RISK
FACTORS
An
investment in our securities has a high degree of risk. Before you invest you should carefully consider the risks and uncertainties described
below and the other information in this prospectus. Any of the risks and uncertainties set forth herein and therein could materially
and adversely affect our business, results of operations and financial condition, which in turn could materially and adversely affect
the trading price or value of our securities. Additional risks not currently known to us or which we consider immaterial based on information
currently available to us may also materially adversely affect us. As a result, you could lose all or part of your investment.
Risk
Factor Summary
| • | We
have incurred losses since inception, we anticipate that we will incur continued losses for
the foreseeable future; |
| • | We
require additional financing to accomplish our long-term business plan and failure to obtain
necessary capital when needed on acceptable terms, or at all, could force us to delay, limit,
reduce or terminate our operations; |
| • | We
will need additional financings to fund operations and such additional financings may cause
dilution to existing stockholders, restrict our operations or require us to relinquish our
technologies; |
| • | The
timing and costs related to the clinical development of our products are difficult to predict,
particularly due to our developing products to treat NASH, for which there are currently
no approved products, and any delays in our clinical trials may lead to a delay in the submission
of marketing approval applications; |
| • | We
may be required to make significant payments under the License Agreement; |
| • | We
may not be able to successfully obtain regulatory or marketing approval for, or successfully
commercialize, any of our product candidates. |
| • | The
regulatory review and approval processes of the FDA and comparable foreign regulatory authorities
are lengthy, time-consuming and inherently unpredictable; |
| • | Our
pursuit of potential therapeutic and prophylactic treatments for COVID-19 is in an early
stage and subject to many risks, and our COVID-19 product candidates may not be approved
in a timely manner, if at all; |
| • | In
light of the COVID-19 pandemic, it is possible that one or more government entities may take
actions that directly or indirectly have the effect of abrogating some of our rights or opportunities; |
| • | We
are currently evaluating alternatives with respect to NB-01 and may not be able to develop
NB-01 pursuant to other pathways, including as an orphan drug or as a nutraceutical candidate; |
| • | Undesirable
side effects from future product candidates could delay or prevent their marketing approval,
limit the commercial profile of an approved label, or result in significant negative consequences
following marketing approval, and the development of such product candidates exposes us to
additional risks; |
| • | Delays
in our clinical trials may lead to a delay in the submission of marketing approval applications
and jeopardize our ability to potentially receive approvals and generate revenues from the
sale of our products. |
| • | Enrollment
and retention of patients in clinical trials is an expensive and time-consuming process and
could be made more difficult or rendered impossible by multiple factors outside of our control; |
| • | We
face substantial competition, which may result in others discovering, developing or commercializing
products before or more successfully than we do; |
| • | Our
commercial success depends upon attaining significant market acceptance of its product candidates,
if approved, among hospitals, physicians, patients and healthcare payors; |
| • | We
rely on third parties to develop our preclinical studies, clinical trials, research programs
and product candidates and to manufacture our product candidates and preclinical and clinical
drug supplies. If these third parties do not successfully carry out their contractual duties
or meet expected deadlines or if they engage in misconduct or other improper activities or
if we are unable to engage with these third parties, it could have a material adverse effect
on our business and our obtaining of regulatory approval and commercialization of our product
candidates; |
| • | We
may form or seek strategic alliances or enter into additional licensing arrangements in the
future, and we may not realize the benefits of such alliances or licensing arrangements. |
| • | Our
relationships with healthcare providers and third-party payors will be subject to applicable
healthcare laws and regulations, which could expose us to certain penalties and consequences; |
| • | Certain
tax matters, including our ability to use our NOLs to offset future taxable income may be
subject to certain limitations, could impact its results of operations and financial conditions; |
| • | If
we are unable to obtain, maintain and protect sufficient intellectual property rights, its
competitive position could be harmed; |
| • | We
may not be able to protect or practice our intellectual property rights throughout the world. |
| • | We
may become involved in lawsuits to protect or enforce our intellectual property, which could
be expensive, time consuming, unsuccessful and could distract our personnel from their normal
responsibilities; |
| • | Dong-A
has a significant interest in and controls our Company, and as a result, Dong-A’s interests
may conflict with ours or our other stockholders’ interests in the future; |
| • | We
are a “controlled company” within the meaning of the Nasdaq listing rules and
may follow certain exemptions from certain corporate governance requirements that could adversely
affect our public shareholders. |
| • | Provisions
in our corporate charter documents and under Delaware law could make an acquisition of our
Company more difficult and may prevent attempts by our stockholders to replace or remove
our current management; |
| • | We
are a “smaller reporting company”, which could make our common stock less attractive
to investors; |
| • | We
have identified material weaknesses in our internal control over financial reporting that
could, if not remediated, result in material misstatements in its financial statements or
impair its ability to produce accurate and timely consolidated financial statements; |
| • | Any
failure, inadequacy, interruption or security lapse of our information technology could prevent
us from accessing critical information or expose us to liability; |
| • | An
active trading market for our common stock may not be maintained; |
| • | We
incur increased costs as a result of operating as a public company and its management is
required to devote substantial time to compliance initiatives; |
| • | We
do not anticipate declaring or paying, in the foreseeable future, any cash dividends on our
capital stock and, consequently, the ability of our stockholders to achieve a return on their
investment will depend on appreciation in the price of our common stock; |
| • | Our
Bylaws designate the Court of Chancery of the State of Delaware as the sole and exclusive
forum for certain types of actions and proceedings that may be initiated by our stockholders,
which could limit the ability of our stockholders to obtain a favorable judicial forum for
disputes with our Company or our directors, officers or employees; |
| • | Unstable
market and economic conditions may have serious adverse consequences on our business, financial
condition and stock price; |
| • | The
liquidity and trading volume of our common stock could be low, its ownership will be concentrated
and the market price of its common stock may be highly volatile; and |
| • | Our
common stock may be delisted from the Nasdaq Capital Market if it fails to comply with the
continued listing requirements. |
Risks
Related to the Business
We
have incurred losses since inception, we anticipate that we will incur continued losses for the foreseeable future. We require additional
financing to accomplish our long-term business plan and failure to obtain necessary capital when needed on acceptable terms, or at all,
could force us to delay, limit, reduce or terminate our operations.
We
have experienced net losses and negative cash flows from operating activities since our inception and have an accumulated deficit of
$91.1 million as of September 30, 2022. It is possible we will never generate revenue or profit.
As
of September 30, 2022, we had cash and cash equivalents of $6.4 million. In November 2022, we completed our public offering
and concurrent private placement which resulted in net proceeds to us of approximately $29.3 million. We expect that our cash and cash
equivalents will be adequate to fund operations into the second quarter of 2024.
We
expect that our costs will increase significantly as we advance the development of our product candidates through clinical trials and
other research. Because of the numerous risks and uncertainties associated with our commercialization efforts and future product development
and ongoing government investigation, we are unable to predict when we will become profitable, and we may never become profitable. Even
if we do achieve profitability, we may not be able to sustain or increase our profitability.
The
amount and timing of any expenditures needed to implement our commercial strategy will depend on numerous factors, including:
| • | timing
of clinical trials, including our ability to recruit clinical sites and enroll patients and
timing of receipt of necessary approvals to commence clinical trials; |
| • | timing
and cost structure of product manufacturing for our clinical trials; |
| • | our
ability to establish and maintain strategic sub-licensing, collaboration, partnering or other
arrangements and the financial terms of such agreements; |
| • | the
timing, receipt, and amount of license fees and sales of, or royalties on, our future products
or future improvements on our existing products, if any; |
| • | the
cost to establish, maintain, expand, and defend the scope of our intellectual property portfolio,
as well as any other action required in connection with licensing, preparing, filing, prosecuting,
defending, and enforcing any patents or other intellectual property rights; |
| • | the
emergence of competing technologies and other adverse market developments; and |
| • | our
ability to achieve sufficient market acceptance, the ability for our customers to get coverage
and adequate reimbursement from third-party payors and our ability to achieve acceptable
market share. |
If
we raise additional capital or develop and/or commercialize our products with third parties through marketing and distribution arrangements
or other collaborations, strategic alliances or licensing arrangements, we may have to develop our products on a slower timeline or relinquish
certain valuable rights to our products, technologies, future revenue streams or research programs or grant licenses on terms that may
not be favorable to us. If we raise additional capital through public or private equity offerings, the ownership interest of our existing
stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our
stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting
our ability to take specific actions, such as incurring additional debt or making capital expenditures. If we are unable to obtain adequate
financing on commercially reasonable terms when needed, we may have to delay, reduce the scope of or suspend our sales and marketing
efforts, which would have a material adverse effect on our business, financial condition, and results of operations. We also expect the
continuing economic uncertainty resulting from the COVID-19 pandemic to have a negative impact on our ability to secure additional financing
in a timely manner or on favorable terms, if at all.
Raising
additional capital may cause dilution to existing stockholders, restrict our operations or require us to relinquish rights to our technologies.
Existing
stockholders could suffer dilution or be negatively affected by fixed payment obligations we may incur if we raise additional funds through
the issuance of additional equity securities or debt. Furthermore, these securities may have rights senior to those of our common stock
and could contain covenants or protective rights 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. If we need to secure additional
financing, such additional fundraising efforts may divert our management and research efforts from our day-to-day activities, which may
adversely affect our ability to develop and commercialize our product candidates.
To
the extent we obtain additional funding through product collaborations, these arrangements would generally require us to relinquish rights
to some of our technologies, product candidates or products, and we may not be able to enter into such agreements, on acceptable terms,
if at all. If we are unable to obtain additional funding on a timely basis, we may be required to curtail or terminate some or all of
our development programs or product candidates.
We
are initially developing DA-1241 for the treatment of NASH, an indication for which there are no approved products. This makes it
difficult to predict the timing and costs of the clinical development of DA-1241 and, if applicable, DA-1726,
for the treatment of NASH.
Our
research and development efforts are focused in part on developing DA-1241 for the treatment of NASH, an indication for which there are
no approved products. The regulatory approval process for novel product candidates such as DA-1241 for NASH can be more expensive and
take longer than for other, better known or extensively studied product candidates. As other companies are in later stages of clinical
trials for their potential NASH therapies, we expect that the path for regulatory approval for NASH therapies may continue to evolve
in the near term as these other companies refine their regulatory approval strategies and interact with regulatory authorities. Such
evolution may impact our future clinical trial designs, including trial size and endpoints, in ways that we cannot predict today. Our
anticipated development costs would likely increase if development of DA-1241 or any future product candidate is delayed because we are
required by the FDA to perform studies or trials in addition to, or different from, those that we currently anticipate. Because of the
numerous risks and uncertainties associated with pharmaceutical product development, we are unable to predict the timing or amount of
any increase in our anticipated development costs.
We
may be required to make significant payments under the License Agreement.
We
have acquired exclusive rights (other than in the Republic of Korea) to DA-1241 and DA-1726 for the specific indications provided in
the License Agreement. Under the License Agreement, in consideration for the license, we have made an upfront payment of $22.0 million
in Series A Convertible Preferred Stock which converted into 7,333,333 shares of common stock upon stockholder approval of conversion
of the Series A Convertible Preferred Stock. As additional consideration for the license, we are required to pay Dong-A milestone
payments upon the achievement of specified regulatory milestones and milestone payments upon the achievement of specified commercial
milestones. Commencing on the first commercial sale of licensed products, we are obligated to pay royalties of single-digit percentages
on annual net sales of the products covered by the license. If milestone or other non-royalty obligations become due, we may not have
sufficient funds available to meet our obligations, which will materially adversely affect our business operations and financial condition.
Even
if we obtain favorable clinical results, we may not be able to obtain regulatory approval for, or successfully commercialize, ANA001
or gemcabene.
We
are not permitted to market ANA001 in the United States until we receive approval of an NDA from the FDA, or in any foreign
countries until we receive the requisite approval from such countries. As a condition to submitting an NDA to the FDA for ANA001, we
must process the data from our Phase 2 clinical trial, conduct and complete further Phase 3 clinical trials, and any additional
nonclinical studies or clinical trials required by the FDA. To date, we have completed the Phase 1 Single Ascending Dosing (SAD)
study and two Multiple Ascending Dosing (MAD) studies for ANA001. ANA001 may not be successful in clinical trials or receive
regulatory approval. Further, ANA001 may not receive regulatory approval even if it is successful in clinical trials. Obtaining
approval of an NDA is a complex, lengthy, expensive and uncertain process that typically takes many years following the commencement
of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In
addition, the policies or 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. Our development activities could be
harmed or delayed by a partial shutdown of the U.S. government, including the FDA. We have not obtained regulatory approval for any
product candidate and it is possible that ANA001 will never obtain regulatory approval. The FDA may delay, limit or deny approval of
ANA001 for many reasons, including, among others:
| • | the
results of our clinical trials may not meet the level of statistical or clinical significance
required by the FDA for marketing approval; |
| • | the
FDA may disagree with the number, design, size, conduct or implementation of our clinical
trials; |
| • | the
FDA may not approve the formulation, labeling or specifications of ANA001; |
| • | the
FDA may require that we conduct additional clinical trials; |
| • | the
contract research organizations (“CROs”) or the clinical investigators that we
retain to conduct our clinical trials may take actions outside of our control that materially
adversely impact our clinical trials; |
| • | we,
our CROs or clinical investigators may fail to perform in accordance with the FDA’s
good clinical practice (“GCP”) requirements; |
| • | the
FDA may disagree with our interpretation of data from our preclinical studies and clinical
trials; |
| • | the
FDA may find deficiencies with the manufacturing processes or facilities of third-party manufacturers
with which we contract; or |
| • | the
policies or regulations of the FDA may significantly change in a manner that renders our
clinical data insufficient for approval or may require that we amend or submit new clinical
protocols. |
In
addition, similar reasons may cause the EMA or other regulatory authorities to delay, limit or deny approval of ANA001 or gemcabene outside
the United States. Any of these factors, many of which are beyond our control, could jeopardize our ability to obtain regulatory approval
for and successfully market ANA001 or gemcabene.
