ITEM 1A. RISK FACTORS
An investment in our common
stock involves a high degree of risk. Before making an investment decision, you should give careful consideration to the following risk
factors, in addition to the other information included in this Annual Report, including our financial statements and related notes, before
deciding whether to invest in shares of our common stock. The occurrence of any of the adverse developments described in the following
risk factors could materially and adversely harm our business, financial condition, results of operations or prospects. In that case,
the trading price of our common stock could decline, and you may lose all or part of your investment.
Risks Related to Financial Position and Need
for Capital
We have a limited operating history and
have never generated any revenues other than from research grants and a limited number of DRP® biomarker development agreements,
which may make it difficult to evaluate the success of our business to date and to assess our future viability.
We were incorporated as a Delaware
corporation in April 2021 for the purposes of undertaking our Recapitalization Share Exchange. In December 2021, Allarity Therapeutics
A/S, became our predecessor upon consummation of the Recapitalization Share Exchange, and was deemed to be the accounting acquirer in
the Recapitalization Share Exchange. Our predecessor, Allarity Therapeutics A/S, was organized under the laws of Denmark on September 9,
2004, and was largely focused on organizing and staffing our company, raising capital, developing our proprietary DRP®
companion diagnostics platform and acquiring the rights to, advancing the development of, our therapeutic candidates, including conducting
clinical trials on our therapeutic candidates, and completing our Recapitalization Share Exchange. As such, we have a limited operating
history and have not generated any revenues.
In addition, we have not yet
demonstrated an ability to successfully obtain marketing approvals, manufacture drugs on a commercial scale, or conduct sales and marketing
activities necessary for successful commercialization. Consequently, predictions 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 drugs.
111
We expect our financial condition
and operating results to continue to fluctuate from quarter to quarter and year to year due to a variety of factors, many of which are
beyond our control. We will need to eventually transition from a company with a research and development focus to a company capable of
undertaking commercial activities. We may encounter unforeseen expenses, difficulties, complications, and delays, and may not be successful
in such a transition.
We have incurred significant operating losses
since inception and anticipate that we will continue to incur substantial operating losses for the foreseeable future and may never achieve
or maintain profitability.
Since our inception of our predecessor, Allarity Therapeutics A/S,
we have incurred losses and have an accumulated deficit of $66.5 million as of December 31, 2021. Our net losses were $26.6
million and $6.6 million for the years ended December 31, 2021 and 2020, respectively. We expect to continue to incur significant expenses
and increasing operating losses for the foreseeable future. None of our current therapeutic candidates have been approved for marketing
in the United States, or in any other jurisdiction, and may never receive such approval. It could be several years, if ever, before we
have a commercialized drug that generates significant revenues. As a result, we are uncertain when or if we will achieve profitability
and, if so, whether we will be able to sustain profitability. The net losses we incur may fluctuate significantly from quarter to quarter
and year to year. We anticipate that our expenses will increase substantially as we:
To become and remain profitable,
we must develop and eventually commercialize one or more therapeutic candidates with significant market potential or license one or more
of our therapeutic candidates to an industry partner. This will require us to be successful in a range of challenging activities, including
completing clinical trials of our therapeutic candidates, publishing our data and findings on our therapeutic candidates with peer reviewed
publications, developing commercial scale manufacturing processes, obtaining marketing approval, manufacturing, marketing and selling
any current and future therapeutic candidates for which we may obtain marketing approval, and satisfying any post-marketing requirements.
While we submitted an NDA to the U.S. FDA on our therapeutic candidate Dovitinib in December 2021, we are only in the early stages of
most of these activities and, in some cases, have not yet commenced certain of these activities. On February 15, 2022, we received Refusal
to File (RTF) letters for both our dovitinib NDA and our DRP®-Dovitinib companion diagnostic PMA. The FDA has asserted that neither
our NDA or PMA meets the regulatory requirements to warrant a complete agency review. The primary grounds of rejection asserted by the
FDA relates to Allarity’s use of prior Phase 3 clinical trial data, generated by Novartis in a “superiority” endpoint
study against sorafenib (Bayer), to support a “non-inferiority” endpoint in connection with the DRP®-Dovitinib companion
diagnostic. Allarity anticipates that it may be necessary to conduct a new, prospective Phase 3 study, to gain approval of dovitinib in
the U.S. Despite our efforts, we may never succeed in any or all these activities and, even if we do, we may never generate sufficient
revenue to achieve profitability.
112
Because of the numerous risks
and uncertainties associated with drug development, we are unable to accurately predict the timing or amount of expenses or when, or if,
we will obtain marketing approval to commercialize any of our therapeutic candidates. If we are required by the FDA, or other regulatory
authorities such as the European Medicines Agency, or EMA, to perform studies and trials in addition to those currently expected, or if
there are any delays in the development, or in the completion of any planned or future preclinical studies or clinical trials of our current
or future therapeutic candidates, our expenses could increase, and profitability could be further delayed.
Even if we do 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
decrease the value of our company and could impair our ability to raise capital, maintain our research and development efforts, expand
our business, or continue our operations. A decline in the value of our company also could cause you to lose all or part of your investment.
Our recurring losses from operations since
inception and required additional funding to finance our operations raise substantial doubt about our ability to continue as a going concern.
