Related to Our Common Stock
The
price of our stock may be volatile, and you could lose all or part of your investment.
The
trading price of our common stock may be highly volatile and could be subject to wide fluctuations in response to various factors, some
of which are beyond our control, including limited trading volume. In addition to the factors discussed in this “Risk Factors”
section and elsewhere in this Annual Report on Form 10-K, these factors include:
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the
commencement, enrollment or results of clinical trials and pre-clinical studies of our drug candidates or those of our competitors; |
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any
delay in identifying and advancing a clinical candidate for our other development programs; |
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any
delay in our regulatory filings for our drug candidates and any adverse development or perceived adverse development with respect
to the applicable regulatory authority’s review of such filings, including, without limitation, the FDA’s issuance of
a “refusal to file” letter or a request for additional information; |
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adverse
results or delays in future clinical trials;
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our
decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial; |
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adverse
regulatory decisions, including failure to receive regulatory approval of for our drug candidates; |
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changes
in laws or regulations applicable to our drug candidates, including, but not limited to, clinical trial requirements for approvals; |
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adverse
developments concerning our manufacturers; |
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our
inability to obtain adequate product supply for any approved product or inability to do so at acceptable prices; |
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our
inability to establish collaborations, if needed; |
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our
failure to commercialize our product candidates, if approved; |
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additions
or departures of key scientific or management personnel; |
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unanticipated
serious safety concerns related to the use of our drug candidates; |
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introduction
of new products offered by us or our competitors; |
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announcements
of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors; |
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our
ability to effectively manage our growth; |
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actual
or anticipated variations in quarterly operating results; |
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our
cash position; |
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our
failure to meet the estimates and projections of the investment community or that we may
otherwise provide to the public;
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publication
of research reports about us or our industry, or product candidates in particular, or positive or negative recommendations or withdrawal
of research coverage by securities analysts; |
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changes
in the market valuations of similar companies; |
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changes
in the structure of the healthcare payment systems; |
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overall
performance of the equity markets; |
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sales
of our common stock by us or our stockholders in the future; |
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trading
volume of our common stock; |
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changes
in accounting practices; |
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ineffectiveness
of our internal controls; |
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disputes
or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection
for our technologies; |
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significant
lawsuits, including patent or stockholder litigation; |
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general
political and economic conditions; and |
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other
events or factors, many of which are beyond our control. |
In
addition, the stock market in general, and the market for biopharmaceutical companies in particular, have experienced extreme price and
volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market
and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance. In the
past, securities class action litigation has often been instituted against companies following periods of volatility in the market price
of a company’s securities. This type of litigation, if instituted, could result in substantial costs and a diversion of management’s
attention and resources.
We
are currently listed on The Nasdaq Capital Market. If we are unable to maintain listing of our securities on Nasdaq or any stock exchange,
our stock price could be adversely affected and the liquidity of our stock and our ability to obtain financing could be impaired and
it may be more difficult for our stockholders to sell their securities.
Although
our common stock is currently listed on The Nasdaq Capital Market, we may not be able to continue to meet the exchange’s minimum
listing requirements or those of any other national exchange. If we are unable to maintain listing on Nasdaq or if a liquid market for
our common stock does not develop or is sustained, our common stock may remain thinly traded.
The
Listing Rules of Nasdaq require listing issuers to comply with certain standards in order to remain listed on its exchange. If, for any
reason, we should fail to maintain compliance with these listing standards and Nasdaq should delist our securities from trading on its
exchange and we are unable to obtain listing on another national securities exchange, a reduction in some or all of the following may
occur, each of which could have a material adverse effect on our stockholders:
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the
liquidity of our common stock; |
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the
market price of our common stock; |
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our
ability to obtain financing for the continuation of our operations; |
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the
number of investors that will consider investing in our common stock; |
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the
number of market makers in our common stock; |
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the
availability of information concerning the trading prices and volume of our common stock; and |
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the
number of broker-dealers willing to execute trades in shares of our common stock. |
We
do not intend to pay dividends on our common stock so any returns will be limited to the value of our stock.
We
currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate
declaring or paying any cash dividends for the foreseeable future. Furthermore, future debt or other financing arrangements may contain
terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock. Any return to stockholders will
therefore be limited to the appreciation of their stock.
Our
principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters
subject to stockholder approval.
As
of March 10, 2023, our executive officers, directors and their affiliates will beneficially hold, in the aggregate, approximately 44.10%
of our outstanding voting stock. These stockholders, acting together, would be able to significantly influence all matters requiring
stockholder approval. For example, these stockholders would be able to significantly influence elections of directors, amendments of
our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage
unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders.
Failure
to maintain effective internal controls could cause our investors to lose confidence in us and adversely affect the market price of our
common stock. If our internal controls are not effective, we may not be able to accurately report our financial results or prevent fraud.
