B. |
Capitalization and Indebtedness |
Not Applicable.
C. |
Reasons for the Offer and Use of Proceeds |
Not Applicable.
Our business has significant
risks. In addition to the other information included in this annual report, including the matters addressed in the section of the annual
report entitled “Cautionary Note Regarding Forward-Looking Statements” and in our financial statements and the related notes,
you should consider carefully the risks described below. The risks and uncertainties described below are not the only risks and uncertainties
we may face. Additional risks and uncertainties not presently known to us, or that we currently consider immaterial could also negatively
affect our business, financial condition, results of operations, prospects, profits and stock prices. If any of the risks described below
actually occur, our business, financial condition, results of operations, prospects, profits and stock prices could be materially adversely
affected.
Summary of Risk Factors
The
occurrence of one or more of the events or circumstances described in this section titled “Risk Factors,” alone or in combination
with other events or circumstances, may materially adversely affect our business, financial condition and operating results. In that event,
the trading price of our securities could decline, and you could lose all or part of your investment. Such risks include, but are not
limited to:
| | We have incurred significant losses since our inception and anticipate that we will continue to incur
losses in the future; |
| | Our requirement for additional financing in the short-term represents a material uncertainty that raises
substantial doubt about our ability to continue as a going concern. |
| | The effects of health epidemics, including the ongoing global coronavirus COVID-19 pandemic, in regions
where we, or the third parties on which we rely, have business operations could adversely impact our business, including our clinical
trials, preclinical studies and supply chains, depending on the location, duration and severity of disruptions to the systems affecting
our business. |
| | Our operations are in early-stage development with no sources of recurring revenue and there is no assurance
that we will successfully develop and license our product candidates or ever become profitable. |
| | We are exposed to political, regulatory, social and economic risk relating to the United Kingdom’s
exit from the European Union. |
| | In 2020, our license agreement related to panobinostat, the active pharmaceutical ingredient in our MTX110
product, was terminated by Secura Bio, Inc., or Secura Bio. Because of this, we believe that the relevant Secura Bio patents may delay
a launch of MTX110, which could have a material adverse effect on our business, financial condition and results of operations. |
| | Our future success is dependent on product development and the ability to successfully license our product
candidates to partners who can seek regulatory approval and commercialization of our product candidates. |
| | Clinical drug development involves a risky, lengthy and expensive process with an uncertain outcome, and
results of earlier studies and trials may not be predictive of future trial results. |
| | We expect to seek to establish agreements with potential licensing partners and collaborators and, if
we are not able to establish them on commercially reasonable terms, we may have to alter our development and commercialization plans. |
| | Recently enacted and future legislation in the United States and other countries may affect the prices
we may obtain for our product candidates and increase the difficulty and cost for us to commercialize our product candidates. |
| | Our success depends in part on our ability to protect rights in our intellectual property, which cannot
be assured. |
| | We rely on third parties to conduct our preclinical and clinical trials. If these third parties do not
successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize
our product candidates and our business could be substantially harmed. |
| | We are dependent on third party suppliers, and if we experience problems with any of these third parties,
the manufacturing of our product candidates could be delayed, which could harm our results of operations. |
| | We recently experienced a leadership transition and this transition, along with the possibility that we
may in the future be unable to retain and recruit qualified scientists, key executives, key employees or key consultants, may delay our
development efforts or otherwise harm our business. |
| | The price of our Ordinary Shares and Depositary Shares may be volatile. |
| | Shareholder ownership interests in the Company may be diluted as a result of future financings, additional
acquisitions or the exercise of our options and warrants, and may have a material negative effect on the market price of our securities. |
| | The rights of holders of Depositary Shares are not the same as the rights of holders of Ordinary Shares. |
| | It may be difficult for you to bring any action or enforce any judgment obtained in the United States
against us or members of our Board of Directors, which may limit the remedies otherwise available to you. |
| | We are a “foreign private issuer” under the rules and regulations of the SEC and, as a result,
are exempt from a number of rules under the Exchange Act and are permitted to file less information with the SEC than a company incorporated
in the United States. |
| | If we cannot meet NASDAQ’s continued listing requirements, NASDAQ may delist our Depositary Shares,
which could have an adverse impact on the liquidity and market price of our Depositary Shares. |
Risks Related to Our Financial Operations and Capital Needs
We have incurred significant losses since
our inception and anticipate that we will continue to incur losses in the future.
We are an early-stage biopharmaceutical
company. Investment in biopharmaceutical product development is highly speculative because we entail substantial upfront capital expenditures
and significant risk that a product candidate will fail in development, will fail to gain regulatory approval or otherwise fail to become
commercially viable. We continue to incur significant development and other expenses related to our ongoing operations. As a result, we
are not profitable and have incurred substantial losses since our inception. For the year ended December 31, 2021, we had a net loss of
£5.46 million and an accumulated deficit of £127.80 million. For the years ended December 31, 2020 and 2019 we had a net loss
of £22.19 million and £10.09 million, respectively.
We expect to continue to incur
losses for the foreseeable future, and do not expect these losses to reduce as we continue our development of, and work with any licensing
partners to seek regulatory approvals for, our product candidates.
We may encounter unforeseen
expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. 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 revenues. If we fail to find
licensing partners, if we abandon any development programs, or if any of our licensed product candidates fail in clinical trials or do
not gain regulatory approval, or if approved, fail to achieve market acceptance, we may never become profitable. Even if we achieve profitability
in the future, we may not be able to sustain profitability in subsequent periods. Our prior losses and expected future losses have had
and will continue to have an adverse effect on our shareholders’ equity and working capital.
In 2020, we undertook a strategic review
of our operations, which may yield uncertain results.
On March 31, 2020, we announced
that, due to the prevailing conditions in the capital markets and the prospect of raising additional funds and finding a partner for our
assets, the Board of Directors initiated a strategic review of our operations. The objective of the review was to identify ways to maximize
value for our stakeholders given the significant challenges faced by our business. We have formed a Finance Committee comprised of Mr.
Stamp and Rolf Stahel, our Non-Executive Chairman, to review, analyze and make recommendations to the Board of Directors regarding a possible
sale of our business or other strategic transactions, and hired an outside advisor to assist us. We entered into an “offer period”
under United Kingdom rules and regulations, which placed certain restrictions and obligations on us. In January 2021, we announced that
the strategic review had completed, although the impact of the uncertainty created by the process on all stakeholders, including employees,
vendors and shareholders, may not be apparent for some time.
Our requirement for additional financing
in the short-term represents a material uncertainty that raises substantial doubt about our ability to continue as a going concern.
We have experienced net losses
and significant cash outflows from cash used in operating activities over the past years as we develop our portfolio. For the year ended
December 31, 2021, the Company incurred a consolidated loss from operating activities of £5.46 million and negative cash
flows from operations of £6.55 million. As of December 31, 2021, we had an accumulated deficit of £127.80 million.
Our future viability is dependent
on our ability to raise cash from financing activities to finance our development plans until commercialization, generate cash from operating
activities and to successfully obtain regulatory approval to allow marketing of our development products. Our failure to raise capital
as and when needed could have a negative impact on our financial condition and ability to pursue our business strategies.
Our consolidated financial
statements have been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. As at December 31, 2021, we had cash and cash equivalents of £10.06 million. We believe we currently
have enough cash to fund our planned operations into the first quarter of 2023.
We have prepared cash flow
forecasts and considered the cash flow requirement for our next three years, including the period twelve months from the date of the approval
of the financial statements. These forecasts show that further financing will be required during the course of the next 12 months, assuming,
inter alia, that certain development programs and other operating activities continue as currently planned. This requirement for
additional financing represents a material uncertainty that raises substantial doubt about our ability to continue as a going concern.
As a result, our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements
as of and for the year ended December 31, 2021 with respect to this uncertainty.
In addition, the global spread
of pandemic novel coronavirus, COVID-19, places increased uncertainty over our forecasts. The restrictions placed and being placed on
the movement of people will likely cause delays to some of our plans. We have established a COVID-19 task force internally to monitor
the impact of COVID-19 on our business and prioritize activities to minimize its effect.
In addition to utilizing the
existing cash reserves, we are evaluating a number of near-term funding options potentially available to us, including fundraising and/or
the partnering of assets or technologies. After considering the uncertainties, we considered it appropriate to continue to adopt the going
concern basis in preparing the financial information.
Our ability to continue as
a going concern is dependent upon our ability to obtain additional capital and/or dispose of assets, for which there can be no assurance
we will be able to do on a timely basis, on favorable terms or at all.
Our operations are in early-stage development
with no sources of recurring revenue and there is no assurance that we will successfully develop and license our product candidates or
ever become profitable.
We are at a relatively early
stage of our commercial development. To date, we have generated a minimal amount of revenue from our product candidates. Our ability to
generate revenue and become and remain profitable depends, in part, on our ability to successfully find a licensing partner for our product
candidates, or other product candidates we may in-license or acquire, and have such candidates successfully commercialized. Our current
strategy is, once proof-of-concept of our product candidates has been established, to generate revenue via a partner, thereby earning
royalty and/or milestone income; however, this is not expected to materialize in the foreseeable future, and there can be no guarantee
we will be able to find a licensing partner for our product candidates. Even if our product candidates were to successfully achieve regulatory
approval, we do not know when any of the product candidates will generate revenue, if at all. Our ability to generate revenue from our
product candidates also depends on a number of additional factors, including our ability, and the ability of any licensing partners, to:
| | successfully complete development activities; |
| | complete and submit new drug applications to the European Medicines Agency, or the EMA, the Medicines
and Healthcare Products Regulatory Agency in the United Kingdom, or the MHRA, the United States Food and Drug Administration , or the
FDA, and any other foreign regulatory authorities, and obtain regulatory approval for products for which there is a commercial market; |
| | set a commercially viable price; |
| | obtain commercial qualities of the products at acceptable cost levels; |
| | develop and maintain a commercial organization capable of sales, marketing and distribution in the markets
where the product is to be sold; and |
| | obtain adequate reimbursement from third-parties, including government, departments and healthcare payors. |
In addition, because of the
numerous risks and uncertainties associated with product development, including that our product candidates may not advance through development
or achieve the endpoints of applicable clinical trials, we are unable to predict the timing or amount of increased expenses, or when or
if we will be able to achieve or maintain profitability. Even if we are able to complete the process described above, we anticipate incurring
significant costs.
Even if we are able to generate
royalty and/or milestone revenues from the sale of product candidates, we may not become profitable and may need to obtain additional
funding to continue operations. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we
may be unable to continue our operations at planned levels and may be forced to cease or reduce our operations.
There can be no assurance
that we will operate profitably, produce a reasonable return, if any, on investment, or remain solvent. If our strategy proves unsuccessful,
stockholders could lose all or part of their investment.
If we require or seek to raise additional
capital to fund our operations and we fail to obtain necessary financing, we may be unable to complete the development of our product
candidates.
We expect to continue to spend
substantial amounts of our cash resources going forward in order to advance the development of our product candidates.
Until such time as we can
generate a sufficient amount of revenue from the product candidates we license, if ever, we expect that we may finance future cash needs
through, among other things, public or private equity or debt offerings. Such offerings may take place in the United Kingdom, the United
States or other foreign countries. However, if we are unable to raise capital when needed, or on terms acceptable to us, our business
could be significantly harmed. If we raise additional funds through the issuance of debt or additional equity securities, such issuance
could result in dilution to our existing shareholders and/or increased fixed payment obligations. Furthermore, these securities may have
rights senior to those of our Ordinary Shares and could contain covenants that would restrict our operations and potentially impair our
competitiveness, such as limitations on our ability to 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. Any of these events
could significantly harm our business, financial condition and prospects.
Our forecast of the period
of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks
and uncertainties, and actual results could vary as a result of a number of factors, including the factors discussed elsewhere in this
“Risk Factors” section. We have based this estimate on assumptions that may prove to be wrong, and we could utilize
our available capital resources sooner than we currently expect. Our future funding requirements, both near and long-term, will depend
on many factors, including, but not limited to:
| | any acquisitions and the commercialization of other assets, including licensed assets; |
| | the initiation, progress, timing, costs and results of clinical trials for any product candidates we advance
to clinical trials; |
| | the attainment of milestones and the need to make any royalty payments on any of our product candidates
or any other future product candidates; |
| | the number and characteristics of product candidates we in-license or acquire and develop; |
| | the outcome, timing and cost of regulatory approvals by the EMA, the MHRA, the FDA and any other comparable
foreign regulatory authorities, including the potential for such regulatory authorities to require that we perform more studies, or more
costly studies, than those we currently expect; |
| | the cost of filing, prosecuting, defending and enforcing any patent claims or other intellectual property
rights; and |
| | the effect of competing technological and market developments. |
If a lack of available capital
means that we are unable to expand our operations or otherwise capitalize on our business opportunities, our business, financial condition
and results of operations could be materially adversely affected.
In previous years, we and our independent
registered public accounting firm have identified material weaknesses in our internal control over financial reporting. Any failure by
us to maintain an effective system of internal controls or provide reliable financial and other information in the future, may cause investors
to lose confidence in our financial statements and SEC filings and the market price of our securities may be materially and adversely
affected.
The Sarbanes-Oxley Act of
2002, or the Sarbanes-Oxley Act, requires, among other things, that we maintain effective internal controls for financial reporting and
disclosure controls and procedures. We are required, under Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on,
among other things, the effectiveness of our internal control over financial reporting. This assessment includes disclosures of any material
weaknesses identified by management in its internal control over financial reporting.
A material weakness is a control
deficiency, or combination of control deficiencies, in internal control over financial reporting that results in more than a reasonable
possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis.
Section 404 of the Sarbanes-Oxley Act also generally requires an attestation from our independent registered public accounting firm on
the effectiveness of our internal control over financial reporting. However, for as long as we remain a non-accelerated filer, we are
not required to comply with the independent registered public accounting firm attestation requirement.
In previous years, we and
our independent registered public accounting firm have identified material weaknesses in our internal controls over financial reporting.
Although we have instituted these remedial measures to address the material weaknesses identified and to continually review and evaluate
our internal control systems to allow management to report on the sufficiency of our internal control over financial reporting, we cannot
assure you that we will not discover additional weaknesses in our internal control over financial reporting. Any such additional weaknesses
or failure to adequately remediate any existing weakness could materially and adversely affect our financial condition and results of
operations, as well as our ability to accurately report our financial condition and results of operations in a timely and reliable
manner.
Additionally, the material
weaknesses previously identified, or other material weaknesses or significant deficiencies we may become aware of in the future, could
result in our determining that our controls and procedures are not effective in future periods or could result in a material misstatement
of the consolidated financial statements that would not be prevented or detected.
Any failure to maintain effective
internal controls over financial reporting could severely inhibit our ability to accurately report our financial condition, results of
operations or cash flows. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent
registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial
reporting once that firm begin its Section 404 reviews, we could lose investor confidence in the accuracy and completeness of our financial
statements and reports, the market price of our ordinary shares and/or Depositary Shares could decline, and we could be subject to sanctions
or investigations by NASDAQ, the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal control
over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict
our future access to the capital markets.
We recognized a material intangible asset
impairment loss as of December 31, 2020, and we may be required to recognize additional non-cash impairment losses in the future.
As of December 31, 2020, in
connection with our decision to terminate further in-house development of MTD201, our Q-Sphera formulation of octreotide, we recognized
an impairment loss for in-process research and development of £9.3 million. In addition, because no other Q-Sphera products were
advanced beyond the formulation stage as of December 31, 2020, we recognized an impairment of goodwill arising from our acquisition of
Q Chip Limited in December 2014 of £2.3 million. Further, in connection with the termination of our license to panobinostat, the
active ingredient for our MTX110 product, by Secura Bio, we recognized an impairment of an intangible asset of £0.8 million as of
December 31, 2020. We had no impairment loss for the year ended December 31, 2021.
These charges discussed above
and any future impairment charges could materially increase our expenses and reduce our profitability. The process of testing goodwill
and intangible assets for impairment involves numerous judgments, assumptions and estimates made by our management including expected
future profitability, cash flows and the fair values of assets and liabilities, which inherently reflect a high degree of uncertainty
and may be affected by significant variability. If the business climate deteriorates, including the markets in which certain of our product
candidates may be sold, then actual results may not be consistent with these judgments, assumptions and estimates, and our goodwill and
intangible assets, to the extent not impaired at the time, may become impaired in future periods. This would in turn have an adverse impact
on our financial position and results of operations.
Risks Related to Our Business, Strategy and
Industry
The effects of health epidemics, including
the ongoing global coronavirus COVID-19 pandemic, in regions where we, or the third parties on which we rely, have business operations
could adversely impact our business, including our clinical trials, preclinical studies and supply chains, depending on the location,
duration and severity of disruptions to the systems affecting our business.
As
of the date hereof, the COVID-19 pandemic, caused by the novel strain of coronavirus SARS-CoV-2, has caused substantial disruptions of
economies and human societies worldwide for over two years. Efforts to contain the spread of the pandemic in the United Kingdom, Europe,
the United States and in many other countries across the globe, have involved imposing widespread restrictions on travel, periodic quarantines
and shelter-in-place orders, limitations on the permitted size of group gatherings, shuttering of businesses, implementation of programs
for remote schooling, and other crisis-driven measures. Notwithstanding these efforts and remarkable successes achieved in the development
and recent distribution of vaccines, vast portions of the populations in most countries have yet to be inoculated, and numerous nations
and regions have experienced multiple surges that have sickened millions of people, strained the capacity of healthcare systems, and caused
an estimated six million deaths worldwide. Over the course of the pandemic, government-imposed precautionary measures have been relaxed
in certain countries or states as the spread of COVID-19 has decelerated, only to be reinstated in many jurisdictions due to an ensuing
resurgence in cases. The concerning emergence of numerous new strains of COVID-19, which the current vaccines were not specifically designed
to immunize against, casts more uncertainty over the future effects of the pandemic.
The
duration, geographic scope and costs of the societal and economic disruptions caused by the COVID-19 pandemic cannot be reasonably estimated
at this time, and it is not possible to accurately predict the extent of the adverse effects of the pandemic on our business. However,
we have experienced certain impacts and may experience others which, if they continue for an extended period of time, could have material
adverse effects on our operations and the execution of our business plans. Examples of these include the following:
| | We have experienced some delays in our clinical trials, in particular our Phase I trials of MTX110 in
diffuse intrinsic pontine glioma, or DIPG, at Columbia University and in medulloblastoma at the University of Texas. Individuals defer
seeking treatment, physicians have fewer in-person meetings to recruit and enroll patients, and recruited patients are hindered by restrictions
in traveling to and accessing clinical sites. In addition, resources at hospitals have been diverted to dealing with the pandemic, causing
delays in scheduling screening evaluations, implant procedures, and follow-up monitoring visits. As a result of the foregoing factors,
the expected timeline for data readouts of our clinical trials may be negatively impacted, which would adversely affect our business. |
| | We rely on third party service providers to assist us in managing and otherwise carrying out our nonclinical
studies and clinical trials, and the outbreak may affect their ability to devote sufficient time and resources to our programs. |
| | We rely on third party suppliers and contract manufacturers to produce materials for our clinical trials.
We could experience supply chain delays or shortages with respect to these materials, which could impact our ability to meet current timetables
for our clinical trials. |
| | We previously temporarily closed our executive offices and implemented various governmental safety guidelines,
including work-from-home policies for most employees. The effects of government orders and our work-from-home policies may negatively
impact productivity, disrupt our business and delay our clinical programs and timelines, the magnitude of which will depend, in part,
on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course. |
| | We have, from time to time, instituted work-from-home policies for certain of our employees, and this
could adversely affect our operations, the productivity of our employees and our ability to conduct and complete our nonclinical studies
and clinical trials. |
| | The pandemic could cause delays in pursuing and obtaining governmental and other third-party reimbursement
decisions, as the work of these organizations may be slowed due to personnel work-from-home measures and travel and other scheduling constraints. |
| | In addition, the ability of the FDA, MHRA, EMA and other regulatory authorities or other bodies to engage
in routine regulatory and oversight activities, such as the review and authorization or certification of new products and the inspection
of manufacturing and clinical trial sites, may be affected by the COVID-19 pandemic. The FDA, MHRA, EMA and other regulatory authorities
or other bodies may have slower response times or be under-resourced. If the global health concerns continue to disrupt or prevent regulatory
authorities from conducting their regular reviews, inspections, or other regulatory activities, it could significantly impact the timely
review and process our marketing applications, clinical trial authorizations, or other regulatory submissions, which could have a material
adverse effect on our business. |
| | The near- and longer-term future impacts of the COVID-19 pandemic on global and national economies, and
related impacts on the availability of investment capital in financial markets, continues to be uncertain. Continued economic disruptions
could cause a contraction in equity capital and debt markets, making access to financing unavailable on acceptable terms or at all. |
The
global COVID-19 pandemic continues to evolve rapidly. We do not yet know the full extent of potential delays or impacts on our business,
our licensing efforts, our clinical studies, our research programs, healthcare systems or the global economy. However, these effects
could have a material impact on our operations, and we continue to monitor the COVID-19 situation closely. The
full extent to which the COVID-19 pandemic will impact our business operations, financial condition, results of operations, and cash flows
will depend on future developments, including, but not limited to, the ultimate severity, scope and duration of the pandemic before it
is brought under control, the pace at which governmental and private travel and other restrictions and concerns about public gatherings
will ease, the rate at which historically large increases in unemployment rates will decrease, and the speed with which national economies
recover, all of which are highly uncertain. To the extent the COVID-19 pandemic adversely affects our business and financial results,
it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.
In 2020, our license agreement related to
panobinostat, the active pharmaceutical ingredient in our MTX110 product, was terminated by Secura Bio. Because of this, we believe that
the relevant Secura Bio patents may delay a launch of MTX110, which could have a material adverse effect on our business, financial condition
and results of operations.
We entered into a License
Agreement, executed on or about June 6, 2017, or the License Agreement, by and between Midatech Limited and Novartis AG, or Novartis,
which Novartis subsequently transferred to Secura Bio, or the Secura License Agreement. Pursuant to the Secura License Agreement, Midatech
Limited was granted a worldwide, sublicenseable license to certain patents of panobinostat, the active pharmaceutical ingredient of Midatech’s
development product MTX110. Midatech Limited’s rights are limited to the treatment of brain cancer in humans, administered by convection-enhanced
delivery. We received a letter dated June 1, 2020, sent on behalf of Secura Bio purporting to terminate the Secura License Agreement “effective
immediately,” the reason specified being that we were proposing to liquidate the Company. Despite our assurances to the contrary,
and despite our repeated requests that Secura Bio withdraw its termination, Secura Bio reaffirmed the termination and reasons therefor
and the agreement was thus terminated. We received a further letter sent on behalf of Secura Bio dated May 21, 2021 purporting to terminate
the Secura License Agreement a second time for alleged material breaches of the agreement, and demanding a non-exclusive, fully paid-up,
royalty-free, perpetual license to Midatech’s MTX110 intellectual property. This demand was refused based upon, among other things,
Secura Bio’s previous termination of the License Agreement in 2020.
We view MTX110 as an important
asset and currently have two ongoing clinical trials for MTX110 and intend to commence two further clinical trials as part of our MTX110
clinical program. While we continue to enjoy freedom to use panobinostat for research purposes and we plan to continue to pursue development
of MTX110, we believe that the relevant Secura Bio patents may delay a launch of MTX110 for use in patients with DIPG. We do not, however,
anticipate it would have any impact on launching MTX110 for use in patients with glioblastoma multiforme. If we are unable to launch a
product candidate until the patent expires, there could be a material adverse effect on our business, financial condition and results
of operations.
Further, should Secura Bio
continue to interfere with our ongoing business by, among other things, challenging the legality of the termination of the Secura License
Agreement, the uncertainty and diversion of time and resources associated could have a material adverse effect on our business, financial
condition and prospects, and we cannot assure you that we would be successful in resolving such dispute.
We are exposed
to political, regulatory, social and economic risk relating to the United Kingdom’s exit from the European Union.
Following the result of a
referendum in 2016, the United Kingdom left the European Union on January 31, 2020, commonly referred to as Brexit. Pursuant to the formal
withdrawal arrangements agreed between the United Kingdom and the European Union, the United Kingdom was subject to a transition period
until December 31, 2020, during which European Union rules continued to apply. The Trade and Cooperation Agreement between the United
Kingdom and the European Union, which outlines the future trading relationship between the United Kingdom and the European Union, was
agreed in December 2020. The impact of the new trade agreement on the general and economic conditions in the United Kingdom remains uncertain.
There may be, for example, additional costs in materials and equipment sourced from the European Union and/or delays that could have a
material adverse effect on our business, financial condition and results of operations.
From a regulatory perspective,
the United Kingdom’s withdrawal from the European Union could bear significant complexity and risks. A basic requirement of
European Union law relating to the grant of a marketing authorization for a medicinal product in the European Union is that the applicant
is established in the European Union. Following the withdrawal of the United Kingdom from the European Union, marketing authorizations
previously granted to applicants established in the United Kingdom may no longer be valid. Moreover, the scope of a marketing authorization
for a medicinal product granted by the European Commission pursuant to the centralized procedure might not, in the future, include the
United Kingdom. In these circumstances, an authorization granted by competent United Kingdom authorities would be required to place medicinal
products on the United Kingdom market. In addition, the laws and regulations that will apply after the United Kingdom withdraws from the
European Union would affect the manufacturing sites that hold a certification issued by the United Kingdom competent authorities, and
vice versa. Our capability to rely on these manufacturing sites for products intended for the European Union market would also depend
upon the exact terms of the United Kingdom withdrawal.
Any of these factors could
significantly increase the complexity of our activities in the European Union and in the United Kingdom, could depress our economic activity
and restrict our access to capital, which could have a material adverse effect on our business, financial condition and results of operations
and reduce the price of our Ordinary Shares and Depositary Shares.
We have undertaken in the past, and may in the future undertake,
strategic acquisitions. Failure to integrate acquisitions could adversely affect our value.
One of the ways we have
grown our pipeline and business in the past is through strategic acquisitions of other businesses, products, and technologies. We may,
from time to time, evaluate additional acquisition opportunities, and may, in the future, strategically make further acquisitions of,
and investments in, businesses, products and technologies when we believe the opportunity is advantageous to our prospects. There can
be no assurance that in the future we will be able to find appropriate acquisitions or investments. In connection with these acquisitions
or investments, we may:
| | issue stock that would dilute our shareholders’ percentage of ownership; |
| | be obligated to make milestone or other contingent or non-contingent payments; |
| | incur debt and assume liabilities; and |
| | incur amortization expenses related to intangible assets or incur large and immediate write-offs. |
We also may be unable to find
suitable acquisition candidates and may not be able to complete acquisitions on favorable terms, if at all, or obtain adequate financing
for such acquisitions. If we do complete an acquisition, this may not ultimately strengthen our competitive position or ensure that we
will not be viewed negatively by customers, financial markets or investors. Further, acquisitions could also pose numerous additional
risks to our operations, including:
| | problems integrating the purchased business, products or technologies without substantial costs, delays
or other problems; |
| | increases to our expenses; |
| | the failure to have discovered undisclosed liabilities of the acquired asset or company for which we may
not be adequately indemnified; |
| | diversion of management’s attention from their day-to-day responsibilities and our core business; |
| | inability to enforce indemnification and non-compete agreements; |
| | the failure to successfully incorporate acquired products or technologies into our business; |
| | the failure of the acquired business, products or technologies to perform as well as anticipated; |
| | the failure to realize expected synergies and cost savings; |
| | unexpected safety issues and/or clinical trial failure of the acquisition’s products; |
| | harm to our operating results or financial condition, particularly during the first several reporting
periods after the acquisition is completed; |
| | entrance into markets in which we have limited or no prior experience; and |
| | potential loss of key employees or customers, particularly those of the acquired entity. |
We may not be able to complete
one or more acquisitions or effectively integrate the operations, products or personnel gained through any such acquisition without a
material adverse effect on our business, financial condition and results of operations.
