ITEM 1A. RISK FACTORS
We are subject to various risks that could have a material adverse effect on our business, our financial condition and our results of operations. These risks could cause actual operating results to differ from those expressed in certain “forward looking statements”
contained in this Annual Report as well as in other communications.
Summary of Risk Factors
● We have never generated any product revenues.
Risks Related to Our Business, Financial Position and
Capital Requirements
We are a clinical stage biopharmaceutical company and have a limited operating history upon which to base an investment decision.
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We are a clinical stage biopharmaceutical company. Since inception, we have engaged primarily in research and development activities of niclosamide and adrulipase.
We have not generated any revenue from product sales and have incurred significant net losses. We have not demonstrated our ability to perform the functions necessary for the successful commercialization of any product candidates. The successful
commercialization of any of our products will require us to perform a variety of functions, including:
● continuing to undertake pre-clinical development and clinical trials;
● participating in regulatory approval processes;
● formulating and manufacturing products; and
● conducting sales and marketing activities.
Our operations to date have been limited to organizing and staffing, acquiring, developing and securing the proprietary rights for, and undertaking pre-clinical
development, manufacturing and clinical trials of adrulipase, and the acquisition of rights to and clinical trials for niclosamide. These operations provide a limited basis for our stockholders and prospective investors to assess our ability to
complete development of or commercialize niclosamide and adrulipase or any other product candidates and the advisability of investing in our securities.
We have incurred significant losses and negative cash flows from our operations since inception. As of December 31, 2021, we had accumulated deficit of approximately $153.9
million and negative working capital of approximately $2.9 million. Based on our historical and anticipated rate of cash expenditures, we do not anticipate our existing working capital will be sufficient to sustain our business through the commercialization of our product candidates. Therefore, we are
dependent on obtaining, and are continuing to pursue, the necessary funding from outside sources, including obtaining additional funding from the sale of securities in order to continue our operations. We are actively working to obtain
additional funding. We cannot make any assurances that additional financings will be available to us and, if available, completed on a timely basis, on acceptable terms or at all. If we are unable to complete an equity and/or debt offering, or
otherwise obtain sufficient financing when and if needed, it would negatively impact our business and operations, which would likely cause the price of our Common Stock to decline or ultimately force us to cease our operations.
A pandemic, epidemic, or
outbreak of an infectious disease, such as COVID-19, or coronavirus, may materially and adversely affect our business and our financial results.
The spread of COVID-19 has affected segments of the global economy and
may affect our operations, including the potential interruption of our clinical trial activities and our supply chain. Beginning in March 2020, the majority of our workforce began working from home. Disruptions caused by the continued spread
of COVID-19, including the effects of stay-at-home orders and work-from-home policies, have impacted productivity and may result in further periods of business disruption, including delays in our clinical trials or delays or disruptions in
our supply chain. In addition, there could be a potential effect of COVID-19 to the business at FDA or other health authorities, which could result in delays of reviews and approvals, including with respect to our product candidates.
The continued spread of COVID-19 globally could adversely affect our
clinical trial operations in the United States and Europe and other jurisdictions where we may decide to conduct clinical trials, including our ability to recruit and retain patients and principal investigators and site staff who, as
healthcare providers, may have heightened exposure to COVID-19 if an outbreak occurs in their geography. We have already experienced certain delays of our clinical trials and may experience further delays as the pandemic continues.
Disruptions in national or international shipments and deliveries could impede our ability to distribute product to trial sites in a timely manner. Any of the foregoing factors could delay our ability to conduct clinical trials or release
clinical trial results. COVID-19 may also affect employees of third-party CROs located in affected geographies that we rely upon to carry out our clinical trials, which could result in inefficiencies due to reductions in staff and disruptions
to work environments.
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The spread of COVID-19, or another infectious disease, could also
negatively affect the operations at our third-party manufacturers, which could result in delays or disruptions in the supply of our product candidates. In addition, we have taken temporary precautionary measures intended to help minimize the
risk of the virus to our employees, including temporarily requiring all employees to work remotely, suspending all non-essential travel worldwide for our employees, and discouraging employee attendance at industry events and in-person
work-related meetings, which could negatively affect our business.
We have implemented business continuity plans designed to address and
mitigate the impact of the ongoing COVID-19 pandemic on our employees and our business. We continue to operate normally with the exception of enabling all of our employees to work productively at home and abiding by travel restrictions issued
by federal, state and local governments. Our current plans to return to the office remain fluid as federal, state and local guidelines, rules and regulations continue to evolve.
We cannot presently predict the scope and severity of any potential
business shutdowns or disruptions. If we or any of the third parties with whom we engage, however, were to experience shutdowns or other business disruptions, our ability to conduct our business in the manner and on the timelines presently
planned could be materially and negatively affected, which could have a material adverse impact on our business and our results of operation and financial condition.
In addition, the global spread of COVID-19 has created significant
volatility and uncertainty in global financial markets and may materially affect us economically and such conditions continue to persist. While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess
or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity. A recession or market correction
resulting from the spread of COVID-19 could materially affect our business and the value of our Common Stock.
Geopolitical risks associated
with Russia’s recent invasion of Ukraine could result in increased market volatility and uncertainty, which could negatively impact our business, financial condition, and results of operations.
The uncertain nature, scope, magnitude, and duration of hostilities
stemming from Russia’s recent military invasion of Ukraine, including the potential effects of such hostilities as well as sanctions, embargoes, asset freezes, cyber-attacks and other actions taken in response to such hostilities on the
world economy and markets, have disrupted global markets and contributed to increased market volatility and uncertainty, which could have an adverse impact on macroeconomic and other factors that affect our business and supply chain. There
can be no certainty regarding the impacts stemming from the invasion, including the imposition of additional sanctions, embargoes, asset freezes or other economic or military measures resulting from the invasion. The impact of these
developments, and additional events that may occur as a result, is currently unknown and could adversely affect our business, supply chain, suppliers and customers and potential customers. It is not possible to predict the broader
consequences of this conflict, which could include further sanctions, embargoes, regional instability, geopolitical shifts and adverse effects on macroeconomic conditions, the availability and cost of materials, supplies, labor, currency
exchange rates and financial markets, all of which could negatively impact our business, financial condition and results of operations.
We will face intense
competition and may not be able to compete successfully.
We operate in highly competitive segments of the biotechnology and
biopharmaceutical markets. We face competition from many different sources, including commercial pharmaceutical and biotechnology enterprises, academic institutions, government agencies, and private and public research institutions.
Niclosamide and adrulipase, if successfully developed and approved, will compete with established therapies, as well as new treatments that may be introduced by our competitors. Many of our competitors have significantly greater financial,
product development, manufacturing and marketing resources than us. Large pharmaceutical companies have extensive experience in clinical testing and obtaining regulatory approval for drugs. We also may compete with these organizations to
recruit management, scientists and clinical development personnel. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. New
developments, including the development of other biological and pharmaceutical technologies and methods of treating disease, occur in the pharmaceutical and life sciences industries at a rapid pace. Developments by competitors may render our
product candidates obsolete or noncompetitive. We will also face competition from these third parties in recruiting and retaining qualified personnel, establishing clinical trial sites and patient registration for clinical trials and in
identifying and in-licensing new product candidates. In the case of niclosamide, we may also face competition from other companies developing different formulation of niclosamide for the same indications for which we intend to develop
niclosamide, or from off-label uses of niclosamide approved for other indications.
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We may incur substantial
product liability or indemnification claims relating to the use of our product candidates.
