ITEM 1A. RISK FACTORS
An investment in our securities involves a
high degree of risk. You should consider carefully all of the risks described below, together with the other information contained in
this report, before making a decision to invest in our securities. If any of the following events occur, our business, financial condition
and operating results may be materially adversely affected. In that event, the trading price of our securities could decline, and you
could lose all or part of your investment.
Summary of Risk Factors
Risks Related to Our Financial Position
Risks Related to Our Business Development
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Risks Related to Our Industry
Risks Related to Commercialization and Manufacturing
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Risks Related to Our Intellectual Property
Risks Related to Government Regulation
Risks Related to Employee Matters and Growth
Management
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Risks Related to Our Common Shares and this
Offering
General Risk Factors
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Risks Related to Our Financial Condition
We are a commercial development stage biopharmaceutical
company in the early stages of commercial development of our one product approved for commercial sale and have incurred significant losses
since our inception. We expect to incur significant losses for the foreseeable future and our costs may increase substantially in the
foreseeable future.
Since our
inception, we have incurred significant net losses, and we expect to continue to incur significant expenses and operating losses for the
foreseeable future. Our net losses were approximately $12.4 million and $13.8 million for the years ended December 31,
2024, and 2023, respectively. As of December 31, 2024, we had an accumulated deficit of approximately $74 million. We have
only one product, ZUNVEYL formerly known as ALPHA-1062, approved for planned commercialization and have never generated any revenue from
product sales.
We have devoted substantially all our financial
resources and efforts to the development of our product candidates, including conducting preclinical studies and clinical trials. We expect
to continue to incur significant expenses and operating losses over the next several years. We expect that it could be several years,
if ever, before we have a commercialized product. Our net losses may fluctuate significantly from quarter to quarter and year to year.
We anticipate that our expenses will increase substantially for the foreseeable future as we:
● maintain, expand and protect our intellectual property portfolio;
● hire additional clinical, manufacturing and scientific personnel;
● scale up our clinical and regulatory capabilities.
Our ability to generate revenue and achieve
profitability depends significantly on our ability to achieve commercial success with ZUNVEYL oral tablet formulation, our one FDA approved
product, and continued development and commercialization of our other product candidates, if approved.
To date, we have not generated any revenue from
the commercialization of our product candidates. We have only one product, ZUNVEYL oral tablets, approved for commercialization. To generate
revenue and become and remain profitable, we must succeed in the commercialization of ZUNVEYL and developing and eventually commercializing
our other product candidates. This will require us to be successful in a range of challenging activities, including commercial manufacturing,
marketing and sales of ZUNVEYL, completing preclinical testing and clinical trials of our other product candidates, obtaining regulatory
approval of our other product candidates, and manufacturing, marketing and selling any other product candidates for which we may obtain
regulatory approval, as well as discovering and developing additional product candidates. Outside of our commercial development activities
for ZUNVEYL, we are only in the preliminary stages of most of these activities. We may never succeed in these activities and, even if
we do, may never generate any revenue or revenue that is significant enough to achieve profitability. Even if we achieve profitability,
we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would
depress the value of our Company and could impair our ability to raise capital, expand our business, maintain our development efforts,
obtain product approvals, diversify our offerings or continue our operations. A decline in the value of our Company could also cause you
to lose all or part of your investment.
We have a limited operating history and
have no history of commercializing products, which may make it difficult for an investor to evaluate the success of our business to date
and to assess our future viability.
We commenced operations in 2014, and our operations
to date have been largely focused on developing our clinical and preclinical product candidates, primarily ALPHA-1062. To date, we have
successfully obtained regulatory approval for only one product, ZUNVEYL oral tablets, and have not demonstrated our ability to manufacture
a product on a commercial scale, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary
for successful commercialization. Consequently, any predictions made about our future success or viability may not be as accurate as they
could be if we had a longer operating history or a history of successfully developing and commercializing products.
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We may encounter unforeseen expenses, difficulties,
complications, delays and other known or unknown factors in achieving our business objectives. We may also need to transition from a company
with a research focus to a company capable of supporting commercial activities. Our inability to adequately address these risks and difficulties
or successfully make such a transition could adversely affect our business, financial condition, results of operations and growth prospects.
We will need substantial capital to meet
our financial obligations and to pursue our business objectives, including the commercialization of ZUNVEYL oral tablet formulation. If
we are unable to raise capital when needed, we could be forced to delay, reduce and/or eliminate one or more of our research and drug
development programs or future commercialization efforts.
Our operations have required substantial amounts
of capital since inception, and we expect our expenses to increase significantly in the foreseeable future. Developing commercial manufacturing,
marketing and sales is expensive and uncertain which could take a long time to complete. We may not achieve commercial success with ZUNVEYL.
Similarly, identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive
and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain regulatory
approval and achieve product sales. We expect to continue to incur significant expenses and operating losses over the next several years
as we complete our commercialization activities for ZUNVEYL and our ongoing clinical trials of our other product candidates, initiate
future clinical trials of our other product candidates, prepare for commercialization activities of our other product candidates and advance
any of our other product candidates we may develop or otherwise acquire. In addition, our product candidates, if approved, may not achieve
commercial success. Our revenue, if any, will be derived from sales of ZUNVEYL following our commercial development activities and our
other products that we do not expect to be commercially available for the foreseeable future, if at all. If we obtain marketing approval
for any other product candidates that we develop or otherwise acquire, we expect to incur significant commercialization expenses related
to product sales, marketing, distribution and manufacturing. We also expect an increase in our expenses associated with creating additional
infrastructure to support operations as a public company.