Alternatively,
even if we obtain regulatory approval, that approval may be for indications or patient populations that are not as broad as we intend
or desire or may require labeling that includes significant use or distribution restrictions or safety warnings. We may also be required
to perform additional, unanticipated clinical trials to obtain approval or be subject to additional post marketing testing requirements
to maintain regulatory approval. In addition, regulatory authorities may withdraw their approval of a product or the FDA may require
a risk evaluation and mitigation strategy (“REMS”) for a product, which could impose restrictions on its distribution. Any
of the foregoing scenarios could materially harm the commercial prospects for our product candidates.
Gemcabene
was being evaluated in a Phase 2 randomized, double-blind, placebo-controlled study to assess its efficacy safety and tolerability in
patients with severe hypertriglyceridemia. In January 2016, the gemcabene Phase 2 clinical study was placed on partial clinical
hold as the FDA requested 2-year rat and mouse carcinogenicity studies to be completed and submitted. The study currently remains on
partial clinical hold for the treatment of dyslipidemia. NeuroBo is currently assessing the path forward for gemcabene for additional
indications including COVID-19. As a result, there is a significant uncertainty around our development of gemcabene.
We
may not be able to successfully obtain regulatory or marketing approval for, or successfully commercialize, any of our product candidates.
Although
we currently have no drug product for sale and may never be able to develop marketable drug products, our business depends heavily on
the successful clinical development (for our pharmaceutical drug products), regulatory approval and commercialization of our drug candidates.
The
clinical trials of our product candidates are, and the manufacturing and marketing of our product candidates will be, subject to extensive
and rigorous review and regulation by government authorities in the United States and in other countries where we intend to test and,
if approved, market any product candidate. Before obtaining regulatory approvals for the commercial sale of any product candidate as
a pharmaceutical product, we must successfully meet a number of critical developmental milestones, including:
| • | developing
dosages that will be well-tolerated, safe and effective; |
| • | completing
the development and scale-up to permit manufacture of our product candidates in commercial
quantities and at acceptable costs; |
| • | demonstrating
through pivotal clinical trials that the product candidate is safe and effective in patients
for the intended indication; |
| • | establishing
commercial manufacturing capabilities or making arrangements with third-party manufacturers;
and |
| • | obtaining
and maintaining exclusive rights, including patent and trade secret protection and non- patent
exclusivity for our product candidates. |
The
time necessary to achieve these developmental milestones for any individual product candidate is long and uncertain, and we may not successfully
complete these milestones for any product candidates that we may develop.
We
are continuing to test and develop our product candidates and may explore possible design or formulation changes to address safety, efficacy,
manufacturing efficiency and performance issues to the extent any arise. The design of a clinical trial may be able to determine whether
its results will support approval of a product, and flaws in the design of a clinical trial may not become apparent until the clinical
trial is well advanced or completed. There is no assurance that we will be able to design and complete a clinical trial to support marketing
approval. Moreover, nonclinical and clinical data are often susceptible to multiple interpretations and analyses. A number of companies
in the pharmaceutical and biotechnology industries have experienced significant setbacks in advanced clinical trials, even after promising
results in earlier trials.
We
may not be able to complete development of any product candidates that demonstrate safety and efficacy and that will have a commercially
reasonable treatment and storage period. If we are unable to complete development of DA-1241 and DA-1726 or any other product candidates
that we may develop, we will not be able to commercialize and earn revenue from them.
The
regulatory review and approval processes of the FDA and comparable foreign regulatory authorities are lengthy, time-consuming and inherently
unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, our business will be substantially
harmed.
Of
the large number of drugs in development in the United States, only a small percentage receive FDA regulatory approval and are
commercialized in the United States. We are not permitted to market DA-1241, DA-1726, or any other product candidate as a
pharmaceutical drug in the United States until we receive approval of an NDA from the FDA, or in any foreign countries until we
receive the requisite approval from such countries or jurisdictions, such as the marketing authorization application, or MAA, in
the European Union from the European Medicines Agency, or EMA.
Successfully
completing clinical trials and obtaining approval of an NDA is a complex, lengthy, expensive and uncertain process, and the FDA, or a
comparable foreign regulatory authority, may delay, limit or deny approval of an NDA for many reasons, including, among others:
| • | disagreement
with the design or implementation of our clinical trials; |
| • | disagreement
with the sufficiency of our clinical trials; |
| • | failure
to demonstrate the safety and efficacy of the product candidate for the proposed indications; |
| • | failure
to demonstrate that any clinical and other benefits of the product candidate outweigh their
safety risks; |
| • | a
negative interpretation of the data from our nonclinical studies or clinical trials; |
| • | deficiencies
in the manufacturing or control processes or failure of third-party manufacturing facilities
with which our contracts for clinical and commercial supplies to comply with current Good
Manufacturing Practice requirements, or cGMPs; |
| • | deficiencies
in the harvesting and processing of botanical raw materials under Good Agricultural and Collection
Processes, or GACPs, or the inability to demonstrate that the final product is capable of
being therapeutically consistent, as applicable to botanical drug products, as applicable; |
| • | insufficient
data collected from clinical trials or changes in the approval requirements that render our
nonclinical and clinical data insufficient to support the filing of an NDA or to obtain regulatory
approval; or |
| • | changes
in clinical practice in or approved products available for the treatment of the target patient
population that could have an impact on the indications that we are pursuing for our product
candidates. |
The
FDA or a comparable foreign regulatory authority may also require more information, including additional nonclinical or clinical data,
to support approval, which may delay or prevent approval and our commercialization plans, or cause us to abandon the development program.
Even if we obtain regulatory approval, our product candidates may be approved for fewer or more limited indications than we request,
such approval may be contingent on the performance of costly post-marketing clinical trials, or we may not be allowed to include the
labeling claims necessary or desirable for the successful commercialization of such product candidate.
Our
pursuit of potential therapeutic and prophylactic treatments for COVID-19 is in an early stage and subject to many risks. We may be unable
to receive approval for any of our COVID-19 product candidates a timely manner, if at all, and our COVID-19 product candidates may never
be approved.
We
may experience difficulties or delays in enrolling patients in clinical trials due to the impact of the global COVID-19 pandemic or other
reasons. Many of the risks related to the development of these product candidates are beyond our control, including risks related to
clinical development, the regulatory submission process, potential threats to our intellectual property rights, macro issues such as
the ongoing invasion of Ukraine and manufacturing delays or difficulties. We may be unable to produce an efficacious and/or approved
product for the treatment of patients with early COVID-19 in a timely manner, if at all.
The
results of preclinical studies from our COVID-19 product candidates may not be predictive of the results of clinical trials, and the
results of any early-stage clinical trials we commence may not be predictive of the results of the later-stage clinical trials. There
can be no assurance that any of our clinical trials for our COVID-19 product candidates, or any other of our product candidates, will
ultimately be successful or support further clinical development. In addition, the interpretation of the data from our clinical trials
of ANA001 or gemcabene by the FDA and other regulatory agencies may differ from our interpretation of such data and the FDA or other
regulatory agencies may require that we conduct additional studies or analyses. Any of these factors could delay or prevent us from receiving
regulatory approval of ANA001 or gemcabene and there can be no assurance that any such product candidate will be approved in a timely
manner, if at all.
If
the COVID-19 outbreak is effectively contained or the risk of coronavirus infection is diminished or eliminated before we can successfully
develop and manufacture our product candidates, the commercial viability of such product candidate may be diminished or eliminated. We
are also committing financial resources and personnel to the development of these product candidates which may cause delays in or otherwise
negatively impact our other development programs, despite uncertainties surrounding the longevity and extent of coronavirus as a global
health concern. Our business could be negatively impacted by our allocation of significant resources to a global health threat that is
unpredictable and could rapidly dissipate or against which our treatment, if successfully developed, may not be effective. In addition,
other parties are currently producing therapeutic and vaccine candidates for COVID-19, which may be more efficacious or may be approved
prior to our product.
The
regulatory pathway for ANA001 and gemcabene is continually evolving, and ma y result in unexpected or unforeseen challenges.
The
speed at which parties are acting to create and test many therapeutics and vaccines for COVID-19 is unusual, and evolving or changing
plans or priorities within the FDA, including those based on new knowledge of COVID-19 and how the disease affects the human body, may
significantly affect the regulatory timeline for our product candidates. Results from ongoing clinical trials and discussions with regulatory
authorities may raise new questions and require us to redesign proposed clinical trials, including revising proposed endpoints or adding
new clinical trial sites or cohorts of subjects. Any such developments could delay the development timeline for our product candidates
and materially increase the cost of the development for such candidates.
In
light of the COVID-19 pandemic, it is possible that one or more government entities may take actions that directly or indirectly have
the effect of abrogating some of our rights or opportunities. If we were to develop a treatment for COVID-19, the economic value of such
a therapeutic treatment to us could be limited.
Various
government entities, including the U.S. government, are offering incentives, grants and contracts to encourage additional investment
by commercial organizations into preventative and therapeutic agents against coronavirus, which may have the effect of increasing the
number of competitors and/or providing advantages to known competitors. Accordingly, there can be no assurance that we will be able to
successfully establish a competitive market share for our COVID-19 therapeutic treatments, if any.
We
are currently evaluating alternatives with respect to NB-01 and may not be able to develop NB-01 pursuant to other pathways, including
as an orphan drug or as a nutraceutical candidate.
NB-01
has successfully completed two Phase 2 proof-of-concept clinical trials for PDN. However, in light of the present business environment
including the impact of COVID-19, we ceased development of NB-01 on the prior regulatory pathway and determined not advance to Phase
3 clinical trials. We are currently evaluating alternatives with respect to the NB-01 asset. Among these alternatives, we may bring this
asset to the market through a different regulatory pathway. Development of NB-01 as an orphan drug is among the alternatives we are considering,
and we may conduct feasibility studies to identify a rare disease relevant to NB-01. Additionally, we are considering marketing the NB-01
product line as nutraceutical (non-pharmaceutical) products. There is no assurance that we will be able to pursue an alternative to take
NB-01 to market using one of the alternatives referred to above or otherwise.
Our
ability to successfully develop NB-01 as an orphan drug would be subject to the following additional risks, among others:
| • | the
results from different types of animal models could be inconsistent from the previous data
we have; |
| • | a
limited number of potential participants could make clinical trials for NB-01 difficult; |
| • | disparate
locations of a limited number of potential participants could make clinical trials difficult;
and |
| • | batch-by-batch
consistency is difficult to achieve in clinical trials with small numbers of participants. |
Our
ability to successfully develop NB-01 as a nutraceutical product would be subject to the following risks, among others:
| • | the
future growth and profitability of NB-01 would depend in large part upon our ability to successfully
hire personnel with requisite marketing expertise, the effectiveness and efficiency of our
marketing efforts and our ability to select effective markets and media in which to market
and advertise; |
| • | our
inability to properly manage, motivate and retain third party distributors for NB-01, as
applicable, could have a material adverse effect on us; |
| • | the
success of NB-01 would likely be linked to the size and growth rate of the vitamin, mineral
and dietary supplement market, and an adverse change in the size or growth rate of that market
could have a material adverse effect on us; and |
| • | unfavorable
publicity or consumer perception of NB-01 and any similar products distributed by other companies
could have a material adverse effect on us. |
Product
candidates may cause undesirable side effects that could delay or prevent their marketing approval, limit the commercial profile of an
approved label, or result in significant negative consequences following marketing approval, if any, including marketing withdrawal.
Undesirable
side effects caused by any of our product candidates that we may develop or acquire could cause us or the FDA or other regulatory authorities
to interrupt, delay or halt our clinical trials and could result in more restrictive labels or the delay or denial of marketing approval
by the FDA or other regulatory authorities of such product candidates. Results of our clinical trials could reveal a high and unacceptable
severity and prevalence of these or other side effects. In such an event, our trials could be suspended or terminated and the FDA or
comparable foreign regulatory authorities could order us to cease further development of or deny approval of our product candidates for
any or all targeted indications. In addition, any drug-related side effects could affect patient recruitment or the ability of enrolled
patients to complete the trial or result in potential product liability claims. Any of these occurrences may harm our business, financial
condition and prospects significantly.
Further,
clinical trials by their nature utilize a sample of the potential patient population. With a limited number of patients, rare and severe
side effects of our product candidates may only be uncovered with a significantly larger number of patients exposed to the product candidate.