We face an inherent risk of product liability exposure based on the
use of niclosamide and adrulipase in human clinical trials, or, if obtained, following marketing approval and commercialization. Claims could be brought against us if use or misuse of one of our product candidates causes, or merely appears to
have caused, personal injury or death. Although we have and intend to maintain product liability insurance relating to our clinical trials, our coverage may not be sufficient to cover claims that may be made against us and we may be unable to
maintain such insurance. Any claims against us, regardless of their merit, could severely harm our financial condition, strain our management and other resources or destroy the prospects for commercialization of the product which is the
subject of any such claim. We are unable to predict if we will be able to obtain or maintain product liability insurance for any products that may be approved for marketing. Additionally, we have entered into various agreements where we
indemnify third parties for certain claims relating to the testing and use of our product candidates. These indemnification obligations may require us to pay significant sums of money for claims that are covered by these indemnifications.
We cannot predict all of the possible harms or side effects that may
result from the use of our products and, therefore, the amount of insurance coverage we currently hold, or that we or our collaborators may obtain, may not be adequate to protect us from any claims arising from the use of our products that
are beyond the limit of our insurance coverage. If we cannot protect against potential liability claims, we or our collaborators may find it difficult or impossible to commercialize our products, and we may not be able to renew or increase
our insurance coverage on reasonable terms, if at all. The marketing, sale and use of our products and our planned future products could lead to the filing of product liability claims against us if someone alleges that our products failed to
perform as designed. A product liability or professional liability claim could result in substantial damages and be costly and time-consuming for us to defend.
Any product liability or professional liability claim brought against
us, with or without merit, could increase our insurance rates or prevent us from securing insurance coverage. Additionally, any product liability lawsuit could damage our reputation, result in the recall of products, or cause current partners
to terminate existing agreements and potential partners to seek other partners, any of which could impact our results of operations.
We use biological materials and
may use hazardous materials, and any claims relating to improper handling, storage or disposal of these materials could be time consuming or costly.
We may use hazardous materials, including chemicals and biological
agents and compounds, that could be dangerous to human health and safety or the environment. Our operations also produce hazardous waste products. Federal, state and local laws and regulations govern the use, generation, manufacture, storage,
handling and disposal of these materials and wastes. Compliance with applicable environmental laws and regulations may be expensive, and current or future environmental laws and regulations may impair our product development efforts. In
addition, we cannot entirely eliminate the risk of accidental injury or contamination from these materials or wastes. We do not carry specific biological or hazardous waste insurance coverage and our property and casualty, and general
liability insurance policies specifically exclude coverage for damages and fines arising from biological or hazardous waste exposure or contamination. Accordingly, in the event of contamination or injury, we could be held liable for damages
or penalized with fines in an amount exceeding our resources, and our clinical trials or regulatory approvals could be suspended.
Although we maintain workers’ compensation insurance to cover us for
costs and expenses, we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental
liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological or hazardous materials.
In addition, we may incur substantial costs in order to comply with
current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may
result in substantial fines, penalties or other sanctions.
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We will need to grow the size
of our organization, and we may experience difficulties in managing this growth.
As of December 31, 2021, we had 17 employees. As our development and
commercialization plans and strategies develop, we expect to need additional managerial, operational, research and development, sales, marketing, financial and other personnel. Future growth would impose significant added responsibilities on
members of management, including:
Our future financial performance and our ability to commercialize our
product candidates will depend, in part, on our ability to effectively manage any future growth, and our management may also have to divert a disproportionate amount of its attention away from day-to-day activities in order to devote a
substantial amount of time to managing these growth activities.
We currently rely, and for the foreseeable future will continue to
rely, in substantial part on certain independent organizations, advisors and consultants to provide certain services, including certain aspects of regulatory approval, clinical management and manufacturing. There can be no assurance that the
services of independent organizations, advisors and consultants will continue to be available to us on a timely basis when needed, or that we can find qualified replacements. In addition, if we are unable to effectively manage our outsourced
activities or if the quality or accuracy of the services provided by consultants is compromised for any reason, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval of our product
candidates or otherwise advance our business. There can be no assurance that we will be able to manage our existing consultants and contractors or find other competent outside contractors and consultants on economically reasonable terms, or
at all.
If we are not able to effectively expand our organization by hiring
new employees and expanding our groups of consultants and contractors, we may not be able to successfully implement the tasks necessary to further develop and commercialize our product candidates and, accordingly, may not achieve our
research, development and commercialization goals.
Significant disruptions of
information technology systems or breaches of data security could materially adversely affect our business, results of operations and financial condition.
We collect and maintain information in digital form that is necessary
to conduct our business, and we are increasingly dependent on information technology systems and infrastructure to operate our business. In the ordinary course of our business, we collect, store and transmit large amounts of confidential
information, including intellectual property, proprietary business information and personal information. It is critical that we do so in a secure manner to maintain the confidentiality and integrity of such confidential information. We have
established physical, electronic and organizational measures to safeguard and secure our systems to prevent a data compromise, and rely on commercially available systems, software, tools, and monitoring to provide security for our information
technology systems and the processing, transmission and storage of digital information. We have also outsourced elements of our information technology infrastructure, and as a result a number of third-party vendors may or could have access to
our confidential information. Our internal information technology systems and infrastructure, and those of our current and any future collaborators, contractors and consultants and other third parties on which we rely, are vulnerable to
damage from computer viruses, malware, natural disasters, terrorism, war, telecommunication and electrical failures, cyber-attacks or cyber-intrusions over the Internet, attachments to emails, persons inside our organization, or persons with
access to systems inside our organization.
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The risk of a security breach or disruption, particularly through
cyber-attacks or cyber-intrusion, including by computer hackers, foreign governments and cyber-terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have
increased. In addition, the prevalent use of mobile devices that access confidential information increases the risk of data security breaches, which could lead to the loss of confidential information or other intellectual property. The costs
to us to mitigate network security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant, and while we have implemented security measures to protect our data security and information
technology systems, our efforts to address these problems may not be successful, and these problems could result in unexpected interruptions, delays, cessation of service and other harm to our business and our competitive position. If such an
event were to occur and cause interruptions in our operations, it could result in a material disruption of our product development programs. For example, the loss of clinical trial data from completed or ongoing or planned clinical trials
could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Moreover, if a computer security breach affects our systems or results in the unauthorized release of personally
identifiable information, our reputation could be materially damaged.
In addition, such a breach may require notification to governmental
agencies, the media or individuals pursuant to various federal and state privacy and security laws, if applicable, including the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for
Clinical Health Act of 2009, and its implementing rules and regulations, as well as regulations promulgated by the Federal Trade Commission and state breach notification laws.
Under the EU regulation and notably the General Data Protection
Regulation, or GDPR, No. 2016/679, which entered into force on May 25, 2018 and is applicable personal data that we process in relation to our presence in the EU, the offering of products or services to individuals in the EU or the monitoring
of the behavior of individuals in the EU, we have also a legal responsibility to report personal data breaches to the competent supervisory authority. The EU data protection regulation includes a broad definition and a short deadline for the
notification of personal data breaches, which may be difficult to implement in practice and requires that we implement robust internal processes. Under this regulation, we have to report personal data breaches to the competent supervisory
authority within 72 hours of the time we become aware of a breach “unless the personal data breach is unlikely to result in a risk to the right and freedoms of natural persons” (Article 33 of the GDPR). In addition, the GDPR requires that we
communicate the breach to the Data Subject if the breach is “likely to result in a high risk to the rights and freedoms of natural persons” (Article 34 of the GDPR). In order to fulfil these requirements, we have to implement specific
internal processes to be followed in case of a personal data breach, which will allow us to (a) contain and recover the breach, (b) assess the risk to the data subjects, (c) notify, and possibly communicate the breach to the data subjects,
(d) investigate and respond to the breach. The performance of these processes implies substantial costs in resources and time.
