ITEM 1A. RISK FACTORS
We
are providing the following cautionary discussion of risk factors and uncertainties that we believe are relevant to our business.
These are factors that, individually or in the aggregate, we think could cause our actual results to differ materially from expected
or historical results and our forward-looking statements. We note these factors for investors as permitted by Section 21E of the
Securities Exchange Act, and Section 27A of the Securities Act. You should understand that it is not possible to predict or identify
all such factors. Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties
that may impact our business. Moreover, we operate in a competitive and rapidly changing environment. New factors emerge from
time to time, and it is not possible to predict the impact of all of these factors on our business, financial condition or results
of operations. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information,
future events, or otherwise.
Risk
Factors Summary
The
following is a summary of some of the Company’s most important risks and uncertainties that could materially adversely affect
our business, financial condition, and results of operations. You should read this summary together with the more detailed description
of each risk factor. Additional discussion of the risks summarized in this Risk Factors Summary, and other risks that we face,
can be found below under the heading “Risk Factors” and should be carefully considered, together with other information
in this Form 10-K and our other filings with the SEC, before making an investment in our securities.
Risk Related to Our Business and Operations
Risks
Related to Intellectual Property
Risks
Related to Our Securities
● Adverse capital and credit market conditions could affect our liquidity.
RISKS
RELATED TO OUR BUSINESS AND OPERATIONS
We
have a history of significant losses from operations and expect to continue to incur significant losses for the foreseeable future.
Since
our inception, our expenses have substantially exceeded our revenue, resulting in continuing losses and an accumulated deficit
of $312 million at December 31, 2020. For the years ended December 31, 2020 and 2019, we incurred net losses of $21.5 million
and $16.9 million, respectively. We currently have no product revenue and do not expect to generate any product revenue for the
foreseeable future. Because we are committed to continuing our product research, development, clinical trial and commercialization
programs, we will continue to incur significant operating losses unless and until we complete the development of GEN-1 and other
new product candidates and these product candidates have been clinically tested, approved by the U.S. FDA and successfully marketed.
The amount of future losses is uncertain. Our ability to achieve profitability, if ever, will depend on, among other things, us
or our collaborators successfully developing product candidates, obtaining regulatory approvals to market and commercialize product
candidates, manufacturing any approved products on commercially reasonable terms, establishing a sales and marketing organization
or suitable third-party alternatives for any approved product and raising sufficient funds to finance business activities. If
we or our collaborators are unable to develop and commercialize one or more of our product candidates or if sales revenue from
any product candidate that receives approval is insufficient, we will not achieve profitability, which could have a material adverse
effect on our business, financial condition, results of operations and prospects.
We
do not expect to generate revenue for the foreseeable future.
We
have devoted our resources to developing a new generation of products and will not be able to market these products until we have
completed clinical trials and obtain all necessary governmental approvals. Our product candidates, including GEN-1, are still
in various stages of development and trials and cannot be marketed until we have completed clinical testing and obtained necessary
governmental approval. Following our announcement on February 11, 2021 that the Company’s Phase III OPTIMA Study failed
to meet its primary endpoint of OS, we do not expect to generate revenue from ThermoDox® for the foreseeable future.
GEN-1 is currently in a Phase II trial for the treatment of ovarian cancer. Our delivery technology platforms, TheraPlas and TheraSilence,
are in preclinical stages of development. Accordingly, our revenue sources are, and will remain, extremely limited until our product
candidates are clinically tested, approved by the FDA or foreign regulatory agencies and successfully marketed. We cannot guarantee
that any of our product candidates will be approved by the FDA or any foreign regulatory agency or marketed, successfully or otherwise,
at any time in the foreseeable future or at all.
Drug
development is an inherently uncertain process with a high risk of failure at every stage of development. Our lead drug candidate,
ThermoDox®, failed to meet its primary endpoint in two Phase III clinical trials.
On
January 31, 2013, we announced that ThermoDox® in combination with RFA failed to meet the primary endpoint of
the Phase III clinical trial for primary liver cancer, known as the HEAT study. On July 13, 2020, the Company announced that
it has received a recommendation from the independent DMC to consider stopping the global Phase III OPTIMA Study of
ThermoDox® in combination with RFA for the treatment of HCC, or primary liver cancer. The recommendation was
made following the second pre-planned interim safety and efficacy analysis by the DMC on July 9, 2020. The DMC’s
analysis found that the pre-specified boundary for stopping the trial for futility of 0.900 was crossed with an actual value
of 0.903. The Company followed the advice of the DMC and considered its options to either stop the study or continue to
follow patients after a thorough review of the data, and an evaluation of the probability of success. On February 11, 2021,
the Company issued a letter to shareholders stating the Company was notifying all clinical sites to discontinue
following patients in the OPTIMA Study.
