ITEM 1A. RISK FACTORS
Investing in our common stock involves a
high degree of risk. Before making an investment decision, you should carefully consider the risks described below before deciding
whether to invest in our common stock. Before you make a decision to buy our securities, in addition to the risks and uncertainties
discussed above under “Cautionary Note Regarding Forward-Looking Statements”, you should carefully consider
the specific risks set forth herein. If any of these risks actually occur, it may materially harm our business, financial condition,
liquidity and results of operations. As a result, the market price of our securities could decline, and you could lose all or part
of your investment. Additionally, the risks and uncertainties described below are not the only risks and uncertainties that we face.
Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may become material and
adversely affect our business.
Risk Factor Summary
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 and should be carefully considered,
together with other information in this Annual Report on Form 10-K and our other filings with the SEC before making an investment decision
regarding our common stock.
23
● Risks Related to Regulatory Review, including, among others, that:
● Risks Related to Our Intellectual Property, including, among others, that:
24
Risks Related to Our Financial Position and Need for Additional
Capital
We have incurred significant net losses and negative operating
cash flows since our inception. We expect to incur net losses for the foreseeable future and may never achieve or maintain profitability.
We are a clinical-stage biotechnology company dedicated to enabling
cures through therapeutics targeting mast and hematopoietic stem cells and have a limited operating history. Investment in biopharmaceutical
product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that any potential
product candidate will fail to demonstrate adequate effect or an acceptable safety profile, gain regulatory approval and become commercially
viable. We have no products approved for commercial sale and have not generated any revenue from product sales to date, and we continue
to incur significant research and development and other expenses related to our ongoing operations. As a result, we are not profitable
and have incurred losses and negative operating cash flows in each period since our inception. For the years ended December 31,
2024 and 2023, we reported net losses of $71.3 million and $64.5 million, respectively. For the years ended December 31, 2024
and 2023, we reported negative operating cash flows of $62.6 million and $52.1 million, respectively. As of December 31, 2024, we had
an accumulated deficit of $240.9 million. We have devoted all of our efforts to organizing and staffing our company, business and scientific
planning, raising capital, acquiring and developing technology, identifying potential product candidates, undertaking research and preclinical
studies of potential product candidates, developing manufacturing capabilities and evaluating a clinical path for our pipeline programs.
We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future, and we expect these losses
to increase as we continue our research and development of, and seek regulatory approvals for, our product candidates.
The net losses we incur may fluctuate significantly
from quarter to quarter. We anticipate that our expenses will increase substantially if and as we:
● seek to identify additional product candidates and research programs;
● hire additional research and development and clinical personnel;
● develop or in-license manufacturing and distribution technologies;
25
As a company, we have not completed clinical development
of any product candidate and expect that it will be several years, if ever, before we have a product candidate ready for commercialization.
To become and remain profitable, we must develop and, either directly or through collaborators, eventually commercialize a product or
products with significant market potential. This will require us to be successful in a range of challenging activities, including identifying
product candidates, completing preclinical testing and clinical trials of product candidates, obtaining marketing approval for these product
candidates, manufacturing, marketing and selling those products for which we may obtain marketing approval and satisfying any post-marketing
requirements.
We may never succeed in these activities and, even
if we do, may never generate revenues that are significant or large enough to achieve profitability. Our product candidates and research
programs are currently only in the early stages of development. Because of the numerous risks and uncertainties associated with developing
product candidates, we are unable to predict the extent of any future losses or when we will become profitable, if at all. If we do achieve
profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain
profitable would decrease the value of our company and could impair our ability to raise capital, maintain our research and development
efforts, expand our business or continue our operations. A decline in the value of our company could also cause you to lose all or
part of your investment.
We will need substantial additional funding, which may not be
available on acceptable terms, or at all. If we are unable to raise capital when needed, we would be forced to delay, reduce or eliminate
our research and product development programs or future commercialization efforts.
We expect to spend substantial amounts of cash to conduct further research
and development and preclinical testing and clinical trials of our product candidates, to seek regulatory approvals for our product candidates
and to launch and commercialize any product candidates for which we receive regulatory approval. Furthermore, we expect to incur additional
costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in order to maintain
our continuing operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or
eliminate our research and product development programs or future commercialization efforts. As of December 31, 2024, our cash and cash
equivalents were $71.6 million and we had an accumulated deficit of $240.9 million. We will need to raise additional financing to continue
our products’ development for the foreseeable future, and will continue to need to do so until we become profitable. Our future
financing requirements will depend on many factors, including:
26
● the costs of operating as a public company.
Conducting preclinical testing and clinical trials
is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or
results required to obtain marketing approval and achieve product sales. In addition, even if we successfully develop product candidates
and those are approved, we may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products
that we do not expect to be commercially available for several years, if at all. Accordingly, we will need to continue to rely
on additional financing to achieve our business objectives.