Moreover, as we may rely on third parties that will also process as
processor the data for which we are a data controller—for example, in the context of the manufacturing of our product candidates or for the conduct of clinical trials, we must contractually ensure that strict security measures, as well as
appropriate obligations including an obligation to report in due delay any security incident are implemented, in order to allow us fulfilling our own regulatory requirements.
We would also be exposed to a risk of loss or litigation and potential
liability for any security breach on personal data for which we are data controller. The costs of above-mentioned processes together with legal penalties, possible compensation for damages and any resulting lawsuits arising from a breach may
be extensive and may have a negative impact on reputation and materially adversely affect our business, results of operations and financial condition.
In August 2019, management was advised that it was a victim of a
cyber-related fraud whereby a hacker impersonated one of our key vendors to redirect payments, totaling approximately $420,000. Management and our Audit Committee completed our investigation and is reviewing all available avenues of recovery,
including from our financial institution to recover the payments. As of December 31, 2021, we have recovered approximately $50,000 from our financial institution but we are unable to determine the probability of recovering anything further
from the cyber-related fraud. As a result of the cyber-related fraud, we have instituted additional controls and procedures and all employees now undergone cybersecurity training.
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Requirements associated with
being a public company will increase our costs significantly and will divert significant company resources and management attention.
Since we are no longer an “emerging growth company” as defined in the
Jumpstart Our Business Startups Act of 2012, we are no longer able to take advantage of certain exemptions from various reporting requirements that were previously available to us, but which were not available to other public companies that
are not emerging growth companies. Accordingly, we will be required to comply with increased disclosure obligations regarding executive compensation in our periodic reports and proxy statements and the requirements of holding a nonbinding
advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As a result, we will incur greater expenses associated with such reporting requirements. These expenses would further
increase if we ceased to be a “smaller reporting company.” In addition, if we are deemed an accelerated filer or large accelerated filer in the future, we expect to incur additional management time and cost to comply with the more stringent
reporting requirements applicable to companies that are deemed accelerated filers or large accelerated filers, including complying with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. We have not yet completed
the process of compiling the system and processing documentation needed to comply with such requirements. We may not be able to complete our evaluation, testing and any required remediation in a timely fashion when required to do so. In that
regard, we currently do not have an internal audit function, and we will need to hire or contract for additional accounting and financial staff with appropriate public company experience and technical accounting knowledge.
Our management and other personnel need to devote a substantial amount
of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. We cannot predict or estimate the amount of
additional costs we may incur as a result of this.
Risks Related to Clinical Development, Regulatory
Approval and Commercialization
Our product candidates are at an early stage of development and may not be successfully developed or commercialized.
We have no products approved for sale. Niclosamide, which we acquired in 2021, and adrulipase are in the early stages of clinical
development. Our product candidates will require substantial capital expenditures, development, testing, and regulatory clearances prior to commercialization. The development and regulatory approval process take
several years, and it is not likely that any such products, even if successfully developed and approved by the FDA or any comparable foreign regulatory authority, would be commercially available for a significant period of time. Many promising drug candidates fail at some stage of their clinical development. Accordingly, even if we are able to obtain the requisite
financing to fund our development programs, we cannot assure you that our product candidates will be successfully developed, receive required regulatory approvals and successfully commercialized. Our failure to develop, manufacture or receive regulatory approval for or successfully commercialize any of our product candidates, could result in the
failure of our business and a loss of all of your investment in our company.
Any product candidates we advance into and through clinical development are subject to extensive regulation, which can be
costly and time consuming, cause unanticipated delays or prevent the receipt of the required approvals to commercialize our product candidates.
The clinical development, manufacturing, labeling, storage, record-keeping, advertising, promotion, import, export, marketing and distribution of our product
candidates are subject to extensive regulation by the FDA in the United States and by comparable health authorities in foreign markets, including Health Canada’s Therapeutic Products Directorate, or the TPD, and the European Medicines Agency,
or the EMA. In the United States, we are not permitted to market our product candidates until we receive approval of an NDA (New Drug Application) or BLA (Biologic License Application) from the FDA. The process of obtaining such approval is
expensive, often takes many years and can vary substantially based upon the type, complexity and novelty of the products involved. In addition to the significant clinical testing requirements, our ability to obtain marketing approval for these
product candidates depends on obtaining the final results of required non-clinical testing, including characterization of the manufactured components of our product candidates and validation of our manufacturing processes. The FDA may determine
that our product manufacturing processes, testing procedures or facilities are insufficient to justify approval. Approval policies or regulations may change, and the FDA has substantial discretion in the pharmaceutical approval process,
including the ability to delay, limit or deny approval of a product candidate for many reasons. Despite the time and expense invested in clinical development of product candidates, regulatory approval is never guaranteed.
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The FDA, the TPD and/or the EMA can delay, limit or deny approval of a product candidate for many reasons, including, but not limited to:
● disagreement with the design or implementation of our clinical trials;
Any delay in obtaining, or inability to obtain, applicable regulatory approvals would prevent us from commercializing our product candidates.
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. 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 who remain in the trial until its conclusion. The enrollment of patients depends on many factors, including:
● the patient eligibility criteria defined in the protocol;
● the size of the patient population;
● the design of the trial;
● our ability to obtain and maintain patient consents; and
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Our clinical trials will compete with other clinical trials for product candidates that are in the same therapeutic areas as our product candidates. This competition
will reduce the number and types of patients and qualified clinical investigators 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
or clinical trial sites may not allow us to conduct our clinical trial at such site if competing trials are already being conducted there. 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 in such clinical trial site. We may also encounter difficulties finding a clinical trial
site at which to conduct our trials.
Delays in patient enrollment may result in increased costs or may affect the timing or outcome of our planned clinical trials, which could prevent completion of
these clinical trials and adversely affect our ability to advance the development of our product candidates.
Because the results of preclinical studies and early clinical trials are not necessarily predictive of future results, any
product candidate we advance into clinical trials may not have favorable results in later clinical trials, if any, or receive regulatory approval.
Pharmaceutical development has inherent risk. We will be required to demonstrate through well-controlled clinical trials that our product candidates are safe and effective with a favorable benefit-risk profile for use in their target indications before we can seek regulatory approvals for their
commercial sale. Adrulipase, has only completed three Phase 2 clinical trials in two separate indications (two Phase 2 in CF patients and one Phase 2 in CP patients). Niclosamide has completed a Phase 1b/2a study, conducted by First Wave, in
patients with mild-to-moderate ulcerative colitis. Success in pre-clinical studies or early clinical trials does not mean that later clinical trials will be successful, as product candidates in later-stage clinical trials may fail to
demonstrate sufficient safety or efficacy despite having progressed through initial clinical testing. We also may need to conduct additional clinical trials that are not currently anticipated. Drug developers frequently suffer significant setbacks in advanced clinical trials, even after earlier clinical trials have shown promising results.
Any product candidate we advance into and through clinical trials may cause unacceptable adverse events or have other
properties that may delay or prevent their regulatory approval or commercialization or limit their commercial potential.
Unacceptable adverse events caused by niclosamide and adrulipase in clinical trials could cause us or regulatory authorities to interrupt, delay or halt clinical
trials and could result in the denial of regulatory approval by the FDA or other regulatory authorities for any or all targeted indications and markets. This, in turn, could prevent us from commercializing the affected product candidate and
generating revenues from its sale. We have not yet completed testing of any of our product candidates for the treatment of the indications for which we intend to seek product approval in humans, and we currently do not know the extent of adverse
events, if any, that will be observed in patients who receive any of our product candidates. If any of our product candidates cause unacceptable adverse events in clinical trials, we may not be able to obtain regulatory approval or commercialize
such product or, if such product candidate is approved for marketing, future adverse events could cause us to withdraw such product from the market.