If our product candidates receive marketing approval and we or others identify undesirable side effects caused by such product candidates
(or any other similar drugs) after such approval, a number of potentially significant negative consequences could result, including:
| • | regulatory
authorities may withdraw or limit their approval of such product candidates; |
| • | regulatory
authorities may require the addition of labeling statements, such as a “boxed”
warning or a contraindication; |
| • | we
may be required to recall the product, change the way such product candidates are distributed
or administered, conduct additional clinical trials or change the labeling of the product
candidates; |
| • | regulatory
authorities may require a Risk Evaluation and Mitigation Strategy (REMS) plan to mitigate
risks, which could include medication guides to be distributed to patients, physician communication
plans, or elements to assure safe use, such as restricted distribution methods, patient registries
and other risk minimization tools; |
| • | we
may be subject to regulatory investigations and government enforcement actions; |
| • | we
may be subject to fines, injunctions or the imposition of civil or criminal penalties; |
| • | we
may decide to remove such product candidates from the marketplace after they are approved; |
| • | the
product may be rendered less competitive and sales may decrease; |
| • | we
could be sued and held liable for injury caused to individuals exposed to or taking its product
candidates; and |
| • | our
reputation may suffer. |
We
believe that any of these events could prevent us from achieving or maintaining market acceptance of the affected product candidates
and could substantially increase the costs of commercializing our product candidates, if approved, and significantly impact our ability
to successfully commercialize our product candidates and generate revenues.
Delays
in our clinical trials may lead to a delay in the submission of marketing approval applications and jeopardize our ability to potentially
receive approvals and generate revenues from the sale of our products.
We
may experience delays in clinical trials. 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. Clinical trials may be delayed, suspended or terminated for a variety of reasons,
such as:
| • | delay
or failure in reaching agreement with the FDA or a comparable foreign regulatory authority
on a trial design that we are able to execute; |
| • | 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 trial; |
| • | inability,
delay or failure in identifying and maintaining a sufficient number of trial sites, many
of which may already be engaged in competing clinical trial programs; |
| • | issues
with the manufacture of drug substance for use in 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; |
| • | delay
or failure in reaching agreement on acceptable terms with prospective clinical research organizations,
or CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation
and may vary significantly among different CROs and trial sites; |
| • | delay
or failure in obtaining institutional review board, or IRB, approval to conduct a clinical
trial at each site; |
| • | delays
resulting from negative or equivocal findings of the Data Safety Monitoring Board, or DSMB,
if any; |
| • | ambiguous
or negative results; |
| • | decision
by the FDA, a comparable foreign regulatory authority, or recommendation by a DSMB to suspend
or terminate clinical trials at any time for safety issues or for any other reason; |
| • | conflicts
affecting clinical trial sites and regions where clinical trials are being completed; |
| • | lack
of adequate funding to continue the product development program; or |
| • | changes
in governmental regulations or requirements. |
Any
delays in completing our clinical trials will increase our costs, slow down our product candidate development and approval process and
jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may significantly harm our business,
financial condition and prospects. 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.
We
may develop DA-1241 and DA-1726, and potentially future product candidates, in combination with other therapies, which exposes us to
additional risks.
We
may develop DA-1241 and DA-1726 and future product candidates in combination with one or more currently approved therapies. Even if any
product candidate we develop were to receive marketing approval or be commercialized for use in combination with other existing therapies,
we would continue to be subject to the risks that the FDA or similar regulatory authorities outside of the United States could revoke
approval of the therapy used in combination with our product candidate or that safety, efficacy, manufacturing or supply issues could
arise with these existing therapies. This could result in our own products being removed from the market or being less successful commercially.
We
may also evaluate DA-1241 and DA-1726 or any other future product candidates in combination with one or more other therapies that have
not yet been approved for marketing by the FDA or similar regulatory authorities outside of the United States. We will not be able to
market and sell DA-1241 and DA-1726 or any product candidate we develop in combination with any such unapproved therapies that do not
ultimately obtain marketing approval. If the FDA or similar regulatory authorities outside of the United States do not approve these
other drugs or revoke their approval of, or if safety, efficacy, manufacturing, or supply issues arise with, the drugs we choose to evaluate
in combination with DA-1241 and DA-1726 or any other product candidate we develop, we may be unable to obtain approval of or market DA-1241
and DA-1726 or any other product candidate we develop.
Enrollment
and retention of patients in clinical trials is an expensive and time-consuming process and could be made more difficult or rendered
impossible by multiple factors outside our control, including difficulties in identifying patients with NASH and significant competition
for recruiting such patients in clinical trials.
Identifying
and qualifying patients to participate in our clinical trials is critical to our success. We may encounter delays in enrolling, or be
unable to enroll, a sufficient number of patients to complete any of our clinical trials, and even once enrolled we may be unable to
retain a sufficient number of patients to complete any of our trials. In particular, as a result of the inherent difficulties in diagnosing
NASH and the significant competition for recruiting patients with NASH in clinical trials, there may be delays in enrolling the patients
we need to complete clinical trials on a timely basis, or at all. This risk may be more significant for us than other companies conducting
clinical trials for the treatment of patients with NASH because we plan to enroll only patients with a biopsy-confirmed diagnosis of
NASH in our planned clinical trials.
Factors that may generally affect patient enrollment
include:
| • | the size and nature of the patient population; |
| • | the number and location of clinical sites we enroll; |
| • | competition with other companies for clinical sites or patients; |
| • | the eligibility and exclusion criteria for the trial; |
| • | the design of the clinical trial; |
| • | inability to obtain and maintain patient consents; |
| • | risk that enrolled participants will drop out before completion; and |
| • | competing clinical trials and clinicians’ and patients’ perceptions as to the potential advantages of the drug being studied
in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating. |
In addition, if any
significant adverse events or other side effects are observed in any of our future clinical trials, it may make it more difficult for
us to recruit patients to our clinical trials and patients may drop out of our trials, or we may be required to abandon the trials or
our development efforts of one or more product candidates altogether. Our inability to enroll a sufficient number of patients for our
clinical trials would result in significant delays, which would increase our costs and have an adverse effect on our company.
We face substantial competition, which
may result in others discovering, developing or commercializing products before or more successfully than we do.
The development and
commercialization of new products is highly competitive. Our future success depends on our ability to demonstrate and maintain a competitive
advantage with respect to the development and commercialization of our product candidates. Our objective is to develop and commercialize
new products with superior efficacy, convenience, tolerability and safety. In many cases, the products that we commercialize will compete
with existing, market-leading products.
Many of our potential
competitors have significantly greater financial, manufacturing, marketing, drug development, technical and human resources than we do.
Large pharmaceutical companies, in particular, have extensive experience in clinical testing, obtaining regulatory approvals, recruiting
patients and in manufacturing pharmaceutical products. In particular, these companies have greater experience and expertise in securing
government contracts and grants to support their research and development efforts, conducting testing and clinical trials, obtaining regulatory
approvals to market products, manufacturing such products on a broad scale and marketing approved products. These companies also have
significantly greater research and marketing capabilities than we do and may also have products that have been approved or are in late
stages of development, and have collaborative arrangements in our target markets with leading companies and research institutions. Established
pharmaceutical companies may also invest heavily to accelerate discovery and development of novel compounds or to in-license novel compounds
that could make the product that we develop obsolete. As a result of all of these factors, our competitors may succeed in obtaining patent
protection and/or FDA approval or discovering, developing and commercializing products before, or more effectively than, we do. In addition,
any new product that competes with an approved product must demonstrate compelling advantages in efficacy, convenience, tolerability and
safety in order to overcome price competition and to be commercially successful. If we are not able to compete effectively against potential
competitors, our business will not grow and our financial condition and operations will suffer.
To the extent any of
our product candidates are approved for cardio-metabolic indications, particularly obesity, the commercial success of our products will
also depend on our ability to demonstrate benefits over the then-prevailing standard of care, including diet and exercise. Finally, morbidly
obese patients sometimes undergo the gastric bypass procedure, with salutary effects on the many co-morbid conditions of obesity. Some
of these programs have been advanced further in clinical development then our clinical programs or have already received regulatory approval.
T2D
There are a number
of large pharmaceutical and biotechnology companies that currently market and sell products or are pursuing the development of products
for T2D. Some of these competitive products and therapies are based on scientific approaches that are the same as 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.
NASH
There
are currently no medications approved for the treatment of NASH. However, various therapeutics are used off-label for the treatment
of NASH, including vitamin E (an antioxidant), insulin sensitizers (e.g., metformin, pioglitazone), antihyperlipidemic agents (e.g.,
gemfibrozil), pentoxifylline and ursodeoxycholic acid (UDCA). There are several product candidates in Phase 3 or earlier clinical or
preclinical development for the treatment of NASH, including Madrigal Pharmaceuticals, Inc.’s THR beta agonist
(resmetirom), Novo Nordisk’s GLP1 agonist (semaglutide), and Inventiva’s pan-PPAR agonist (lanifibranor), as well as FXR
agonists from Intercept Pharmaceuticals Inc. (obeticholic acid), Novartis AG (tropifexor, nidufexor), Metacrine (MET409, MET642),
Terns Pharmaceuticals (TERN-101), Gilead Sciences, Inc. (cilofexor) and Enanta Pharmaceuticals, Inc. (EDP-305).
Obesity
Due to the growing overweight and obesity
epidemic and consumer demand, there are many competitors in the field of obesity treatment. Obesity treatments range from behavioral modification,
to drugs and medical devices, and surgery, generally as a last resort. If DA-1726 were approved for obesity, our primary competition in
the obesity treatment market would currently be from approved and marketed products, including, liragluitde (SAXENDA®),
semaglutide (WEGOVY®), phentermine/topiramate (QSYMIA®), naltrexone/bupropion (CONTRAVE®)
and orlistat (XENICAL®/ ALLI®). Further competition could arise from products currently in development,
including Lilly’s GLP-1/GIP receptor dual agonist (tierzepatide), Novo Nordisk’s CagriSema (a combination drug of semaglutide
and a novel amylin analogue), Zafgen’s ZGN- 1061 or ZGN-1258 (MetAP2) product candidates and various FGF21 ligands in development.
ANA001
We
expect that, if approved, ANA001 will compete with a number of drugs that are being studied for the treatment of symptoms of
COVID-19. In addition to widely distributed vaccines designed to stop the spread of COVID-19, which could adversely affect the
addressable population for ANA001, several antiviral therapies are currently approved by the FDA for the treatment of COVID-19
(remdesivir [VEKLURY®], nirmatrelvir/ritonavir [PAXLOVID™] and molnupiravir), and several antibody
treatments have received emergency use authorization from the FDA (sotrovimab, bebtelovimab, casirivimab/imdevimab
[REGEN-COV®], tixagevimab/cilgavimab [EVUSHELD™] and bamlanivimab/etesevimab). We are aware due to
the rapidly changing mutations that some of the EUA approved therapies have been restricted in many states according to the
drug’s susceptibility to the local variant outbreak. Additional therapies continue to be studied in clinical trials for the
treatment of COVID-19.
In addition to the
marketed therapies, we are aware of several companies currently developing and commercializing niclosamide for the treatment of COVID-19
symptoms, including Daewoong, Union Therapeutics, TFF and FirstWave. Approved therapies and additional therapies that may be approved
in the near term could significantly and adversely affect the market opportunity for ANA001.
NB-01 and NB-02
There are a
number of large pharmaceutical and biotechnology companies that currently market and sell products or are pursuing the development
of products for the treatment of painful diabetic neuropathy and for the symptomatic and disease modifying treatment of
neurodegenerative diseases, including Alzheimer’s disease and tauopathies. Some of these competitive products and therapies
are based on scientific approaches that are the same as 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.
NB-01 has been in clinical
development for the treatment of painful diabetic neuropathy. We are also developing NB-02 for the symptomatic and disease modifying treatment
of neurodegenerative diseases, including Alzheimer’s disease and tauopathies. For painful diabetic neuropathy, there are no products
currently marketed for disease modification, although there are products available to treat painful diabetic neuropathy. For Alzheimer’s
disease, current symptomatic treatments have limited effectiveness and no disease- modifying therapy is currently available. Some of the
currently approved drug therapies are branded and subject to patent protection, and others are available on a generic basis. Many of these
approved drugs are well- established therapies and are widely accepted by physicians, patients and third-party payors. Insurers and other
third-party payors may also encourage the use of generic products.
Our commercial success depends upon
attaining significant market acceptance of our product candidates, if approved, among hospitals, physicians, patients and healthcare payors.
