Item 1a. Risk Factors
Summary of Risk Factors
Below is a summary of the principal factors that
make an investment in our common stock speculative or risky. This summary does not address all of the risks that we face. Additional discussion
of the risks summarized in this risk factor 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 decision regarding our common stock.
● We must comply with significant government regulations.
● The price of our common stock may be volatile.
You should carefully consider the risks described
below as well as other information provided to you in this document, including information in the section of this document entitled “Information
Regarding Forward Looking Statements.” If any of the following risks actually occur, the Company’s business, financial condition
or results of operations could be materially adversely affected, the value of the Company’s Common Stock could decline, and you
may lose all or part of your investment.
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RISKS RELATED TO OUR BUSINESS
We will need additional capital. If additional
capital is not available or is available at unattractive terms, we may be forced to delay, reduce the scope of or eliminate our research
and development programs, reduce our commercialization efforts or curtail our operations.
In order to develop and bring our product candidates
to market, we must commit substantial resources to costly and time-consuming research, preclinical and clinical trials and marketing activities.
We anticipate that our existing cash and cash equivalents will enable us to maintain our current operations for at least the next twelve
months. We anticipate using our cash and cash equivalents to fund further research and development with respect to our lead product candidates.
We may, however, need to raise additional funding sooner if our business or operations change in a manner that consumes available resources
more rapidly than we anticipate. Our requirements for additional capital will depend on many factors, including:
● successful commercialization of our product candidates;
● costs associated with protecting our intellectual property rights;
● development of marketing and sales capabilities;
● payments received under future collaborative agreements, if any; and
● market acceptance of our products, if any.
To the extent we raise additional capital through
the sale of equity securities, the issuance of those securities could result in dilution to our shareholders. In addition, if we obtain
debt financing, a substantial portion of our operating cash flow may be dedicated to the payment of principal and interest on such indebtedness,
thus limiting funds available for our business activities. If adequate funds are not available, we may be required to delay, reduce the
scope of or eliminate our research and development programs, reduce our commercialization efforts or curtail our operations. In addition,
we may be required to obtain funds through arrangements with collaborative partners or others that may require us to relinquish rights
to technologies, product candidates or products that we would otherwise seek to develop or commercialize ourselves or license rights to
technologies, product candidates or products on terms that are less favorable to us than might otherwise be available.
The Company will require substantial additional
funds to support its research and development activities, and the anticipated costs of preclinical studies and clinical trials, regulatory
approvals and eventual commercialization. Such additional sources of financing may not be available on favorable terms, if at all. If
we do not succeed in raising additional funds on acceptable terms, we may be unable to initiate clinical trials or obtain approval of
any product candidates from the FDA and other regulatory authorities. In addition, we could be forced to discontinue product development,
forego sales and marketing efforts and forego attractive business opportunities. Any additional sources of financing will likely involve
the issuance of our equity securities, which will have a dilutive effect on our stockholders.
We face intense competition in the markets
targeted by our lead product candidates. Many of our competitors have substantially greater resources than we do, and we expect that all
of our product candidates under development will face intense competition from existing or future drugs.
We expect that all of our product candidates under
development, if approved, will face intense competition from existing and future drugs marketed by large companies. These competitors
may successfully market products that compete with our products, successfully identify drug candidates or develop products earlier than
we do, or develop products that are more effective, have fewer side effects or cost less than our products, if any.
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Additionally, if a competitor receives FDA approval
before we do for a drug that is similar to one of our product candidates, FDA approval for our product candidate may be precluded or delayed
due to periods of non-patent exclusivity and/or the listing with the FDA by the competitor of patents covering its newly-approved drug
product. Periods of non-patent exclusivity for new versions of existing drugs such as our current product candidates can extend up to
three and one-half years. See “Business — Government Regulation.”
These competitive factors could require us to
conduct substantial new research and development activities to establish new product targets, which would be costly and time consuming.
These activities would adversely affect our ability to commercialize products and achieve revenue and profits.
Competition and technological change may
make our product candidates and technologies less attractive or obsolete.
We compete with established pharmaceutical and
biotechnology companies that are pursuing other forms of treatment for the same indications we are pursuing and that have greater financial
and other resources. Other companies may succeed in developing products earlier than us, obtaining FDA approval for products more rapidly,
or developing products that are more effective than our product candidates. Research and development by others may render our technology
or product candidates obsolete or noncompetitive, or result in treatments or cures superior to any therapy we develop. We face competition
from companies that internally develop competing technology or acquire competing technology from universities and other research institutions.
As these companies develop their technologies, they may develop competitive positions that may prevent, make futile, or limit our product
commercialization efforts, which would result in a decrease in the revenue we would be able to derive from the sale of any products.
There can be no assurance that any of our product
candidates will be accepted by the marketplace as readily as these or other competing treatments. Furthermore, if our competitors’
products are approved before ours, it could be more difficult for us to obtain approval from the FDA. Even if our products are successfully
developed and approved for use by all governing regulatory bodies, there can be no assurance that physicians and patients will accept
our product(s) as a treatment of choice.
Furthermore, the pharmaceutical research industry
is diverse, complex, and rapidly changing. By its nature, the business risks associated therewith are numerous and significant. The effects
of competition, intellectual property disputes, market acceptance, and FDA regulations preclude us from forecasting revenues or income
with certainty or even confidence.
If we fail to protect our intellectual property
rights, our ability to pursue the development of our technologies and products would be negatively affected.
