Item 1A. Risk Factors
An investment in our
common stock involves a high degree of risk. You should give careful consideration to the following risk factors, in addition to
general economic and business risks and the other information included in this Annual Report on Form 10-K, including our financial
statements and related notes, before deciding whether to invest in shares of our common stock. The occurrence of any of the adverse
developments described in the following risk factors could materially and adversely harm our business, financial condition, results
of operations or prospects. In that case, the trading price of our common stock could decline, and you may lose all or part of
your investment. Additional risks or uncertainties not presently known to us or that we currently deem immaterial may also materially
and adversely harm our business, financial condition, results of operations or prospects.
Risks Related to Financial Position
and Need for Capital
We have a limited operating history
and have never generated any revenues other than from research grants, which may make it difficult to evaluate the success of our
business to date and to assess our future viability.
We were incorporated
in November 7, 2013, and to date have been largely focused on organizing and staffing our company, raising capital, developing
the RADR® platform and acquiring the rights to, and advancing the development of, our drug candidates, including
conducting preclinical studies and early phase clinical trials on our drug candidates. We have not yet demonstrated an ability
to successfully complete clinical trials, obtain marketing approvals, manufacture drugs on a commercial scale, or arrange for a
third party to do so on our behalf, or conduct sales and marketing activities necessary for successful commercialization. Consequently,
predictions about our future success or viability may not be as accurate as they could be if we had a longer operating history
or a history of successfully developing and commercializing drugs.
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We expect our financial
condition and operating results to continue to fluctuate from quarter to quarter and year to year due to a variety of factors,
many of which are beyond our control. We will need to eventually transition from a company with a research and development focus
to a company capable of undertaking commercial activities. We may encounter unforeseen expenses, difficulties, complications and
delays, and may not be successful in such a transition.
We have incurred significant operating
losses since inception and anticipate that we will continue to incur substantial operating losses for the foreseeable future and
may never achieve or maintain profitability.
Since our inception,
we have incurred losses. Our net losses were $5,908,190 and $2,428,185 for the years ended December 31, 2020 and 2019, respectively.
We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. None of our current
drug candidates have been approved for marketing in the United States, or in any other jurisdiction, and may never receive such
approval. It could be several years, if ever, before we have a commercialized drug that generates significant revenues. As a result,
we are uncertain when or if we will achieve profitability and, if so, whether we will be able to sustain profitability. The net
losses we incur may fluctuate significantly from quarter to quarter and year to year. We anticipate that our expenses will increase
substantially as we:
● continue the development of our drug candidates;
● continue to develop, maintain, and expand our RADR® platform;
● hire additional clinical, regulatory, scientific and accounting personnel; and
To become and remain
profitable, we must develop and eventually commercialize one or more drug candidates with significant market potential or license
one or more of our drug candidates to an industry partner. This will require us to be successful in a range of challenging activities,
including completing clinical trials of our drug candidates, publishing our data and findings on our drug candidates with peer
reviewed publications, developing commercial scale manufacturing processes, obtaining marketing approval, manufacturing, marketing
and selling any current and future drug candidates for which we may obtain marketing approval, and satisfying any post-marketing
requirements. We are only in the preliminary stages of most of these activities and, in some cases, have not yet commenced certain
of these activities. We may never succeed in any or all of these activities and, even if we do, we may never generate sufficient
revenue to achieve profitability.
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Because of the numerous
risks and uncertainties associated with drug development, we are unable to accurately predict the timing or amount of expenses
or when, or if, we will obtain marketing approval to commercialize any of our drug candidates. If we are required by the U.S. Food
and Drug Administration, or FDA, or other regulatory authorities such as the European Medicines Agency, or EMA, to perform studies
and trials in addition to those currently expected, or if there are any delays in the development, or in the completion of any
planned or future preclinical studies or clinical trials of our current or future drug candidates, our expenses could increase
and profitability could be further delayed.
Even 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 also could cause
investors to lose all or part of your investment.
We will need substantial additional
funding, and if we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our drug development
programs or commercialization efforts.
We anticipate that
our expenses will increase substantially as we continue to develop and begin and continue clinical trials with respect to LP-184,
LP-300 and our other drug candidates; seek to identify and develop additional drug candidates; acquire or in-license other drug
candidates or technologies; seek regulatory and marketing approvals for our drug candidates that successfully complete clinical
trials, if any; establish sales, marketing, distribution and other commercial infrastructure in the future to commercialize various
drugs for which we may obtain marketing approval, if any; require the manufacture of larger quantities of drug candidates for clinical
development and, potentially, commercialization; maintain, expand and protect our intellectual property portfolio; develop, maintain,
and expand our RADR® platform; hire and retain additional personnel, such as clinical, quality control and scientific
personnel; add operational, financial and management information systems and personnel, including personnel to support our drug
development and help us comply with our obligations as a public company; and add equipment and physical infrastructure to support
our research and development programs.
