ITEM 1A. RISK FACTORS.
An
investment in our common stock involves a high degree of risk. You should carefully consider the risks described below before
making an investment decision in our securities. These risk factors are effective as of the date of this Form 10-K and shall be
deemed to be modified or superseded to the extent that a statement contained in our future filings modifies or replaces such statement.
All of these risks may impair our business operations. The forward-looking statements in this Form 10-K involve risks and uncertainties
and actual results may differ materially from the results we discuss in the forward-looking statements. If any of the following
risks actually occur, our business, financial condition or results of operations could be materially adversely affected. In that
case, the trading price of our stock could decline, and you may lose all or part of your investment.
Risk
Factor Summary
The
below summary of risk factors provides an overview of many of the risks we are exposed to in the normal course of our business
activities. As a result, the below summary risks do not contain all of the information that may be important to you, and you should
read the summary risks together with the more detailed discussion of risks set forth following this section as well as elsewhere
in this Annual Report. Additional risks, beyond those summarized below or discussed elsewhere in this Annual Report, may apply
to our activities or operations as currently conducted or as we may conduct them in the future or in the markets in which we operate
or may in the future operate. Consistent with the foregoing, we are exposed to a variety of risks, including risks associated
with the following:
Risks
Related to Our Business
●
We have incurred significant losses since our inception and expect to continue to experience losses for the foreseeable future.
●
We will need to raise additional capital in the future to complete the development and commercialization of our product candidates
and operate our business.
●
We were denied funding from the Biomedical Advanced Research and Development Authority (“BARDA”) and we may be unable
to win any government contracts, grants, agreement or other funding in the future. Even if we are successful in obtaining such
contracts, grants, agreements or other funding, we cannot assure the success of our Terra CoV-2 vaccine product candidate, that
it will be approved by the FDA or other public health regulatory authority or that any funding provided will be sufficient to
complete development and successful commercialization.
●
We may rely on government funding and collaboration with government entities for our vaccine development, which adds uncertainty
to our research and development efforts and may impose requirements that increase the costs of development, commercialization
and production of any programs developed under those government-funded programs.
●
We have limited vaccine-specific research, development, manufacturing, testing, regulatory, commercialization, sales, distribution,
and marketing experience, and we may need to invest significant financial and management resources to establish these capabilities.
Despite such investments and our best efforts, our strategic acquisition of Noachis Terra may turn out to be unsuccessful.
●
We have limited financial resources and we may not be able to maintain our current level of operations or be able to fund the
further development of our new Terra CoV-2 vaccine product candidate.
●
Our vaccine product candidate is at the preclinical stage and has not been approved for sale. We have not conducted substantial
research and development for a vaccine product candidate, and we may be unable to produce a vaccine that successfully prevents
the virus in a timely and economical manner, if at all.
●The
market opportunities for our vaccine product candidate may be smaller than we believe them to be. Moreover, any pandemic threat
may abate, or alternative vaccines currently being broadly disseminated under the FDA’s Emergency Use Authorization could
become widely accepted and adopted before our vaccines achieve regulatory approval.
●
If we are unable to successfully develop our product candidates, our operating results and competitive position could be harmed.
Research and development involves a lengthy and complex process, and we may not be successful in our efforts to develop and commercialize
our product candidates. The further development and ultimate commercialization of product candidates for SARS-CoV-2 and COVID-19,
as well as our other product candidates, are keys to our growth strategy.
●
If we are successful in producing a vaccine against SARS-CoV-2, we may need to devote significant resources to its scale-up and
development, including for use by the U.S. government or other foreign authorities. Moreover, government involvement may limit
the commercial success of our vaccine product candidate.
●
Our product candidates, if approved, will face significant competition and our failure to compete effectively may prevent us from
achieving significant market penetration.
●
Because our vaccine product development efforts depend on new and rapidly evolving technologies, we cannot be certain that our
efforts will be successful.
●
Our SARS-CoV-2 vaccine product candidate may face competition from biosimilars approved through an abbreviated regulatory pathway.
●
We may be unable to refine a method to produce MU1140 homologs in large-scale commercial quantities. If we cannot, we will be
unable to generate significant revenues from sales of our MU1140 homologs product candidate.