Delays in the commencement or completion of our clinical trials could result in increased costs and delay our ability to
pursue regulatory approval and commercialization of our product candidates.
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Although we commenced the ongoing FW-COV RESEVOIR and the FW-UP clinical trials in 2021, the commencement and completion of clinical trials can be delayed for a
variety of reasons, including delays in:
● obtaining regulatory clearance to commence a clinical trial;
● identifying, recruiting and training suitable clinical investigators;
● availability of funds.
Any delays in the commencement of our clinical trials will delay our ability to pursue regulatory approval for our product candidates. In addition, many of the
factors that cause, or lead to, a delay in the commencement of clinical trials may also ultimately lead to the denial of regulatory approval of a product candidate.
If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed
or otherwise 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
who remain in the trial until its conclusion. We may experience difficulties in patient enrollment in our clinical trials for a variety of reasons, including the size and nature of the patient population and the patient eligibility criteria
defined in the protocol, competition from competing companies, natural disasters, geo-political events, such as the war
in Ukraine or public health epidemics, such as the coronavirus impacting the U.S., Europe and elsewhere.
We may be required to suspend, repeat or terminate our clinical trials if they are not conducted in accordance with regulatory
requirements, the results are negative or inconclusive or the trials are not well designed.
Regulatory agencies, IRBs or data safety monitoring boards may at any time recommend the temporary or permanent discontinuation of our clinical trials or request
that we cease using investigators in the clinical trials if they believe that the clinical trials are not being conducted in accordance with applicable regulatory requirements, or that they present an unacceptable safety risk to participants.
Clinical trials must be conducted in accordance with current cGCPs or other applicable foreign government guidelines governing the design, safety monitoring, quality assurance and ethical considerations associated with clinical studies. Clinical
trials are subject to oversight by the FDA, other foreign governmental agencies and IRBs at the study sites where the clinical trials are conducted. In addition, clinical trials must be conducted with product candidates produced in accordance
with applicable cGMPs, which are the FDA’s regulations governing the design, monitoring and control of manufacturing processes and facilities. Clinical trials may be suspended by the FDA, other foreign governmental agencies, or us for various
reasons, including:
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● deficiencies in the clinical trial operations or trial sites;
● the product candidate may have unforeseen adverse side effects;
● deficiencies in the trial design necessary to demonstrate efficacy;
If we elect or are forced to suspend or terminate a clinical trial for niclosamide and adrulipase the commercial prospects for that product candidate will be harmed
and our ability to generate product revenue from that product candidate may be delayed or eliminated. Furthermore, any of these events could prevent us or our partners from achieving or maintaining market acceptance of the affected product
candidate and could substantially increase the costs of commercializing our product candidates and impair our ability to generate revenue from the commercialization of these product candidates either by us or by our collaboration partners.
The approval processes of regulatory authorities are lengthy, time consuming, expensive and inherently unpredictable. If we
are unable to obtain approval for our product candidates from applicable regulatory authorities, we will not be able to market and sell those product candidates in those countries or regions and our business will be substantially harmed.
The time required to obtain approval by the FDA and comparable foreign authorities is unpredictable, but typically takes many years following the commencement of
clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. We have not submitted an NDA or similar filing or obtained regulatory approval for any drug candidate in any jurisdiction and
it is possible that none of our existing product candidates or any product candidates we may seek to develop in the future will ever obtain regulatory approval.
Niclosamide and adrulipase could fail to receive regulatory approval for many reasons, including any one or more of the following:
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● invest significant additional cash in each of the above activities; and
The time and expense of the approval process, as well as the unpredictability of clinical trial results and other contributing factors, may result in our failure to
obtain regulatory approval to market, in one or more jurisdictions niclosamide, adrulipase or future product candidates, which would significantly harm our business, results of operations and prospects.
In addition, even if we were to obtain regulatory approval in one or more jurisdictions, regulatory authorities may approve niclosamide and adrulipase for fewer or
more limited indications than we request, may not approve the prices we may propose to charge for our products, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve a product candidate with
labeling that does not include the claims necessary or desirable for the successful commercialization of that product candidate. Any of the foregoing circumstances could materially harm the commercial prospects for niclosamide and adrulipase.
Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their
regulatory approval, limit the commercial profile of the approved labeling, or result in significant negative consequences following marketing approval, if any.
Results of current and future clinical trials of niclosamide and adrulipase could reveal a high and/or unacceptable severity and frequency of these or other side
effects. In such an event, our trials could be suspended or terminated, and the FDA or comparable foreign regulatory authorities could order us to cease further development of, or deny approval of, our product candidates for any or all targeted
indications. Further, any observed drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims. Any of these occurrences could materially
harm our business, financial condition and prospects.
Additionally, if niclosamide and adrulipase receive marketing approval, and we or others later identify undesirable side effects caused by our products, a number of
potentially significant negative consequences could result, including:
● regulatory authorities may withdraw approvals of such product;
● we could be sued and held liable for harm caused to patients; and
● our reputation may suffer.
Any of these events could prevent us from achieving or maintaining market acceptance of the particular product, if approved, and could significantly harm our
business, results of operations and prospects
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If we are unable to execute our sales and marketing strategy for our products and are unable to gain market acceptance, we may
be unable to generate sufficient revenue to sustain our business.
We are a clinical-stage biopharmaceutical company and have yet to begin to generate revenue from niclosamide and adrulipase. Our product candidates are in an early
stage of clinical development, and, if we obtain marketing approval for any of products in the future, which we anticipate would not occur for several years, if at all.
We may never gain significant
market acceptance for our product candidates and therefore may never generate substantial revenue or profits for us. We will need to establish
a market for any of our product candidates that receive regulatory approval through physician education, sales and marketing efforts, awareness programs and the publication of clinical data. Gaining acceptance in medical communities requires, among
other things, publication in leading peer-reviewed journals of results from our studies. The process of publication in leading medical journals is subject to a peer review process and peer reviewers may not consider the results of our studies
sufficiently novel or worthy of publication. Failure to have our studies published in peer-reviewed journals could limit the adoption of niclosamide and adrulipase. Our ability to successfully market our product candidates that we may develop
will depend on numerous factors, including:
● the efficacy and safety as demonstrated in clinical trials;
● the clinical indications for which the product is approved;
● relative convenience and ease of administration;
● whether our current or future partners, support our offerings;
● the success of the sales force and marketing effort;
● unfavorable publicity relating to the product;
We currently have no commercial organization. If we are unable to establish satisfactory sales and
marketing capabilities or secure a sales and marketing partner, we may not successfully commercialize any of our product candidates.
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We have no commercial infrastructure. In order to commercialize products that are approved for marketing, we must either establish our own sales
and marketing infrastructure or collaborate with third parties that have such commercial infrastructure.
We may not be able to enter into collaboration agreements on terms acceptable to us or at all. In addition, even if we enter into such
relationships, we may have limited or no control over the sales, marketing and distribution activities of these third parties. Our future revenues may depend heavily on the success of the efforts of these third parties. If we elect to establish a
sales and marketing infrastructure, we may not realize a positive return on this investment. In addition, we will have to compete with established and well-funded pharmaceutical and biotechnology companies to recruit, hire, train and retain sales
and marketing personnel. Factors that may inhibit our efforts to commercialize our product candidates without strategic partners or licensees include:
If we are not successful in recruiting sales and marketing personnel or in building a sales and marketing infrastructure, or if we do not successfully enter into
appropriate collaboration arrangements, we will have difficulty successfully commercializing our product candidates and any we may develop or acquire, which would adversely affect our business, operating results and financial condition. Outside
the United States, we may commercialize our product candidates by entering into collaboration agreements with pharmaceutical partners. We may not be able to enter into such agreements on terms acceptable to us or at all. In addition, even if we
enter into such relationships, we may have limited or no control over the sales, marketing and distribution activities of these third parties. Our future revenues may depend heavily on the success of the efforts of these third parties.