Our success will depend, in part, on our ability
to obtain patents and maintain adequate protection of our technologies and products. If we do not adequately protect our intellectual
property, competitors may be able to use our technologies to produce and market drugs in direct competition with us and erode our competitive
advantage. Some foreign countries lack rules and methods for defending intellectual property rights and do not protect proprietary rights
to the same extent as the United States. Many companies have had difficulty protecting their proprietary rights in these foreign countries.
We may not be able to prevent misappropriation of our proprietary rights.
We have received, and are currently seeking, patent
protection for numerous compounds and methods of treating diseases. However, the patent process is subject to numerous risks and uncertainties,
and there can be no assurance that we will be successful in protecting our products by obtaining and defending patents. These risks and
uncertainties include the following: patents that may be issued or licensed may be challenged, invalidated, or circumvented, or otherwise
may not provide any competitive advantage; our competitors, many of which have substantially greater resources than us and many of which
have made significant investments in competing technologies, may seek, or may already have obtained, patents that will limit, interfere
with, or eliminate our ability to make, use, and sell our potential products either in the United States or in international markets;
there may be significant pressure on the United States government and other international governmental bodies to limit the scope of patent
protection both inside and outside the United States for treatments that prove successful as a matter of public policy regarding worldwide
health concerns; countries other than the United States may have less restrictive patent laws than those upheld by United States courts,
allowing foreign competitors the ability to exploit these laws to create, develop, and market competing products.
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Moreover, any patents issued to us may not provide
us with meaningful protection, or others may challenge, circumvent or narrow our patents. Third parties may also independently develop
products similar to our products, duplicate our unpatented products or design around any patents on products we develop. Additionally,
extensive time is required for development, testing and regulatory review of a potential product. While extensions of patent term due
to regulatory delays may be available, it is possible that, before any of our product candidates can be commercialized, any related patent,
even with an extension, may expire or remain in force for only a short period following commercialization, thereby reducing any advantages
of the patent.
In addition, the United States Patent and Trademark
Office (the “USPTO”) and patent offices in other jurisdictions have often required that patent applications concerning pharmaceutical
and/or biotechnology-related inventions be limited or narrowed substantially to cover only the specific innovations exemplified in the
patent application, thereby limiting the scope of protection against competitive challenges. Thus, even if we or our licensors are able
to obtain patents, the patents may be substantially narrower than anticipated.
Our success depends on patent applications that
are licensed exclusively to us and other patents to which we may obtain assignment or licenses. We may not be aware, however, of all patents,
published applications or published literature that may affect our business either by blocking our ability to commercialize our product
candidates, by preventing the patentability of our product candidates to us or our licensors, or by covering the same or similar technologies
that may invalidate our patents, limit the scope of our future patent claims or adversely affect our ability to market our product candidates.
In addition to patents, we rely on a combination
of trade secrets, confidentiality, nondisclosure and other contractual provisions, and security measures to protect our confidential and
proprietary information. These measures may not adequately protect our trade secrets or other proprietary information. If they do not
adequately protect our rights, third parties could use our technology, and we could lose any competitive advantage we may have. In addition,
others may independently develop similar proprietary information or techniques or otherwise gain access to our trade secrets, which could
impair any competitive advantage we may have.
Patent protection and other intellectual property
protection is crucial to the success of our business and prospects, and there is a substantial risk that such protections will prove inadequate.
We license our patents from third party
owners. If such owners do not properly maintain or enforce the intellectual property underlying such licenses, our competitive position
and business prospects could be harmed. Our licensors may also seek to terminate our license.
We are a party to a number of licenses that give
us rights to third-party intellectual property that is necessary or useful to our business. To this end, we are dependent on our licenses
with Xencor, Inc., Immune Ventures, LLC and the University of Pittsburgh. Our success will depend in part on the ability of our licensors
to obtain, maintain and enforce our licensed intellectual property. Our licensors may not successfully prosecute any applications for
or maintain intellectual property to which we have licenses, may determine not to pursue litigation against other companies that are infringing
such intellectual property, or may pursue such litigation less aggressively than we would. Without protection for the intellectual property
we license, other companies might be able to offer similar products for sale, which could adversely affect our competitive business position
and harm our business prospects. If we lose any of our right to use third-party intellectual property, it could adversely affect our ability
to commercialize our technologies, products or services, as well as harm our competitive business position and our business prospects.
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We are dependent on our licensing agreement
with Xencor and the termination of this agreement could a have an adverse effect on our business.
On October 3, 2017, the Company entered into a license agreement with
Xencor, Inc., which has discovered and developed a proprietary biological molecule that inhibits soluble tumor necrosis factor. Pursuant
to the license agreement, Xencor granted the Company an exclusive worldwide, royalty-bearing license in licensed patent rights, licensed
know-how and licensed materials to make, develop, use, sell and import any pharmaceutical product that comprises, contains, or incorporates
Xencor’s proprietary protein known as XPro that inhibits soluble tumor necrosis factor (or all modifications, formulations and variants
of the licensed protein that specifically bind soluble tumor necrosis factor) alone or in combination with one or more active ingredients,
in any dosage or formulation. If we breach this Agreement Xencor may be able to terminate it and as a result of this terminate our business
could be negatively impacted.
Our officers and Directors own the company
that we license our INKmune patent from.