Even if we obtain regulatory
approval for any of our product candidates that we may develop or acquire in the future, the product may not gain market acceptance among
hospitals, physicians, health care payors, patients and the medical community. Market acceptance of any of our product candidates for
which we receive regulatory approval depends on a number of factors, including:
| • | the clinical indications for which the product candidate is approved; |
| • | acceptance by major operators of hospitals, physicians and patients of the product candidate as a safe and effective treatment, particularly
the ability of our product candidates to establish themselves as a new standard of care in the treatment paradigm for the indications
that we are pursuing; |
| • | the potential and perceived advantages of our product candidates over alternative treatments as compared to the relative costs of
the product candidates and alternative treatments; |
| • | the willingness of physicians to prescribe, and patients to take, a product candidate that is based on a botanical source; |
| • | the prevalence and severity of any side effects with respect to our product candidates, and any elements that may be imposed by the
FDA under a REMS program that could discourage market uptake of the products; |
| • | the availability of adequate reimbursement and pricing for any approved products by third party payors and government authorities; |
| • | inability of certain types of patients to take our product; |
| • | demonstrated ability to treat patients and, if required by any applicable regulatory authority in connection with the approval for
target indications, to provide patients with incremental cardiovascular disease benefits, as compared with other available therapies; |
| • | the relative convenience and ease of administration of our product candidates, including as compared with other treatments available
for approved indications; |
| • | limitations or warnings contained in the labeling approved by the FDA; |
| • | availability of alternative treatments already approved or expected to be commercially launched in the near future; |
| • | the effectiveness of our sales and marketing strategies; |
| • | guidelines and recommendations of organizations involved in research, treatment and prevention of various diseases that may advocate
for alternative therapies; |
| • | the willingness of patients to pay out-of-pocket in the absence of third-party coverage; |
| • | physicians or patients may be reluctant to switch from existing therapies even if potentially more effective, safe or convenient; |
| • | efficacy, safety, and potential advantages compared to alternative treatments; |
| • | the ability to offer our product for sale at competitive prices; |
| • | the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies; |
| • | any restrictions on the use of our product together with other medications; |
| • | interactions of our product with other medicines patients are taking; and |
| • | the timing of market introduction of our products as well as competitive products. |
There may be delays
in getting our product candidates, if approved, on hospital or insurance formularies or limitations on coverages that may be available
in the early stages of commercialization for newly approved drugs. If any of our product candidates are approved but fail to achieve market
acceptance among hospitals, physicians, patients or health care payors, we will not be able to generate significant revenues, which would
have a material adverse effect on our business, prospects, financial condition and results of operations.
Even if we are able to commercialize
a future pharmaceutical drug candidate, the profitability of such product candidate will likely depend in significant part on third-party
reimbursement practices, which, if unfavorable, would harm our business.
Our ability to commercialize
a drug successfully will depend in part on the extent to which coverage and adequate reimbursement will be available from government health
administration authorities, private health insurers and other organizations. Government authorities and third-party payors, such as private
health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels. Government
authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular
medications. Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices
and are challenging the prices charged for medical products. We cannot be sure that coverage will be available for any product candidate
that we commercialize and, if coverage is available, whether the level of reimbursement will be adequate. Assuming we obtain coverage
for our product candidates, if approved, by a third-party payor, the resulting reimbursement payment rates may not be adequate or may
require co-payments that patients find unacceptably high. Patients who are prescribed medications for the treatment of their conditions,
and their prescribing physicians, generally rely on third-party payors to reimburse all or part of the costs associated with their prescription
drugs. Patients are unlikely to use a product candidate, if approved, unless coverage is provided and reimbursement is adequate to cover
all or a significant portion of the cost of our products. Therefore, coverage and adequate reimbursement is critical to new product acceptance.
If reimbursement is not available or is available only to limited levels, we may not be able to successfully commercialize any product
candidate for which we obtain marketing approval.
There may be significant
delays in obtaining reimbursement for newly approved drugs, and coverage may be more limited than the purposes for which a product candidate
is approved by the FDA or similar regulatory authorities outside the United States. Moreover, eligibility for reimbursement does not imply
that any product will be paid for in all cases or at a rate that covers its costs, including research, development, manufacture, sale
and distribution. Interim reimbursement levels for a new product, if applicable, may also not be sufficient to cover our costs and may
not be made permanent. Reimbursement rates may vary according to the use of the product and the clinical setting in which it is used,
may be based on reimbursement levels already set for lower cost medicines and may be incorporated into existing payments for other services.
Net prices for products may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors
and by any future relaxation of laws that presently restrict imports of medicines from countries where they may be sold at lower prices
than in the United States. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement
policies. However, no uniform policy requirement for coverage and reimbursement for drug products exists among third-party payors in the
United States. Therefore, coverage and reimbursement for drug products can differ significantly from payor to payor. As a result, the
coverage determination process is often a time- consuming and costly process that will require us to provide scientific and clinical support
for the use of our products to each payor separately with no assurance that coverage and adequate reimbursement will be applied consistently
or obtained in the first instance.
Our
inability to promptly obtain coverage and profitable payment rates from both government-funded and private payors for any approved products
that we develop could have an adverse effect on our operating results, our ability to raise capital needed to commercialize products and
our overall financial condition.
Product liability lawsuits against
us could cause us to incur substantial liabilities and could limit commercialization of any product candidate that we may develop.
We face an inherent
risk of product liability exposure related to the testing of our product candidates in human clinical trials and will face an even greater
risk if we commercially sell any product that we may develop. Product liability claims might be brought against us by patients, healthcare
providers or others selling or otherwise coming into contact with any of our products or future product candidate during product testing,
manufacturing, marketing or sale. For example, we may be sued on allegations that a product candidate caused injury or that the product
is otherwise unsuitable. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure
to warn of dangers inherent in the product, including as a result of interactions with alcohol or other drugs, negligence, strict liability,
and a breach of warranties. Claims could also be asserted under state consumer protection acts.
If we cannot successfully
defend against claims that our product caused injuries, we could incur substantial liabilities. Regardless of merit or eventual outcome,
liability claims may result in:
| • | decreased demand for any product candidate that we are developing; |
| • | injury to our reputation and significant negative media attention; |
| • | withdrawal of clinical trial participants; |
| • | increased FDA warnings on product labels; |
| • | significant costs to defend the related litigation; |
| • | substantial monetary awards to trial participants or patients; |
| • | distraction of management’s attention from our primary business; |
| • | the inability to commercialize any product candidate that we may develop; |
| • | the removal of a product from the market; and |
| • | increased insurance costs. |
We do not currently
maintain clinical trial insurance coverage for clinical trials. Even if we obtain such insurance in the future, it may not be adequate
to cover all liabilities that we may incur. Insurance coverage is increasingly expensive. We may not be able to obtain or maintain insurance
coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.
If we or our third-party manufacturers
fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs
that could have an adverse effect on the success of our business.
Our
research and development activities involve the controlled use of potentially hazardous substances, including chemical and
biological materials, by us and our third-party manufacturers. Our manufacturers are subject to federal, state and local laws and
regulations in the United States and abroad governing laboratory procedures and the use, manufacture, storage, handling and disposal
of medical and hazardous materials. Although we believe that our manufacturers’ procedures for using, handling, storing and
disposing of these materials comply with legally prescribed standards, we cannot completely eliminate the risk of contamination or
injury resulting from medical or hazardous materials. As a result of any such contamination or injury, we may incur liability or
local, city, state or federal authorities may curtail the use of these materials and interrupt our business operations. In the event
of an accident, we could be held liable for damages or penalized with fines, and the liability could exceed our resources. We do not
have any insurance for liabilities arising from medical or hazardous materials. Although we maintain workers’ compensation
insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous
materials, this insurance may not provide adequate coverage against potential liabilities. Compliance with applicable environmental,
health and safety laws and regulations is expensive, and current or future environmental regulations may impair our research,
development and production efforts, which could harm our business, prospects, financial condition or results of operations.
We rely and will continue to rely
on collaborative partners regarding the development of our research programs and product candidates.
We are and expect to
continue to be dependent on collaborations with partners relating to the development and commercialization of our existing and future
research programs and product candidates. For example, pursuant to the terms of the License Agreement and the Shared Services Agreement
(as described below under “Transactions with Dong-A”), we collaborate with Dong-A on the development of DA-1241 and DA-1726.
We had, have and will
continue to have discussions on potential partnering opportunities with various pharmaceutical and medical device companies. If we fail
to enter into or maintain collaborative agreements on reasonable terms or at all, our ability to develop our existing or future research
programs and product candidates could be delayed, the commercial potential of our products could change, and our costs of development
and commercialization could increase.
Our dependence on collaborative
partners subjects it to a number of risks, including, but not limited to, the following:
| • | We may not be able to control the amount or timing of resources that collaborative partners devote to our research programs and product
candidates; |
| • | We may be required to relinquish significant rights, including intellectual property, marketing and distribution rights; |
| • | We rely on the information and data received from third parties regarding our research programs and product candidates and will not
have control of the process conducted by the third party in gathering and composing such data and information. We may not have formal
or appropriate guarantees from our contract parties with respect to the quality and the completeness of such data; |
| • | A collaborative partner may develop a competing product either by itself or in collaboration with others, including one or more of
our competitors; |
| • | Our collaborative partners’ willingness or ability to complete their obligations under our collaboration arrangements may be
adversely affected by business combinations or significant changes in a collaborative partner’s business strategy; and/or |
| • | We may experience delays in, or increases in the costs of, the development of our research programs and product candidates due to
the termination or expiration of collaborative research and development arrangements. |
If, in the future, we are unable to
establish sales and marketing capabilities or to selectively enter into agreements with third parties to sell and market our product candidates,
we may not be successful in commercializing our product candidates if and when they are approved.
We do not have a sales
or marketing infrastructure and have no experience in the sale, marketing or distribution of pharmaceutical products. To achieve commercial
success for any approved product for which we retain sales and marketing responsibilities, we must either develop a sales and marketing
organization or outsource these functions to other third parties. In the future, we may choose to build a focused sales and marketing
infrastructure to sell some of our product candidates if and when they are approved.
There are risks involved
both with establishing our own sales and marketing capabilities and with entering into arrangements with third parties to perform these
services. For example, recruiting and training a sales force is expensive and time consuming and could delay any product launch. If the
commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not
occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our
investment would be lost if we cannot retain or reposition our sales and marketing personnel.
Factors that may inhibit our efforts
to commercialize our product candidates on our own include:
| • | our inability to recruit and retain adequate numbers of effective sales and marketing personnel; |
| • | the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to prescribe any future
pharmaceutical products; and |
| • | unforeseen costs and expenses associated with creating an independent sales and marketing organization. |
If we enter into arrangements
with third parties to perform sales, marketing and distribution services, our product revenue or the profitability of these product revenue
may be lower than if we were to market and sell any products that we develop ourselves. In addition, we may not be successful in entering
into arrangements with third parties to sell and market our product candidates or may be unable to do so on terms that are favorable to
us. We may have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell
and market our products effectively. If we do not establish sales and marketing capabilities successfully, either on our own or in collaboration
with third parties, we will not be successful in commercializing our product candidates.
Any product candidate for which we
obtain marketing approval could be subject to marketing restrictions or withdrawal from the market, and we may be subject to penalties
if we fail to comply with regulatory requirements or if we experience unanticipated problems with our products.
Any pharmaceutical
product candidate for which we obtain marketing approval will be subject to continual requirements of and review by the FDA and other
regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, registration
and listing requirements, cGMP requirements, quality assurance and corresponding maintenance of records and documents and requirements
regarding the distribution of samples to physicians and recordkeeping. Even if marketing approval of a product candidate is granted, the
approval may be subject to limitations on the indicated uses for which the product may be marketed or to the conditions of approval, or
contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the medicine. The FDA closely
regulates the post-approval marketing and promotion of drugs to ensure that they are marketed only for the approved indications and in
accordance with the provisions of the approved labeling. The FDA imposes stringent restrictions on manufacturers’ communications
regarding off-label use and if we do not market our products for their approved indications, we may be subject to enforcement action for
off-label marketing and/or promotion.
In addition, later
discovery of previously unknown problems with our products, manufacturers or manufacturing processes, or failure to comply with regulatory
requirements, may result in, among other things:
| • | restrictions on such products, manufacturers or manufacturing processes; |
| • | restrictions on the labeling, marketing, distribution or use of a product; |
| • | requirements to conduct post-approval clinical trials; |
| • | warning or untitled letters; |
| • | withdrawal of the products from the market; |
| • | refusal to approve pending applications or supplements to approved applications that we submit; |
| • | fines, restitution or disgorgement of profits or revenue; |
| • | suspension or withdrawal of marketing approvals for the drug products; |
| • | refusal to permit the import or export of our products; |
| • | injunctions or the imposition of civil or criminal penalties. |
Any product marketed
as a nutraceutical could also be subject to FDA review or adverse action and we could be forced to remove such product from the market.
We or any potential collaborator may
never receive regulatory approval to market our product candidates outside of the United States.
The activities associated with the development
and commercialization of pharmaceutical drugs are subject to comprehensive regulation by the FDA, other regulatory agencies in the United
States and by comparable authorities in other countries. Failure to obtain regulatory approval for our product candidates will prevent
us or any potential collaborator from commercializing our product candidates as pharmaceutical drugs. We have not received regulatory
approval to market any of our product candidates in any jurisdiction, and we do not expect to obtain FDA or any other regulatory approvals
to market any of our product candidates for the foreseeable future, if at all. The process of obtaining regulatory approvals is expensive,
often takes many years, if approval is obtained at all, and can vary substantially based upon the type, complexity and novelty of the
product candidates involved.