Our future success is dependent on product development and the
ability to successfully license our product candidates to partners who can seek regulatory approval and commercialization of our product
candidates.
We continue to conduct research
and development for our product candidates and, to a lesser extent, clinical trials for certain of our product candidates; however there
can be no assurance that any of our targeted developments will be successful. We must develop functional products that address specific
market needs. We must therefore engage in new development activities, which may not produce innovative, commercially viable results in
a timely manner or at all. In addition, we may not be able to develop new technologies or identify specific market needs that are addressable
by our technologies, or technologies available to us. We may encounter delays and incur additional development and production costs and
expenses, over and above those expected, in order to develop technologies and products suitable for licensing. If any of our development
programs are curtailed, this may have a material adverse effect on our business and financial conditions.
Our business is dependent
on our ability to complete the development of product candidates, and license our product candidates to partners who will seek to obtain
regulatory approval for and commercialize our product candidates in a timely manner. Any licensing partner cannot commercialize a product
without first obtaining regulatory approval from the appropriate regulatory authorities in a country. Before obtaining regulatory approvals
for the commercial sale of any product candidate for a target indication, it must be demonstrated with substantial evidence gathered in
preclinical and well-controlled clinical studies that the product candidate is safe and effective for use for that target indication and
that the manufacturing facilities, processes and controls are adequate. The process of developing, obtaining regulatory approval for and
commercializing product candidates is long, complex and costly. Even if a product candidate were to successfully obtain approval from
the EMA, the MHRA, the FDA and/or comparable foreign regulatory authorities, any approval might contain significant limitations related
to use restrictions for certain age groups, warnings, precautions or contraindications, or may be subject to burdensome post-approval
study or risk management requirements. If our product candidates are unable to obtain regulatory approval in one or more jurisdictions,
or any approval contains significant limitations, we may not be able to obtain sufficient funding or generate sufficient revenue to continue
the development of any other product candidate. Furthermore, even if a product candidate obtains approval from the regulatory authorities,
it is likely that, in order to obtain royalty and/or milestone revenue from any of our licensing partners, our licensing partners may
need to expand their commercial operations, establish commercially viable pricing and obtain approval for adequate reimbursement from
third parties and government departments and healthcare payors for such products. If our product candidates are unable to successfully
be commercialized, we may not be able to earn sufficient revenues to continue our business.
Our development efforts are in the early
stages. All of our product candidates are in clinical development or preclinical development phases. If we are unable to advance our product
candidates through clinical development, obtain regulatory approval and ultimately commercialize our product candidates, or experience
significant delays in doing so, our business will be materially harmed.
Clinical testing is expensive
and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial
process. The results of any preclinical studies and early clinical trials of our product candidates may not be predictive of the results
of later-stage clinical trials, even after seeing promising results in earlier clinical trials. Product candidates in later stages of
clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial
clinical trials. A number of companies in the biopharmaceutical industry, including many with greater resources and experience than us,
have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising
results in earlier trials.
In 2018, we embarked on first-in-human
clinical trial program for our MTD201 and MTX110 products, with MTD201 completing our Phase I study in the third quarter of 2018, with
an additional Phase I study completed in the third quarter of 2019. The MTX110 Phase I clinical study completed in the fourth quarter
of 2020. In 2020, Phase I clinical trials of MTX110 were initiated by the University of Texas in medulloblastoma, and by Columbia University
in DIPG. In connection with the termination of our MTD201 program, we have determined not to conduct additional clinical trials in humans,
other than pilot trials to establish proof of concept in indications other than those for which the drug is approved. We expect our licensing
partners will be responsible for future clinical trials. We and any of our current or potential licensing partners may experience delays
in ongoing or future clinical trials and we do not know whether planned clinical trials will begin or enroll subjects on time, need to
be redesigned or be completed on schedule, if at all.
There is no assurance that
clinical trials of MTX110 or any other future clinical trials our other product candidates, will be successful or will generate positive
clinical data and we may not receive marketing approval from the FDA, European Commission, or other regulatory authorities for any of
our product candidates. We have limited experience submitting new drug applications, or NDAs, biologics license applications, or BLAs,
and investigational new drug applications, or INDs, to the FDA, as well as clinical trial applications, or CTAs, or marketing authorization
applications, or MAAs, to the EMA. MTX110 is in initial clinical development, currently being studied in an ongoing investigator-initiated
study. There can be no assurance that the FDA will permit any of our future NDAs, BLAs, or INDs, including the NDA for MTX110 or any future
INDs for our other product candidates, to go into effect in a timely manner or at all. Without an IND or CTA for a product candidate,
we will not be permitted to conduct clinical trials in the United States or the European Union, respectively, of such product candidate.
Drug or biological product
development is a difficult, long, time-consuming, expensive and uncertain process, and delay or failure can occur at any stage of any
of our clinical trials. Failure to obtain regulatory approval for our product candidates will prevent us from commercializing and marketing
them. Clinical trials may be delayed, suspended or prematurely terminated for a variety of reasons, such as:
| | delay or failure to complete preclinical studies; |
| | insufficient
financial and other resources to complete the necessary preclinical studies and clinical
trials; |
| | delay or failure in reaching agreement with the applicable regulatory authorities on a trial design; |
| | delay or failure in obtaining authorization to commence a trial or inability to comply with conditions
imposed by a regulatory authority regarding the scope or design of a clinical study; |
| | delay or failure in reaching agreement on acceptable terms with prospective contract research organizations,
or CROs, and clinical trial providers and sites, the terms of which can be subject to extensive negotiation and may vary significantly
among different CROs and trial sites; |
| | delay or failure in obtaining institutional review board, or IRB, or the approval of other reviewing entities,
including foreign regulatory authorities, to conduct a clinical trial at each site; |
| | failure to recruit, or subsequent withdrawal of, clinical trial sites from clinical trials as a result
of changing standards of care or the ineligibility of a site to participate in our clinical trials; |
| | delay or failure in recruiting and enrolling suitable subjects to participate in a trial; |
| | delay or failure in having subjects complete a trial or return for post-treatment follow-up; |
| | clinical sites and investigators deviating from trial protocol, failing to conduct the trial in accordance
with regulatory requirements, or dropping out of a trial; |
| | inability to identify and maintain a sufficient number of trial sites, many of which may already be engaged
in other clinical trial programs, including some that may be for the same indication; |
| | failure of third party clinical trial managers or clinical sites to satisfy contractual duties or meet
expected deadlines; |
| | failure to receive the recommendation of health technology assessment bodies such as the U.S. Agency for
Healthcare Research and Quality, and other relevant international bodies or agencies responsible for pricing and utilization determinations; |
| | delay or failure in adding new clinical trial sites; |
| | ambiguous or negative interim results, or results that are inconsistent with earlier results; |
| | from the EMA, the MHRA, the FDA, the IRB, data safety monitoring boards, or other regulatory authority,
or results from earlier stage or concurrent preclinical and clinical studies, which might require modification to the protocol for a given
study; |
| | decisions by the EMA, the MHRA, the FDA, the IRB, other regulatory authorities, or us, or recommendation
by a data safety monitoring board or other regulatory authority, to suspend or terminate a clinical trial at any time for safety issues
or for any other reason; |
| | unacceptable risk-benefit profile or unforeseen safety issues or adverse side effects; |
| | failure to demonstrate a benefit from using a drug over existing marketed products; |
| | manufacturing issues, including problems with manufacturing or obtaining from third parties sufficient
quantities of raw materials, active pharmaceutical ingredients, or API, or product candidates for use in clinical trials; and |
| | changes in governmental regulations or administrative actions or lack of adequate funding to continue
the clinical trial. |
Many of these factors are
beyond our control. If we experience delays in the completion of, or termination of, any ongoing or future clinical trial of our product
candidates, the commercial prospects of our product candidates will be harmed, and our ability to generate product revenues from any of
these product candidates will be delayed. In addition, any delays in completing clinical trials may slow down our product candidate development
and approval process and jeopardize the ability to commence product sales and generate revenues. Any of these occurrences may harm our
business, financial condition and prospects significantly. In addition, many of the factors that cause, or lead to, a delay in the commencement
or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates. It is possible
that none of our product candidates will ever complete successfully the clinical development process and obtain regulatory approval, even
if we expend substantial time and resources seeking such approval.
Negative results in the development
of our lead product candidates may also prevent or delay our ability to continue or conduct clinical programs or receive regulatory approvals
for our other product candidates. For example, although we believe our preclinical studies and animal testing of MTX110 demonstrate indications
of acceptable safety and effectiveness profiles, future clinical trials may fail to demonstrate adequate levels of safety or effectiveness.
Moreover, anti-tumor activity may be different in each tumor type that we plan to evaluate in the clinical trial. Therefore, even though
we plan to pursue clinical development for multiple tumor types, the tumor response may be low in patients with some cancers compared
to others. As a result, we may be required to discontinue development of MTX110 for patients with those tumor types and/or mutations due
to insufficient clinical benefit, while continuing development for a more limited population of patients. Consequently, in order to obtain
regulatory approval, we may have to reach agreement with the FDA on defining the optimal patient population, study design, and size, any
of which may require significant additional resources and delay our clinical trials and ultimately the approval, if any, of any of our
product candidates.
We may experience setbacks
that could delay or prevent regulatory approval of, or our ability to commercialize, our product candidates, including:
| | negative or inconclusive results from our preclinical studies or clinical trials or positive results from the clinical trials of others
for product candidates similar to ours leading to their approval, and evolving to a decision or requirement to conduct additional preclinical
testing or clinical trials or abandon a program; |
| | product-related side effects experienced by patients or subjects in our clinical trials or by individuals using drugs or therapeutics
that we, the FDA, other regulators or others view as relevant to the development of to our product candidates; |
| | delays in submitting INDs or comparable foreign applications or delays or failure in obtaining the necessary approvals from regulators
to commence a clinical trial, or a suspension or termination of a clinical trial once commenced; |
| | conditions imposed by the FDA or comparable foreign authorities regarding the scope or design of our clinical trials, including our
clinical endpoints; |
| | inability to maintain compliance with regulatory requirements, including current good manufacturing practices, or cGMP, and complying
effectively with other procedures; |
| | inadequate supply or quality of product candidates or other materials necessary for the conduct of our clinical trials; |
| | greater than anticipated clinical trial costs; |
| | inability to compete with other therapies; |
| | poor efficacy of our product candidates during clinical trials; |
| | trial results taking longer than anticipated; |
| | trials being subjected to fraud or data capture failure or other technical mishaps leading to the invalidation of our trials; |
| | the results of our trials not supporting application for conditional approval in the EU; |
| | unfavorable FDA or other regulatory agency inspection and review of a clinical trial site; |
| | failure of our third-party contractors or investigators to comply with regulatory requirements or otherwise meet their contractual
obligations in a timely manner, or at all; |
| | delays related to the impact of the spread of the COVID-19 pandemic, including the impact of COVID-19 on the FDA’s ability to
continue its normal operations; |
| | delays and changes in regulatory requirements, policy and guidelines, including the imposition of additional regulatory oversight
around clinical development generally or with respect to our technology in particular; or |
| | varying interpretations of data by the FDA and similar foreign regulatory agencies. |
In addition, because we have
limited financial and personnel resources and are focusing primarily on developing our lead product candidates, we may forgo or delay
pursuit of other future product candidates that may prove to have greater commercial potential and may fail to capitalize on viable commercial
products or profitable market opportunities. If we do not accurately evaluate the commercial potential or target market for a future product
candidate, we may relinquish valuable rights to those future product candidates 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 future product
candidates.
The results of preclinical studies and early clinical trials
are not always predictive of future results. Any product candidate that we advance in clinical trials may not achieve favorable results
in later clinical trials, if any, or receive marketing approval.
The research and development
of drugs and biological products is expensive and extremely risky. Only a small percentage of product candidates that enter the development
process ever receive marketing approval. Before obtaining marketing approval from regulatory authorities for the sale of our product candidates,
we must conduct extensive clinical trials to demonstrate the safety and efficacy of the product candidates in humans. The outcome of clinical
testing is uncertain. We may face unforeseen challenges in our product candidate development strategy, and we can provide no assurances
that any of our clinical trials will be conducted as planned or completed on schedule, or at all, that we will ultimately be successful
in our current and future clinical trials, or that our product candidates will be able to receive regulatory approval. A failure of one
or more clinical trials can occur at any stage of testing, which may result from a multitude of factors, including, among other things,
flaws in study design, dose selection issues, placebo effects, patient enrollment criteria and failure to demonstrate favorable safety
or efficacy. The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials,
and preliminary or interim results of a clinical trial do not necessarily predict final results. For example, it is not uncommon for product
candidates to exhibit unforeseen safety or efficacy issues when tested in humans despite promising results in preclinical animal models.
Accordingly, we cannot assure you that any clinical trials that we may conduct will demonstrate consistent or adequate efficacy and safety
to support marketing approval. In general, the FDA and regulatory authorities outside the United States require two adequate and well-controlled
clinical trials demonstrating safety and effectiveness, including a Phase III clinical trial, before granting marketing approval of a
drug product.
Many companies in the pharmaceutical
industry have suffered significant setbacks in late-stage clinical trials even after achieving promising results in preclinical testing
and earlier-stage clinical trials, and we cannot be certain that we will not face similar setbacks. Moreover, preclinical and clinical
data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed
satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products. Furthermore,
the failure of MTX110 or any other product candidates that we develop to demonstrate safety and efficacy in any clinical trial could negatively
impact the perception of other product candidates that we develop or cause regulatory authorities to require additional testing before
approving any of our product candidates.
If we are required to conduct
additional clinical trials or other testing of MTX110 or our other product candidates, if we are unable to successfully complete clinical
trials of MTX110 or our other product candidates or other testing, if the results of these trials or tests are not positive or are only
modestly positive, if there are safety concerns or if we determine that the observed safety or efficacy profile would not be competitive
in the marketplace, we may:
| | be delayed in obtaining marketing approval for MTX110 or other product candidates we develop; |
| | not obtain marketing approval at all; |
| | obtain marketing approval in some countries and not in others; |
| | obtain approval for indications or patient populations that are not as broad as intended or desired; |
| | obtain approval with labeling that includes significant use or distribution restrictions or safety warnings; |
| | be subject to additional post-marketing testing requirements; or |
| | have the product removed from the market after obtaining marketing approval. |
Our product development costs
will also increase if we experience delays in clinical trials or in obtaining marketing approvals. We do not know whether any of our clinical
trials will continue or begin as planned, will need to be restructured or will be completed on schedule, or at all. We may also decide
to change the design or protocol of one or more of our clinical trials, including to add additional patients or arms, which could result
in increased costs and expenses or delays. Significant clinical trial delays also could shorten any periods during which we may have the
exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do and impair our
ability to successfully commercialize our product candidates and may harm our business and results of operations.
We or our collaborators may experience delays
or difficulties in the enrollment and/or retention of patients in clinical trials, which could delay or prevent our receipt of necessary
regulatory approvals.
Successful and timely completion
of clinical trials will require that we or our collaborators sponsoring trials for our product candidates enroll a sufficient number of
patients. Patient enrollment, which is an important factor in the timing of clinical trials, is affected by many factors, including the
size and nature of the patient population and competition for patients eligible for our clinical trials with competitors which may have
ongoing clinical trials for product candidates that are under development to treat the same indications as one or more of our product
candidates, or approved products for the conditions for which we are developing our product candidates.
Trials may be subject to
delays as a result of patient enrollment taking longer than anticipated or patient withdrawal. We may not be able to initiate or continue
clinical trials for our product candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate
in these trials as required by the FDA, EMA, or comparable foreign regulatory authorities. We cannot predict how successful we or our
collaborators will be at enrolling subjects in future clinical trials. Subject enrollment is affected by other factors including:
| | the severity and difficulty of diagnosing the disease under investigation; |
| | the eligibility and exclusion criteria for the trial in question; |
| | the size of the patient population and process for identifying patients; |
| | our ability to recruit clinical trial investigators with the appropriate competencies and experience; |
| | the design of the trial protocol; |
| | the perceived risks and benefits of the product candidate in the trial in relation to other available
therapies, including any new products that may be approved for the indications we are investigating; |
| | the availability of competing commercially available therapies and other competing therapeutic candidates’
clinical trials for the disease or condition under investigation, including for melanoma and other cancers in a first-line setting; |
| | the willingness of patients to be enrolled in our clinical trials; |
| | the risk that subjects enrolled in clinical trials will drop out of our trials before completion; |
| | our ability to obtain and maintain clinical trial subject informed consents |
| | the efforts to facilitate timely enrollment in clinical trials; |
| | potential disruptions caused by the COVID-19 pandemic, including difficulties in initiating clinical sites,
enrolling and retaining participants, diversion of healthcare resources away from clinical trials, travel or quarantine policies that
may be implemented, and other factors; |
| | the patient referral practices of physicians; |
| | the ability to monitor patients adequately during and after treatment; and |
| | the proximity and availability of clinical trial sites for prospective patients. |
Inability to enroll a sufficient
number of patients for clinical trials would result in significant delays and could require us to abandon one or more clinical trials
altogether. Enrollment delays in these clinical trials may result in increased development costs for our product candidates, which would
cause the value of our company to decline and limit our ability to obtain additional financing. Furthermore, we expect to rely on contract
research organizations (CROs) and clinical trial sites to ensure the proper and timely conduct of our clinical trials and we will have
limited influence over their performance.
The regulatory approval processes in the United States and Europe
are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product
candidates, our business may be substantially harmed.
The time required to obtain
approval for a product candidate by the EMA, the MHRA, the FDA and other comparable foreign regulatory authorities is unpredictable, and
it typically takes many years following the commencement of preclinical studies and clinical trials, if approval is obtained at all, and
depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations,
or 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 candidate 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 of a
NDA from the FDA, and we cannot market it in the European Union or the United Kingdom until we receive a marketing authorization approval
from the EMA or the MHRA, respectively, or in any other country until we obtain regulatory authorization as required under the laws of
such country.
Our product candidates could
fail to receive regulatory approval from the EMA, the MHRA, the FDA and other comparable foreign regulatory authorities for many reasons,
including:
| | disagreement with the design or implementation of the clinical trials; |
| | failure to demonstrate that a product candidate is safe and effective for its proposed indication; |
| | failure of clinical trial results to meet the level of statistical significance required for approval; |
| | failure to demonstrate that a product candidate’s clinical and other benefits outweigh its safety
risks; |
| | disagreement with our interpretation of data from preclinical studies or clinical trials; |
| | the insufficiency of data collected from clinical trials of our product candidates to support the submission
and filing of a NDA, BLA, MAA or other submission or to obtain regulatory approval; |
| | regulatory authorities may find deficiencies in good clinical practice, or GCP, compliance or may find
our record keeping, or the record keeping of our clinical trial sites, to be inadequate; |
| | disapproval of the manufacturing processes or facilities of third party manufacturers with whom we or
any licensing partner contracts with for clinical and commercial supplies; or |
| | changes in approval policies or regulations that render the preclinical and clinical data insufficient
for approval. |
Of the large number of products
in development, only a small percentage successfully complete the FDA, EMA, MHRA, or other comparable regulatory 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.
In addition, the EMA, the
MHRA, the FDA and other comparable foreign regulatory authorities may require more information, including additional preclinical or clinical
data to support approval, which may delay or prevent approval and any commercialization plans, or we or any licensing partner may decide
to abandon the development program. If approval were to be obtained, regulatory authorities may approve any of our product candidates
for fewer or more limited indications than is requested, may grant approval contingent on the performance of costly post-marketing clinical
trials, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful
commercialization of that product candidate. In addition, if our product candidate produces undesirable side effects or safety issues,
the regulatory authorities (the FDA, MHRA, EMA or a comparable foreign regulatory authority) may require the establishment of Risk Evaluation
and Mitigation Strategy, or REMS, which may, for instance, restrict distribution of the products and impose burdensome implementation
requirements on us or any licensing partner. Any of the foregoing scenarios could materially harm the commercial prospects for our product
candidates.
Our product candidates may cause undesirable
side effects or have other properties that could delay or prevent their regulatory approval and limit the commercial profile of an approved
label, and such side effects or other properties could result in significant negative consequences following any marketing approval of
any of our product candidates.
Undesirable side effects caused
by any of our product candidates could cause us, our licensing partners, if any, or regulatory authorities to interrupt, delay or halt
clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the EMA, the MHRA, the FDA
or other comparable foreign regulatory authority. Results of the clinical trials could reveal a high and unacceptable severity and prevalence
of side effects or risks associated with a product candidate’s use. In such an event, our trials could be suspended or terminated
and the regulatory authorities could order us to cease further development of or deny approval of our product candidates for any or all
targeted indications. The drug-related side effects could affect patient recruitment or the ability of enrolled subjects to complete the
trial or result in potential product liability claims. Any of these occurrences may harm our business, financial condition and prospects
significantly.
Additionally, if undesirable
side effects of our products are identified following marketing approval, a number of potentially significant negative consequences could
result, including:
| | marketing of such product may be suspended; |
| | a product recall or product withdrawal; |
| | regulatory authorities may withdraw approvals of such product or may require additional warnings on the
label; |
| | the requirement to develop a REMS for each product or, if a strategy is already in place, to incorporate
additional requirements under the REMS, or to develop a similar strategy as required by a comparable foreign regulatory authority; |
| | the requirement to conduct additional post-market studies; and |
| | being sued and held liable for harm caused to subjects or patients. |
Consequently, our reputation and business operations
may suffer.
Any of these events could
prevent the achievement or maintaining of market acceptance of the particular product or product candidate, if approved, and could significantly
harm our business, results of operations and prospects.
Even if we receive regulatory approval of any product candidates,
we will be subject to ongoing regulatory oversight and continued regulatory review, which may result in significant additional expense
and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with any of
our product candidates.
Our product candidates, if
they receive regulatory approval, will be subject to the ongoing requirements of the EMA, the MHRA, the FDA and other regulatory agencies
governing the manufacture, quality control, further development, labeling, packaging, storage, distribution, safety surveillance, import,
export, advertising, promotion, recordkeeping and reporting of safety and other post-market information. These requirements include submissions
of safety and other post-marketing information and reports, establishment registration and listing, as well as continued compliance with
cGMP and GCP requirements for any clinical trials that we conduct post-approval. The safety profile of any product is closely monitored
by the EMA, the MHRA, the FDA and other regulatory authorities after approval. If the EMA, the MHRA, the FDA or other regulatory authorities
become aware of new safety information after approval of any of our products or product candidates, regulatory authorities may require
labeling changes or establishment of a risk mitigation strategy or similar strategy, impose significant restrictions on a product’s
indicated uses or marketing, or impose ongoing requirements for potentially costly post-approval studies or post-market surveillance.
In addition, manufacturers
of drug and biological products and their facilities are subject to continual review and periodic inspections by the EMA, the MHRA, the
FDA and other governmental regulatory authorities for compliance with cGMP regulations. If a previously unknown problem with a product,
such as adverse events of unanticipated severity or frequency, or a problem with the facility where the product is manufactured is discovered,
a regulatory agency may impose restrictions on that product, the manufacturing facility or the party commercializing the product, including
requiring recall or withdrawal of the product from the market or suspension of manufacturing. If our product candidates or the manufacturing
facilities for our product candidates fail to comply with applicable regulatory requirements, a regulatory agency may:
| | issue warning letters or untitled letters; |
| | mandate modifications to, or the withdrawal of, marketing and promotional materials or require corrective
information to be provided to healthcare practitioners; |
| | require the violating party to enter into a consent decree, which can include the imposition of various
fines, reimbursements of inspection costs, required due dates for specific actions and penalties for noncompliance; |
| | seek an injunction or impose civil or criminal penalties or monetary fines; |
| | require revisions to the labeling, including limitations on approved uses or the addition of additional
warnings, contraindications or other safety information, including boxed warnings; |
| | suspend, vary or withdraw regulatory approval; |
| | require additional post-market clinical trials to assess the safety of the product; |
| | suspend any ongoing clinical studies; |
| | refuse to approve pending applications or supplements to applications filed by us or any licensing partner; |
| | suspend or impose restrictions on operations, the products, manufacturing or ourselves; |
| | require a change to the product labeling; or |
| | seize or detain products, refuse to permit the import or export of products or require a product recall. |
In the EU, the EMA may require an equivalent risk
management plan (RMP). Non-compliance with European Union requirements regarding safety monitoring or pharmacovigilance can also result
in significant financial penalties. Similarly, failure to comply with the European Union’s requirements regarding the protection
of personal information can also lead to significant penalties and sanctions.
The occurrence of any of these
events or penalties described above may inhibit our ability to generate revenue from product candidates that are commercialized by any
of our licensing partners.
The FDA’s, EMA’s, MHRA’s, and
other comparable foreign regulatory authorities’ policies may change and additional government regulations may be enacted that could
prevent, limit or delay regulatory approval of our product candidates. If we are slow or unable to adapt to changes in existing requirements
or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval
that we may have obtained, which would adversely affect our business, prospects and ability to achieve or sustain profitability.
Obtaining and maintaining regulatory approval
of MTX110 or any of our other product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory
approval of MTX110 or our other product candidates in other jurisdictions.
Obtaining and maintaining
regulatory approval of MTX110 or any of our other product candidates in one jurisdiction does not guarantee that we will be able to obtain
or maintain regulatory approval in any other jurisdiction, while a failure or delay in obtaining regulatory approval in one jurisdiction
may have a negative effect on the regulatory approval process in others. For example, even if the FDA grants marketing approval of a product
candidate, similar foreign regulatory authorities must also approve the manufacturing, marketing and promotion of the product candidate
in those countries. Approval and licensure procedures vary among jurisdictions and can involve requirements and administrative review
periods different from, and greater than, those in the United States, including additional studies or clinical trials as clinical trials
conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In many jurisdictions outside the
United States, a product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some
cases, the price that we intend to charge for our products is also subject to approval.
We may also submit marketing
applications in other countries. Regulatory authorities in jurisdictions outside of the United States have requirements for approval of
product candidates with which we must comply prior to marketing in those jurisdictions. Obtaining similar foreign regulatory approvals
and compliance with similar foreign regulatory requirements could result in significant delays, difficulties and costs for us and could
delay or prevent the introduction of our products in certain countries. We do not have any product candidates approved for sale in any
jurisdiction, including international markets, and we do not have experience in obtaining regulatory approval in international markets.