As of December 31, 2024, we had approximately
$48.6 million in unrestricted cash and cash equivalents and have not generated positive cash flows from operations. Based on our
current business plans, we believe our existing cash and cash equivalents, will be sufficient for us to fund our ongoing operating expenses,
pre-NDA approval commercialization expenses, and capital expenditures requirements through at least the next 12 months. We may
need to raise additional capital to fund our operations and commercial plans after 12 months. Full commercial launch of ZUNVEYL is
expected to require substantial capital to continue our commercialization efforts and bring the product to market in the US. We have
based these estimates on assumptions that may prove to be incorrect or require adjustment as a result of business decisions, and we could
utilize our available capital resources sooner than we currently expect.
Our future capital requirements will depend on
many factors, including, but not limited to:
● the costs, timing and outcome of regulatory review of our product candidates;
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A change in the outcome of any of these or other
factors with respect to the development of any of our product candidates could significantly change the costs and timing associated with
the development of that product candidate.
We are proceeding with our commercial launch of
our ZUNVEYL oral tablet product, where we expect to raise substantial additional capital to continue our commercialization efforts and
bring the product to market in the US and continue development of our product candidates. We expect to incur significant commercialization
expenses related to product manufacturing, sales, marketing, distribution, and continued R&D.
We may seek additional capital due to favorable
market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. Attempting
to secure additional financing may divert our management from our day-to-day activities, which may adversely affect our ability
to develop our product candidates.
Additional funds may not be available on a timely
basis, on favorable terms, or at all, and such funds, if raised, may not be sufficient to enable us to continue to implement our long-term business
strategy. Further, our ability to raise additional capital may be adversely impacted by recent volatility in the equity markets in the
United States and worldwide. Our failure to raise capital as and when needed or on acceptable terms would have a negative impact
on our financial condition and our ability to pursue our business strategy, and we may have to delay, reduce the scope of, suspend or
eliminate one or more of our research-stage programs, clinical trials or future commercialization efforts.
We expect to be exposed to fluctuations
in currency exchange rates, which could adversely affect our results of operations.
We incur expenses in U.S. dollars, Canadian
dollars, and EUROs but our financial statements are denominated in U.S. dollars. Accordingly, we face exposure to adverse movements
in currency exchange rates. Our foreign operations will be exposed to foreign exchange rate fluctuations as the financial results are
translated from the local currency into U.S. dollars upon consolidation. Specifically, the U.S. dollar cost of our operations
in Canada, API manufacturing in Taiwan and conducting clinical trials in India is influenced by any movements in the currency exchange
rate. Such movements in the currency exchange rate may have a negative effect on our financial results. If the U.S. dollar weakens
against foreign currencies, the translation of these foreign currency denominated transactions will result in increased revenue, operating
expenses and net income. Similarly, if the U.S. dollar strengthens against foreign currencies, the translation of these foreign currency
denominated transactions will result in decreased revenue, operating expenses and net income. As exchange rates vary, sales and other
operating results, when translated, may differ materially from our or the capital market’s expectations.
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Risks Related to Our Business Development
Our business is heavily dependent on the
successful commercialization of ZUNVEYL oral tablet formulation, our only FDA approved product, and the development and commercialization
of any future product candidates that we may develop or acquire.
The NDA for ZUNVEYL oral tablets was approved
by the FDA on July 26, 2024, but all our other product candidates are in the pre-clinical stage. The success of our business,
including our ability to finance our Company and generate revenue in the future, will primarily depend on the successful commercialization
of ZUNVEYL, our only FDA approved product, and the development, regulatory approval and commercialization of our product candidates. We
cannot be certain that ZUNVEYL can be successfully commercialized or that our other product candidates will receive regulatory approval
or be successfully commercialized even if we receive regulatory approval.
The clinical and commercial success of ZUNVEYL
and any future product candidates that we may develop or acquire will depend on a number of factors, including the following:
● the convenience of our treatment or dosing regimen;
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● a continued acceptable safety profile following any marketing approval;
● our ability to compete with other therapies;
These factors, many of which are beyond our control,
could cause us to experience significant delays or an inability to obtain future regulatory approvals or commercialize our product candidates.
Even if regulatory approvals are obtained, we may never be able to successfully commercialize any of our product candidates. Accordingly,
we cannot provide assurances that we will be able to generate sufficient revenue through the sale of our product candidates or any future
product candidates to continue our business or achieve profitability.
We may not successfully expand our pipeline
of product candidates. If we are not successful in identifying, developing, in-licensing, acquiring or/and commercializing additional
product candidates, our ability to expand our business and achieve our strategic objectives would be impaired.