Furthermore, our independent registered public accounting firm has included an explanatory paragraph relating to our ability to continue
as a going concern in its report on our audited financial statements included in this Annual Report. Our audited financial statements
at December 31, 2021 and 2020 and for the years then ended were prepared assuming that we will continue as a going concern.
Our reports from our independent registered public accounting firms
for the years ended December 31, 2021 and 2020 include an explanatory paragraph stating that our recurring losses from operations since
inception and required additional funding to finance our operations raise substantial doubt about our ability to continue as a going concern.
Such an opinion could materially limit our ability to raise additional funds through the issuance of new debt or equity securities or
otherwise. There is no assurance that sufficient financing will be available when needed to allow us to continue as a going concern. The
perception that we may not be able to continue as a going concern may also make it more difficult to operate our business due to concerns
about our ability to meet our contractual obligations. Our ability to continue as a going concern is contingent upon, among other factors,
the sale of our common stock or obtaining alternate financing. We cannot provide any assurance that we will be able to raise additional
capital.
If we are unable to secure
additional capital, we may be required to curtail our clinical and research and development initiatives and take additional measures to
reduce costs to conserve our cash in amounts sufficient to sustain operations and meet our obligations. These measures could cause significant
delays in our clinical and regulatory efforts, which is critical to the realization of our business plan. The accompanying financial statements
do not include any adjustments that may be necessary should we be unable to continue as a going concern. It is not possible for us to
predict at this time the potential success of our business. The revenue and income potential of our proposed business and operations are
currently unknown. If we cannot continue as a viable entity, you may lose some or all of your investment.
We will need substantial additional funding,
and if we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our drug development programs or commercialization
efforts.
We anticipate that our expenses
will increase substantially as we continue our efforts relating to the re-submission of an NDA to the FDA for our therapeutic candidate dovitinib
and as we advance our DRP®-guided Phase 2 clinical trial of stenoparib as a treatment
for ovarian cancer, being conducted at the Dana-Farber Cancer Institute (Boston, MA USA.), our DRP®-guided
Phase 2 clinical trial of IXEMPRA® as a treatment for metastatic breast cancer, being
conducted at numerous locations in Europe, and advance development of our other therapeutic candidates; seek to identify and develop additional
therapeutic candidates; acquire or in-license other therapeutic candidates or technologies; seek regulatory and marketing approvals for
our therapeutic candidates that successfully complete clinical trials, if any; establish sales, marketing, distribution and other commercial
infrastructure in the future to commercialize various drugs for which we may obtain marketing approval, if any; require the manufacture
of larger quantities of therapeutic candidates for clinical development and, potentially, commercialization; maintain, expand and protect
our intellectual property portfolio; develop, maintain, and expand our proprietary DRP®
companion diagnostics platform; hire and retain additional personnel, such as clinical, quality control and scientific personnel; add
operational, financial and management information systems and personnel, including personnel to support our drug development and help
us comply with our obligations as a public company; and add equipment and physical infrastructure to support our research and development
programs.
113
We plan to use the net proceeds
of the PIPE Investment primarily to fund our ongoing clinical development efforts for our three priority pipeline projects. We will be
required to expend significant funds in order to prepare and re-submit an NDA with the U.S. FDA for our therapeutic candidate
dovitinib and to advance the development of stenoparib, IXEMPRA®. In addition, while we may seek one or more collaborators
for future development of our current therapeutic candidates or any future therapeutic candidates that we may develop for one or more
indications, we may not be able to enter into a partnership or out-license for any of our therapeutic candidates for such indications
on suitable terms, on a timely basis or at all. In any event, our existing cash and cash equivalents will not be sufficient to fund all
the efforts that we plan to undertake or to fund the completion of development of our therapeutic candidates or our other preclinical
studies. Accordingly, we will be required to obtain further funding through public or private equity offerings, debt financings, collaborations
and licensing arrangements or other sources. Further financing may not be available to us on acceptable terms, or at all. Our failure
to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy.
We believe that our existing cash and cash equivalents as of the date
of this Annual Report, and our anticipated expenditures and commitments for calendar year 2022, will enable us to fund our operating expenses
and capital expenditure requirements for 6 months from the date of this Annual Report. Our estimate as to how long we expect the net proceeds
from the PIPE Investment, together with our existing cash and cash equivalents, to be able to continue to fund our operations is based
on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Further,
changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than we currently
anticipate, and we may need to seek additional funds sooner than planned. Our future funding requirements, both short-term and long-term,
will depend on many factors, including:
● the costs, timing and outcome of seeking regulatory approvals;
114
● changes in regulatory policies or laws that may affect our operations;
● the costs of acquiring potential new therapeutic candidates or technology;
● the costs of operating as a public company.
We have identified
material weaknesses in our internal control over financial reporting and have restated our financial statements for prior periods. If
we are unable to remediate these material weaknesses, or if we identify additional material weaknesses in the future or otherwise fail
to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition or results
of operations, which may adversely affect our business and stock price.