If we fail to comply with the regulatory requirements in international markets and/or receive applicable marketing approvals, our target
market will be reduced and our ability to realize the full market potential of our product candidates will be harmed.
We seek to establish agreements with potential licensing partners
and collaborators and, if we are not able to establish them on commercially reasonable terms, we may have to alter our development and
commercialization plans.
Our current development and
commercialization strategy is to deploy our proprietary drug delivery technologies to formulate a compelling portfolio of novel first-in-class
sustained release formulations of products with significant commercial potential for licensing to pharmaceutical company partners at proof-of-concept
stage, which would potentially result in revenue generation from product royalty and/or milestone deals. We seek to work with licensing
or collaboration partners for the development and commercialization of one or more of our product candidates. For example, in January
2019, we entered into that certain Licensing, Collaboration and Distribution Agreement, or the CMS License Agreement, with China Medical
Systems Holdings Limited, or CMS, as guarantor, and two of its wholly owned subsidiaries, CMS Bridging Limited, or CMS Bridging, and CMS
Medical Hong Kong Limited, or CMS Medical HK, each a CMS Party, pursuant to which, among other things, we agreed to license certain of
our products to the CMS Parties in exchange for, among other things, royalty revenue. In June 2020, we announced a research and development
collaboration with Dr. Reddy’s Laboratories Ltd., or Dr. Reddy’s, under which we evaluated the feasibility of applying Q-Sphera
technology to molecules nominated by Dr. Reddy’s. The collaboration was subsequently terminated by mutual agreement. In July 2020,
we announced a similar collaboration with an unnamed European affiliate of a global healthcare company, which was subsequently extended
in January 2022 and the collaboration partner disclosed as Janssen Pharmaceutical NV, a subsidiary of Johnson & Johnson. Likely future
collaborators may include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies and biotechnology
companies.
We face significant competition
in seeking appropriate licensing or collaboration partners. Whether we reach a definitive agreement will depend, among other things, upon
our assessment of the partner’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed
partner’s evaluation of a number of factors. Those factors may include the potential differentiation of our product candidate from
competing product candidates, design or results of clinical trials, the likelihood of approval by the FDA or comparable foreign regulatory
authorities and the regulatory pathway for any such approval, the potential market for the product candidate, the costs and complexities
of manufacturing and delivering the product to patients and the potential of competing products. The partner may also consider alternative
product candidates or technologies for similar indications that may be available for collaboration and whether such collaboration could
be more attractive than the one with us for our product candidate.
These agreements are complex
and time consuming to negotiate and document. Further, there have been a significant number of recent business combinations among large
pharmaceutical companies that have resulted in a reduced number of potential future licensing and collaboration partners.
We may not be able to negotiate
agreements with these potential partners on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to
curtail the development of the product candidate for which we are seeking to collaborate, reduce or delay its development program or one
or more of our other development programs.
If we enter into agreements with a licensing
or collaboration partner for the development and commercialization of our product candidates, our prospects with respect to those product
candidates will depend in significant part on the success of those collaborations.
Some of our revenues are
currently derived from licensing or collaboration agreements with other biopharmaceutical companies, research institutes and universities,
and we expect a material amount of our revenue in the future will be derived from these and similar agreement. We may enter into additional
agreements with a licensing or collaboration partner for the development and commercialization of certain of our product candidates. If
we enter into such agreements, we will have limited control over the amount and timing of resources that our partners will dedicate to
the development or commercialization of our product candidates. Our ability to generate revenues from these arrangements will depend on
any future licensing partners’ ability to successfully perform the functions assigned to them in these arrangements. In addition,
any future licensing or collaboration partner may have the right to abandon research or development projects and terminate applicable
agreements, including funding obligations, prior to or upon the expiration of the agreed upon terms.
Agreements involving our
product candidates pose a number of risks, including:
| | partners have significant discretion in determining the efforts and resources that they will apply to
these matters; |
| | partners may not perform their obligations as expected; |
| | partners may not pursue development and commercialization of our product candidates or may elect not to
continue or renew development or commercialization programs, based on clinical trial results, changes in the their strategic focus or
available funding or external factors, such as an acquisition, that divert resources or create competing priorities; |
| | partners may delay clinical trials, provide insufficient funding for a clinical trial, stop a clinical
trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical
testing; |
| | a partner with marketing and distribution rights to one or more products may not commit sufficient resources
to the marketing and distribution of such product or products; |
| | disagreements with partners, including disagreements over proprietary rights, contract interpretation
or the preferred course of development, might cause delays or termination of the research, development or commercialization of product
candidates, might lead to additional responsibilities for us with respect to product candidates, or might result in litigation or arbitration,
any of which would be time-consuming and expensive; |
| | partners may not properly maintain or defend our intellectual property rights or may use our proprietary
information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information
or expose us to potential litigation; |
| | partners may infringe the intellectual property rights of third parties, which may expose us to litigation
and potential liability; and |
| | agreements may be terminated and, if terminated, may result in a need for additional capital to pursue
further development or commercialization of the applicable product candidates. |
Agreements may not lead to
development or commercialization of product candidates in the most efficient manner, or at all. If any future partners of ours is involved
in a business combination, it could decide to delay, diminish or terminate the development or commercialization of any product candidate
licensed to it by us.
The commercial success of any of our product
candidates is not guaranteed.
There can be no assurance
that any of our product candidates currently in development will be successfully developed into any commercially viable product or products
and/or be manufactured in commercial quantities at an acceptable cost or be marketed successfully and profitably. If we, or our partners,
encounter delays at any stage, and fail successfully to address such delays, it may have a material adverse effect on our business, financial
condition and prospects. In addition, our success will depend on the market’s acceptance of these products and there can be no guarantee
that this acceptance will be forthcoming or that our technologies will succeed as an alternative to competing products. If a market fails
to develop or develops more slowly than anticipated, we may be unable to recover the costs we may have incurred in the development of
particular products and may never achieve profitable royalty or licensing revenues from that product.
The pharmaceutical and biotechnology industries
are highly competitive.
The development and commercialization
of new drug products is highly competitive. Our business faces competition from a range of major and specialty pharmaceutical and biotechnology
companies worldwide with respect to our product candidates, and will face competition in the future with respect to any product candidates
that we may seek to develop or commercialize.
There are a number of pharmaceutical
and biotechnology companies that currently market and sell products or are pursuing development of products similar to our technology
and product candidates. With respect to our product candidates, from a technology perspective, we believe other companies in the sustained
release space include Medincell S.A., GP Pharm, S.A., Peptron, Inc., Graybug Inc. and Nanomi B.V. In addition, other companies using gold
nanoparticle technologies include CytImmune Sciences, Inc., and Nanospectra Biosciences, Inc.
Some of these competitive
products and therapies are based on scientific approaches that are the same or similar to our approach, and others are based on entirely
different approaches. Potential competitors also include academic institutions, government agencies and other public and private research
organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing
and commercialization.
Our competitors in the biotechnology
and pharmaceutical industries may have superior research and development capabilities, products, manufacturing capability or sales and
marketing expertise. Many of our competitors may have significantly greater financial and human resources and may have more experience
in research and development.
As a result of these factors,
our competitors may obtain regulatory approval of their products more rapidly than we are able to or may obtain patent protection of other
intellectual property rights that limit our ability to develop or commercialize our product candidates. Our competitors may also develop
products that are more effective, more widely used and less costly than our own product candidates, and may be more successful in commercializing
their products.
We anticipate that we will
face increased competition in the future as new companies enter our markets and alternative products and technologies become available.
Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among
a smaller number of our competitors. Smaller and other early-stage companies may also prove to be significant competitors, particularly
through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining
qualified scientific, management and commercial personnel, as well as in acquiring technologies complementary to, or necessary for, our
programs.
Healthcare legislative reform and government price control measures
may have a material adverse effect on our business and results of operations
The United States and many
foreign jurisdictions have enacted or proposed legislative and regulatory changes affecting the healthcare system that could prevent or
delay marketing approval of our current product candidates and any future product candidates, restrict or regulate post-approval activities
and affect our ability to profitably sell a product for which we obtain marketing approval. Changes in regulations, statutes or the interpretation
of existing regulations could impact our business in the future by requiring, for example: (i) changes to our manufacturing arrangements;
(ii) additions or modifications to product labeling; (iii) the recall or discontinuation of our products; or (iv) additional record-keeping
requirements. If any such changes were to be imposed, they could adversely affect the operation of our business.
In the United States, there
have been and continue to be a number of legislative initiatives to contain healthcare costs. For example, in March 2010, the Patient
Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the ACA), was
passed, which substantially changed the way healthcare is financed by both governmental and private insurers, and significantly impacted
the U.S. pharmaceutical industry. The ACA, among other things, subjected biological products to potential competition by lower-cost biosimilars,
addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs and
biologics that are inhaled, infused, instilled, implanted or injected, increased the minimum Medicaid rebates owed by manufacturers under
the Medicaid Drug Rebate Program and extended the rebate program to individuals enrolled in Medicaid managed care organizations, established
annual fees and taxes on manufacturers of certain branded prescription drugs and biologics, and created a new Medicare Part D coverage
gap discount program, in which manufacturers must agree to offer 70% (increased from 50% pursuant to the Bipartisan Budget Act of 2018,
effective as of 2019) point-of-sale discounts off negotiated prices of applicable brand drugs and biologics to eligible beneficiaries
during their coverage gap period, as a condition for the manufacturer’s outpatient drugs or biologics to be covered under Medicare
Part D.
Since its enactment, there
have been judicial, executive and Congressional challenges to certain aspects of the ACA. On June 17, 2021, the U.S. Supreme Court dismissed
the most recent judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality of the ACA.
Prior to the Supreme Court’s decision, President Biden issued an executive order to initiate a special enrollment period from February
15, 2021 through August 15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order
also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare,
including among others, re-examining Medicaid demonstration projects and waiver programs that include work requirements, and policies
that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is unclear how other
healthcare reform measures of the Biden administration or other efforts, if any, to challenge, repeal or replace the ACA will impact the
ACA or our business.
In addition, other legislative
changes have been proposed and adopted since the ACA was enacted. On August 2, 2011, the Budget Control Act of 2011 was signed into law,
which, among other things, resulted in reductions to Medicare payments to providers of 2% per fiscal year, which went into effect on April
1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2030, with the exception of a temporary
suspension from May 1, 2020 through June 30, 2022 (a 1% sequester will apply from April 1, 2022 through June 30, 2022) due to the COVID-19
pandemic, unless additional Congressional action is taken. On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into
law, which, among other things, reduced Medicare payments to several providers, including hospitals and cancer treatment centers, and
increased the statute of limitations period for the government to recover overpayments to providers from three to five years. As another
example, the 2021 Consolidated Appropriations Act signed into law on December 27, 2020 incorporated extensive healthcare provisions and
amendments to existing laws, including a requirement that all manufacturers of drugs and biological products covered under Medicare Part
B report the product’s average sales price, or ASP, to Department of Health and Human Services (HHS) beginning on January 1, 2022,
subject to enforcement via civil money penalties.
Further, there has been heightened
governmental scrutiny in the United States of pharmaceutical pricing practices in light of the rising cost of prescription drugs. Such
scrutiny has resulted in several recent congressional inquiries and proposed and enacted federal and state legislation designed to, among
other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and
reform government program reimbursement methodologies for products. Although a number of these and other measures may require additional
authorization to become effective, Congress and the current U.S. administration have each indicated that it will continue to seek new
legislative and/or administrative measures to control drug costs. Any reduction in reimbursement from Medicare and other government programs
may result in a similar reduction in payments from private payors. Moreover, in July 2021, President Biden issued a sweeping executive
order on promoting competition in the American economy that includes several mandates pertaining to the pharmaceutical and healthcare
insurance industries. Among other things, the executive order directs the FDA to work towards implementing a system for importing drugs
from Canada (following on a Trump administration notice-and-comment rulemaking on Canadian drug importation that was finalized in October
2020). The Biden order also called on HHS to release a comprehensive plan to combat high prescription drug prices, and it includes several
directives regarding the Federal Trade Commission’s oversight of potentially anticompetitive practices within the pharmaceutical
industry. The drug pricing plan released by HHS in September 2021 in response to the executive order makes clear that the Biden Administration
supports aggressive action to address rising drug prices, including allowing HHS to negotiate the cost of Medicare Part B and D drugs,
but such significant changes will require either new legislation to be passed by Congress or time-consuming administrative actions. Accordingly,
there remains a large amount of uncertainty regarding the federal government’s approach to making pharmaceutical treatment costs
more affordable for patients.
At the state level, legislatures
have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including
price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency
measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. For example, California requires
pharmaceutical manufacturers to notify certain purchasers, including health insurers and government health plans at least 60 days before
any scheduled increase in the wholesale acquisition cost (WAC), of their product if the increase exceeds 16%, and further requires pharmaceutical
manufacturers to explain whether a change or improvement in the product necessitates such an increase. Similarly, Vermont requires pharmaceutical
manufacturers to disclose price information on certain prescription drugs, and to provide notification to the state if introducing a new
drug with a WAC in excess of the Medicare Part D specialty drug threshold. In December 2020, the U.S. Supreme Court also held unanimously
that federal law does not preempt the states’ ability to regulate pharmaceutical benefit managers, or PBMs, and other members of
the healthcare and pharmaceutical supply chain, an important decision that may lead to further and more aggressive efforts by states in
this area. Legally mandated price controls on payment amounts by third-party payors or other restrictions could harm our 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 the ultimate demand for our product candidates, if approved, or put pressure on our product
pricing, which could negatively affect our business, results of operations, financial condition and prospects.
We expect that the ACA, the
recent laws described above, and other healthcare reform measures that may be adopted in the future may result in additional reductions
in Medicare and other healthcare funding, more rigorous coverage criteria, new payment methodologies and additional downward pressure
on the price that we receive for any approved product. The implementation of cost containment measures or other healthcare reforms may
prevent us from being able to generate revenue, attain profitability, or commercialize or product candidates, if approved. Further, it
is possible that additional governmental action will be taken in response to the COVID-19 pandemic.
Outside of the United States,
particularly in the European Union, the coverage status and pricing of prescription pharmaceuticals and biologics is subject to governmental
control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing
approval for a product. Furthermore, the requirements may differ across the E.U. Member States. To obtain coverage and reimbursement or
pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product
candidate to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is
set at unsatisfactory levels, our business could be harmed. Also, at national level, actions have been taken to enact transparency and
anti-gift laws (similar to the US Physician Payments Sunshine Act) regarding payments between pharmaceutical companies and healthcare
professionals.
Coverage
and adequate reimbursement may not be available for our current or any future product candidates, which could make it difficult for us
to sell profitably, if approved.
Market
acceptance and sales of any product candidates that we commercialize, if approved, will depend in part on the extent to which reimbursement
for these products and related treatments will be available from third-party payors, including government health administration authorities,
managed care organizations and private health insurers. Significant uncertainty exists as to the coverage and reimbursement status of
any products for which we may obtain regulatory approval. Third-party payors decide which therapies they will pay for and establish reimbursement
levels. Third-party payors in the United States often rely upon Medicare coverage policy and payment limitations in setting their own
coverage and reimbursement policies. However, decisions regarding the extent of coverage and amount of reimbursement to be provided for
any product candidates that we develop will be made on a payor-by-payor basis. One payor’s determination to
provide coverage for a drug does not assure that other payors will also provide coverage for the drug. Additionally,
a third-party payor’s decision to provide coverage for a therapy does not imply that an adequate reimbursement rate will be approved.
Third-party payors are increasingly challenging the price, examining the medical necessity and reviewing the cost-effectiveness of medical
products, therapies and services, in addition to questioning their safety and efficacy. We may incur significant costs to conduct expensive
pharmaco-economic studies in order to demonstrate the medical necessity and cost-effectiveness of our product candidates, in addition
to the costs required to obtain FDA approvals. Our product candidates may not be considered medically necessary or cost-effective.
Each
payor determines whether or not it will provide coverage for a therapy, what amount it will pay the manufacturer for the therapy, and
on what tier of its list of covered drugs, or formulary, it will be placed. The position on a payor’s formulary, generally determines
the co-payment that a patient will need to make to obtain the therapy and can strongly influence the adoption of such therapy
by patients and physicians. Patients who are prescribed treatments for their conditions and providers prescribing such services generally
rely on third-party payors to reimburse all or part of the associated healthcare costs. Patients are unlikely to use our products, and
providers are unlikely to prescribe our products, unless coverage is provided and reimbursement is adequate to cover a significant portion
of the cost of our products and their administration. Therefore, coverage and adequate reimbursement is critical to new medical product
acceptance.
In
the United States, no uniform policy of coverage and reimbursement for products exists among third-party payors. Therefore, coverage and
reimbursement for our products can differ significantly from payor to payor. As a result, obtaining coverage and reimbursement approval
of a product from a government or other third-party payor is a time-consuming and costly process that could require us to provide to each
payor supporting scientific, clinical and cost-effectiveness data for the use of our products on a payor-by-payor basis, with no assurance
that coverage and adequate reimbursement will be obtained. Even if we obtain coverage for a given product, the resulting reimbursement
payment rates might not be adequate for us to achieve or sustain profitability or may require co-payments that patients find unacceptably
high. Additionally, third-party payors may not cover, or provide adequate reimbursement for, long-term follow-up evaluations required
following the use of product candidates, once approved.
A
primary trend in the U.S. healthcare industry and elsewhere is cost containment. Third-party payors have attempted to control costs by
limiting coverage and the amount of reimbursement for particular medications. We cannot be sure that coverage and reimbursement will be
available for any product that we may commercialize and, if reimbursement is available, what the level of reimbursement will be. Even
if favorable coverage and reimbursement status is attained for one or more product candidates for which we receive regulatory approval,
less favorable coverage policies and reimbursement rates may be implemented in the future. Inadequate coverage and reimbursement may impact
the demand for, or the price of, any drug for which we obtain marketing approval. If coverage and adequate reimbursement are not available,
or are available only to limited levels, we may not be able to successfully commercialize our current and any future product candidates
that we develop.
We are subject to environmental laws and regulations that govern
the use, storage, handling and disposal of hazardous materials and other waste products.
We are subject to environmental
laws and regulations governing the use, storage, handling and disposal of hazardous materials and other waste products. We have health
and safety policies and procedures in place to assess the risks associated with use of hazardous materials, and the assessment includes
information for employees on how the substances should be used to avoid contamination of the environment and inadvertent exposure to themselves
and their colleagues. Despite our precautions for handling and disposing of these materials, we cannot eliminate the risk of accidental
contamination or injury. In the event of a hazardous waste spill or other accident, we could be liable for damages, penalties or other
forms of censure. If we fail to comply with any laws or regulations, or if an accident occurs, we may have to pay significant penalties
and may be held liable for any damages that result. This liability could exceed our financial resources and could harm our reputation.
We may also have to incur significant additional costs to comply with current or future environmental laws and regulations. Our failure
to comply with any government regulation applicable to our laboratory and the materials used in our laboratory may adversely affect our
ability to develop, produce, market or partner any products we may commercialize or develop.
Our employees, principal investigators,
consultants and commercial partners may engage in misconduct or other improper activities, including noncompliance with regulatory standards
and requirements, which could have a material adverse effect on our business.
We are exposed to the
risk of employee fraud or other misconduct by our employees, principal investigators, consultants and commercial partners. Misconduct
by such parties could include intentional failures to comply with applicable regulations, provide accurate information to regulatory authorities,
comply with manufacturing standards, comply with healthcare fraud and abuse laws and regulations, report financial information or data
accurately, or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry
are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws
and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive
programs and other business arrangements. Such misconduct could also involve the improper use of information obtained in the course of
clinical trials, which could result in regulatory sanctions and serious harm to our reputation. We have adopted a Code of Business Conduct
and Ethics, but it is not always possible to identify and deter employee misconduct, and the precautions we have taken 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 be in compliance with such laws or regulations. If any such actions are instituted
against us and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on
our business and results of operations, including the imposition of significant fines or other sanctions.
Unexpected facility shutdowns or system failures may occur and
our disaster recovery plans may not be sufficient.
We depend on the performance,
reliability and availability of our properties, machinery, and laboratory equipment and information technology systems. We may not be
able to access our facilities as a result of events beyond our control, such as extreme weather conditions, quarantines, flood, fire,
theft, terrorism and acts of God.
Further, any damage to or
failure of our equipment and/or systems could also result in disruptions to our operations. A complete or partial failure of our information
technology systems, or those of our CROs and other third parties on which we rely, or corruption of data could result in our inability
to access information that we need in order to meet our obligations to our customers or a breach of confidentiality with respect to our
or our customers’ proprietary information. If such an event were to occur and cause interruptions in our operations, it could result
in a material disruption of our drug development programs. For example, the loss of clinical trial data from completed or ongoing clinical
trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data.
Our disaster recovery plans may not adequately address every potential event and our insurance policies may not cover any loss in full
or in part (including losses resulting from business interruptions) or damage that we suffer fully or at all. The occurrence of one or
more of these events could have a material adverse effect on our business, financial position, reputation or prospects, and might lead
to a claim for damages.
Our business may be adversely affected by
economic conditions and current economic weakness.
Any economic downturn either
globally, regionally or locally, including the economic downturn due to COVID-19 or due to geopolitical instability, in any country in
which we operate may have an adverse effect on the demand for any products derived from our product candidates. A more prolonged economic
downturn may lead to an overall decline in our sales, limiting our ability to generate a profit and positive cash flow. The markets in
which we expect the products to be offered are directly affected by many national and international factors that are beyond our control,
such as political, economic, currency, social and other factors.
Our business may be impacted by political
events, war, terrorism, business interruptions and other geopolitical events and uncertainties beyond our control.
War, terrorism, geopolitical
uncertainties and other business interruptions could cause damage to disrupt or cancel the conduct of our planned clinical trials on a
global or regional basis, which could have a material adverse effect on our business, clinical sites or vendors with which we do business.
Such events could also decrease patient demand to enroll in our clinical trials or make it difficult or impossible for us to deliver products
and services to our clinical investigational sites. In addition, territorial invasions can lead to cybersecurity attacks on companies,
such as ours, located far outside of the conflict zone. In the event of prolonged business interruptions due to geopolitical events, we
could incur significant losses, require substantial recovery time and experience significant expenditures in order to resume our business
or clinical operations. We have no operations in Russia or Ukraine, but we do not and cannot know if the current uncertainties in these
geopolitical areas, which are unfolding in real-time, may escalate and result in broad economic and security conditions or rationing of
medical supplies, which could limit our ability to conduct clinical trials or result in material implications for our business.
We are exposed to the risks of doing business
internationally.
We have in the past, and may
in the future, operate outside of the United Kingdom. These international operations are subject to a number of risks inherent in operating
in different countries. These include, but are not limited to, risks regarding:
| | currency
exchange rate fluctuations; |
| | restrictions
on repatriation of earnings; |
| | difficulty
of effective enforcement of contractual provisions in local jurisdictions;’ |
| | inadequate
intellectual property (including confidentiality) protection in foreign countries; |
| | public
health epidemics or outbreaks, such as COVID-19; |
| | trade-protection measures, import or export licensing requirements and fines, penalties or suspension or
revocation of export privileges; and |
| | changes in a specific country’s or a region’s political or economic conditions, including
the implications of the United Kingdom’s withdrawal from the European Union. |
The occurrence of any of these events or conditions
could adversely affect our ability to increase or maintain our operations in various countries.
We are exposed to risks related to currency
exchange rates.
We currently conduct a portion
of our operations outside of the United Kingdom. Because we use the British pound sterling as our financial statement reporting currency,
changes in currency exchange rates have had and could have a significant effect on our operating results when our operating results are
translated from the local currency into the British pound sterling. Exchange rate fluctuations between local currencies and the British
pound sterling create risk in several ways, including the following: weakening of the British pound sterling, as seen, for example, following
the results of the Brexit referendum, may increase the British pound sterling cost of overseas research and development expenses and the
cost of sourced product components outside the United Kingdom; strengthening of the British pound sterling may decrease the value of our
revenues denominated in other currencies; the exchange rates on non-sterling transactions and cash deposits can distort our financial
results; and commercial pricing and profit margins are affected by currency fluctuations. Future changes in currency exchange rates could
have a material adverse effect on our financial results.
We are subject to cybersecurity risks and
other cyber incidents, including the misappropriation of our information and other breaches of information security that may result in
disruption and the incurrence of costs in an effort to minimize those risks.
In the normal course of conducting
our business, we collect and store sensitive data on our networks, including intellectual property, personal information of our employees,
and our proprietary business information and that of our customers, vendors and business partners. Despite the security measures
we have in place and any additional measures we may implement in the future to safeguard our systems and to mitigate potential security
risks, our facilities and systems, and those of our third-party service providers, could be vulnerable to security breaches, computer
viruses, lost or misplaced data, programming errors, human errors, acts of vandalism or other events. Any steps we take to deter and mitigate
these risks may not be successful and may cause us to incur increasing costs. Any disruption of our systems or security breach or event
resulting in the misappropriation, loss or other unauthorized disclosure of confidential information, whether by us directly or by our
third-party service providers, could damage our reputation, result in the incurrence of costs, expose us to the risks of litigation and
liability, result in regulatory penalties under laws that protect privacy of personal information, disrupt our business or otherwise affect
our results of operations.
We may incur substantial costs in our efforts
to comply with evolving global data protection laws and regulations, and any failure or perceived failure by us to comply with such laws
and regulations may harm our business and operations.
We
maintain a large quantity of sensitive information, including confidential business and personal information in connection with the conduct
of our clinical trials and related to our employees, and we are subject to laws and regulations governing the privacy and security of
such information. In the United States, there are numerous federal and state privacy and data security laws and regulations governing
the collection, use, disclosure and protection of personal information, including federal and state health information privacy laws, federal
and state security breach notification laws, and federal and state consumer protection laws. The legislative and regulatory landscape
for privacy and data protection continues to evolve, and there has been an increasing focus on privacy and data protection issues, including
with respect to regulatory enforcement and private litigation, which may affect our business and is expected to increase our compliance
costs and exposure to liability. In the United States, numerous federal and state laws and regulations could apply to our operations or
the operations of our partners, including state data breach notification laws, state health information privacy laws, and federal and
state consumer protection laws and regulations, that govern the collection, use, disclosure, and protection of health-related and other
personal information. 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 and regulations promulgated
thereunder. Depending on the facts and circumstances, we could be subject to significant penalties if we obtain, use, or disclose, or
are subject to an actual or alleged data breach regarding, individually identifiable health information in a manner that is not authorized
or permitted by HIPAA.