Although a substantial amount of our effort will
focus on the continued development and potential approval of our current product candidates, a key element of our strategy is to identify,
develop and commercialize a portfolio of products that help the cognitive and functional symptoms of mild-to-moderate Alzheimer’s
disease. A component of our strategy is to evaluate our product candidates in multiple indications, such as mild-to-moderate Alzheimer’s
disease, moderate-to-severe Alzheimer’s disease, and TBI. However, we have not yet evaluated ALPHA-1062 or ALPHA-0602 in
all of these patient populations and we may find that while we have seen promising results in one neurodegenerative disease, that effect
is not replicated across other indications with promising similarities. Even if we successfully identify additional product candidates,
we may still fail to yield additional product candidates for development and commercialization for many reasons, including the following:
We therefore cannot provide any assurance that
we will be able to successfully identify, in-license or acquire additional product candidates, advance any of these additional product
candidates through the development process, successfully commercialize any such additional product candidates, if approved, or assemble
sufficient resources to identify, acquire, develop or, if approved, commercialize additional product candidates. If we are unable to successfully
identify, acquire, develop and commercialize additional product candidates, our commercial opportunities may be limited.
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We have initially concentrated our research
and development efforts on the treatment of Alzheimer’s Disease, a disease that has seen limited success in drug development.
Efforts by biopharmaceutical and pharmaceutical
companies in treating Alzheimer’s disease have seen limited success in drug development. Biogen’s Aduhelm, a monoclonal antibody
administered via infusion, received accelerated approval from the FDA on June 7, 2021, but Biogen has announced that it will discontinue
marketing Adelheim by the end of 2024. Adlarity, transdermal formulation of donepezilfrom the markers of Corium, was the
most recently FDA approved symptomatic treatment in 8 years, in March 2022. We cannot be certain that our oral, small-molecule
approach will lead to the development of further approvable or marketable products. Since 2003, over 500 clinical studies in Alzheimer’s
have been completed and only Aduhelm, Adlarity and now our product ZUNVEYL have been approved by the FDA, compared to higher success rates
for all other drug candidates.
ZUNVEYL remains subject to regulatory oversight.
Even though we obtained regulatory approval for
ZUNVEYL, our lead product, it will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising,
promotion, sampling, record-keeping and submission of safety and other post-market information. FDA has required that we conduct
further root cause investigation into observe high variability of the dissolution data for ZUNVEYL oral tables and develop new dissolution
methods and acceptance criteria and to report to FDA by February 28, 2025. ZUNVEYL also remains subject to a post-approval safety
monitoring program, limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval,
or contain requirements for potentially costly post-marketing testing and surveillance to monitor the quality, safety and efficacy
of the product. For example, the holder of an approved NDA is obligated to monitor and report adverse events and any failure of a product
to meet the specifications in the NDA. The holder of an approved NDA also must submit new or supplemental applications and obtain
FDA approval for certain changes to the approved product, product labeling or manufacturing process. Advertising and promotional materials
must comply with FDA rules and are subject to FDA review, in addition to other potentially applicable federal and state laws.
In addition, product manufacturers and their facilities
are subject to payment of user fees and continual review and periodic inspections by the FDA and other regulatory authorities. If we,
or a regulatory authority, discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency,
or problems with the facility where the product is manufactured or disagrees with the promotion, marketing or labeling of that product,
a regulatory authority may impose restrictions relative to that product, the manufacturing facility or us, including requiring recall
or withdrawal of the product from the market or suspension of manufacturing.
If we fail to comply with applicable regulatory
requirements of ZUNVEYL or any future product candidate, a regulatory authority may take enforcement actions, such as issuing warnings,
fines, or even revoking approval, which could result in delays, financial penalties, reputational damage, and potential legal liabilities
for our Company.
Any government investigation of alleged violations
of law could require us to expend significant time and resources in response and could generate negative publicity. The occurrence of
any event or penalty described above may inhibit our ability to commercialize ZUNVEYL and adversely affect our business, financial condition,
results of operations and prospects.
We cannot predict the likelihood, nature or extent
of government regulation that may arise from future legislation or administrative action, either in the United States or abroad.
If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not
able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain
profitability, which would materially and adversely affect our business, financial condition, results of operations and prospects.
For our other product candidates, we may
encounter substantial delays in our preclinical studies, clinical trials and obtaining NDA approval or may not be able to conduct or complete
our preclinical studies or clinical trials or receive NDA approval on the timelines we expect, if at all.
Clinical trials are expensive and can take many years
to complete, and the outcome is inherently uncertain. The historical failure rate for product candidates in our industry is high. We cannot
guarantee that any clinical trials will be conducted as planned or completed on schedule, if at all. A failure of one or more clinical
trials can occur at any stage and our future clinical trials may not be successful. Clinical trials can be delayed or terminated for a
variety of reasons. Further, even once completed the process to receive a NDA can be delayed or unsuccessful.
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The timing and success of obtaining NDA approval
can be affected by many factors including:
● identifying, recruiting and training suitable clinical investigators;
● obtaining IRB approval at each trial site;
● recruiting an adequate number of suitable patients to participate in a trial;
● having subjects complete a trial or return for post-treatment follow-up;
● clinical sites deviating from trial protocol or dropping out of a trial;
● addressing subject safety concerns that arise during the course of a trial;
● adding a sufficient number of clinical trial sites; or
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We may experience numerous adverse or unforeseen
events during, or as a result of, preclinical studies and clinical trials which could delay or prevent our ability to receive marketing
approval or commercialize our product candidates, including:
● incur unplanned costs;
● obtain marketing approval in some countries and not in others;
● be subject to additional post-marketing testing requirements; or
● have the product removed from the market after obtaining marketing approval.