We will be required
to expend significant funds in order to advance the development of LP-184, LP-300 and our other drug candidates. In addition, while
we may seek one or more collaborators for future development of our current drug candidates or any future drug candidates that
we may develop for one or more indications, we may not be able to enter into a partnership or out-license for any of our drug candidates
for such indications on suitable terms, on a timely basis or at all. In any event, our existing cash, cash equivalents and other
capital resources will not be sufficient to fund all of the efforts that we plan to undertake or to fund the completion of development
of our drug candidates or our other preclinical studies. Accordingly, we will be required to obtain further funding through public
or private equity offerings, debt financings, collaborations and licensing arrangements or other sources. We do not have any committed
external source of funds. Further financing may not be available to us on acceptable terms, or at all. Our failure to raise capital
as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy.
We believe our existing
cash and cash equivalents as of December 31, 2020, plus approximately $64,200,000 of net proceeds from our public offering of common
shares in January 2021, along with our anticipated expenditures and commitments for calendar year 2021, will enable us to fund
our operating expenses and capital expenditure requirements for at least 12 months from the filing of this Form 10-K for the year
ended December 31, 2020. Our estimate as to how long we expect our existing cash, cash equivalents and other capital resources
to be able to continue to fund our operations is based on assumptions that may prove to be wrong, and we could use our available
capital resources sooner than we currently expect. Further, changing circumstances, some of which may be beyond our control, could
cause us to consume capital significantly faster than we currently anticipate, and we may need to seek additional funds sooner
than planned. Our future funding requirements, both short-term and long-term, will depend on many factors, including:
● the costs, timing and outcome of seeking regulatory approvals;
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● changes in regulatory policies or laws that may affect our operations;
● the costs of acquiring potential new drug candidates or technology;
● the costs associated with purchasing data for our RADR® platform;
● the costs of operating as a public company.
Risks Related to the Discovery and Development
of Drug Candidates
We have limited experience in drug
discovery and drug development and may not receive regulatory approval to market our drug candidates.
Prior to the acquisition
of our drug candidates, we were not involved in and had no control over their preclinical and clinical development. In addition,
we rely upon the parties from whom we have acquired our drug candidates from to have conducted such research and development in
accordance with the applicable protocol, legal, regulatory and scientific standards, having accurately reported the results of
all clinical trials conducted prior to our acquisition of the applicable drug candidate, and having correctly collected the data
from these studies and trials. To the extent any of these has not occurred, our expected development time and costs may be increased,
which could adversely affect our prospects for marketing approval of, and receiving any future revenue from, these drug candidates.
In the near term, we
are dependent on our ability to advance the development of LP-184 and LP-300 and on the efforts of Allarity Therapeutics to advance
LP-100. If we are unable to initiate or complete the clinical development of, obtain marketing approval for or successfully commercialize
LP-184 and LP-300 and our other drug candidates, either alone or with a collaborator, or if we experience significant delays in
doing so, our business could be substantially harmed.
We currently do not
have any drugs that have received regulatory approval and may never be able to develop marketable drug candidates. We are investing
a significant portion of our efforts and financial resources in the advancement of LP-184, LP-300 and our other drug candidates
and in the development of our RADR® platform. Our prospects are substantially dependent on our ability, or those
of any future collaborator, to develop, obtain marketing approval for and successfully commercialize drug candidates in one or
more disease indications.
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The success of LP-184,
LP-300 and our other drug candidates will depend on several factors, including the following:
● the performance of our future collaborators, if any;
● protection of our rights in our intellectual property portfolio;
● successful launch of commercial sales following any marketing approval;
● a continued acceptable safety profile following any marketing approval;
● our ability to compete with other therapies.
Many of these factors
are beyond our control, including the results of clinical trials, the time required for the FDA or any comparable foreign regulatory
authorities to review any regulatory submissions we may make, potential threats to our intellectual property rights and the manufacturing,
marketing and sales efforts of any future collaborator. If we are unable to develop, receive marketing approval for and successfully
commercialize LP-300 and LP-184 our other drug candidates, on our own or with any future collaborator or experience delays as a
result of any of these factors or otherwise, our business could be substantially harmed. The regulatory approval processes of the
FDA and comparable foreign authorities are lengthy, time consuming, expensive and inherently unpredictable, and if we are ultimately
unable to obtain regulatory approval for our drug candidates, our business will be substantially harmed.
The time required to
obtain approval by the FDA and comparable foreign authorities is unpredictable but can take many years following the commencement
of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. The results
of preclinical studies and early clinical trials of our drug candidates may not be predictive of the results of later-stage clinical
trials. Drug candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having
progressed through preclinical studies and initial clinical trials. It is not uncommon for companies in the biotechnology and pharmaceutical
industries to suffer significant setbacks in advanced clinical trials due to nonclinical findings made while clinical studies were
underway and safety or efficacy observations made in clinical studies, including previously unreported adverse events. Our future
clinical trial results may not be successful, and notwithstanding any potential promising results in earlier studies, we cannot
be certain that we will not face similar setbacks. The historical failure rate for drug candidates in our industry is high. In
addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during
the course of a drug candidate’s clinical development and may vary among jurisdictions. We have not obtained final regulatory
approval for any drug candidate and it is possible that none of our existing drug candidates or any drug candidates we may seek
to develop in the future will ever obtain regulatory approval.