As a newly reporting
company under the Exchange Act, we are not required to evaluate the effectiveness of our internal controls over financial reporting
until the end of the fiscal year after we file our first annual report on Form 10-K, which will occur on December 31, 2022. However,
in connection with the audit of our financial statements for the years ended December 31, 2020 and 2021, we were required to restate
our financial statements for the year ended December 31, 2020 and for the quarterly period ended September 30, 2021. We identified
material weaknesses in our internal controls over financial reporting because we did not have a formal process for period end
financial closing and reporting, we historically had insufficient resources to conduct an effective monitoring and oversight
function independent from our operations and we lack accounting resources and personnel to maintain effective segregation of duties
and to properly account for accounting transactions such as the issuance of warrants with a derivative liability component and a
convertible promissory note. If we are unable to remediate these material weaknesses, or if we identify additional material
weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or
timely report our financial condition or results of operations, which may adversely affect our business and stock price.
The material weaknesses identified
were:
We have implemented and are
continuing to implement various measures to address the material weaknesses identified; these measures include:
● the hiring of a chief financial officer that is a CPA in the U.S;
● and engage an independent US GAAP advisory firm.
A significant deficiency is
a control deficiency, or a combination of control deficiencies, that adversely affects our ability to initiate, authorize, record, process,
or report external financial data reliably in accordance with US GAAP such that there is more than a remote likelihood that a misstatement
of our annual or interim financial statements that is more than inconsequential will not be prevented or detected by our employees. A
material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood
that a material misstatement of our annual or interim financial statement will not be prevented or detected by our employees. In response,
we have begun the process of evaluating our internal control over financial reporting. We have also taken several remedial actions set
forth above to address these material weaknesses.
115
Furthermore, it is possible
that, had our independent registered public accounting firm conducted an audit of our internal control over financial reporting such firm
might have identified additional material weaknesses and deficiencies. We are a public company in the United States subject to the Sarbanes-Oxley
Act of 2002. Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, requires that we include a report of management on our internal
control over financial reporting in our annual report on Form 10-K beginning with our annual report for the fiscal year ending December
31, 2022. In addition, once we cease to be an “emerging growth company” as such term is defined in the JOBS Act and a “smaller
reporting company” as defined in Item 10(f)(1) of Regulation S-K, our independent registered public accounting firm must attest
to and report on the effectiveness of our internal control over financial reporting. Our management may conclude that our internal control
over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting
is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that
is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated,
or reviewed, or if it interprets the relevant requirements differently from us. In addition, our reporting obligations may place a significant
strain on our management, operational and financial resources, and systems for the foreseeable future. We may be unable to timely complete
our evaluation, testing and any required remediation.
While documenting and testing
our internal control procedures to satisfy the requirements of Section 404, we may identify other weaknesses and deficiencies in our internal
control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, as
these standards are modified, supplemented, or amended from time to time, we may not be able to conclude on an ongoing basis that we have
effective internal control over financial reporting in accordance with Section 404. If we fail to achieve and maintain an effective internal
control environment, we could experience material misstatements in our financial statements and fail to meet our reporting obligations,
which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital
markets, harm our results of operations, and lead to a decline in the trading price of our common stock. Additionally, ineffective internal
control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential
delisting from Nasdaq, regulatory investigations and civil or criminal sanctions. We may also be required to restate
our financial statements for prior periods.
We are committed to remediating our material weakness as promptly as possible. However, there can be no assurance
as to when this material weakness will be remediated or that additional material weaknesses will not arise in the future. If we are unable
to maintain effective internal control over financial reporting, our ability to record, process and report financial information timely
and accurately could be adversely affected, which could subject us to litigation or investigations, require management resources, increase
our expenses, negatively affect investor confidence in our financial statements and adversely impact the trading price of our common stock.
Risks Related to the Discovery and Development
of Our Therapeutic Candidates
Clinical trials are very expensive, time-consuming,
and difficult to design and implement, and involve uncertain outcomes. Furthermore, results of earlier preclinical studies and clinical
trials may not be predictive of results of future preclinical studies or clinical trials.
The risk of failure for most
of our therapeutic candidates is substantial. It is impossible to predict when or if any of our therapeutic candidates will prove effective
or safe or effective in humans or will receive regulatory approval. To obtain the requisite regulatory approvals to market and sell any
of our therapeutic candidates, we must demonstrate through extensive preclinical studies and clinical trials that our therapeutic candidates
are safe and effective in humans for use in each target indication. Preclinical investigation and clinical testing is expensive and can
take many years to complete, and the outcome is inherently uncertain. Failure can occur at any time during the preclinical investigation
or clinical trial process, or during the regulatory approval process.
In addition, the results of
preclinical studies and earlier clinical trials may not be predictive of the results of later-stage preclinical studies or clinical trials.
The results generated to date in preclinical studies and clinical trials for our therapeutic candidates do not ensure that later preclinical
studies or clinical trials will demonstrate similar results.
Therapeutic candidates in
later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical
and earlier stage clinical trials. In later-stage clinical trials, we will likely be subject to more rigorous statistical analyses than
in completed earlier stage clinical trials. Several companies in the pharmaceutical industry have suffered significant setbacks in later-stage
clinical trials due to adverse safety profiles or lack of efficacy, notwithstanding promising results in earlier trials, and we cannot
be certain that we will not face similar setbacks. Moreover, preclinical, and clinical data are often susceptible to varying interpretations
and analyses, and many companies that have believed their therapeutic candidates performed satisfactorily in preclinical studies and clinical
trials have nonetheless failed to obtain marketing approval of their products.
