Item 1A. Risk Factors.
An investment in our securities involves
a high degree of risk. You should consider carefully all of the material risks described below, together with the other information
contained in this Form 10-K. If any of the following events occur, our business, financial condition, results of operations and
cash flows may be materially adversely affected.
Risks Related to the Company’s Business and Industry
We will require substantial funding, which may not be available
to us on acceptable terms, or at all, and, if not so available, may require us to delay, limit, reduce or cease our operations.
We are using the proceeds from our IPO and
subsequent funding to, among other uses, advance Berubicin through clinical development. Developing pharmaceutical products, including
conducting preclinical studies and clinical trials, is expensive. We will require substantial additional future capital in order
to complete clinical development and commercialize Berubicin. If the FDA requires that we perform additional nonclinical studies
or clinical trials, our expenses would further increase beyond what we currently expect and the anticipated timing of any potential
approval of Berubicin would likely be delayed. Further, there can be no assurance that the costs we will need to incur to obtain
regulatory approval of Berubicin will not increase.
We will continue to require substantial
additional capital to continue our clinical development and commercialization activities. Because successful development of our
product candidates is uncertain, we are unable to estimate the actual amount of funding we will require to complete research and
development and commercialize our products under development.
We estimate that we will require
additional financing of approximately $16.0 to $20.0 million to complete the Phase 2 trial for Berubicin, approximately $2.0
million to support near-term WP1244 preclinical work, plus such additional working capital to fund our operations during the
pendency of the trial. The timing and costs of clinical trials are difficult to predict and as such the foregoing estimates
may prove to be inaccurate. We have no commitments for such additional needed financing and will likely be required to raise
such financing through the sale of additional equity securities.
The amount and timing of our future funding
requirements will depend on many factors, including but not limited to:
· whether our plan for clinical trials will be completed on a timely basis;
· market acceptance of our product candidates;
· the effect of competing drug candidates and new product approvals;
Some of these factors are outside of our
control. We may seek additional funding through a combination of equity offerings, debt financings, government or other third-party
funding, commercialization, marketing and distribution arrangements and other collaborations, strategic alliances and licensing
arrangements. Additional funding may not be available to us on acceptable terms or at all. In addition, the terms of any financing
may adversely affect the holdings or the rights of our stockholders.
If we are unable to obtain funding on a
timely basis, we may be required to significantly curtail one or more of our research or development programs. We also could be
required to seek funds through arrangements with collaborative partners or otherwise that may require us to relinquish rights to
some of our technologies or product candidates or otherwise agree to terms unfavorable to us.
The report of our independent registered public accounting
firm expresses substantial doubt about our ability to continue as a going concern. Such “going concern” opinion could
impair our ability to obtain financing.
Our auditors have indicated in their report
on our financial statements for the fiscal year ended December 31, 2020 that conditions exist that raise substantial doubt about
our ability to continue as a going concern due to our recurring losses from operations. A “going concern” opinion could
impair our ability to finance our operations through the sale of equity, incurring debt, or other financing alternatives. Our ability
to continue as a going concern will depend upon the availability and terms of future funding. If we are unable to achieve this
goal, our business would be jeopardized and we may not be able to continue. If we ceased operations, it is likely that all of our
investors would lose their investment.
We have in the past completed related party transactions,
some of which that were not conducted on an arm’s length basis.
We have entered into transactions with entities
affiliated with our largest shareholder, Dr. Waldemar Priebe, including:
We entered into the above agreements related
to Berubicin with HPI and WPD prior to our IPO, at a time during which we did not have an independent board of directors. As such,
due to the related party relationship between our Company and these entities, the negotiation of these agreements was not conducted
on an arm’s length basis. As such, it is possible that the terms were less favorable to us than in a transaction negotiated
in an arm’s length transaction.
We have never been profitable, we have no products approved
for commercial sale, and we have not generated any revenue from product sales. As a result, our ability to reduce our losses and
reach profitability is unproven, and we may never achieve or sustain profitability. Therefore, we may not be able to continue as
a going concern.
We have never been profitable and do not
expect to be profitable in the foreseeable future. We have not yet submitted any drug candidates for approval by regulatory authorities
in the United States or elsewhere. Our ability to continue as a going concern is dependent upon our generating cash flow from sales
that are sufficient to fund operations or finding adequate financing to support our operations. To date, we have had no revenues
and have relied on equity-based financing from the sale of securities in private placements and the issuance of convertible notes.
The continuation of the Company as a going concern is dependent upon our ability to obtain continued financial support from its
stockholders, necessary equity financing to continue operations and the attainment of profitable operations. As of December 31,
2020 the Company has incurred an accumulated deficit of $20,946,343 since inception and had not yet generated any revenue from
operations. Additionally, management anticipates that its cash on hand as of December 31, 2020 is sufficient to fund its planned
operations through but not beyond calendar year 2021.
To date, we have devoted most of our financial
resources to corporate overhead, clinical trial preparation and marketing of our securities. We have not generated any revenues
from product sales. We expect to continue to incur losses for the foreseeable future, and we expect these losses to increase as
we continue our development of, and seek regulatory approvals for Berubicin, prepare for and begin the commercialization of any
approved products, and add infrastructure and personnel to support our continuing product development efforts. We anticipate that
any such losses could be significant for the next several years. If Berubicin or any of our other drug candidates fail in clinical
trials or do not gain regulatory approval, or if our drug candidates do not achieve market acceptance, we may never become profitable.