Preclinical
testing and clinical trials are long, expensive, and highly uncertain processes and failure can unexpectedly occur at any stage
of clinical development, as evidenced by the failure of ThermoDox® to meet its primary endpoint in the HEAT Study
and the OPTIMA Study. Drug development is inherently risky and clinical trials take us several years to complete. The start or
end of a clinical trial is often delayed or halted due to changing regulatory requirements, manufacturing challenges, required
clinical trial administrative actions, slower than anticipated patient enrollment, changing standards of care, availability, or
prevalence of use of a comparator drug or required prior therapy, clinical outcomes including insufficient efficacy, safety concerns,
or our own financial constraints. 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 a belief
that subjects participating in such trials are being exposed to unacceptable health risks or adverse side effects. 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. The failure of one or more of our drug candidates or development programs could have a material adverse effect on
our business, financial condition, and results of operations.
We
will need to raise additional capital to fund our planned future operations, and we may be unable to secure such capital without
dilutive financing transactions. If we are not able to raise additional capital, we may not be able to complete the development,
testing and commercialization of our product candidates.
We
have not generated significant revenue and have incurred significant net losses in each year since our inception. For the year
ended December 31, 2020, we incurred a net loss of $21.5 million. We have incurred approximately $312 million of cumulative
net losses. As of December 31, 2020, we had cash and cash equivalents of $17.2 million.
We have substantial future capital requirements
to continue our research and development activities and advance our product candidates through various development stages. We
are unable to estimate the duration and completion costs of our research and development projects or when, if ever, and to what
extent we will receive cash inflows from the commercialization and sale of a product.. Our inability to complete any of our research
and development activities, preclinical studies or clinical trials in a timely manner or our failure to enter into collaborative
agreements when appropriate could significantly increase our capital requirements and could adversely impact our liquidity. While
our estimated future capital requirements are uncertain and could increase or decrease as a result of many factors, including
the extent to which we choose to advance our research, development activities, preclinical studies and clinical trials, or if
we are in a position to pursue manufacturing or commercialization activities, we will need significant additional capital to develop
our product candidates through development and clinical trials, obtain regulatory approvals and manufacture and commercialize
approved products, if any. We do not know whether we will be able to access additional capital when needed or on terms favorable
to us or our stockholders. Our inability to raise additional capital, or to do so on terms reasonably acceptable to us, would
jeopardize the future success of our business.
If
we do not obtain or maintain FDA and foreign regulatory approvals for our drug candidates on a timely basis, or at all, or if
the terms of any approval impose significant restrictions or limitations on use, we will be unable to sell those products and
our business, results of operations and financial condition will be negatively affected.
To
obtain regulatory approvals from the FDA and foreign regulatory agencies, we must conduct clinical trials demonstrating that our
products are safe and effective. We may need to amend ongoing trials, or the FDA and/or foreign regulatory agencies may require
us to perform additional trials beyond those we planned. The testing and approval process requires substantial time, effort and
resources, and generally takes a number of years to complete. The time to complete testing and obtaining approvals is uncertain,
and the FDA and foreign regulatory agencies have substantial discretion, at any phase of development, to terminate clinical studies,
require additional clinical studies or other testing, delay or withhold approval, and mandate product withdrawals, including recalls.
In addition, our drug candidates may have undesirable side effects or other unexpected characteristics that could cause us or
regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restricted label or the delay or
denial of regulatory approval by regulatory authorities.
Even
if we receive regulatory approval of a product, the approval may limit the indicated uses for which the drug may be marketed.
The failure to obtain timely regulatory approval of product candidates, the imposition of marketing limitations, or a product
withdrawal would negatively impact our business, results of operations and financial condition. Even if we receive approval, we
will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional
expense and subject us to restrictions, withdrawal from the market, or penalties if we fail to comply with applicable regulatory
requirements or if we experience unanticipated problems with our product candidates, when and if approved. Finally, even if we
obtain FDA approval of any of our product candidates, we may never obtain approval or commercialize such products outside of the
U.S., given that we may be subject to additional or different regulatory burdens in other markets. This could limit our ability
to realize their full market potential.
Our
industry is highly regulated by the FDA and comparable foreign regulatory agencies. We must comply with extensive, strictly enforced
regulatory requirements to develop, obtain, and maintain marketing approval for any of our product candidates.
Securing
FDA or comparable foreign regulatory approval requires the submission of extensive preclinical and clinical data and supporting
information for each therapeutic indication to establish the product candidate’s safety and efficacy for its intended use.
It takes years to complete the testing of a new drug or biological product and development delays and/or failure can occur at
any stage of testing. Any of our present and future clinical trials may be delayed, halted, not authorized, or approval of any
of our products may be delayed or may not be obtained due to any of the following:
In
addition, information generated during the clinical trial process is susceptible to varying interpretations that could delay,
limit, or prevent marketing approval at any stage of the approval process. Moreover, early positive preclinical or clinical trial
results may not be replicated in later clinical trials. As more product candidates within a particular class of drugs proceed
through clinical development to regulatory review and approval, the amount and type of clinical data that may be required by regulatory
authorities may increase or change. Failure to demonstrate adequately the quality, safety, and efficacy of any of our product
candidates would delay or prevent marketing approval of the applicable product candidate. We cannot assure you that if clinical
trials are completed, either we or our potential collaborators will submit applications for required authorizations to manufacture
or market potential products or that any such application will be reviewed and approved by appropriate regulatory authorities
in a timely manner, if at all.
The outbreak, duration and severity
of the novel coronavirus disease, COVID-19, pandemic could adversely impact our business, including our preclinical
studies and clinical trials.