On October 29, 2015, we entered into an exclusive
license agreement with Immune Ventures, LLC (Immune Ventures). The license agreement relates to our natural killer program, INKmune. Immune
Ventures is owned by our President and a member of our Board of Directors, David Moss, our Chief Financial Officer and Treasurer and Mark
Lowdell, our Chief Scientific Officer. Because our officers and directors also own Immune Ventures there may be an inherent conflict of
interest which could result in unanticipated actions that adversely affect us.
We have a limited operating history, and
expect to incur significant additional operating losses.
We are an early-stage company formed in September 2015 and have only a limited operating history. Therefore, there is limited historical
financial information upon which to base an evaluation of our performance. Our prospects must be considered in light of the uncertainties,
risks, expenses, and difficulties frequently encountered by companies in their early stages of operations. We expect to incur substantial
additional operating expenses over the next several years as our research, development, and commercial activities increase. The amount
of future losses and when, if ever, we will achieve profitability are uncertain. Our ability to generate material revenue and achieve
profitability will depend on, among other things, successful completion of the preclinical and clinical development of our product candidate;
obtaining necessary regulatory approvals from the FDA and international regulatory agencies; implementing successful manufacturing, sales,
and marketing arrangements; and raising sufficient funds to finance our activities. If we are unsuccessful at some or all of these undertakings,
our business, prospects, and results of operations may be materially adversely affected.
INKmune represents a novel approach to cancer
treatment that creates significant challenges for us.
We believe INKmune represents a novel approach
to cancer treatment. Advancing this novel therapy creates significant challenges for us, including:
Even if we are able to commercialize any
product candidate that we develop, the product may become subject to unfavorable pricing regulations, third-party payor reimbursement
practices or healthcare reform initiatives that could harm our business.
The commercial success of our product candidates
will depend substantially, both domestically and abroad, on the extent to which the costs of our product candidates will be paid by health
maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or reimbursed by government health administration
authorities (such as Medicare and Medicaid), private health coverage insurers and other third-party payors. If reimbursement is not available,
or is available only to limited levels, we may not be able to successfully commercialize our product candidates. Even if coverage is provided,
the approved reimbursement amount may not be high enough to allow us to establish and maintain pricing sufficient to realize a meaningful
return on our investment.
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There is significant uncertainty related to third-party
payor coverage and reimbursement of newly approved drugs. Marketing approvals, pricing and reimbursement for new drug products vary widely
from country to country. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the
pricing review period begins after marketing or product licensing approval is granted. In some non-U.S. markets, prescription pharmaceutical
pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain marketing
approval for a product in a particular country, but then be subject to price regulations that delay commercial launch of the product,
possibly for lengthy time periods, which may negatively impact the revenues we are able to generate from the sale of the product in that
country. Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even if our product
candidates obtain marketing approval.
We depend on obtaining certain patents and
protecting our proprietary rights.
Our success will depend, in part, on our ability
to obtain patents, maintain trade secret protection and operate without infringing on the proprietary rights of third parties or having
third parties circumvent our rights. We have filed and are actively pursuing a patent application for our product candidates. The patent
positions of biotechnology, biopharmaceutical and pharmaceutical companies can be highly uncertain and involve complex legal and factual
questions. Thus, there can be no assurance that our patent application will result in the issuance of a patent, that we will develop additional
proprietary products that are patentable, that any patents issued to us will provide us with any competitive advantages or will not be
challenged by any third parties, that the patents of others will not impede our ability to do business or that third parties will not
be able to circumvent our patents. Furthermore, there can be no assurance that others will not independently develop similar products,
duplicate any of our products not under patent protection, or, if patents are issued to us, design around the patented products we developed
or will develop.
We may be required to obtain licenses from third
parties to avoid infringing patents or other proprietary rights. No assurance can be given that any licenses required under any such patents
or proprietary rights would be made available, if at all, on terms we find acceptable. If we do not obtain such licenses, we could encounter
delays in the introduction of products or could find that the development, manufacture or sale of products requiring such licenses could
be prohibited.
A number of pharmaceutical, biopharmaceutical
and biotechnology companies and research and academic institutions have developed technologies, filed patent applications or received
patents on various technologies that may be related to or affect our business. Some of these technologies, applications or patents may
conflict with our technologies or patent applications. Such conflict could limit the scope of the patents, if any, that we may be able
to obtain or result in the denial of our patent applications. In addition, if patents that cover our activities are issued to other companies,
there can be no assurance that we would be able to obtain licenses to these patents at a reasonable cost or be able to develop or obtain
alternative technology. If we do not obtain such licenses, we could encounter delays in the introduction of products, or could find that
the development, manufacture or sale of products requiring such licenses could be prohibited. In addition, we could incur substantial
costs in defending ourselves in suits brought against us on patents it might infringe or in filing suits against others to have such patents
declared invalid.
Much of our know-how and technology may not be
patentable. To protect our rights, we plan to require employees, consultants, advisors and collaborators to enter into confidentiality
agreements. There can be no assurance, however, that these agreements will provide meaningful protection for our trade secrets, know-how
or other proprietary information in the event of any unauthorized use or disclosure. Further, our business may be adversely affected by
competitors who independently develop competing technologies, especially if we obtain no, or only narrow, patent protection.
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We are subject to various government regulations.