We currently have an effective universal shelf
registration statement on Form S-3, which we filed with the SEC on April 28, 2023, and which was declared effective on May 5, 2023 and
will expire on May 5, 2026 (the “Shelf Registration Statement”). Pursuant to the Shelf Registration Statement, we may offer
from time to time up to an aggregate of $250.0 million of securities, including any combination of common stock, preferred stock, debt
securities, warrants, rights, units and depositary shares. On November 10, 2022, we entered into a Controlled
Equity OfferingSM Sales Agreement with Cantor Fitzgerald & Co. (the “Agent”), pursuant to which
we may offer and sell through or to the Agent, as sales agent or principal, shares of common stock from time to time (the “ATM Offering”).
On May 5, 2023, we filed with the SEC under the Shelf Registration Statement a prospectus with the SEC in connection with the ATM Offering
(the “ATM Prospectus”), pursuant to which we may offer pursuant to the ATM Offering shares of our common stock having an aggregate
offering price of up to $75.0 million. No securities were sold pursuant to the ATM Prospectus as of December 31, 2024. In February 2024,
we issued and sold 3,900,000 shares of our common stock in an underwritten offering pursuant to the Shelf Registration Statement for net proceeds of $47.2 million pursuant an underwriting agreement with Cowen and Company, LLC and Evercore Group L.L.C., as the
representatives of the several underwriters named therein.
As of February 25, 2025, $75.0 million remains
allocated and available under the ATM Prospectus and approximately $124.5 million remains available and unallocated under the Shelf Registration
Statement.
If we raise additional capital by issuing equity
securities, the percentage ownership of our existing stockholders may be reduced, and accordingly these stockholders may experience substantial
dilution. We may also issue equity securities that provide for rights, preferences and privileges senior to those of our common stock.
Given our need for cash and that equity issuances are the most common type of fundraising for similarly situated companies, the risk of
dilution is particularly significant for our stockholders.
Any additional fundraising efforts may divert our
management from our day-to-day activities, which may adversely affect our ability to develop and commercialize product candidates.
We cannot be certain that additional funding will be available on acceptable terms, or at all. We have no committed source of additional
capital and, if we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly
delay, scale back or discontinue the development or commercialization of product candidates or other research and development initiatives.
Our license agreements and any future collaboration agreements may also be terminated if we are unable to meet the payment or other obligations
under the agreements. We could be required to seek collaborators for product candidates at an earlier stage than otherwise would be desirable
or on terms that are less favorable than might otherwise be available or relinquish or license on unfavorable terms our rights to product
candidates in markets where we otherwise would seek to pursue development or commercialization ourselves.
27
As a result of our history of losses
and negative cash flows from operations, our management has performed an analysis and concluded that substantial doubt exists about our
ability to continue as a going concern, and we will need to raise additional financing to continue our products’ development.
Our history of operating
losses and negative cash flows from operations combined with our anticipated use of cash to fund operations raises substantial doubt about
our ability to continue as a going concern beyond one year from the date of filing of this Annual Report on Form 10-K. Our financial statements
as of December 31, 2024 do not include any adjustments that might result from the outcome of this uncertainty. Based on our current operating
plan, we will need to raise additional financing to continue our products’ development for the foreseeable future, and until we
become profitable. Our future viability as an ongoing business is dependent on our ability to generate cash from our operating activities
or to raise additional capital to finance our operations. We expect to finance our future cash needs through equity or debt financings,
collaborations or a combination of these approaches. The sale of equity or convertible debt securities may result in dilution to our stockholders,
and, in the case of preferred equity securities or convertible debt, those securities could provide for rights, preferences or privileges
senior to those of our common stock. Debt financings may subject us to covenant limitations or restrictions on our ability to take specific
actions, such as incurring additional debt or making capital expenditures. Our ability to raise additional funds may be adversely impacted
by negative global economic conditions and any disruptions to and volatility in the credit and financial markets in the United States
and worldwide or other factors. There can be no assurance that we will be successful in acquiring additional funding at levels sufficient
to fund our operations or on terms favorable or acceptable to us. If we are unable to obtain adequate financing when needed or on terms
favorable or acceptable to us, we may be forced to delay, reduce the scope of or eliminate one or more of our research and development
programs.
The perception that we
might be unable to continue as a going concern may also make it more difficult to obtain financing for the continuation of our operations
on terms that are favorable to us, or at all, and could result in the loss of confidence by investors and employees. Our consolidated
financial statements do not include any adjustments that might result from the outcome of this uncertainty. If we are unable to continue
as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our consolidated
financial statements, and it is likely that our investors will lose all or a part of their investment.
We have a limited operating history and no history of commercializing
pharmaceutical products, which may make it difficult to evaluate the prospects for our future viability.
We are a clinical stage company. We were founded
and commenced operations in March 2018. Our operations to date have been limited to organizing and staffing our company, business
planning, raising capital, acquiring and developing our technology, identifying potential product candidates and undertaking preclinical
studies and clinical trials. Although we have initiated clinical trials for briquilimab, we have not yet demonstrated an ability to successfully
complete clinical trials of our product candidates; obtained marketing approvals; manufactured a commercial-scale medicine or therapy,
or arranged for a third party to do so on our behalf; or conducted sales and marketing activities necessary for successful commercialization.