As a result of the foregoing, we expect to continue to experience net losses and negative cash flows for the foreseeable future.
These net losses and negative cash flows have had, and will continue to have, an adverse effect on our stockholders’ equity
and working capital.
Because of the numerous risks and uncertainties
associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses
or when, or if, we will be able to achieve profitability. In addition, our expenses could increase if we are required by the FDA
to perform studies or trials in addition to those currently expected, or if there are any delays in completing our clinical trials
or the development of any of our drug candidates. The amount of future net losses will depend, in part, on the rate of future growth
of our expenses and our ability to generate revenues.
We have no operating history and we expect a number of factors
to cause our operating results to fluctuate on an annual basis, which may make it difficult to predict our future performance.
We are a preclinical pharmaceutical company
with no operating history. Our operations to date have been limited to acquiring our technology portfolio. We have not yet commenced
any clinical trials or obtained any regulatory approvals for any of our drug candidates. 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 approved products
on the market. Our operating results are expected to significantly fluctuate from quarter to quarter or year to year due to a variety
of factors, many of which are beyond our control. Factors relating to our business that may contribute to these fluctuations include:
· delays in the commencement, enrollment and timing of clinical trials;
· difficulties in identifying patients suffering from our target indications;
· the success of our clinical trials through all phases of clinical development;
· our ability to obtain additional funding to develop drug candidates;
· competition from existing products or new products that continue to emerge;
· potential product liability claims.
These factors are our best estimates of
possible factors, but cannot be considered a complete recitation of possible factors that could affect the Company. Accordingly,
the results of any historical quarterly or annual periods should not be relied upon as indications of future operating performance.
We cannot be certain that Berubicin will receive regulatory
approval, and without regulatory approval we will not be able to market Berubicin.
Our business currently depends largely on
the successful development and commercialization of Berubicin. Our ability to generate revenue related to product sales, if ever,
will depend on the successful development and regulatory approval of Berubicin for the treatment of glioblastoma.
We currently have no products approved for
sale and we cannot guarantee that we will ever have marketable products. The development of a product candidate and issues relating
to its approval and marketing are subject to extensive regulation by the FDA in the United States and regulatory authorities in
other countries, with regulations differing from country to country. We are not permitted to market our product candidates in the
United States until we receive approval of an NDA from the FDA. We have not submitted any marketing applications for any of our
product candidates.
NDAs must include extensive preclinical
and clinical data and supporting information to establish the product candidate’s safety and effectiveness for each desired
indication. NDAs must also include significant information regarding the chemistry, manufacturing and controls for the product.
Obtaining approval of an NDA is a lengthy, expensive and uncertain process, and we may not be successful in obtaining approval.
The FDA review processes can take years to complete and approval is never guaranteed. If we submit an NDA to the FDA, the FDA must
decide whether to accept or reject the submission for filing. We cannot be certain that any submissions will be accepted for filing
and review by the FDA. Regulators in other jurisdictions have their own procedures for approval of product candidates. Even if
a product is approved, the FDA may limit the indications for which the product may be marketed, require extensive warnings on the
product labeling or require expensive and time-consuming clinical trials or reporting as conditions of approval. Regulatory authorities
in countries outside of the United States and Europe also have requirements for approval of drug candidates with which we must
comply with prior to marketing in those countries. Obtaining regulatory approval for marketing of a product candidate in one country
does not ensure that we will be able to obtain regulatory approval in any other country. In addition, delays in approvals or rejections
of marketing applications in the United States, Europe or other countries may be based upon many factors, including regulatory
requests for additional analyses, reports, data, preclinical studies and clinical trials, regulatory questions regarding different
interpretations of data and results, changes in regulatory policy during the period of product development and the emergence of
new information regarding our product candidates or other products. Also, regulatory approval for any of our product candidates
may be withdrawn.
If we are unable to obtain approval from
the FDA, or other regulatory agencies, for Berubicin and our other product candidates, or if, subsequent to approval, we are unable
to successfully commercialize Berubicin or our other product candidates, we will not be able to generate sufficient revenue to
become profitable or to continue our operations, likely resulting in the total loss of principal for our investors.
Any statements in this filing indicating
that Berubicin has demonstrated preliminary evidence of efficacy are our own and are not based on the FDA’s or any other
comparable governmental agency’s assessment of Berubicin and do not indicate that Berubicin will achieve favorable efficacy
results in any later stage trials or that the FDA or any comparable agency will ultimately determine that Berubicin is effective
for purposes of granting marketing approval.
Delays in the commencement, enrollment and completion of
clinical trials could result in increased costs to us and delay or limit our ability to obtain regulatory approval for Berubicin
and our other product candidates.
Delays in the commencement, enrollment and
completion of clinical trials could increase our product development costs or limit the regulatory approval of our product candidates.