In January 2020, the WHO declared COVID-19
a global pandemic, and the U.S. Department of Health and Human Services declared a public health emergency to aid the U.S. healthcare
community in responding to COVID-19. Governments and businesses around the world have taken unprecedented actions to mitigate
the spread of COVID-19, including, but not limited to, shelter-in-place orders, quarantines, and significant restrictions on travel,
as well as restrictions that prohibit many employees from going to work. Uncertainty with respect to the economic impacts of the
pandemic has introduced significant volatility in the financial markets. The Company did not observe significant impacts on its
business or results of operations for the year ended December 31, 2020 due to the global emergence of COVID-19.
While the extent to which COVID-19 impacts the Company’s future results will depend on future developments, the pandemic
and associated economic impacts could result in a material impact to the Company’s future financial condition, results of
operations and cash flows.
The
Company’s ability to raise additional capital may be adversely impacted by potential worsening global economic conditions
and the recent disruptions to, and volatility in, financial markets in the U.S. and worldwide resulting from the ongoing COVID-19
pandemic.
The
disruptions caused by COVID-19 may also disrupt preclinical studies, the clinical trials process and enrollment of patients. This
may delay commercialization efforts. The Company is currently monitoring its operating activities in light of these events and
it is reasonably possible that the virus could have a negative effect on the Company’s financial condition and results of
operations. The specific impact is not readily determinable as of the date of this report.
While,
as of the date of this report, we have not experienced any material disruptions to the execution of the clinical trials and the
research and development activities that we currently have underway, as a result of the pandemic we may experience disruptions
that could severely impact research and development timelines and outcomes, including, but not limited to:
● delays or difficulties in enrolling patients in our clinical trials;
In
addition, the trading prices for common stock of other biopharmaceutical companies have been highly volatile as a result of the
COVID-19 pandemic. The COVID-19 pandemic continues to rapidly evolve. The extent to which the pandemic impacts our business,
preclinical studies and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted
with confidence, such as the ultimate geographic spread of the disease, the duration of the pandemic, travel restrictions and
social distancing in the U.S. and other countries, business closures or business disruptions and the effectiveness of actions
taken in the U.S. and other countries to diagnose, contain and treat the disease. If we or any of the third parties with whom
we engage were to experience shutdowns or other business disruptions, our ability to conduct our business and development activities
in the manner and on the timelines presently planned could be materially and negatively impacted. There can be no assurance that
any such disruptions or delays will not materially adversely impact our business, results of operations, access to financial resources
and our financial condition.
New
gene-based products for therapeutic applications are subject to extensive regulation by the FDA and comparable agencies in other
countries. The precise regulatory requirements with which we will have to comply, now and in the future, are uncertain due to
the novelty of the gene-based products we are developing.
The
regulatory approval process for novel product candidates such as ours can be significantly more expensive and take longer than
for other, better known or more extensively studied product candidates. Limited data exist regarding the safety and efficacy of
DNA-based therapeutics compared with conventional therapeutics, and government regulation of DNA-based therapeutics is evolving.
Regulatory requirements governing gene and cell therapy products have changed frequently and may continue to change in the future.
The FDA has established the Office of Cellular, Tissue and Gene Therapies within its Center for Biologics Evaluation and Research
(CBER), to consolidate the review of gene therapy and related products, and has established the Cellular, Tissue and Gene Therapies
Advisory Committee to advise CBER in its review. It is difficult to determine how long it will take or how much it will cost to
obtain regulatory approvals for our product candidates in either the U.S. or the European Union or how long it will take to commercialize
our product candidates.
Adverse
events or the perception of adverse events in the field of gene therapy generally, or with respect to our product candidates specifically,
may have a particularly negative impact on public perception of gene therapy and result in greater governmental regulation, including
future bans or stricter standards imposed on gene-based therapy clinical trials, stricter labeling requirements and other regulatory
delays in the testing or approval of our potential products. For example, if we were to engage an NIH-funded institution to conduct
a clinical trial, we may be subject to review by the NIH Office of Biotechnology Activities’ Recombinant DNA Advisory Committee
(the RAC). If undertaken, RAC can delay the initiation of a clinical trial, even if the FDA has reviewed the trial design and
details and approved its initiation. Conversely, the FDA can put an IND application on a clinical hold even if the RAC has provided
a favorable review or an exemption from in-depth, public review. Such committee and advisory group reviews and any new guidelines
they promulgate may lengthen the regulatory review process, require us to perform additional studies, increase our development
costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of our product
candidates or lead to significant post-approval limitations or restrictions. Any increased scrutiny could delay or increase the
costs of our product development efforts or clinical trials.
Even
if our products receive regulatory approval, they may still face future development and regulatory difficulties. Government regulators
may impose significant restrictions on a product’s indicated uses or marketing or impose ongoing requirements for potentially
costly post-approval studies. This governmental oversight may be particularly strict with respect to gene-based therapies.
Serious
adverse events, undesirable side effects or other unexpected properties of our product candidates may be identified during development
or after approval, which could lead to the discontinuation of our clinical development programs, refusal by regulatory authorities
to approve our product candidates or, if discovered following marketing approval, revocation of marketing authorizations or limitations
on the use of our product candidates thereby limiting the commercial potential of such product candidate.