●
Our success will depend on our ability to obtain regulatory approval of our product candidate under our Lantibiotics Program and
its successful commercialization.
●
We may choose not to continue developing or commercializing any of our product candidates at any time during development or after
approval, which would reduce or eliminate our potential return on investment for those product candidates.
●
We have limited experience in the conduct of clinical trials. We have never initiated a vaccine-related clinical trial. We have
never obtained approval of any product candidates. We may be unable to undertake any of those actions successfully.
●
We cannot assure you that the market and consumers will accept our products or product candidates. If they do not, we will be
unable to generate significant revenues from our products or product candidates and our business, financial condition and results
of operations will be materially adversely affected.
●
Failure to obtain marketing approval in international jurisdictions would prevent our product candidates from being marketed abroad.
●
We will need to further increase the size and complexity of our organization in the future, and we may experience difficulties
in executing our growth strategy and managing our growth.
●
If our manufacturers and suppliers in general fail to meet our requirements and the requirements of regulatory authorities, our
research and development may be materially adversely affected.
●
We rely on the significant experience and specialized expertise of our senior management and scientific team and the loss of any
of our key personnel or our inability to successfully hire their successors could harm our business.
●
We need to hire and retain additional qualified scientists and other highly skilled personnel to maintain and grow our business.
●
If any of our product candidates are shown to be ineffective or harmful in humans, we will be unable to generate revenues from
these product candidates.
●
Because we are new to vaccine development, we must identify vaccines for development with our technologies and establish successful
third-party relationships.
●
We intend to seek licensing partners to cover a portion of the costs associated with obtaining regulatory approval for, and manufacturing
and marketing of, our product candidates. If we are unable to obtain agreements with third parties to fund these costs, we will
have to fund such costs ourselves or we may be unable to extract any value from these technologies.
●
We might not be successful at acquiring, investing in or integrating businesses, entering into joint ventures or divesting businesses.
●
We may face product liability exposure, and if successful claims are brought against us, we may incur substantial liability if
our insurance coverage for those claims is inadequate.
●
We may be adversely affected by natural disasters, pandemics and other catastrophic events, and by man-made problems such as terrorism,
that could disrupt our business operations and our business continuity and disaster recovery plans may not adequately protect
us from a serious disaster.
●
Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited, each of which could harm
our business.
●
Our auditor has previously expressed substantial doubt about our ability to continue as a going concern and absent additional
financing we may be unable to remain a going concern.
Risks
Related to Our Licenses, Intellectual Property and Data Security and Privacy
●
Our vaccine research and development efforts are to a large extent dependent upon our intellectual property and biologicals materials
license with the NIAID and the NIH.
●
We may incur additional expenses and obligations in connection our NIH license.
●
The intellectual property covered by our NIH license concerns patent applications and provisional applications. We cannot assure
investors that any of the currently pending or future patent applications will result in granted patents, nor can we predict how
long it will take for such patents to be granted.
●
We cannot prevent the NIH or other companies, including our competitors, from licensing the same intellectual property and biological
materials that we have licensed or from otherwise duplicating our business model and operations.
●
Our Lantibiotic Development program development efforts are to a large extent dependent upon our intellectual property and exclusive
channel collaboration agreement with Eleszto Genetika, Inc. (“EGI”) and is based on early-stage technology in its
field.
●
We will incur additional expenses in connection with our exclusive channel collaboration arrangement.
●
We may not be able to retain the exclusive rights licensed to us under our Lantibiotic ECC to develop and commercialize
lantibiotic products.
●
Our Collaboration Partner, EGI, may not devote sufficient time and resources to successfully carry out their contracted duties
or meet expected deadlines, we may not be able to advance our product candidates in a timely manner or at all.
●
We may be subject to claims challenging the inventorship of our patents and other intellectual property.
●
Changes in patent law or patent jurisprudence could diminish the value of patents in general, thereby impairing our ability to
protect our product candidates.
●
If we are unable to protect our trademarks or other intellectual property from infringement, our business prospects may be harmed.
●
We may not be able to protect our intellectual property rights throughout the world.