We do not know whether any future trials or studies of our other product candidates will begin on time or will be completed on
schedule, if at all. The start or end of a clinical study is often delayed or halted due to changing regulatory requirements, manufacturing
challenges, including delays or shortages in available drug product, required clinical trial administrative actions, slower than
anticipated patient enrollment, changing standards of care, availability or prevalence of use of a comparative drug or required
prior therapy, clinical outcomes or financial constraints. For instance, delays or difficulties in patient enrollment or difficulties
in retaining trial participants can result in increased costs, longer development times or termination of a clinical trial. Clinical
trials of a new product candidate require the enrollment of a sufficient number of patients, including patients who are suffering
from the disease the product candidate is intended to treat and who meet other eligibility criteria. The rates of patient enrollment
are affected by many factors, including the size of the patient population, the eligibility criteria for the clinical trial, that
include the age and condition of the patients and the stage and severity of disease, the nature of the protocol, the proximity
of patients to clinical sites and the availability of effective treatments and/or availability of investigational treatment options
for the relevant disease.
A product candidate can unexpectedly fail
at any stage of preclinical and clinical development. The historical failure rate for product candidates is high due to scientific
feasibility, safety, efficacy, changing standards of medical care and other variables. The results from preclinical testing or
early clinical trials of a product candidate may not predict the results that will be obtained in later phase clinical trials of
the product candidate. We, the FDA or other applicable regulatory authorities may suspend clinical trials of a product candidate
at any time for various reasons, including, but not limited to, a belief that subjects participating in such trials are being exposed
to unacceptable health risks or adverse side effects, or other adverse initial experiences or findings. We may not have the financial
resources to continue development of, or to enter into collaborations for, a product candidate if we experience any problems or
other unforeseen events that delay or prevent regulatory approval of, or our ability to commercialize, product candidates, including,
but not limited to:
· inability to obtain sufficient funds required for a clinical trial;
· high dropout rates and high fail rates of research subjects;
· greater than anticipated clinical trial costs;
· poor effectiveness of our product candidates during clinical trials; or
We have never conducted a clinical trial or submitted an
NDA before, and any product candidate we advance through clinical trials may not have favorable results in later clinical trials
or receive regulatory approval.
Clinical failure can occur at any stage
of our clinical development. Clinical trials may produce negative or inconclusive results, and our collaborators or we may decide,
or regulators may require us, to conduct additional clinical trials or nonclinical studies. In addition, data obtained from trials
and studies are susceptible to varying interpretations, and regulators may not interpret our data as favorably as we do, which
may delay, limit or prevent regulatory approval. Success in preclinical studies and early clinical trials does not ensure that
subsequent clinical trials will generate the same or similar results or otherwise provide adequate data to demonstrate the efficacy
and safety of a product candidate. A number of companies in the pharmaceutical industry, including those with greater resources
and experience than us, have suffered significant setbacks in clinical trials, even after seeing promising results in earlier clinical
trials.
In addition, the design of a clinical trial
can determine whether its results will support approval of a product and flaws in the design of a clinical trial may not become
apparent until the clinical trial is well advanced. We may be unable to design and execute a clinical trial to support regulatory
approval. Further, clinical trials of potential products often reveal that it is not practical or feasible to continue development
efforts.
If Berubicin is found to be unsafe or lack efficacy, we will
not be able to obtain regulatory approval for it and our business would be materially and possibly irreparably harmed.
In some instances, there can be significant
variability in safety and/or efficacy results between different trials of the same product candidate due to numerous factors, including
changes in trial protocols, differences in composition of the patient populations, adherence to the dosing regimen and other trial
protocols and the rate of dropout among clinical trial participants. We do not know whether any clinical trials we or any of our
potential future collaborators may conduct will demonstrate the consistent or adequate efficacy and safety that would be required
to obtain regulatory approval and market any products. If we are unable to bring Berubicin to market, or to acquire other products
that are on the market or can be developed, our ability to create long-term stockholder value will be limited.
Interim or preliminary data from our clinical trials that
we announce or publish from time to time may change as more patient data become available and are subject to audit and verification
procedures that could result in material changes in the final data.
We may publicly disclose preliminary data
from our clinical trials, which is based on a preliminary analysis of then-available data, and the results and related findings
and conclusions are subject to change following a full analyses of all data related to the particular trial. We also make assumptions,
estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity
to fully and carefully evaluate all data. As a result, the preliminary results that we report may differ from future results of
the same trials, or different conclusions or considerations may qualify such results once additional data have been received and
fully evaluated. Preliminary 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, preliminary data should be viewed with caution
until the final data are available. We may also disclose interim data from our clinical trials. Interim data from clinical trials
that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment
continues and more patient data become available. Adverse differences between preliminary or interim data and final data could
significantly harm our business prospects. Further, disclosure of preliminary or interim data by us could result in volatility
in the price of shares of our common stock.
In addition, 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 approvability of the particular drug candidate and our business 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, and any information we determine not to disclose may ultimately be deemed significant
with respect to future decisions, conclusions, views, activities or otherwise regarding a particular drug candidate or our business.
If the interim data that we report differ from actual results, or if others, including regulatory authorities, disagree with the
conclusions reached, our ability to obtain approval for and commercialize our current or any our future drug candidate, our business,
operating results, prospects or financial condition may be materially harmed.
The COVID-19 outbreak may delay recruitment in our clinical
trials and may continue or worsen, may affect the business of the FDA, EMA or other health authorities, which could result in delays
in meetings related to our planned clinical trials and ultimately of reviews and approvals of our product candidates.