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Our drug candidates could fail to receive
regulatory clearance or marketing approval for many reasons, including the following:
We have not previously
completed all clinical trials for any of our drug candidates. Consequently, we may not have the necessary capabilities, including
adequate staffing, to successfully manage the execution and completion of any clinical trials we initiate in a way that leads to
our obtaining marketing approval for our drug candidates in a timely manner, or at all. This lengthy approval process as well as
the unpredictability of future clinical trial results may result in our failing to obtain regulatory approval to market our drug
candidates, which would significantly harm our business, results of operations and prospects.
In addition, even if
we were to obtain approval, regulatory authorities may approve any of our drug candidates for fewer or more limited indications
than we request, may not approve the price we intend to charge for our drugs, may grant approval contingent on the performance
of costly post-marketing clinical trials, may approve a drug candidate with a label that does not include the labeling claims necessary
or desirable for the successful commercialization of that drug candidate or may restrict its distribution. Any of the foregoing
restrictions or requirements could materially harm the commercial prospects for our drug candidates.
We have not previously
submitted a new drug application (an “NDA”) to the FDA or similar drug approval filings to comparable foreign authorities,
for any drug candidate, and we cannot be certain that any of our drug candidates will be successful in clinical trials or receive
regulatory approval. Further, our drug candidates may not receive regulatory approval even if they are successful in clinical trials.
If we do not receive regulatory approvals for our drug candidates, we may not be able to continue our operations. Even if we successfully
obtain regulatory approvals to market one or more of our drug candidates, our revenues will be dependent, in part, upon the size
of the markets in the territories for which we gain regulatory approval and have commercial rights. If the markets for patients
that we are targeting for our drug candidates are not as significant as we estimate, or if the price we charge for our drug candidate
is too high, we may not generate significant revenues from sales of such drugs, if approved.
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We plan to seek regulatory approval to commercialize
our drug candidates both in the United States and the European Union and in additional foreign countries. While the scope of regulatory
approval is similar in other countries, to obtain separate regulatory approval in many other countries we must comply with numerous
and varying regulatory requirements of such countries regarding safety and efficacy and governing, among other things, clinical
trials and possible limitations placed upon commercial sales, pricing and distribution of our drug candidates, and we cannot predict
success in these jurisdictions.
Our business strategy to rescue previously
failed drug candidates may not be successful, and important issues relating to safety and efficacy remain to be resolved for all
of our drug candidates. Our strategy also involves risks and uncertainties that differ from other biotechnology companies that
focus solely on new drug candidates that do not have a history of failed clinical trials.
Our drug candidate
portfolio includes small molecules that others have tried, but failed, to develop into an approved commercialized drug. Our strategy
to rescue previously failed drug candidates may not be successful, and the use of the term “drug rescue,” “rescuing,”
or words of similar meaning in this report should not be construed to mean that our RADR® platform has resolved
all issues of safety and/or efficacy for any of our drug candidates. Issues of safety and efficacy for any drug candidate may only
be determined by the U.S. FDA or other applicable regulatory authorities in jurisdictions outside the United States.
Our business strategy
includes a focus on leveraging A.I. to streamline the drug development process and to identify patients that will benefit from
drug candidates that other biotechnology or pharmaceutical companies have abandoned or shelved after initiating clinical trials
under an IND application filed with the FDA, including candidates that have failed to achieve statistical significance on the original
endpoints established in the clinical trials. We use our RADR®platform to assess drug candidates together with big
data sources of information to both target and evaluate sub-populations and identify new therapeutic indices and gene signatures
that will potentially correlate with drug efficacy and patient response to treatment. While we have not yet successfully received
regulatory or marketing approval for any of our drug candidates, and while we believe that our approach has the potential to reduce
the cost and time of drug development through the identification and selection of patient populations more likely to respond to
therapy, our strategy involves risks and uncertainties that differ from other biotechnology companies that focus solely on new
drug candidates that do not have a history of failed clinical development. These risks and uncertainties include, but are not limited
to, the following:
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We are dependent on Allarity Therapeutics for the
development of LP-100.
We, with the consent
of our licensor for LP-100, AF Chemicals, have entered into an agreement with Allarity Therapeutics in which we have granted an
exclusive, royalty-bearing license, with the right to sublicense, to develop LP-100. Allarity Therapeutics will be solely responsible
for the development of LP-100, including development of a comprehensive plan for a clinical trial program, but has the right to
assign all or part of the agreement to a third-party program acquirer. Under the agreement, we and AF Chemicals, are entitled to
receive certain specified milestone payments from Allarity Therapeutics subject to an overall aggregate maximum payment of $21
million U.S. dollars ($21,000,000) with certain exceptions. In addition to milestone payments, we are also entitled to receive
royalty payments based on incremental levels of annual sales of LP-100 products by Allarity Therapeutics or any third-party program
acquirer. As a result of the drug license and development agreement with Allarity Therapeutics, we are completely dependent on
Allarity Therapeutics for the development of LP-100. Allarity Therapeutics is managing a Phase II clinical trial of LP-100 in patients
with mCRPC. Continuing enrollment for this Phase II clinical trial has slowed during the COVID-19 pandemic. Allarity Therapeutics
has also stated that it is focusing its existing resources on other programs that are currently higher priority for Allarity than
LP-100. As of the date of this report, we are unable to forecast the timeline for the completion of the Phase II clinical trial.