●
If we fail to comply with our obligations under our intellectual property license agreements, we could lose our license rights
that are important to our business and development of our product candidates.
●
If we are sued for infringing intellectual property rights of third parties, it will be costly and time-consuming and an unfavorable
outcome in that litigation could have a material adverse effect on our business.
●
We may become involved in lawsuits to protect or enforce our patents or other intellectual property or the patents of our licensors,
which could be expensive and time-consuming.
●
Our success will depend on our ability to partner or sub-license our product candidates and their subsequent successful commercialization.
●
If our intellectual property rights do not adequately protect our products or product candidates, or if third parties claim we
are infringing their intellectual property rights, others could compete against us more directly or we could be subject to significant
litigation. Such results could prevent us from marketing our products or product candidates and hurt our profitability.
●
Our business and operations would suffer in the event of cybersecurity/information systems risk.
●
We may incur costs of addressing a cybersecurity incident.
●
Our business and operations would suffer in the event of failures in our internal computer systems or those of our collaborators.
Risks
Related to Government Regulations
●
Our product candidates are subject to substantial government regulation, including the regulation of nonclinical testing and clinical
trials. If we are unable to obtain regulatory approval for our product candidates, we will be unable to generate revenues.
●
We may be unable to obtain regulatory approval for our SARS-CoV-2 vaccine product candidate, or other early-stage product candidates
under applicable regulatory requirements. The FDA and foreign regulatory bodies have substantial discretion in the approval process,
including the ability to delay, limit or deny approval of product candidates. The delay, limitation or denial of any regulatory
approval would adversely impact commercialization, our potential to generate revenue, our business and our operating results.
●
Delays or difficulties in the enrollment of patients in clinical trials may result in additional costs and delays in our ability
to generate significant revenues, and may delay or prevent our receipt of any regulatory approvals necessary to commercialize
our planned and future products.
●
Any product candidates that we commercialize will be subject to ongoing and continued regulatory review.
●
Our product candidates may cause serious or undesirable side effects or possess other unexpected properties that could delay or
prevent their regulatory approval, limit the commercial profile of approved labeling or result in post-approval regulatory action.
●
If any of our product candidates are approved for marketing and we are found to have improperly promoted off-label uses, or if
physicians misuse our products or use our products off-label, we may become subject to prohibitions on the sale or marketing of
our products, product liability claims and significant fines, penalties and sanctions, and our brand and reputation could be harmed.
●
We may also be subject to healthcare laws, regulation and enforcement and our failure to comply with those laws could adversely
affect our business, operations and financial condition.
●
Our employees, independent contractors, principal investigators, consultants, vendors and CROs may engage in misconduct or other
improper activities, including noncompliance with regulatory standards and requirements.
●
Even if our current product candidates or any future product candidates obtain regulatory approval, they may fail to achieve the
broad degree of health care payers, physician and patient adoption and use necessary for commercial success.
●
If we are unable to achieve and maintain coverage and adequate levels of reimbursement for any of our product candidates for which
we receive regulatory approval, or any future products we may seek to commercialize, their commercial success may be severely
hindered.
●
If our products do not receive favorable third-party reimbursement, or if new restrictive legislation is adopted, market acceptance
of our products may be limited and we may not generate significant revenues.
Risks
Related to Coronavirus Disease (COVID-19)
●
Our business is subject to risks arising from public health crises, epidemic or pandemic diseases, such as the recent global outbreak
of the coronavirus disease (COVID-19).
●
Our ability to conduct clinical trials may be impeded, delayed, limited or prevented entirely due to the spread of COVID-19, the
imposition of government restrictions and the concurrent disruptions to ordinary business activities globally.
●
Our business involves international components, and we are exposed to various global and local risks related to the coronavirus
disease 2019 (COVID-19) that could have a material adverse effect on our financial condition and results of operations.
●
Macroeconomic pressures in the markets in which we operate, including, but not limited to, the effectives of the coronavirus disease
(COVID-19) may alter the ways in which we conduct our business operations and manage our financial capacities.
●
Economic uncertainty may adversely affect our access to capital, cost of capital and ability to execute our business plan as scheduled.