Effective
internal control over financial reporting is necessary for us to provide reliable financial reports in a timely manner. In
connection with the audit of our financial statements for the years ended December 31, 2022 and 2021, our independent registered
public accounting firm identified a material weakness. A material weakness is a significant deficiency, or a combination of
significant deficiencies, in internal controls over financial reporting such that it is reasonably possible that a material
misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material
weaknesses that have been identified by our independent registered public accounting firm relate to (i) the design and
implementation of appropriate segregation of duties to separate
the roles of authorizing, initiating, and recording transactions or reviewing transactions for the completeness and accuracy
of contracts with financial reporting implications and (ii) us lacking
sufficient appropriate accounting and reporting knowledge to effectively perform review controls surrounding technical accounting
matters. In addition, the terms and conditions related to these contracts were
not communicated to the financial reporting function for analysis and reporting implications in a timely manner. While we intend to
take steps to remediate the material weakness in our internal control over financial reporting by formalizing certain accounting
policies and internal control documentation, adding staff members with requisite experience to oversee the review of contracts and using third party experts to review the accounting treatment for significant transactions and to provide management
with guidance on the treatment of the transactions,
we may not be successful in remediating such weaknesses in a timely manner, if at all, which may undermine our ability to provide
accurate, timely and reliable reports on our financial and operating results. Furthermore, if we remediate our current material
weakness but identify new material weaknesses in our internal control over financial reporting in the future, investors may lose
confidence in the accuracy and completeness of our financial reports and the market price of our common stock may be negatively
affected. As a result of such failures, we could also become subject to investigations by Nasdaq, the SEC, or other regulatory
authorities, and become subject to litigation from investors and stockholders, which could harm our reputation, financial condition
or divert financial and management resources from our business.
Our
Certificate of Incorporation, as amended (“Certificate of Incorporation”) provides that the Court of Chancery of the State
of Delaware will be the sole and exclusive forum for substantially all disputes between the Company and its stockholders, which could
limit stockholders’ ability to obtain a favorable judicial forum for disputes with the Company or its directors, officers or employees.
Our
Certificate of Incorporation provides that unless we consent in writing to the selection of an alternative forum, the State of Delaware
is the sole and exclusive forum for: (i) any derivative action or proceeding brought on behalf of us, (ii) any action asserting a claim
of breach of a fiduciary duty owed by any director, officer or other employee of our Company to us or our stockholders, (iii) any action
asserting a claim arising pursuant to any provision of the Delaware General Corporation Law (the “DGCL”) or our Certificate
of Incorporation or Bylaws, or (iv) any action governed by the internal affairs doctrine. This exclusive forum provision would not apply
to suits brought to enforce any liability or duty created by the Securities Act or the Exchange Act or any other claim for which the
federal courts have exclusive jurisdiction. To the extent that any such claims may be based upon federal law claims, Section 27 of the
Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act
or the rules and regulations thereunder.
Section
22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability
created by the Securities Act or the rules and regulations thereunder. However, our Certificate of Incorporation contains a federal forum
provision which provides that unless we consent in writing to the selection of an alternative forum, the federal district courts of the
United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the
Securities Act.
These
choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes
with us or our directors, officers or other employees and may result in increased costs to our stockholders, which may discourage such
lawsuits against us and our directors, officers and other employees. Alternatively, if a court were to find our choice of forum provisions
contained in our Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated
with resolving such action in other jurisdictions, which could harm our business, results of operations, and financial condition.
Our
Certificate of Incorporation, Bylaws and Delaware law may have anti-takeover effects that could discourage, delay or prevent a change
in control, which may cause our stock price to decline.
Our
Certificate of Incorporation, our Bylaws and Delaware law could make it more difficult for a third party to acquire us, even if closing
such a transaction would be beneficial to our stockholders. We are authorized to issue up to 10 million shares of preferred stock. This
preferred stock may be issued in one or more series, the terms of which may be determined at the time of issuance by our board of directors
without further action by stockholders. The terms of any series of preferred stock may include voting rights (including the right to
vote as a series on particular matters), preferences as to dividend, liquidation, conversion and redemption rights and sinking fund provisions.
The issuance of any preferred stock could materially adversely affect the rights of the holders of our common stock, and therefore, reduce
the value of our common stock. In particular, specific rights granted to future holders of preferred stock could be used to restrict
our ability to merge with, or sell our assets to, a third party and thereby preserve control by the present management.
Provisions
of our Certificate of Incorporation, our Bylaws and Delaware law also could have the effect of discouraging potential acquisition proposals
or making a tender offer or delaying or preventing a change in control, including changes a stockholder might consider favorable. Such
provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. In particular, our Certificate
of Incorporation, our Bylaws and Delaware law, as applicable, among other things:
● |
provide
the board of directors with the ability to alter the Bylaws without stockholder approval; |
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establish
advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon
at stockholder meetings; and |
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provide
that vacancies on the board of directors may be filled by a majority of directors in office, although less than a quorum. |
General
Risk Factors
Market
and economic conditions may negatively impact our business, financial condition and share price.