We may form or seek strategic alliances or enter into additional licensing arrangements in the future, and we may not realize
the benefits of such alliances or licensing arrangements.
From time to time, we may form or seek strategic alliances, create joint ventures or collaborations or enter into additional licensing arrangements with third
parties that we believe will complement or augment our development and commercialization efforts with respect to niclosamide and adrulipase and any future product candidates that we may develop. Any of these relationships may require us to incur
non-recurring and other charges, increase our near and long-term expenditures, issue securities that dilute our existing stockholders or disrupt our management and business. These relationships also may result in a delay in the development of
niclosamide and adrulipase if we become dependent upon the other party and such other party does not prioritize the development of our product candidates relative to its other development activities. In addition, we face significant competition
in seeking appropriate strategic partners and the negotiation process is time-consuming and complex. Moreover, we may not be successful in our efforts to establish a strategic partnership or other alternative arrangements for our product
candidates because they may be deemed to be at too early of a stage of development for collaborative effort and third parties may not view our product candidates as having the requisite potential to demonstrate safety and efficacy. If we license
products or businesses, we may not be able to realize the benefit of such transactions if we are unable to successfully integrate them with our existing operations and company culture. We cannot be certain that, following a strategic transaction
or license, we will achieve the revenue or specific net income that justifies such transaction. We rely completely on third parties to manufacture our preclinical and clinical pharmaceutical supplies and expect to continue to rely on third
parties to produce commercial supplies of our product candidates, and our dependence on third party suppliers could adversely impact our business.
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We rely completely on third parties to manufacture our preclinical and clinical pharmaceutical supplies and expect to continue
to rely on third parties to produce commercial supplies of any approved product candidate, and our dependence on third party suppliers could adversely impact our business.
We rely on third parties to manufacture our product candidates, including niclosamide and adrulipase. The proprietary yeast cell line from which the adrulipase API
is derived is kept at a storage facility maintained by Charles RiverLaboratories Inc. Adrulipase drug substance
and drug product are currently manufactured at a contract facility located in Tianjin, China owned by Asymchem Life Science Co., Ltd. We believe there are multiple alternative contract manufacturers capable of producing the adrulipase product we need for
clinical trials. There is no guarantee that the processes are easily reproducible and transferrable.
Niclosamide API is obtained by chemical synthesis and is currently
manufactured by Olon SpA at a facility in Murcia, Spain. The drug product manufacturing for niclosamide is currently conducted at a contract facility located in Milan, Italy and Tianjin, China owned by Monteresearch s.r.l. and Asymchem Life
Science Co., Ltd, respectively.
We are completely dependent on these third parties for product supply and our niclosamide and adrulipase development programs would be adversely affected by a
significant interruption in our ability to receive such materials. We have not yet entered into long-term manufacturing or supply agreements with any third parties. Furthermore, our third-party suppliers will be required to maintain compliance
with cGMPs and will be subject to inspections by the FDA or comparable regulatory authorities in other jurisdictions to confirm such compliance. In the event that the FDA or such other authorities determine that our third-party suppliers have not
complied with cGMP, our clinical trials could be terminated or subjected to a clinical hold until such time as we are able to obtain appropriate replacement material. Any delay, interruption or other issues that arise in the manufacture,
packaging, or storage of our products as a result of a failure of the facilities or operations of our third-party suppliers to pass any regulatory agency inspection could significantly impair our ability to develop and commercialize our products.
We do not expect to have the resources or capacity to commercially manufacture any of our proposed products, if approved, and will likely continue to be dependent
upon third party manufacturers. Our dependence on third parties to manufacture and supply us with clinical trial materials and any approved products may adversely affect our ability to develop and commercialize our products on a timely basis or
at all.
We rely on third parties to conduct our clinical trials. If these third parties do not meet our deadlines or otherwise conduct
the trials as required, our clinical development programs could be delayed or unsuccessful and we may not be able to obtain regulatory approval for or commercialize our product candidates when expected or at all.
We do not have the ability to conduct all aspects of our preclinical testing or clinical trials ourselves. We use contract research organizations (CROs) to conduct
our clinical trials and will rely upon such CROs, as well as medical institutions, clinical investigators and consultants, to conduct our trials in accordance with our clinical protocols. Our CROs, investigators and other third parties will play
a significant role in the conduct of these trials and the subsequent collection and analysis of data from the clinical trials.
There is no guarantee that any CROs, investigators and other third parties upon which we rely for administration and conduct of our clinical trials will devote
adequate time and resources to such trials or perform as contractually required. If any of these third parties fail to meet expected deadlines, fail to adhere to our clinical protocols or otherwise perform in a substandard manner, our clinical
trials may be extended, delayed or terminated. If any of our clinical trial sites terminate for any reason, we may experience the loss of follow-up information on patients enrolled in our ongoing clinical trials unless we are able to transfer the
care of those patients to another qualified clinical trial site. In addition, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive cash or equity compensation in
connection with such services. If these relationships and any related compensation result in perceived or actual conflicts of interest, the integrity of the data generated at the applicable clinical trial site may be jeopardized.
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We intend to rely on market exclusivity periods that may not be or remain available to us.
We intend to rely on our ability to obtain and maintain a regulatory period of market exclusivity for any of our product candidates, including niclosamide and
adrulipase that are successfully developed and approved for commercialization. Although this period in the United States is currently 12 years from the date of marketing approval, reductions to this period have been proposed. This exclusivity
period in Europe is currently 10 years from the date of marketing approval by the EMA. Once any regulatory period of exclusivity expires, depending on the status of our patent coverage and the nature of the product, we may not be able to prevent
others from marketing products that are biosimilar to or interchangeable with our products, which would materially adversely affect us.
Because niclosamide is a small molecule it would be subject either to three or five year exclusivity, depending on the regulatory pathway of any clinical trials.
Niclosamide is not entitled to the same 12-year exclusivity as our biologic product candidates.
Due to the significant resources required for the development of our product candidates, we must prioritize development of
certain product candidates and/or certain disease indications. We may expend our limited resources on candidates or indications that do not yield a successful product and fail to capitalize on product candidates or indications that may be more
profitable or for which there is a greater likelihood of success.
We intend to develop a pipeline of product candidates to treat GI and other diseases. Due to the significant resources required for the development of product
candidates, we must focus our attention and resources on specific diseases and/or indications and decide which product candidates to pursue and the amount of resources to allocate to each. We are currently focusing our resources on the
development of our product candidates, niclosamide and adrulipase.
Our decisions concerning the allocation of research, development, collaboration, management and financial resources toward particular product candidates or
therapeutic areas may not lead to the development of any viable commercial product and may divert resources away from better opportunities. Similarly, any decision to delay, terminate or collaborate with third parties in respect of certain
programs or product candidates may subsequently prove to be suboptimal and could cause us to miss valuable opportunities. If we make incorrect determinations regarding the viability or market potential of any of our programs or product candidates
or misread trends in the GI, CF, CP, COVID-19, ICI-AC or biotechnology industry, our business, financial condition and results of operations could be materially adversely affected. As a result, we may fail to capitalize on viable commercial
products or profitable market opportunities, be required to forego or delay pursuit of opportunities with other product candidates or other diseases and indications that may later prove to have greater commercial potential than those we choose to
pursue, or relinquish valuable rights to such product candidates through collaboration, licensing or other royalty arrangements in cases in which it would have been advantageous for us to invest additional resources to retain development and
commercialization rights.