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The outcome of preclinical testing and early
clinical trials may not be predictive of the success of later clinical trials, and the results of our clinical trials may not satisfy
the requirements of the FDA or other comparable foreign regulatory authorities.
We will be required to demonstrate with substantial
evidence through well-controlled clinical trials that our product candidates are safe and effective for use in a diverse population
before we can seek marketing approvals for their commercial sale. Success in preclinical studies and early-stage clinical trials
does not mean that future clinical trials will be successful. For instance, we do not know whether ALPHA-1062 will perform in future
clinical trials as ALPHA-1062 has performed in preclinical studies or earlier clinical trials. Product candidates in clinical trials
may fail to demonstrate sufficient safety and efficacy to the satisfaction of the FDA and other comparable foreign regulatory authorities
despite having progressed through preclinical studies. Regulatory authorities may also limit the scope of later-stage trials until
we have demonstrated satisfactory safety, which could delay regulatory approval, limit the size of the patient population to which we
may market our product candidates, or prevent regulatory approval.
In some instances, there can be significant variability
in safety and efficacy results between different clinical trials of the same product candidates due to numerous factors, including changes
in trial protocols, differences in size and type of the patient populations, differences in and adherence to the dose and dosing regimen
and other trial protocols and the rate of dropout among clinical trial participants. Patients treated with our product candidates may
also be undergoing other therapies and may be using other approved products or investigational new drugs, which can cause side effects
or adverse events that are unrelated to our product candidates. As a result, assessments of efficacy can vary widely for a particular
patient, and from patient to patient and site to site within a clinical trial. This subjectivity can increase the uncertainty of, and
adversely impact, our clinical trial outcomes.
We do not know whether any clinical trials we
may conduct will demonstrate consistent or adequate efficacy and safety sufficient to obtain approval to market any of our product candidates.
We rely on third parties in the conduct
of all of our clinical trials. If these third parties do not successfully carry out their contractual duties, fail to comply with applicable
regulatory requirements or meet expected deadlines, we may be unable to obtain regulatory approval for our product candidates.
We currently do not have the ability to independently
conduct clinical trials that comply with the regulatory requirements known as good laboratory practice (“GLP”) requirements
or good clinical practice (“GCP”) requirements, respectively. The FDA and regulatory authorities in other jurisdictions require
us to comply with GCP requirements for conducting, monitoring, recording and reporting the results of clinical trials, in order to ensure
that the data and results are scientifically credible and accurate and that the trial subjects are adequately informed of the potential
risks of participating in clinical trials. We rely on medical institutions, clinical investigators, contract laboratories and other third
parties, such as CROs, to conduct GLP-compliant preclinical studies and GCP-compliant clinical trials on our product candidates
properly and on time. While we have agreements governing their activities, we control only certain aspects of their activities and have
limited influence over their actual performance. The third parties with whom we contract for execution of our GLP-compliant preclinical
studies and our GCP-compliant clinical trials play a significant role in the conduct of these studies and the subsequent collection
and analysis of data. These third parties are not our employees and, except for restrictions imposed by our contracts with such third
parties, we have limited ability to control the amount or timing of resources that they devote to our programs. Although we rely on these
third parties to conduct our GLP-compliant preclinical studies and GCP-compliant clinical trials, we remain responsible for
ensuring that each of our preclinical studies and clinical trials is conducted in accordance with its investigational plan and protocol
and applicable laws and regulations, and our reliance on the CROs does not relieve us of our regulatory responsibilities.
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Many of the third parties with whom we contract
may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting preclinical
studies, clinical trials or other drug development activities that could harm our competitive position. If the third parties conducting
our preclinical studies or our clinical trials do not adequately perform their contractual duties or obligations, experience significant
business challenges, disruptions or failures, do not meet expected deadlines, terminate their agreements with us or need to be replaced,
or if the quality or accuracy of the data they obtain is compromised due to their failure to adhere to our protocols or to GLPs or GCPs,
or for any other reason, we may need to enter into new arrangements with alternative third parties. This could be difficult, costly or
impossible, and our preclinical studies or clinical trials may need to be extended, delayed, terminated or repeated. As a result, we may
not be able to obtain regulatory approval in a timely fashion, or at all, for the applicable product candidate, our business, financial
results and the commercial prospects for our product candidates would be harmed, our costs could increase, and our ability to generate
revenues could be delayed.
Use of our therapeutic candidates could
be associated with side effects, adverse events or other properties or safety risks, which could delay or preclude approval, cause us
to suspend or discontinue clinical trials, abandon a therapeutic candidate, limit the commercial profile of an approved label or result
in other significant negative consequences that could severely harm our business, prospects, operating results and financial condition.