Typically, it takes about 10 to 15 years to develop a new medicine from the time it is discovered to when it is available
for treating patients. Consequently, any predictions we make about our future success or viability may not be as accurate as they could
be if we had a longer operating history.
In addition, as a young business, we may encounter
unforeseen expenses, difficulties, complications, delays and other known and unknown factors. We will need to transition at some point
from a company with a research and development focus to a company capable of supporting commercial activities. We may not be successful
in such a transition.
28
We have never generated revenue from product sales and may never
be profitable.
Our ability to generate revenue from product
sales and achieve profitability depends on our ability, alone or with collaborators, to successfully complete the development of,
and obtain the regulatory approvals necessary to commercialize, product candidates. We do not anticipate generating revenues from
product sales for the next several years, if ever. Our ability to generate future revenue from product sales depends heavily on
our, or our future collaborators’, ability to successfully:
● obtain market acceptance of product candidates as viable treatment options;
● address competing technological and market developments;
● implement internal systems and infrastructure, as needed;
● attract, hire and retain qualified personnel.
Even if one or more of the product candidates we
develop are approved for commercial sale, we anticipate incurring significant costs associated with commercializing any approved product
candidate. Our expenses could increase beyond expectations if we are required by the FDA, the EMA or other regulatory authorities to perform
clinical and other studies in addition to those that we currently anticipate.
Many of the factors listed above are beyond our
control, and could cause us to experience significant delays or prevent us from completing the development of our product candidates,
obtaining regulatory approvals or commercializing our product candidates. Even if we do achieve profitability, we may not be able to sustain
or increase profitability on a quarterly or annual basis. A failure to become or remain profitable could result in a decline in the value
of our company and could also cause you to lose all or part of your investment.
29
Our ability to utilize our net operating loss carryforwards and
certain other tax attributes to offset taxable income or taxes may be limited.
As of December 31, 2024, we had net
operating loss carryforwards for federal income tax purposes of $123.2 million that can be carried forward indefinitely. As of
December 31, 2024, we had net operating loss carryforwards for state income tax purposes of $131.9 million that begin to
expire in 2038. Portions of these net operating loss carryforwards could expire unused and be unavailable to offset future
income tax liabilities. Under the legislation enacted in 2017, informally titled the Tax Cuts and Jobs Act (the “Tax
Act”), as modified by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), U.S. federal
net operating losses incurred in taxable years beginning after December 31, 2017 may be carried forward indefinitely, but
the deductibility of such federal net operating losses in taxable years beginning after December 31, 2020 is limited. It
is uncertain how various states will respond to the Tax Act and the CARES Act. For state income tax purposes, there may be periods
during which the use of net operating loss carryforwards is suspended or otherwise limited, which could accelerate or permanently
increase state taxes owed. In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the
“Code”), and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which
is generally defined as a greater than 50% change, by value, in its equity ownership over a three-year period, the
corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its
post-change income or taxes may be limited. Our existing net operating loss carryforwards may be subject to limitations arising out
of previous ownership changes and we may be limited as to the amount that can be utilized each year as a result of such previous
ownership changes, including the Business Combination and related transactions. In addition, future changes in our stock ownership,
including future offerings, as well as other changes that may be outside of our control, could result in additional ownership
changes. We have completed a Section 382 analysis covering taxable periods from its inception through the year ended
December 31, 2021. We experienced an ownership change on November 21, 2019 for both federal and California tax purposes
related to its Series A redeemable convertible preferred stock financing. Any net operating loss generated for taxable periods
in 2018 and through November 21, 2019 in excess of $2.87 million will be permanently limited for California tax purposes.
We reduced our California net operating loss deferred tax assets balance by the permanently limited amount of $0.6 million as of December 31, 2021.
There would be no permanent loss of federal net operating loss based on the limits. We experienced an additional ownership change on
September 24, 2021; however, we do not expect there are additional tax attributes that will expire unused before the expiration
periods. There is a full valuation allowance for net deferred tax assets, including net operating loss carryforwards for the year
ended December 31, 2024.
Business disruptions caused by natural or man-made disasters,
acts of war or other hostilities could seriously harm our future revenues and financial condition and increase our costs and expenses
generally.
Our corporate headquarters are located in the San
Francisco Bay Area, a region known for seismic activity. Our suppliers may also experience a disruption in their business as a result
of natural or man-made disasters. A significant natural or man-made disaster, such as an earthquake, prolonged or repeated power outage,
hurricane, flood, fire, drought or other extreme weather events and changing weather patterns, which are increasing in frequency due to
the impacts of climate change, could severely damage or destroy our headquarters or facilities or the facilities of our manufacturers
or suppliers, which could have a material and adverse effect on our business, financial condition and results of operations. In addition,
terrorist acts, acts of war or the outbreak of hostilities against the U.S. or other countries globally, could cause damage or disruption
to us, our employees, facilities, partners and suppliers, which could have a material adverse effect on our business, financial condition
and results of operations.
Recent and future changes to tax laws could materially adversely
affect our company.