Concerns
over inflation, energy costs, geopolitical issues, the U.S. mortgage market and the real estate market, unstable global credit markets
and financial conditions, and volatile oil prices have led to periods of significant economic instability, diminished liquidity and credit
availability, declines in consumer confidence and discretionary spending, diminished expectations for the global economy and expectations
of slower global economic growth going forward, increased unemployment rates, and increased credit defaults in recent years. Our general
business strategy may be adversely affected by any such economic downturns, volatile business environments and continued unstable or
unpredictable economic and market conditions. If these conditions continue to deteriorate or do not improve, it may make any necessary
debt or equity financing more difficult to complete, more costly, and more dilutive. Failure to secure any necessary financing in a timely
manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance, and share price and
could require us to delay or abandon development or commercialization plans.
Future
sales and issuances of our securities could result in additional dilution of the percentage ownership of our stockholders and could cause
our share price to fall.
We
expect that significant additional capital will be needed in the future to continue our planned operations, including research and development,
increased marketing, hiring new personnel, commercializing our products, and continuing activities as an operating public company. To
the extent we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. We may sell
common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from
time to time. If we sell common stock, convertible securities or other equity securities in more than one transaction, investors may
be materially diluted by subsequent sales. Such sales may also result in material dilution to our existing stockholders, and new investors
could gain rights superior to our existing stockholders.
We
are an emerging growth company, and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies
will make our common stock less attractive to investors.
We
are an emerging growth company, as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take
advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth
companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act,
reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the
requirements of holding nonbinding advisory votes on executive compensation and stockholder approval of any golden parachute payments
not previously approved. We could be an emerging growth company for up to five years following the year in which we completed our initial
public offering, although circumstances could cause us to lose that status earlier. We will remain an emerging growth company until the
earlier of (i) the last day of the fiscal year (a) following the fifth anniversary of the completion of our initial public offering,
(b) in which we have total annual gross revenue of at least $1.235 billion or (c) in which we are deemed to be a large accelerated filer,
which requires the market value of our common stock that is held by non-affiliates to exceed $700.0 million as of the prior June 30th
and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
We
may choose to take advantage of some, but not all, of the available exemptions. We cannot predict whether investors will find our common
stock less attractive if we rely on certain or all of 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.
Under
the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards
apply to private companies, which may make our financial statements less comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates. We have chosen to take advantage of the extended transition periods available to
emerging growth companies under the JOBS Act for complying with new or revised accounting standards until those standards would otherwise
apply to private companies provided under the JOBS Act. As a result, our financial statements may not be comparable to those of companies
that comply with public company effective dates for complying with new or revised accounting standards.
Financial
reporting obligations of being a public company in the U.S. are expensive and time-consuming, and our management will be required to
devote substantial time to compliance matters.
As
a publicly traded company we incur significant additional legal, accounting and other expenses. The obligations of being a public company
in the U.S. require significant expenditures and place significant demands on our management and other personnel, including costs resulting
from public company reporting obligations under the Exchange Act and the rules and regulations regarding corporate governance practices,
including those under the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and The Nasdaq Capital Market.
These rules require the establishment and maintenance of effective disclosure and financial controls and procedures, internal control
over financial reporting and changes in corporate governance practices, among many other complex rules that are often difficult to implement,
monitor and maintain compliance with. Moreover, despite recent reforms made possible by the JOBS Act, the reporting requirements, rules,
and regulations will make some activities more time-consuming and costly, particularly after we are no longer an “emerging growth
company” or a “smaller reporting company.” Our management and other personnel will need to devote a substantial amount
of time to ensure that we comply with all of these requirements and to keep pace with new regulations, otherwise we may fall out of compliance
and risk becoming subject to litigation or being delisted, among other potential problems.
If
securities or industry analysts do not publish research or reports, or publish unfavorable research or reports about our business, our
stock price and trading volume may decline.
The
trading market for our common stock relies in part on the research and reports that industry or financial analysts publish about us,
our business, our markets and our competitors. We do not control these analysts. If securities analysts do not cover our common stock,
the lack of research coverage may adversely affect the market price of our common stock. Furthermore, if one or more of the analysts
who do cover us downgrade our stock or if those analysts issue other unfavorable commentary about us or our business, our stock price
would likely decline. If one or more of these analysts cease coverage of us or fails to regularly publish reports on us, we could lose
visibility in the market and interest in our stock could decrease, which in turn could cause our stock price or trading volume to decline
and may also impair our ability to expand our business with existing customers and attract new customers.
We
could be subject to securities class action litigation.
In
the past, securities class action litigation has often been brought against a company following a decline in the market price of its
securities. This risk is especially relevant for us because pharmaceutical companies have experienced significant stock price volatility
in recent years. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and
resources, which could harm our business.