If we fail to attract and retain key management and clinical development personnel, we may be unable to successfully develop
or commercialize our product candidates.
We are dependent on our management team and clinical development personnel and our success will depend on their continued service, as well as our ability to attract
and retain highly qualified personnel. In particular, the continued development of our senior management team which now includes James Sapirstein, our President and Chief Executive Officer, Sarah Romano, our Chief Financial Officer, and James
Pennington, our Chief Medical Officer, is critical to our success. The market for the services of qualified personnel in the biotechnology and pharmaceutical industries are highly competitive. The loss of service of any member of our senior
management team or key personnel could prevent, impair or delay the implementation of our business plan, the successful conduct and completion of our planned clinical trials and the commercialization of any product candidates that we may
successfully develop. We do not carry key man insurance for any member of our senior management team.
Healthcare reform and restrictions on reimbursements may limit our financial returns.
Our ability or the ability of our collaborators to commercialize any of our product candidates that we successfully develop may depend, in part, on the extent to
which government health administration authorities, private health insurers and other organizations will reimburse consumers for the cost of these products. These third parties are increasingly challenging both the need for and the price of new
drug products. Significant uncertainty exists as to the reimbursement status of newly approved therapeutics. Adequate third-party reimbursement may not be available for our product candidates to enable us or our collaborators to maintain price
levels sufficient to realize an appropriate return on their and our investments in research and product development.
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Changes in healthcare law and implementing regulations, including government restrictions on pricing and reimbursement, as
well as healthcare policy and other healthcare payor cost-containment initiatives, may negatively impact our ability to generate revenues.
The potential pricing and reimbursement environment for niclosamide, adrulipase and any future drug products may change in the future and become more challenging due
to, among other reasons, policies advanced by the current or any new presidential administration, federal agencies, healthcare legislation passed by Congress, or fiscal challenges faced by all levels of government health administration
authorities.
If we or any of our independent contractors, consultants, collaborators, manufacturers, vendors or service providers fail to
comply with healthcare laws and regulations, we or they could be subject to enforcement actions, which could result in penalties and affect our ability to develop, market and sell our product candidates and may harm our reputation.
We are subject to federal, state, and foreign healthcare laws and regulations pertaining to fraud and abuse and patients’ rights. These laws and regulations include:
If our operations are found to be in violation of any such health care laws and regulations, we may be subject to penalties, including administrative, civil and
criminal penalties, monetary damages, disgorgement, imprisonment, the curtailment or restructuring of our operations, loss of eligibility to obtain approvals from the FDA, or exclusion from participation in government contracting, healthcare
reimbursement or other government programs, including Medicare and Medicaid, any of which could adversely affect our financial results. Although effective compliance programs can mitigate the risk of investigation and prosecution for violations
of these laws, these risks cannot be entirely eliminated. Any action against us for an alleged or suspected violation could cause us to incur significant legal expenses and could divert our management’s attention from the operation of our
business, even if our defense is successful. In addition, achieving and sustaining compliance with applicable laws and regulations may be costly to us in terms of money, time and resources.
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Our employees and independent contractors, including principal investigators, consultants, commercial collaborators, service
providers and other vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have an adverse effect on our results of operations.
We are exposed to the risk that our employees and independent contractors, including principal investigators, consultants, any future commercial collaborators,
service providers and other vendors may engage in misconduct or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or other unauthorized activities that violate the laws and
regulations of the FDA, EMA and other similar regulatory bodies, including those laws that require the reporting of true, complete and accurate information to such regulatory bodies; manufacturing standards; healthcare fraud and abuse, data
privacy laws and other similar laws; or laws that require the true, complete and accurate reporting of financial information or data. Activities subject to these laws also involve the improper use or misrepresentation of information obtained in
the course of clinical trials, the creation of fraudulent data in our preclinical studies or clinical trials, or illegal misappropriation of product, which could result in regulatory sanctions and cause serious harm to our reputation. It is not
always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us
from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. In addition, we are subject to the risk that a person or government could allege such fraud or other
misconduct, even if none occurred. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and financial results,
including, without limitation, the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgements, possible exclusion from participation in governmental healthcare programs, individual imprisonment,
other sanctions, contractual damages, reputational harm, diminished profits and future earnings and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
Risks Related to our Intellectual Property
Our success will depend upon
intellectual property, proprietary technologies and regulatory market exclusivity periods, and we may be unable to protect our intellectual property.
Our success will depend, in large part, on obtaining and maintaining
patent protection and trade secret protection for niclosamide and adrulipase and their formulations and uses, as well as successfully defending these patents against third-party challenges. If we or our licensors fail to appropriately
prosecute and maintain patent protection for our product candidates, our ability to develop and commercialize these product candidates may be adversely affected and we may not be able to prevent competitors from making, using and selling
competing products. This failure to properly protect the intellectual property rights relating to these product candidates could have a material adverse effect on our financial condition and results of operations.
The patent application process is subject to numerous risks and
uncertainties, and there can be no assurance that we or our partners will be successful in protecting our product candidates by obtaining and defending patents. These risks and uncertainties include the following:
● patent applications may not result in any patents being issued;
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In addition to patents, we and our partners also rely on trade secrets
and proprietary know-how. Although we have taken steps to protect our trade secrets and unpatented know-how, including entering into confidentiality agreements with third parties, and confidential information and inventions agreements with
employees, consultants and advisors, third parties may still obtain this information or come upon this same or similar information independently. We may become subject to claims that we or consultants, advisors or independent contractors that
we may engage to assist us in developing niclosamide and adrulipase have wrongfully or inadvertently disclosed to us or used trade secrets or other proprietary information of their former employers or their other clients.
If we or our partners are sued
for infringing intellectual property rights of third parties, it will be costly and time consuming, and an unfavorable outcome in that litigation would have a material adverse effect on our business.
Our success also depends upon our ability and the ability of any of
our future collaborators to develop, manufacture, market and sell our product candidates without infringing the proprietary rights of third parties. Numerous United States and foreign issued patents and pending patent applications, which are
owned by third parties, exist in the fields in which we are developing products, some of which may be directed at claims that overlap with the subject matter of our intellectual property. Because patent applications can take many years to
issue, there may be currently pending applications, unknown to us, which may later result in issued patents that our product candidates or proprietary technologies may infringe. Similarly, there may be issued patents relevant to our product
candidates of which we are not aware.
There is a substantial amount of litigation involving patent and other
intellectual property rights in the biotechnology and biopharmaceutical industries generally. If a third-party claims that we or any of our licensors, suppliers or collaborators infringe the third party’s intellectual property rights, we may
have to:
Our ability to compete may decline if we do not adequately protect our proprietary rights.
Our success depends on obtaining and maintaining proprietary rights to our product candidates for the treatment of age-related diseases, as well as successfully
defending these rights against third-party challenges. We will only be able to protect our product candidates, and their uses from unauthorized use by third parties to the extent that valid and enforceable patents, or effectively protected trade
secrets, cover them. Our ability to obtain patent protection for our product candidates is uncertain due to a number of factors, including:
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● our compositions and methods may not be patentable;
Even if we have or obtain patents covering our product candidates or compositions, we may still be barred from making, using and selling our product candidates or
technologies because of the patent rights of others. Others may have filed, and in the future may file, patent applications covering compositions or products that are similar or identical to ours. There are many issued U.S. and foreign patents
relating to chemical compounds and therapeutic products, and some of these relate to compounds we intend to commercialize. These could materially affect our ability to develop our product candidates or sell our products if approved. Because
patent applications can take many years to issue, there may be currently pending applications unknown to us that may later result in issued patents that our product candidates or compositions may infringe. These patent applications may have
priority over patent applications filed by us.