The manufacture and sale of human therapeutic
products in the U.S. and foreign jurisdictions are governed by a variety of statutes and regulations. These laws require approval of manufacturing
facilities, controlled research and testing of products and government review and approval of a submission containing manufacturing, preclinical
and clinical data in order to obtain marketing approval based on establishing the safety and efficacy of the product for each use sought,
including adherence to current cGMP during production and storage, and control of marketing activities, including advertising and labeling.
The products we are currently developing will
require significant development, preclinical and clinical testing and investment of substantial funds prior to its commercialization.
The process of obtaining required approvals can be costly and time-consuming, and there can be no assurance that we develop successfully
this product or any future products, or that this product or any future products we develop will prove to be safe and effective in clinical
trials or receive applicable regulatory approvals. Potential investors and shareholders should be aware of the risks, problems, delays,
expenses and difficulties which we may encounter in view of the extensive regulatory environment which controls our business.
If we are unable to keep up with rapid technological
changes in our field or compete effectively, we will be unable to operate profitably.
We are engaged in a rapidly changing field. Other
products and therapies that will compete directly with the product that we are seeking to develop and market currently exist or are being
developed. Competition from fully integrated pharmaceutical companies and more established biotechnology companies is intense and is expected
to increase. Most of these companies have significantly greater financial resources and expertise in discovery and development, manufacturing,
preclinical and clinical testing, obtaining regulatory approvals and marketing than us. Smaller companies may also prove to be significant
competitors, particularly through collaborative arrangements with large pharmaceutical and established biopharmaceutical or biotechnology
companies. Many of these competitors have significant products that have been approved or are in development and operate large, well-funded
discovery and development programs. Academic institutions, governmental agencies and other public and private research organizations also
conduct research, seek patent protection and establish collaborative arrangements for therapeutic products and clinical development and
marketing. These companies and institutions compete with us in recruiting and retaining highly qualified scientific and management personnel.
In addition to the above factors, we will face competition based on product efficacy and safety, the timing and scope of regulatory approvals,
availability of supply, marketing and sales capability, reimbursement coverage, price and patent position. There is no assurance that
our competitors will not develop more effective or more affordable products, or achieve earlier patent protection or product commercialization,
than our own.
Other companies may succeed in developing products
earlier than ourselves, obtaining FDA and European Medicines Agency (“EMA”) approvals for such products more rapidly than
we will, or in developing products that are more effective than products we propose to develop. While we will seek to expand our technological
capabilities in order to remain competitive, there can be no assurance that research and development by others will not render our technology
or products obsolete or non-competitive or result in treatments or cures superior to any therapy we develop, or that any therapy we develop
will be preferred to any existing or newly developed technologies.
We may request priority review for our product
candidate in the future. The FDA may not grant priority review for our product candidate. Moreover, even if the FDA designates such product
for priority review, that designation may not lead to a faster regulatory review or approval process and, in any event, would not assure
FDA approval.
We may be eligible for priority review designation
for our product candidate if the FDA determines such product candidate offers major advances in treatment or provides a treatment where
no adequate therapy exists. A priority review designation means that the goal for the FDA to review an application in six months, rather
than the standard review period of ten months. The FDA has broad discretion with respect to whether or not to grant priority review status
to a product candidate, so even if we believe a particular product candidate is eligible for such designation or status, the FDA may decide
not to grant it. Thus, while the FDA has granted priority review to other oncology disease products, our product candidate, should we
determine to seek priority review, may not receive similar designation. Moreover, even if our product candidate is designated for priority
review, such a designation does not necessarily mean a faster regulatory review process or necessarily confer any advantage with respect
to approval compared to conventional FDA procedures. Receiving priority review from the FDA does not guarantee approval within an accelerated
timeline or thereafter.
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We believe we may in some instances be able to secure
approval from the FDA or comparable non-U.S. regulatory authorities to use accelerated development pathways. If we are unable to obtain
such approval, we may be required to conduct additional preclinical studies or clinical trials beyond those that we contemplate, which
could increase the expense of obtaining, and delay the receipt of, necessary marketing approvals.
We anticipate that we may seek an accelerated
approval pathway for our product candidates. Under the accelerated approval provisions in the Federal Food, Drug, and Cosmetic Act, or
FDCA, and the FDA’s implementing regulations, the FDA may grant accelerated approval to a product designed to treat a serious or
life-threatening condition that provides meaningful therapeutic benefit over available therapies upon a determination that the product
has an effect on a surrogate endpoint or intermediate clinical endpoint that is reasonably likely to predict clinical benefit. The FDA
considers a clinical benefit to be a positive therapeutic effect that is clinically meaningful in the context of a given disease, such
as irreversible morbidity or mortality. For the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory
measurement, radiographic image, physical sign, or other measure that is thought to predict clinical benefit, but is not itself a measure
of clinical benefit. An intermediate clinical endpoint is a clinical endpoint that can be measured earlier than an effect on irreversible
morbidity or mortality that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit.
The accelerated approval pathway may be used in cases in which the advantage of a new drug over available therapy may not be a direct
therapeutic advantage, but is a clinically important improvement from a patient and public health perspective. If granted, accelerated
approval is usually contingent on the sponsor’s agreement to conduct, in a diligent manner, additional post-approval confirmatory
studies to verify and describe the drug’s clinical benefit. If such post-approval studies fail to confirm the drug’s clinical
benefit, the FDA may withdraw its approval of the drug.