In
the European Union, the General Data Protection Regulation (EU) 2016/679, or GDPR, lays down the legal framework for data protection and
privacy. The GDPR applies directly in all European Union member states (until December 31, 2020, this included the United Kingdom) and
applies to companies with an establishment in the European Economic Area, or EEA, and to certain other companies not in the EEA that offer
or provide goods or services to individuals located in the EEA or monitor the behavior of individuals located in the EEA. In the United
Kingdom, the GDPR has been converted into United Kingdom domestic law, pursuant to the Data Protection, Privacy and Electronic Communications
(Amendments etc.)(EU Exit) Regulations 2019 (as amended), which makes some minor technical amendments to ensure the GDPR is operable in
the United Kingdom, or the UK GDPR. The UK GDPR is also supplemented by the Data Protection Act 2018. United Kingdom and European Union
data protection law is therefore aligned. The GDPR and UK GDPR implement stringent operational requirements for controllers of personal
data, including, for example, expanded disclosures about how personal information is to be used, limitations on retention of information,
increased requirements pertaining to health data and pseudonymized (i.e., key-coded) data, increased cyber security requirements, mandatory
data breach notification requirements and higher standards for controllers to demonstrate that they have obtained a valid legal basis
for certain data processing activities. The GDPR provides that European Union member states may make their own further laws and regulations
in relation to the processing of genetic, biometric or health data, which could result in differences between member states, limit our
ability to use and share personal data or could cause our costs to increase, and harm our business and financial condition.
Failure
to comply with European Union laws, including failure under the GDPR and UK GDPR, Data Protection Act 2018, ePrivacy Directive and other
laws relating to the security of personal data may result in fines up to €20 million (or £17.5 million under the UK GDPR) or
up to 4% of the total worldwide annual turnover of the preceding financial year, if greater, and other administrative penalties including
criminal liability, which may be onerous and adversely affect our business, financial condition, results of operations and prospects.
The GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory
authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR. In addition, the GDPR
includes restrictions on cross-border data transfers. Failure to comply with the GDPR and related
laws may lead to increased risk of private actions from data subjects and consumer not-for-profit organizations, including a new form
of class action that is available under the GDPR. While we do not routinely handle or process personal data, we do maintain a database
of employee information; however, since the GDPR and UK GDPR only came into effect recently, the potential risks associated with non-compliance
therewith are uniquely difficult to predict.
We may in the future
be unable to retain and recruit qualified scientists, key executives and directors, key employees
or key consultants, may delay our development efforts or otherwise harm our business.
Our
future development and prospects depend to a large degree on the experience, performance and continued service of our senior management
team, including members of our Board of Directors. We have invested in our management team at all levels. We have entered into contractual
arrangements with our directors and senior management team with the aim of securing the services of each of them. However, retention of
these services or the identification of suitable replacements cannot be guaranteed. There can be no guarantee that the services of the
current directors and senior management team will be retained, or that suitably skilled and qualified individuals can be identified and
employed, which may adversely impact our ability to develop our technologies and/or provide our services at the time requested by our
customers or our ability to market our services and technologies, and otherwise to grow our business, could be impaired. The loss of the
services of any of the directors or other members of the senior management team and the costs of recruiting replacements may have a material
adverse effect on us and our commercial and financial performance.
The
ability to continue to attract and retain employees with the appropriate expertise and skills also cannot be guaranteed. Finding and hiring
any additional personnel and replacements could be costly and might require us to grant significant equity awards or other incentive compensation,
which could adversely impact our financial results, and there can be no assurance that we will have sufficient financial resources to
do so. Effective product development and innovation, upon which our success is dependent, is in turn dependent upon attracting and retaining
talented technical and scientific personnel, who represent a significant asset and serve as the source of our technological and product
innovations. If we are unable to hire, train and retain such personnel in a timely manner, the development and introduction of our products
could be delayed and our ability to sell our products and otherwise to grow our business will be impaired and the delay and inability
may have a detrimental effect upon our performance.
Risks related to our intellectual property
Our success depends in part on our ability
to protect rights in our intellectual property, which cannot be assured.
Our success and ability to
compete effectively are in large part dependent upon exploitation of proprietary technologies and products that we have developed internally
or have acquired or in-licensed. To date, we have relied on copyright, trademark and trade secret laws, as well as confidentiality procedures,
non-compete and/or work for hire invention assignment agreements and licensing arrangements with our employees, consultants, contractors,
customers and vendors, to establish and protect our rights to our technology and, to the best extent possible, control the access to and
distribution of our technology, software, documentation and other proprietary information, all of which offer only limited protection.
Where we have the right to do so under our agreements, we seek to protect our proprietary position by filing patent applications in the
United States, the United Kingdom and worldwide related to our novel technologies and products that are important to our business. The
patent positions of biotechnology and pharmaceutical companies generally are highly uncertain, involve complex legal and factual questions
and have in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial
value of our patents, including those patent rights licensed to us by third parties, are highly uncertain. There can be no assurance that:
| | the scope of our patents provides and will provide us with exclusivity with respect to any or all of our
product candidates and technologies, as well as any other technologies and/or products that address the same problems as our technologies
and product candidates by a different means, whether in the same manner as us or not; |
| | pending or future patent applications will be issued as patents; |
| | our patents, and/or those patents to which we are licensed, are and will remain valid and enforceable
and will not be subject to invalidity or revocation proceedings and that such proceedings will not result in a complete or partial loss
of rights; |
| | our entitlement to exploit patents from time to time (including patents registered solely in our name
or our affiliates’ name or in the joint names of Midatech or an affiliate and a third party or patents which are licensed to us)
is and will be sufficient to protect our core intellectual property rights against third parties, our commercial activities from competition
or to support comprehensively our ability to develop and market our proposed products either now or in the future; |
| | the lack of any particular patents or rights to exploit any particular patents, and the scope of our patents,
will not have a material adverse effect on our ability to develop and market our proposed product candidates, either now or in the future; |
| | we have or will have the resources to pursue any infringer of: (i) patents registered in our name (whether
solely or jointly with a third party) from time to time; or (ii) patents licensed to us where we or an affiliate have the financial responsibility
to bring such infringement actions pursuant to the relevant license agreement; |
| | we will develop technologies or product candidates which are patentable, either alone or in conjunction
with third parties; |
| | the ownership, scope or validity of any patents registered in our name (either solely or jointly) from
time to time will not be challenged by third parties, including parties with whom we, or any affiliate, have entered into collaboration
projects or co-ownership arrangements and that any such challenge will not be successful; |
| | any patent or patent application owned solely or jointly by us will not be challenged on grounds that
we failed to identify the correct inventors or that we failed to comply with our duty of disclosure to the United States Patent and Trademark
Office or any equivalent office in a foreign jurisdiction having a disclosure requirement; |
| | any issued patent in our sole or joint name from time to time will not be challenged in one or more post-grant
proceedings, including but not limited to inter partes review, derivation proceedings, interferences, and that like; and that any
such challenge will not result in a complete or partial loss of rights to such issued patent or patents; |
| | any patent applications in our sole or joint name from time to time will not be opposed by any third party,
including parties to collaboration, co-existence and any other contractual relationship with us or any of its members; |
| | the license agreements between us and third parties are and will be valid and subsisting in the future
or until their expiry dates, and that we have complied with our contractual obligations under the license agreements; |
| | all intellectual property capable of being commercialized that is or has been generated pursuant to collaboration
agreements between us and third parties will be or has been identified; |
| | all intellectual property generated pursuant to collaboration agreements and to which we have a contractual
entitlement or generated by employees has been lawfully assigned into our sole name (or to one of our subsidiaries); |
| | in respect of all intellectual property generated pursuant to a collaboration agreement between us and
a third party to which we and that third party have a joint contractual entitlement, that such intellectual property has been lawfully
assigned into joint names and the rights between us and that third party are properly regulated by a co-ownership agreement; and |
| | beyond contractual warranties, the licensors of intellectual property to us or our affiliates own the
relevant patents and that those patents have not and will not be the subject of, or subject to, infringement, invalidity or revocation
actions. |
The steps we have taken
to protect our proprietary rights may not be adequate to preclude misappropriation of our proprietary information or infringement of our
intellectual property rights, both inside and outside of the United Kingdom and United States. The rights already granted under any of
our currently issued patents and those that may be granted under future issued patents may not provide us with the proprietary protection
or competitive advantages we are seeking. If we are unable to obtain and maintain patent protection for our technology and products, or
if the scope of the patent protection obtained is not sufficient, our competitors could develop and commercialize technology and products
similar or superior to ours, and our ability to successfully commercialize our technology and products may be adversely affected.
With respect to patent rights,
we do not know whether any of the pending patent applications for any of our licensed compounds will result in the issuance of patents
that protect our technology or products, or which will effectively prevent others from commercializing competitive technologies and products.
Although we have a number of issued patents covering our technology, our pending applications cannot be enforced against third parties
practicing the technology claimed in such applications unless and until a patent issues from such applications. Further, the examination
process may require us to narrow the claims, which may limit the scope of patent protection that may be obtained. Because the issuance
of a patent is not conclusive as to its inventorship, scope, validity or enforceability, issued patents that we own or have licensed from
third parties may be challenged in the courts or patent offices in the European Union, United Kingdom, the United States and other foreign
jurisdictions. Overall, such challenges may result in the loss of patent protection, the narrowing of claims in such patents, or the invalidity
or unenforceability of such patents, which could limit our ability to stop others from using or commercializing similar or identical technology
and products, or limit the duration of the patent protection for our technology and products. Protecting against the unauthorized use
of our patented technology, trademarks and other intellectual property rights is expensive, difficult and may in some cases not be possible.
In some cases, it may be difficult or impossible to detect third party infringement or misappropriation of our intellectual property rights,
even in relation to issued patent claims, and proving any such infringement may be even more difficult.
The patent prosecution process
is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable
cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of inventions made in the course of our
development and commercialization activities before it is too late to obtain patent protection on them. Further, given the amount of time
required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire
before or shortly after such candidates are commercialized. We expect to seek extensions of patent terms where they are available in any
countries where we are prosecuting patents. However, the applicable authorities, including the FDA in the United States, and any equivalent
regulatory authority in other countries, may not agree with our assessment of whether such extensions are available, and may refuse to
grant extensions to our patents, or may grant more limited extensions than we request. If this occurs, our competitors may be able to
take advantage of our investment in development and clinical trials by referencing our clinical and preclinical data and launch their
product earlier than might otherwise be the case. Changes in either the patent laws or interpretation of the patent laws in the European
Union, the United Kingdom, the United States and other countries may diminish the value of our patents or narrow the scope of our patent
protection. The laws of foreign countries may not protect our rights to the same extent as the laws of the United Kingdom or the United
States, and these foreign laws may also be subject to change. Publication of discoveries in the scientific literature often lag behind
the actual discoveries, and patent applications typically are not published until 18 months after filing or, in some cases, not at all.
Therefore, we cannot be certain that we were the first to make the inventions claimed in our owned or licensed patents or pending patent
applications, or that we were the first to file for patent protection of such inventions.
Previously, in the United
States, assuming the other requirements for patentability are met, the first to make the claimed invention was entitled to the patent.
Outside the United States, the first to file a patent application is entitled to the patent. In March 2013, the United States transitioned
to a “first to file” system in which the first inventor to file a patent application will be entitled to the patent. Under
either the previous or current system, third parties will be allowed to submit prior art prior to the issuance of a patent by the United
States Patent and Trademark Office, and may become involved in opposition, derivation, reexamination, inter-partes review or interference
proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding
or litigation could reduce the scope of, or invalidate, our patent rights, which could adversely affect our competitive position with
respect to third parties.
Our commercial success depends, in part,
upon our not infringing intellectual property rights owned by others.
Although we believe that we
have proprietary platforms for our technologies and product candidates, we cannot determine with certainty whether any existing third
party patents or the issuance of any third party patents in the future would require us to alter our technology, obtain licenses or cease
certain activities. We may become subject to claims by third parties that our technology infringes their intellectual property rights,
in which case we will have no option other than to defend the allegation, which may be possible to resolve through negotiation or which
might result in court proceedings. An adverse outcome in any of these circumstances is that we might be subject to significant liabilities,
be required to cease using a technology or to pay license fees (both prospectively and retrospectively); and may be subject to the payment
of significant damages. We could incur substantial costs in any litigation or other proceedings relating to patent rights, even if it
is resolved in our favor. If the proceedings occur in the United States, it is likely that we will be responsible for our own legal costs,
no matter the outcome of the litigation. In contrast, in the United Kingdom, the losing party typically is ordered to pay the winning
party’s costs, although it is rare to have a complete recovery of all costs from the losing side. Some of our competitors may be
able to sustain the costs of complex litigation more effectively or for a longer time than we can because of their substantially greater
resources. In addition, uncertainties or threatened or actual disputes relating to any patent, patent application or other intellectual
property right (including confidential information) could have a material adverse effect on our ability to market a product, enter into
collaborations in respect of the affected products, or raise additional funds.
The policing of unauthorized
use of our patented technologies and product candidates is difficult and expensive. There can be no assurance that the steps we take will
prevent misappropriation of, or prevent an unauthorized third party from obtaining or using, the technologies, know-how and products we
rely on. In addition, effective protection may be unavailable or limited in some jurisdictions. Any misappropriation of our proprietary
technology, product candidates and intellectual property could have a negative impact on our business and our operating results. Litigation
may be necessary in the future to enforce or protect our rights or to determine the validity or scope of the proprietary rights of others.
Litigation could cause us to incur substantial costs and divert resources and management attention away from our daily business and there
can be no guarantees as to the outcome of any such litigation. In addition, a defendant in any such litigation may counterclaim against
us, resulting in additional time and expense to defend against such a counterclaim, which defense may not be successful.
We may become involved in lawsuits to protect
or enforce our intellectual property, which could be expensive, time consuming and unsuccessful.
Competitors may infringe on
our patents or misappropriate or otherwise violate our intellectual property rights. To counter infringement or unauthorized use, litigation
may be necessary in the future to enforce or defend our intellectual property rights, to protect our trade secrets or to determine the
validity and scope of our own intellectual property rights or the proprietary rights of others. This can be expensive and time consuming.
Many of our current and potential competitors have the ability to dedicate substantially greater resources to defend our intellectual
property rights than we can. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating
our intellectual property. Litigation could result in substantial costs and diversion of management resources, which could harm our business
and financial results. In addition, in an infringement proceeding, a court may decide that a patent owned by or licensed to us is invalid
or unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover
the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk of being invalidated,
held unenforceable or interpreted narrowly. Furthermore, because of the substantial amount of discovery required in connection with intellectual
property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of
litigation.
Third parties may initiate legal proceedings
alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could have a material
adverse effect on the success of our business.
Our commercial success depends
upon our ability and the ability of our collaborators and licensing partners to develop, manufacture, market and sell our product candidates,
and to use our proprietary technologies without infringing the proprietary rights of third parties. We may become party to, or threatened
with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our products and technology.
Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future. If we
are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party
to continue developing and commercializing our products and technology. However, we may not be able to obtain any required license on
commercially reasonable terms or at all. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors
access to the same technologies licensed to us. We could be forced, including by court order, to cease commercializing the infringing
technology or product. In addition, in any such proceeding or litigation, we could be found liable for monetary damages. A finding of
infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations, which
could materially harm our business. Any claims by third parties that we have misappropriated our confidential information or trade secrets
could have a similar negative impact on our business.
We may be subject to claims that our employees
have wrongfully used or disclosed alleged trade secrets of their former employers.
Many of our employees, including
our senior management, were previously employed at other biotechnology or pharmaceutical companies. Some of these employees, including
members of our senior management, executed proprietary rights, non-disclosure and non-competition agreements in connection with such previous
employment. Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for
us, we may be subject to claims that we or these employees have used or disclosed intellectual property, including trade secrets or other
proprietary information, of any such employee’s former employer. We are not aware of any threatened or pending claims related to
these matters or concerning the agreements with our senior management, but in the future litigation may be necessary to defend against
such claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property
rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a
potential distraction to management.
If we are unable to protect the confidentiality
of our trade secrets, our business and competitive position could be harmed.
In addition to seeking patents
for some of our technology and product candidates, we also rely on trade secrets, including unpatented know-how, technology and other
proprietary information, to maintain our competitive position. We seek to protect these trade secrets, in part, by entering into non-disclosure
and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific
collaborators, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention
or patent assignment agreements with our employees and consultants. Despite these efforts, any of these parties may breach the agreements
and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches.
In addition, a court may determine that we failed to take adequate steps to protect our trade secrets, in which case it may not be possible
to enforce our trade secret rights. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult,
expensive and time-consuming, and the outcome is unpredictable. In addition, some may be less willing or unwilling to protect trade secrets.
If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent
such competitor from using that technology or information to compete with us, which could harm our competitive position.
We may face potential product liability,
and, if successful claims are brought against us, we may incur substantial liability and costs. If the use of our product candidates harms
patients or is perceived to harm patients even when such harm is unrelated to our product candidates, our regulatory approvals could be
revoked or otherwise negatively impacted and we could be subject to costly and damaging product liability claims.
In carrying out our activities,
we may potentially face contractual and statutory claims, or other types of claims from customers, suppliers and/or investors. In addition,
we are exposed to potential product liability risks that are inherent in the research, development, production and supply of products.
Subjects enrolled in our clinical trials, consumers, healthcare providers or other persons administering or selling products based on
our and our collaborators’ technology may be able to bring claims against us based on the use of such products. If we cannot successfully
defend ourselves against claims that any product candidates commercialized caused injuries, we could incur substantial costs and liabilities.
Irrespective of their merits or actual outcome, liability claims may result in:
| | decreased demand for any product candidates that we may develop; |
| | withdrawal of clinical trial participants; |
| | termination of clinical trials; |
| | significant negative media attention and injury to our reputation; |
| | significant costs to defend the related litigation; |
| | substantial monetary awards to trial subjects or patients; |
| | diversion of management and scientific resources from our business operations; and |
| | the inability to commercialize any products that we may develop. |
While we have obtained product
liability coverage, our insurance coverage may not be sufficient to cover our entire product liability related expenses or losses and
may not cover us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive and, in the
future, we may not be able to maintain insurance coverage at a reasonable cost, in sufficient amounts or upon adequate terms to protect
us against losses due to product liability. If we determine that it is prudent to increase our product liability, we may be unable to
obtain this increased product liability insurance on commercially reasonable terms or at all. Large judgments have been awarded in class
action or individual lawsuits based on drugs that had unanticipated side effects, including side effects that may be less severe than
those of our products. A successful product liability claim or series of claims brought against us could cause the price of the Ordinary
Shares and/or Depositary Shares to decline and, if judgments exceed our insurance coverage, could decrease our cash and have a material
adverse effect our business, results of operations, financial condition and prospects.
Risks Related to our Relationships with Third
Parties
We rely on third parties to conduct our
preclinical and clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines,
we may not be able to obtain regulatory approval for or commercialize our product candidates and our business could be substantially harmed.
We are, and may continue to
be, reliant on other parties for the successful development and commercialization of many of our product candidates. We rely upon CROs
for the conduct of our clinical studies. We rely on these parties for execution of our preclinical 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 and legal, regulatory and scientific standards, and our reliance on the CROs or collaboration partners does
not relieve us of our regulatory responsibilities. We also rely on third parties to assist in conducting our preclinical studies in accordance
with good laboratory practices, or GLP, and requirements with respect to animal welfare. We and our CROs or collaboration or licensing
partners are required to comply with GCP, which are regulations and guidelines enforced by the MHRA, the FDA, the EMA and comparable foreign
regulatory authorities for all of our products in clinical development. Regulatory authorities enforce these GCP through periodic inspections
of trial sponsors, principal investigators and trial sites. If we or any of our CROs or partners fail to comply with applicable GCP, the
clinical data generated in our clinical trials may be deemed unreliable and the EMA, the MHPA, the FDA or comparable foreign regulatory
authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot be assured that
upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials comply with
GCP requirements. In addition, our clinical trials must be conducted with product produced under cGMP requirements. Failure to comply
with these regulations may require us to repeat preclinical and clinical trials, which would delay the regulatory approval process.
Our CROs are not our employees,
and except for remedies available to us under such agreements with such CROs, we cannot control whether or not they devote sufficient
time and resources to our on-going clinical, nonclinical and preclinical programs. If CROs do not successfully carry out their contractual
duties or obligations or meet expected deadlines 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, then our clinical trials may be extended,
delayed or terminated and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. As
a result, our results of operations and the commercial prospects for our product candidates would be harmed, our costs could increase
and our ability to generate revenues could be delayed.
If any of our relationships
with these third parties terminate, we may not be able to enter into arrangements with alternative third parties on commercially reasonable
terms, or at all. Entering into arrangements with alternative CROs, clinical trial investigators or other third parties involves additional
cost and requires management focus and time, in addition to requiring a transition period when a new CRO, clinical trial investigator
or other third party begins work. If third parties do not successfully carry out their contractual duties or obligations or meet expected
deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain are compromised due to the failure
to adhere to our clinical protocols, regulatory requirements or for other reasons, any clinical trials such third parties are associated
with may be extended, delayed or terminated, and we may not be able to obtain marketing approval for or successfully commercialize our
product candidates. As a result, we believe that our financial results and the commercial prospects for our product candidates in the
subject indication would be harmed, our costs could increase and our ability to generate revenue could be delayed.
Because we have relied on
third parties, our internal capacity to perform these functions is limited. Outsourcing these functions involves risk that third parties
may not perform to our standards, may not produce results in a timely manner or may fail to perform at all. In addition, the use of third
party service providers requires us to disclose our proprietary information to these parties, which could increase the risk that this
information will be misappropriated. We currently have a small number of employees, which limits the internal resources we have available
to identify and monitor our third party providers. To the extent we are unable to identify and successfully manage the performance of
third party service providers in the future, our business may be adversely affected. 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.
We rely on third parties to manufacture
our product candidates, and we expect to continue to rely on third parties for the clinical as well as any future commercial supply of
our product candidates and other future product candidates. The development of our current and future product candidates, and the commercialization
of any approved products, could be stopped, delayed or made less profitable if any such third party fails to provide us with sufficient
clinical or commercial quantities of such product candidates or products, fails to do so at acceptable quality levels or prices or fails
to achieve or maintain satisfactory regulatory compliance.
We do not currently have,
and we do not plan to build, the infrastructure or capability internally to manufacture current product candidates or any future product
candidates for use in the conduct of our clinical trials or, if approved, for commercial supply. We rely on, and expect to continue to
rely on, contract manufacturing organizations (CMOs). Reliance on third-party contractors may expose us to more risk than if we were to
manufacture our product candidates ourselves. We do not control the manufacturing processes of the CMOs we contract with and are dependent
on those third parties for the production of our product candidates in accordance with relevant applicable regulations, such as cGMP,
which include, among other things, quality control, quality assurance and the maintenance of records and documentation.
In complying with the manufacturing
regulations of the FDA and other comparable foreign regulatory authorities, we and our third-party manufacturers must spend significant
time, money and effort in the areas of design and development, testing, production, record-keeping and quality control to assure that
the product candidates meet applicable specifications and other regulatory requirements. If either we or our CMOs fail to comply with
these requirements, we may be subject to regulatory enforcement action, including the seizure of product candidates and shutting down
of production.
Even if we are able to establish
and maintain agreements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including:
| | reliance on the third party for regulatory, compliance and quality assurance; |
| | the possible breach of the manufacturing agreement by the third party; |
| | the possible misappropriation of our proprietary information, including our trade secrets and know-how;
and |
| | the possible termination or nonrenewal of the agreement by the third party at a time that is costly or
inconvenient for us. |
We or our third-party manufacturers
may encounter shortages in the raw materials or APIs necessary to produce our product candidates in the quantities needed for our clinical
trials or, if our product candidates are approved, in sufficient quantities for commercialization or to meet an increase in demand, as
a result of capacity constraints or delays or disruptions in the market for the raw materials or active pharmaceutical ingredients, including
shortages caused by the purchase of such raw materials or APIs by our competitors or others. The failure by us or our third-party manufacturers
to obtain the raw materials or APIs necessary to manufacture sufficient quantities of our product candidates, may have a material adverse
effect on our business.
Our third-party manufacturers
are subject to inspection and approval by regulatory authorities before we can commence the manufacture and sale of any of our product
candidates, and thereafter are subject to ongoing inspection from time to time. Our third-party manufacturers may not be able to comply
with cGMP regulations or similar regulatory requirements outside of the United States. Our failure, or the failure of our third-party
manufacturers, to comply with applicable regulations could result in regulatory actions, such as the issuance of notices of inspectional
observations, warning letters or sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays,
suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or drugs, operating restrictions
and criminal prosecutions, any of which could significantly and adversely affect supplies of our products. If any of our third-party suppliers
fails to comply with cGMP or other applicable manufacturing regulations, our ability to develop and commercialize our product candidates
could suffer significant interruptions.
Any disruption, such as a
fire, natural hazards or vandalism at our CMOs, or any impacts on our CMOs due to the COVID-19 pandemic, could significantly interrupt
our manufacturing capability. We currently do not have alternative production plans in place or disaster-recovery facilities available.
In case of a disruption, we will have to establish alternative manufacturing sources. This would require substantial capital on our part,
which we may not be able to obtain on commercially acceptable terms or at all. Additionally, we would likely experience months of manufacturing
delays as we build facilities or locate alternative suppliers and seek and obtain necessary regulatory approvals. If this occurs, we will
be unable to satisfy manufacturing needs on a timely basis, if at all. If changes to CMOs occur, then there also may be changes to manufacturing
processes inherent in the setup of new operations for our product candidates and any products that may obtain approval in the future.
Any such changes could require the conduct of bridging studies before we can use any materials produced at new facilities or under new
processes in clinical trials or, for any products reaching approval, in our commercial supply. Further, business interruption insurance
may not adequately compensate us for any losses that may occur and we would have to bear the additional cost of any disruption. For these
reasons, a significant disruptive event of any CMOs could have drastic consequences, including placing our financial stability at risk.
Our product candidates and
any drugs that we may develop may compete with other product candidates and drugs for access to manufacturing facilities. There are no
assurances we would be able to enter into similar arrangements with other manufacturers that operate under cGMP regulations and that might
be capable of manufacturing for us. Any performance failure on the part of our existing or future manufacturers could delay clinical development
or marketing approval.
If we were to experience an
unexpected loss of supply of or if any supplier were unable to meet our clinical or commercial demand for any of our product candidates,
we could experience delays in our planned clinical studies or commercialization. For example, the COVID-19 pandemic may impact our ability
to procure sufficient supplies for the development of our current and future product candidates, and the extent of such impacts will depend
on the severity and duration of the spread of the virus and the actions undertaken to contain COVID-19 or treat its effects. We could
be unable to find alternative suppliers of acceptable quality and experience that can produce and supply appropriate volumes at an acceptable
cost or on favorable terms. Moreover, our suppliers are often subject to strict manufacturing requirements and rigorous testing requirements,
which could limit or delay production. The long transition periods necessary to switch manufacturers and suppliers, if necessary, would
significantly delay our clinical trials and, for any product candidates that reach approval, the commercialization of our products, which
would materially adversely affect our business, financial condition and results of operation.
We are dependent on third party suppliers,
and if we experience problems with any of these third parties, the manufacturing of our product candidates could be delayed, which could
harm our results of operations.