The tax regimes we are subject to or operate
under, including with respect to income and non-income taxes, are unsettled and may be subject to significant change.
Changes in tax laws, regulations, or rulings, or changes in interpretations of existing laws and regulations, could materially
adversely affect our company. For example, the Tax Cuts and JOBS Act, the Coronavirus Aid, Relief, and Economic Security Act, and
the Inflation Reduction Act, or the IRA, enacted many significant changes to the U.S. tax laws. Future guidance from the Internal
Revenue Service and other tax authorities with respect to such legislation may affect us, and certain aspects thereof could be
repealed or modified in future legislation. For example, the IRA includes provisions that will impact the U.S. federal income
taxation of certain corporations, including imposing a 15% minimum tax on the book income of certain large corporations and a 1%
excise tax on certain corporate stock repurchases that would be imposed on the corporation repurchasing such stock. Additionally,
new income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could
adversely affect our business operations and financial performance. Further, existing tax laws, statutes, rules, regulations or
ordinances could be interpreted, changed, modified or applied adversely to us. For example, the Trump administration has proposed
various U.S. federal tax law changes, which if enacted could have a material impact on our business, cash flows, financial condition
or results of operations. It is also uncertain if and to what extent various states will conform to federal tax laws. In addition,
many countries in Europe, as well as a number of other countries and organizations (including the Organization for Economic
Cooperation and Development and the European Commission), have proposed, recommended, or (in the case of countries) enacted or
otherwise become subject to changes to existing tax laws or new tax laws that could significantly increase our tax obligations in
the countries where we do business or require us to change the manner in which we operate our business. Future tax reform
legislation could have a material impact on the value of our deferred tax assets, could result in significant one-time charges, and
could increase our future tax expense.
30
Risks Related to Discovery, Development, Manufacturing and Commercialization
We are substantially dependent on the success of our most advanced
product candidate, briquilimab. If we are unable to complete development of, obtain approval for and commercialize our product candidates,
including briquilimab, in a timely manner or at all, our business will be harmed.
Our future success is dependent on our ability
to timely advance and complete clinical trials, obtain marketing approval for and successfully commercialize our product candidates. We
are not permitted to market or promote briquilimab or any other product candidate before we receive marketing approval from the FDA and
comparable foreign regulatory authorities, and we may never receive such marketing approvals.
The success of our product candidates will depend
on several factors, including the following:
● the frequency and severity of adverse events in the clinical trials;
31
● a continued acceptable safety profile following any marketing approval;
● our ability to compete with other treatments.
We do not have complete control over many of these
factors, including certain aspects of clinical development and the regulatory submission process, potential threats to our intellectual
property rights and the manufacturing, marketing, distribution and sales efforts of any future collaborator. If we are not successful
with respect to one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully
commercialize briquilimab, which would materially harm our business. If we do not receive marketing approvals for briquilimab, we may
not be able to continue our operations.
We may not be successful in our efforts to identify, develop
and commercialize additional product candidates. If these efforts are unsuccessful, we may never become a commercial stage company
or generate any revenues.
The success of our business depends primarily
upon our ability to identify, develop, and commercialize additional product candidates based on, or complementary with, our
technology platform. We are currently enrolling patients in a Phase 1b/2a trial evaluating briquilimab in patients with CSU, a Phase
1b/2a trial evaluating briquilimab in patients with CIndU, a Phase 1b/2a asthma challenge study of briquilimab in asthma and a
Phase 1/2 clinical trial of briquilimab as a conditioning agent prior to allogenic transplant for SCID patients. We are also in
the process of initiating other product development programs in mast cell drive diseases that are still in the research or
preclinical stage of development. Our research programs may fail to identify additional indications for clinical development or
product candidates for clinical development for a number of reasons. Our research methodology may be unsuccessful in identifying
potential product candidates, our potential product candidates may be shown to have harmful side effects in preclinical in vitro
experiments or animal model studies, they may not show promising signals of efficacy in such experiments or studies or they may have
other characteristics that may make the product candidates impractical to manufacture, unmarketable or unlikely to receive marketing
approval. The historical failure rate for product candidates is high due to risks relating to safety, efficacy, clinical execution,
changing standards of medical care, and other unpredictable variables. In addition, although we believe our technology platform will
position us to rapidly expand our portfolio of product candidates beyond our current product candidates, our ability to expand our
portfolio may never materialize.
32
If any of these events occur, we may be forced
to abandon our research or development efforts for a program or programs, which would have a material adverse effect on our business,
financial condition, results of operations and prospects. Research programs to identify new product candidates require substantial technical,
financial and human resources. We may focus our efforts and resources on potential programs or product candidates that ultimately prove
to be unsuccessful, which would be costly and time-consuming.
We may expend our limited resources to pursue a particular product
candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is
a greater likelihood of success.
Because we have limited financial and managerial
resources, we focus on research programs and product candidates that we identify for specific indications among many potential options.