Prior to seeking such accelerated approval, we
will seek feedback from the FDA and will otherwise evaluate our ability to seek and receive such accelerated approval. There can be no
assurance that after our evaluation of the feedback and other factors we will decide to pursue or submit a New Drug Application, or NDA,
for accelerated approval or any other form of expedited development, review or approval. Similarly, there can be no assurance that after
subsequent FDA feedback we will continue to pursue or apply for accelerated approval or any other form of expedited development, review
or approval, even if we initially decide to do so. Furthermore, if we decide to submit an application for accelerated approval or under
another expedited regulatory designation (e.g., breakthrough therapy designation), there can be no assurance that such submission or application
will be accepted or that any expedited development, review or approval will be granted on a timely basis, or at all. The FDA or other
non-U.S. authorities could also require us to conduct further studies prior to considering our application or granting approval of any
type. A failure to obtain accelerated approval or any other form of expedited development, review or approval for our product candidate
would result in a longer time period to commercialization of such product candidate, could increase the cost of development of such product
candidate and could harm our competitive position in the marketplace.
Clinical drug development involves a lengthy
and expensive process with an uncertain outcome. We may incur additional costs or experience delays in completing, or ultimately be unable
to complete the development and commercialization of our product candidate.
Our product candidates are either in early clinical
development or have not entered into clinical trials and are in development stage. Therefore, the risk of failure of our product candidates
is high. It is impossible to predict when or if our product candidates will prove effective or safe in humans or will receive regulatory
approval. Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete preclinical
development and then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidate in humans. Clinical
testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. A failure of
one or more clinical trials can occur at any stage of testing. The clinical development of our product candidates is susceptible to the
risk of failure inherent at any stage of drug development, including failure to demonstrate efficacy in a clinical trial or across a broad
population of patients, the occurrence of severe or medically or commercially unacceptable adverse events, failure to comply with protocols
or applicable regulatory requirements and determination by the FDA or any comparable non-U.S. regulatory authority that a drug product
is not safe or effective for its intended uses. It is possible that even if our product candidate has a beneficial effect, that effect
will not be detected during clinical evaluation as a result of one or more of a variety of factors, including the size, duration, design,
measurements, conduct or analysis of our clinical trials. Conversely, as a result of the same factors, our clinical trials may indicate
an apparent positive effect of a product candidate that is greater than the actual positive effect, if any. Similarly, in our clinical
trials we may fail to detect toxicity of or intolerability caused by our product candidates, or mistakenly believe that our product candidates
are toxic or not well tolerated when that is not in fact the case.
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The outcome of preclinical studies and early clinical trials
may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final
results. Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical
trials after achieving positive results in earlier development, and we cannot be certain that we will not face additional setbacks.
The design of a clinical trial can determine whether
its results will support approval of a product; however, flaws in the design of a clinical trial may not become apparent until the clinical
trial is well advanced or completed. In addition, preclinical and clinical data are often susceptible to varying interpretations and analyses.
Many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless
failed to obtain marketing approval for the product candidates. Even if we believe that the results of clinical trials for our product
candidate warrant marketing approval, the FDA or comparable non-U.S. regulatory authorities may disagree and may not grant marketing approval
of our product candidate.
In some instances, there can be significant variability
in safety or efficacy results between different clinical trials of the same product candidate due to numerous factors, including changes
in trial procedures set forth in protocols, differences in the size and type of the patient populations, changes in and adherence to the
clinical trial protocols and the rate of dropout among clinical trial participants. Any clinical trials that we may conduct may not demonstrate
the efficacy and safety necessary to obtain regulatory approval to market our product candidate.
The results of preclinical studies and
early-stage clinical trials may not be predictive of future results. Initial success in clinical trials may not be indicative of results
obtained when these trials are completed or in later-stage trials.
The results of preclinical studies may not be predictive of the results
of clinical trials, and the results of any early-stage clinical trials we commence may not be predictive of the results of the later-stage
clinical trials. In addition, initial success in clinical trials may not be indicative of results obtained when such trials are completed.
In particular, the small number of patients in our planned early clinical trials may make the results of these trials less predictive
of the outcome of later clinical trials. For example, even if successful, the results of our initial clinical trials for XPro may not
be predictive of the results of further clinical trials of this drug candidate or any of our other drug candidates. Moreover, preclinical
and clinical data often are susceptible to varying interpretations and analyses, and many companies that have believed their drug candidates
performed satisfactorily in preclinical studies and clinical trials nonetheless have failed to obtain marketing approval of their products.
Our future clinical trials may not ultimately be successful or support further clinical development of any of our drug candidates. There
is a high failure rate for drug candidates proceeding through clinical trials. A number of companies in the pharmaceutical and biotechnology
industries have suffered significant setbacks in clinical development even after achieving encouraging results in earlier studies. Any
such setbacks in our clinical development could materially harm our business, results of operations, financial condition and prospects.
Interim top-line and preliminary data
from our planned clinical trials that we announce or publish from time to time may change as more patient data become available and are
subject to audit and verification procedures that could result in material changes in the final data.
From time to time, we
may publish interim top-line or preliminary data from our planned clinical trials. Interim data from clinical trials that we may complete
are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient
data become available. Preliminary or top-line data also remain subject to audit and verification procedures that may result in the final
data being materially different from the preliminary data we previously published. As a result, interim and preliminary data should be
viewed with caution until the final data are available. Adverse differences between preliminary or interim data and final data could significantly
harm our reputation and business prospects.