Adverse events or other undesirable side effects
caused by our product candidates or related to procedures conducted as part of the clinical trials could cause us or regulatory authorities
to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval
by the FDA or comparable foreign regulatory authorities. Results of our planned clinical trials could reveal a high and unacceptable severity
and prevalence of side effects or unexpected characteristics. If unacceptable side effects arise in the development of our product candidates,
we, the FDA, the IRBs at the institutions in which our studies are conducted or the Data Safety Monitoring Board, or DSMB, could suspend
or terminate our clinical trials or the FDA or comparable foreign regulatory authorities could order us to cease clinical trials or deny
approval of our product candidates for any or all targeted indications. Treatment-related side effects may not be appropriately recognized
or managed by the treating medical staff. We expect to have to train medical personnel using our product candidates to understand the
side effect profiles for our clinical trials and upon any commercialization of any of our product candidates. Inadequate training in recognizing
or managing the potential side effects of our product candidates could result in patient injury or death. Any of these occurrences may
materially and adversely affect our business, financial condition, results of operations and prospects.
In addition, our patient tolerability study and
other clinical trials may only include a limited number of subjects and limited duration of exposure to our product candidates. As a result,
our product candidates may cause unforeseen safety events when evaluated in larger patient populations. Further, clinical trials may not
be sufficient to determine the effect and safety consequences of taking our product candidates over a multi-year period.
If following marketing approval of ZUNVEYL (which
was received on July 26, 2024) or of any of our future product candidates, we or others later identify undesirable and unforeseen
side effects caused by such product, a number of potentially significant negative consequences could result, including but not limited
to:
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● we could be sued and held liable for harm caused to patients;
● the product may become less competitive; and
● our reputation may suffer.
Any of these events could prevent us from achieving
or maintaining market acceptance of the particular product candidate, if approved, and result in the loss of significant revenues to us,
which would materially and adversely affect our business, financial condition, results of operations and prospects.
Interim “top-line” and preliminary
data from studies or trials that we announce or publish from time to time may change as more data become available and are subject to
audit and verification procedures that could result in material changes in the final data.
From time to time, we may publish interim “top-line”
or preliminary data from preclinical studies or clinical trials. Interim data are subject to the risk that one or more of the outcomes
may materially change as more data becomes available. We also make assumptions, estimations, calculations and conclusions as part of our
analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data when we publish such data.
As a result, the “top-line” results that we report may differ from future results of the same studies, or different conclusions
or considerations may qualify such results once additional data have been received and fully evaluated. Preliminary or “top-line”
data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary
data we previously published. As a result, interim and preliminary data should be viewed with caution until the final data are available.
Additionally, interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes
may materially change as patient enrollment continues and more patient data becomes available. Adverse differences between preliminary
or interim data and final data could significantly harm our business, financial condition, results of operations and prospects.
Further, others, including regulatory agencies,
may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance
of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular
product candidate or product and our Company in general. In addition, the information we choose to publicly disclose regarding a particular
study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is
the material or otherwise appropriate information to include in our disclosure. Any information we determine not to disclose may ultimately
be deemed significant by you or others with respect to future decisions, conclusions, views, activities or otherwise regarding a particular
product candidate or our business. If the top-line data that we report differ from final results, or if others, including regulatory
authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, product candidates may be harmed,
which could significantly harm our business, financial condition, results of operations and prospects.
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We have conducted, and in the future plan
to conduct, clinical trials for product candidates outside the United States, and the FDA and comparable foreign regulatory authorities
may not accept data from such trials.
We have conducted clinical trials of our product
candidates outside the United States, and plan to continue to do so in the future. For example, we initially conducted our bioavailability
and bioequivalence pivotal clinical trials of ALPHA-1062 in collaboration with Vimta Labs, Inc in Hyperabad, India. In addition,
the Phase 1 single and multiple ascending dose studies of ALPHA-1062 in healthy volunteers were conducted at the Centre for
Human Disease Research (CHDR) in the Netherlands. The acceptance of future study data from clinical trials conducted outside the United States
or another jurisdiction by the FDA, any comparable foreign regulatory authority may be subject to certain conditions or may not be accepted
at all. In cases where data from foreign clinical trials are intended to serve as the basis for marketing approval in the United States,
the FDA will generally not approve the application on the basis of foreign data alone unless:
● the data are applicable to the U.S. population and U.S. medical practice;
● the trials were performed pursuant to GCP requirements; and
Many foreign regulatory authorities have similar
requirements. In addition, foreign trials are subject to the applicable local laws of the foreign jurisdictions where the trials are conducted.
There can be no assurance that the FDA or any comparable foreign regulatory authority will accept data from future trials conducted outside
of the United States or the applicable jurisdiction. If the FDA or any comparable foreign regulatory authority does not accept such
data, it would result in the need for additional trials, which would be costly and time-consuming and delay aspects of our business
plan, and which may result in product candidates that we may develop not receiving approval or clearance for commercialization in the
applicable jurisdiction.
We may expend our limited resources to pursue
a particular product candidate and fail to capitalize on product candidates that may have been more profitable or for which there could
have been a greater likelihood of success.
Because we have limited financial and management
resources, we must focus on development programs and product candidates that we identify for specific diseases. As such, currently we
are primarily focused on the commercialization and further development of ZUNVEYL oral tablets. As a result, we may forego or delay the
pursuit of opportunities with other product candidates. For example, we plan to out-license ALPHA-1062IN for applications in
treating mild traumatic brain injury to a private entity formed by us for the purpose of raising private capital and developing the asset.
Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities.
Our spending on current and future development programs and product candidates for specific diseases may not yield any commercially viable
products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish
valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have
been more advantageous for us to retain sole development and commercialization rights to such product candidate.