As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to
have greater commercial potential. For example, on January 10, 2023, we announced, as part of an overall portfolio prioritization, that
we will focus on the development of our lead product candidate, briquilimab (formerly known as JSP191), in chronic mast and stem cell
diseases as well as a conditioning agent for stem cell transplant in rare diseases. This portfolio includes new programs as a therapeutic
for patients with CSU, CIndU and asthma, along with our existing program for briquilimab as a conditioning agent for stem cell transplant
in patients with sickle cell disease, Fanconi anemia or severe combined immunodeficiency. Additionally, in May 2024, we announced the
expansion of our mast cell development program with a Phase 1b/2a study evaluating briquilimab in asthma patients. Our resource allocation
decisions may cause us to fail to capitalize on viable commercial medicines or profitable market opportunities. Our projections of both
the number of people who have these diseases, as well as the subset of people with these diseases who have the potential to benefit from
treatment with our product candidates, are based on estimates. If any of our estimates are inaccurate, the market opportunities for any
of our product candidates could be significantly diminished and have an adverse material impact on our business. Additionally, the potentially
addressable patient population for our product candidates may be limited, or may not be amenable to treatment with our product candidates.
Our spending on current and future research and development programs and product candidates for specific indications may not yield any
commercially viable product candidates. If we do not accurately evaluate the commercial potential or target market for a particular product
candidate (including briquilimab), we may relinquish valuable rights to that product candidate through collaboration, licensing, or other
royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights
to such product candidate. Any such event could have a material adverse effect on our business, financial condition, results of operations
and prospects.
If any of our product candidates cause serious adverse events,
undesirable side effects or unexpected characteristics, such events, side effects or characteristics could delay or prevent regulatory
approval of the product candidate, limit our commercial potential or result in significant negative consequences following any potential
marketing approval.
Undesirable side effects or adverse events caused
by briquilimab or other therapeutics we may develop could cause us or regulatory authorities to interrupt, delay or halt clinical trials
and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or comparable foreign regulatory
authorities. Results of our clinical trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected
characteristics. Treatment-related side effects could also affect patient recruitment or the ability of enrolled patients to complete
the trials or result in potential product liability claims.
If any product candidates we develop are associated
with serious adverse events, undesirable side effects or unexpected characteristics, we may need to abandon their development or limit
development to certain 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, any of which would have a material adverse effect on our
business, financial condition, results of operations, and prospects. Many product candidates that initially showed promise in early stage
testing have later been found to cause side effects that prevented further clinical development of the product candidates.
33
Results of preclinical studies and early clinical trials may
not be predictive of results of future clinical trials, and such results do not guarantee approval of a product candidate by regulatory
authorities. In addition, our clinical trials to date have been limited in scope, and results received to date may not be replicated in
expanded or additional future clinical trials.
The outcome of preclinical studies and early clinical
trials may not be predictive of the success of later clinical trials, and interim results of clinical trials do not necessarily predict
success in the results of completed clinical trials. There can be no assurance that any of our current or future preclinical and clinical
trials will ultimately be successful or support further preclinical or clinical development of any of our product candidates. 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 could face similar setbacks. The design of a clinical trial can determine whether its results will
support approval of a product, and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced.
Many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless
failed to obtain regulatory approval for their product candidates. In addition, preclinical and clinical data are often susceptible to
varying interpretations and analyses, which may delay, limit or prevent regulatory approval. In addition, regulatory delays or rejections
may be encountered as a result of many factors, including changes in regulatory policy during the period of product development. Any such
adverse events may cause us to delay, limit or terminate planned clinical trials, any of which would have a material adverse effect on
our business, financial condition, results of operations and prospects.
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
dosing regimen and other clinical trial procedures and the rate of dropout among clinical trial participants. If we fail to receive positive
results in clinical trials of our product candidates, the development timeline and regulatory approval and commercialization prospects
for our most advanced product candidate, and, correspondingly, our business and financial prospects would be negatively impacted.
If we experience delays or difficulties in the enrollment of
patients in clinical trials, the cost of developing product candidates could increase and our receipt of necessary regulatory approvals
could be delayed or prevented.
Patient enrollment is a significant factor in the
timing of clinical trials. The timing of our clinical trials depends, in part, on the speed at which we can recruit patients to participate
in our trials. We or our collaborators may not be able to continue clinical trials for briquilimab or any other product candidates we
identify or develop if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required
by the FDA, the EMA or other analogous regulatory authorities outside the United States, or as needed to provide appropriate statistical
power for a given trial. Patients may be unwilling to participate in our clinical trials because of negative publicity from adverse events
related to the biotechnology competitive clinical trials for similar patient populations, clinical trials in competing products or for
other reasons. As a result, the timeline for recruiting patients, conducting trials and obtaining regulatory approval of product candidates
may be delayed.