Obtaining and maintaining a patent portfolio entails significant expense and resources. Part of the expense includes periodic maintenance fees, renewal fees, annuity
fees, various other governmental fees on patents and/or applications due in several stages over the lifetime of patents and/or applications, as well as the cost associated with complying with numerous procedural provisions during the patent
application process. We may or may not choose to pursue or maintain protection for particular inventions. In addition, there are situations in which failure to make certain payments or noncompliance with certain requirements in the patent process
can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. If we choose to forgo patent protection or allow a patent application or patent to lapse
purposefully or inadvertently, our competitive position could suffer.
Legal actions to enforce our proprietary rights (including patents and trademarks) can be expensive and may involve the diversion of significant management time. In
addition, these legal actions could be unsuccessful and could also result in the invalidation of our patents or trademarks or a finding that they are unenforceable. We may or may not choose to pursue litigation or other actions against those that
have infringed on our patents or trademarks, or used them without authorization, due to the associated expense and time commitment of monitoring these activities. If we fail to protect or to enforce our intellectual property rights successfully,
our competitive position could suffer, which could harm our results of operations.
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Risks Related to our Securities
Our failure to maintain compliance with Nasdaq’s continued listing requirements could result in the delisting of our Common
Stock.
Our common stock is currently listed for trading on the Nasdaq Capital Market. We must satisfy Nasdaq Capital Market’s continued listing
requirements, including, among other things, a minimum stockholders’ equity of $2.5 million or risk delisting, which would have a material adverse effect on our business. A delisting of our common stock from the Nasdaq Capital Market could
materially reduce the liquidity of our common stock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital through alternative financing sources on terms
acceptable to us, or at all, and may result in the potential loss of confidence by investors, suppliers, customers and employees and fewer business development opportunities.
On November 26, 2021, we received notice from the Listing Qualifications Staff of Nasdaq indicating that we were not in compliance with the
minimum stockholders’ equity requirement for continued listing on the Nasdaq Capital Market, under Listing Rule 5550(b)(1) because our stockholders’ equity of $(6,969,988) as reported in our Quarterly Report on Form 10-Q for the period ended
September 30, 2021 was below the required minimum of $2.5 million, and because, as of November 24, 2021, we did not meet the alternative compliance standards, relating to the market value of listed securities of $35 million or net income from
continuing operations of $500,000 in the most recently completed fiscal year or in two of the last three most recently completed fiscal years.
On January 10, 2022, we submitted to Nasdaq a plan to regain compliance with Listing Rule 5550(b)(1). On February 15, 2022, Nasdaq notified us
that they have granted us an extension of up to 180 calendar days from November 26, 2021, or through May 25, 2022, to regain compliance. If we fail to evidence compliance upon filing our periodic report for the quarter ending June 30, 2022 with
the SEC, we may be subject to delisting. If Nasdaq determines to delist our common stock, we will have the right to appeal to a Nasdaq hearings panel.
If our common stock were delisted from Nasdaq, trading of our common stock would most likely take place on an over-the-counter market
established for unlisted securities, such as the OTCQB or the Pink Market maintained by OTC Markets Group Inc. An investor would likely find it less convenient to sell, or to obtain accurate quotations in seeking to buy, our common stock on an
over-the-counter market, and many investors would likely not buy or sell our common stock due to difficulty in accessing over-the-counter markets, policies preventing them from trading in securities not listed on a national exchange or other
reasons. In addition, as a delisted security, our common stock would be subject to SEC rules as a “penny stock,” which impose additional disclosure requirements on broker-dealers. The regulations relating to penny stocks, coupled with the
typically higher cost per trade to the investor of penny stocks due to factors such as broker commissions generally representing a higher percentage of the price of a penny stock than of a higher-priced stock, would further limit the ability of
investors to trade in our common stock. In addition, delisting could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors,
suppliers, customers and employees and fewer business development opportunities. For these reasons and others, delisting would adversely affect the liquidity, trading volume and price of our common stock, causing the value of an investment in us
to decrease and having an adverse effect on our business, financial condition and results of operations, including our ability to attract and retain qualified employees and to raise capital.
The limited public market for our securities may adversely affect an investor’s ability to liquidate an investment in us.
Although our Common Stock is currently listed on the Nasdaq Capital Market, there is limited trading activity. We can give no assurance that an active market will
develop, or if developed, that it will be sustained. If an investor acquires shares of our Common Stock, the investor may not be able to liquidate our shares should there be a need or desire to do so.
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The market price of our Common Stock may be volatile which could subject us to securities class action litigation and prevent
you from being able to sell your shares at or above the offering price.
The market price for our Common Stock has been and may continue to be volatile and subject to wide fluctuations in response to factors including the following:
● developments concerning our licensors or product manufacturers;
● conditions in the pharmaceutical or biotechnology industries;
● governmental regulation and legislation;
● variations in our anticipated or actual operating results;
● overall economic conditions.
Many of these factors are beyond our control. The stock markets in general, and the market for pharmaceutical and biotechnological companies in particular, have
historically experienced extreme price and volume fluctuations. These fluctuations often have been unrelated or disproportionate to the operating performance of these companies. These broad market and industry factors could reduce the market
price of our Common Stock, regardless of our actual operating performance.
We have never paid and do not intend to pay cash dividends on our Common Stock. As a result, capital appreciation, if any,
will be your sole source of gain.
We have never paid cash dividends on any of our capital stock and we currently intend to retain future earnings, if any, to fund the development and growth of our
business. Our Series B Preferred Stock carries a dividend rate of 9.0% per year, which is cumulative and continues to accrue on a daily basis whether or not declared and whether or not we have assets legally available therefor. We may pay such
dividends at our option either in cash or in kind in additional shares of preferred stock. We do not expect to pay any dividends in cash and have paid accrued dividends in kind in additional shares of preferred stock to date. In addition, the
terms of future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our Common Stock will be your sole source of gain for the foreseeable future.
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Provisions in our Charter, our amended and restated
by-laws and Delaware law might discourage, delay or prevent a change in control of our company or changes in our management and, therefore, depress the trading price of our Common Stock.
Provisions of our Charter, our amended and restated by-laws and Delaware law may have the
effect of deterring unsolicited takeovers or delaying or preventing a change in control of our company or changes in our management, including transactions in which our stockholders might otherwise receive a premium for their shares over then
current market prices. In addition, these provisions may limit the ability of stockholders to approve transactions that they may deem to be in their best interests. These provisions include:
● the inability of stockholders to call special meetings;
In addition, Section 203 of the DGCL prohibits a publicly held Delaware corporation from engaging in a business combination with an interested stockholder, generally
a person which together with its affiliates owns, or within the last three years, has owned 15% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner.
The existence of the foregoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our
Common Stock. They could also deter potential acquirers of our company, thereby reducing the likelihood that you could receive a premium for your Common Stock in an acquisition.
If securities or industry analysts do not publish research or reports about our business, if they adversely change their
recommendations regarding our shares or if our results of operations do not meet their expectations, our share price and trading volume could decline.
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The trading market for our shares is influenced by the research and reports that industry or securities analysts publish about us or our business. We do not have any
control over these analysts. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our share price or trading volume
to decline. Moreover, if one or more of the analysts who cover us downgrade our stock, or if our results of operations do not meet their expectations, our share price could decline.
We currently have Series B Preferred Stock outstanding and may be required to issue additional shares of
our Series C Preferred Stock upon the exercise of the Series B Exchange Right. Our certificate of incorporation authorizes our Board to create new series of preferred stock without further approval by our stockholders, which could adversely
affect the rights of the holders of our Common Stock.