●
Inadequate funding for the FDA, the SEC and other government agencies in light of the coronavirus pandemic could hinder their
ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized
in a timely manner or otherwise prevent those agencies from performing normal business functions on which the operation of our
business may rely, which could negatively impact our business.
Risks
Related to Our Common Stock
●
The issuance of additional equity securities by us in the future would result in dilution to our existing common shareholders.
●
Our financial results could vary significantly from quarter to quarter and are difficult to predict.
●
Our Series
A and Series B preferred stock, if not converted into common stock, has a distribution and liquidation preference senior to our
common stock in liquidation which could negatively affect the value of our common stock and impair our ability to raise additional
capital.
●
The conversion of our Series A Preferred Stock, and Series B Preferred Stock and the exercise of currently outstanding warrants
could result in significant dilution to the holders of our common stock.
●
Our stockholders may not realize a benefit from our acquisition of Noachis Terra commensurate with the ownership dilution experienced
in connection with the acquisition.
●
Certain provisions of our articles of incorporation, bylaws, executive employment agreements and stock option plan may prevent
a change of control of our company that a shareholder may consider favorable.
●
The price and volume of our common stock has been volatile and fluctuates substantially, which could result in substantial losses
for stockholders.
●
We may be subject to securities litigation, which is expensive and could divert management attention.
●
Future sales or issuances of our common stock in the public markets, or the perception of such sales, could depress the trading
price of our common stock.
●
The requirements of being a public company may strain our resources, divert management’s attention and affect our ability
to attract and retain qualified members for our Board of Directors.
●
If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results
or prevent fraud which could subject us to regulatory sanctions, harm our business and operating results and cause the trading
price of our stock to decline.
●
We will continue to incur significant costs as a result of and devote substantial management time to operating as a public company
listed on the NYSE American.
●
We will continue to incur significant costs as a result of and devote substantial management time to operating as a public company
listed on the NYSE American.
●
If securities or industry analysts publish research or publish inaccurate or unfavorable research about our business, our stock
price and trading volume could decline.
●
We may issue debt or debt securities convertible into equity securities, any of which may be senior to our common stock as to
distributions and in liquidation, which could negatively affect the value of our common stock.
●
We are a “smaller reporting company” and, as a result of the reduced disclosure and governance requirements applicable
to smaller reporting companies, our common stock may be less attractive to investors.
●
We have never paid cash dividends on our capital stock, and we do not anticipate paying any cash dividends in the foreseeable
future.
Risks
Related to Our Business
We
have incurred significant losses since our inception and expect to continue to experience losses for the foreseeable future.
We
have incurred significant net losses and negative cash flow in each year since our inception, including net losses of approximately
$26.4 million and $15.6 million for the years ended December 31, 2020, and 2019, respectively. As of December 31, 2020, our accumulated
deficit was approximately $154.4 million. We have devoted a significant amount of our financial resources to research and development,
including our nonclinical development activities and clinical trials, as well as licensing and acquisitions related to our product
candidates. We expect that the costs associated with our plans to begin preclinical research, contract manufacturing and file
an IND for our Terra CoV-2 vaccine product candidate and the research and development of our product candidates pursuant to our
exclusive channel partnerships with Eleszto Genetika, Inc. in the area of lantibiotics (“Lantibiotics Program”) will
continue to increase the level of our overall expenses significantly going forward. Additionally, our NIH license also requires
the payment of certain recurring and performance-based royalties that may negatively impact our financial capabilities. As a result,
we expect to continue to incur substantial net losses and negative cash flow for the foreseeable future. These losses and negative
cash flows have had, and will continue to have, an adverse effect on our shareholders’ equity and working capital. Because
of the numerous risks and uncertainties associated with product development and commercialization, we are unable to accurately
predict the timing or amount of substantial expenses or when, or if, we will be able to generate the revenue necessary to achieve
or maintain profitability.
We
will need to raise additional capital in the future to complete the development and commercialization of our product candidates
and operate our business.