Patient enrollment is also affected by other factors,
including:
● severity of the disease under investigation;
● size of the patient population and process for identifying patients;
● design of the trial protocol;
● availability of genetic testing for potential patients;
34
● ability to obtain and maintain patient informed consent;
● risk that enrolled patients will drop out before completion of the trial;
● eligibility and exclusion criteria for the trial in question;
● perceived risks and benefits of the product candidate under trial;
● efforts to facilitate timely enrollment in clinical trials;
● patient referral practices of physicians;
● ability to monitor patients adequately during and after treatment;
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 have opted to enroll in our trials may instead opt to
enroll in a trial being conducted by a competitor. We may 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 at such clinical trial sites.
Enrollment delays in our clinical trials may result
in increased development costs for briquilimab or any other product candidates we may develop, which would cause the value of our company
to decline and limit our ability to obtain additional financing. If we or our collaborators have difficulty enrolling a sufficient number
of patients to conduct our clinical trials as planned, we may need to delay, limit or terminate ongoing or planned clinical trials, any
of which would have an adverse effect on our business, financial condition, results of operations and prospects.
We have never obtained regulatory approval for a drug, may never
receive regulatory approval for any of our product candidates, and may therefore never generate revenues from product sales.
As a company, we have never obtained
regulatory approval for, or commercialized, a drug. It is possible that the FDA may refuse to accept any or all future product
candidates for substantive review or may conclude after review of our data that our application is insufficient to obtain regulatory
approval for any current or future product candidates. If the FDA does not approve any future product candidates, it may require
that we conduct additional costly clinical, preclinical or manufacturing validation studies before the FDA will reconsider one or
more of our applications. Depending on the extent of these or any other FDA-required studies, approval of any product candidates or
other application that we submit may be significantly delayed, possibly for several years, or may require us to expend more
resources than we have available. Any failure or delay in obtaining regulatory approvals would prevent us from commercializing
briquilimab or any other product candidate, generating revenues and achieving and obtaining or sustaining profitability. It is also
possible that additional studies, if performed and completed, may not be considered sufficient by the FDA to approve any new drug
application or other application we submit. If any of these outcomes occur, we may be forced to abandon the development of our
product candidates, which would materially adversely affect our business and could potentially cause us to cease operations. We face
similar risks for our applications in foreign jurisdictions.
35
Our commercial success depends upon attaining significant market
acceptance of our product candidates, if approved, among physicians, patients, healthcare payers and operators of major clinics, and we
may not be successful in attaining such market acceptance.
Even with the requisite approvals from the FDA
in the U.S., the EMA in the European Union and other regulatory authorities internationally, the commercial success of our product candidates
will depend, in part, upon the degree of market acceptance by physicians, patients, third-party payors and others in the medical community.
Any product that we commercialize may not gain acceptance by physicians, patients, health care payors and others in the medical community.
If these products do not achieve an adequate level of acceptance, we may not generate significant product revenue and may not become profitable.
Efforts to educate the medical community and third-party payors on the benefits of our product candidates may require significant resources,
including our management’s time and financial resources, and may not be successful. Even if any product candidate we develop receives
marketing approval, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, healthcare payors and others
in the medical community. The degree of market acceptance of any product candidate we develop, if approved for commercial sale, will depend
on a number of factors, including:
● the ability to offer our products for sale at competitive prices;
● convenience and ease of administration compared to alternative treatments;
● relative convenience and ease of administration;
● the strength of marketing and distribution support;
● availability of third-party coverage and sufficiency of reimbursement; and
● the prevalence and severity of any side effects.
Even if a product candidate is approved, such product
may not achieve an adequate level of acceptance, we may not generate significant product revenues, and we may not become profitable.
36
If we are unable to establish effective marketing and sales capabilities
or enter into agreements with third parties to market and sell our product candidates, if approved, we may not be able to effectively
market and sell our product candidates, if approved, or generate product revenues.
We have limited marketing capabilities and limited
experience in the sale, marketing or distribution of pharmaceutical products. In addition, we do not have a large sales, promotion and
marketing budget. As a result of our limited marketing capabilities, to achieve commercial success for any approved product for which
we retain sales and marketing responsibilities, we must either develop a sales and marketing organization or outsource these functions
to third parties. In the future, we may choose to build a focused sales, marketing and commercial support infrastructure to sell, or participate
in sales activities with our collaborators for, some of our product candidates if and when they are approved.
Factors that may inhibit our efforts to commercialize
our product candidates on our own include:
We may not be successful in entering into arrangements
with third parties to commercialize our product candidates or may be unable to do so on terms that are favorable to us. We may have little
control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products
effectively. If we do not establish commercialization capabilities successfully, either on our own or in collaboration with third parties,
we will not be successful in commercializing our product candidates.
We face significant competition in an environment of rapid technological
change, and there is a possibility that our competitors may achieve regulatory approval before us or develop therapies that are safer
or more advanced or effective than ours, which may harm our financial condition and our ability to successfully market or commercialize
our product candidates.
The development and commercialization of new drug
and biologic products is highly competitive. Moreover, the biotechnology field generally is characterized by rapidly changing technologies,
significant competition and a strong emphasis on intellectual property. We will face competition with respect to briquilimab and any other
product candidates that we develop or commercialize in the future from major pharmaceutical companies, specialty pharmaceutical companies
and biotechnology companies worldwide. Potential competitors also include academic institutions, government agencies and other public
and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research,
development, manufacturing and commercialization.