As
we continue our development of our product candidates and initiate clinical trials of our additional product candidates, serious
adverse events, undesirable side effects or unexpected characteristics may emerge causing us to abandon these product candidates
or limit their development to more narrow uses or subpopulations in which the serious adverse events, undesirable side effects
or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective.
Even
if our product candidates initially show promise in these early clinical trials, the side effects of drugs are frequently only
detectable after they are tested in large, Phase 3 clinical trials or, in some cases, after they are made available to patients
on a commercial scale after approval. Sometimes, it can be difficult to determine if the serious adverse or unexpected side effects
were caused by the product candidate or another factor, especially in oncology subjects who may suffer from other medical conditions
and be taking other medications. If serious adverse or unexpected side effects are identified during development and are determined
to be attributed to our product candidate, we may be required to develop a Risk Evaluation and Mitigation Strategy (REMS) to mitigate
those serious safety risks, which could impose significant distribution and use restrictions on our products.
In
addition, drug-related side effects could also affect subject recruitment or the ability of enrolled subjects to complete the
trial, result in potential product liability claims, reputational harm, withdrawal of approvals, a requirement to include additional
warnings on the label or to create a medication guide outlining the risks of such side effects for distribution to patients. It
can also result in patient harm, liability lawsuits, and reputational harm. Any of these occurrences could prevent us from achieving
or maintaining market acceptance and may harm our business, financial condition, and prospects significantly.
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 and exclusion criteria defined in the protocol;
● the willingness or availability of patients to participate in our trials;
● the proximity of patients to trial sites;
● the design of the trial;
● our ability to obtain and maintain patient informed consents; and
In
addition, our clinical trials will compete with other clinical trials for product candidates that are in the same therapeutic
areas as our product candidates, and this competition will reduce the number and types of patients available to us, because some
patients who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one of our competitors.
Since the number of qualified clinical investigators is limited, we expect to conduct some of our clinical trials at the same
clinical trial sites that some of our competitors use, which will reduce the number of patients who are available for our clinical
trials in such clinical trial site. Certain of our planned clinical trials may also involve invasive procedures, which may lead
some patients to drop out of trials to avoid these follow-up procedures.
Further,
timely enrollment in clinical trials is reliant on clinical trial sites which may be adversely affected by global health matters,
including, among other things, pandemics. For example, our clinical trial sites may be located in regions currently being affected
by the COVID-19 coronavirus. Some factors from the COVID-19 coronavirus pandemic or any future pandemics that we believe
may adversely affect enrollment in our trials include:
These
and other factors arising from the COVID-19 coronavirus could worsen in countries that are already afflicted with the virus or
could continue to spread to additional countries, each of which may further adversely impact our clinical trials. The global pandemic
of the COVID-19 coronavirus continues to evolve and the conduct of our trials may continue to be adversely affected, despite
efforts to mitigate this impact.
We
may not successfully engage in future strategic transactions, which could adversely affect our ability to develop and commercialize
product candidates, impact our cash position, increase our expense and present significant distractions to our management.
In
the future, we may consider strategic alternatives intended to further the development of our business, which may include acquiring
businesses, technologies, or products, out- or in-licensing product candidates or technologies or entering into a business combination
with another company. Any strategic transaction may require us to incur non-recurring or other charges, increase our near- and
long-term expenditures and pose significant integration or implementation challenges or disrupt our management or business. These
transactions would entail numerous operational and financial risks, including exposure to unknown liabilities, disruption of our
business and diversion of our management’s time and attention in order to manage a collaboration or develop acquired products,
product candidates or technologies, incurrence of substantial debt or dilutive issuances of equity securities to pay transaction
consideration or costs, higher than expected collaboration, acquisition or integration costs, write-downs of assets or goodwill
or impairment charges, increased amortization expenses, difficulty and cost in facilitating the collaboration or combining the
operations and personnel of any acquired business, impairment of relationships with key suppliers, manufacturers or customers
of any acquired business due to changes in management and ownership and the inability to retain key employees of any acquired
business. Accordingly, although there can be no assurance that we will undertake or successfully complete any transactions of
the nature described above, any transactions that we do complete may be subject to the foregoing or other risks and have a material
adverse effect on our business, results of operations, financial condition and prospects. Conversely, any failure to enter any
strategic transaction that would be beneficial to us could delay the development and potential commercialization of our product
candidates and have a negative impact on the competitiveness of any product candidate that reaches market.
Strategic
transactions, such as acquisitions, partnerships, and collaborations, including the EGEN asset acquisition, involve numerous risks,
including:
● uncertainties in identifying and pursuing acquisition targets;
● the diversion of management’s attention from other business concerns;
We
may never realize the perceived benefits of the EGEN asset acquisition or potential future transactions. We cannot assure you
that we will be successful in overcoming problems encountered in connection with any transactions, and our inability to do so
could significantly harm our business, results of operations and financial condition. These transactions could dilute a stockholder’s
investment in us and cause us to incur debt, contingent liabilities and amortization/impairment charges related to intangible
assets, all of which could materially and adversely affect our business, results of operations and financial condition. In addition,
our effective tax rate for future periods could be negatively impacted by the EGEN asset acquisition or potential future transactions.