We may depend on enrollment of patients
with specific genomic or biomarker signatures in our clinical trials in order for us to continue development of our drug candidates.
If we are unable to enroll patients with specific genomic or biomarker signatures in our clinical trials, our research, development
and commercialization efforts could be adversely affected.
The timely completion
of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number
of patients with genomic or biomarker signatures we have identified and who remain in the study until its conclusion. We may experience
difficulties in patient enrollment in our clinical trials for a variety of reasons. Patient enrollment is affected by many factors
including the size and nature of the patient population with the specific genomic or biomarker signature we have identified, the
proximity of patients to clinical sites, the eligibility criteria for the trial, the design of the clinical trial, the size of
the patient population required for analysis of the trial’s primary endpoints, the proximity of patients to study sites,
our ability to recruit clinical trial investigators with the appropriate competencies and experience, our ability to obtain and
maintain patient consents, the risk that patients enrolled in clinical trials will drop out of the trials before completion, and
competing clinical trials and clinicians’ and patients’ perceptions as to the potential advantages of the drug being
studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating.
We will compete with other pharmaceutical companies for clinical sites, physicians and the limited number of patients who fulfill
the stringent requirements for participation in oncology clinical trials. Also, due to the confidential nature of clinical trials,
we do not know how many of the eligible patients may be enrolled in competing studies and who are consequently not available to
us for our clinical trials. Our clinical trials may be delayed or terminated due to the inability to enroll enough patients. The
delay or inability to meet planned patient enrollment may result in increased costs and delay or termination of our trials, which
could have a harmful effect on our ability to develop drugs.
Delays in clinical testing could
result in increased costs to us and delay our ability to generate revenue.
Although we are planning
for certain clinical trials relating to LP-300 and LP-184 and our other drug candidates, there can be no assurance that the FDA
will accept our proposed trial designs. We may experience delays in our clinical trials and we do not know whether planned clinical
trials will begin on time, need to be redesigned, enroll patients on time or be completed on schedule, if at all. Clinical trials
can be delayed for a variety of reasons, including delays related to:
● obtaining regulatory clearance to commence a trial;
● obtaining institutional review board, or IRB, approval at each site;
● recruiting suitable patients to participate in a trial;
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● clinical sites deviating from trial protocol or dropping out of a trial;
● addressing patient safety concerns that arise during the course of a trial;
● having patients complete a trial or return for post-treatment follow-up;
● adding a sufficient number of clinical trial sites; or
We may also 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 our drug candidates, including:
If we are required
to conduct additional clinical trials or other testing of our drug candidates beyond those that we currently contemplate, if we
are unable to successfully complete clinical trials of our drug candidates or other testing, if the results of these trials or
tests are not positive or are only modestly positive or if there are safety concerns, we may:
● incur unplanned costs;
● obtain marketing approval in some countries and not in others;
● be subject to additional post-marketing testing requirements; or
● have the drug removed from the market after obtaining marketing approval.
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Furthermore, we intend
to rely on CROs, cancer research centers and clinical trial sites to ensure the proper and timely conduct of our clinical trials
and we intend to have agreements governing their committed activities. They may not perform as required or we may face competition
from other clinical trials being conducted by other pharmaceutical companies.
We could encounter
delays if a clinical trial is suspended or terminated by us, by the Institutional Review Board or IRB of the institutions in which
such trials are being conducted, by the Data Safety Monitoring Board, or DSMB, for such trial or by the FDA or other regulatory
authorities. Such authorities may impose such a suspension or termination due to a number of factors, including failure to conduct
the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations
or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues
or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative
actions or lack of adequate funding to continue the clinical trial.
Further, conducting
clinical trials in foreign countries, as we may do for our current and future drug candidates, presents additional risks that may
delay completion of our clinical trials. These risks include the failure of enrolled patients in foreign countries to adhere to
clinical protocol as a result of differences in healthcare services or cultural customs, managing additional administrative burdens
associated with foreign regulatory schemes, as well as political and economic risks relevant to such foreign countries.
If we experience delays
in the completion of, or termination of, any clinical trial of our drug candidates, the commercial prospects of our drug candidates
will be harmed, and our ability to generate revenues from any of these drug candidates will be delayed. In addition, any delays
in completing our clinical trials will increase our costs, slow down our drug candidate development and approval process and jeopardize
our ability to commence drug sales and generate revenues. Any of these occurrences may harm our business, financial condition and
prospects significantly. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of
clinical trials may also ultimately lead to the denial of regulatory approval of our drug candidates.
Our drug candidates may cause undesirable
side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial profile of an
approved label, or result in significant negative consequences following marketing approval, if any.