If product liability lawsuits are brought
against us, we may incur substantial liabilities and may be required to limit commercialization of our current or future product candidates.
We face an inherent risk of product liability
as a result of the clinical testing of our product candidates and will face an even greater risk if we commercialize any products. For
example, we may be sued if any product we develop allegedly causes injury or is found to be otherwise unsuitable during product testing,
manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design,
a failure to warn of dangers inherent in the product, negligence, strict liability and breach of warranty. Claims could also be asserted
under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial
liabilities or be required to limit commercialization of our product candidates. Even a successful defense would require significant financial
and management resources. Regardless of the merits or eventual outcome, liability claims may result in:
● decreased demand for our current or future product candidates;
● injury to our reputation;
● withdrawal of clinical trial participants;
● costs to defend the related litigation;
● diversion of management’s time and our resources;
● substantial monetary awards to trial participants or patients;
● loss of revenue; and
● the inability to commercialize our current or any future product candidates.
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If we are unable to obtain and maintain sufficient
product liability insurance at an acceptable cost and scope of coverage to protect against potential product liability claims, the commercialization
of our current or any future product candidates we develop could be inhibited or prevented. We currently carry product liability insurance
covering our clinical trials. Although we maintain such insurance, any claim that may be brought against us could result in a court judgment
or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance
coverage. Our insurance policies also have various exclusions and deductibles, and we may be subject to a product liability claim for
which we have no coverage. We will have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations
or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient funds to pay such amounts. Moreover, in
the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses.
Following the marketing approval of ZUNVEYL or if and when we obtain approval for marketing any of our future product candidates, we intend
to expand our insurance coverage to include the sale of such product candidate; however, we may be unable to obtain this liability insurance
on commercially reasonable terms or at all.
Significant disruptions of our information
technology systems, breaches of data security and other incidents could materially adversely affect our business, results of operations
and financial condition.
We collect and maintain information in digital
and other forms that is necessary to conduct our business, and we are increasingly dependent on information technology systems and infrastructure
to operate our business. In the ordinary course of our business, we collect, store and transmit large amounts of confidential information,
including intellectual property, proprietary business information and personal information. It is critical that we do so in a secure manner
to maintain the privacy, security, confidentiality and integrity of such confidential information. We have established physical, electronic
and organizational measures designed to safeguard and secure our systems to prevent a data compromise, and rely on commercially available
systems, software, tools and monitoring to provide security for our information technology systems and the processing, transmission and
storage of digital information. We have also outsourced elements of our information technology infrastructure, and as a result a number
of third-party vendors may have access to our confidential information. Our internal information technology systems and infrastructure,
and those of any future collaborators and our contractors, consultants, vendors and other third parties on which we rely, are vulnerable
to damage or unauthorized access or use resulting from computer viruses, malware, natural disasters, terrorism, war, telecommunication
and electrical failures, cyber-attacks or cyber-intrusions over the Internet, denial or degradation of service attacks, ransomware,
hacking, phishing and other social engineering attacks, attachments to emails, persons inside our organization or persons with access
to systems inside our organization.
The risk of a security breach or disruption, particularly
through cyber-attacks or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally
increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. The prevalent
use of mobile devices that access confidential information also increases the risk of lost or stolen devices, security incidents and data
security breaches, which could lead to the loss of confidential information or other intellectual property. As a result of the COVID-19 pandemic,
we may face increased risks of a security breach or disruption due to our reliance on internet technology and the number of our employees
who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities. The costs to us to
investigate, mitigate and remediate security incidents, breaches, disruptions, network security problems, bugs, viruses, worms, malicious
software programs and security vulnerabilities could be significant, and while we have implemented security measures to protect our data
security and information technology systems, our efforts to address these problems may not be successful, and these problems could result
in unexpected interruptions, delays, cessation of service, negative publicity and other harm to our business and our competitive position.
If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our product development
programs. For example, the loss of clinical trial data from completed or ongoing or planned clinical trials could result in delays in
our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Any security compromise affecting
us, our partners or our industry, whether real or perceived, could harm our reputation, erode confidence in the effectiveness of our security
measures and lead to regulatory scrutiny. Moreover, if a computer security breach affects our systems or results in the unauthorized access
to or unauthorized use, disclosure, release or other processing of personally identifiable information or clinical trial data, it may
be necessary to notify individuals, governmental authorities, supervisory bodies, the media and other parties pursuant to privacy and
security laws, and our reputation could be materially damaged. We would also be exposed to a risk of loss, governmental investigations
or enforcement, or litigation and potential liability, which could materially adversely affect our business, results of operations and
financial condition.
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Risk related to Our Industry
Research and development of pharmaceuticals
is a lengthy and inherently risky. We cannot give any assurance that our future product candidates will receive regulatory approval.
Our ZUNVEYL oral formulation for mild-to-moderate dementia
of the Alzheimer’s type in adults (Alzheimer’s disease) is our only product that has FDA approval. All our other product candidates
are in the pre-clinical stage of development. Our future success is dependent on our ability to successfully develop, obtain regulatory
approval for and then successfully commercialize our product candidates, and we may experience delays or fail to do so for many reasons,
including the following:
● any changes to our manufacturing process that may be necessary or desired;
If any of these events occur, we may be forced
to abandon our development efforts for a product candidate or candidates, which would have a material adverse effect on our business and
could potentially cause us to cease operations. Failure of a product candidate may occur at any stage of preclinical or clinical development,
and we may never succeed in developing marketable products or generating product revenue.