The COVID-19 outbreak has delayed recruitment
in clinical trials and may continue or worsen. Additionally, it may delay the approvals of our product candidates due to its effect
on the business of the FDA, EMA or other health authorities, which could result in delays in meetings related to planned clinical
trials. The spread of COVID-19 may also slow potential enrollment of clinical trials and reduce the number of eligible patients
for our clinical trials. The COVID-19 outbreak and mitigation measures also have had and may continue to have an adverse impact
on global economic conditions which could have an adverse effect on our business and financial condition, including impairing our
ability to raise capital when needed. The extent to which the COVID-19 outbreak impacts our business and operations will depend
on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning
the severity of the virus and the actions to contain its impact.
Our product candidates may have undesirable side effects
that may delay or prevent marketing approval, or, if approval is received, require them to be taken off the market, require them
to include safety warnings or otherwise limit their sales.
Unforeseen side effects from any of our
product candidates could arise either during clinical development or, if Berubicin is approved, after the approved product has
been marketed. The range and potential severity of possible side effects from therapies such as Berubicin are significant. If Berubicin
causes undesirable or unacceptable side effects in the future, this could interrupt, delay or halt clinical trials and result in
the failure to obtain or suspension or termination of marketing approval from the FDA and other regulatory authorities, or result
in marketing approval from the FDA and other regulatory authorities only with restrictive label warnings.
If any of our product candidates receives
marketing approval and we or others later identify undesirable or unacceptable side effects caused by such products:
· we may be subject to limitations on how we may promote the product;
· sales of the product may decrease significantly;
· we may be subject to litigation or product liability claims; and
· our reputation may suffer.
Any of these events could prevent us or
our potential future collaborators from achieving or maintaining market acceptance of the affected product or could substantially
increase commercialization costs and expenses, which in turn could delay or prevent us from generating significant revenues from
the sale of our products.
If the FDA does not find the manufacturing facilities of
our future contract manufacturers acceptable for commercial production, we may not be able to commercialize any of our product
candidates.
We do not have any manufacturing capabilities
and we do not intend to manufacture the pharmaceutical products that we plan to sell. We utilize contract manufacturers for the
production of the active pharmaceutical ingredients and the formulation of drug product for our trials of Berubicin that we will
need to conduct prior to seeking regulatory approval. However, we do not have agreements for supplies of Berubicin or any of our
other product candidates and we may not be able to reach agreements with these or other contract manufacturers for sufficient
supplies to commercialize Berubicin if it is approved. Additionally, the facilities used by any contract manufacturer to manufacture
Berubicin or any of our other product candidates must be the subject of a satisfactory inspection before the FDA approves the
product candidate manufactured at that facility. We will be completely dependent on these third-party manufacturers for compliance
with the requirements of U.S. and non-U.S. regulators for the manufacture of our finished products. If our manufacturers cannot
successfully manufacture material that conform to our specifications and the FDA’s current good manufacturing practice standards,
or cGMP, and other requirements of any governmental agency whose jurisdiction to which we are subject, our product candidates
will not be approved or, if already approved, may be subject to recalls. Reliance on third-party manufacturers entails risks to
which we would not be subject if we manufactured our product candidates, including:
Any of these factors could cause the delay
of approval or commercialization of our product candidates, cause us to incur higher costs or prevent us from commercializing our
product candidates successfully. Furthermore, if any of our product candidates are approved and contract manufacturers fail to
deliver the required commercial quantities of finished product on a timely basis at commercially reasonable prices and we are unable
to find one or more replacement manufacturers capable of production at a substantially equivalent cost, in substantially equivalent
volumes and quality and on a timely basis, we would likely be unable to meet demand for our products and could lose potential revenue.
It may take several years to establish an alternative source of supply for our product candidates and to have any such new source
approved by the government agencies that regulate our products.
We have no sales, marketing or distribution experience and
we will have to invest significant resources to develop those capabilities or enter into third-party sales and marketing arrangements,
the problems with which could materially harm our business at any time.
We have no sales, marketing or distribution
experience. To develop sales, distribution and marketing capabilities, we will have to invest significant amounts of financial
and management resources, some of which will need to be committed prior to any confirmation that Berubicin or any of our other
product candidates will be approved by the FDA. For product candidates where we decide to perform sales, marketing and distribution
functions ourselves or through third parties, we could face a number of additional risks, including that we or our third-party
sales collaborators may not be able to build and maintain an effective marketing or sales force. If we use third parties to market
and sell our products, we may have limited or no control over their sales, marketing and distribution activities on which our future
revenues may depend.
We may not be successful in establishing and maintaining
development and commercialization collaborations, which could adversely affect our ability to develop certain of our product candidates
and our financial condition and operating results.
Because developing pharmaceutical products,
conducting clinical trials, obtaining regulatory approval, establishing manufacturing capabilities and marketing approved products
are expensive, we may seek to enter into collaborations with companies that have more experience. Additionally, if any of our product
candidates receives marketing approval, we may enter into sales and marketing arrangements with third parties with respect to our
unlicensed territories. If we are unable to enter into arrangements on acceptable terms, if at all, we may be unable to effectively
market and sell our products in our target markets. We expect to face competition in seeking appropriate collaborators. Moreover,
collaboration arrangements are complex and time consuming to negotiate, document and implement and they may require substantial
resources to maintain. We may not be successful in our efforts to establish and implement collaborations or other alternative arrangements
for the development of our product candidates.
One or more of our collaboration partners
may not devote sufficient resources to the commercialization of our product candidates or may otherwise fail in their commercialization.