We
rely on third parties to conduct all of our clinical trials. If these third parties are unable to carry out their contractual
duties in a manner that is consistent with our expectations, comply with budgets and other financial obligations or meet expected
deadlines, we may not receive certain development milestone payments or be able to obtain regulatory approval for or commercialize
our product candidates in a timely or cost-effective manner.
We
do not independently conduct clinical trials for our drug candidates. We rely, and expect to continue to rely, on third-party
clinical investigators, clinical research organizations (CROs), clinical data management organizations and consultants to design,
conduct, supervise and monitor our clinical trials.
Because
we do not conduct our own clinical trials, we must rely on the efforts of others and have reduced control over aspects of these
activities, including, the timing of such trials, the costs associated with such trials and the procedures that are followed for
such trials. We do not expect to significantly increase our personnel in the foreseeable future and may continue to rely on third
parties to conduct all of our future clinical trials. If we cannot contract with acceptable third parties on commercially reasonable
terms or at all, if these third parties are unable to carry out their contractual duties or obligations in a manner that is consistent
with our expectations or meet expected deadlines, if they do not carry out the trials in accordance with budgeted amounts, if
the quality or accuracy of the clinical data they obtain is compromised due to their failure to adhere to our clinical protocols
or for other reasons, or if they fail to maintain compliance with applicable government regulations and standards, our clinical
trials may be extended, delayed or terminated or may become significantly more expensive, we may not receive development milestone
payments when expected or at all, and we may not be able to obtain regulatory approval for or successfully commercialize our product
candidates.
Despite
our reliance on third parties to conduct our clinical trials, we are ultimately responsible for ensuring that each of our clinical
trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDA requires
clinical trials to be conducted in accordance with good clinical practices for conducting, recording and reporting the results
of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality
of clinical trial participants are protected. We also are required to register ongoing clinical trials and post the results of
completed clinical trials on a government-sponsored database, ClinicalTrials.gov, within certain timeframes. Failure to
do so can result in fines, adverse publicity and civil and criminal sanctions. Our reliance on third parties that we do not control
does not relieve us of these responsibilities and requirements. If we or a third party we rely on fails to meet these requirements,
we may not be able to obtain, or may be delayed in obtaining, marketing authorizations for our drug candidates and will not be
able to, or may be delayed in our efforts to, successfully commercialize our drug candidates. This could have a material adverse
effect on our business, financial condition, results of operations and prospects.
Because
we rely on third party manufacturing and supply partners, our supply of research and development, preclinical and clinical development
materials may become limited or interrupted or may not be of satisfactory quantity or quality.
We
rely on third party supply and manufacturing partners to supply the materials and components for, and manufacture, our research
and development, preclinical and clinical trial drug supplies. We do not own manufacturing facilities or supply sources for such
components and materials. There can be no assurance that our supply of research and development, preclinical and clinical development
drugs and other materials will not be limited, interrupted, restricted in certain geographic regions or of satisfactory quality
or continue to be available at acceptable prices. Suppliers and manufacturers must meet applicable manufacturing requirements
and undergo rigorous facility and process validation tests required by FDA and foreign regulatory authorities in order to comply
with regulatory standards, such as current cGMP. In the event that any of our suppliers or manufacturers fails to comply with
such requirements or to perform its obligations to us in relation to quality, timing or otherwise, or if our supply of components
or other materials becomes limited or interrupted for other reasons, we may be forced to manufacture the materials ourselves,
for which we currently do not have the capabilities or resources, or enter into an agreement with another third party, which we
may not be able to do on reasonable terms, if at all.
Our
business is subject to numerous and evolving state, federal and foreign regulations and we may not be able to secure the government
approvals needed to develop and market our products.
Our
research and development activities, pre-clinical tests and clinical trials, and ultimately the manufacturing, marketing and labeling
of our products, are all subject to extensive regulation by the FDA and foreign regulatory agencies. Pre-clinical testing and
clinical trial requirements and the regulatory approval process typically take years and require the expenditure of substantial
resources. Additional government regulation may be established that could prevent or delay regulatory approval of our product
candidates. Delays or rejections in obtaining regulatory approvals would adversely affect our ability to commercialize any product
candidates and our ability to generate product revenue or royalties.
The
FDA and foreign regulatory agencies require that the safety and efficacy of product candidates be supported through adequate and
well-controlled clinical trials. If the results of pivotal clinical trials do not establish the safety and efficacy of our product
candidates to the satisfaction of the FDA and other foreign regulatory agencies, we will not receive the approvals necessary to
market such product candidates. Even if regulatory approval of a product candidate is granted, the approval may include significant
limitations on the indicated uses for which the product may be marketed.
We
are subject to the periodic inspection of our clinical trials, facilities, procedures and operations and/or the testing of our
products by the FDA to determine whether our systems and processes, or those of our vendors and suppliers, are in compliance with
FDA regulations. Following such inspections, the FDA may issue notices on Form 483 and warning letters that could cause us to
modify certain activities identified during the inspection.