Developing
and commercializing biopharmaceutical products, including conducting nonclinical studies and clinical trials and establishing
manufacturing capabilities, is expensive, and the progress of our efforts to develop and commercialize our product candidates,
including our acquisition of a vaccine product candidate, can cause us to use our limited, available capital resources faster
than we currently anticipate. Our actual costs may ultimately vary from our current expectations, which could materially impact
our use of capital and our forecast of the period of time through which our financial resources will be adequate to support our
operations. Our current cash, cash equivalents and short-term investments are not sufficient to fully implement our business strategy
and sustain our operations beyond the second quarter of 2022. Accordingly, we will need to seek additional sources of financing
and such additional financing may not be available on favorable terms, if at all. Until we can generate a sufficient amount of
product revenue, if ever, we expect to finance future cash needs through public or private equity offerings, debt financings or
corporate or government collaboration and licensing arrangements. If we do not succeed in raising additional funds on acceptable
terms, we may be unable to complete existing nonclinical and planned clinical trials or obtain approval of our product candidates
from the FDA and other regulatory authorities. We expect capital outlays and operating expenditures to increase over the next
several years as we expand our infrastructure, and research and development activities. Specifically, we need to raise additional
capital to, among other things:
● expand our clinical laboratory operations;
● fund our clinical validation study activities;
● expand our research and development activities; and
● finance our capital expenditures and general and administrative expenses.
Our
present and future funding requirements will depend on many factors, including:
● competing technological and market developments;
● changes in regulatory policies or laws that affect our operations.
Additional
capital may not be available on satisfactory terms, or at all. Furthermore, if we raise additional funds by issuing equity securities,
dilution to our existing stockholders would result. Any equity securities issued also may provide for rights, preferences or privileges
senior to those of holders of our common stock. If we raise additional funds by issuing debt securities, these debt securities
would have rights, preferences and privileges senior to those of holders of our common stock, and the terms of the debt securities
issued could impose significant restrictions on our operations. If we raise additional funds through collaborations and licensing
arrangements, we might be required to relinquish significant rights to our technologies or our products under development, or
grant licenses on terms that are not favorable to us, which could lower the economic value of those programs to us. If adequate
funds are not available, we may have to scale back our operations or limit our research and development activities, which may
cause us to grow at a slower pace, or not at all, and our business could be adversely affected.
In
addition, we could be forced to discontinue product development and commercialization of one or more of our product candidates,
and/or forego licensing attractive business opportunities.
We
were denied funding from the Biomedical Advanced Research and Development Authority (“BARDA”) and we may be unable
to win any government contracts, grants, agreement or other funding in the future. Even if we are successful in obtaining such
contracts, grants, agreements or other funding, we cannot assure the success of our Terra CoV-2 vaccine product candidate, that
it will be approved by the FDA or other public health regulatory authority or that any funding provided will be sufficient to
complete development and successful commercialization.
From
time to time, we may apply for contracts, grants, agreements or other funding from government agencies, academic institutions
and non-profit organizations. Such contracts or grants can be highly attractive because they provide capital to fund the ongoing
development of our technologies and vaccine candidates without diluting our stockholders. However, significant competition exists
for these contracts, grants, agreements or other funding. Entities offering such contracts, grants, agreements or other funding
may have requirements to apply for or to otherwise be eligible to receive such contracts, grants, agreements or other funding
that our competitors may be able to satisfy that we cannot. In addition, such entities have limited funding available to award
and may make arbitrary decisions as to whether to offer contracts or make grants, to whom the contracts or grants will be awarded
and the size of the contracts or grants to each awardee. Even if we are able to satisfy the award requirements, we may not be
a successful awardee. Therefore, we may not be able to win any contracts or grants in a timely manner, if at all. For example,
we applied for BARDA funding in connection with our license with the NIH and received notification that are request for BARDA
funding had been denied.
Even
if we receive a financing through one of the aforementioned mechanisms, the success of our Terra CoV-2 vaccine product candidate
cannot be assured solely by our ability to obtain such financing, nor can it assure that any vaccine product candidate so financed
will succeed in clinical trials and receive regulatory approval from the FDA or other public health regulatory authorities. Moreover,
we cannot guarantee that our receipt of such financing will obviate the need for future financial resources to support the further
development of our Terra CoV-2 vaccine product candidate, as additional development activities may be needed, and the vaccine
approval and development process can be costly and unpredictable. We have no control over the resources and funding that government
agencies may devote to these agreements, which may be subject to annual renewal and which generally may be terminated by the government
agencies at any time. Accordingly, our receipt of such funding cannot be relied upon solely as an indicator or guarantee of the
success of our Terra CoV-2 vaccine product candidate.