The terms of any collaboration or other arrangement that we establish may contain provisions that are not favorable to us, or the
favorability of which is dependent on conditions that are out of our control or unknowable at the time of execution. In addition,
any collaboration that we enter into may be unsuccessful in the development and commercialization of our product candidates. In
some cases, we may be responsible for continuing preclinical and initial clinical development of a product candidate or research
program under a collaboration arrangement, and the payment we receive from our collaboration partner may be insufficient to cover
the cost of this development. If we are unable to reach agreements with suitable collaborators for our product candidates, we would
face increased costs, we may be forced to limit the number of our product candidates we can commercially develop or the territories
in which we commercialize them. As a result, we might fail to commercialize products or programs for which a suitable collaborator
cannot be found. If we fail to achieve successful collaborations, our operating results and financial condition could be materially
and adversely affected.
Our success depends greatly on the success of Berubicin’s
development for the treatment of glioblastoma, and our pipeline of product candidates beyond this lead indication is extremely
early stage and limited.
Other than Berubicin, we do not have any
other clinical-stage drug candidates in our portfolio. As such, we are dependent on the success of Berubicin in the near term.
We cannot provide you any assurance that we will be able to successfully advance Berubicin through the development process.
We face competition from other biotechnology and pharmaceutical
companies and our operating results will suffer if we fail to compete effectively.
The biotechnology and pharmaceutical industries
are intensely competitive and subject to rapid and significant technological change. We have competitors in the United States,
Europe and other jurisdictions, including major multinational pharmaceutical companies, established biotechnology companies, specialty
pharmaceutical and generic drug companies and universities and other research institutions. Many of our competitors have greater
financial and other resources, such as larger research and development staff and more experienced marketing and manufacturing organizations
than we do. Large pharmaceutical companies, in particular, have extensive experience in clinical testing, obtaining regulatory
approvals, recruiting patients and manufacturing pharmaceutical products. These companies also have significantly greater research,
sales and marketing capabilities and collaborative arrangements in our target markets with leading companies and research institutions.
Established pharmaceutical companies may also invest heavily to accelerate discovery and development of novel compounds or to in-license
novel compounds that could make the product candidates that we develop obsolete. As a result of all of these factors, our competitors
may succeed in obtaining patent protection and/or FDA approval or discovering, developing and commercializing drugs for the diseases
that we are targeting before we do or may develop drugs that are deemed to be more effective or gain greater market acceptance
than ours. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements
with large, established companies. In addition, many universities and private and public research institutes may become active
in our target disease areas. Our competitors may succeed in developing, acquiring or licensing on an exclusive basis, technologies
and drug products that are more effective or less costly than any of our product candidates that we are currently developing or
that we may develop, which could render our products obsolete or noncompetitive.
If our competitors market products that
are more effective, safer or less expensive or that reach the market sooner than our future products, if any, we may not achieve
commercial success. In addition, because of our limited resources, it may be difficult for us to stay abreast of the rapid changes
in each technology. If we fail to stay at the forefront of technological change, we may be unable to compete effectively. Technological
advances or products developed by our competitors may render our technologies or product candidates obsolete, less competitive
or not economical.
Our licensed U.S. patents expired in March 2020, the expiration
of our patents may subject us to increased competition, and the Orphan Drug Designation we received for Berubicin will not bar
approval of other similar products under certain circumstances.
The U.S. patents for Berubicin that we licensed
from HPI expired in March 2020, and such expiration may subject us to increased competition. On June 10, 2020, the FDA granted
Orphan Drug Designation (“ODD”) for Berubicin for the treatment of malignant gliomas. ODD from the FDA is available
for drugs targeting diseases with less than 200,000 cases per year. ODD may enable market exclusivity of 7 years from the date
of approval of a NDA in the United States. During that period the FDA generally could not approve another product containing the
same drug for the same designated indication. Orphan drug exclusivity will not bar approval of another product under certain circumstances,
including if a subsequent product with the same active ingredient for the same indication is shown to be clinically superior to
the approved product on the basis of greater efficacy or safety, or providing a major contribution to patient care, or if the company
with orphan drug exclusivity is not able to meet market demand. The ODD now constitutes our primary intellectual property protections
although we are exploring if there are other patents that could be filed related to Berubicin to extend additional protections.
However, we can provide no assurance that we will be able to file or receive additional patent protection. The failure to obtain
additional patent protection will reduce the barrier to entry for competition for Berubicin, which may adversely affect our operations.
We may incur substantial costs as a result of litigation
or other proceedings relating to patent and other intellectual property rights.
We may from time to time seek to enforce
our intellectual property rights against infringers when we determine that a successful outcome is probable and may lead to an
increase in the value of the intellectual property. If we choose to enforce our patent rights against a party, then that individual
or company has the right to ask the court to rule that such patents are invalid or should not be enforced. Additionally, the validity
of our patents and the patents we have licensed may be challenged if a petition for post grant proceedings such as interpartes
review and post grant review is filed within the statutorily applicable time with the U.S. Patent and Trademark Office (USPTO).
These lawsuits and proceedings are expensive and would consume time and resources and divert the attention of managerial and scientific
personnel even if we were successful in stopping the infringement of such patents. In addition, there is a risk that the court
will decide that such patents are not valid and that we do not have the right to stop the other party from using the inventions.