If clinical trials of our product candidates
fail to demonstrate safety and efficacy to the satisfaction of the FDA and comparable non-U.S. regulators, we may incur additional costs
or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.
We are not permitted to commercialize, market,
promote or sell any product candidate in the United States without obtaining marketing approval from the FDA. Comparable non-U.S. regulatory
authorities, such as the EMA, impose similar restrictions. We may never receive such approvals. We must complete extensive preclinical
development and clinical trials to demonstrate the safety and efficacy of our product candidate in humans before we will be able to obtain
these approvals.
Clinical testing is expensive, difficult to design
and implement, can take many years to complete and is inherently uncertain as to outcome. We have not previously submitted an NDA to the
FDA or similar drug approval filings to comparable non-U.S. regulatory authorities for any product candidate.
Any inability to successfully complete preclinical
and clinical development could result in additional costs to us and impair our ability to generate revenues from product sales, regulatory
and commercialization milestones and royalties. In addition, if (1) we are required to conduct additional clinical trials or other testing
of our product candidate beyond the trials and testing than we contemplate, (2) we are unable to successfully complete clinical trials
of our product candidate or other testing, (3) the results of these trials or tests are unfavorable, uncertain or are only modestly favorable,
or (4) there are unacceptable safety concerns associated with our product candidate, we, in addition to incurring additional costs, may:
● be delayed in obtaining marketing approval for our product candidate;
● not obtain marketing approval at all;
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● be subject to additional post-marketing testing or other requirements; or
If we experience any of a number of possible
unforeseen events in connection with clinical trials of any of our product candidates, potential marketing approval or commercialization
of that product candidate could be delayed or prevented.
We may experience numerous unforeseen events during,
or as a result of, clinical trials that could delay or prevent marketing approval of any of our product candidates, including:
● participating patients may be subject to unacceptable health risks;
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Product development costs for us will increase
if we experience delays in testing or pursuing marketing approvals and we may be required to obtain additional funds to complete clinical
trials and prepare for possible commercialization of our product candidates. We do not know whether any preclinical tests or clinical
trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant preclinical or clinical
trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow
our competitors to bring products to market before we do and impair our ability to successfully commercialize our product candidates and
may harm our business and results of operations. In addition, many of the factors that cause, or lead to, clinical trial delays may ultimately
lead to the denial of marketing approval of our product candidates.
If we experience delays or difficulties
in the enrollment of patients in clinical trials, we may not achieve our clinical development on our anticipated timeline, or at all,
and our receipt of necessary regulatory approvals could be delayed or prevented.
We may not be able to initiate or continue clinical
trials for INKmune our DN-TNF product platform or any other product candidate if we are unable to locate and enroll a sufficient number
of eligible patients to participate in clinical trials. Patient enrollment is a significant factor in the timing of clinical trials, and
is affected by many factors, including:
● the size and nature of the patient population;
● the severity of the disease under investigation;
● the proximity of patients to clinical sites;
● the eligibility criteria for the trial;
● the design of the clinical trial;
● efforts to facilitate timely enrollment;
● competing clinical trials; and
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Our inability to enroll a sufficient number of
patients for our clinical trials could result in significant delays or may require us to abandon one or more clinical trials altogether.
Enrollment delays in our clinical trials may result in increased development costs for our product candidates, delay or halt the development
of and approval processes for our product candidates and jeopardize our ability to achieve our clinical development timeline and goals,
including the dates by which we will commence, complete and receive results from clinical trials. Enrollment delays may also delay or
jeopardize our ability to commence sales and generate revenues from our product candidates. Any of the foregoing could cause the value
of the Company to decline and limit our ability to obtain additional financing, if needed.
We will need to obtain FDA approval of any
proposed product brand names, and any failure or delay associated with such approval may adversely impact our business.
A pharmaceutical product cannot be marketed in
the U.S. or other countries until we have completed rigorous and extensive regulatory review processes, including approval of a brand
name. Any brand names we intend to use for our product candidates will require approval from the FDA regardless of whether we have secured
a formal trademark registration from the U.S. Patent and Trademark Office, or the USPTO. The FDA typically conducts a review of proposed
product brand names, including an evaluation of potential for confusion with other product names. The FDA may also object to a product
brand name if it believes the name inappropriately implies medical claims. If the FDA objects to any of our proposed product brand names,
we may be required to adopt an alternative brand name for our product candidates. If we adopt an alternative brand name, we would lose
the benefit of our existing trademark applications for such product candidate and may be required to expend significant additional resources
in an effort to identify a suitable product brand name that would qualify under applicable trademark laws, not infringe the existing rights
of third parties and be acceptable to the FDA. We may be unable to build a successful brand identity for a new trademark in a timely manner
or at all, which would limit our ability to commercialize our product candidates.
We may rely on orphan drug status to develop
and commercialize our product candidates, but orphan drug designation, if obtained, may not confer marketing exclusivity or other expected
commercial benefits as anticipated.
Market exclusivity afforded by orphan drug designation
is generally offered as an incentive to drug developers to invest in developing and commercializing products for unique diseases that
impact a limited number of patients. The FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition,
which is generally a disease or condition that affects fewer than 200,000 individuals in the United States. Qualification to maintain
orphan drug status is generally monitored by the regulatory authorities during the orphan drug exclusivity period, currently seven years
from the date of approval in the United States.