There are a number of large pharmaceutical
and biotechnology companies that currently market and sell products or are pursuing the development of products for the treatment of
the disease indications for which we have product candidates and research programs. Some of these competitive products and therapies
are based on scientific approaches that are the same as or similar to our approach, and others are based on entirely different
approaches. Any product candidates that we successfully develop and commercialize will compete with existing therapies and new
therapies that may become available in the future that are approved to treat the same diseases for which we may obtain approval for
our product candidates. This may include other types of therapies, such as small molecule, antibody and/or protein therapies.
37
Many of our current or potential competitors, either
alone or with their collaboration partners, may have significantly greater financial resources and expertise in research and development,
manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we
do. Mergers and acquisitions in the pharmaceutical, biotechnology and gene therapy industries may result in even more resources being
concentrated among a smaller number of our competitors. Smaller or early-stage companies may also prove to be significant competitors,
particularly through collaborative arrangements with large and established companies. These competitors also compete with us in recruiting
and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical
trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Our commercial opportunity could be reduced
or eliminated if our competitors develop and commercialize product candidates that are safer, more effective, have fewer or less severe
side effects, are more convenient or are less expensive than our product candidates or that would render our product candidates obsolete
or non-competitive. Our competitors also may obtain FDA or other regulatory approval for their product candidates more rapidly than we
may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter
the market. Additionally, technologies developed by our competitors may render our product candidates uneconomical or obsolete, and we
may not be successful in marketing any product candidates against competitors.
Competitors of briquilimab include the following:
If product liability lawsuits are brought against us, we may
incur substantial liabilities and may be required to limit commercialization of our product candidates.
We face an inherent risk of product liability exposure
related to the testing in human clinical trials of our product candidates and will face an even greater risk if we commercially sell any
products that we may develop. For example, we may be sued if our product candidates cause, or are perceived to cause, injury or are found
to be otherwise unsuitable during clinical trials, manufacturing, marketing or sale. Any such product liability claims may include allegations
of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability or
a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves
against claims that our product candidates or products caused injuries, we could incur substantial liabilities or be required to limit
commercialization of our product candidates. Even a successful defense would require significant financial and management resources. Regardless
of merit or eventual outcome, liability claims may result in:
● the inability to commercialize any products that we may develop;
38
● decreased demand for our product candidates or products that we may develop;
● injury to our reputation and significant negative media attention;
● withdrawal of clinical trial participants;
● significant time and costs to defend the related litigation;
● substantial monetary awards to trial participants or patients; and
● loss of revenue.
Although we maintain product liability insurance
coverage, it may not be adequate to cover all liabilities that we may incur. We anticipate that we will need to increase our insurance
coverage as we continue clinical trials and if we successfully commercializes any product. Insurance coverage is increasingly expensive.
We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.
Our product candidates are complex and difficult to manufacture.
We could experience delays in satisfying regulatory authorities or production problems that result in delays in our development or commercialization
programs, limit the supply of our product candidates, or otherwise harm our business.
Our product candidates require processing steps
that are more complex than those required for most chemical and other biological pharmaceuticals. As a result, assays of the finished
product candidate may not be sufficient to ensure that the product candidate will perform in the intended manner. Problems with the manufacturing
process, even minor deviations from the normal process, could result in product defects or manufacturing failures that result in lot failures,
product recalls, product liability claims, insufficient inventory or potentially delay progression of our clinical trials. If we successfully
develop product candidates, we may encounter problems achieving adequate quantities and quality of clinical-grade materials that meet
FDA, EMA or other comparable applicable foreign standards or specifications with consistent and acceptable production yields and costs.
In addition, our product candidates will require complicated delivery modalities, such as electroporation, which will introduce additional
complexities into the manufacturing process.
In addition, the FDA, the EMA and other regulatory
authorities may require us to submit samples of any lot of approved product together with the protocols showing the results of applicable
tests at any time. Under some circumstances, the FDA, the EMA or other regulatory authorities may require that we not distribute a lot
until the agency authorizes its release. Slight deviations in the manufacturing process, including those affecting quality attributes
and stability, may result in unacceptable changes in the product that could result in lot failures or product recalls. Lot failures or
product recalls could cause us to delay clinical trials or product launches, which could be costly to us and otherwise harm our business,
financial condition, results of operations and prospects.
Moreover, the clinical development of our product
candidates depends on the availability of certain materials and agents used in our clinical trials. Specifically, our clinical trial protocols
for briquilimab-based conditioning include the administration of fludarabine, and the FDA recently reported a shortage of fludarabine.
Any failure or delays by us or by our clinical sites to obtain sufficient quantities of fludarabine or other components and agents necessary
for the conduct of our clinical trials, may delay our ability to enroll and treat patients in, or complete, our current or future clinical
trials of our product candidates on time, if at all.