We are dependent upon certain
qualified suppliers, of which there are a limited number, for the supply of raw materials, components, devices and manufacturing equipment,
some of which are manufactured or supplied by small companies with limited resources and experience to support commercial pharmaceutical
and biologics production. Additionally, these suppliers may also have upstream suppliers who supply materials, components, devices and
manufacturing equipment, which may indirectly impact our business operations. Thus, the success of our business may be adversely affected
by the underperformance of third parties, exploitation by third parties of our commercial dependence and by unforeseen interruptions to
third parties’ businesses. Although the existence of several alternative suppliers for each function mitigates the risks associated
with this dependence, as does the availability of commercial insurance in respect of the impact of accidental events, the failure of a
third party to properly to carry out their contractual duties or regulatory obligations could be highly disruptive to our business. Supply
chain failures can result in significant clinical or commercial supply interruptions which could materially hamper our ability to conduct
clinical trials or to supply adequate commercial supplies, and efforts to qualify new suppliers can be costly and time consuming. Further,
any action taken by a third party that is detrimental to our reputation could have a negative impact on our ability to register our trademarks
and/or market and sell our products.
For some of these raw materials,
components, devices and manufacturing equipment, we rely and may in the future rely on sole source vendors or a limited number of vendors.
The supply of the reagents and other specialty materials and equipment that are necessary to produce our product candidates could be reduced
or interrupted at any time. In such case, identifying and engaging an alternative supplier or manufacturer could result in delay, and
we may not be able to find other acceptable suppliers or manufacturers on acceptable terms, or at all. Switching suppliers or manufacturers
may involve substantial costs and is likely to result in a delay in our desired clinical and commercial timelines. If we change suppliers
or manufacturers for commercial production, applicable regulatory agencies may require us to conduct additional studies or trials. If
key suppliers or manufacturers are lost, or if the supply of the materials is diminished or discontinued, we may not be able to develop,
manufacture and market our product candidates in a timely and competitive manner, or at all. An inability to continue to source product
from any of these suppliers, which could be due to a number of issues, including regulatory actions or requirements affecting the supplier,
adverse financial or other strategic developments experienced by a supplier, labor disputes or shortages, unexpected demands or quality
issues, could adversely affect our ability to satisfy demand for our product candidates, which could adversely and materially affect our
product sales and operating results or our ability to conduct clinical trials, either of which could significantly harm our business.
As we continue to develop
our product candidates and manufacturing processes, we expect that we will need to obtain rights to and supplies of certain materials
and equipment to be used as part of that process. We may not be able to obtain rights to such materials on commercially reasonable terms,
or at all, and if we are unable to alter our process in a commercially viable manner to avoid the use of such materials or find a suitable
substitute, it would have a material adverse effect on our business. Even if we are able to alter our process so as to use other materials
or equipment, such a change may lead to a delay in our clinical development and/or commercialization plans. If such a change occurs for
product candidate that is already in clinical testing, the change may require us to perform both in vitro or in vivo comparability studies
and to collect additional data from patients prior to undertaking more advanced clinical trials. These factors could cause the delay of
studies or trials, regulatory submissions, required approvals or commercialization of product candidates that we develop, cause us to
incur higher costs and prevent us from commercializing our product candidates successfully.
Our counterparties may become insolvent.
There is a risk that parties
with whom we trade or have other business relationships with (including partners, joint venturers, customers, suppliers, subcontractors
and other parties) may become insolvent. This may be due to general economic conditions or factors specific to that company. In the event
that a party with whom we trade becomes insolvent, this could have an adverse impact on our revenues and profitability.
Our relationships with customers, healthcare
providers, physicians, prescribers, purchasers, third party payors, charitable organizations and patients are subject to applicable anti-kickback,
fraud and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages,
reputational harm and diminished profits and future earnings.
Although we do not currently
have any products on the market, upon commercialization of any of our product candidates, if approved, we will be subject to additional
healthcare statutory and regulatory requirements and oversight by federal and state governments in the United States as well as foreign
governments in the jurisdictions in which we conduct our business. Healthcare providers, physicians and third-party payors in the United
States and elsewhere play a primary role in the recommendation and prescription of drug and biological products. Arrangements with third-party
payors and customers can expose pharmaceutical manufacturers to broadly applicable fraud and abuse and other healthcare laws and regulations,
including, without limitation, the federal Anti-Kickback Statute, or AKS, and the False Claims Act, or FCA, which may constrain the business
or financial arrangements and relationships through which such companies sell, market and distribute pharmaceutical products. In particular,
the research of any of our product candidates, as well as the promotion, sales and marketing of healthcare items and services, as well
as certain business arrangements in the healthcare industry, are subject to extensive laws designed to prevent fraud, kickbacks, self-dealing
and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion,
structuring and commission(s), certain customer incentive programs and other business arrangements generally. Activities subject to these
laws also involve the improper use of information obtained in the course of patient recruitment for clinical trials.
The healthcare laws that may
affect us include: the federal fraud and abuse laws, including the AKS; false claims and civil monetary penalties laws, including the
FCA and Civil Monetary Penalties Law; federal data privacy and security laws, including HIPAA, as amended by HITECH; and the federal Physician
Payments Sunshine Act related to ownership and investment interests and payments and/or other transfers of value made to or held by physicians
(including doctors, dentists, optometrists, podiatrists, and chiropractors) and teaching hospitals and, beginning in 2022, information
regarding payments and transfers of value provided to other healthcare professionals, such as physician assistants and nurse practitioners
among others, during the previous year. In addition, many states have similar laws and regulations that may differ from each other and
federal law in significant ways, thus complicating compliance efforts. Moreover, several states require pharmaceutical companies to comply
with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal
government and may require manufacturers to report information related to payments and other transfers of value to physicians and other
healthcare providers or marketing expenditures. Additionally, some state and local laws require the registration of pharmaceutical sales
representatives in the jurisdiction.
The scope and enforcement
of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of
the lack of applicable precedent and regulations. Ensuring business arrangements comply with applicable healthcare laws, as well as responding
to possible investigations by government authorities, can be time- and resource-consuming and can divert a company’s attention from
other aspects of its business.
It is possible that governmental
and enforcement authorities will conclude that our business practices may not comply with current or future statutes, regulations or case
law interpreting applicable fraud and abuse or other healthcare laws and regulations. If any such actions are instituted against us, and
we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including
the imposition of significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, reputational harm,
possible exclusion from participation in federal and state funded healthcare programs, contractual damages and the curtailment or restricting
of our operations, as well as additional reporting obligations and oversight if we become subject to a corporate integrity agreement or
other agreement to resolve allegations of non-compliance with these laws. Further, if any of the physicians or other healthcare providers
or entities with whom we expect to do business is found not to be in compliance with applicable laws, they may be subject to significant
criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs. Any action for violation
of these laws, even if successfully defended, could cause a pharmaceutical manufacturer to incur significant legal expenses and divert
management’s attention from the operation of the business. Therefore, even if we are successful in defending against any such actions
that may be brought against us, our business may be impaired. Prohibitions or restrictions on sales or withdrawal of future marketed products
could materially affect business in an adverse way.
Risks Related to Ownership of Our Securities
and Our Status as a U.S. Listed Company
The price of our Ordinary Shares and Depositary
Shares may be volatile.
The trading price of our Ordinary
Shares and Depositary Shares in both the United Kingdom and the United States has fluctuated, and is likely to continue to fluctuate,
substantially in response to various factors, some of which are beyond our control, including limited trading volume. The stock market
in general, and the market for pharmaceutical and biotechnology stocks in particular, have experienced extreme volatility that has often
been unrelated to the operating performance of these companies. As a result of this volatility, investors may not be able to sell their
Ordinary Shares or Depositary Shares at or above the price paid for the Ordinary Shares or Depositary Shares, respectively.
In addition to the factors
discussed in this “Risk Factors” section and elsewhere in this annual report, the factors that could cause volatility
in the market price of each Ordinary Share and the Depositary Shares include:
| | the success of competitive products or technologies; |
| | actual or anticipated changes in our growth rate relative to our competitors; |
| | announcements by us or our competitors of new products, significant acquisitions, strategic partnerships,
joint ventures, collaborations or capital commitments; |
| | the progress of preclinical development, laboratory testing and clinical trials of our product candidates
or those of our competitors; |
| | the results from our clinical programs and any future trials we may conduct; |
| | developments in the clinical trials of potentially similar competitive products; |
| | EMA, MHRA, FDA or international regulatory or legal developments; |
| | failure of any of our product candidates, if approved, to achieve commercial success; |
| | developments or disputes concerning patent applications, issued patents or other proprietary intellectual
property rights; |
| | the recruitment or departure of key personnel; |
| | the level of expenses related to any of our product candidates or clinical development programs; |
| | litigation or public concern about the safety of our products; |
| | actual or anticipated changes in estimates as to financial results, development timelines or recommendations
by securities analysts; |
| | actual and anticipated fluctuations in our operating results; |
| | variations in our financial results or those of companies that are perceived to be similar to us; |
| | share price and volume fluctuations attributable to inconsistent trading volume levels of our shares; |
| | announcements or expectations of additional financing efforts; |
| | rumors relating to us or our competitors; |
| | sales of our Ordinary Shares or Depositary Shares by us, our insiders or our other shareholders; |
| | changes in the structure of healthcare payment systems; |
| | market conditions in the pharmaceutical and biotechnology sectors, or general volatility in the market
due to other factors, such as the recent volatility attributed to COVID-19; |
| | third party reimbursement policies; |
| | Brexit and any resulting economic or currency volatility; |
| | developments concerning current or future collaborations, strategic alliances, joint ventures or similar
relationships; and |
| | reviews of long-term values of our assets, which could lead to impairment charges that could reduce our
earnings. |
These and other market and
industry factors may cause the market price and demand for our Ordinary Shares and Depositary Shares to fluctuate substantially, regardless
of our actual operating performance, which may limit or prevent investors from selling their Ordinary Shares or Depositary Shares at or
above the price paid for the Ordinary Shares or Depositary Shares, respectively, and may otherwise negatively affect the liquidity of
our Ordinary Shares and Depositary Shares. The realization of any of the above risks or any of a broad range of other risks,
including those described in these “Risk Factors,” could have a dramatic and material adverse impact on the market
price of our Ordinary Shares and Depositary Shares.
We may be subject to securities litigation,
which is expensive and could divert management attention.
The market price of our Ordinary
Shares and Depositary Shares may be volatile, and in the past, some companies that have experienced volatility in the market price of
their stock have been subject to securities class action litigation. Any lawsuit to which we are a party, with or without merit,
may result in an unfavorable judgment. We also may decide to settle lawsuits on unfavorable terms.
Any such negative outcome
could result in payments of substantial damages or fines, damage to our reputation or adverse changes to our business practices. Defending
against litigation is costly and time-consuming, and could divert our management’s attention and our resources. Furthermore, during
the course of litigation, there could be negative public announcements of the results of hearings, motions or other interim proceedings
or developments, which could have a negative effect on the market price of our ADSs and our ordinary shares.
The liquidity of our Depositary Shares and
Ordinary Shares may have an adverse effect on our share price.
As at March 31, 2022, we had
98,468,413 Ordinary Shares outstanding. Of these shares, 41,594,935 of our Ordinary Shares were held as Depositary Shares. Some companies
that have issued American depositary shares on United States stock exchanges have experienced lower levels of liquidity in their American
depositary shares than is the case for their ordinary shares listed on their domestic exchange. Our Depositary Shares are traded on the
NASDAQ Capital Market and our Ordinary Shares are traded on AIM. We cannot predict the effect of this dual listing on the value of our
Ordinary Shares and Depositary Shares. However, the dual listing of our Ordinary Shares and Depositary Shares may dilute the liquidity
of these securities in one or both markets and may adversely affect the development of an active trading market for the Depositary Shares
in the United States. The price of the Depositary Shares could also be adversely affected by trading in our Ordinary Shares on AIM. As
a result of these and other factors, you may not be able to sell your Depositary Shares. In addition, investors may incur higher transaction
costs when buying and selling Depositary Shares than they would incur in buying and selling common stock. An inactive market may also
impair our ability to raise capital by selling Depositary Shares and Ordinary Shares and may impair our ability to enter into strategic
partnerships or acquire companies or products by using our Ordinary Shares as consideration.
Our Ordinary Shares and Depositary Shares
trade on two different markets, which is costly to maintain and may result in price variations.
Our Depositary Shares are
listed for trading on the NASDAQ Capital Market and our Ordinary Shares are traded on AIM. As
long as we are listed on these markets, we will continue to generate additional costs, including increased legal, accounting, investor
relations and other expenses, in addition to the costs associated with the additional reporting requirements described elsewhere in this
annual report. Trading in our securities on these markets is made in different currencies and at different times, including
as a result of different time zones, different trading days and different public holidays in the U.S. and the United Kingdom. Consequently,
the effective trading prices of our securities on these two markets may differ. Any decrease in the trading price of our securities on
one of these markets could cause a decrease in the trading price of our securities on the other market.
Shareholder ownership interests in the Company may be diluted
as a result of future financings, additional acquisitions or the exercise of our options and warrants, and may have a material negative
effect on the market price of our securities.
We may seek to raise additional
funds from time to time in public or private issuances of equity and such financings may take place in the near future or over the longer
term. Sales of our securities offered through future equity offerings may result in substantial dilution to the interests of our current
shareholders. The sale of a substantial number of securities to investors, or anticipation of such sales, could make it more difficult
for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales.
As of March 31, 2022, we had
issued 2,881,500 options under the Midatech Pharma PLC Enterprise Management Incentive Plan, and 126,776 non-EMI options. In addition,
we assumed options in connection with our acquisition of DARA in 2015, of which 2,835 were still outstanding. Further, as of March 31,
2022, we had issued outstanding warrants exercisable for (i) 630,000 Depositary Shares with an exercise price of $6.25 each (representing
3,1500,000 Ordinary Shares), (ii) 1,318,182 Depositary Shares with an exercise price of $2.05 each (representing 6,590,910 Ordinary Shares),
(iii) 29,546 Depositary Shares with an exercise price of $2.0625 each (representing 147,730 Ordinary Shares), (iv) 6,999,999 Ordinary
Shares with an exercise price of £0.34 each, and (v) 4,080 Ordinary Shares with a weighted average exercise price of $61.03 per
share (assumed pursuant to the acquisition of DARA in 2015). We may also issue Ordinary Shares (and Depositary Shares underlying such
Ordinary Shares) or other securities convertible into Ordinary Shares from time to time for future acquisition. The issuance of the securities
underlying these instruments, or perception that issuance may occur, will have a dilutive impact on other shareholders and could have
a material negative effect on the market price of our Ordinary Shares and Depositary Shares.
If equity research analysts do not publish
research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
The
trading market for our Ordinary Shares and Depositary Shares will depend in part on the research and reports that equity research analysts
publish about us or our business. If no or few equity research analysts cover our Company,
the trading price for our Ordinary Shares and Depositary Shares would be negatively impacted.
We do not have any control over the analysts or the content and opinions included in their reports. The price of our Ordinary Shares
and Depositary Shares could decline if one or more equity research analysts downgrade our Ordinary
Shares and Depositary Shares or issue other unfavorable commentary or research about us. If one
or more equity research analysts ceases coverage of us or fails to publish reports on us regularly, demand for our Ordinary Shares
and Depositary Shares could decrease, which in turn could cause the trading price or trading volume
of our Ordinary Shares and Depositary Shares to decline.
The rights of holders of Depositary Shares
are not the same as the rights of holders of Ordinary Shares.
We are a public limited company
incorporated under the laws of England and Wales. The Depositary Shares represent a beneficial ownership interest in our Ordinary Shares.
The rights of holders of Depositary Shares will be governed by English law, our constitutional documents, the listing rules of AIM, or
AIM Rules, and the deposit agreement pursuant to which the Depositary Shares are issued. The rights and terms of the Depositary Shares
are designed to replicate, to the extent reasonably practicable, the rights attendant to the Ordinary Shares, for which there is currently
no active trading market in the United States. However, because of aspects of United Kingdom law, our constitutional documents and the
terms of the deposit agreement, the rights of holders of Depositary Shares will not be identical to and, in some respects, may be less
favorable than, the rights of holders of Ordinary Shares.
You may not have the same voting rights
as the holders of our Ordinary Shares and may not receive voting materials in time to be able to exercise your right to vote.
Holders of our Depositary
Shares do not have the same rights as shareholders who hold our Ordinary Shares directly and may only exercise their voting rights with
respect to the underlying Ordinary Shares in accordance with the provisions of the deposit agreement. Holders of the Depositary Shares
will appoint the depositary or its nominee as their representative to exercise the voting rights attaching to the Ordinary Shares represented
by the Depositary Shares. When a general meeting is convened, if you hold Depositary Shares, you may not receive sufficient notice of
a shareholders’ meeting to permit you to withdraw the Ordinary Shares underlying your Depositary Shares to allow you to vote with
respect to any specific matter. Further, we cannot assure purchasers of Depositary Shares that they will receive voting materials in time
to instruct the depositary to vote, and it is possible that they, or persons who hold their Depositary Shares through brokers, dealers
or other third parties, will not have the opportunity to exercise a right to vote. Furthermore, the depositary will not be liable for
any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of any such vote. As a result,
purchasers of Depositary Shares may not be able to exercise their right to vote and they may lack recourse if their Depositary Shares
are not voted as they request.
You may not receive distributions on Ordinary
Shares represented by Depositary Shares or any value for them if it is illegal or impractical to make them available to holders of Depositary
Shares.
The depositary of the Depositary
Shares has agreed to pay to you distributions with respect to cash or other distributions it or the custodian receives on Ordinary Shares
or other deposited securities after deducting its agreed fees and expenses. You will receive these distributions in proportion to the
number of Ordinary Shares your Depositary Shares represent. However, the depositary is not responsible if it decides that it is unlawful
or impractical to make a distribution available to any holders of Depositary Shares. We have no obligation to take any other action to
permit the distribution of our Depositary Shares, Ordinary Shares, rights or anything else to holders of our Depositary Shares. As a result,
you may not receive the distributions made on Ordinary Shares or any value from them if it is illegal or impractical for us to make them
available to you. These restrictions may have a material adverse effect on the value of your Depositary Shares.
You may be subject to limitations on transfer of your Depositary
Shares.
Your Depositary Shares are
transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems
expedient in connection with the performance of its duties. The depositary may refuse to deliver, transfer or register transfers of your
Depositary Shares generally when our books or the books of the depositary are closed, or at any time if we or the depositary deems it
advisable to do so because of any requirement of law or government or governmental body, or under any provision of the deposit agreement,
or for any other reason.
We have no present intention to pay dividends
on our Ordinary Shares in the foreseeable future and, consequently, your only opportunity to achieve a return on your investment during
that time may be if the price of Depositary Shares appreciates.
We have no present intention
to pay dividends on our Ordinary Shares in the foreseeable future. Any determination by our Board of Directors to pay dividends will depend
on many factors, including our financial condition, results of operations, legal requirements and other factors. Accordingly, if the price
of the Depositary Shares falls in the foreseeable future and you sell your Depositary Shares, you will lose money on your investment,
without the likelihood that this loss will be offset in part or at all by cash dividends.
We are no longer an “emerging growth
company” but remain a non-accelerated filer, and the reduced reporting obligations applicable non-accelerated filers may make our
securities less attractive to investors.
We are no longer an “emerging
growth company,” as defined under the Jumpstart Our Business Startups Act. However, for as long as we remain a “non-accelerated
filer” under the rules of the SEC, our independent registered public accounting firm is not required to deliver an annual attestation
report on the effectiveness of our internal control over financial reporting. We will cease to be a non-accelerated filer if
(a) the aggregate market value of our outstanding Ordinary Shares held by non-affiliates as of the last business day of our most recently
completed second fiscal quarter is $75 million or more and we reported annual net revenues of greater than $100 million for
our most recently completed fiscal year or (b) the aggregate market value of our outstanding Ordinary Shares held by non-affiliates as
of the last business day of our most recently completed second fiscal quarter is $700 million or more, regardless of annual
net revenues. If we cease to be a non-accelerated filer, we would be subject to the requirement for an annual attestation report
by our independent registered public accounting firm on the effectiveness of our internal control over financial reporting. We cannot
predict whether investors will find our securities less attractive if we rely on this exemption. If some investors find our securities
less attractive as a result, there may be a less active trading market for our securities and our stock price may be more volatile and
may decline.
Our disclosure controls and procedures may
not prevent or detect all errors or acts of fraud.
We
are subject to the periodic reporting requirements of the Exchange Act. We design our disclosure controls and procedures to reasonably
assure that information we are required to disclose in reports we file or submit under the Exchange Act is accumulated and communicated
to management, recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We believe
that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the control system are met. These inherent limitations include the realities
that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls
can be circumvented by the individual acts of some persons, by collusion of two or more people, or by an unauthorized override of the
controls. Accordingly, because of the inherent limitations in our control system, misstatements or insufficient disclosure due to error
or fraud may occur and we may not detect them.
Any
failure to maintain effective internal controls and procedures over financial reporting could severely inhibit our ability to accurately
report our financial condition, results of operations or cash flows.
We are incurring increased costs as a result
of operating as a public company, and management will be required to devote substantial time to new compliance initiatives.
As a public company in the
United Kingdom and United States, we are incurring significant legal, accounting and other expenses that we did not incur as a private
company, and these expenses may increase even more after we are no longer an “emerging growth company.” We are subject to
the reporting requirements of, in the United Kingdom, the AIM Rules, the Market Abuse Regulation, or MAR, and the Disclosure Guidance
and Transparency Rules, and in the United States, the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Protection
Act, as well as rules adopted, and to be adopted, by the SEC and the NASDAQ. Our management and other personnel will need to devote a
substantial amount of time to these compliance initiatives. Moreover, we expect these rules and regulations to substantially increase
our legal and financial compliance costs and to make some activities more time-consuming and costly. For example, we expect these rules
and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required
to incur substantial costs to maintain the sufficient coverage. We cannot predict or estimate the amount or timing of additional costs
we may incur to respond to these requirements. The impact of these requirements could also make it more difficult for us to attract and
retain qualified persons to serve on our Board of Directors, our board committees or as members of our senior management.
If we cannot meet NASDAQ’s
continued listing requirements, NASDAQ may delist our Depositary Shares, which could have an adverse impact on the liquidity and market
price of our Depositary Shares.
Our Depositary Shares are
currently listed on the NASDAQ Capital Market. We are required to meet certain qualitative and financial tests to maintain the listing
of our Depositary Shares on NASDAQ. On April 13, 2022, we received a letter from NASDAQ stating that, for the previous 30 consecutive
business days, the bid price for our Depositary Shares had closed below the minimum $1.00 bid price per share requirement for continued
listing on the NASDAQ Capital Market under NASDAQ Listing Rule 5550(a)(2). The notice has no immediate effect on the listing or trading
of our Depositary Shares and the Depositary Shares will continue to trade on the NASDAQ Capital Market under the symbol “MTP.”
In accordance with
NASDAQ Listing Rules, we have a grace period of 180 calendar days, or until October 10, 2022, or the Compliance Period, to regain
compliance with the minimum bid price requirement. To regain compliance, the closing bid price of the Depositary Shares must
meet or exceed $1.00 per share for at least 10 consecutive business days during the Compliance Period. If the Depositary
Shares do not regain compliance with the minimum bid price requirement during the Compliance Period, we may be eligible for an
additional grace period of 180 calendar days provided that we satisfy NASDAQ's initial listing standards for listing on the NASDAQ
Capital Market, other than the minimum bid price requirement, and provide written notice to NASDAQ of its intention to cure the
delinquency during the second grace period. If we do not regain compliance during the initial grace period and are not eligible for
an additional grace period, NASDAQ will provide written notice that the Depositary Shares are subject to delisting from the NASDAQ
Capital Market. In that event, we may appeal such determination to a hearing panel.
If we are unable to regain compliance with the
minimum bid price requirement, our Depositary Shares may be subject to delisting by NASDAQ. This could inhibit the ability of our holders
of Depositary Shares to trade their shares in the open market, thereby severely limiting the liquidity of such shares. Although stockholders
may be able to trade their shares of Depositary Shares on the over-the-counter market, there can be no assurance that this would occur.
Further, the over-the-counter market provides significantly less liquidity than NASDAQ and other national securities exchanges, is thinly
traded and highly volatile, has fewer market makers and is not followed by analysts. As a result, your ability to trade or obtain quotations
for these securities may be more limited than if they were quoted on NASDAQ or other national securities exchanges.
Risks Related to Investing in a Foreign Private
Issuer or United Kingdom Company
We are a “foreign private issuer”
under the rules and regulations of the SEC and, as a result, are exempt from a number of rules under the Exchange Act and are permitted
to file less information with the SEC than a company incorporated in the United States.
We are incorporated as a public
limited company in England and Wales and are deemed to be a “foreign private issuer” under the rules and regulations of the
SEC. As a foreign private issuer, we are exempt from certain rules under the Exchange Act that would otherwise apply if we were a company
incorporated in the United States, including:
| | the requirement to file periodic reports and financial statements with the SEC as frequently or as promptly
as United States companies with securities registered under the Exchange Act; |
| | the requirement to file financial statements prepared in accordance with U.S. GAAP; |
| | the proxy rules, which impose certain disclosure and procedural requirements for proxy or consent solicitations;
and |
| | the requirement to comply with Regulation FD, which imposes certain restrictions on the selective disclosure
of material information. |
In addition, our officers,
directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions of Section
16 of the Exchange Act and the related rules with respect to their purchases and sales of Ordinary Shares and Depositary Shares. Accordingly,
you may receive less information about us than you would receive about a public company incorporated in the United States and may be afforded
less protection under the United States federal securities laws than you would be if we were incorporated in the United States.
Additional reporting requirements may apply if we lose our status
as a foreign private issuer.
As a foreign private issuer,
we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act applicable to
U.S. domestic issuers. In order to maintain our current status as a foreign private issuer, either (1) a majority of our voting
securities must be either directly or indirectly owned of record by non-residents of the United States or (2)(a) a majority of our
executive officers or directors cannot be U.S. citizens or residents, (b) more than 50% of our assets must be located outside the
United States and (c) our business must be administered principally outside the United States.
If we lose our status as a
foreign private issuer, we would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic
issuers, which are more detailed and extensive than the requirements for foreign private issuers. We may also be required to make changes
in our corporate governance practices in accordance with various SEC and NASDAQ rules. The regulatory and compliance costs to us under
U.S. securities laws if we are required to comply with the reporting requirements applicable to a U.S. domestic issuer may be significantly
higher than the cost we would incur as a foreign private issuer. As a result, we expect that a loss of foreign private issuer status would
increase our legal and financial compliance costs and would make some activities highly time consuming and costly. We also expect that
if we were required to comply with the rules and regulations applicable to U.S. domestic issuers, it would make it more difficult and
expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially
higher costs to obtain coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified
members of our Board of Directors.
As a foreign private issuer, we are not
required to comply with many of the corporate governance standards of NASDAQ applicable to companies incorporated in the United States.