116
In some instances, there can
be significant variability in safety or efficacy results between different clinical trials of the same therapeutic candidate due to numerous
factors, including changes in clinical trial procedures set forth in protocols, differences in the size and type of the patient populations,
adherence to the dosing regimen and other clinical trial protocols, and the rate of dropout among clinical trial participants. If we fail
to produce positive results in our planned preclinical studies or clinical trials of any of our therapeutic candidates, the development
timeline and regulatory approval and commercialization prospects for our therapeutic candidates, and, correspondingly, our business and
financial prospects, would be materially and adversely affected.
We may encounter substantial delays in our
preclinical studies or clinical trials or we may fail to demonstrate safety and efficacy to the satisfaction of applicable regulatory
authorities.
Before obtaining marketing
approval from regulatory authorities for the sale of our therapeutic candidates, we must conduct extensive clinical trials to demonstrate
the safety and efficacy of the therapeutic candidate for its intended indications. Preclinical studies and clinical trials are expensive,
time-consuming, and uncertain as to outcome. We cannot guarantee that any preclinical studies or clinical trials will be conducted as
planned or completed on schedule, if at all. A failure of one or more preclinical studies or clinical trials can occur at any stage of
testing. Events that may prevent successful or timely completion of preclinical or clinical development include:
● delays in reaching a consensus with regulatory authorities on trial design;
For instance, the ongoing COVID-19 pandemic
and the measures taken by the governmental authorities could disrupt the supply chain and the manufacture or shipment of drug substances
and finished drug products for our therapeutic candidates for use in our research and clinical trials, delay, limit or prevent our employees
and CROs from continuing research and development activities, impede the ability of patients to enroll or continue in clinical trials,
or impede testing, monitoring, data collection and analysis or other related activities, any of which could delay our clinical trials
and increase our development costs, and have a material adverse effect on our business, financial condition and results of operations.
117
Any inability to timely and
successfully complete preclinical and clinical development could result in additional costs to us or impair our ability to achieve regulatory
and commercialization milestones. In addition, if we make manufacturing or formulation changes to our therapeutic candidates, we may need
to conduct additional testing to bridge our modified therapeutic candidate to earlier versions. Clinical trial delays could also shorten
any periods during which we may have the exclusive right to commercialize our therapeutic candidates, if approved, or allow our competitors
to bring comparable drugs to market before we do, which could impair our ability to successfully commercialize our therapeutic candidates
and may harm our business, financial condition, results of operations and prospects.
Additionally, if the results
of our clinical trials are inconclusive or if there are safety concerns or serious adverse events associated with our therapeutic candidates,
we may:
● be delayed in obtaining marketing approval, if at all;
● be subject to additional post-marketing testing requirements;
● be sued; or
● experience damage to our reputation.
Our drug development costs
will also increase if we experience delays in testing or obtaining marketing approvals. We do not know whether any of our preclinical
studies or clinical trials will begin as planned, need to be restructured or be completed on schedule, if at all.
Further, we, the FDA or an
institutional review board (“IRB”) may suspend our clinical trials at any time if it appears that we or our collaborators
are failing to conduct a trial in accordance with regulatory requirements, including the FDA’s current Good Clinical Practice, (“GCP”),
regulations, that we are exposing participants to unacceptable health risks or if the FDA finds deficiencies in our Investigational New
Drug (“IND”) Applications, or INDs, or the conduct of these trials. Therefore, we cannot predict with any certainty the schedule
for commencement and completion of future clinical trials. If we experience delays in the commencement or completion of our clinical trials,
or if we terminate a clinical trial prior to completion, the commercial prospects of our therapeutic candidates could be negatively impacted,
and our ability to generate revenues from our therapeutic candidates may be delayed or eliminated entirely.
If we encounter difficulties enrolling patients
in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.
We may experience difficulties
in patient enrollment in our clinical trials for a variety of reasons, including challenges resulting from the ongoing COVID-19 pandemic.
The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll enough
patients who remain in the study until its conclusion. The enrollment of patients depends on many factors, including:
● the patient eligibility criteria defined in the protocol;
118
● the proximity of patients to study sites;
● the design of the trial;
● our ability to obtain and maintain patient consents;
● enough patients willing to consent to a recent biopsy; and
In addition, our clinical trials
will compete with other clinical trials for therapeutic candidates that are in the same therapeutic areas as our therapeutic candidates,
and this competition will reduce the number and types of patients available to us, because some patients who might have opted to enroll
in our trials may instead opt to enroll in a trial being conducted by one of our competitors. Since the number of qualified clinical investigators
is limited, we expect to conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which
will reduce the number of patients who are available for our clinical trials at such clinical trial site. Moreover, because our therapeutic
candidates represent a departure from more commonly used methods for cancer treatment, potential patients and their doctors may be inclined
to use conventional therapies rather than enroll patients in any future clinical trial.
Delays in patient enrollment
may result in increased costs or may affect the timing or outcome of our current or planned clinical trials, which could prevent completion
of these trials and adversely affect our ability to advance the development of our therapeutic candidates.