There is also the risk that, even if the validity of such patents is upheld, the court will refuse to stop the other party on the
ground that such other party’s activities do not infringe our intellectual property rights. In addition, in recent years
the U.S. Supreme Court modified some tests used by the USPTO in granting patents over the past 20 years, which may decrease the
likelihood that we will be able to obtain patents and increase the likelihood of a challenge of any patents we obtain or license.
We may be subject to claims that our employees and contractors
have wrongfully used or disclosed alleged trade secrets of their former employers.
As is common in the biotechnology and pharmaceutical
industries, we employ individuals who were previously employed at other biotechnology or pharmaceutical companies, including our
competitors or potential competitors. We may be subject to claims that these employees, or we, have used or disclosed trade secrets
or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. Even if
we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.
If we are not able to adequately prevent disclosure of trade
secrets and other proprietary information, the value of our technology and products could be significantly diminished.
We rely on trade secrets to protect our
proprietary technologies, especially where we do not believe patent protection is appropriate or obtainable. However, trade secrets
are difficult to protect. We rely in part on confidentiality agreements with our employees, consultants, outside scientific collaborators,
and other advisors to protect our trade secrets and other proprietary information. These agreements may not effectively prevent
disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential
information. In addition, others may independently discover our trade secrets and proprietary information. Costly and time-consuming
litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade
secret protection could adversely affect our competitive business position.
We will need to expand our operations and increase the size
of our Company, and we may experience difficulties in managing growth.
As of February 11, 2021, we have 3 full-time
employees. We also have 2 officers serving as part-time employees. As we advance our product candidates through preclinical studies
and clinical trials, we will need to increase our product development, scientific and administrative headcount to manage these
programs. In addition, to meet our obligations as a public company, we may need to increase our general and administrative capabilities.
Our management, personnel and systems currently in place may not be adequate to support this future growth. If we are unable to
successfully manage this growth and increased complexity of operations, our business may be adversely affected.
We may not be able to manage our business effectively if
we are unable to attract and retain key personnel and consultants.
We may not be able to attract or retain
qualified management, finance, scientific and clinical personnel and consultants due to the intense competition for qualified personnel
and consultants among biotechnology, pharmaceutical and other businesses. If we are not able to attract and retain necessary personnel
and consultants to accomplish our business objectives, we may experience constraints that will significantly impede the achievement
of our development objectives, our ability to raise additional capital.
We are highly dependent on the development,
regulatory, commercialization and business development expertise of our management team, key employees and consultants. If we lose
one or more of our executive officers or key employees or consultants, our ability to implement our business strategy successfully
could be seriously harmed. Any of our executive officers or key employees or consultants may terminate their employment at any
time. Replacing executive officers, key employees and consultants may be difficult and may take an extended period of time because
of the limited number of individuals in our industry with the breadth of skills and experience required to develop, gain regulatory
approval of and commercialize products successfully. Competition to hire and retain employees and consultants from this limited
pool is intense, and we may be unable to hire, train, retain or motivate these additional key personnel and consultants. Our failure
to retain key personnel or consultants could materially harm our business.
In addition, we have scientific and clinical
advisors and consultants who assist us in formulating our research, development and clinical strategies. These advisors are not
our employees and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability
to us and typically they will not enter into noncompete agreements with us. If a conflict of interest arises between their work
for us and their work for another entity, we may lose their services. In addition, our advisors may have arrangements with other
companies to assist those companies in developing products or technologies that may compete with ours.
Our chief medical officer and chief science officer are currently
working for us on a part-time basis. Our chief executive officer, chief medical officer and chief science officer, also provide
services for other companies in our industry and such other positions may create conflicts of interest for such officers in the
future.
Certain of our key employees are currently
part-time and/or provide services for other biotechnology development efforts, including companies, with respect to our chief executive
officer and chief medical officer, which are developing anti-cancer drug candidates. Specifically, John M. Climaco, our chairman
and chief executive officer, is also serving as a director for Moleculin Biotech, Inc ., a company also actively developing
anticancer drugs. Sandra Silberman, our chief medical officer, is also the chief medical officer for New Products at Moleculin.
Donald Picker, our chief science officer, is the chief scientific officer at Moleculin.
In addition to our officers’ part-time
status, since Mr. Climaco, Dr. Silberman and Dr. Picker are associated with other companies that are developing anti-cancer drug
candidates, they may encounter conflicts of interest in the future. Although we do not believe that the drug candidates we are
currently pursuing compete with the types of drug candidates being pursued by the other companies Mr. Climaco, Dr. Silberman and
Dr. Picker are associated with, there is no assurance that such conflicts will not arise in the future.
We do not expect that our insurance policies will cover all
of our business exposures thus leaving us exposed to significant uninsured liabilities.
We do not carry insurance for all categories
of risk that our business may encounter. There can be no assurance that we will secure adequate insurance coverage or that any
such insurance coverage will be sufficient to protect our operations to significant potential liability in the future. Any significant
uninsured liability may require us to pay substantial amounts, which would adversely affect our financial position and results
of operations.
Although dependent on certain key personnel, we do not have
any key man life insurance policies on any such people.