Undesirable side effects
caused by our drug candidates 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 other comparable foreign authorities. The
clinical evaluation of LP-184 and our other drug candidates in patients is still in the early stages and it is possible that there
may be side effects associated with their use. In such an event, we, the FDA, the IRBs at the institutions in which our studies
are conducted, or the DSMB could suspend or terminate our clinical trials or the FDA or comparable foreign regulatory authorities
could order us to cease clinical trials or deny approval of our drug candidates for any or all targeted indications. Treatment-related
side effects could also affect patient recruitment or the ability of enrolled patients to complete the clinical trial or result
in potential product liability claims. In addition, these side effects may not be appropriately recognized or managed by the treating
medical staff. We expect to have to train medical personnel using our drug candidates to understand the side effect profiles for
our clinical trials and upon any commercialization of any of our drug candidates. Inadequate training in recognizing or managing
the potential side effects of our drug candidates could result in patient injury or death. Any of these occurrences may harm our
business, financial condition and prospects significantly.
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Additionally, if one or more of our drug
candidates receives marketing approval, and we or others later identify undesirable side effects caused by such drugs, a number
of potentially significant negative consequences could result, including:
● regulatory authorities may withdraw approvals of such drugs;
● we could be sued and held liable for harm caused to patients;
● our drug may become less competitive; and
● our reputation may suffer.
Any of these events
could prevent us from achieving or maintaining market acceptance of the particular drug candidate or for particular indications
of a drug candidate, if approved, and could significantly harm our business, results of operations and prospects. Our approach
to the discovery and development of drug candidates based on our RADR® platform is innovative and in the early stages
of development; and we do not know whether we will be able to develop any drugs of commercial value.
We are leveraging our
RADR® platform in an attempt to create a pipeline of drug candidates using biomarker identification and patient
stratification for the development of oncology drugs. While we believe that applying our RADR® platform to drugs
that have failed, been abandoned or otherwise failed to meet clinical endpoints and then developing a precision oncology approach
that identifies the mechanism of action, potential combination drug usage and potentially responsive patient population is a powerful
strategy, our approach is both innovative and in the early stages of development. Because our approach is both innovative and in
the early stages of development, the cost and time needed to develop our drug candidates is difficult to predict, and our efforts
may not result in the successful discovery and development of commercially viable medicines. We may also be incorrect about the
effects of our drug candidates on the diseases of our defined patient populations, which may limit the utility of our approach
or the perception of the utility of our approach. Furthermore, our estimates of our defined patient populations available for study
and treatment may be lower than expected, which could adversely affect our ability to conduct clinical trials and may also adversely
affect the size of any market for medicines we may successfully commercialize. Our approach may not result in time savings, higher
success rates or reduced costs as we expect it to, and if not, we may not attract collaborators or develop new drugs as quickly
or cost effectively as expected and therefore we may not be able to commercialize our approach as originally expected.
Our RADR® platform
may fail to help us discover and develop additional potential drug candidates.
Any drug discovery
or drug development that we are conducting using our RADR® platform may not be successful in identifying compounds
that have commercial value or therapeutic utility. Our RADR® platform may initially show promise in identifying
potential drug candidates, yet fail to yield viable drug candidates for clinical development or commercialization for a number
of reasons, including:
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Any failure by us to comply with
existing regulations could harm our reputation and operating results.
We will be subject
to extensive regulation by U.S. federal and state and foreign governments in each of the markets where we intend to sell LP-300
and LP-184 if and after they are approved. For example, we will have to adhere to all regulatory requirements including the FDA’s
current GCPs, Good Laboratory Practice, or GLP, and GMP requirements. If we fail to comply with applicable regulations, including
FDA pre-or post- approval cGMP requirements, then the FDA or other foreign regulatory authorities could sanction us. Even if a
drug is FDA-approved, regulatory authorities may impose significant restrictions on a drug’s indicated uses or marketing
or impose ongoing requirements for potentially costly post-marketing studies.
Any action against
us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses,
divert our management’s attention from the operation of our business and damage our reputation. We will need to expend significant
resources on compliance efforts and such expenses are unpredictable and might adversely affect our results.
The FDA’s and
other regulatory authorities’ policies may change and additional government regulations may be enacted that could prevent,
limit or delay regulatory approval of our drug candidates. For example, in December 2016, the 21st Century Cures Act, or Cures
Act, was signed into law. The Cures Act, among other things, is intended to modernize the regulation of drugs and spur innovation,
but its ultimate implementation is unclear. If we are slow or unable to adapt to changes in existing requirements or the adoption
of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that
we may have obtained and we may not achieve or sustain profitability, which would adversely affect our business, prospects, financial
condition and results of operations.
In addition, we cannot
predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive
action, either in the United States or abroad. If future legislation or administrative or executive actions impose restrictions
on FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be negatively
impacted. In addition, if we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements
or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained
and we may not achieve or sustain profitability.
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We may be subject to extensive regulations
outside the United States and may not obtain marketing approvals for drugs in Europe and other jurisdictions.
In addition to regulations
in the United States, should we or our collaborators pursue marketing approvals for LP-184 and LP-300 and our other drug candidates
internationally, we and our collaborators will be subject to a variety of regulations in other jurisdictions governing, among other
things, clinical trials and any commercial sales and distribution of our drugs. Whether or not we, or our collaborators, obtain
applicable FDA regulatory clearance and marketing approval for a drug, we must obtain the requisite approvals from regulatory authorities
in foreign countries prior to the commencement of clinical trials or marketing of the drug in those countries. The requirements
and process governing the conduct of clinical trials, drug licensing, pricing and reimbursement vary from country to country.