If we fail to comply with our obligations
in the agreements under which we have licensed the intellectual property rights from third parties for our therapeutic candidates dovitinib
and stenoparib or otherwise experience disruptions to our business relationships with our licensors, we could lose rights to advance the
development of dovitinib and stenoparib which would have a material adverse effect on our business.
We have entered into intellectual
property license agreements with third party licensors for our two lead therapeutic candidates, dovitinib and stenoparib that are important
to our business. These license agreements impose various diligence, milestone payment, royalty, and other obligations on us. If we fail
to comply with any obligations under any of these agreements with our licensors, we may be subject to termination of the license agreements
in whole or in part; increased financial obligations to our licensors or loss of exclusivity in a particular field or territory, in which
case our ability to develop or commercialize the therapeutic candidate covered by the license agreement will be impaired.
In addition, disputes may arise
regarding intellectual property rights subject to the license agreement, including:
119
If disputes over intellectual
property that we have licensed prevent or impair our ability to maintain our future licensing arrangements on acceptable terms, we may
be unable to successfully develop and commercialize the therapeutic candidate covered by the license agreement which would have a material
adverse effect on our business.
We may expend our limited resources to pursue
a particular therapeutic candidate or indication and fail to capitalize on therapeutic candidates or indications that may be more profitable
or for which there is a greater likelihood of success.
Because we have limited financial
and managerial resources, we focus on research programs that we identify for specific indications using our proprietary DRP®
companion diagnostics platform. As a result, we may forego or delay pursuit of opportunities with other therapeutic candidates or for
other indications, even those that we have begun investigating and that may have shown promise, that later prove to have greater commercial
potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial therapies or profitable market opportunities.
Our spending on current and future research and development programs and therapeutic candidates for specific indications may not yield
any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular therapeutic
candidate, we may relinquish valuable rights to that therapeutic 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 therapeutic
candidate.
We have limited experience in drug discovery
and drug development and may not receive regulatory approval to market our therapeutic candidates.
Prior to the acquisition of
our therapeutic candidates, we were not involved in and had no control over their preclinical and clinical development. In addition, we
rely upon the parties from whom we have acquired our therapeutic candidates from to have conducted such research and development in accordance
with the applicable protocol, legal, regulatory, and scientific standards, having accurately reported the results of all clinical trials
conducted prior to our acquisition of the applicable therapeutic candidate, and having correctly collected the data from these studies
and trials. To the extent any of these has not occurred, our expected development time and costs may be increased, which could adversely
affect our prospects for marketing approval of, and receiving any future revenue from, these therapeutic candidates.
We are dependent on our ability to advance the development of our therapeutic candidates.
If we are unable to submit an NDA to the FDA for our therapeutic candidate dovitinib, or initiate or complete the clinical development
of, obtain marketing approval for or successfully commercialize our other therapeutic candidates, either alone or with a collaborator,
or if we experience significant delays in doing so, our business could be substantially harmed.
Although we submitted an NDA
to the FDA for our therapeutic candidate dovitinib in December 2021, we currently do not have any drugs that have received regulatory
approval and may never be able to develop marketable therapeutic candidates. We are investing a significant portion of our efforts and
financial resources in the advancement of dovitinib, stenoparib, IXEMPRA®, and our
other therapeutic candidates and in the development of our proprietary DRP® companion
diagnostics platform. Our prospects are substantially dependent on our ability, or those of any future collaborator, to develop, obtain
marketing approval for and successfully commercialize therapeutic candidates in one or more disease indications.
120
The success of dovitinib, stenoparib,
IXEMPRA®, and our other therapeutic candidates will depend on several
factors, including the following:
● the performance of our future collaborators, if any;
● protection of our rights in our intellectual property portfolio;
● successful launch of commercial sales following any marketing approval;
● a continued acceptable safety profile following any marketing approval;
● our ability to compete with other therapies.
Many of these factors are beyond
our control, including the results of clinical trials, the time required for the FDA or any comparable foreign regulatory authorities
to review any regulatory submissions we may make, potential threats to our intellectual property rights and the manufacturing, marketing
and sales efforts of any future collaborator. If we are unable to develop, receive marketing approval for and successfully commercialize
dovitinib and our other therapeutic candidates, on our own or with any future collaborator or experience delays as a result of any of
these factors or otherwise, our business could be substantially harmed. The regulatory approval processes of the FDA and comparable foreign
authorities are lengthy, time consuming, expensive and inherently unpredictable, and if we are ultimately unable to obtain regulatory
approval for our therapeutic candidates, our business will be substantially harmed.
121
The time required to obtain
approval by the FDA and comparable foreign authorities is unpredictable but can take many years following the commencement of clinical
trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. The results of preclinical
studies and early clinical trials of our therapeutic candidates may not be predictive of the results of later-stage clinical trials. Therapeutic
candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through
preclinical studies and initial clinical trials. It is not uncommon for companies in the biotechnology and pharmaceutical industries to
suffer significant setbacks in advanced clinical trials due to nonclinical findings made while clinical studies were underway and safety
or efficacy observations made in clinical studies, including previously unreported adverse events. Our future clinical trial results may
not be successful, and notwithstanding any potential promising results in earlier studies, we cannot be certain that we will not face
similar setbacks. The historical failure rate for therapeutic candidates in our industry is high. In addition, approval policies, regulations,
or the type and amount of clinical data necessary to gain approval may change during the course of a therapeutic candidate’s clinical
development and may vary among jurisdictions. We have not obtained final regulatory approval for any therapeutic candidate and it is possible
that none of our existing therapeutic candidates or any therapeutic candidates we may seek to develop in the future will ever obtain regulatory
approval.