Our Board has the authority to fix and determine the relative rights and preferences of preferred stock. Our Board also has the authority to
issue preferred stock without further stockholder approval.
We currently have approximately 645.20 shares of Series B Preferred Stock outstanding with a
stated value of $7,700 per share, which are currently convertible at the holder’s option at any time, together with any accrued but unpaid dividends thereon, into shares of Common Stock at a conversion price of $7.70, subject to certain
adjustments.
Our Series B Preferred Stock gives its holders the preferred right to our assets upon liquidation and the right to receive dividend payments at
9.00% per annum before dividends are distributed to the holders of Common Stock, among other things. In addition, in the event we effect any issuance of Common Stock or Common Stock equivalents for cash consideration, or a combination of units
thereof, the holders of the Series B Preferred Stock have the right, subject to certain exceptions, at their option, to exchange (in lieu of cash subscription payments) all or some of the Series B Preferred Stock then held (with a value per share
of the Series B Preferred Stock equal to the Series B stated value per share of $7,700 plus accrued and unpaid dividends thereon) for any securities or units issued in such issuance on a dollar-for-dollar basis. The holders of the Series B
Preferred Stock, voting as a separate class, also have customary consent rights with respect to certain corporate actions, including the issuance of an increased number of shares of Series B Preferred Stock, the establishment of any capital stock
ranking senior to or on parity the Series B Preferred Stock as to dividends or upon liquidation, the incurrence of indebtedness, and certain changes to our Charter or Bylaws including other actions.
Our Board created a series of preferred stock designated as Series C Preferred Stock (“Series C Preferred Stock”), of which
57,000 shares are authorized for issuance, none of which are currently outstanding. Pursuant to the Series B Exchange Right, we may be required to issue shares of Series C Preferred Stock in certain circumstances.
Our obligations to the holders of the Series B Preferred Stock and any future holders of any additional series of preferred stock we may issue
could limit our ability to obtain additional financing or increase our borrowing costs, which could have an adverse effect on our financial condition and hinder the accomplishment of our corporate goals.
In addition to the Series B Preferred Stock and Series C Preferred Stock, our Board could authorize the issuance of additional series of
preferred stock with such rights preferential to the rights of our Common Stock, including the issuance of a series of preferred stock that has greater voting power than our Common Stock or that is convertible into our Common Stock, which could
decrease the relative voting power of our Common Stock or result in dilution to our existing stockholders.
As a result of the “most favored nation” in the Certificate of Designations, Powers, Preferences and
Rights of the Series B Preferred Stock (the “Series B Certificate of Designations”), we may be required to issue additional securities to the investors who purchased shares of our Series B Preferred Stock and related warrants to purchase shares
of our Common Stock in a private placement in July 2020.
On July 16, 2020, we consummated a private placement offering (the “Series B Private Placement”) in which we issued an
aggregate of approximately 2,912.58 shares of Series B Preferred Stock, at a price of $7,700.00 per share, initially convertible into an aggregate of 2,912,576 shares of Common Stock at $7.70 per share, together with warrants to purchase an aggregate of 1,456,283 shares of Common Stock at an exercise price of $8.50 per share. The Series B Preferred Stock carries a cumulative dividend at a rate of 9.0% per annum, payable at our option
either in cash or in kind in additional shares of Series B Preferred Stock.
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As a result of previous conversions and exchanges, as of March 28, 2022, 645.20 shares of Series B Preferred Stock were outstanding, with an
aggregate stated value of approximately $5,100,000, plus accrued and unpaid dividends through such date of approximately $519,000, and a conversion price of $7.70 per share.
Under the Series B Certificate of Designations, in the event we effect any issuance of Common Stock or Common Stock equivalents for cash
consideration, or a combination of units thereof (a “Subsequent Financing”), each holder of the Series B Preferred Stock has the right to exchange the stated value, plus accrued and unpaid dividends, of
the Series B Preferred Stock for any securities issued in the Subsequent Financing, in lieu of any cash subscription payments therefor (the “Series B Exchange Right”). As a result of our registered direct
offering and private placement consummated in January 2021, as of March 28, 2022, we may be required to issue in the aggregate up to 7,047.48 additional shares of Series C Preferred Stock that would be convertible into up to 704,750 underlying
shares of common stock, together with warrants to purchase up to an additional 704,750 shares of our common stock, to any holders of Series B Preferred Stock who elect to exercise their Series B Exchange Right in connection with that offering.
Alternatively, as a result of sales of additional shares of common stock made on November 30, 2021, at a price of $2.1657 per share, pursuant to our At The Market Agreement dated May 26, 2021 (the “ATM Agreement”)
(such price being the lowest price per share sold under the ATM Agreement to date), as of March 28, 2022, we may be required to issue in aggregate up to 2,020,785 shares of common stock, with no warrants, to any holders of Series B Preferred
Stock who elect to exercise their Series B Exchange Right into shares of common stock. In any event, we anticipate that we would convert any shares of Series C Preferred Stock to be issued pursuant to the Series B Exchange Right into underlying
shares of common stock immediately upon issuance.
In February 2022, we entered into Waivers with certain holders of Series B Preferred Stock, pursuant to which we agreed to pay a cash waiver fee equal to ten percent of the stated value of the shares of Series B
Preferred Stock held by such holder (other than holders who are insiders of our company), and such holder agreed to irrevocably waive its Series B Exchange Right with respect to any Subsequent Financing that occurs from and after the date of the
Waiver until December 31, 2022. However, as of February 18, 2022, holders of Series B Preferred Stock holding approximately $2.21 million of stated value of the shares of Series B Preferred Stock outstanding did not enter into a Waiver with us.
Accordingly, such non-waiving holders may exercise their Series B Exchange Right in connection with the offerings of the Company through December 31, 2022. However, as of March 28, 2022, holders of Series B Preferred Stock holding approximately
$2.1 million of stated value of the shares of Series B Preferred Stock outstanding did not enter into a Waiver with us. Accordingly, such non-waiving holders may exercise their Series B Exchange Right in connection with the March 2022 Offering.
If the holders of Series B Preferred Stock who did not enter into Waivers with us elect to exchange into the March 2022 Offering, up to 1,482,153 additional shares of Common Stock may be issued pursuant to the Series B Exchange Right in excess of
amounts currently underlying the Series B Preferred Stock and up to 1,671,395 shares of Common Stock issuable upon exercise of the warrants.
If the holders of our Series B Preferred Stock exercise their Series B Exchange Rights, it will result in certain dilution to our stockholders,
and would afford our stockholders a smaller percentage interest in our voting power, liquidation value and aggregate book value. The sale or resale of the Common Stock issued upon conversion of the preferred stock could cause the market price of
our Common Stock to decline. In addition, the issuance of Common Stock upon the exercise of the Investor Warrants will result in similar dilution to our stockholders. This dilution, or the possibility that it may occur, may make it more difficult
for us to sell equity securities in the future at a time and a price that we deem appropriate.
To raise additional capital, we may in the future offer additional shares of common stock or other securities convertible into or exchangeable
for our common stock at prices and other terms that may be more favorable to investors than the terms of our prior offerings that may have been previously approved by our stockholders. As a result, holders of Series B Preferred Stock may become
entitled to exercise their Series B Exchange Right in connection with that future offering. This may result in certain dilution to our stockholders and could afford our stockholders a smaller percentage interest in our voting power, liquidation
value and aggregate book value. The existence of the Series B Exchange Right may make it more difficult for us to consummate future offerings of our securities at a time and a price that we deem appropriate and may trigger the obligation for the