We expect to pursue
marketing approvals for LP-184 and LP-300 and our other drug candidates in Europe and other jurisdictions outside the United States
with collaborative partners. The time and process required to obtain regulatory approvals and reimbursement in Europe and other
jurisdictions may be different from those in the United States regulatory and approval in one jurisdiction does not ensure approvals
in any other jurisdiction; however, negative regulatory decisions in any jurisdiction may have a negative impact on the regulatory
process in other jurisdictions.
Additionally, on June
23, 2016, the electorate in the United Kingdom voted in favor of leaving the European Union, commonly referred to as Brexit. On
March 29, 2017, the country formally notified the European Union of its intention to withdraw pursuant to Article 50 of the Lisbon
Treaty triggering a two-year period for the United Kingdom to formally leave the European Union. Following a series of extensions
to leave the European Union, on January 31, 2020, the United Kingdom officially left the European Union commencing a transition
period in which the United Kingdom is required to continue to follow all European Union rules and trading relationships, but will
no longer be represented in the European Parliament. During the transition period, the United Kingdom and the European Union will
engage in negotiations for new trade agreements and, among other things, the regulation of their pharmaceutical industries. Since
a significant proportion of the regulatory framework in the United Kingdom is derived from European Union directives and regulations,
the transition period could materially impact the regulatory regime with respect to the approval of our drug candidates in the
United Kingdom or the European Union. Any delay in obtaining, or an inability to obtain, any marketing approvals, as a result of
Brexit or otherwise, would prevent us from commercializing our drug candidates in the United Kingdom and/or the European Union
and restrict our ability to generate revenue and achieve and sustain profitability. If any of these outcomes occur, we may be forced
to restrict or delay efforts to seek regulatory approval in the United Kingdom and/or European Union for our drug candidates, which
could materially and adversely affect our business.
If we are found in violation of federal
or state “fraud and abuse” laws, we may be required to pay a penalty and/or be suspended from participation in federal
or state health care programs, which may adversely affect our business, financial condition and results of operations.
In the United States,
we will be subject to various federal and state health care “fraud and abuse” laws, including anti-kickback laws, false
claims laws and other laws intended to reduce fraud and abuse in federal and state health care programs, which could affect us,
particularly upon successful commercialization of our drugs in the United States. The federal Anti-Kickback Statute makes it illegal
for any person, including a prescription drug manufacturer (or a party acting on its behalf), to knowingly and willfully solicit,
receive, offer or pay any remuneration that is intended to induce the referral of business, including the purchase, order or prescription
of a particular drug for which payment may be made under a federal health care program, such as Medicare or Medicaid. Under federal
government regulations, some arrangements, known as safe harbors, are deemed not to violate the federal Anti-Kickback Statute.
Although we seek to structure our business arrangements in compliance with all applicable requirements, these laws are broadly
written, and it is often difficult to determine precisely how the law will be applied in specific circumstances. Accordingly, it
is possible that our practices may be challenged under the federal Anti-Kickback Statute. False claims laws prohibit anyone from
knowingly and willfully presenting or causing to be presented for payment to third-party payers, including government payers, claims
for reimbursed drugs or services that are false or fraudulent, claims for items or services that were not provided as claimed,
or claims for medically unnecessary items or services. Cases have been brought under false claims laws alleging that off-label
promotion of pharmaceutical drugs or the provision of kickbacks has resulted in the submission of false claims to governmental
health care programs. Under the Health Insurance Portability and Accountability Act of 1996, we are prohibited from knowingly and
willfully executing a scheme to defraud any health care benefit program, including private payers, or knowingly and willfully falsifying,
concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with
the delivery of or payment for health care benefits, items or services. Violations of fraud and abuse laws may be punishable by
criminal and/or civil sanctions, including fines and/or exclusion or suspension from federal and state health care programs such
as Medicare and Medicaid and debarment from contracting with the U.S. government. In addition, private individuals have the ability
to bring actions on behalf of the government under the federal False Claims Act as well as under the false claims laws of several
states.
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Many states have adopted
laws similar to the federal anti-kickback statute, some of which apply to the referral of patients for health care services reimbursed
by any source, not just governmental payers. Neither the government nor the courts have provided definitive guidance on the application
of fraud and abuse laws to our business. Law enforcement authorities are increasingly focused on enforcing these laws, and if we
are found in violation of one of these laws, we could be required to pay a penalty and could be suspended or excluded from participation
in federal or state health care programs, and our business, results of operations and financial condition may be adversely affected.
We may be unable to maintain sufficient clinical trial liability insurance.
Our inability to obtain and retain
sufficient clinical trial liability insurance at an acceptable cost to protect against potential liability claims could prevent
or inhibit our ability to conduct clinical trials for drug candidates we develop.
We currently do not
have clinical trial liability insurance and would need to secure coverage before commencing patient enrollment for our clinical
trials in the United States or other jurisdictions. Any claim that may be brought against us could result in a court judgment or
settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance
coverage. We expect we will supplement our clinical trial coverage with product liability coverage in connection with the commercial
launch of LP-184 and LP-300 or other drug candidates we develop in the future; however, we may be unable to obtain such increased
coverage on acceptable terms or at all. If we are found liable in a clinical trial lawsuit or a product liability lawsuit in the
future, we will have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or
that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts.