Our therapeutic candidates
could fail to receive regulatory clearance or marketing approval for many reasons, including the following:
We have not previously completed
all clinical trials for any of our therapeutic candidates and we have relied on the clinical trial results of others to advance dovitinib
to the submission of an unsuccessful NDA filing with the FDA. Consequently, we may not have the necessary capabilities, including adequate
staffing, to successfully manage the execution and completion of any clinical trials we initiate in a way that leads to our obtaining
marketing approval for our therapeutic candidates in a timely manner, or at all. This lengthy approval process as well as the unpredictability
of future clinical trial results may result in our failing to obtain regulatory approval to market our therapeutic candidates, which would
significantly harm our business, results of operations and prospects.
In addition, even if we were
to obtain approval, regulatory authorities may approve any of our therapeutic candidates for fewer or more limited indications than we
request, may not approve the price we intend to charge for our drugs, may grant approval contingent on the performance of costly post-marketing
clinical trials, may approve a therapeutic candidate with a label that does not include the labeling claims necessary or desirable for
the successful commercialization of that therapeutic candidate or may restrict its distribution. Any of the foregoing restrictions or
requirements could materially harm the commercial prospects for our therapeutic candidates.
122
We have not successfully filed
an NDA to the FDA or similar drug approval filings to comparable foreign authorities, for any therapeutic candidate, and we cannot be
certain that any of our therapeutic candidates will be successful in clinical trials or receive regulatory approval. Further, our therapeutic
candidates may not receive regulatory approval even if they are successful in clinical trials. If we do not receive regulatory approvals
for our therapeutic candidates, we may not be able to continue our operations. Even if we successfully obtain regulatory approvals to
market one or more of our therapeutic candidates, our revenues will be dependent, in part, upon the size of the markets in the territories
for which we gain regulatory approval and have commercial rights. If the markets for patients that we are targeting for our therapeutic
candidates are not as significant as we estimate, or if the price we charge for our therapeutic candidate is too high, we may not generate
significant revenues from sales of such drugs, if approved.
We plan to seek regulatory
approval to commercialize our therapeutic candidates both in the United States and the European Union and in additional foreign countries.
While the scope of regulatory approval is similar in other countries, to obtain separate regulatory approval in many other countries we
must comply with numerous and varying regulatory requirements of such countries regarding safety and efficacy and governing, among other
things, clinical trials and possible limitations placed upon commercial sales, pricing and distribution of our therapeutic candidates,
and we cannot predict success in these jurisdictions.
Our business strategy of using our proprietary
DRP® companion diagnostics platform to advance therapeutic candidates that have previously failed therapeutic clinical
trial endpoints in Phase 2 or later clinical trials conducted by others and that we believe may be successfully developed with a DRP®
companion diagnostic may not be successful, and important issues relating to safety and efficacy remain to be resolved for most of our
therapeutic candidates. Our strategy also involves risks and uncertainties that differ from other biotechnology companies that focus solely
on new therapeutic candidates that do not have a history of failed clinical trials.
Our therapeutic candidate portfolio
includes small molecules that others have tried, but failed, to develop into an approved commercialized drug. Our strategy to use our
proprietary DRP® companion diagnostics platform to identify and subsequently clinically
advance therapeutic candidates that have previously failed clinical trial endpoints but that we believe have potential to succeed with
a DRP® companion diagnostic may not be successful.
Our business strategy includes
a focus on leveraging our proprietary DRP® companion diagnostics platform to streamline
the drug development process and to identify patients that will benefit from therapeutic candidates that other biotechnology or pharmaceutical
companies have abandoned or shelved after initiating clinical trials under an IND application filed with the FDA, including candidates
that have failed to achieve statistical significance on the original endpoints established in the clinical trials. We use our proprietary
DRP® companion diagnostics platform to advance therapeutic candidates by targeting
and evaluating patient sub-populations having gene signatures, determined by our DRP®
companion diagnostics platform, that will potentially correlate with drug efficacy and patient response to treatment. While we have not
yet successfully received regulatory or marketing approval for any of our therapeutic candidates or companion diagnostics, and while we
believe that our approach has the potential to reduce the cost and time of drug development through the identification and selection of
patient populations more likely to respond to therapy, our strategy involves risks and uncertainties that differ from other biotechnology
companies that focus solely on new therapeutic candidates that do not have a history of failed clinical development. These risks and uncertainties
include, but are not limited to, the following:
123
We rely on Smerud Medical Research International
and Chosa ApS for the development of our LiPlaCis® DRP® companion diagnostic.