We may seek to avail ourselves of
mechanisms to expedite and/or reduce the cost for development or approval of any of our product candidates or product candidates we may
pursue in the future, such as fast track designation or orphan drug designation, but such mechanisms may not actually lead to a faster
or less expensive development or regulatory review or approval process.
We may seek fast track
designation, priority review, orphan drug designation, or accelerated approval for any product candidate we may pursue in the future.
For example, if a drug is intended for the treatment of a serious or life-threatening condition and the drug demonstrates the potential
to address unmet medical needs for this condition, the drug sponsor may apply for FDA fast track designation. However, the FDA has broad
discretion with regard to these mechanisms, and even if we believe a particular product candidate is eligible for any such mechanism,
it cannot assure you that the FDA would decide to grant it. Even if we obtain fast track or priority review designation or pursue an accelerated
approval pathway, we may not experience a faster and/or less costly development process, review or approval compared to conventional FDA
procedures. The FDA may withdraw a particular designation if it believes that the designation is no longer supported by data from our
clinical development program.
Current and future legislation may
increase the difficulty and cost to obtain marketing approval of and commercialize our product candidates and affect the prices we may
obtain.
In the United States
and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare
system that could prevent or delay marketing approval of our product candidates, restrict post-approval activities and affect our ability
to profitably sell any product candidates for which we obtain marketing approval.
Legislative and regulatory
proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products.
New legislation or regulations may adversely affect the potential for our products as nutraceuticals. We cannot be sure whether additional
legislative changes will be enacted, or whether FDA regulations, guidance or interpretations will be changed, or what the impact of such
changes on the marketing approvals, if any, of our product candidates may be. In addition, increased scrutiny by the U.S. Congress of
the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product
labeling and post-marketing conditions and other requirements.
Governments outside the United States
tend to impose strict price controls, which may adversely affect our revenues, if any.
In some countries,
particularly the countries of the European Union, the pricing of prescription pharmaceuticals 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. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the
cost-effectiveness of its 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, possibly materially.
Our relationships with healthcare
providers and third-party payors will be 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, among other penalties and consequences.
Healthcare providers
and third-party payors will play a primary role in the recommendation and prescription of any product candidate for which we obtain marketing
approval. Our arrangements with third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare
laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute
any product candidate for which we obtain marketing approval.
Efforts to ensure that
our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs.
It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes,
regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to
be in violation of any of these laws or any other governmental regulations that may apply to it, we may be subject to significant civil,
criminal and administrative penalties, damages, fines, imprisonment, exclusion of products from government funded healthcare programs,
such as Medicare and Medicaid, and the curtailment or restructuring of our operations. If any of the physicians or other healthcare providers
or entities with whom we expect to do business is found to be not in compliance with applicable laws, they may be subject to criminal,
civil or administrative sanctions, including exclusions from government funded healthcare programs.
We are subject to U.S. and certain
foreign export and import controls, sanctions, embargoes, anti-corruption laws, and anti-money laundering laws and regulations. Compliance
with these legal standards could impair its ability to compete in domestic and international markets. We can face criminal liability and
other serious consequences for violations which can harm its business.
We are subject to export
control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations, various economic
and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls, the U.S. Foreign
Corrupt Practices Act of 1977, as amended, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the
USA PATRIOT Act, and other state and national anti-bribery and anti-money laundering laws in the countries in which we conduct activities.
Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents, contractors, and other partners from
authorizing, promising, offering, or providing, directly or indirectly, improper payments or anything else of value to recipients in the
public or private sector. We may engage third parties for clinical trials outside of the United States to sell our products abroad and/or
to obtain necessary permits, licenses, patent registrations, and other regulatory approvals. We have direct or indirect interactions with
officials and employees of government agencies or government-affiliated hospitals, universities, and other organizations. We can be held
liable for the corrupt or other illegal activities of our employees, agents, contractors, and other partners, even if it does not explicitly
authorize or have actual knowledge of such activities. Our violations of the laws and regulations described above may result in substantial
civil and criminal fines and penalties, imprisonment, the loss of export or import privileges, debarment, tax reassessments, breach of
contract and fraud litigation, reputational harm, and other consequences.
Our ability to use our NOLs to offset
future taxable income may be subject to certain limitations
In
general, under Section 382 of Internal Revenue Code of 1986, as amended (the “Code”), a corporation
that undergoes an “ownership change” is subject to limitations on its ability to utilize its carryforwards to offset
future taxable income. Our existing NOL carryforwards, or NOLs, may be subject to limitations arising from previous ownership
changes, including in connection with the 2019 and 2020 Mergers. Future changes in our stock ownership, some of which are outside of
our control, could result in further ownership changes under Section 382 of the Code. There is also a risk that due to
regulatory changes, such as suspensions on the use of NOLs, or other unforeseen reasons, our existing and any future NOLs could
expire or otherwise be unavailable to offset future income tax liabilities.
We
believe that we have undergone an ownership change as a result of our transactions in 2019 and 2020 and may have undergone an additional
ownership change upon the closing of the 2022 License Agreement and private placement, however, we have not conducted a study to assess
whether there have been multiple ownership changes since inception due to the significant complexity and cost associated with such a
study.
Tax matters, including the changes
in corporate tax rates, disagreements with taxing authorities and imposition of new taxes could impact our results of operations and financial
condition.
We are subject to income
and other taxes in the United States and our operations, plans and results are affected by tax and other initiatives. On December 22,
2017, comprehensive changes to the Code were signed into law, informally titled the Tax Cuts and Jobs Act (the “Tax Act”).
The Tax Act included significant changes that could materially impact the taxation of corporations, like us, including, among other things,
changes to the corporate income tax rate, limitation of the tax deduction for interest expense to business interest income plus 30% of
adjusted taxable income (except for certain small businesses), immediate deductions for certain new investments instead of deductions
for depreciation expense over time, and modifying or repealing many business deductions and credits (including changes to the orphan drug
tax credit and changes to the deductibility of research and experimental expenditures that will be effective in the future). The Tax Act
also included a limitation of the deduction for net operating losses (“NOLs”) generated in tax years beginning after December 31,
2017 to 80% of current year taxable income and the general elimination of carrybacks of NOLs generated in taxable years ending after December 31,
2017. However, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) signed into law on March 27, 2020,
provided that NOLs generated in a taxable year beginning in 2018, 2019, or 2020 may now be carried back five years. In addition, the 80%
taxable income limitation is temporarily removed, allowing NOLs to fully offset net taxable income. Notwithstanding the reduction in the
corporate income tax rate, the overall impact of the Tax Act and any future tax reform is uncertain and our business and financial condition
could be adversely affected. The impact of the Tax Act and any future tax reform on holders of our common stock is likewise uncertain
and could be adverse.
We
are also subject to regular reviews, examinations, and audits by the IRS and other taxing authorities with respect to our taxes.
Although we believe our tax estimates are reasonable, if a taxing authority disagrees with the positions we have taken, we could
face additional tax liability, including interest and penalties. There can be no assurance that payment of such additional amounts
upon final adjudication of any disputes will not have a material impact on our results of operations and financial position.
We also need to comply
with new, evolving or revised tax laws and regulations. The enactment of or increases in tariffs, or other changes in the application
or interpretation of the Tax Act, or on specific products that we may ultimately sell or with which our products compete, may have an
adverse effect on our business or on our results of operations.
Inadequate funding
for the FDA and other government agencies could hinder their ability to hire and retain key leadership and other personnel, prevent new
products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal
business functions on which the operation of our business may rely, which could negatively impact our business.
The ability of the
FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, the ability
to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory and policy changes. Average review times
at the agency have fluctuated in recent years as a result. In addition, government funding of other government agencies on which the combined
organization’s operations may rely, including those that fund research and development activities is subject to the political process,
which is inherently fluid and unpredictable.
Disruptions
at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government
agencies, which would adversely affect our business. For example, over the last several years the U.S. government has shut down
several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA and other government employees and
stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely
review and process our regulatory submissions, which could have a material adverse effect on our business. Further, in our
operations as a public company, future government shutdowns could impact our ability to access the public markets and obtain
necessary capital in order to properly capitalize and continue our operations.
Federal legislation and actions by
state and local governments may permit reimportation of drugs from foreign countries into the United States, including foreign countries
where the drugs are sold at lower prices than in the United States, which could adversely affect our operating results.
We may face competition
for our product candidates, if approved, from cheaper alternatives sourced from foreign countries that have placed price controls on pharmaceutical
products. The Medicare Modernization Act contains provisions that may change U.S. importation laws and expand pharmacists and wholesalers’
ability to import cheaper versions of an approved drug and competing products from Canada, where there are government price controls.
These changes to U.S. importation laws will not take effect unless and until the Secretary of Health and Human Services certifies that
the changes will pose no additional risk to the public’s health and safety and will result in a significant reduction in the cost
of products to consumers. In July of 2021, President Biden issued an executive order to bolster health-care industry competition
in the interest of lowering drug prices. Among its proposals are a push for the Food and Drug Administration to work with states to import
prescription drugs from Canada. It remains to be seen how this action will affect the Company and the pharmaceutical industry as a whole.
Risks Related to Dependence on Third
Parties
We have relied and will rely on third-party
clinical research organizations (CROs) to conduct our preclinical studies and clinical trials. If these CROs 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 have relied upon
and plan to continue to rely upon CROs and clinical data management organizations to monitor and manage data for our ongoing preclinical
and clinical programs. Although we control only certain aspects of their activities, 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 does not relieve us of our regulatory responsibilities. We also rely on third parties to conduct our preclinical studies in accordance
with Good Laboratory Practice, or GLP, requirements and the Laboratory Animal Welfare Act of 1966 requirements. We, our CROs and our clinical
trial sites are required to comply with regulations and current Good Clinical Practices, or GCP, and comparable foreign requirements to
ensure that the health, safety and rights of patients are protected in clinical trials, and that data integrity is assured. Regulatory
authorities ensure compliance with GCP requirements through periodic inspections of trial sponsors and trial sites. If we, any of our
CROs or our clinical trial sites fail to comply with applicable GCP requirements, the clinical data generated in our clinical trials or
a specific site may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional
clinical trials before approving our marketing applications.
Our CROs are not our
employees, and except for remedies available to us under our agreements with such CROs, we cannot control whether or not they devote sufficient
time and resources to our ongoing clinical and preclinical programs. If CROs do not successfully carry out their contractual obligations
or meet expected timelines or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere
to our clinical protocols, regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated and
we may not be able to obtain regulatory approval for or successfully commercialize our 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.
We rely on third parties to manufacture
our product candidates and preclinical and clinical drug supplies.
We have no experience
manufacturing our product candidates on a large clinical or commercial scale and have no manufacturing facility. We are currently dependent
on Dong-A as our sole third party manufacturer for the manufacture of DA-1241, DA-1726 and NB-01. We rely completely on third parties
to supply and manufacture our preclinical and clinical drug supplies for Gemcabene and ANA001, and we intend to rely on third parties
to produce commercial supplies of these product candidates.
To meet our projected
needs for clinical supplies to support our activities through regulatory approval and commercial manufacturing, Dong-A or our other third
party providers will need to provide sufficient scale of production for these projected needs. If any issues arise in the manufacturing
and we are unable to arrange for alternative third-party manufacturing sources, we are unable to find an alternative third party capable
of reproducing the existing manufacturing method or we are unable to do so on commercially reasonable terms or in a timely manner, we
may not be able to complete development of our product candidates, or market or distribute them.
In addition, under
FDA’s guidelines for botanical drug products, the harvesting and processing of the botanical raw materials that are the basis of
our product candidates must be done in compliance with Good Agricultural and Collection Processes, or GACPs. We are relying on Dong-A
and other third parties to ensure that their practices comply with applicable GACPs.
Reliance on third-party
manufacturers entails risks to which we would not be subject if we manufactured our product candidates and preclinical and clinical drug
supplies, including:
| • | reliance on the third party for regulatory compliance and quality assurance; |
| • | the possibility of breach of the manufacturing agreement by the third party because of factors beyond our control (including a failure
to synthesize and manufacture our product candidates or any products that we may eventually commercialize in accordance with our specifications); |
| • | the possibility of termination or nonrenewal of the agreement by the third party, based on our own business priorities, at a time
that is costly or damaging to us; |
| • | delay in, or failure to obtain, regulatory approval of any of our product candidates because of the failure by our third-party manufacturer
to comply with cGMP or failure to scale up manufacturing processes; and |
| • | current manufacturer and any future manufacturers may not be able to manufacture our product candidates at a cost or in quantities
or in a timely manner necessary to make commercially successful products. |
If third-party manufacturers
do not successfully carry out their contractual obligations or meet expected timelines or if the quality or accuracy of the clinical data
they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, our clinical
trials may be extended, delayed or terminated and we may not be able to obtain regulatory approval for or successfully commercialize our
product candidates.
We may engage in future acquisitions
or in-licenses of technology that could disrupt our business, cause dilution to our stockholders and harm our financial condition and
operating results.