We
may rely on government funding and collaboration with government entities for our vaccine development, which adds uncertainty
to our research and development efforts and may impose requirements that increase the costs of development, commercialization
and production of any programs developed under those government-funded programs.
Because
we anticipate the resources necessary to develop our new Terra CoV-2 vaccine product candidate will be substantial, we may explore
funding and development collaboration opportunities with the U.S. government and its agencies. For example, we may continue to
apply for certain grant funding from BARDA, the NIH or other government agencies to further the research, development,
manufacture, testing, and regulatory approval of our Terra CoV-2 vaccine product candidate. We have no control or input over whether
an application for BARDA grant funding or any other funding will be accepted or approved, in full or in part, and we cannot provide
investors with any assurances that we will receive such funding.
Similar
to the requirements imposed by our new NIH license, contracts and grants funded by the U.S. government and its agencies, contain
provisions that reflect the government’s substantial rights and remedies, many of which are not typically found in commercial
contracts, including powers of the government to:
● audit contract-related costs and fees, including allocated indirect costs;
● control and potentially prohibit the export of products;
In
addition, government contracts and grants, ordinarily contain additional requirements that may increase our costs of doing business,
reduce our profits, and expose us to liability for failure to comply with these terms and conditions, including the following:
● specialized accounting systems unique to government contracts and grants;
If
we received such grants or agreements, we may not have the right to prohibit the U.S. government from using certain technologies
developed by us, and we may not be able to prohibit third-parties, including our competitors, from using those technologies in
providing products and services to the U.S. government. Further, under such agreements we could be subject to obligations to and
the rights of the U.S. government set forth in the Bayh-Dole Act of 1980, meaning the U.S. government may have rights in certain
inventions developed under these government-funded agreements, including a non-exclusive, non-transferable, irrevocable worldwide
license to use inventions for any governmental purpose. In addition, the U.S. government could have the right to require us to
grant exclusive, partially exclusive, or nonexclusive licenses to any of these inventions to a third party if it determines that:
(i) adequate steps have not been taken to commercialize the invention; (ii) government action is necessary to meet public health
or safety needs; or (iii) government action is necessary to meet requirements for public use under federal regulations, also referred
to as “march-in rights.” Although the U.S. government’s historic restraint with respect to these rights indicates
they are unlikely to be used, any exercise of the march-in rights could harm our competitive position, business, financial condition,
results of operations, and prospects. In the event we would be subject to the U.S. government’s exercise such march-in rights,
we may receive compensation that is deemed reasonable by the U.S. government in its sole discretion, which may be less than what
we might be able to obtain in the open market.
Additionally,
as is the case under our new NIH license, the U.S. government requires that any products embodying any invention generated through
the use of U.S. government funding be manufactured substantially in the United States. The manufacturing preference requirement
can be waived if the owner of the intellectual property can show that reasonable but unsuccessful efforts have been made to grant
licenses on similar terms to potential licensees that would be likely to manufacture substantially in the United States or that
under the circumstances domestic manufacture is not commercially feasible. This preference for U.S. manufacturers may limit our
ability to contract with non-U.S. manufacturers for products covered by such intellectual property.
Although
we will need to comply with some of these obligations in relation to our NIH license, not all of the aforementioned obligations
may be applicable to us unless and only to the extent that we receive a government grant, contract or other agreement. However,
as an organization, we are relatively new to government contracting and new to the regulatory compliance obligations that such
contracting entails. If we were to fail to maintain compliance with those obligations, we may be subject to potential liability
and to termination of our contracts, including the NIH license, which may have a materially adverse effect on our ability to develop
our Terra CoV-2 vaccine product candidate.
We
have limited vaccine-specific research, development, manufacturing, testing, regulatory, commercialization, sales, distribution,
and marketing experience, and we may need to invest significant financial and management resources to establish these capabilities.
Despite such investments and our best efforts, our strategic acquisition of Noachis Terra may turn out to be unsuccessful.
