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 $333
million at December 31, 2021. For the years ended December 31, 2021 and 2020, we incurred net losses of $20.8 million and $21.5 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. 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 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, 2021, we incurred a net loss of $20.8 million. We have incurred approximately $333 million of cumulative net losses. As
of December 31, 2021, we had cash and cash equivalents, short-term investments, interest receivable, net proceeds on the sale of net
operating losses and restricted money market investments of $56.9 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, 2021 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 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 III 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.
The
regulatory authorities also may, at any time following approval of a product for sale, audit the manufacturing facilities of our third-party
manufacturers. If any such inspection or audit identifies a failure to comply with applicable regulations or if a violation of our product
specifications or applicable regulations occurs independent of such an inspection or audit, we or the relevant regulatory authority may
require remedial measures that may be costly and/or time-consuming for us or our third-party manufacturers to implement and that may
include the temporary or permanent suspension of a clinical trial or commercial sales or the temporary or permanent closure of a manufacturing
facility. Any such remedial measures imposed upon third parties with whom we contract could materially harm our business.
If
we or any of our third-party manufacturers or testing contractors fail to maintain regulatory compliance, this could cause the delay
of clinical trials, regulatory submissions, required approvals or commercialization of our product candidates, cause us to incur higher
costs and prevent us from commercializing our products successfully. Furthermore, if our suppliers fail to meet contractual requirements,
and we are unable to secure one or more replacement suppliers capable of production at a substantially equivalent cost, our clinical
trials may be delayed, or we could lose potential revenue. 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.
Some
of the provisions of the ACA have yet to be fully
implemented and there have been challenges to certain provision to the ACA. 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. In June 2021, the U.S. Supreme Court
held that the states and individuals that brought the lawsuit challenging ACA’s individual mandate did not have standing. The Company
will continue to evaluate the effect that ACA has 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 is wide-ranging in scope and imposes numerous requirements on companies
that process personal data, including requirements relating to processing health and other sensitive data, obtaining consent of the individuals
to whom the personal data relates, providing information to individuals regarding data processing activities, implementing safeguards
to protect the security and confidentiality of personal data, providing notification of data breaches, and taking certain measures when
engaging third-party processors. The GDPR also imposes strict rules on the transfer of personal data to countries outside the EEA, including
the U.S., and permits data protection authorities to impose large penalties for violations of the GDPR, including potential fines of
up to €20 million or 4% of annual global revenues, whichever is greater. The GDPR also confers on data subjects the right to lodge
complaints with supervisory authorities, and seek certain judicial review for violations of the GDPR. In addition, the GDPR includes
restrictions on cross-border data transfers. The GDPR increases our responsibility and liability in relation to personal data that we
process where such processing is subject to the GDPR, and we are required to put in place additional mechanisms to ensure compliance
with the GDPR, including additional requirements imposed by individual countries.
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 pharmacoeconomic
studies in order to demonstrate the medical necessity and cost-effectiveness of the product, in addition to the costs required to obtain
FDA or other comparable regulatory approvals. Additionally, companies may also need to provide discounts to purchasers, private health
plans or government healthcare programs. Nonetheless, product candidates may not be considered medically necessary or cost effective.
A decision by a third-party payor not to cover a product could reduce physician utilization once the product is approved and have a material
adverse effect on sales, our operations and financial condition.
Government,
private health insurers and other third-party payors are increasingly attempting to contain healthcare costs by limiting both coverage
and the level of reimbursement for new therapeutic products approved for marketing by the FDA. For example, Congress passed the ACA in
2010 which enacted a number of reforms to expand access to health insurance while also reducing or constraining the growth of healthcare
spending, enhancing remedies against fraud and abuse, adding new transparency requirements for healthcare industries, and imposing new
taxes on fees on healthcare industry participants, among other policy reforms. Federal agencies, Congress and state legislatures have
continued to show interest in implementing cost containment programs to limit the growth of health care costs, including price controls,
price disclosures, restrictions on reimbursement and other fundamental changes to the healthcare delivery system. In addition, in recent
years, Congress has enacted various laws seeking to reduce the federal debt level and contain healthcare expenditures, and the Medicare
and other healthcare programs are frequently identified as potential targets for spending cuts. New government legislation or regulations
related to pricing or other fundamental changes to the healthcare delivery system as well as a government or third-party payer decision
not to approve pricing for, or provide adequate coverage or reimbursement of, our product candidates hold the potential to severely limit
market opportunities of such products. Accordingly, even if coverage and reimbursement are provided by government, private health insurers
and third-party payors for uses of our products, market acceptance of these products would be adversely affected if the reimbursement
available proves to be unprofitable for health care providers.
Our