While we currently
have no specific plans to acquire any other businesses or in-license any additional products or technology, we may, in the future, make
acquisitions or licenses of, or investments in, companies, products or technologies that we believe are a strategic or commercial fit
with its current product candidates and business or otherwise offer opportunities for us. In connection with these acquisitions or investments,
the organization may:
| • | issue stock that would dilute its stockholders’ percentage of ownership; |
| • | 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 or license candidates and we may not be able to complete acquisitions or licenses on favorable terms, if
at all. If we do complete an acquisition or license, we cannot assure you that it will ultimately strengthen our competitive position
or that it will not be viewed negatively by customers, financial markets or investors. Further, future acquisitions or licenses could
also pose numerous additional risks to our operations, including:
| • | problems integrating the purchased or licensed business, products or technologies; |
| • | increases to our expenses; |
| • | the failure to have discovered undisclosed liabilities of the acquired or licensed asset or company; diversion of management’s
attention from their day-to-day responsibilities; |
| • | harm to our operating results or financial condition; |
| • | entrance into markets in which we have limited or no prior experience; and |
| • | potential loss of key employees, 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.
We may form or seek strategic alliances
or enter into additional licensing arrangements in the future, and we may not realize the benefits of such alliances or licensing arrangements.
We may form or seek
strategic alliances, create joint ventures or collaborations or enter into additional licensing arrangements with third parties that we
believe will complement or augment our development and commercialization efforts with respect to our products and any future product candidates
that we may develop. Any strategic alliance or collaboration may require us to incur non-recurring and other charges, increase our near
and long-term expenditures, issue securities that dilute our existing stockholders or disrupt our management and business. Our likely
collaborators include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies and biotechnology companies.
If we enter into any such arrangements with any third parties, we will likely have limited control over the amount and timing of resources
that our collaborators dedicate to the development or commercialization of our products or any future product candidate. Our ability to
generate revenues from these arrangements will depend on our collaborators’ abilities to successfully perform the functions assigned
to them in these arrangements. We cannot be certain that, following a strategic transaction or license, we will achieve the revenue or
specific net income that justifies such transaction.
Collaborations involving
our product candidates or any future product candidate pose the following risks to us:
| • | collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations; |
| • | collaborators may not perform their obligations as expected; |
| • | collaborators may not pursue development and commercialization or may elect not to continue or renew development or commercialization
programs based on clinical trial results, changes in the collaborator’s strategic focus or available funding or external factors
such as an acquisition that diverts resources or creates competing priorities; |
| • | collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, 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; |
| • | collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our product
candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized
under terms that are more economically attractive; |
| • | a collaborator with marketing and distribution rights to one or more product candidates may not commit sufficient resources to the
marketing and distribution of any such product candidate; |
| • | collaborators 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 proprietary information or expose us to potential litigation; |
| • | collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability; |
| • | disputes may arise between the collaborators and us that result in the delay or termination of the research, development or commercialization
of our product candidate or that result in costly litigation or arbitration that diverts management’s attention and resources; |
| • | we may lose certain valuable rights under circumstances identified in its collaborations, including if it undergoes a change of control; |
| • | collaborations 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; |
| • | collaborators may learn about our discoveries and use this knowledge to compete with us in the future; |
| • | the results of collaborators’ preclinical or clinical studies could harm or impair other development programs; |
| • | there may be conflicts between different collaborators that could negatively affect those collaborations and potentially others; |
| • | the number and type of our collaborations could adversely affect our attractiveness to future collaborators or acquirers; |
| • | collaboration agreements may not lead to development or commercialization of our product candidate in the most efficient manner or
at all. If our present or future collaborator were to be involved in a business combination, the continued pursuit and emphasis on our
product development or commercialization program under such collaboration could be delayed, diminished or terminated; and |
| • | collaborators may be unable to obtain the necessary marketing approvals. |
If future collaboration
partners fail to develop or effectively commercialize our product candidates or any future product candidate for any of these reasons,
such product candidate may not be approved for sale and our sales of such product candidate, if approved, may be limited, which would
have an adverse effect on our operating results and financial condition.
If we are not able to establish new
collaborations on commercially reasonable terms, we may have to alter our development and commercialization plans.
We may selectively
seek additional third-party collaborators for the development and commercialization of our product candidates. Our likely collaborators
for any collaboration arrangements include large and mid- size pharmaceutical companies, regional and national pharmaceutical companies
and biotechnology companies. If we enter into any such arrangements with any third parties, we will likely have limited control over the
amount and timing of resources that our collaborators dedicate to the development or commercialization of our product candidates. Our
ability to generate revenue from these arrangements will depend on our collaborators’ abilities to successfully perform the functions
assigned to them in these arrangements.
We may be restricted
under existing collaboration agreements from entering into future agreements on certain terms with potential collaborators. Collaborations
are complex and time-consuming to negotiate and document. In addition, there have been a significant number of recent business combinations
among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators.
We may not be able
to negotiate collaborations 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 our development program or one or more of our other
development programs, delay our potential commercialization or reduce the scope of any sales or marketing activities, or increase our
expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to
fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us
on acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop our product candidate or bring
it to market and generate product revenue.
Our employees, principal investigators,
CROs and consultants 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 that our employees, principal investigators, CROs and consultants may engage in fraudulent conduct or other illegal activity. Misconduct
by these parties could include failures to comply with FDA regulations or similar regulations of comparable foreign regulatory authorities,
to provide accurate information to the FDA or comparable foreign regulatory authorities, to comply with manufacturing standards we have
established, to comply with federal and state healthcare fraud and abuse laws and regulations and similar laws and regulations established
and enforced by comparable foreign regulatory authorities, to report financial information or data accurately or to 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. Employee or third-party 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. It is not always possible to identify and deter
employee misconduct, and the precautions we take to detect and prevent this activity, such as employee training, 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 such action 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.
Risks Related to Intellectual Property
If we are unable to obtain and maintain
sufficient intellectual property rights, our competitive position could be harmed.
Our commercial success
depends in part on our ability to protect our proprietary technology and products. We rely on trade secret, patent, copyright and trademark
laws, and confidentiality, licensing and other agreements with employees and third parties, all of which offer only limited protection.
We depend in large part on our ability to obtain and maintain patent protection in the United States and other countries with respect
to our proprietary technology and products. Where we are permitted to do so under our license agreements, we seek to protect our proprietary
position by filing patent applications in the United States and other countries that are 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.
The steps we have taken
to protect our proprietary rights may not be sufficient to prevent misappropriation of our proprietary information or infringement of
our intellectual property rights, both inside and outside the United States. If we are unable to adequately protect our intellectual property
and proprietary technology, including through obtaining and maintaining 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, which could erode or negate any competitive advantage we may have and adversely affect our business.
With respect to patent
rights, we do not know whether any of our owned or licensed pending patent applications for any of our product candidates 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. Our owned or licensed 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
or our licensors to narrow the claims, which may limit the scope of patent protection that may be obtained. Although we currently have,
and the License Agreement includes, a number of issued patents that are exclusively licensed to us, the issuance of a patent is not conclusive
as to its inventorship, scope, validity or enforceability, and so issued patents that we own or have licensed from third parties may be
challenged in the courts or patent offices in the United States and abroad. 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 owned and licensed 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.
Laws and rulings by U.S. courts make
it difficult to predict how patents will be issued or enforced in the biotechnology industry.
Changes in either the
patent laws or interpretation of the patent laws in the United States and other countries may have a significant impact on our ability
to protect our technology and enforce our intellectual property rights. There have been numerous changes to the patent laws and to the
rules of the United States Patent and Trademark Office, or USPTO, which may have a significant impact on our ability to protect our
technology and enforce our intellectual property rights. For example, the Leahy-Smith America Invents Act, which was signed into law in
2011, includes a transition from a “first-to-invent” system to a “first-to- file” system, and changes the way
issued patents are challenged. Certain changes, such as the institution of inter partes review proceedings, came into effect on September 16,
2012. Substantive changes to patent law associated with the America Invents Act may affect our ability to obtain patents, and, if obtained,
to enforce or defend them in litigation or post-grant proceedings, all of which could harm our business.
Furthermore, the patent
positions of companies engaged in the development and commercialization of biologics and pharmaceuticals are particularly uncertain. Two
cases involving diagnostic method claims and “gene patents” have been decided by the Supreme Court. On March 20, 2012,
the Supreme Court issued a decision in Mayo Collaborative Services v. Prometheus Laboratories, Inc., or Prometheus, a case involving
patent claims directed to measuring a metabolic product in a patient to optimize a drug dosage amount for the patient. According to the
Supreme Court, the addition of well-understood, routine or conventional activity such as “administering” or “determining”
steps was not enough to transform an otherwise patent ineligible natural phenomenon into patent eligible subject matter. On July 3,
2012, the USPTO issued guidance indicating that process claims directed to a law of nature, a natural phenomenon or an abstract idea that
do not include additional elements or steps that integrate the natural principle into the claimed invention such that the natural principle
is practically applied and the claim amounts to significantly more than the natural principle itself should be rejected as directed to
non-statutory subject matter. On June 13, 2013, the Supreme Court issued its decision in Association for Molecular Pathology v. Myriad
Genetics, Inc., or Myriad, a case involving patent claims held by Myriad Genetics, Inc. relating to the breast cancer susceptibility
genes BRCA1 and BRCA2. Myriad held that isolated segments of naturally occurring DNA, such as the DNA constituting the BRCA1 and BRCA2
genes, is not patent eligible subject matter, but that complementary DNA, which is an artificial construct that may be created from RNA
transcripts of genes, may be patent eligible. We cannot assure you that our current patent protection and our efforts to seek patent protection
for our technology and products will not be negatively impacted by the decisions described above, rulings in other cases or changes in
guidance or procedures issued by the USPTO.
Moreover, although
the Supreme Court has held in Myriad that isolated segments of naturally occurring DNA are not patent-eligible subject matter, certain
third parties could allege that activities that we may undertake infringe other gene-related patent claims, and we may deem it necessary
to defend against these claims by asserting non-infringement and/or invalidity positions, or pay to obtain a license to these claims.
In any of the foregoing or in other situations involving third-party intellectual property rights, if we are unsuccessful in defending
against claims of patent infringement, we could be forced to pay damages or be subjected to an injunction that would prevent us from utilizing
the patented subject matter. Such outcomes could harm our business.
We may not be able to protect or practice
our intellectual property rights throughout the world.
In jurisdictions where
we or our licensors have not obtained patent protection, competitors may use our owned or licensed intellectual property to develop their
own products and, further, may export otherwise infringing products to territories where we or our licensors have patent protection, but
where it is more difficult to enforce a patent as compared to the U.S. Such competitor products may compete with our product candidates,
including DA-1241, DA-1726, ANA001, NB-01 and NB-02, if approved, or any future product candidate in jurisdictions where we or our licensors
do not have issued or granted patents or where our owner or licensed issued or granted patent claims or other intellectual property rights
are not sufficient to prevent competitor activities in these jurisdictions. The legal systems of certain countries, particularly certain
developing countries, make it difficult to enforce patents and such countries may not recognize other types of intellectual property protection,
particularly that relate to pharmaceuticals. This could make it difficult for us to prevent the infringement of our owned or licensed
patents or marketing of competing products in violation of our proprietary rights generally in certain jurisdictions. Proceedings to enforce
our owned or licensed patent rights in foreign jurisdictions could result in substantial cost and divert its efforts and attention from
other aspects of our business.
The laws of some jurisdictions
do not protect intellectual property rights to the same extent as the laws in the United States, and many companies have encountered significant
difficulties in protecting and defending such rights in such jurisdictions. If we, or our licensors, encounter difficulties in protecting,
or are otherwise precluded from effectively protecting, the intellectual property rights important for our business in such jurisdictions,
the value of these rights may be diminished and we may face additional competition from others in those jurisdictions. Many countries
have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries
limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have
limited remedies, which could materially diminish the value of such patent. If we, or any of our licensors, are forced to grant a license
to third parties with respect to any patents relevant to our business, our competitive position in the relevant jurisdiction may be impaired
and our business and results of operations may be adversely affected.
We may become involved in lawsuits
to protect or enforce our owned or licensed intellectual property, which could be expensive, time consuming and unsuccessful.
In addition to the
possibility of litigation relating to infringement claims asserted against us, we may become a party to other patent litigation and other
proceedings, including inter partes review proceedings, post-grant review proceedings, derivation proceedings declared by the USPTO and
similar proceedings in foreign countries, regarding intellectual property rights with respect to our current or future technologies or
product candidates or products. The cost to us of any patent litigation or other proceeding, even if resolved in our favor, could be substantial.
Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their
substantially greater financial resources. Patent litigation and other proceedings may also absorb significant management time. Uncertainties
resulting from the initiation and continuation of patent litigation or other proceedings could impair our ability to compete in the marketplace.
Competitors may infringe
or otherwise violate our intellectual property, including patents that may issue to or be licensed by us. As a result, we may be required
to file claims in an effort to stop third-party infringement or unauthorized use. Any such claims could provoke these parties to assert
counterclaims against us, including claims alleging that we infringe their patents or other intellectual property rights. This can be
prohibitively expensive, particularly for a company of our size, and time-consuming, and even if we are successful, any award of monetary
damages or other remedy we may receive may not be commercially valuable. In addition, in an infringement proceeding, a court may decide
that our asserted intellectual property is not valid or is unenforceable, or may refuse to stop the other party from using the technology
at issue on the grounds that our owned or licensed intellectual property does not cover its technology. An adverse determination in any
litigation or defense proceedings could put our owned or licensed intellectual property at risk of being invalidated or interpreted narrowly
and could put our owned or licensed patent applications at risk of not issuing.