The FDA and other regulatory agencies
actively enforce the laws and regulations prohibiting the promotion of off-label uses.
If we are found to
have improperly promoted off-label uses of our drugs or drug candidates, if approved, we may become subject to significant liability.
Such enforcement has become more common in the industry. The FDA and other regulatory agencies strictly regulate the promotional
claims that may be made about prescription drug products, such as our drug candidates, if approved. In particular, a drug may not
be promoted for uses that are not approved by the FDA or such other regulatory agencies as reflected in the drug’s approved
labeling. If we receive marketing approval for our drug candidates for our proposed indications, physicians may nevertheless use
our drugs for their patients in a manner that is inconsistent with the approved label, if the physicians personally believe in
their professional medical judgment it could be used in such manner. However, if we are found to have promoted our drugs for any
off-label uses, the federal government could levy civil, criminal and/or administrative penalties, and seek fines against us. The
FDA or other regulatory authorities could also request that we enter into a consent decree or a corporate integrity agreement,
or seek a permanent injunction against us under which specified promotional conduct is monitored, changed or curtailed. If we cannot
successfully manage the promotion of our drug candidates, if approved, we could become subject to significant liability, which
would materially adversely affect our business and financial condition.
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We may not experience a faster development or regulatory
review or approval process with potential Fast Track designation.
If a drug is intended
for the treatment of a serious condition and nonclinical or clinical data demonstrate the potential to address unmet medical need
for this condition, a drug sponsor may apply for FDA Fast Track designation. If we seek Fast Track designation for a drug candidate,
we may not receive it from the FDA. However, even if we receive Fast Track designation, Fast Track designation does not ensure
that we will receive marketing approval or that approval will be granted within any particular timeframe. We may not experience
a faster development or regulatory review or approval process with Fast Track designation compared to conventional FDA procedures.
In addition, the FDA may withdraw Fast Track designation if it believes that the designation is no longer supported by data from
our clinical development program. Fast Track designation alone does not guarantee qualification for the FDA’s priority review
procedures.
Risks Related to Commercialization of
Our Drug Candidates
Even if we are successful in completing
all preclinical studies and clinical trials, we may not be successful in commercializing one or more of our drug candidates.
Even if we complete
the necessary preclinical studies and clinical trials, the marketing approval process is expensive, time-consuming and uncertain
and may prevent us from obtaining approvals for the commercialization of some or all of our drug candidates. If we are not able
to obtain, or if there are delays in obtaining, required regulatory approvals, we will not be able to commercialize our drug candidates,
and our ability to generate revenue will be materially impaired.
Our drug candidates
and the activities associated with their development and commercialization, including their design, testing, manufacture, safety,
efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, export and import are subject
to comprehensive regulation by the FDA and other regulatory agencies in the United States and by the EMA and similar regulatory
authorities outside of the United States. Failure to obtain marketing approval for a drug candidate will prevent us from commercializing
the drug candidate. We have not submitted an application for or received marketing approval for any of our drug candidates in the
United States or in any other jurisdiction.
We have only limited
experience in filing and supporting the applications necessary to gain marketing approvals and expect to rely on third-party clinical
research organizations or other third-party consultants or vendors to assist us in this process. Securing marketing approval requires
the submission of extensive preclinical and clinical data and supporting information to regulatory authorities for each therapeutic
indication to establish the drug candidate’s safety and efficacy. Securing marketing approval also requires the submission
of information about the drug manufacturing process to, and inspection of manufacturing facilities by, the regulatory authorities.
Our drug candidates may not be effective, may be only moderately effective or may prove to have undesirable or unintended side
effects, toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial
use. New cancer drugs frequently are indicated only for patient populations that have not responded to an existing therapy or have
relapsed. If any of our drug candidates receives marketing approval, the accompanying label may limit the approved use of our drug
in this way, which could limit sales of the drug.
The process of obtaining
marketing approvals, both in the United States and abroad, is expensive, may take many years, if approval is obtained at all, and
can vary substantially based upon a variety of factors, including the type, complexity and novelty of the drug candidates involved.
Changes in marketing approval policies during the development period, changes in or the enactment of additional statutes or regulations,
or changes in regulatory review for each submitted drug application, may cause delays in the approval or rejection of an application.
Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide
that our data is insufficient for approval and require additional preclinical, clinical or other studies. In addition, varying
interpretations of the data obtained from preclinical studies and clinical trials could delay, limit or prevent marketing approval
of a drug candidate. Any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments
that render the approved drug not commercially viable.
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If our drugs do not gain market acceptance, our business
will suffer because we might not be able to fund future operations.
A number of factors
may affect the market acceptance of our drugs or any other products we develop or acquire, including, among others:
● our ability to fund our sales and marketing efforts; and
● the effectiveness of our sales and marketing efforts.
If our drugs do not
gain market acceptance, we may not be able to fund future operations, including developing, testing and obtaining regulatory approval
for new drug candidates and expanding our sales and marketing efforts for our approved drugs, which would cause our business to
suffer.