We are dependent on John M. Climaco, Christopher
Downs, Sandra Silberman, and Donald Picker in order to conduct our operations and execute our business plan, however, we have not
purchased any insurance policies with respect to those individuals in the event of their death or disability. Therefore, if any
of John M. Climaco, Christopher Downs, Sandra Silberman, or Donald Picker die or become disabled, we will not receive any compensation
to assist with such person’s absence. The loss of such person could negatively affect us and our operations.
There are limited suppliers for active pharmaceutical ingredients
(“API”) used in our drug candidates. Problems with the third parties that manufacture the API used in our drug candidates
may delay our clinical trials or subject us to liability.
We do not currently own or operate manufacturing
facilities for clinical or commercial production of the API used in any of our drug candidates. We have no experience in API manufacturing,
and we lack the resources and the capability to manufacture any of the APIs used in our drug candidates, on either a clinical or
commercial scale. As a result, we rely on third parties to supply the API used in each of our drug candidates. We expect to continue
to depend on third parties to supply the API for our current and future product candidates and to supply the API in commercial
quantities. We are ultimately responsible for confirming that the APIs used in our product candidates are manufactured in accordance
with applicable regulations.
Our third-party suppliers may not carry
out their contractual obligations or meet our deadlines. In addition, the API they supply to us may not meet our specifications
and quality policies and procedures or they may not be able to supply the API in commercial quantities. If we need to find alternative
suppliers for the API used in any of our product candidates, we may not bel able to contract for such supplies on acceptable terms,
if at all. Any such failure to supply or delay caused by such contract manufacturers would have an adverse effect on our ability
to continue clinical development of our product candidates or commercialization of our product candidates.
If our third-party drug suppliers fail to
achieve and maintain high manufacturing standards in compliance with cGMP regulations, we could be subject to certain product liability
claims in the event such failure to comply resulted in defective product that caused injury or harm.
We may not be able to recover from any catastrophic event
affecting our suppliers.
Our suppliers may not have adequate measures
in place to minimize and recover from catastrophic events that may substantially destroy their capability to meet customer needs
and any measures they may have in place may not be adequate to recover production processes quickly enough to support critical
timelines or market demands. These catastrophic events may include weather and geologic events such as tornadoes, earthquakes,
floods, tidal waves, volcanic eruptions, and fires as well as infectious disease epidemics, acts of war, acts of terrorism and
nationalization of private industry. In addition, these catastrophic events may render some or all of the products at the affect
facilities unusable.
We may be materially adversely affected in the event of cyber-based
attacks, network security breaches, service interruptions, or data corruption.
We rely on information technology to process
and transmit sensitive electronic information and to manage or support variety of business processes and activities. We use technology
systems to record, process, and summarize financial information and results of operations for internal reporting purposes and to
comply with regulatory financial reporting, legal, and tax requirements. Our information technology systems, some of which are
managed by third parties, may be susceptible to damage, disruptions or shut down student computer viruses, attacks by computer
hackers, failures during the process of upgrading or replacing software, databases or components thereof, power outages, hardware
failures, technology for communication failures, user errors or catastrophic events. Although we have developed systems and processes
that are designed to protect proprietary or confidential information and prevent data loss and other security breaches, such measures
cannot provide absolute security. If our systems are breached or suffer severe damage, disruption or shutdown and we are unable
to effectively resolve the issues in a timely manner, our business and operating results may significantly suffer and we may be
subject to litigation, government enforcement actions or potential liability. Security breaches could also cause us to incur significant
remediation costs, result in product development delays, disrupt key business operations, including development of our product
candidates, and divert attention of management and key information technology resources.
Risks Related to Our Common Stock
Failure to maintain effective internal control over our financial
reporting in accordance with Section 404 of the Sarbanes-Oxley Act could cause our financial reports to be inaccurate.
We are required pursuant to Section 404
of the Sarbanes-Oxley Act of 2002, or Section 404, to maintain internal control over financial reporting and to assess and report
on the effectiveness of those controls. This assessment includes disclosure of any material weaknesses identified by our management
in our internal control over financial reporting. Our management concluded that our internal controls over financial reporting
were, and continue to be ineffective, and as of the year ended December 31, 2020, identified a material weakness in our internal
controls due to the lack of sufficient personnel to allow for segregation of duties. While management is working to remediate the
material weakness, there is no assurance that such changes, when economically feasible and sustainable, will remediate the identified
material weaknesses or that the controls will prevent or detect future material weaknesses. If we are not able to maintain effective
internal control over financial reporting, our financial statements, including related disclosures, may be inaccurate, which could
have a material adverse effect on our business.
Failure to continue improving our accounting systems and
controls could impair our ability to comply with the financial reporting and internal controls requirements for publicly traded
companies.
As a public company, we operate in an increasingly
demanding regulatory environment, which requires us to comply with the Sarbanes-Oxley Act of 2002, and the related rules and regulations
of the SEC. Company responsibilities required by the Sarbanes-Oxley Act include establishing corporate oversight and adequate internal
control over financial reporting and disclosure controls and procedures. Effective internal controls are necessary for us to produce
reliable financial reports and are important to help prevent financial fraud.