We have out-licensed our
LiPlaCis® DRP® companion diagnostic to Chosa ApS, an affiliate of our long-time CRO partner Smerud
Medical Research International in our efforts to advance the clinical development of this asset. Chosa ApS intends to conduct
expanded enrollment of a DRP®-guided Phase 2 clinical trial in Europe for LiPlaCis® with the intent of
establishing sufficient clinical results to garner the interest of a larger pharmaceutical acquirer or partner to advance the
program through Phase 3 clinical trials and, if approved, to market. Although Chosa ApS and SMERUD will be solely responsible for
the development of LiPlaCis®, we intend to support these clinical trials with our proprietary DRP®
companion diagnostics and our clinical trial and regulatory expertise, as requested. Under the agreements, we are entitled to
receive certain specified milestone payments from Chosa ApS and SMERUD. As a result of these agreements, we rely on Chosa ApS and
SMERUD for the further development of LiPlaCis®.
We may depend on enrollment of patients
with specific genomic or biomarker signatures, identified through DRP® companion diagnostics, in our clinical trials in
order for us to continue development of our therapeutic candidates. If we are unable to enroll patients with specific genomic or biomarker
signatures in our clinical trials, our research, development and commercialization efforts could be adversely affected.
The timely completion of clinical
trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number of patients with genomic
or biomarker signatures we have identified by our DRP® companion diagnostics platform,
and who remain in the study until its conclusion. We may experience difficulties in patient enrollment in our clinical trials for a variety
of reasons. Patient enrollment is affected by many factors including the size and nature of the patient population with the specific genomic
or biomarker signature we have identified, the proximity of patients to clinical sites, the eligibility criteria for the trial, the design
of the clinical trial, the size of the patient population required for analysis of the trial’s primary endpoints, the proximity
of patients to study sites, our ability to recruit clinical trial investigators with the appropriate competencies and experience, our
ability to obtain and maintain patient consents, the risk that patients enrolled in clinical trials will drop out of the trials 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.
We will compete with other pharmaceutical companies for clinical sites, physicians and the limited number of patients who fulfill the
stringent requirements for participation in oncology clinical trials. Also, due to the confidential nature of clinical trials, we do not
know how many of the eligible patients may be enrolled in competing studies and who are consequently not available to us for our clinical
trials. Our clinical trials may be delayed or terminated due to the inability to enroll enough patients. The delay or inability to meet
planned patient enrollment may result in increased costs and delay or termination of our trials, which could have a harmful effect on
our ability to develop drugs.
124
Delays in clinical testing could result
in increased costs to us and delay our ability to generate revenue.
Although we intend to advance
our ongoing DRP®-guided Phase 2 clinical trial of stenoparib as a treatment for ovarian
cancer, being conducted at the Dana-Farber Cancer Institute (Boston, MA USA.) and our ongoing DRP®-guided
Phase 2 clinical trial of IXEMPRA® as a treatment for metastatic breast cancer, being
conducted at numerous locations in Europe, we are planning for certain clinical trials relating to our other therapeutic candidates, or
for other indications of all of our therapeutic candidates, there can be no assurance that the FDA will accept our proposed trial designs.
We may experience delays in our clinical trials and we do not know whether planned clinical trials will begin on time, need to be redesigned,
enroll patients on time or be completed on schedule, if at all. Clinical trials can be delayed for a variety of reasons, including delays
related to:
● obtaining institutional review board, or IRB, approval at each site;
● recruiting suitable patients to participate in a trial;
● clinical sites deviating from trial protocol or dropping out of a trial;
● addressing patient safety concerns that arise during the course of a trial;
● having patients complete a trial or return for post-treatment follow-up;
● adding a sufficient number of clinical trial sites; or
We may also experience numerous
unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or
commercialize our therapeutic candidates, including:
125
If we are required to conduct
additional clinical trials or other testing of our therapeutic candidates beyond those that we currently contemplate, if we are unable
to successfully complete clinical trials of our therapeutic candidates or other testing, if the results of these trials or tests are not
positive or are only modestly positive or if there are safety concerns, we may:
● incur unplanned costs;
● obtain marketing approval in some countries and not in others;
● be subject to additional post-marketing testing requirements; or
● have the drug removed from the market after obtaining marketing approval.
Furthermore, we intend to rely
on CROs, cancer research centers and clinical trial sites to ensure the proper and timely conduct of our clinical trials and we intend
to have agreements governing their committed activities. They may not perform as required or we may face competition from other clinical
trials being conducted by other pharmaceutical companies.
We could encounter delays if
a clinical trial is suspended or terminated by us, by the Institutional Review Board or IRB of the institutions in which such trials are
being conducted, by the Data Safety Monitoring Board, or DSMB, for such trial or by the FDA or other regulatory authorities. Such authorities
may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance
with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other
regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate
a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the
clinical trial.
Further, conducting clinical
trials in foreign countries, as we may do for our current and future therapeutic candidates, presents additional risks that may delay
completion of our clinical trials. These risks include the failure of enrolled patients in foreign countries to adhere to clinical protocol
as a result of differences in healthcare services or cultural customs, managing additional administrative burdens associated with foreign
regulatory schemes, as well as political and economic risks relevant to such foreign countries.
126
If we experience delays in
the completion of, or termination of, any clinical trial of our therapeutic candidates, the commercial prospects of our therapeutic candidates
will be harmed, and our ability to generate revenues from any of these therapeutic candidates will be delayed. In addition, any delays
in completing our clinical trials will increase our costs, slow down our therapeutic candidate development and approval process and jeopardize
our ability to commence drug sales and generate revenues. Any of these occurrences may harm our business, financial condition and prospects
significantly. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may
also ultimately lead to the denial of regulatory approval of our therapeutic candidates.