If the breadth or strength
of our patent or other intellectual property rights, whether owned or licensed, is compromised or threatened, it could allow third parties
to commercialize our technology or products or result in our inability to commercialize our technology and products without infringing
third-party intellectual property rights. Further, third parties may be dissuaded from collaborating with us.
Interference or derivation
proceedings brought by the USPTO or its foreign counterparts may be necessary to determine the priority of inventions with respect to
our patent applications, and we or our licensors may also become involved in other proceedings, such as re-examination proceedings, before
the USPTO or its foreign counterparts. Due to the substantial competition in the pharmaceutical space, the number of such proceedings
may increase. This could delay the prosecution of our pending patent applications or impact the validity and enforceability of any future
patents that we may obtain. In addition, any such litigation, submission or proceeding may be resolved adversely to us and, even if successful,
may result in substantial costs and distraction to our management.
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. Moreover, intellectual property law relating
to the fields in which we operate is still evolving and, consequently, patent and other intellectual property positions in our industry
are subject to change and are often uncertain. We may not prevail in any of these suits or other efforts to protect its technology, and
the damages or other remedies awarded, if any, may not be commercially valuable. During the course of this type of litigation, there
could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts
or investors perceive these results to be negative, the market price for our common stock could be significantly harmed.
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 to develop, manufacture, market and sell our product candidates, including DA-1241, DA-1726, ANA001, NB-01, NB-02
and gemcabene, 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, including interference and various post grant proceedings before the USPTO or non-U.S. opposition proceedings. Third parties
may assert infringement claims against us based on existing patents or patents that may be granted in the future.
As a result of any
such infringement claims, or to avoid potential claims, we may choose or be compelled to seek intellectual property licenses from third
parties. These licenses may not be available on acceptable terms, or at all. Even if we are able to obtain a license, the license would
likely obligate us to pay license fees or royalties or both, and the rights granted to us likely would be nonexclusive, which would mean
that our competitors also could obtain licenses to the same intellectual property. Ultimately, we could be prevented from commercializing
a product candidate or technology or be forced to cease some aspect of our business operations if, as a result of actual or threatened
infringement claims, we are unable to enter into licenses of the relevant intellectual property on acceptable terms. Further, if we attempt
to modify a product candidate or technology or to develop alternative methods or products in response to infringement claims or to avoid
potential claims, we could incur substantial costs, encounter delays in product introductions or interruptions in sales. Ultimately, such
efforts could be unsuccessful.
Intellectual property litigation could
cause us to spend substantial resources and distract our personnel from their normal responsibilities.
Litigation or other
legal proceedings relating to intellectual property claims, with or without merit, is unpredictable and generally expensive and time consuming
and is likely to divert significant resources from our core business, including distracting our technical and management personnel from
their normal responsibilities. 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.
In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and
if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of
our common stock and negatively impact our ability to raise additional funds. Such litigation or proceedings could substantially increase
our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities.
We may not have sufficient
financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the
costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and
developed intellectual property portfolios. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing
upon or misappropriating or from successfully challenging our intellectual property rights. Uncertainties resulting from the initiation
and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.
Our trade secrets are difficult to
protect and if we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
In addition to
seeking patents for some of our technologies 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, non-competition, non-solicitation, and invention assignment agreements with our employees and
consultants that obligate them to assign to us any inventions developed in the course of their work for us. However, we cannot
guarantee that we have executed these agreements with each party that may have or have had access to our trade secrets or that the
agreements we have executed will provide adequate protection. 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 seek patent protection on
technology relating to our product candidates or obtain adequate remedies for such breaches. As a result, we may be forced to bring
claims against third parties, or defend claims that they bring against us, to determine ownership of what we regard as our
intellectual property. Monitoring unauthorized disclosure is difficult and we do not know whether the procedures that we have
followed to prevent such disclosure are or will be adequate. 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 courts inside and
outside the United States may be less willing or unwilling to protect trade secrets.
Furthermore, if any
of the technology or information that we protect as trade secrets were to be lawfully obtained or independently developed by a competitor,
we would have no right to prevent them from using that technology or information to compete with us. If any of our trade secrets were
to be disclosed to, or independently developed by, a competitor, our competitive position would be harmed.
Obtaining and maintaining our patent
protection depends on compliance with various procedural, documentary, fee payment and other requirements imposed by governmental patent
agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
Periodic
maintenance fees on any issued patent are due to be paid to the USPTO, and foreign patent agencies in several stages over the
lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural,
documentary, fee payment and other requirements during the patent application process. While an inadvertent lapse can in many cases
be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which
noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of
patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of a patent or patent
application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of
fees and failure to properly legalize and submit formal documents. If we or our licensors fail to maintain the patents and patent
applications covering our product candidates, our competitors might be able to enter the market, which would have a material adverse
effect on our business.
Intellectual property
rights do not necessarily address all potential threats to our competitive advantage.
The degree of future
protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not
adequately protect our business or permit us to maintain our competitive advantage. For example:
| • | others may be able to make product candidates that are similar to our candidates but that are not covered by the claims of the patents
that we own or have exclusively licensed; |
| • | we or our future licensors or collaborators might not have been the first to make the inventions covered by the issued patent or pending
patent application that we own or have exclusively licensed; |
| • | we or our future licensors or collaborators might not have been the first to file patent applications covering certain of our inventions; |
| • | others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual
property rights; |
| • | it is possible that our owned or exclusively licensed pending patent applications will not lead to issued patents; |
| • | issued patents that we own or have exclusively licensed may be held invalid or unenforceable, as a result of legal challenges by our
competitors; |
| • | our competitors might conduct research and development activities in countries where we do not have patent rights and then use the
information learned from such activities to develop competitive products for sale in our major commercial markets; |
| • | we may not develop additional proprietary technologies that are patentable; and |
| • | the patents of others may have an adverse effect on our business. |
Should any of these
events occur, they could significantly harm our business, results of operations and prospects.
Risks Relating to Our Common Stock and
Ownership
Dong-A has a significant interest
in and controls our Company, and its interests may conflict with ours or those of our other stockholders in the future.
Dong-A currently owns
approximately 48.87% of our outstanding common stock. In addition, pursuant to the Investor Rights Agreement between us and Dong-A, Dong-A
has the right to appoint a number of our directors commensurate with its percentage holding of our common stock and, as a result, Dong-A
controls both the determinations of the Board and the vote of all matters submitted to a vote of our shareholders, which enables them
to control all corporate decisions. This concentration of ownership may delay, deter or prevent acts that would be favored by our other
stockholders. The interests of Dong-A may not always coincide with our interests or the interests of our other stockholders. For as long
as Dong-A owns shares of our common stock and the Investor Rights Agreement is effective, Dong-A will have significant influence with
respect to our management, business plans and policies, including the appointment and removal of our officers, decisions on whether to
raise future capital and amending our charter and bylaws, which govern the rights attached to our common stock. In particular, Dong-A
is able to cause or prevent a change of control of us or a change in the composition of our Board and could preclude any unsolicited acquisition
of us. The concentration of ownership could deprive you of an opportunity to receive a premium for your shares of common stock as part
of a sale of us and ultimately might affect the market price of our common stock. In addition, this concentration of ownership may adversely
affect the trading price of our common stock because investors may perceive disadvantages in owning shares in a company with significant
stockholders.
Dong-A
and its affiliates engage in a broad spectrum of activities, including investments in the healthcare industry generally. In the ordinary
course of its business activities, Dong-A and its affiliates may engage in activities where their interests conflict with our interests
or those of our other shareholders, such as investing in or advising businesses that directly or indirectly compete with certain portions
of our business or are suppliers or customers of ours. Dong-A also may pursue acquisition opportunities that may be complementary to
our business, and, as a result, those acquisition opportunities may not be available to us. In addition, Dong-A may have an interest
in pursuing acquisitions, divestitures and other transactions that, in their judgment, could enhance its investment, even though such
transactions might involve risks to you.
We are a “controlled company”
within the meaning of the Nasdaq listing rules and may follow certain exemptions from certain corporate governance requirements that
could adversely affect our public shareholders.
Dong-A owns more than
50% of our outstanding common stock. Thus, we meet the definition of a “controlled company” under the corporate governance
standards for Nasdaq listed companies and for so long as we remain a “controlled company” under this definition, we are eligible
to utilize certain exemptions from the corporate governance requirements of Nasdaq, including the requirements (i) that a majority
of the Board consist of independent directors, (ii) to have a governance committee that is composed entirely of independent directors
with a written charter addressing the committee’s purpose and responsibilities, (iii) to have a compensation committee that
is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities, (iv) that
the compensation committee consider certain independence factors when engaging legal counsel and other committee advisors and (v) for
an annual performance evaluation of the governance and compensation committees. Although we do not currently rely on the “controlled
company” exemptions under the Nasdaq listing rules even though we are deemed a “controlled company,”
we could elect to rely on these exemptions in the future. If we were to elect to rely on the “controlled company” exemptions,
a majority of the members of the Board might not be independent directors and our nominating and corporate governance and compensation
committees might not consist entirely of independent directors. Accordingly, if we rely on the exemptions, during the period we remain
a controlled company and during any transition period following a time when we are no longer a controlled company, you would not have
the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of Nasdaq.
Provisions in our corporate charter
documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may
prevent attempts by our stockholders to replace or remove our current management.
Provisions in our certificate
of incorporation and the bylaws may discourage, delay or prevent a merger, acquisition or other change in control of us that stockholders
may consider favorable, including transactions in which our stockholders might otherwise receive a premium for their shares. These provisions
could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the
market price of our common stock. In addition, because our board is responsible for appointing the members of our management team, these
provisions may frustrate or prevent any attempts by stockholders to replace or remove their current management by making it more difficult
for stockholders to replace members of our board. Among other things, these provisions:
| • | establish a classified board of directors such that not all members of the board are elected at one time; |
| • | allow the authorized number of our directors to be changed only by resolution of our board of directors; |
| • | limit the manner in which our stockholders can remove directors from the board; |
| • | establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our
board of directors; |
| • | require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our stockholders by
written consent; |
| • | prohibit our stockholders from calling special meetings; |
| • | authorize our board to issue preferred stock without stockholder approval, which preferred stock may include rights superior to the
rights of the holders of common stock, and which could be used to institute a shareholder rights plan, or so-called “poison pill,”
that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been
approved by our board; and |
| • | require the approval of the holders of at least two-thirds of the votes that all our stockholders would be entitled to cast to amend
or repeal certain provisions of our charter or bylaws. |
Moreover, because we
are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits
a person who owns in excess of 15% of our outstanding voting stock from merging or combining with it for a period of three years after
the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination
is approved in a prescribed manner.
We are a “smaller reporting
company” and we cannot be certain if the reduced reporting requirements applicable to such companies could make our common stock
less attractive to investors.
We are a “smaller
reporting company”, as defined in the Exchange Act. For as long as we continue to be a smaller reporting company, we may take advantage
of exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies”,
including exemption from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley
Act), only being required to provide two years of audited financial statements in annual reports and reduced disclosure obligations regarding
executive compensation in its periodic reports and proxy statements.
We cannot predict if
investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock
less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
We have identified material weaknesses
in our internal control over financial reporting that could, if not remediated, result in material misstatements in our financial statements
or impair our ability to produce accurate and timely consolidated financial statements.
We concluded that there
were material weaknesses relating to our internal control over financial reporting relating to a lack of segregation of duties over certain
financial processes, and logical access to financial reporting systems. For more information about these material weaknesses, see Part II, Item
9A (Controls and Procedures) of our Annual Report on Form 10-K for the year ended December 31, 2021, which is incorporated herein
by reference. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such
that there is a reasonable possibility that a material misstatement of the company’s annual or interim consolidated financial statements
will not be prevented or detected on a timely basis.
Although we have begun
to take measures to remediate these material weaknesses, the measures we have taken, and expect to take, to improve our internal controls
may not be sufficient to address the issues identified, to ensure that our internal controls are effective or to ensure that the identified
material weaknesses will not result in a material misstatement of our annual or interim consolidated financial statements. If we are unable
to correct material weaknesses or deficiencies in internal controls in a timely manner, our ability to record, process, summarize and
report financial information accurately and within the time periods specified in the rules and forms of the SEC will be adversely
affected. This failure could negatively affect the market price and trading liquidity of our common stock, cause investors to lose confidence
in our reported financial information, subject us to civil and criminal investigations and penalties, and materially and adversely impact
our business and financial condition.
General Risks
Our business and operations would
suffer in the event of system failures or unplanned events.
Despite the implementation
of security measures, our internal computer systems and those of our current and future contractors and consultants are vulnerable to
damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. While
we are not aware of any such material system failure, accident or security breach to date, if such an event were to occur and cause interruptions
in our operations, it could result in a material disruption of our development programs and our business operations. For example, the
loss of clinical trial data from completed or future clinical trials could result in delays in regulatory approval efforts and significantly
increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of,
or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability
and the further development and commercialization of our product candidates could be delayed.