Our Board of Directors is
required to maintain an audit committee comprised solely of three or more directors satisfying the independence standards of NASDAQ applicable
to audit committee members. As a foreign private issuer, however, we are not required to comply with most of the other corporate governance
rules of NASDAQ, including the requirement to maintain a majority of independent directors, and nominating and compensation committees
of our Board of Directors comprised solely of independent directors. Although United Kingdom corporate governance rules which we abide
by have comparable requirements, holders of Depositary Shares may not be afforded the benefits of the corporate governance standards of
NASDAQ to the same extent applicable to companies incorporated in the United States.
Securities traded on AIM may carry a higher risk than shares
traded on other exchanges that may impact the value of your investment.
Our Ordinary Shares are currently
traded on the AIM. Investment in equities traded on the AIM is perceived to carry a higher risk than an investment in equities quoted
on exchanges with more stringent listing requirements, such as the Main Market of the London Stock Exchange, New York Stock Exchange or
NASDAQ. This is because the AIM imposes less stringent corporate governance and ongoing reporting requirements than those other exchanges.
In addition, the AIM requires only semi-annual, rather than quarterly, financial reporting. You should be aware that the value of our
Ordinary Shares may be influenced by many factors, some of which may be specific to us and some of which may affect AIM-listed companies
generally, including the depth and liquidity of the market, our performance, a large or small volume of trading in our Ordinary Shares,
legislative changes and general economic, political or regulatory conditions, and that the prices may be volatile and subject to extensive
fluctuations. Therefore, the market price of our Ordinary Shares underlying the Depositary Shares may not reflect the underlying value
of the Company.
Your right to participate in any future
rights offerings may be limited, which may cause dilution to your holdings.
Under English law, shareholders
usually have preemptive rights to subscribe on a pro rata basis in the issuance of new shares for cash. The exercise of preemptive rights
by certain shareholders not resident in the United Kingdom may be restricted by applicable law or practice in the United Kingdom and overseas
jurisdictions. We may from time to time distribute rights to our shareholders, including rights to acquire our securities. However, we
cannot make rights available to shareholders in the United States unless we register the rights and the securities to which the rights
relate under the Securities Act or an exemption from the registration requirements is available. Also, under the deposit agreement, the
depositary bank will not make rights available to Depositary Share holders unless either both the rights and any related securities are
registered under the Securities Act, or the distribution of them to Depositary Share holders is exempted from registration under the Securities
Act. We are under no obligation to file a registration statement with respect to any such rights or securities or to endeavor to cause
such a registration statement to be declared effective. Moreover, we may not be able to establish an exemption from registration under
the Securities Act. If the depositary does not distribute the rights, it may, under the deposit agreement, either sell them, if possible,
or allow them to lapse. Accordingly, Depositary Share holders may be unable to participate in our rights offerings and may experience
dilution in their holdings. We are also permitted under English law to disapply preemptive rights (subject to the approval of our shareholders
by special resolution or the inclusion in our articles of association of a power to disapply such rights) and thereby exclude certain
shareholders, such as overseas shareholders, from participating in a rights offering (usually to avoid a breach of local securities laws).
It may be difficult for you to bring any
action or enforce any judgment obtained in the United States against us or members of our Board of Directors, which may limit the remedies
otherwise available to you.
We are incorporated as a public
limited company in England and Wales and all of our assets are located outside the United States. In addition, all of the members of our
Board of Directors are nationals and residents of countries, including the United Kingdom, outside of the United States. Most or all of
the assets of these individuals are located outside the United States. As a result, it may not be possible for investors to effect service
of process within the United States upon such persons or to enforce judgments obtained in U.S. courts against them or us, including judgments
predicated upon the civil liability provisions of the U.S. federal securities laws.
The United States and the
United Kingdom do not currently have a treaty providing for the reciprocal recognition and enforcement of judgments (other than arbitration
awards) in civil and commercial matters. Consequently, a final judgment for payment given by a court in the United States, whether or
not predicated solely upon U.S. securities laws, would not automatically be recognized or enforceable in England and Wales. In addition,
uncertainty exists as to whether the English and Welsh courts would entertain original actions brought in England and Wales against us
or our directors or executive officers predicated upon the securities laws of the United States or any state in the United States. Any
final and conclusive monetary judgment for a definite sum obtained against us in U.S. courts would be treated by the courts of England
and Wales as a cause of action in itself and sued upon as a debt so that no retrial of the issues would be necessary, provided that certain
requirements are met consistent with English law and public policy. Whether these requirements are met in respect of a judgment based
upon the civil liability provisions of the U.S. securities laws is an issue for the English court making such decision. If an English
court gives judgment for the sum payable under a U.S. judgment, the English judgment will be enforceable by methods generally available
for this purpose.
As a result, U.S. investors
may not be able to enforce against us or our executive officers, board of directors or certain experts named herein who are residents
of the United Kingdom or countries other than the United States any judgments obtained in U.S. courts in civil and commercial matters,
including judgments under the U.S. federal securities laws.
We intend to operate so as to be treated
exclusively as a resident of the United Kingdom for tax purposes, but the relevant tax authorities may treat us as also being a resident
of another jurisdiction for tax purposes.
We are a public limited company
incorporated under the laws of England and Wales. Under current English law, the decisions of the English courts and the published practice
of Her Majesty’s Revenue and Customs suggest that we are likely to be regarded as being a United Kingdom resident and should remain
so if, as we intend that, (i) all major meetings of our Board of Directors and most routine meetings are held in the United Kingdom with
a majority of directors present in the United Kingdom for those meetings; (ii) at those meetings there are full discussions of, and decisions
are made regarding, the key strategic issues affecting us and our subsidiaries; (iii) those meetings are properly minuted; (iv) at least
some of our directors, together with supporting staff, are based in the United Kingdom; and (v) we have permanent staffed office premises
in the United Kingdom sufficient to discharge our functions.
Even if we are considered
by Her Majesty’s Revenue and Customs as resident in the United Kingdom for United Kingdom tax purposes, as expected, we would nevertheless
not be treated as resident in the United Kingdom if (a) we were concurrently resident in another jurisdiction (applying the tax residence
rules of that jurisdiction) that has a double tax treaty with the United Kingdom and (b) there is a tiebreaker provision in that tax treaty
which allocates exclusive residence to that other jurisdiction. Because this analysis is highly factual and may depend on future changes
in our management and organizational structure, there can be no assurance regarding the final determination of our tax residence. Should
we be treated as resident for tax purposes in another jurisdiction other than the United Kingdom, we would be subject to taxation in such
jurisdiction in accordance with such jurisdiction’s laws, which could result in additional costs and expenses.
The rights of our shareholders may differ from the rights typically
offered to shareholders of a U.S. corporation.
We
are incorporated under English law. The rights of holders of Ordinary Shares and, therefore, certain of the rights of holders of our ADSs,
are governed by English law, including the provisions of the United Kingdom Companies Act 2006, or the Companies Act, and by our articles
of association. These rights differ in certain respects from the rights of shareholders in typical U.S. corporations. See Item 10.B
– “Memorandum and Articles of Association—Differences in corporate law” for a description of the principal differences
between the provisions of the Companies Act applicable to us and, for example, the Delaware General Corporation Law relating to shareholders’
rights and protections.
Protections found
in provisions under the United Kingdom City Code on Takeovers and Mergers may delay or discourage a takeover attempt, including attempts
that may be beneficial to holders of our Ordinary Shares and Depositary Shares.
The
U.K. City Code on Takeovers and Mergers, or the Takeover Code, applies, among other things, to an offer for a public company whose registered
office is in the United Kingdom and whose securities are admitted to trading on a multilateral trading facility in the United Kingdom,
which includes AIM. We are therefore currently subject to the Takeover Code.
The
Takeover Code provides a framework within which takeovers of certain companies organized in the United Kingdom are regulated and conducted.
The following is a brief summary of some of the most important rules of the Takeover Code:
| | In connection with a potential offer, if following an approach by or on behalf of a potential bidder,
the company is “the subject of rumor or speculation” or there is an “untoward movement” in the company’s
share price, there is a requirement for the potential bidder to make a public announcement about a potential offer for the company, or
for the company to make a public announcement about its review of a potential offer. |
| | When interests in shares carrying 10% or more of the voting rights of a class have been acquired by an
offeror (i.e., a bidder) in the offer period (i.e., before the shares subject to the offer have been acquired) or within the previous
12 months, the offer must be in cash or be accompanied by a cash alternative for all shareholders of that class at the highest price paid
by the offeror or any person acting in concert with them in that period. Further, if an offeror or any person acting in concert with them
acquires any interest in shares during the offer period, the offer for the shares must be in cash or accompanied by a cash alternative
at a price at least equal to the price paid for such shares during the offer period. |
| | If after an announcement is made, the offeror or any person acting in concert with them acquires an interest
in shares in an offeree company (i.e., a target) at a price higher than the value of the offer, the offer must be increased accordingly. |
| | The board of directors of the offeree company must appoint a competent independent adviser whose advice
on the financial terms of the offer must be made known to all the shareholders, together with the opinion of the board of directors of
the offeree company. |
| | Favorable deals for selected shareholders are not permitted, except in certain circumstances where independent
shareholder approval is given and the arrangements are regarded as fair and reasonable in the opinion of the financial adviser to the
offeree. |
| | All shareholders must be given the same information. |
| | Those issuing documents in connection with a takeover must include statements taking responsibility for
the contents thereof. |
| | Profit forecasts, quantified financial benefits statements and asset valuations must be made to specified
standards and must be reported on by professional advisers. |
| | Misleading, inaccurate or unsubstantiated statements made in documents or to the media must be publicly
corrected immediately. |
| | Actions during the course of an offer by the offeree company, which might frustrate the offer are generally
prohibited unless shareholders approve these plans. Frustrating actions would include, for example, lengthening the notice period for
directors under their service contract or agreeing to sell off material parts of the target group. |
| | Stringent requirements are laid down for the disclosure of dealings in relevant securities during an offer,
including the prompt disclosure of positions and dealing in relevant securities by the parties to an offer and any person who is interested
(directly or indirectly) in 1% or more of any class of relevant securities. |
| | Employees of both the offeror and the offeree company and the trustees of the offeree company’s
pension scheme must be informed about an offer. In addition, the offeree company’s employee representatives and pension scheme trustees
have the right to have a separate opinion on the effects of the offer on employment appended to the offeree board of directors’
circular or published on a website. |
If we are deemed or become a passive foreign investment company,
or PFIC, for U.S. federal income tax purposes in 2021 or in any prior or subsequent year, this may result in adverse U.S. federal income
tax consequences for U.S. taxpayers that are holders of our securities.
We will be treated as a PFIC
for U.S. federal income tax purposes in any taxable year in which either (1) at least 75% of our gross income is “passive income”
or (2) on average at least 50% of our assets by value produce passive income or are held for the production of passive income. Passive
income for this purpose generally includes, among other things, certain dividends, interest, royalties, rents and gains from commodities
and securities transactions and from the sale or exchange of property that gives rise to passive income. Passive income also includes
amounts derived by reason of the temporary investment of funds, including those raised in a public offering. In determining whether a
non-U.S. corporation is a PFIC, a proportionate share of the income and assets of each corporation in which it owns, directly or indirectly,
at least a 25% interest (by value) is taken into account.
We do not believe we were
a PFIC for 2021, but there can be no assurance that we will not be a PFIC in 2022 or for any other taxable year, as our operating results
for any such years may cause us to be a PFIC. If we were to be characterized as a PFIC for U.S. federal income tax purposes in any taxable
year during which a U.S. shareholder owns our securities, and such U.S. shareholder does not make an election to treat us as a “qualified
electing fund,” or a QEF, or make a “mark-to-market” election, then “excess distributions” to a U.S. shareholder,
and any gain realized on the sale or other disposition of our securities will be subject to special rules. Under these rules: (1) the
excess distribution or gain would be allocated ratably over the U.S. shareholder’s holding period for the securities; (2) the amount
allocated to the current taxable year and any period prior to the first day of the first taxable year in which we were a PFIC would be
taxed as ordinary income; and (3) the amount allocated to each of the other taxable years would be subject to tax at the highest rate
of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed
with respect to the resulting tax attributable to each such other taxable year. In addition, if the United States Internal Revenue Service,
or the IRS, determines that we are a PFIC for a year with respect to which we have determined that we were not a PFIC, it may be too late
for a U.S. shareholder to make a timely QEF or mark-to-market election. U.S. shareholders who hold or have held our securities during
a period when we were or are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC in subsequent years, subject
to exceptions for U.S. shareholders who made a timely QEF or mark-to-market election. However, because we do not intend to prepare or
provide the information that would permit the making of a valid QEF election, such an election will not be available to United States
holders.
Recent and potential future changes to U.S. and non-U.S. tax
laws could materially adversely affect our Company and holders of our Ordinary Shares and the Depositary Shares.
The Tax Cut Act, which was
legislation bringing about broad changes in the existing U.S. corporate tax system, was enacted in the United States in December 2017.
The Tax Cut Act made significant changes to the U.S. federal income tax laws. Certain provisions of the Tax Cut Act could have an adverse
effect on the Company or holders of our Ordinary Shares or Depositary Shares. The U.S. Treasury Department and the IRS continue to interpret
and issue guidance on how provisions of the Tax Cut Act will be applied and administered. The interpretations of many provisions of the
Tax Cut Act are still unclear. We cannot predict when or to what extent any additional U.S. federal tax laws, regulations, interpretations,
or rulings clarifying the Tax Cut Act will be issued or the impact of any such guidance on investors or the Company. Holders of Ordinary
Shares and Depositary Shares are urged to consult their own tax advisors regarding the effect of the Tax Cut Act and other potential changes
to the U.S. federal tax laws.
We are unable to predict what
tax changes may be enacted in the future or what effect such changes would have on our business, but such changes could affect our effective
tax rates in countries where we have operations and could have an adverse effect on our overall tax position in the future, along with
increasing the complexity, burden and cost of tax compliance. In addition, such changes could impact the holders of Ordinary Shares or
Depositary Shares.
ITEM 4. |
INFORMATION ON THE COMPANY. |
A. |
History and Development of the Company |
We were originally formed
as a limited liability company under the laws of England and Wales in 2000 under the name Midatech Limited, which acquired its base nanoparticle
technology through an assignment of worldwide commercialization rights and joint ownership of patent rights from Consejo Superior de Investigaciones
Cientificas, or CSIC, in Madrid, Spain. Midatech Limited was a research and development focused biotech company which subsequently advanced
and developed this gold nanoparticle drug delivery platform technology to enhance the delivery of medicines for major therapeutic indications
where clinical therapeutic options are limited, with a particular focus on certain cancers, such as liver and brain cancer.
To better be able to continue
the commercial development of the research and development programs of Midatech Limited, Midatech Pharma PLC was incorporated on September
12, 2014 under the laws of England and Wales, to be the public holding company of Midatech Limited and Midatech Pharma (Wales) Limited,
or Midatech Wales, under registered number 09216368. On December 8, 2014, we completed our initial public offering of our Ordinary Shares
in the United Kingdom.
On March 31, 2020 we announced
that, in the context of prevailing conditions in the capital markets, we did not expect to be able to raise capital to fund the continued
development of MTD201, including scale-up of MTD201 manufacturing at our Bilbao facilities. We determined to conduct a strategic review
of our operations, cease further investment in MTD201 and close our operations in Bilbao, Spain, including making all our employees in
Bilbao redundant.
On April 20, 2020, we announced
an update to the strategic review of operations including the appointment of Noble Capital Markets, Inc. to advise us on options for extracting
value from our technologies, including partnering our clinical stage assets, partnering existing and upcoming proof of concept formulations,
partnering or selling one or more of our technologies or selling the entire Company.
On January 26, 2021, we announced,
among other things, that the strategic review had completed and that we were now focused on executing our realigned strategy of deploying
our technologies to develop more early stage products and seeking licensing partners at proof of concept stage.
Our principal executive office
and registered offices are located at 1 Caspian Point, Caspian Way Cardiff, United Kingdom CF10 4DQ, and our telephone number is +44 29
2048 0180. Our authorized representative in the United States is Donald J. Puglisi of Puglisi and Associates. Our agent for service in
the United States is Donald J. Puglisi of Puglisi and Associates, located at 850 Library Avenue, Suite 204, Newark, Delaware 19711. Our
Ordinary Shares are traded on AIM under the symbol “MTPH,” and our Depositary Shares are traded on the NASDAQ Capital Market
under the symbol “MTP.”
We file reports and other
information with the SEC. The SEC maintains an Internet website that contains reports, proxy and information statements, and other information
regarding issuers, including us, that file electronically with the SEC. Our filings with the SEC are available to the public through the
SEC’s website at http://www.sec.gov. Our corporate website is located at www.midatechpharma.com. Information contained
on our website is not part of, or incorporated in, this annual report.
Capital Expenditures
Our capital expenditures amounted
to £0.32 million, £0.21 million and £0.31 million for the years ended December 31, 2021, 2020 and 2019, respectively.
For the year ended December
31, 2021, our principal capital expenditures largely related to investment in our laboratory and pilot-scale manufacturing facility in
Cardiff, Wales.
For the year ended December
31, 2020, our principal capital expenditures largely related to investment in our laboratory and pilot-scale manufacturing facility in
Cardiff, Wales.
For the year ended December
31, 2019, our principal capital expenditures largely related to the purchase of laboratory equipment for our former manufacturing facility
in Bilbao, Spain.
Business Overview
We are focused on the research
and development of medicines which we believe would benefit from improved bio-delivery and/or bio-distribution using our using our proprietary
platform drug delivery technologies:
| | Q-Sphera™ platform: Our disruptive polymer microsphere microtechnology is used for sustained delivery
to prolong and control the release of therapeutics over an extended period of time, from weeks to months. |
| | MidaSolve™ platform: Our innovative oligosaccharide nanotechnology is used to solubilize drugs so
that they can be administered in liquid form directly and locally into tumors. |
| | MidaCore™ platform: Our leading-edge gold nanoparticle, or GNP, nanotechnology is used for targeting
sites of disease by using either chemotherapeutic agents or immunotherapeutic agents |
Revenue. Revenue from
continuing and discontinued operations for the whole of the Group is set out below.
| |
Year ended December 31, | |
(£ in thousands) | |
2021 | | |
2020 | | |
2019 | |
Continuing Operations: | |
| | | |
| | | |
| | |
Revenue (United States) | |
| -- | | |
| -- | | |
| 60 | |
Revenue (Europe, including United Kingdom) | |
| 578 | | |
| 118 | | |
| 252 | |
Revenue (Rest of World) | |
| -- | | |
| 62 | | |
| -- | |
| |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | |
Discontinued Operations: | |
| | | |
| | | |
| | |
Revenue (United States) | |
| -- | | |
| -- | | |
| -- | |
Revenue (Europe, including United Kingdom) | |
| -- | | |
| -- | | |
| -- | |
Total Revenue from continuing and discontinued operations | |
| 578 | | |
| 180 | | |
| 312 | |
Recent Developments
Strategic Review
In March 2020, we reviewed
the remaining costs necessary to complete the Phase III clinical trial of MTD201, which uses our sustained release platform, Q-Sphera,
to formulate a long acting dose of octreotide for the treatment of acromegaly and neuroendocrine tumors, as well as the manufacturing
scale-up of our MTD201 manufacturing capabilities at our Bilbao, Spain facilities. We believed the remaining costs to be in the order
of $30 million (of which $8.5 million had been raised in loans from the Spanish government, as discussed in more detail herein). Given
the state of the financial markets at that time, and our cash runway, we determined we were unlikely to conclude a license transaction
or raise sufficient funds to continue the required remaining investment in MTD201 in a timely manner. The Board of Directors made the
determination to terminate the further in-house development of MTD201 and, on March 31, 2020, announced a strategic review of our operations.
In connection with the decision
to terminate the MTD201 program, we closed our MTD201-dedicated manufacturing facilities in Bilbao, Spain. We have made redundant all
of our Midatech Pharma España S.L., or Midatech Spain, employees pursuant to a consultation process as required by Spanish law.
We also made redundant five employees located in the United Kingdom in our clinical research and administrative departments.
Following these changes, our
strategy has shifted to deploying our proprietary drug delivery technologies to formulate a compelling portfolio of novel first-in-class
sustained release formulations of products with significant commercial potential for licensing to pharmaceutical company partners at a
proof-of-concept stage. Other than with respect to MTX110, for which pilot clinical trials are required to demonstrate proof of concept
due to the fact we are repurposing an existing medicine, we have no plans to undertake additional clinical trials in humans unless a license
partner or grant funding has been secured. MTX110 is a direct delivery treatment for diffuse intrinsic pontine glioma, or DIPG, an ultra-rare
brain cancer suffered by children, using our MidaSolve technology for direct delivery. For more information regarding our strategy, see
“—Our Strategy.”
Additionally, on March 31,
2020, Dr. Craig Cook, our then-Chief Executive Officer, resigned from his position and as a director of Midatech, effective immediately.
He was succeeded by Mr. Stephen Stamp, our then-current Chief Financial Officer, who now serves in the combined roles of Chief Executive
Officer and Chief Financial Officer. Further, in line with our streamlined strategy and operations, each of Dr. Huaizheng Peng and Mr.
Frederic Duchesne resigned from the Board of Directors, effective March 31, 2020.
On January 26, 2021, we announced,
among other things, that the strategic review had been completed and that we were now focused on executing our realigned strategy of deploying
our technologies to develop more early stage products and seeking licensing partners at proof of concept stage.
Secura License Agreement
Pursuant to the Secura License
Agreement, Midatech Limited was granted a non-exclusive worldwide, sublicenseable license to certain patents of panobinostat, the active
pharmaceutical ingredient of our development product MTX110. Midatech Limited’s rights are limited to the treatment of brain cancer
in humans, administered by convection-enhanced delivery. We received a letter dated June 1, 2020, sent on behalf of Secura Bio purporting
to terminate the Secura License Agreement “effective immediately,” the reason specified being that we were proposing to liquidate
the Company. Despite our assurances to the contrary, and despite our repeated requests that Secura Bio withdraw its termination, Secura
Bio reaffirmed the termination and reasons therefor and the agreement was thus terminated. We received a further letter sent on behalf
of Secura Bio dated May 21, 2021 purporting to terminate the Secura License Agreement a second time for alleged material breaches of the
agreement, and demanding a non-exclusive, fully paid-up, royalty-free, perpetual license to Midatech’s MTX110 intellectual property.
This demand was refused based upon, among other things, Secura Bio’s previous termination of the Secura License Agreement in 2020.
We view MTX110 as an important asset and currently
have two ongoing clinical trials for MTX110 and intend to commence two further clinical trials as part of our MTX110 clinical program.
We continue to enjoy freedom to use panobinostat for research purposes and we plan to continue to pursue development of MTX110. We believe
that the relevant Secura Bio patents may delay a launch of MTX110 for use in patients with DIPG, however we do not anticipate it would
have any impact on launching MTX110 for use in patients with glioblastoma multiforme. If we are unable to launch a product candidate until
the patent expires, there could be a material adverse effect on our business, financial condition and results of operations.
Impact of COVID-19
With the global spread of
the ongoing COVID-19 pandemic, we established a COVID-19 task force in mid-March 2020 with the objectives of safeguarding the health and
wellbeing of our staff members and monitoring the impact on our vendors and collaborators. Beginning in mid-March 2020, our employees
primarily worked from their homes. Since that time, we have formally implemented a work-from-home policy for our employees, with exceptions
being made for essential laboratory personnel. To the extent possible, we have reorganized the layout of our offices and laboratories
in Cardiff, Wales to conform to social distancing policies and allow laboratory employees to safely return to the workplace, if allowed
by their local government.
Our expectation is that the COVID-19 pandemic is
likely to negatively affect businesses globally for an indeterminate period and that, once the pandemic is under control, recovery to
normalization will not be instantaneous. Accordingly, we believe governmental limitations on travel will certainly cause delays to timelines.
These delays may be the result of a limitation on the number of staff permitted in our facilities at any one time or delays in our vendor’s
supply chains. In addition, delays have occurred in the recruitment and execution of clinical trials as prospective and enrolled patients
are unable to visit clinical sites.
It is not currently possible
to quantify the impact of COVID-19 and resultant delays on the Company until it becomes clear that the global crisis has abated and a
normalization of the business environment can be foreseen with confidence.
United Kingdom Placing
In July 2021, we, through
Turner Pope Investments Limited, a United Kingdom Financial Conduct Authority registered broker, completed a placing with certain investors
in the United Kingdom of 35,087,720 Ordinary Shares, or the July 2021 Placing Shares, at an issue price of £0.285 per share,
or the 2021 UK Placing.
The July 2021 Placing Shares
were offered only outside the United States in reliance upon Regulation S under the Securities Act in an offshore transaction.
MTX110 Updates
The first application of our
MidaSolve technology is for the treatment of debilitating childhood brain cancers that have no approved therapies. DIPG is an ultra-rare
brain cancer, most commonly found in children. We believe MTX110 (soluble panobinostat), which is a ‘direct-to-brain’ treatment
for DIPG and is based on our MidaSolve technology for direct delivery, may be an important advancement in transforming outcomes for patients
with this disease.
We have previously completed
a Phase I study at the University of California, San Francisco, or UCSF, in seven DIPG patients. The UCSF study met its primary endpoint,
supporting a dose of between 60μM and 90μM of MTX110, depending upon patient tolerance in Phase II. We plan to initiate a Phase
II study in DIPG in the second half of 2022 to examine efficacy and safety in approximately 20 patients. The Phase II trial will also
use a convection enhanced delivery, or CED, system, whereby MTX110 will be infused under slight pressure directly into and around the
tumor. We believe the primary endpoint of the study is likely to be patient survival rates after 12 months.
On December 13, 2021, we announced
our investigational new drug, or IND, application for a Phase I trial of MTX110 in patients with recurrent glioblastoma multiforme, GBM,
(rGBM), had been cleared by the FDA. At that time, the 30-day review period had expired and the IND had been judged safe to proceed. Accordingly,
we have initiated preparations for the trial start in the first half of 2022.
We were engaged in tentative
discussions with a third party around the potential co-development of MTX110. We subsequently terminated these discussions pending the
outcome of our Phase I trial in GBM.
Governmental Loans and Grants
On September 11, 2019, Midatech
Spain received a €6.6 million loan from the Spanish Ministry of Industry, Commerce and Tourism, under its Re-industrialisation Programme,
or the REINDUS Loan. The loan was fully drawn down in September 2019, and was partially secured by a guarantee by the Company of €3.0
million in the form of a cash bond. The REINDUS Loan was intended to partially fund activities to scale-up the manufacturing capability
of our MTD201 program, however, in connection with our decision to terminate the MTD201 program and shut down our Bilbao, Spain manufacturing
facilities, we fully repaid this loan in August 2020. The total amount repaid was approximately €3.6 million (net of deposits returned
to us). In addition, we repaid other loans from the Spanish government in connection with this termination. As of December 31, 2020, €119,000
of Spanish government loans remained outstanding. This remaining amount was repaid in February 2021. In February 2021, we received a fine
of €149,835 from the Spanish tax authorities in relation to the purported late repayment of the loan. We consider the fine without
foundation and are currently appealing it.