Our therapeutic candidates may cause undesirable
side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial profile of an approved
label, or result in significant negative consequences following marketing approval, if any.
Undesirable side effects caused
by our therapeutic candidates 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 other comparable foreign authorities. The clinical
evaluation of some of our therapeutic candidates in patients is still in the early stages and it is possible that there may be side effects
associated with their use. In such an event, we, the FDA, the IRBs at the institutions in which our studies are conducted, or the 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 therapeutic candidates for any or all targeted indications. Treatment-related side effects could also affect
patient recruitment or the ability of enrolled patients to complete the clinical trial or result in potential product liability claims.
In addition, these side effects may not be appropriately recognized or managed by the treating medical staff. We expect to have to train
medical personnel using our therapeutic candidates to understand the side effect profiles for our clinical trials and upon any commercialization
of any of our therapeutic candidates. Inadequate training in recognizing or managing the potential side effects of our therapeutic candidates
could result in patient injury or death. Any of these occurrences may harm our business, financial condition and prospects significantly.
Additionally, if one or more
of our therapeutic candidates receives marketing approval, and we or others later identify undesirable side effects caused by such drugs,
a number of potentially significant negative consequences could result, including:
● regulatory authorities may withdraw approvals of such drugs;
● we could be sued and held liable for harm caused to patients;
● our drug 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 therapeutic candidate or for particular indications of a therapeutic
candidate, if approved, and could significantly harm our business, results of operations and prospects.
127
We are leveraging our proprietary
DRP® companion diagnostics platform in an attempt to create a pipeline of therapeutic
candidates using biomarker identification and patient stratification for the development of oncology drugs in a personalized medicine
approach. While we believe that applying our proprietary DRP® companion diagnostics
platform to drugs that have failed, been abandoned or otherwise failed to meet clinical endpoints and then developing a precision oncology
approach that identifies the mechanism of action, potential combination drug usage and potentially responsive patient population is a
powerful strategy, our approach is both innovative and has not been approved by the FDA or any equivalent foreign regulatory authority.
While we have retrospectively validated our proprietary DRP® companion diagnostics
platform in 35 clinical trials conducted by other companies, we have not yet received approval from the FDA or other regulatory agency
to market a companion diagnostic. Because our approach is both innovative and in the early stages of development, the cost and time needed
to develop our therapeutic candidates is difficult to predict, and our efforts may not result in the successful discovery and development
of commercially viable medicines. We may also be incorrect about the effects of our therapeutic candidates on the diseases of our defined
patient populations, which may limit the utility of our approach or the perception of the utility of our approach. Furthermore, our estimates
of our defined patient populations available for study and treatment may be lower than expected, which could adversely affect our ability
to conduct clinical trials and may also adversely affect the size of any market for medicines we may successfully commercialize. Our approach
may not result in time savings, higher success rates or reduced costs as we expect it to, and if not, we may not attract collaborators
or develop new drugs as quickly or cost effectively as expected and therefore we may not be able to commercialize our approach as originally
expected.
Our proprietary DRP® companion
diagnostics platform may fail to help us select and treat likely responder patients for our therapeutic candidates or help us identify
additional potential therapeutic candidates.
Any drug development that we
are conducting using our proprietary DRP® companion diagnostics platform may not be
successful or have commercial value or therapeutic utility. Our proprietary DRP® companion
diagnostics platform may initially show promise in identifying potential therapeutic candidates, yet fail to yield viable therapeutic
candidates for clinical development or commercialization for a number of reasons, including:
Any failure by us to comply with existing
regulations could harm our reputation and operating results.
We will be subject to extensive
regulation by U.S. federal and state and foreign governments in each of the markets where we intend to sell our therapeutic candidates
if and after they are approved. For example, we will have to adhere to all regulatory requirements including the FDA’s current GCPs,
Good Laboratory Practice, or GLP, and GMP requirements. If we fail to comply with applicable regulations, including FDA pre-or post- approval
cGMP requirements, then the FDA or other foreign regulatory authorities could sanction us. Even if a drug is FDA-approved, regulatory
authorities may impose significant restrictions on a drug’s indicated uses or marketing or impose ongoing requirements for potentially
costly post-marketing studies.
128
Any action against us for violation
of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses, divert our management’s
attention from the operation of our business and damage our reputation. We will need to expend significant resources on compliance efforts
and such expenses are unpredictable and might adversely affect our results.
The FDA’s and other regulatory
authorities’ policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory
approval of our therapeutic candidates. For example, in December 2016, the 21st Century
Cures Act, or Cures Act, was signed into law. The Cures Act, among other things, is intended to modernize the regulation of drugs and
spur innovation, but its ultimate implementation is unclear. 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 adversely affect our business, prospects, financial
condition and results of operations.
In addition, we cannot predict
the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action,
either in the United States or abroad. 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.
We may be subject to extensive regulations
outside the United States and may not obtain marketing approvals for drugs in Europe and other jurisdictions.
In addition to regulations
in the United States, should we or our collaborators pursue marketing approvals for our therapeutic candidates internationally, we and
our collaborators will be subject to a variety of regulations in other jurisdictions governing, among other things, clinical trials and