Furthermore, any unplanned
event, such as flood, fire, explosion, tornadoes, earthquake, extreme weather condition, medical epidemics, power shortage, telecommunication
failure or other natural or manmade accidents or incidents that result in us being unable to fully utilize the facilities, may have an
adverse effect on our ability to operate the business, particularly on a daily basis, and have significant negative consequences on our
financial and operating conditions. Loss of access to these facilities may result in increased costs, delays in the development of our
product candidates or interruption of our business operations.
We rely significantly on information
technology and any failure, inadequacy, interruption or security lapse of that technology or loss of data, including any cyber security
incidents, could compromise sensitive information related to our business, prevent us from accessing critical information or expose us
to liability which could harm our ability to operate our business effectively and adversely affect our business and reputation.
In the ordinary course
of our business, our contract research organizations and other third parties on which we rely collect and store sensitive data, including
legally protected patient health information, personally identifiable information about our employees, intellectual property, and proprietary
business information. We manage and maintain our applications and data utilizing on-site systems. These applications and data encompass
a wide variety of business-critical information, including research and development information and business and financial information.
The secure processing,
storage, maintenance and transmission of this critical information is vital to our operations and business strategy. Despite the implementation
of security measures, our internal computer systems and those of third parties with which we contract are vulnerable to damage from cyber-attacks,
computer viruses, breaches, unauthorized access, interruptions due to employee error or malfeasance or other disruptions, or damage from
natural disasters, terrorism, war and telecommunication and electrical failures. Any such event could compromise our networks and the
information stored there could be accessed by unauthorized parties, publicly disclosed, lost or stolen. We have measures in place that
are designed to detect and respond to such security incidents and breaches of privacy and security mandates. Any such access, disclosure
or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information,
government enforcement actions and regulatory penalties. Unauthorized access, loss or dissemination could also disrupt our operations,
including our ability to conduct research, development and commercialization activities, process and prepare Company financial information,
manage various general and administrative aspects of our business and damage our reputation, in addition to possibly requiring substantial
expenditures of resources to remedy, any of which could adversely affect our business. The loss of clinical trial data could result in
delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. In addition, there can
be no assurance that we will promptly detect any such disruption or security breach, if at all. To the extent that any disruption or security
breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary
information, we could incur liability and our research, development and commercialization efforts could be delayed.
An active trading market for our common
stock may not be maintained.
Our common stock is
currently traded on the Nasdaq Capital Market, but we can provide no assurance that we will be able to maintain an active trading market
for our shares on the Nasdaq Capital Market or any other exchange in the future. If there is no active market for our common stock, it
may be difficult for our stockholders to sell shares without depressing the market price for the shares or at all.
If securities analysts do not publish
research or reports about our business or if they publish negative evaluations of our stock, the price of our stock could decline.
If one or more analysts
cover our business and downgrade their evaluations of our stock or publish inaccurate or unfavorable research about our business, the
price of our stock could decline. If one or more of these analysts cease to cover our stock, we could lose visibility in the market for
our stock, which in turn could cause our stock price and trading volume to decline.
We incur increased costs as a result
of operating as a public company and our management is required to devote substantial time to compliance initiatives.
The Sarbanes-Oxley
Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the stock exchange upon which our common
stock is listed and other applicable securities rules and regulations impose various requirements on public companies, including
establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other
personnel devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations increase our
legal and financial compliance costs and make some activities more time-consuming and costly. However, these rules and regulations
are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice
may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding
compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. Stockholder activism, the
current political environment and the current high level of government intervention and regulatory reform may lead to substantial new
regulations and disclosure obligations, which may lead to additional compliance costs and impact the manner in which we operate our business
in ways we cannot currently anticipate.
We are subject to Section 404
of the Sarbanes-Oxley Act and the related rules of the SEC that generally require our management and independent registered public
accounting firm to report on the effectiveness of our internal control over financial reporting. However, for so long as we remain a “smaller
reporting company”, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to
public companies that are not smaller reporting companies, including, but not limited to, for smaller reporting companies, not being required
to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. Once we are no longer a “smaller
reporting company” and if our public float is above $75 million as of the last business day of our most recently completed second
fiscal quarter or, if before such date, we opt to no longer take advantage of the applicable exemption, we will be required to include
an opinion from our independent registered public accounting firm on the effectiveness of our internal control over financial reporting.
To achieve compliance
with Section 404, we are required to engage in a process to document and evaluate our internal control over financial reporting,
which is both costly and challenging. In this regard, we must dedicate internal resources, hire additional finance and accounting personnel,
potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial
reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented
and implement a continuous reporting and improvement process for internal control over financial reporting.
During the course of
our review and testing, we may identify deficiencies and be unable to remediate them before we must provide the required reports. We or
our independent registered public accounting firm may not be able to conclude on an ongoing basis that we have effective internal control
over financial reporting, which could harm our operating results, cause investors to lose confidence in our reported financial information
and cause the trading price of our stock to fall.
In addition, as a public
company we are required to timely file accurate quarterly and annual reports with the SEC under the Exchange Act. In order to report our
results of operations and financial statements on an accurate and timely basis, we will depend on CROs to provide timely and accurate
notice of their costs to it. Any failure to report our financial results on an accurate and timely basis could result in sanctions, lawsuits,
delisting of our shares from Nasdaq or other adverse consequences that would materially harm our business. We do not anticipate declaring
or paying, in the foreseeable future, any cash dividends on our capital stock and, consequently, the ability of our stockholders to achieve
a return on their investment will depend on appreciation in the price of our common stock.
We have never declared or paid any
cash dividend on our capital stock and do not currently intend to do so in the foreseeable future.
We currently anticipate
that we will retain future earnings for the development, operation and expansion of our business. Therefore, the success of an investment
in shares of our common stock will depend upon any future appreciation in their value. There is no guarantee that shares of our common
stock will appreciate in value or even maintain the price at which you purchased them.
Our Bylaws designate the Court of
Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by
our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors,
officers or employees.
Our Bylaws provide
that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will generally
be the sole and exclusive forum for any derivative action or proceeding brought on its behalf, any action asserting a claim of breach
of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, any action asserting a claim
arising pursuant to any provision of the Delaware General Corporation Law, as amended, the certificate of incorporation or the bylaws
or any other action asserting a claim governed by the internal affairs doctrine. This provision does not apply to claims arising under
the Securities Act of 1933, as amended (the “Securities Act”) and the Securities Exchange Act of 1934, as amended
(the “Exchange Act”) or any claim for which the federal courts have exclusive jurisdiction. Any person or entity
purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to have consented
to the provisions of the bylaws described above. This choice of forum provision may limit a stockholder’s ability to bring a claim
in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such
lawsuits against us and our directors, officers and employees. Alternatively, if a court were to find this provision inapplicable to,
or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated
with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.
Unstable market and economic conditions
may have serious adverse consequences on our business, financial condition and stock price.
The global credit and
financial markets have experienced extreme volatility and disruptions in the past several years, including severely diminished liquidity
and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty
about economic stability. We cannot assure you that further deterioration in credit and financial markets and confidence in economic conditions
will not occur. Our general business strategy may be adversely affected by any such economic downturn, volatile business environment or
continued unpredictable and unstable market conditions. If the current equity and credit markets deteriorate, or do not improve, it may
make any necessary debt or equity financing more difficult, more costly, and more dilutive. Failure to secure any necessary financing
in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock
price and could require it to delay or abandon clinical development plans. In addition, there is a risk that one or more of our current
service providers, manufacturers and other partners may not survive these difficult economic times, which could directly affect our ability
to attain our operating goals on schedule and on budget.
The liquidity and trading volume of
our common stock could be low, and our ownership will be concentrated.
The liquidity and trading
volume of our common stock has at times been low in the past and could again be low in the future. If the liquidity and trading volume
of our common stock is low, this could adversely impact the trading price of our shares, our ability to issue stock and our stockholders’
ability to obtain liquidity in their shares.
As of December 31,
2022, Dong-A holds approximately 48.9% of our outstanding common stock. As a result, Dong-A is able to affect
the outcome of, or exert significant influence over, all matters requiring stockholder approval, including the election and removal of
directors and any change in control. In particular, this concentration of ownership of our common stock results in Dong-A having the ability
to determine whether there would be a change in control of us. This, in turn, could have a negative effect on the market price of our
common stock. It could also prevent our stockholders from realizing a premium over the market prices for their shares of common stock.
Moreover, the interests of this concentration of ownership may not always coincide with our interests or the interests of other stockholders.
The concentration of ownership may also contribute to the low trading volume and volatility of our common stock.
The market price of our common stock
may be highly volatile, and you could lose all or part of your investment.
The trading price of
our common stock has been and is likely to continue to be volatile. This volatility may prevent you from being able to sell your securities
at or above the price you paid for your securities.
Our stock price could
be subject to wide fluctuations in response to a variety of factors, which include:
| • | whether we achieve our anticipated corporate objectives; |
| • | termination of the lock-up agreement or other restrictions on the ability of our stockholders and other security holders to sell shares
after this offering; and |
| • | general economic or political conditions in the United States or elsewhere. |
In addition, the stock
market in general, and the stock of biotechnology companies in particular, have experienced extreme price and volume fluctuations that
have often been unrelated or disproportionate the operating performance of these companies. Broad market and industry factors may negatively
affect the market price of our common stock, regardless of our actual operating performance.
If we do not meet continued listing
requirements, our common stock may be delisted from the Nasdaq Capital Market, which could affect the market price and liquidity for our
common stock and reduce our ability to raise additional capital.
On
March 18, 2022, we received written notice (the “Notification Letter”) from The Nasdaq Stock Market
LLC (“Nasdaq”) notifying us that the Company was not in compliance with the minimum bid price requirements
set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. Nasdaq Listing
Rule 5550(a)(2) requires listed securities maintain a minimum closing bid price of $1.00 per share, and Nasdaq Listing
Rule 5810(c)(3)(A) provides that a failure to meet the minimum closing bid price requirement exists if the deficiency
continues for a period of 30 consecutive business days. Based on the closing bid price of the Company’s common stock for the
30 consecutive business days prior to the date of the Notification Letter, the Company did not meet the minimum closing bid price
requirement. To regain compliance, the closing bid price of the Company’s common stock must be at least $1.00 per share for a
minimum of 10 consecutive business days at any time prior to September 14, 2022. On September 12, 2022, we effected a
reverse stock split of our outstanding shares of our common stock at a ratio of one-for- thirty. On September 14, 2022, we were
granted an extension period by Nasdaq to comply with the minimum closing bid price requirement. On September 27, 2022, we were
notified by Nasdaq that we were in compliance with all listing requirements, including the minimum closing bid price
requirement.
There can be no assurance
that we will be able to remain in compliance with the minimum bid price requirement and other Nasdaq listing criteria. If we fail meet
the applicable continued listing requirements for the Nasdaq Capital Market in the future, Nasdaq may delist our common stock.
Delisting from the
Nasdaq could adversely affect our ability to raise additional financing through the public or private sale of equity securities, would
significantly affect the ability of investors to trade our securities and would negatively affect the value and liquidity of our common
stock. Delisting could also have other negative results, including the potential loss of confidence by employees, the loss of institutional
investor interest and fewer business development opportunities. If our common stock is delisted by the Nasdaq the price of our common
stock may decline and our common stock may be eligible to trade on the OTC Bulletin Board, another over-the-counter quotation system,
or on the pink sheets where an investor may find it more difficult to dispose of their common stock or obtain accurate quotations as to
the market value of our common stock. Further, if we are delisted, we would incur additional costs under requirements of state “blue
sky” laws in connection with any sales of our securities. These requirements could severely limit the market liquidity of our common
stock and the ability of our stockholders to sell our common stock in the secondary market.
In addition, if our
common stock is delisted from the Nasdaq Capital Market and the trading price remains below $5.00 per share, trading in our common stock
might also become subject to the requirements of certain rules promulgated under the Exchange Act, which require additional disclosure
by broker-dealers in connection with any trade involving a stock defined as a “penny stock” (generally, any equity security
not listed on a national securities exchange or quoted on Nasdaq that has a market price of less than $5.00 per share, subject to certain
exceptions).
Additionally, in 2020,
the SEC approved a previously proposed Nasdaq rule change to expedite delisting of securities with a closing bid price at or below
$0.10 for 10 consecutive trading days during any bid price compliance period and that have had one or more reverse stock splits with a
cumulative ratio of one for 250 or more shares over the prior two-year period. In addition, if a company falls out of compliance with
the $1.00 minimum bid price after completing reverse stock splits over the immediately preceding two years that cumulatively result in
a ratio one for 250 shares, the company will not be able to avail itself of any bid price compliance periods under Rule 5810(c)(3)(A),
and Nasdaq will instead require the issuance of a Staff delisting determination. The company could appeal the determination to a hearings
panel, which could grant the company a 180-day exception to remain listed if it believes the company would be able to achieve and maintain
compliance with the bid price requirement. Following the exception, the company would be subject to the procedures applicable to a company
with recurring deficiencies (Nasdaq Rule 5815(d)(4)(B)).