Failure
to comply with the FDA and other governmental regulations can result in fines, unanticipated compliance expenditures, recall or
seizure of products, total or partial suspension of production and/or distribution, suspension of the FDA’s review of product
applications, enforcement actions, injunctions and criminal prosecution. Under certain circumstances, the FDA also has the authority
to revoke previously granted product approvals. Although we have internal compliance programs, if these programs do not meet regulatory
agency standards or if our compliance is deemed deficient in any significant way, it could have a material adverse effect on the
Company.
We
are also subject to recordkeeping and reporting regulations. These regulations require, among other things, the reporting to the
FDA of adverse events alleged to have been associated with the use of a product or in connection with certain product failures.
Labeling and promotional activities also are regulated by the FDA. We must also comply with record keeping requirements as well
as requirements to report certain adverse events involving our products. The FDA can impose other post-marketing controls on us
as well as our products including, but not limited to, restrictions on sale and use, through the approval process, regulations
and otherwise.
Many
states in which we do or may do business, or in which our products may be sold, if at all, impose licensing, labeling or certification
requirements that are in addition to those imposed by the FDA. There can be no assurance that one or more states will not impose
regulations or requirements that have a material adverse effect on our ability to sell our products.
In
many of the foreign countries in which we may do business or in which our products may be sold, we will be subject to regulation
by national governments and supranational agencies as well as by local agencies affecting, among other things, product standards,
packaging requirements, labeling requirements, import restrictions, tariff regulations, duties and tax requirements. There can
be no assurance that one or more countries or agencies will not impose regulations or requirements that could have a material
adverse effect on our ability to sell our products.
We
have obtained Orphan Drug Designation for GEN-1 ThermoDox® and may seek Orphan Drug Designation for other product candidates,
but we may be unsuccessful or may be unable to maintain the benefits associated with Orphan Drug Designation, including the potential
for market exclusivity.
GEN-1
has been granted orphan drug designation for ovarian cancer in both the U.S. and Europe. ThermoDox® has been granted
orphan drug designation for primary liver cancer in both the U.S. and Europe. Regulatory authorities in some jurisdictions, including
the U.S. and Europe, may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act,
the FDA may designate a drug as an orphan drug if it is a drug intended to treat a rare disease or condition, which is generally
defined as a patient population of fewer than 200,000 individuals annually in the U.S., or a patient population greater than 200,000
in the U.S. where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the
U.S.
Even
though we have obtained Orphan Drug Designation for GEN-1 and ThermoDox® and may obtain such designation
for other product candidates in specific indications, we may not be the first to obtain marketing approval of these product candidates
for the orphan-designated indication due to the uncertainties associated with developing pharmaceutical products. In addition,
exclusive marketing rights in the U.S. may be limited if we seek approval for an indication broader than the orphan-designated
indication or may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer
is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition. Further,
even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition
because different drugs with different active moieties can be approved for the same condition. Even after an orphan product is
approved, the FDA can subsequently approve the same drug with the same active moiety for the same condition if the FDA concludes
that the later drug is safer, more effective or makes a major contribution to patient care. Orphan Drug Designation neither shortens
the development time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval
process.
Fast
Track designation may not actually lead to a faster development or regulatory review or approval process.
Both GEN-1 and ThermoDox® have
received U.S. FDA Fast Track Designation in 2021 and 2010, respectively. However, we may not experience a faster
development process, review, or approval compared to conventional FDA procedures. The FDA may withdraw our Fast-Track designation
if the FDA believes that the designation is no longer supported by data from our clinical or pivotal development program. Our
Fast-Track designation does not guarantee that we will qualify for or be able to take advantage of the FDA’s expedited review
procedures or that any application that we may submit to the FDA for regulatory approval will be accepted for filing or ultimately
approved.
Our
relationships with healthcare providers and physicians and third-party payors will be subject to applicable anti-kickback, fraud
and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual
damages, reputational harm and diminished profits and future earnings.
Healthcare
providers, physicians and third-party payors in the U.S. and elsewhere play a primary role in the recommendation and prescription
of biopharmaceutical products. Arrangements with third-party payors and customers can expose biopharmaceutical manufacturers to
broadly applicable fraud and abuse and other healthcare laws and regulations, including, without limitation, the federal Anti-Kickback
Statute and the federal False Claims Act, which may constrain the business or financial arrangements and relationships through
which such companies sell, market and distribute biopharmaceutical products. In particular, the research of our product candidates,
as well as the promotion, sales and marketing of healthcare items and services, as well as certain business arrangements in the
healthcare industry, are subject to extensive laws designed to prevent fraud, kickbacks, self-dealing and other abusive practices.
These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, structuring
and commission(s), certain customer incentive programs and other business arrangements generally. Activities subject to these
laws also involve the improper use of information obtained in the course of patient recruitment for clinical trials. The applicable
federal, state and foreign healthcare laws and regulations laws that may affect our ability to operate include, but are not limited
to:
The
distribution of biopharmaceutical products is subject to additional requirements and regulations, including extensive record-keeping,
licensing, storage and security requirements intended to prevent the unauthorized sale of biopharmaceutical products.