Management performed an annual assessment
as of December 31, 2020 of the effectiveness of our internal control over financial reporting for its annual report. Our management
concluded that our internal control over financial reporting was, and continues to be, ineffective and as of the year ended December
31, 2020, due to a material weakness in our internal controls due to the lack of segregation of duties. For as long as we remain
an “emerging growth company” as defined in the JOBS Act, we have and intend to consider to take advantage of certain
exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth
companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section
404(b) of the Sarbanes-Oxley Act. We may continue to take advantage of these reporting exemptions until we are no longer an “emerging
growth company.” To remediate this material weakness, we engaged an outside firm to assist management with such accounting
and will continue to use outside firms as a resource to deal with other non-recurring or unusual transactions. However, notwithstanding
our remediation efforts, there is no assurance we will not encounter accounting errors in the future. If we cannot provide reliable
financial reports or prevent fraud, our business and results of operations could be harmed, and investors could lose confidence
in our reported financial information.
Our executive officers, directors, major stockholder and
their respective affiliates exercise significant control over us, which will limit our stockholders ability to influence corporate
matters and could delay or prevent a change in corporate control.
The holdings of our executive officers,
directors, founder and their affiliates, are, in the aggregate, approximately 42.2% of our outstanding common stock. As a result,
these stockholders will be able to influence our management and affairs and control the outcome of matters submitted to our stockholders
for approval, including the election of directors and any sale, merger, consolidation, or sale of all or substantially all of our
assets.
These stockholders acquired their shares
of common stock for substantially less than the price of the shares of common stock at the time of this report, and these stockholders
may have interests, with respect to their common stock, that are different from those of our other stockholders and the concentration
of voting power among one or more of these stockholders may have an adverse effect on the price of our common stock.
In addition, this concentration of ownership
might adversely affect the market price of our common stock by: (1) delaying, deferring or preventing a change of control of our
Company; (2) impeding a merger, consolidation, takeover or other business combination involving our Company; or (3) discouraging
a potential acquirer from making a tender offer or otherwise attempting to obtain control of our Company.
Our current stockholders’ ownership may be diluted
if additional capital stock is issued to raise capital, to finance acquisitions or in connection with strategic transactions.
We intend to seek to raise additional funds,
finance acquisitions or develop strategic relationships by issuing equity or convertible debt securities, which would reduce the
percentage ownership of our existing stockholders. Our board of directors has the authority, without action or vote of the stockholders,
to issue all or any part of our authorized but unissued shares of common or preferred stock. Our articles of incorporation authorize
us to issue up to 75,000,000 shares of common stock and 5,000,000 shares of preferred stock. Future issuances of common or preferred
stock would reduce your influence over matters on which stockholders vote and would be dilutive to earnings per share. In addition,
any newly issued preferred stock could have rights, preferences and privileges senior to those of the common stock. Those rights,
preferences and privileges could include, among other things, the establishment of dividends that must be paid prior to declaring
or paying dividends or other distributions to holders of our common stock or providing for preferential liquidation rights. These
rights, preferences and privileges could negatively affect the rights of holders of our common stock, and the right to convert
such preferred stock into shares of our common stock at a rate or price that would have a dilutive effect on the outstanding shares
of our common stock.
In May 2020, the SEC issued an order suspending the trading
of our common stock and Nasdaq issued a trading halt in our common stock.
On May 1, 2020, the SEC, pursuant to Section
12(k) of the Exchange Act, ordered the temporary suspension of trading in our securities because of questions regarding the accuracy
and adequacy of information in the marketplace about us and our securities. Pursuant to the suspension order, the suspension commenced
at 9:30 a.m. EDT on May 4, 2020 and terminated at 11:59 p.m. EDT on May 15, 2020. On May 15, 2020, Nasdaq issued a trading halt
in our common stock pending the receipt of requested information, which halt was released on May 28, 2020. We believe in the accuracy
and adequacy of our public disclosures, but can provide no assurances that we will not encounter future similar actions, which
may adversely affect the holders of our common stock.
General Risk Factors
As a biotechnology company, we may be at an increased risk
of securities class action litigation.
Historically, securities class action litigation
has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant
for us because biotechnology and pharmaceutical companies have experienced significant stock price volatility in recent years.
If we were to be sued, it could result in substantial costs and a diversion of management’s attention and resources, which
could harm our business.
If securities or industry analysts do not publish research
or reports about us, or if they adversely change their recommendations regarding our common stock, then our stock price and trading
volume could decline.
The trading market for our common stock
will be influenced by the research and reports that industry or securities analysts publish about us, our industry and our market.
If no analyst elects to cover us and publish research or reports about us, the market for our common stock could be severely limited
and our stock price could be adversely affected. As a small-cap company, we are more likely than our larger competitors to lack
coverage from securities analysts. In addition, even if we receive analyst coverage, if one or more analysts ceases coverage of
us or fails to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our
stock price or trading volume to decline. If one or more analysts who elect to cover us issue negative reports or adversely change
their recommendations regarding our common stock, our stock price could decline.
As an “emerging growth company” under the Jumpstart
Our Business Startups Act, or JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements.
As an “emerging growth company”
under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. We are an emerging
growth company until the earliest of:
For so long as we remain an emerging growth
company, we will not be required to:
We intend to take advantage of all of these
reduced reporting requirements and exemptions, other than the longer phase-in periods for the adoption of new or revised financial
accounting standards under §107 of the JOBS Act.
Certain of these reduced reporting requirements
and exemptions were already available to us due to the fact that we also qualify as a “smaller reporting company” under
SEC rules. For instance, smaller reporting companies are not required to obtain an auditor attestation and report regarding management’s