We may not be successful in our efforts to further
develop our current and future product candidates. Each of our product candidates will require significant clinical development, management
of preclinical, clinical and manufacturing activities, regulatory approval, adequate manufacturing supply, a commercial organization and
significant marketing efforts before we generate any revenue from product sales, if at all. Any clinical studies that we may conduct may
not be acceptable to the FDA or other regulatory authorities or demonstrate the efficacy and safety necessary to obtain regulatory approval
to market our product candidates. If the results of our ongoing or future clinical studies are inconclusive with respect to the efficacy
of our product candidates, if we do not meet the clinical endpoints with statistical significance or if there are safety concerns or adverse
events associated with our product candidates, we may be prevented or delayed in obtaining marketing approval for our product candidates.
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In addition, to obtain regulatory approval in
countries outside the United States, we must comply with numerous and varying regulatory requirements of such other countries regarding
safety, efficacy, chemistry, manufacturing and controls, clinical trials, commercial sales, pricing and distribution of our product candidates.
We may also rely on collaborators or partners to conduct the required activities to support an application for regulatory approval and
to seek approval for one or more of our product candidates. We cannot be sure that any such collaborators or partners will conduct these
activities successfully or do so within the timeframe we desire. Even if we or any future collaborators or partners are successful in
obtaining approval in one jurisdiction, we cannot ensure that we will obtain approval in any other jurisdictions. If we are unable to
obtain approval for our product candidates in multiple jurisdictions, our revenue and results of operations could be negatively affected.
Disruptions at the FDA and other government
agencies caused by funding shortages or global health concerns could hinder their ability to hire, retain or deploy key leadership and
other personnel, or otherwise prevent new or modified products from being developed, approved or commercialized in a timely manner or
at all, which could negatively impact our business.
The ability of the FDA to review and/or approve
new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory, and policy
changes, the FDA’s ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise
affect the FDA’s ability to perform routine functions. Average review times at the FDA have fluctuated in recent years as a
result. In addition, government funding of other government agencies 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. On March 18, 2020, the FDA announced its intention to temporarily postpone routine surveillance inspections of domestic
manufacturing facilities. Regulatory authorities outside the United States may adopt similar restrictions or other policy measures
in response to the COVID-19 pandemic. If a prolonged government shutdown occurs, or if global health concerns continue to prevent
the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly
impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have
a material adverse effect on our business.
Failure to comply with health and data protection
laws and regulations could lead to government enforcement actions and civil or criminal penalties, private litigation or adverse publicity
and could negatively affect our operating results and business.
We are subject to or affected by federal, state
and foreign data protection laws and regulations which address privacy and data security. In the United States, numerous federal
and state laws and regulations, including the U.S. federal Health Insurance Portability and Accountability Act of 1996,
or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 and its implementing
regulations, or HITECH, state data breach notification laws, state health information privacy laws and federal and state consumer protection
laws, including Section 5 of the Federal Trade Commission Act, which govern the collection, use, disclosure and protection of health-related and
other personal information, may apply to our operations and the operations of any future collaborators. In addition, we may obtain health
information from third parties, including research institutions from which we obtain clinical trial data, that are subject to privacy
and security requirements under HIPAA, as amended by HITECH, and other privacy and data security laws. Depending on the facts and circumstances,
we could be subject to significant administrative, civil and criminal penalties if we obtain, use or disclose individually identifiable
health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA. Further, various
states have implemented similar privacy laws and regulations. For example, California also recently enacted the California Consumer Privacy
Act of 2018, or CCPA. The CCPA gives California residents expanded rights to access and delete their personal information,
opt out of certain personal information sharing and receive detailed information about how their personal information is used. The CCPA
also provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase
data breach litigation. The CCPA went into effect on January 1, 2020 and grants the California Attorney General the power to bring
enforcement actions for violations beginning July 1, 2020. The CCPA has been amended from time to time, and it remains unclear what,
if any, further modifications will be made to this legislation or how it will be interpreted. As currently written, the CCPA may impact
our business activities and as a result may increase our compliance costs and potential liability. Many similar privacy laws have been
proposed at the federal level and in other states.
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Foreign data protection laws, including Regulation 2016/679,
known as the General Data Protection Regulation, or GDPR, may also apply to health-related and other personal information data subjects
in the EU or the United Kingdom, or UK. The GDPR went into effect on May 25, 2018. Companies that must comply with the GDPR
face increased compliance obligations and risk, including robust regulatory enforcement of data protection requirements as well as potential
fines for noncompliance of up to €20 million or 4% of annual global revenue of the noncompliance company, whichever is greater.
The GDPR imposes numerous requirements for the collection, use, storage and disclosure of personal information of EU or UK data subjects,
including requirements relating to providing notice to and obtaining consent from data subjects, personal data breach notification, cross-border transfers
of personal information, and honoring and providing for the rights of EU or UK individuals in relation to their personal information,
including the right to access, correct and delete their data.