Collaboration with Janssen
On July 21, 2020, we announced
a collaboration with the European affiliate of a global pharmaceutical company to deploy our in-house expertise and proprietary drug delivery
platforms towards product candidates nominated by the collaborating company. On January 17, 2022, we announced the extension of this collaboration
and disclosed the collaborator as Janssen, an affiliate of Johnson & Johnson. On March 9, 2022, we announced we had extended this
collaboration to include another large molecule.
Nominated Advisor
On March 8, 2022, we announced
that Strand Hanson Limited was appointed as our nominated and financial advisor, effective as of such date.
Non-Compliance with NASDAQ Continued Listing
Requirements
Our Depositary Shares are
currently listed on the NASDAQ Capital Market. We are required to meet certain qualitative and financial tests to maintain the listing
of our Depositary Shares on NASDAQ. On April 13, 2022, we received a letter from NASDAQ stating that, for the previous 30 consecutive
business days, the bid price for our Depositary Shares had closed below the minimum $1.00 bid price per share requirement for continued
listing on the NASDAQ Capital Market under NASDAQ Listing Rule 5550(a)(2). The notice has no immediate effect on the listing or trading
of our Depositary Shares and the Depositary Shares will continue to trade on the NASDAQ Capital Market under the symbol “MTP.”
In accordance with
NASDAQ Listing Rules, we have a grace period of 180 calendar days, or until October 10, 2022, or the Compliance Period, to regain
compliance with the minimum bid price requirement. To regain compliance, the closing bid price of the Depositary Shares must
meet or exceed $1.00 per share for at least 10 consecutive business days during the Compliance Period. If the Depositary
Shares do not regain compliance with the minimum bid price requirement during the Compliance Period, we may be eligible for an
additional grace period of 180 calendar days provided that we satisfy NASDAQ's initial listing standards for listing on the NASDAQ
Capital Market, other than the minimum bid price requirement, and provide written notice to NASDAQ of its intention to cure the
delinquency during the second grace period. If we do not regain compliance during the initial grace period and are not eligible for
an additional grace period, NASDAQ will provide written notice that the Depositary Shares are subject to delisting from the NASDAQ
Capital Market. In that event, we may appeal such determination to a hearing panel.
We intend to monitor the bid price of our Depositary
Shares during the Compliance Period and will consider taking such actions as may be necessary and appropriate to achieve compliance with
continued listing requirements prior to the expiration of all available grace periods.
For more information, see “Item 3.D—Key
Information—Risk Factors— If we cannot meet NASDAQ’s
continued listing requirements, NASDAQ may delist our Depositary Shares, which could have an adverse impact on the liquidity and market
price of our Depositary Shares.”
Our Strategy
Our development, manufacturing
and commercialization strategy is based on advancing our proprietary technology platforms and programs with a view to partnering these
assets during the course of their development. This is expected to drive a commercial pipeline of products with improved essential parameters,
over and above the currently marketed source or parent compound, including safety, tolerability, efficacy and compliance profiles. We
believe that our management team has significant industry and technical experience and is highly capable of, and committed to, building
our value.
Since our announcement of
a strategic review in March 2020 and the termination of further in-house development of MTD201, we have sought to broaden our research
and development pipeline through technology collaborations with third party pharmaceutical companies, initiating new internal programs
and adding new indications to MTX110. Our realigned strategy is to advance our development programs to proof-of-concept stage, before
seeking license partners to fund further development, manufacturing scale-up and commercialization of such programs.
Development
Our intention is to build
a balanced portfolio of Q-Sphera programs employing a strategy to create an:
| | internal pipeline of long-acting, injectable products by re-formulating existing, approved therapies;
and |
| | external pipeline by entering into research collaboration with partners to formulate their proprietary
products into long-acting injectable products. |
We
have applied our MidaSolve technology to panobinostat to create our proprietary product MTX110. Our development strategy for MTX110 is
to demonstrate its utility in a range of intractable brain cancers with a series of pilot proof-of-concept studies before seeking licensee
partners. Once a licensing partner has been secured, we would expect any future development costs to be reimbursed by that partner.
Manufacturing
As part of our strategic review,
we decided to close our operations in Bilbao, Spain, including our Q-Sphera dedicated manufacturing facility. To establish proof-of-concept
in pre-clinical studies for potential licensees, we are able to manufacture non-GMP Q-Sphera products at pilot scale at our Cardiff, Wales
facility. Our intention is to technology transfer the manufacturing of clinical trial supplies and, ultimately, full GMP commercial manufacture
to a third party CMO. We would expect a licensee to assume the cost of manufacturing GMP product and commercial scale-up pursuant to a
technology transfer agreement.
MTX110 is currently being manufactured to GMP standards
at a CMO.
Commercialization
Once proof-of-concept has
been established, we intend to seek to license our products to a partner who would complete the development, and subsequently market and
sale, of the product in an agreed upon licensed territory. In addition to reimbursement of development costs, the partner would be expected
to make milestone payments based on sales targets and royalty payments.
Our Platform Technologies and Pipeline
Central to our business are
our three complementary platform technologies that enable the sustained release, direct local delivery, or targeted delivery improvement
to previously approved therapeutic drugs. Individually, these platforms are expected to offer unique advantages that address current therapeutic
challenges and needs. Our sustained release “Q-Sphera” technology platform is used for selected applications, and ensures
consistently sized monodispersed polymer microparticles that may be engineered for precise and sustained release drug delivery. Our GNP
“MidaCore” technology platform may provide improved targeting of chemotherapeutics agents to individual tumors using specific
targeting agents in order to deliver a therapeutic payload into the tumor cell, while at the same time decreasing the side effect profile
associated with off-target effects of these drugs. Our nano-inclusion technology platform, “MidaSolve,” used for local
delivery of therapeutics, allows for the delivery of generally water insoluble drugs into the site of disease through the creation of
water soluble complexes without the efficacy of the active drug compound being affected. Individually and collectively, we believe that
these technologies provide platforms that improve bio-delivery and bio-distribution of therapeutic molecules to the right place of disease,
at the right time.
In 2020, following our strategic
review, we pivoted from a largely singular focus on the clinical development and manufacturing scale up of MTD201 to a strategy based
on a broader, but earlier stage, pipeline designed to optimize opportunities for partnering success. Our development pipeline includes
eight projects, of which two are partnered with Janssen Pharmaceutical NV, or Janssen, an affiliate of Johnson & Johnson, and as set
forth in more detail below:
Sustained Release Technology Platform: Q-Sphera
Technology. Our Q-Sphera
technology employs 3-D printing techniques to encapsulate medicines in polymer-based bioresorbable microspheres. Q-Sphera is a precise,
scalable, efficient, and environmentally friendly microparticle manufacturing platform. From a clinical perspective, Q-Sphera ensures
monodispersed microparticles that release active drug compounds into the body in a tightly controlled, highly predictable and linear manner
over an extended period of time.
Q-Sphera is the next generation
polymer microsphere technology which simplifies manufacturing, facilitates the sustained release of products and delivers formulations
with significant patient, healthcare professional and payor benefits. Our polymer microsphere platform has been developed to enable sustained
release delivery solutions for peptide and small-molecule therapeutics through precise definition of the properties of polymer microparticles
into which active compounds can be incorporated. Microspheres are small, spherical particles that can be utilized as a time release drug
capsule. This technology contributes to our oncology franchise as well as potential applications in endocrinology and other disease areas.
Current reactor-based emulsion
manufacturing technology has been in use for over 20 years and, despite several issues, it continues to be used by the vast majority of
the market as there are limited alternatives. Reactor-based emulsion processes, used by most existing products, require large infrastructure,
are energy intensive, inefficient and wasteful, producing large quantities of unusable particles, and utilize large volumes of toxic organic
solvents that are damaging to the environment.
The microspheres may be injected
to form depots in the body, which release drugs over predictable, sustained periods from one week up to several months. We believe Q-Sphera
offers numerous potential advantages to patients and payors compared with other immediate release products and polymer-based technologies,
as set forth below:
|
|
Advantages of Q-Sphera |
Features |
Benefits |
For
patients |
For payors |
Compared
with
immediate
release
products |
Compared with
other polymer-
based systems |
Biocompatible, bio-degradable
microspheres |
Safe, sustained release delivery of therapeutics with substantially increased dose intervals |
● |
|
● |
|
Homogenous, monodispersed
microspheres |
Lower dose to dose variability and improved injectability |
● |
● |
● |
● |
Tunable, predictable drug release |
Low variability plasma levels within a targeted therapeutic window |
● |
● |
● |
● |
Easier reconstitution and adaptable
to a wide range of presentations |
Nurse or self-administration. Easy to use, safer pre-filled syringe and ‘pen’ presentations |
● |
● |
|
● |
Low viscosity, smaller gauge
needles |
Reduced severity and frequency of injection site reactions. Higher doses with subcutaneous and/or self-administration |
● |
● |
|
● |
Localized delivery, including
intratumoral, intraocular,
peritoneal and intraarticular |
Reduced systemic side effects |
● |
● |
● |
|
Small footprint, reliable and
scalable manufacturing process |
Lower cost of manufacture |
|
|
|
● |
Class 3 solvents in low volume |
Less environmental impact and lower cost of manufacture |
|
|
|
● |
|
|
|
|
|
|
|
Pipeline. We have an
internal Q-Sphera pipeline comprised of MTD211 and MTD219.
MTD211. We have
developed a long-acting formulation of brexpiprazole using Q-Sphera technology. Marketed under the brand name Rexulti® by Otsuka Pharmaceutical
Co., Ltd, brexpiprazole is indicated for the treatment of schizophrenia and adjunctive treatment of major depressive disorder, or MDD,
and is currently only available as an immediate release oral tablet. The market for anti-psychotic drugs is shifting towards long-acting
formulations for reasons of improved patient compliance and lowering of payor costs associated with patient hospitalization events. Sales
of long-acting anti-psychotic products in 2020 were approximately $5.7 billion globally.
In in vivo studies,
MTD211 was well tolerated and demonstrated that a single dose of MTD211 is expected to deliver therapeutic blood levels of brexpiprazole
over a period of three months.
MTD219. We have
also developed a long-acting formulation of tacrolimus using our Q-Sphera technology. Marketed under the brand name ProGraf® among
others, tacrolimus is an immunosuppressive drug used to lower the risk of organ transplant rejection. It is currently available in once
or twice daily oral formulations. Tacrolimus is known to have a relatively narrow therapeutic index and the attendant risk of over- or
under-dosing patients may result in significant negative outcomes. MTD219 is designed to address these issues by delivering predictable,
sustained blood levels over an extended period.
In our first in vivo
studies, MTD219 was well tolerated and demonstrated that a single dose of MTD219 is expected to deliver therapeutic blood levels of tacrolimus
over a period of three weeks. MTD219 is expected to undergo a second iteration to further refine the formulation and pharmacokinetic characteristics.
MTD201. Following
the announcement of a strategic review, we ceased further in-house development of MTD201, our Q-Sphera formulation of octreotide for acromegaly
and neuroendocrine tumors. We completed two clinical trials for MTD201, a 2018 first-in-human Phase I study compared MTD201 with Novartis’
Sandostatin LAR Depot, and second Phase I study of MTD201 completed in January 2020 which compared subcutaneous administration with intramuscular
administration in healthy volunteers and showed similar pharmacokinetics and bioavailability in healthy volunteers. Together, the two
Phase I studies of MTD201 serve as clinical validation of the Q-Sphera technology, confirming many of Q-Sphera’s features and benefits
for patients, payors and licensees.
Q-Sphera Formulations of
Proteins. On June 17, 2021, we announced that we had been able to successfully encapsulate a large molecule protein, specifically
an exemplar monoclonal antibody, or mAb, and had preserved the functional integrity and antigen binding capacity of the mAb in vitro.
We believe there are no other approved long-acting injectable formulations of biologic products such as mAbs or other high molecular weight
proteins because they are delicate and easily de-natured in the manufacturing process. We further believe this to be breakthrough data,
since, to our knowledge, no other commercial or academic organization has been able to successfully deliver therapeutic proteins over
extended periods using methods capable of commercial scaling.
This favorable data led to
the expansion of our research and development collaboration with Janssen, as announced on January 17, 2022. We will be seeking to optimize
drug loading and the in vitro dissolution profile of Janssen’s proprietary development compound as project MTX213.
We believe the data from experiments
on the exemplar mAb and other proteins could potentially open up opportunities for its Q-Sphera technology. A significant number of latest
generation medicines are protein based and reformulation as long-acting injectables could provide significant benefits to patients, physicians
and payors. In 2020, the top 10 mAbs recorded aggregate sales of $74.9 billion and all mAbs $154 billion globally.
MidaSolve: Local Delivery Technology Platform
Technology. Our MidaSolve
nano inclusion technology is utilized for potent, small molecule chemotherapeutics that have minimal solubility in water at biological
pH, which means they cannot normally be injected and limits them to oral administration in solid form. When reformulated with MidaSolve
technology, the complexed molecules solubilize such that the molecule can be administered in liquid form into the body. This enables local
infusion directly into the tumor, thus extending the available routes of administration for drugs that otherwise would be limited to oral
forms only.
The complexed molecules comprise
a hydrophobic (‘water-fearing’) inner surface and a hydrophilic (‘water-loving’) outer surface, and as a result
are capable of forming host-guest complexes with normally water-insoluble molecules. A hydrophobic, poorly water-soluble drug can associate
with the inner, more hydrophobic surface of the MidaSolve host, while the hydrophilic outer surface allows the complex to dissolve at
biological pH.
MTX110. Using our MidaSolve
technology in combination with panobinostat, an otherwise insoluble drug, MTX110 is designed for direct-to-tumor treatment of intractable
brain cancers. The resulting complex is readily soluble in water at therapeutic concentrations, thus enabling liquid administration routes
directly into the tumor that otherwise would not be possible. Panobinostat (Farydak®) is a potent, nonselective histone deacetylase
inhibitor that was developed for the treatment of multiple myeloma. Given in its natural oral form, panobinostat does not cross the blood-brain
barrier, and thus does not reach brain tumors. It is also a highly toxic substance and, when given orally, suffers from significant dose-limiting
side effects. MidaSolve allows an alternate means of delivery in liquid form, and MTX110, our soluble form of panobinostat, is infused
directly into the tumor. Direct delivery of MTX110 bypasses the blood-brain barrier and ensures adequate drug exposure to tumor cells
without exposing the rest of the body to potentially toxic concentrations. MTX110’s intratumoral delivery thus provides a significant
potential for treatment of DIPG and, potentially, other forms of brain cancer.
We are currently researching the utility of MTX110
to proof-of-concept stage in the following three indications.
| | DIPG. DIPG tumors are located in the pons (middle) of the brain stem and aggressively infiltrate
the brainstem such that cancer tissue typically cannot be differentiated from normal brain tissue. Occurring mostly in children, approximately
1,000 patients globally are diagnosed with DIPG per annum and median survival is approximately 10 months. There is no effective treatment
as surgical resection is not possible, and radiotherapy and chemotherapy do not improve survival since anti-cancer drugs cannot cross
the blood-brain barrier to access the tumor. |
On October 24, 2019, we announced that
the FDA has granted orphan drug designation for MTX110. Orphan drug designation is granted to support the development of drugs that target
rate diseases with high unmet needs, affecting 200,000 or fewer U.S. patients annually, and that are expected to provide significant therapeutics
advantages over existing treatments. Orphan designation qualifies a company for benefits that apply across all stages of drug development,
including an accelerated approval process, seven years of market exclusivity upon regulatory approval, if received, tax credits for qualified
U.S. clinical trials, eligibility for orphan drug grants and exemption from certain administrative fees.
As noted above, in October 2020, we reported
the first-in-man study by UCSF of MTX110 in DIPG using a CED system. The Phase I study established a recommended dose for Phase II, a
good safety and tolerability profile but also encouraging survival data in the seven patients treated. We plan to initiate a Phase II
study in DIPG to examine efficacy and safety in approximately 20 patients. The Phase II trial will also use a CED system, whereby MTX110
will be infused under slight pressure directly into and around the tumor. We believe the primary endpoint of the study is likely to be
patient survival rates after 12 months.
| | Glioblastoma Multiforme. GBM is one of the most aggressive forms of cancer and glioblastomas usually
occur in the white matter of the cerebrum, although metastasis through the cerebrospinal fluid, or CSF, to the spinal cord is rare. Treatments
include radiation, surgical resection and chemotherapy although, in most cases, tumors recur. There are approximately two to three new
cases of GBM per 100,000 population per annum, with median survival of approximately 12 months. |
In December 2021, we received an IND approval
for a pilot Phase I study in recurrent GBM. We are currently in the process of planning for the study to start recruitment in the first
half of 2022.
| | Medulloblastoma. Medulloblastomas are generally located in the fourth ventricle of the brain between
the brainstem and the cerebellum. They are invasive and, unlike most brain tumors, spread through CSF and frequently metastasize to different
locations in the brain and spinal cord. Treatments include resection, radiation and chemotherapy. Approximately 350 patients in the US
are diagnosed with medulloblastoma per annum, and 3,800 people are living with the disease in the United States. The cumulative survival
rate is 60%, 52% and 47% at five years, 10 years and 20 years, respectively. |
The University of Texas is undertaking
a Phase I exploratory study in medulloblastoma using direct administration of MTX110 into the fourth ventricle of the brain, enabling
it to circulate through the CSF.
In 2020, our non-exclusive
worldwide, sublicenseable license to certain patents of panobinostat was terminated by Secura Bio. We view MTX110 as an important asset
and currently have two ongoing clinical trials for MTX110 and intend to commence two further clinical trials as part of our MTX110 clinical
program. We continue to enjoy freedom to use panobinostat for research purposes and we plan to continue to pursue development of MTX110.
We believe that the relevant Secura Bio patents may delay a launch of MTX110 for use in patients with DIPG, however we do not anticipate
it would have any impact on launching MTX110 for use in patients with GBM. If we are unable to launch a product candidate until the patent
expires, there could be a material adverse effect on our business, financial condition and results of operations. For more information,
see “—Recent Developments—Secura License Agreement.”
For additional information
regarding MTX110, see “—Recent Developments—MTX110 Updates.”
MidaCore: Targeted Delivery Platform
Technology. MidaCore
is a leading innovation in ‘ultra-small’ nanomedicine and is designed for targeted delivery to enable improved delivery of
therapeutics to tumor cells and the immune system. In oncology treatments MidaCore provides a nano complex (less than 5nm in size, or
approximately 80,000 times smaller than the width of a hair) that carries conventional small molecule chemo-therapeutic payloads and delivers
these to the tumor site in high concentrations. In immunotherapy, treatments, MidaCore acts as a nanocarrier complex for synthetic immuno-peptides
that stimulate the immune system to seek out and destroy cancer cells via immune mediated vaccine processes. These small complexes can
enter immune processing cells to induce T-cell mediated immune responses specifically against tumor cells, viral infected host cells or
autoimmune disease.
The MidaCore technology platform is based upon
‘ultra-small’ nanoparticle drug conjugates, which at 2-4nm in size are among the smallest particles in biomedical use. They
are composed of a core of gold atoms decorated with a permutation of therapeutic and/or targeting molecules. The small size and multi-functional
arrangement around the gold core underpin the ability to improve biodistribution, and target tumor and/or immune sites providing a new
generation of oncology drugs.
MidaCore design and synthesis
GNP technology enables the production of 2nm to 5nm medications, which we believe is roughly five-to-tenfold smaller than any other delivery
vehicle in clinical trials. MidaCore’s therapeutics are comprised of a core of gold atoms (approximately 100 gold atoms per GNP)
surrounded by an organic layer of carbohydrates that stabilize the metallic core and make the particle water-soluble and biocompatible.
MTX114. Using MidaCore
technology, we have developed a re-engineered version of methotrexate, an immuno-suppressant for topical application in psoriasis. If
successful, MTX114 would be a first topical formulation of methotrexate, thus avoiding the need for potentially toxic systemic administration.
Pre-clinical data suggest MTX114 may reduce inflammation in a psoriatic skin model. There are estimated to be over 100 million people
who suffer from psoriasis worldwide.
Commercial Agreements, Strategic Partnerships and Collaborations
We are currently collaborating
with a number of biopharmaceutical companies, research institutes and universities on several of our development programs involving our
core technologies.
On July 21, 2020, we announced
a collaboration with the European affiliate of a global pharmaceutical company to deploy our in-house expertise and proprietary drug delivery
platforms towards product candidates nominated by the collaborating company. On January 17, 2022, we announced the extension of this collaboration
and disclosed the collaborator as Janssen, an affiliate of Johnson & Johnson. On March 9, 2022, we announced we had extended this
collaboration to include another large molecule.
CMS License Agreement.
On January 29, 2019, we entered into the CMS License Agreement with CMS, as guarantor, and the Licensees. The CMS License Agreement
was effective as of February 26, 2019. Pursuant to the terms of the CMS License Agreement, we agreed to license to the Licensees the exclusive
right to use our technology and our intellectual property rights and information and data related to certain of our clinical and pre-clinical
products (i.e. MTD201, MTX110, MTX102, MTR103 and MTD119), together with any other pipeline products or line extensions which are in or
which enter pre-clinical or clinical development in the first three years following the effective time of the CMS License Agreement, together
the Products, to develop and commercialize the Products in China, including Macau, Hong Kong and Taiwan, with the same rights in certain
countries in south east Asia in respect of which the Licensees notifies us that such licensee wants a license after the grant of a regulatory
approval of any of the Products by the FDA, EMA or by the regulatory authorities in the United Kingdom, France, Germany or Switzerland,
collectively the Territory, such activities to be conducted by the Licensee(s) and affiliates of CMS and local partners as permitted sub-licensees.
The Licensees have the exclusive right to import, obtain market approvals and register, market, distribute, promote and sell the Products
in the Territory at the Licensees’ sole discretion, and in the event we choose not to or fail to meet the Licensees’ binding
orders for the Products under certain circumstances, will be granted the right to manufacture the Products itself. The Licensees will
be restricted from supplying the Products to any customers outside of the Territory, while we will be restricted from supplying the Products
into the Territory, except through the Licensees.
In addition, we agreed to
assist the Licensees (and/or any affiliate of CMS) with their applications for marketing approvals for the Products in the Territory,
which approvals, if granted, will be exercised by CMS Bridging or CMS Medical HK, unless it is being transferred to us when we are entitled
to terminate the CMS License Agreement for material breach by CMS Bridging or CMS Medical HK. We will manufacture the Products for the
Licensees and their sub-licensees, which Products will be subject to exclusive purchase and supply arrangements with the Licensees for
the Territory.
Further, we agreed to permit
the Licensees to identify their own product and line extension targets in respect of which, if we agree, we will carry out initial development
and then will, for a technology transfer fee, the amount of which will be dependent on the circumstances, transfer the specific program
know-how and data to enable the Licensees to continue to develop using our platform technologies and then to commercialize in the Territory.
We will receive a low single digit royalty on the Net Sales (as such term is defined in the CMS License Agreement) in the Territory. The
Licensees will own any intellectual property rights it creates and any data they collect during the development process and will license
such rights and data to us for the purposes of manufacturing the products in question and also to commercialize the products outside the
Territory, for which we will pay the Licensees a low double digit royalty.
The Licensees shall pay us
lump sum payments on a Product-by-Product basis (in U.S. dollars) upon the achievement of certain regulatory approvals (in six, or potentially
seven, figure amounts) and sales performance milestones (in seven, or potentially, eight figure amounts), as well as royalties upon Net
Sales (as a low double digit percentage for the Products other than MTX110, for which the royalty will be a single digit percentage) in
the Territory.
The CMS License Agreement
may be terminated by either party for specific material breaches or insolvency. In particular, our rights to terminate are limited to
breaches of certain non-compete restrictions, failure to pay milestones or royalties, insolvency, or a failure to develop and/or commercialize
particular Products in particular countries after the grant of an FDA or EMA regulatory approval. In addition, we have the right to terminate
the agreement if the Licensee directly or indirectly infringes upon our intellectual property rights or challenges their validity or,
in relation to a particular Product and a particular Territory at any time, because the Licensee has made a determination that it no longer
wishes to develop and/or commercialize the Product in that country in the Territory. The CMS License Agreement also includes customary
indemnification for a transaction of this type.
Sales and Marketing
We do not currently have any
internal sales and marketing organization or distribution capabilities.
Research and Development
We have development and pilot
scale manufacturing facilities for Q-Sphera and MidaCore products in Cardiff, Wales.
As of December 31, 2021, the
research and development staff comprised approximately five Ph.D. scientists, five MSc scientists and eight BSc scientists.
Intellectual Property
Our success depends in large
part on our ability to obtain and maintain proprietary protection for our product candidates (and products derived therefrom), technology
and know-how, to operate without infringing the proprietary rights of others and to prevent others from infringing our proprietary rights.
We strive to protect the proprietary technology that we believe is important to our business by, among other methods, seeking and maintaining
patents, where available, that are intended to cover our product candidates (and products derived therefrom), compositions and formulations,
their methods of use and processes for their manufacture and any other inventions that are commercially important to the development of
our business. We also rely on trade secrets, know-how, continuing technological innovation and in-licensing opportunities to develop and
maintain our proprietary and competitive position.
We have developed a strong
intellectual property base globally, comprising patents, know-how, and trade secrets. Currently, we have 111 granted patents, 49 applications
in process, in each case covering all major world markets, and 31 separate patent families covering all major regions. We continue to
strengthen our patent portfolio by strategically submitting new patents and divisional patent applications based on our active research
and development activities. Central to our business are our three intellectual property technologies that are designed to enable the targeted
delivery, i.e. right place, and controlled sustained release, i.e. right time, of existing therapeutic drugs. These technologies have
broad applications in multiple therapeutic areas and offer the potential to create multiple revenue opportunities.
Patent rights have been granted
in all the major world markets, including Europe, the United States and Japan, or the Key Markets. They confer a broad position of exclusivity
for metal-core glycated-nanoparticles, including our GNPs. Our granted patents in our patent family 1 provide the foundation to the portfolio
with product, process and use claims that encompass the GNPs used in all of our major programs and technology platforms, including oncology,
nanoparticle technology and sustained release technology. The granted patents and pending patent applications in our patent families are
owned solely by us, co-owned with other parties or in-licensed to us. These include:
| | Sustained release technology. 10 patent families which protect devices, methods and formulations
for sustained release drug delivery. |
| | Oncology including Nano-inclusion technology. Eight patent families, which have predicted expiration
dates ranging from 2025 to 2040. These patent rights include 19 granted patents and 18 pending applications in Key Markets relating to
products and methods for treating and imaging cancers. In addition to the radiative and immune-based therapies contemplated by many of
these patent families, our pipeline of GNP-drug conjugates for oncology benefits from protection by the foundation GNP patents of patent
family 1. |
| | Nanoparticle technology. 13 patent families, with expiration dates ranging from 2021 to 2039. These
patent families include 49 granted patents and 16 pending patent applications in Key Markets protecting products in our pipeline. |
We also have in our portfolio several vaccine and
infectious disease related patent families. These relate to GNPs for immune-based therapy and antibiotic-GNP conjugates. We acquired through
the Q Chip transaction patent applications directed to the apparatus and methods of “Q-Sphera” technology, which employs a
piezoelectric droplet generator to form polymeric microparticles that encapsulate a drug for sustained release. The combination of our
GNP technology with Midatech Wales’ sustained release technology has provided possibilities for new formulations of GNP-drug conjugates.