The
scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare
reform, especially in light of the lack of applicable precedent and regulations. Ensuring business arrangements comply with applicable
healthcare laws, as well as responding to possible investigations by government authorities, can be time- and resource-consuming
and can divert a company’s attention from the business.
It
is possible that governmental and enforcement authorities will conclude that our business practices may not comply with current
or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws and regulations.
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, including the imposition of significant civil, criminal and administrative
penalties, damages, fines, disgorgement, imprisonment, reputational harm, possible exclusion from participation in federal and
state funded healthcare programs, contractual damages and the curtailment or restricting of our operations, as well as additional
reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations
of non-compliance with these laws. Further, if any of the physicians or other healthcare providers or entities with whom we expect
to do business is found to be not in compliance with applicable laws, they may be subject to significant criminal, civil or administrative
sanctions, including exclusions from government funded healthcare programs. Any action for violation of these laws, even if successfully
defended, could cause a biopharmaceutical manufacturer to incur significant legal expenses and divert management’s attention
from the operation of the business. Prohibitions or restrictions on sales or withdrawal of future marketed products could materially
affect business in an adverse way.
Ongoing
legislative and regulatory changes affecting the healthcare industry could have a material adverse effect on our business.
Political,
economic and regulatory influences are subjecting the healthcare industry to potential fundamental changes that could substantially
affect our results of operations by requiring, for example: (i) changes to our manufacturing arrangements; (ii) additions or modifications
to product labeling; (iii) the recall or discontinuation of our products; or (iv) additional record-keeping requirements.
In
the U.S., there have been and continue to be a number of legislative initiatives to contain healthcare costs. For example, in
March 2010, the ACA was passed, which substantially changed the way health care is financed by both governmental and private insurers,
and significantly impacted the U.S. biopharmaceutical industry. The ACA, among other things, addressed a new methodology by which
rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled,
implanted or injected, increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and
extended the rebate program to individuals enrolled in Medicaid managed care organizations, established annual fees and taxes
on manufacturers of certain branded prescription drugs, and created a new Medicare Part D coverage gap discount program, in which
manufacturers must agree to offer certain point-of-sale discounts off negotiated prices of applicable brand drugs to eligible
beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under
Medicare Part D.
Since
its enactment, some of the provisions of the ACA have yet to be fully implemented, while certain provisions have been subject
to judicial, congressional, and executive challenges. While Congress has not passed comprehensive repeal legislation, it has enacted
laws that modify certain provisions of the ACA such as removing penalties, starting January 1, 2019, for not complying with the
ACA’s individual mandate to carry health insurance, delaying the implementation of certain ACA-mandated fees, and increasing
the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D. On December 14, 2018,
a Texas U.S. District Court Judge ruled that the ACA is unconstitutional in its entirety because the “individual mandate”
was repealed by Congress as part of the Tax Cuts and Jobs Act of 2017. Additionally, on December 18, 2019, the U.S. Court of Appeals
for the 5th Circuit upheld the District Court ruling that the individual mandate was unconstitutional and remanded the case back
to the District Court to determine whether the remaining provisions of the ACA are invalid as well. On March 2, 2020, the U.S.
Supreme Court granted the petitions for writs of certiorari to review this case, and has allotted one hour for oral arguments.
The United States Supreme Court is expected to rule on the legal challenge to the constitutionality of the ACA in early 2021.
We cannot predict what affect further changes to the ACA would have on our business.
Other
legislative changes have been proposed and adopted in the U.S. since the ACA was enacted, affecting among other matters, Medicare
payments to providers.
Moreover,
increasing efforts by governmental and third-party payors in the U.S. and abroad to cap or reduce healthcare costs may cause such
organizations to limit both coverage and the level of reimbursement for newly approved products and, as a result, they may not
cover or provide adequate payment for our product candidates. There has been increasing legislative and enforcement interest in
the U.S. with respect to specialty drug pricing practices. Specifically, there have been several recent U.S. Congressional inquiries
and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing,
reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs,
and reform government program reimbursement methodologies for drugs. Several states have adopted price transparency requirements
and those as well as any future federal price transparency requirements that may be implemented in the future could have a negative
effect on our business. Additionally, we expect to experience pricing pressures in connection with the sale of any future approved
product candidates due to the trend toward managed healthcare, the increasing influence of health maintenance organizations, cost
containment initiatives and additional legislative changes.
Any reduction in reimbursement from Medicare
and other government programs may result in a similar reduction in payments from private payers. In addition, individual states
in the U.S. have also increasingly passed legislation and implemented regulations designed to control pharmaceutical product pricing,
including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure
and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
At
the state level, legislatures are increasingly passing legislation and implementing regulations designed to control biopharmaceutical
and biologic product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product
access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other
countries and bulk purchasing.
We
cannot predict what healthcare reform initiatives may be adopted in the future. Further, federal and state legislative and regulatory
developments are likely, and we expect ongoing initiatives in the U.S. to increase pressure on drug pricing. Such reforms could
have an adverse effect on anticipated revenues any product candidates that we may successfully develop and for which we may obtain
regulatory approval and may affect our overall financial condition and ability to develop product candidates.
We
may fail to comply with evolving European and other privacy laws.