We intend to seek orphan drug designation in the
United States for our product candidate for the treatment of AML and ovarian cancer and we expect to rely on orphan drug exclusivity for
our product candidate. Even if granted, orphan drug designation, and related market exclusivity, in the United States could be lost. Further,
even if we are granted orphan drug status, the FDA can still approve different drugs for use in treating the same indication or disease,
which would create a more competitive market for us and our revenues will be diminished.
Further, for our product candidate, it is possible
that another company also holding orphan drug designation for the same product candidate will receive marketing approval for the same
indication before we do. If that were to happen, our applications for that indication may not be approved until the competing company’s
period of exclusivity expires. Even if we are the first to obtain marketing authorization for an orphan drug indication, there are circumstances
under which a competing product may be approved for the same indication during the seven-year period of marketing exclusivity, such as
if the later product is shown to be clinically superior to the orphan product, or if the later product is deemed a different product than
ours. Further, the seven-year marketing exclusivity would not prevent competitors from obtaining approval of the same product candidate
as ours for indications other than those in which we have been granted orphan drug designation, or for the use of other types of products
in the same indications as our orphan product.
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If the market opportunities for our product
candidates are smaller than we believe they are, our revenues may be adversely affected and our business may suffer. Because the target
patient populations of our product candidates are small, we must be able to successfully identify patients and capture a significant market
share to achieve and maintain profitability.
We focus our research and product development
on treatments for certain cancer indications. Our projections of both the number of people who have failed other therapies or have limited
medical options for such indications, are based on estimates. These estimates may prove to be incorrect and new studies may change the
estimated incidence or prevalence. The number of patients with such diseases in the United States, Europe and elsewhere may turn out to
be lower than expected or may not be otherwise amenable to treatment with our products, or new patients may become increasingly difficult
to identify or gain access to, all of which would adversely affect our results of operations and our business. Additionally, because our
target patient populations are small, we will be required to capture a significant market share to achieve and maintain profitability.
We may fail to comply with regulatory requirements.
Our success will be dependent upon our ability,
and our collaborative partners’ abilities, to maintain compliance with regulatory requirements, including cGMP, and safety reporting
obligations. The failure to comply with applicable regulatory requirements can result in, among other things, fines, injunctions, civil
penalties, total or partial suspension of regulatory approvals, refusal to approve pending applications, recalls or seizures of products,
operating and production restrictions and criminal prosecutions.
Even if our product candidates receive marketing
approval, they may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical
community necessary for commercial success and the market opportunity for the product candidates may be smaller than we estimate.
We have never commercialized a product. Even if
INKmune, our DN-TNF product platform (INB03 or XPro), or any other product candidate we develop is approved by the appropriate regulatory
authorities for marketing and sale, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party
payors and others in the medical community. For example, physicians are often reluctant to switch their patients from existing therapies
even when new and potentially more effective or convenient treatments enter the market. Further, patients often acclimate to the therapy
that they are currently taking and do not want to switch unless their physicians recommend switching products or they are required to
switch therapies due to lack of reimbursement for existing therapies.
Efforts to educate the medical community and third-party
payors on the benefits of our product candidate may require significant resources and may not be successful. If our product candidate
is approved but does not achieve an adequate level of market acceptance, we may not generate significant revenues and we may not become
profitable. The degree of market acceptance of INmune or any other product candidate we develop, if approved for commercial sale, will
depend on a number of factors, including:
● the efficacy and safety of the product;
● the potential advantages of the product compared to alternative treatments;
● the prevalence and severity of any side effects;
● the clinical indications for which the product is approved;
● our ability to offer the product for sale at competitive prices;
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● the strength of sales, marketing and distribution support;
● the approval of other new products for the same indications;
● changes in the standard of care for the targeted indications for the product;
● potential product liability claims.
The potential market opportunities for our product
candidate are difficult to estimate precisely. Our estimates of the potential market opportunities are predicated on many assumptions,
including industry knowledge and publications, third-party research reports and other surveys. While we believe that our internal assumptions
are reasonable, these assumptions involve the exercise of significant judgment on the part of our management, are inherently uncertain
and the reasonableness of these assumptions has not been assessed by an independent source. If any of the assumptions proves to be inaccurate,
the actual markets for our product candidate could be smaller than our estimates of the potential market opportunities.
Even if we obtain regulatory approvals for
INKmune and/or any product from our DN-TNF platform (INB03, XPro) those approvals and ongoing regulation of our products may limit how
we manufacture and market our products, which could prevent us from realizing the full benefit of our efforts.
If we obtain regulatory approvals, INKmune and/or
the DN-TNF product platform, and the manufacturing facilities used for its production will be subject to continual review, including periodic
inspections, by the FDA and other United States and foreign regulatory authorities. In addition, regulatory authorities may impose significant
restrictions on the indicated uses or marketing of INKmune or other products that we may develop. These and other factors may significantly
restrict our ability to successfully commercialize INKmune.
We and many of our vendors and suppliers will
be required to comply with current Good Manufacturing Practices, or GMP, which include requirements relating to quality control and quality
assurance as well as to the corresponding maintenance of records and documentation. Furthermore, any manufacturing facilities will need
to be approved by regulatory agencies before these facilities can be used to manufacture, and they will also be subject to additional
regulatory inspections. Any material changes we may make to our manufacturing process may require approval by the FDA and state or foreign
regulatory authorities. Failure to comply with FDA or other applicable regulatory requirements may result in criminal prosecution, civil
penalties, recall or seizure of products, partial or total suspension of production or withdrawal of a product from the market.