Compliance with U.S. and foreign data protection
laws and regulations could require us to take on more onerous obligations in our contracts, require us to engage in costly compliance
exercises, restrict our ability to collect, use and disclose data, or in some cases, impact our or our partners’ or suppliers’
ability to operate in certain jurisdictions. Failure to comply with U.S. and foreign data protection laws and regulations could result
in government investigations and/or enforcement actions, fines, civil or criminal penalties, private litigation or adverse publicity and
could negatively affect our operating results and business.
Moreover, clinical trial subjects about whom we
or any of our potential collaborators obtain information, as well as the providers who share this information with us, may contractually
limit our ability to use and disclose the information. Claims that we have violated individuals’ privacy rights, failed to comply
with data protection laws or breached our contractual obligations, even if we are not found liable, could be expensive and time consuming
to defend and could result in adverse publicity that could materially and adversely affect our business, financial condition, results
of operations and prospects.
Even if the product candidates that we develop
receive regulatory approval in the United States or another jurisdiction, they may never receive approval in other jurisdictions,
which would limit market opportunities for our product candidates and adversely affect our business.
Approval of a product candidate in the United States
by the FDA or by the requisite regulatory agencies in any other jurisdiction does not ensure approval of such product candidate by regulatory
authorities in other countries or jurisdictions. The approval process varies among countries and may limit our or any future collaborators’
ability to develop, manufacture, promote and sell product candidates internationally. Failure to obtain marketing approval in international
jurisdictions would prevent the product candidates from being marketed outside of the jurisdictions in which regulatory approvals have
been received. In order to market and sell product candidates in the European Union, or EU, and many other jurisdictions, we and any future
collaborators must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure
varies among countries and may involve additional preclinical studies or clinical trials both before and after approval. In many countries,
any product candidate for human use must be approved for reimbursement before it can be approved for sale in that country. In some cases,
the intended price for such product is also subject to approval. Further, while regulatory approval of a product candidate in one country
does not ensure approval in any other country, a failure or delay in obtaining regulatory approval in one country may have a negative
effect on the regulatory approval process in others. If we or any future collaborators fail to comply with the regulatory requirements
in international markets or to obtain all required marketing approvals, the target market for a particular potential product will be reduced,
which would limit our ability to realize the full market potential for the product and adversely affect our business.
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We face significant competition in an environment
of rapid technological and scientific change, and there is a possibility that our competitors may develop therapies that are safer, more
advanced or more effective than ours, which may negatively impact our ability to successfully market or commercialize any product candidates
we may develop and ultimately harm our financial condition.
The development and commercialization of new drug
products is highly competitive. Moreover, the neurodegenerative field is characterized by strong and increasing competition, and a strong
emphasis on intellectual property. We may face competition with respect to any of our product candidates that we seek to develop or commercialize
in the future from major pharmaceutical companies, specialty pharmaceutical companies, and biotechnology companies worldwide. 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.
There are a number of large pharmaceutical and
biotechnology companies that are currently in market or pursuing the development of product candidates for the treatment of the diseases
and disorders for which we have research programs, including Alzheimer’s disease, mTBI, and Amyotrophic Lateral Sclerosis. Current
generic competitors in the Alzheimer’s disease market include donepezil, rivastigmine, galantamine, and memantine. Branded competitors
include Namzaric® by maker Abbvie and newly approved Adlarity® by maker Corium. Alzheimer’s
disease companies developing therapeutics for similar indications include large companies with significant financial resources, such as
Biogen, Eli Lilly, Corium, Taurz, Vasopharm. Neuren Pharmaceuticals, Abliva, and AB Science. In the TBI market, there are no current acute
or chronic treatments approved to date. Companies currently in clinical trials for TBI include Vasopharm, SanBio/Sumitomo, Ostuka/Avanir
Pharmaceuticals, Biogen, and Cellvation.
Many of our current or potential competitors,
either alone or with their strategic partners, have significantly greater financial resources and expertise in research and development,
manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals, and marketing approved products than we
do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among
a smaller number of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly
through collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining
qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well
as in acquiring technologies complementary to, or necessary for, our programs. Our commercial opportunity could be reduced or eliminated
if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more
convenient, or are less expensive than any products that we may develop. Furthermore, currently approved products could be discovered
to have application for treatment of mild-to-moderate Alzheimer’s diseases, which could give such products significant regulatory
and market timing advantages over any of our product candidates. Our competitors also may obtain FDA, EMA or other regulatory approval
for their products more rapidly than we may obtain approval for ours and may obtain orphan product exclusivity from the FDA for indications
our product candidates are targeting, which could result in our competitors establishing a strong market position before we are able to
enter the market. Additionally, products or technologies developed by our competitors may render our potential product candidates uneconomical
or obsolete, and we may not be successful in marketing any product candidates we may develop against competitors.
In addition, we could face litigation or other
proceedings with respect to the scope, ownership, validity and/or enforceability of our patents relating to our competitors’ products
and our competitors may allege that our products infringe, misappropriate or otherwise violate their intellectual property. The availability
of our competitors’ products could limit the demand, and the price we are able to charge, for any products that we may develop and
commercialize. See the section entitled “Risks Related to Our Intellectual Property.” The successful commercialization
of our product candidates will depend in part on the extent to which governmental authorities and health insurers establish adequate coverage,