Some of the raw materials that we anticipate will
be required in our manufacturing process are derived from biologic sources. Such raw materials are difficult to procure and may be subject
to contamination or recall. A material shortage, contamination, recall or restriction on the use of biologically derived substances in
the manufacture of our product candidates could adversely impact or disrupt the commercial manufacturing or the production of clinical
material, which could materially harm our development timelines and our business, financial condition, results of operations and prospects.
39
If we or any contract research organizations, contract manufacturers
or suppliers that we engage fail to comply with environmental, health and safety laws and regulations, we could become subject to fines
or penalties or incur costs that could have a material adverse effect on the success of our business.
We and any contract research organizations, contract
manufacturers and suppliers we engage are subject to numerous federal, state and local environmental, health and safety laws, regulations
and permitting requirements, including those governing laboratory procedures; the generation, handling, use, storage, treatment and disposal
of hazardous and regulated materials and wastes; the emission and discharge of hazardous materials into the ground, air and water; and
employee health and safety. Our operations involve the use of hazardous and flammable materials, including chemicals and biological and
radioactive materials. Our operations also produce hazardous waste. We generally contract with third parties for the disposal of these
materials and wastes. Although we believe that our and such third parties’ procedures for handling, storing and disposing of these
materials and waste comply with legally prescribed standards, we cannot eliminate the risk of contamination or injury from these materials.
In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages,
and any liability could exceed our resources. Under certain environmental laws, we could be held responsible for costs relating to any
contamination at our current or past facilities and at third-party facilities. We also could incur significant costs associated with civil
or criminal fines and penalties.
Compliance with applicable environmental laws and
regulations may be expensive, and current or future environmental laws and regulations may impair our product development and research
efforts. In addition, we cannot entirely eliminate the risk of accidental injury or contamination from these materials or wastes. Although
we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting
from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not carry specific
biological or hazardous waste insurance coverage, and our property, casualty and general liability insurance policies specifically exclude
coverage for damages and fines arising from biological or hazardous waste exposure or contamination. Accordingly, in the event of contamination
or injury, we could be held liable for damages or be penalized with fines in an amount exceeding our resources, and our clinical trials
or regulatory approvals could be suspended, which could have a material adverse effect on our business, financial condition, results of
operations and prospects.
In addition, we may incur substantial costs in
order to comply with current or future environmental, health and safety laws, regulations and permitting requirements. For example, our
products are considered to contain genetically modified organisms or cells, which are regulated in different ways depending upon the country
in which preclinical research or clinical trials are conducted. These current or future laws, regulations and permitting requirements
may impair our research, development or production efforts. Failure to comply with these laws, regulations and permitting requirements
also may result in substantial fines, penalties or other sanctions or business disruption, which could have a material adverse effect
on our business, financial condition, results of operations and prospects.
Any third-party contract research organizations,
contract manufacturers and suppliers we engage will also be subject to these and other environmental, health and safety laws and regulations.
Liabilities they incur pursuant to these laws and regulations could result in significant costs or an interruption in operations, which
could have a material adverse effect on our business, financial condition, results of operations and prospects.
Risks Related to Regulatory Review
If clinical trials of our product candidates fail to demonstrate
safety and efficacy to the satisfaction of regulatory authorities or do not otherwise produce positive results, we may incur additional
costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of such product candidates.
Before obtaining marketing approval from
regulatory authorities for the sale of briquilimab and any other product candidates we identify and develop, we must complete
preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of such product candidates
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 outcome of preclinical testing 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. Moreover, preclinical and clinical data are often susceptible to varying interpretations and
analyses. Many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical
trials have nonetheless failed to obtain marketing approval of their product candidates.
40
We and our collaborators, if any, may experience
numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval
or commercialize any product candidates, including:
● delays in reaching a consensus with regulators on trial design;
● the cost of clinical trials may be greater than we anticipate;
● clinical trial sites dropping out of a trial;
41
If we or our collaborators, if any, are required
to conduct additional clinical trials or other testing of product candidates beyond those that we currently contemplate, if we or our
collaborators are unable to successfully complete clinical trials or other testing of product candidates, or if the results of these trials
or tests are not positive or are only modestly positive or if there are safety concerns, we or our collaborators may:
● be subject to changes in the way the product is administered;
● be sued; or
● experience damage to our reputation.
Product development costs will also increase if
we or our collaborators experience delays in clinical trials or other testing or in obtaining marketing approvals. We do not know whether
any clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant clinical
trial delays also could shorten any periods during which we may have the exclusive right to commercialize product candidates, could allow
our competitors to bring products to market before we do and could impair our ability to successfully commercialize product candidates,
any of which may harm our business, financial condition, results of operations and prospects.
Further, disruptions at the FDA and other agencies
may prolong the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect
our business. For example, over the last several years, the U.S. government has shut down several times and certain regulatory
agencies, including the FDA, have furloughed critical employees and stopped critical activities. If a prolonged government shutdown occurs,
it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material
adverse effect on our business.
42
Failure to obtain marketing approval in foreign jurisdictions
would prevent any product candidates we develop from being marketed in such jurisdictions, which, in turn, would materially impair our
ability to generate revenue.