Since
we conduct clinical trials in the European Economic Area (“EEA”), we are subject to additional European data-privacy
laws. The General Data Protection Regulation, (EU) 2016/679 (“GDPR”) became effective on May 25, 2018 and deals with
the processing of personal data and on the free movement of such data. The GDPR imposes a broad range of strict requirements on
companies subject to the GDPR, including requirements relating to having legal bases for processing personal information relating
to identifiable individuals and transferring such information outside the EEA, including to the U.S., providing details to those
individuals regarding the processing of their personal information, keeping personal information secure, having data processing
agreements with third parties who process personal information, responding to individuals’ requests to exercise their rights
in respect of their personal information, reporting security breaches involving personal data to the competent national data protection
authority and affected individuals, appointing data protection officers, conducting data protection impact assessments, and record-keeping.
The GDPR increases substantially the penalties to which we could be subject in the event of any non-compliance, including fines
of up to 10,000,000 Euros or up to 2% of our total worldwide annual turnover for certain comparatively minor offenses, or up to
20,000,000 Euros or up to 4% of our total worldwide annual turnover for more serious offenses. Given the limited enforcement of
the GDPR to date, we face uncertainty as to the exact interpretation of the new requirements on our trials and we may be unsuccessful
in implementing all measures required by data protection authorities or courts in interpretation of the new law.
In
particular, national laws of member states of the EU are in the process of being adapted to the requirements under the GDPR, thereby
implementing national laws which may partially deviate from the GDPR and impose different obligations from country to country,
so that we do not expect to operate in a uniform legal landscape in the EEA. Also, as it relates to processing and transfer of
genetic data, the GDPR specifically allows national laws to impose additional and more specific requirements or restrictions,
and European laws have historically differed quite substantially in this field, leading to additional uncertainty. Further, the
United Kingdom’s decision to leave the EU, often referred to as Brexit, has created uncertainty with regard to data protection
regulation in the United Kingdom. In particular, it is unclear how data transfers to and from the United Kingdom will be regulated
now that the United Kingdom has left the EU.
In
the event we continue to conduct clinical trials in the EEA, we must also ensure that we maintain adequate safeguards to enable
the transfer of personal data outside of the EEA, in particular to the U.S., in compliance with European data protection laws.
We expect that we will continue to face uncertainty as to whether our efforts to comply with our obligations under European privacy
laws will be sufficient. If we are investigated by a European data protection authority, we may face fines and other penalties.
Any such investigation or charges by European data protection authorities could have a negative effect on our existing business
and on our ability to attract and retain new clients or pharmaceutical partners. We may also experience hesitancy, reluctance,
or refusal by European or multi-national clients or pharmaceutical partners to continue to use our products and solutions due
to the potential risk exposure as a result of the current (and, in particular, future) data protection obligations imposed on
them by certain data protection authorities in interpretation of current law, including the GDPR. Such clients or pharmaceutical
partners may also view any alternative approaches to compliance as being too costly, too burdensome, too legally uncertain, or
otherwise objectionable and therefore decide not to do business with us. Any of the foregoing could materially harm our business,
prospects, financial condition and results of operations.
The
success of our products may be harmed if the government, private health insurers and other third-party payers do not provide sufficient
coverage or reimbursement.
Our
ability to commercialize our new cancer treatment systems successfully will depend in part on the extent to which reimbursement
for the costs of such products and related treatments will be available from third-party payors, which include government authorities
such as Medicare, Medicaid, TRICARE, and the Veterans Administration, managed care providers, private health insurers, and other
organizations. Patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse
all or part of the costs associated with their treatment. Coverage and adequate reimbursement from governmental healthcare programs,
such as Medicare and Medicaid, and commercial payors is critical to new product acceptance. Patients are unlikely to use our product
candidates unless coverage is provided, and reimbursement is adequate to cover a significant portion of the cost. The reimbursement
status of newly approved medical products is subject to significant uncertainty We cannot be sure that coverage and reimbursement
will be available for, or accurately estimate the potential revenue from, our product candidates or assure that coverage and reimbursement
will be available for any product that we may develop.
Government
authorities and other third-party payors decide which drugs and treatments they will cover and the amount of reimbursement. In
the U.S., the principal decisions about reimbursement for new medicines are typically made by the Centers for Medicare & Medicaid
Services, or CMS, an agency within the U.S. Department of Health and Human Services. CMS decides whether and to what extent a
new medicine will be covered and reimbursed under Medicare and private payors tend to follow CMS to a substantial degree. No uniform
policy of coverage and reimbursement for drug products exists among third-party payors. Therefore, coverage and reimbursement
for drug products can differ significantly from payor to payor. The process for determining whether a third-party payor will provide
coverage for a product may be separate from the process for setting the price or reimbursement rate that the payor will pay for
the product once coverage is approved. Coverage and reimbursement by a third-party payor may depend upon a number of factors,
including the third-party payor’s determination that use of a product is:
● a covered benefit under its health plan;
● safe, effective, and medically necessary;
● appropriate for the specific patient;
● cost-effective; and
● neither experimental nor investigational.
In
order to secure coverage and reimbursement for any product that might be approved for sale, a company may need to conduct expensive