Our GNPs, when encapsulated in Midatech Wales’ microparticles, enjoy patent protection conferred by the existing granted patents.
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 United States, the
patent term is 20 years from the filing date of a non-provisional patent application. In the United States, a patent’s term may,
in certain cases, be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the United States
Patent and Trademark Office in examining and granting a patent, or may be shortened if a patent is terminally disclaimed over an earlier
filed patent.
The term of a United States
patent that covers a drug, biological product or medical device approved pursuant to a pre-market approval may also be eligible for patent
term extension when FDA approval is granted, provided that certain statutory and regulatory requirements are met. The length of the patent
term extension is related to the length of time the drug is under regulatory review while the patent is in force. The Drug Price Competition
and Patent Term Restoration Act of 1984 permits a patent term extension of up to five years beyond the expiration date set for the patent.
Patent extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent
applicable to each regulatory review period may be granted an extension and only those claims reading on the approved drug may be extended.
Similar provisions are available in Europe and certain other foreign jurisdictions to extend the term of a patent that covers an approved
drug, provided that statutory and regulatory requirements are met. Thus, in the future, if and when our product candidates receive approval
by the FDA or foreign regulatory authorities, we expect to apply for patent term extensions on issued patents covering those products,
depending upon the length of the clinical trials for each drug and other factors. The expiration dates of our patents and patent applications
referred to above are without regard to potential patent term extension or other market exclusivity that may be available to us.
In addition to patents, we
may rely, in some circumstances, on trade secrets to protect our technology and maintain our competitive position. However, trade secrets
can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by confidentiality agreements with
our employees, corporate and scientific collaborators, consultants, scientific advisors, contractors and other third parties. We also
seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and
physical and electronic security of our information technology systems.
Government Regulations
Government authorities in
the United States, at the federal, state and local level, and in other countries and jurisdictions, including the European Union and the
United Kingdom, extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval,
packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, post-approval monitoring and reporting,
and import and export of pharmaceutical products. The processes for obtaining regulatory approvals in the United States and in foreign
countries and jurisdictions, along with subsequent compliance with applicable statutes and regulations and other regulatory authorities,
require the expenditure of substantial time and financial resources. As we have disclosed herein, we are seeking to license our product
candidates and other formulations to licensing partners. While many of the rules and regulations set forth herein do and will apply to
us, some are more applicable to any licensing partner who seeks to conduct clinical trials of, obtain regulatory approval for and commercialize
any of our product candidates, which could have an impact on any licensing revenue received by us.
Review and Approval of Drugs in the United States
In the United States, the
FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or the FDCA, and implementing regulations. Failure to comply with
the applicable United States requirements at any time during the product development process, approval process or after approval may subject
an applicant and/or sponsor to a variety of administrative or judicial sanctions, including refusal by the FDA to approve pending applications,
withdrawal of an approval, imposition of a clinical hold, issuance of warning letters and other types of letters, product recalls, product
seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution,
disgorgement of profits, exclusion from participation in government sponsored insurance programs such as Medicare, or civil or criminal
investigations and penalties brought by the FDA and the Department of Justice, or the DOJ, or other governmental entities.
An applicant seeking approval to market and distribute
a new drug product in the United States must typically undertake the following:
| | completion of preclinical laboratory tests, animal studies and formulation studies in compliance with the FDA’s good laboratory
practice, or GLP, regulations; |
| | submission to the FDA of an IND application, which must take effect before human clinical trials may begin; |
| | approval of clinical protocols by an independent institutional review board, or IRB, or ethics committee representing each clinical
site before each site may enroll subjects; |
| | potential initiation and completion of successive clinical trials that establish safety dose ranges; |
| | performance of adequate and well-controlled human clinical trials in accordance with good clinical practices, or GCP, and other clinical-trial
related regulations to establish the safety and efficacy of the proposed drug product for each indication; |
| | preparation and submission to the FDA of a new drug application, or NDA, or a biologics license application, or BLA; |
| | review of the submission by an FDA advisory committee, where appropriate or if applicable; |
| | satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the product, or components
thereof, are produced to assess compliance with cGMP requirements and to assure that the facilities, methods and controls are adequate
to preserve the product’s identity, strength, quality and purity; |
| | satisfactory completion of FDA audits of clinical trial sites to assure compliance with GCPs and the integrity of the clinical data; |
| | payment of user fees and securing FDA approval of the NDA or BLA; |
| | agree to comply with any post-approval requirements, including Risk Evaluation and Mitigation Strategies, or REMS, and post-approval
studies required by the FDA; and |
| | FDA review and approval of the NDA or licensure of the BLA. |
Preclinical Studies
Preclinical studies include
laboratory evaluation of the purity and stability of the manufactured drug substance or API and the formulated finished drug or drug product,
as well as in vitro and animal studies to assess the safety and activity of the drug for initial testing in humans and to establish
a rationale for therapeutic use. The conduct of preclinical studies is subject to federal and state regulations and requirements, including
GLP regulations. The results of the preclinical tests, together with manufacturing information, analytical data, any available clinical
data or literature and plans for clinical trials, among other things, are submitted to the FDA as part of an IND. An IND is a request
for authorization from the FDA to administer an investigational product to humans and must become effective before human clinical trials
may begin. Some long-term preclinical testing, such as animal tests of reproductive adverse events and carcinogenicity, may continue after
the IND is submitted.
Human Clinical Trials in Support of an NDA
Clinical trials involve the
administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with GCP
requirements, which include, among other things, the requirement that all research subjects provide their informed consent in writing
before their participation in any clinical trial. Clinical trials are conducted under written study protocols detailing, among other things,
the inclusion and exclusion criteria, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness
criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part
of the IND. An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or
questions related to a proposed clinical trial and places the clinical trial on clinical hold. In such a case, the IND sponsor and the
FDA must resolve any outstanding concerns before the clinical trial can begin. Accordingly, submission of an IND may not result in the
FDA allowing clinical trials to commence. A separate submission to an existing IND must also be made for each successive clinical trial
conducted during product development of a product candidate, and the FDA must grant permission, either explicitly or implicitly by not
objecting, before each clinical trial can begin.
Following commencement of
a clinical trial, the FDA may also place a clinical hold or partial clinical hold on that trial. A clinical hold is an order issued by
the FDA to the sponsor to delay a proposed clinical investigation or to suspend an ongoing investigation. A partial clinical hold is a
delay or suspension of only part of the clinical work requested under the IND. No more than 30 days after imposition of a clinical hold
or partial clinical hold, the FDA will provide the sponsor a written explanation of the basis for the hold. Following issuance of a clinical
hold or partial clinical hold, an investigation may only resume after the FDA has notified the sponsor that the investigation may proceed.
In addition, an IRB representing
each institution participating in the clinical trial must review and approve the plan for any clinical trial before it commences at that
institution, and the IRB must conduct a continuing review and reapprove the study at least annually. The IRB must review and approve,
among other things, the study protocol and informed consent information to be provided to study subjects. An IRB must operate in compliance
with FDA regulations.
Some trials are overseen by
an independent group of qualified experts organized by the trial sponsor, known as a data safety monitoring board or committee, or DSMB.
This group provides authorization as to whether or not a trial may move forward at designated check points based on access that only the
group maintains to available data from the study.
Information about certain
clinical trials, including details of the protocol and eventually study results, must be submitted within specific timeframes to the National
Institutes of Health for public dissemination on their ClinicalTrials.gov website. Information related to the product, patient population,
phase of investigation, study sites and investigators and other aspects of the clinical trial is made public as part of the registration
of the clinical trial. Sponsors are also obligated to disclose the results of their clinical trials after completion. Disclosure of the
results of these trials can be delayed in some cases for up to two years after the date of completion of the trial. Failure to timely
register a covered clinical study or to submit study results as provided for in the law can give rise to civil monetary penalties and
also prevent the non-compliant party from receiving future grant funds from the federal government. The NIH’s Final Rule on ClinicalTrials.gov
registration and reporting requirements became effective in 2017, and both NIH and FDA have recently begun enforcing those requirements
against non-compliant clinical trial sponsors.
Human clinical trials are typically conducted in
three sequential phases, Phase I, Phase II and Phase III, which may overlap or be combined:
| | Phase I. The product candidate is initially introduced into healthy human subjects and tested for safety, dosage tolerance,
absorption, metabolism, distribution and excretion. In the case of some product candidates for severe or life-threatening diseases, especially
when the product candidate may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing is often
conducted in patients. |
| | Phase II. The product candidate is evaluated in a limited patient population to identify possible adverse effects and
safety risks, to preliminarily evaluate the efficacy of the product candidate for specific targeted diseases and to determine dosage tolerance,
optimal dosage and dosing schedule. |
| | Phase III. Clinical trials are undertaken to further evaluate dosage, clinical efficacy, potency, and safety in an expanded
patient population at geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk/benefit
ratio of the product candidate and provide, if appropriate, an adequate basis for approval and product labeling. These trials may include
comparisons with placebo and/or other comparator treatments. The duration of treatment is often extended to mimic the actual use of a
product during marketing. |
Post-approval clinical trials, sometimes referred
to as Phase IV clinical trials, may be conducted after initial marketing approval. These clinical trials are used to gain additional
experience from the treatment of patients in the intended therapeutic indication, particularly for long-term safety follow-up. In certain
instances, the FDA may mandate the performance of Phase IV clinical trials as a condition of approval of an NDA or BLA.
Progress reports detailing
the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse events occur.
In addition, IND safety reports must be submitted to the FDA for any of the following: serious and unexpected suspected adverse reactions;
findings from other studies or animal or in vitro testing that suggest a significant risk in humans exposed to the drug; and any
clinically important increase in the case of a serious suspected adverse reaction over that listed in the protocol or investigator brochure.
Phase I, Phase II and Phase III clinical trials may not be completed successfully within any specified period, or at all. Furthermore,
the FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research
subjects are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at
its institution, or an institution it represents, if the clinical trial is not being conducted in accordance with the IRB’s requirements
or if the drug has been associated with unexpected serious harm to patients. The FDA will typically inspect one or more clinical sites
to assure compliance with GCP and the integrity of the clinical data submitted.
Submission of an NDA or BLA to the FDA
Assuming successful completion
of required clinical testing and other requirements, the results of the preclinical studies and clinical trials, together with detailed
information relating to the product’s chemistry, manufacture, controls and proposed labeling, among other things, are submitted
to the FDA as part of an NDA or BLA requesting approval to market the product candidate for one or more indications. Data may come from
company-sponsored clinical trials intended to test the safety and effectiveness of a use of a product, or from a number of alternative
sources, including studies initiated by investigators. To support marketing approval, the data submitted must be sufficient in quality
and quantity to establish the safety and effectiveness of the investigational drug product to the satisfaction of the FDA. In particular,
a BLA must contain proof of the biological product candidate’s safety, purity, potency and efficacy for its proposed indication
or indications. Under federal law, the submission of most NDAs is additionally subject to an application user fee, currently $3,117,218,
and the sponsor of an approved NDA is also subject to annual product and establishment user fees, currently $369,413. These fees are typically
increased annually. Certain exceptions and waivers are available for some of these fees, such as an exception from the application fee
for products with orphan designation and a waiver of the application fee for the first application filed by a qualifying small business.
The FDA conducts a preliminary
review of an NDA within 60 days of its receipt and informs the sponsor by the 74th day after the FDA’s receipt of the submission
whether the application is sufficiently complete to permit substantive review. The FDA may request additional information rather than
accept an NDA for filing. In this event, the application must be resubmitted with the additional information. The resubmitted application
is also subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth
substantive review. The FDA has agreed to specified performance goals in the review process of NDAs and BLAs. Most such applications are
meant to be reviewed within ten months from the date of filing, and most applications for “priority review” products are meant
to be reviewed within six months of filing. Despite these review goals, it is not uncommon for FDA review of an NDA or BLA to extend beyond
the goal date. For instance, the review process may be extended by the FDA for three additional months to consider new information or
clarification provided by the applicant to address an outstanding deficiency identified by the FDA following the original submission.
The FDA may refer applications
for novel drug or biological products or drug or biological products which present difficult questions of safety or efficacy to an advisory
committee, typically a panel that includes independent 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 and typically follows the advisory committee’s recommendations.
Before approving an NDA, the
FDA typically will inspect the facility or facilities where the product is or will be manufactured. These pre-approval inspections cover
all facilities associated with an NDA or BLA submission, including drug or biologic component manufacturing (such as APIs), finished product
manufacturing, and control testing laboratories. The FDA will not approve an application 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.
Additionally, before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP.
Fast Track, Breakthrough Therapy and Priority
Review Designations
The FDA is authorized to designate certain products
for expedited review if they are intended to address an unmet medical need in the treatment of a serious or life-threatening disease or
condition. These programs are fast track designation, breakthrough therapy designation and priority review designation.
Specifically, the FDA may
designate a product for fast track review if it is intended, whether alone or in combination with one or more other drugs, for the treatment
of a serious or life-threatening disease or condition, and it demonstrates the potential to address unmet medical needs by providing a
therapy where none exists or a therapy that may be potentially superior to existing therapy based on efficacy or safety factors. For fast
track products, sponsors may have more frequent interactions with the FDA and the FDA may initiate review of sections of a fast track
product’s NDA or BLA before the application is complete. This rolling review may be available if the FDA determines, after preliminary
evaluation of clinical data submitted by the sponsor, that a fast track product may be effective. The sponsor must also provide, and the
FDA must approve, a schedule for the submission of the remaining information and the sponsor must pay applicable user fees. However, the
FDA’s time period goal for reviewing a fast track application does not begin until the last section of the NDA is submitted. In
addition, the fast track designation may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data
emerging in the clinical trial process.
The FDA may grant breakthrough
therapy designation to a drug or biologic meeting certain statutory criteria upon a request made by the IND sponsor. A product may be
designated as a breakthrough therapy if it is intended, either 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 product may demonstrate substantial improvement
over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical
development. The FDA may take certain actions with respect to breakthrough therapies, including holding meetings with the sponsor throughout
the development process; providing timely advice to the product sponsor regarding development and approval; involving more senior staff
in the review process; assigning a cross-disciplinary project lead for the review team; and taking other steps to design the clinical
trials in an efficient manner. In addition, breakthrough therapies are eligible for accelerated approval of their respective marketing
applications.
The FDA may designate a product
for priority review if it is a drug that treats a serious condition and, if approved, would provide a significant improvement in safety
or effectiveness. The FDA determines, at the time that the marketing application is submitted, on a case- by-case basis, whether the proposed
drug represents a significant improvement when compared with other available therapies. Significant improvement may be illustrated by
evidence of increased effectiveness in the treatment of a condition, elimination or substantial reduction of a treatment-limiting drug
reaction, documented enhancement of patient compliance that may lead to improvement in serious outcomes, or evidence of safety and effectiveness
in a new subpopulation. A priority designation is intended to direct overall attention and resources to the evaluation of such applications,
and to shorten the FDA’s goal for taking action on a marketing application from ten months to six months for an original BLA or
for an NME NDA from the date of filing.
Even if a product qualifies
for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide
that the time period for FDA review or approval will not be shortened. Furthermore, fast track designation, breakthrough therapy designation,
and priority review do not change the scientific or medical standards for approval or the quality of evidence necessary to support approval
but may expedite the development or review process.
Accelerated Approval Pathway
The FDA may grant accelerated
approval to a drug or biologic for a serious or life-threatening condition that provides meaningful therapeutic advantage to patients
over existing treatments based upon a determination from well-controlled clinical trials that the drug has an effect on a surrogate endpoint
that is reasonably likely to predict clinical benefit. The FDA may also grant accelerated approval for such a drug or biologic when the
product has an effect on an intermediate clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality,
or IMM, and that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into
account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. Drugs and biologics
granted accelerated approval must meet the same statutory standards for safety and effectiveness as those granted traditional approval.
For the purposes of accelerated
approval, a surrogate endpoint is a marker, such as a laboratory measurement, radiographic image, physical sign, or other measure that
is thought to predict clinical benefit, but is not itself a measure of clinical benefit. Surrogate endpoints can often be measured more
easily or more rapidly than clinical endpoints. An intermediate clinical endpoint is a measurement of a therapeutic effect that is considered
reasonably likely to predict the clinical benefit of a drug or biologic, such as an effect on IMM. The FDA has limited experience with
accelerated approvals based on intermediate clinical endpoints, but has indicated that such endpoints generally may support accelerated
approval where the therapeutic effect measured by the endpoint is not itself a clinical benefit and basis for traditional approval, if
there is a basis for concluding that the therapeutic effect is reasonably likely to predict the ultimate clinical benefit of a drug or
biologic.
The accelerated approval pathway
is most often used in settings in which the course of a disease is long and an extended period of time is required to measure the intended
clinical benefit of a drug, even if the effect on the surrogate or intermediate clinical endpoint occurs rapidly. For example, accelerated
approval has been used extensively in the development and approval of drugs for treatment of a variety of cancers in which the goal of
therapy is generally to improve survival or decrease morbidity and the duration of the typical disease course requires lengthy and sometimes
large clinical trials to demonstrate a clinical or survival benefit.
The accelerated approval pathway
is usually contingent on a sponsor’s agreement to conduct, in a diligent manner, additional post-approval confirmatory studies to
verify and describe the drug’s clinical benefit. As a result, a drug candidate approved on this basis is subject to rigorous post-marketing
compliance requirements, including the completion of Phase IV or post-approval clinical trials to confirm the effect on the clinical endpoint.
Failure to conduct required post-approval studies, or confirm a clinical benefit during post-marketing studies, would allow the FDA to
withdraw the drug from the market on an expedited basis. All promotional materials for drug candidates approved under accelerated regulations
are subject to prior review by the FDA.
The FDA’s Decision on an NDA or BLA
The FDA reviews an NDA to
determine, among other things, whether a product is safe and effective for its intended use and whether its manufacturing is cGMP-compliant
to assure and preserve the product’s identity, strength, quality and purity. The FDA reviews a BLA to determine, among other things
whether the product is safe, pure and potent and the facility in which it is manufactured, processed, packed or held meets standards designed
to assure the product’s continued safety, purity and potency. The approval process is lengthy and often difficult, and the FDA may
refuse to approve an NDA or BLA if the applicable regulatory criteria are not satisfied or may require additional clinical or other data
and information. On the basis of the FDA’s evaluation of the NDA and accompanying information, including the results of the inspection
of the manufacturing facilities, the FDA may issue an approval letter or a complete response letter. An approval letter authorizes commercial
marketing of the product 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 generally
outlines the deficiencies in the submission and may require substantial additional testing or information in order for the FDA to reconsider
the application. If and when those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA, the
FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of
information included. Even with submission of this additional information, the FDA ultimately may decide that the application does not
satisfy the regulatory criteria for approval.
If the FDA approves a product,
it may limit the approved indications for use for the product, require that contraindications, warnings or precautions be included in
the product labeling, require that post-approval studies, including Phase IV clinical trials, be conducted to further assess the drug’s
safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions,
including distribution restrictions or other risk management mechanisms, including REMS, which can materially affect the potential market
and profitability of the product. The FDA may prevent or limit further marketing of a product based on the results of post-market studies
or surveillance programs. The FDA may also require an applicant to develop a REMS as a condition of approval to ensure that the benefits
of the product outweigh its risks and to assure its safe use. REMS use risk minimization strategies beyond the professional labeling to
ensure that the benefits of the product outweigh the potential risks. To determine whether a REMS is needed, the FDA will consider the
size of the population likely to use the product, seriousness of the disease, expected benefit of the product, expected duration of treatment,
seriousness of known or potential adverse events, and whether the product is a new molecular entity. REMS can include medication guides,
physician communication plans for healthcare professionals, and elements to assure safe use, or ETASU. ETASU may include, but are not
limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring,
and the use of patient registries. The FDA may require a REMS before approval or post-approval if it becomes aware of a serious risk associated
with use of the product. If the FDA concludes a REMS is needed as a condition of approval, the sponsor must submit a proposed REMS during
the application review process; the FDA will not approve the NDA without an approved REMS, if required. The requirement for a REMS can
materially affect the potential market and profitability of a product. After approval, many types of changes to the approved product,
such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and
FDA review and approval.
Post-Approval Requirements
Drugs or biologics manufactured
or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things,
requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting
of adverse experiences with the product. After approval, most changes to the approved product, such as adding new indications or other
labeling claims, are subject to prior FDA review and approval. There also are continuing, annual program fee requirements for any marketed
products, as well as new application fees for supplemental applications with clinical data.
In addition, drug and biologic
manufacturers and other entities involved in the manufacture and distribution of approved drugs or biologics are required to register
their establishments with the FDA and state agencies, and are subject to periodic prescheduled or unannounced inspections by the FDA and
the relevant state agencies for compliance with cGMP and other regulatory requirements. Changes to the manufacturing process are strictly
regulated and often require prior FDA approval before being implemented. FDA regulations also require investigation and correction of
any deviations from cGMP and impose reporting and documentation requirements upon the sponsor and any third-party manufacturers that the
sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality
control to maintain cGMP compliance.
Once an approval is granted,
the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after
the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated
severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to
the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks;
or imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things:
| | restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from
the market or product recalls; |
| | fines, warning letters or holds on post-approval clinical trials; |
| | refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation
of product license approvals; |
| | product seizure or detention, or refusal to permit the import or export of products; or |
| | injunctions or the imposition of civil or criminal penalties. |
The FDA strictly regulates
marketing, labeling, advertising and promotion of products that are placed on the market, and we must comply with the FDA’s advertising
and promotion requirements, such as those related to direct-to-consumer advertising, industry-sponsored scientific and educational activities,
and promotional activities involving the internet, as well as the prohibition on promoting products for uses or in patient populations
that are not described in the product’s approved labeling (known as “off-label use”). Drugs and biologics may be promoted
only for the approved indications and in accordance with the provisions of the approved label. Although physicians may prescribe legally
available products for off-label uses, manufacturers may not market or promote such uses. The FDA and other agencies actively enforce
the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label
uses may be subject to significant liability.
In addition, the distribution
of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act, or PDMA, which regulates the distribution of
drugs and drug samples at the federal level, and sets minimum standards for the registration and regulation of drug distributors by the
states. Both the PDMA and state laws limit the distribution of prescription pharmaceutical product samples and impose requirements to
ensure accountability in distribution. Furthermore, the Drug Supply Chain Security Act, or DSCSA, was enacted with the aim of building
an electronic system to identify and trace certain prescription drugs distributed in the United States, including most biological products.
The DSCSA mandates phased-in and resource-intensive obligations for pharmaceutical manufacturers, wholesale distributors, and dispensers
over a 10-year period that is expected to culminate in November 2023. From time to time, new legislation and regulations may be implemented
that could significantly change the statutory provisions governing the approval, manufacturing and marketing of products regulated by
the FDA. It is impossible to predict whether further legislative or regulatory changes will be enacted, or FDA regulations, guidance or
interpretations changed or what the impact of such changes, if any, may be.
Abbreviated New Drug Applications for Generic Drugs
In 1984, with passage of the
Hatch-Waxman amendments to the FDCA, Congress authorized the FDA to approve generic drugs that are the same as drugs previously approved
by the FDA under the NDA provisions of the statute and also enacted Section 505(b)(2) of the FDCA. To obtain approval of a generic drug,
an applicant must submit an abbreviated new drug application, or ANDA, to the agency. In support of such applications, a generic manufacturer
may rely on the preclinical and clinical testing previously conducted for a drug product previously approved under an NDA, known as the
reference listed drug, or RLD.
Specifically, in order for
an ANDA to be approved, the FDA must find that the generic version is identical to the RLD with respect to the active ingredients, the
route of administration, the dosage form, and the strength of the drug. At the same time, the FDA must also determine that the generic
drug is “bioequivalent” to the innovator drug. Under the statute, a generic drug is bioequivalent to a RLD if “the rate
and extent of absorption of the drug do not show a significant difference from the rate and extent of absorption of the listed drug.”
Upon approval of an ANDA,
the FDA indicates whether the generic product is “therapeutically equivalent” to the RLD in its publication “Approved
Drug Products with Therapeutic Equivalence Evaluations,” also referred to as the “Orange Book.” Physicians and pharmacists
consider a therapeutic equivalent generic drug to be fully substitutable for the RLD. In addition, by operation of certain state laws
and numerous health insurance programs, the FDA’s designation of therapeutic equivalence often results in substitution of the generic
drug without the knowledge or consent of either the prescribing physician or patient.
In contrast, Section 505(b)(2)
permits the filing of an NDA where at least some of the information required for approval comes from studies not conducted by or for the
applicant and for which the applicant has not obtained a right of reference. A Section 505(b)(2) applicant may eliminate the need
to conduct certain preclinical or clinical studies, if it can establish that reliance on studies conducted for a previously-approved product
is scientifically appropriate. Unlike the ANDA pathway used by developers of bioequivalent versions of innovator drugs, which does not
allow applicants to submit new clinical data other than bioavailability or bioequivalence data, the 505(b)(2) regulatory pathway does
not preclude the possibility that a follow-on applicant would need to conduct additional clinical trials or nonclinical studies; for example,
they may be seeking approval to market a previously approved drug for new indications or for a new patient population that would require
new clinical data to demonstrate safety or effectiveness. The FDA may then approve the new product for all or some of the label indications
for which the RLD has been approved, or for any new indication sought by the Section 505(b)(2) applicant, as applicable.
In addition, under the Hatch-Waxman
amendments, the FDA may not approve an ANDA or 505(b)(2) NDA until any applicable period of non-patent exclusivity for the RLD has expired.
These market exclusivity provisions under the FDCA also can delay the submission or the approval of certain applications. The FDCA provides
a period of five years of non-patent data exclusivity for a new drug containing a new chemical entity. A drug is a new chemical entity
if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible
for the action of the drug substance. In cases where such exclusivity has been granted, an ANDA or 505(b)(2) NDA may not be filed with
the FDA until the expiration of five years unless the submission is accompanied by a Paragraph IV certification, in which case the applicant
may submit its application four years following the original product approval.
The FDCA also provides for
a period of three years of exclusivity for an NDA, 505(b)(2) NDA or supplement thereto if one or more new clinical investigations, other
than bioavailability or bioequivalence studies, that were conducted by or for the applicant are deemed by the FDA to be essential to the
approval of the application. This three-year exclusivity period often protects changes to a previously approved drug product, such as
a new dosage form, route of administration, combination or indication. This three-year exclusivity covers only the conditions of use associated
with the new clinical investigations and does not prohibit the FDA from approving follow-on applications for drugs containing the
original active agent. Five-year and three-year exclusivity also will not delay the submission or approval of a traditional NDA filed
under Section 505(b)(1) of the FDCA. However, an applicant submitting a traditional NDA would be required to either conduct or obtain
a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety
and effectiveness.