We may rely on orphan drug status
to commercialize some of our drug candidates, and even if orphan drug status is approved, such approval may not confer marketing
exclusivity or other commercial advantages or expected commercial benefits.
We may rely on orphan
drug exclusivity for our drug candidates. In the United States, orphan drug designation entitles a party to financial incentives
such as opportunities for grant funding towards clinical trial costs, tax advantages and user-fee waivers. In addition, if a drug
that has orphan drug designation subsequently receives the first FDA marketing approval for the disease for which it has such designation,
the drug is entitled to orphan drug exclusivity. Orphan drug exclusivity in the United States provides that the FDA may not approve
any other applications, including a full NDA, to market the same drug for the same indication for seven years, and except in limited
circumstances the applicable exclusivity period is ten years in Europe. The European exclusivity period can be reduced to six years
if a drug no longer meets the criteria for orphan drug designation or if the drug is sufficiently profitable so that market exclusivity
is no longer justified.
Even if we, or any
future collaborators, obtain orphan drug designation for a drug candidate, we, or they, may not be able to obtain or maintain orphan
drug exclusivity for that drug candidate. We may not be the first to obtain marketing approval of any drug candidate for which
we have obtained orphan drug designation for the orphan-designated indication due to the uncertainties associated with developing
pharmaceutical products, and it is possible that another company also holding orphan drug designation for the same drug 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. In addition, exclusive marketing rights
in the United States may be limited if we seek approval for an indication broader than the orphan-designated indication or may
be lost if the FDA later determines that the request for designation was materially defective or if we are unable to assure sufficient
quantities of the drug to meet the needs of patients with the rare disease or condition. Further, even if we, or any future collaborators,
obtain orphan drug exclusivity for a drug, that exclusivity may not effectively protect the drug from competition because different
drugs with different active moieties may be approved for the same condition. Even after an orphan drug is approved, the FDA can
subsequently approve the same drug with the same active moiety for the same condition if the FDA concludes that the later drug
is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care or the manufacturer
of the drug with orphan exclusivity is unable to maintain sufficient drug quantity. Orphan drug designation neither shortens the
development time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval process,
nor does it prevent competitors from obtaining approval of the same drug candidate as ours for indications other than those in
which we have been granted orphan drug designation.
On August 3, 2017, the U.S. Congress passed
the FDA Reauthorization Act of 2017, or FDARA. FDARA, among other things, codified the FDA’s preexisting regulatory interpretation,
to require that a drug sponsor demonstrate the clinical superiority of an orphan drug that is otherwise the same as a previously
approved drug for the same rare disease in order to receive orphan drug exclusivity. The new legislation reverses prior precedent
holding that the Orphan Drug Act unambiguously requires that the FDA recognize the orphan exclusivity period regardless of a showing
of clinical superiority. The FDA may further reevaluate the Orphan Drug Act and its regulations and policies. We do not know if,
when or how the FDA may change the orphan drug regulations and policies in the future, and it is uncertain how any changes might
affect our business. Depending on what changes the FDA may make to its orphan drug regulations and policies, our business could
be adversely impacted.
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A Breakthrough Therapy designation
by the FDA for our drug candidates may not lead to a faster development or regulatory review or approval process, and it does not
increase the likelihood that our drug candidates will receive marketing approval.
We may seek a breakthrough
therapy designation for some of our drug candidates. A breakthrough therapy is defined as a drug that is intended, alone or in
combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical
evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant
endpoints, such as substantial treatment effects observed early in clinical development. For drugs and biologics that have been
designated as breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify
the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens.
Drugs designated as breakthrough therapies by the FDA are also eligible for accelerated approval.
Designation as a breakthrough
therapy is within the discretion of the FDA. Accordingly, even if we believe one of our drug candidates meets the criteria for
designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. Even if we receive
Breakthrough Therapy designation, the receipt of such designation for a drug candidate may not result in a faster development process,
review or approval compared to drugs considered for approval under conventional FDA procedures and does not assure ultimate approval
by the FDA. In addition, even if one or more of our drug candidates qualify as breakthrough therapies, the FDA may later decide
that the drugs no longer meet the conditions for qualification or decide that the time period for FDA review or approval will not
be shortened.
A Fast Track designation by the FDA
may not lead to a faster development or regulatory review or approval process.
We may seek Fast Track
designation for some of our drug candidates. If a drug is intended for the treatment of a serious or life-threatening condition
and the drug demonstrates the potential to address unmet medical needs for this condition, the drug sponsor may apply for FDA Fast
Track designation. The FDA has broad discretion whether or not to grant this designation, so even if we believe a particular drug
candidate is eligible for this designation, we cannot assure you that the FDA would decide to grant it. Even if we do receive Fast
Track designation, we may not experience a faster development process, review or approval compared to conventional FDA procedures.
The FDA may withdraw Fast Track designation if it believes that the designation is no longer supported by data from our clinical
development program.
Failure to obtain marketing approval
in foreign jurisdictions would prevent our drug candidates from being marketed abroad.
In order to market
and sell our drugs in the European Union and many other foreign jurisdictions, we or our potential third-party collaborators must