We must also report adverse events that occur
when our products are used. The discovery of previously unknown problems with INKmune, the DN-TNF product platform or manufacturing facilities
used to manufacture INKmune or the DN-TNF product platform may result in restrictions or sanctions on our products or manufacturing facilities,
including withdrawal of our products from the market. Regulatory agencies may also require us to reformulate our products, conduct additional
clinical trials, make changes in the labeling of our product or obtain re-approvals. This may cause our reputation in the market place
to suffer or subject us to lawsuits, including class action suits.
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If our product candidates receive marketing approval and
we, or others, later discover that the drug is less effective than previously believed or causes undesirable side effects that were not
previously identified, our ability to market the drugs could be compromised.
Clinical trials of our product candidates will
be conducted in carefully defined subsets of patients who have agreed to enter into clinical trials. Consequently, it is possible that
our clinical trials may indicate an apparent positive effect of a product candidate that is greater than the actual positive effect, if
any, or alternatively fail to identify undesirable side effects. If, following approval of our product candidate, we, or others, discover
that the drug is less effective than previously believed or causes undesirable side effects that were not previously identified, any of
the following adverse events could occur:
● we could be sued and held liable for harm caused to patients;
● the drug may become less competitive; and
● our reputation may suffer.
Any of these events could have a material and
adverse effect on our operations and business.
Any product candidate for which we obtain
marketing approval, along with the manufacturing processes, qualification testing, post-approval clinical data, labeling and promotional
activities for such product, will be subject to continual and additional requirements of the FDA and other regulatory authorities.
These requirements include submissions of safety
and other post-marketing information, reports, registration and listing requirements, good manufacturing practices, or GMP requirements
relating to quality control, quality assurance and corresponding maintenance of records and documents, and recordkeeping. Even if marketing
approval of our product candidate is granted, the approval may be subject to limitations on the indicated uses for which the product may
be marketed or to conditions of approval, or contain requirements for costly post-marketing testing and surveillance to monitor the safety
or efficacy of the product. The FDA closely regulates the post-approval marketing and promotion of pharmaceutical products to ensure such
products are marketed only for the approved indications and in accordance with the provisions of the approved labeling.
In addition, later discovery of previously unknown
problems with our products, manufacturing processes, or failure to comply with regulatory requirements, may lead to various adverse results,
including:
● restrictions on such products, manufacturers or manufacturing processes;
● restrictions on the labeling or marketing of a product;
● restrictions on product distribution or use;
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● requirements to conduct post-marketing clinical trials;
● warning letters issued by the FDA or other regulatory authorities;
● withdrawal of the products from the market;
● recall of products, fines, restitution or disgorgement of profits or revenue;
● suspension, revocation or withdrawal of marketing approvals;
● refusal to permit the import or export of our products; and
● injunctions or the imposition of civil or criminal penalties.
We currently have no marketing and sales
organization and have no experience in marketing products. If we are unable to establish marketing and sales capabilities or enter into
agreements with third parties to market and sell our product candidates, we may not be able to generate product revenue.
We currently have no sales, marketing or distribution
capabilities and have no experience as a company in marketing products. If we develop internal sales, marketing and distribution organization,
this would require significant capital expenditures, management resources and time, and we would have to compete with other pharmaceutical
and biotechnology companies to recruit, hire, train and retain marketing and sales personnel.
If we are unable or decide not to establish internal
sales, marketing and distribution capabilities, we expect to pursue collaborative arrangements regarding the sales, marketing and distribution
of our products. However, we may not be able to establish or maintain such collaborative arrangements, or if we are able to do so, their
sales forces may not be successful in marketing our products. Any revenue we receive would depend upon the efforts of such third parties,
which may not be successful. We may have little or no control over the sales, marketing and distribution efforts of such third parties
and our revenue from product sales may be lower than if we had commercialized our product candidates ourselves. We also face competition
in our search for third parties to assist us with the sales, marketing and distribution efforts of our product candidates. There can be
no assurance that we will be able to develop internal sales, marketing distribution capabilities or establish or maintain relationships
with third-party collaborators to commercialize any product in the United States or overseas.
We face substantial competition from other
pharmaceutical and biotechnology companies and our operating results may suffer if we fail to compete effectively.
The development and commercialization of new drug
products is highly competitive. We expect that we will face significant competition from major pharmaceutical companies, specialty pharmaceutical
companies and biotechnology companies worldwide with respect to INKmune, our DN-TNF product platform, and any other of our product candidates
that we may seek to develop or commercialize in the future. Specifically, due to the large unmet medical need, global demographics and
relatively attractive reimbursement dynamics, the oncology market is fiercely competitive and there are a number of large pharmaceutical
and biotechnology companies that currently market and sell products or are pursuing the development of product candidates for the treatment
of cancer. Our competitors may succeed in developing, acquiring or licensing technologies and drug products that are more effective, have
fewer or more tolerable side effects or are less costly than any product candidates that we are currently developing or that we may develop,
which could render our product candidates obsolete and noncompetitive.
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We rely on key personnel and, if we are
unable to retain or motivate key personnel or hire qualified personnel, we may not be able to grow effectively.
We are dependent on certain members of our management,
the loss of services of one or more of whom could materially adversely affect us. In particular, our success depends to a significant
extent upon the continued services of Dr. Raymond J. Tesi, our President and CEO. Dr. Tesi has overseen INmune Bio since inception and