As
part of our business strategy, we monitor and analyze strategic acquisition opportunities that we believe will be strategic fits
for the Company and beneficial to the Company’s shareholders. As demonstrated by our acquisition of Noachis Terra, we may
acquire companies, businesses, products and technologies that complement, augment or transform our existing business. However,
such acquisitions could involve numerous risks that may prevent us from fully realizing the benefits that we anticipated as a
result of such transactions.
Prior
to our acquisition of Noachis Terra, we had little-to-no experience in the development and commercialization of vaccines. Although,
in connection with the acquisition, we added experienced vaccine researchers and consultants and appointed an experienced vaccine
industry professional to our board of directors, given our size and current stage of development, we still have limited vaccine-specific
research, development, manufacturing, testing, regulatory, commercialization, sales, distribution, and marketing experience. To
successfully develop our Terra CoV-2 vaccine product candidate, we will need to dedicate significant amounts of our limited financial
and management resources to bolster our expertise in this area. Our success depends significantly on the continued contributions
of our executive officers, financial, scientific and technical personnel and consultants, and on our ability to attract additional
personnel.
During
our operating history, many essential responsibilities have been assigned to a relatively small number of individuals, and we
currently depend heavily upon the efforts and abilities of our management team. However, as we advance into vaccine development,
the demands on our key employees will expand and we will need to recruit additional qualified employees for our Company. The competition
for such qualified personnel is intense, particularly in light of the demand for a vaccine or other treatment for SARS-CoV-2 and/or
COVID-19. The loss of services of any of our existing consultants or our inability to attract additional personnel to fill critical
positions could adversely affect our ability to efficiently develop our Terra CoV-2 vaccine product candidate. The loss or unavailability
of the services of any of these individuals could have a material adverse effect on our business, prospects, financial condition
and results.
Alternatively,
or in addition to the above, we may enter into strategic alliances or partnership with other vaccine industry entities to utilize
their research, development, manufacturing testing, regulatory or commercialization skills, but we may be unable to enter into
such agreements on favorable terms, if at all. If our future strategic collaborators do not commit sufficient resources to our
alliances or partnerships and the progress of our vaccine development, if any, and we are unable to develop the necessary capabilities
on our own, we may be unable to advance the development of our Terra CoV-2 vaccine product candidate to the point of commercialization,
even if we obtain regulatory approval. We will be competing with many companies that currently have existing, extensive and well-funded
operations, and without a significant internal team or the support of a third party to perform essential functions related to
vaccine research, development, manufacturing, testing, regulatory approval, and commercialization, we may be unable to compete
successfully against these more established companies and our Terra CoV-2 vaccine product candidate may fail.
Any
failure by us to effectively limit such risks as we implement our strategic acquisition could have a material adverse effect on
our business, financial condition or results of operations and cause the price of our securities to fall.
We
have limited financial resources and we may not be able to maintain our current level of operations or be able to fund the further
development of our new Terra CoV-2 vaccine product candidate.
To
date, Oragenics has never developed a vaccine product candidate, and we cannot assure investors that we will be able to successfully
develop a vaccine to prevent SARS-CoV-2 or COVID-19 with our current resources and capabilities. Because our new Terra CoV-2 vaccine
product candidate is in early stages of development, it will require extensive preclinical and clinical testing, and we will need
significant additional funding to conduct such research and testing. We do not expect to generate revenue from product sales,
licensing fees, royalties, milestones, contract research or other sources in amounts sufficient to fully fund our operations for
the foreseeable future, and we will therefore use our cash resources, and expect to require additional funds, to maintain our
existing operations, continue our research and development programs, commence future preclinical studies and clinical trials for
our Terra CoV-2 vaccine product candidate, and to seek regulatory approvals.
We
anticipate seeking such additional funds through a combination of public or private equity or debt financings, as well as potential
collaborations, strategic alliances and marketing, distribution or licensing arrangements and non-dilutive funding from government
and nongovernment funding entities, as well as other sources to further the research, development, manufacturing, testing, and
regulatory approval of vaccine product candidates. While we may continue to apply for contracts or grants from academic institutions,
nonprofit organizations and governmental entities, we may not be successful. Adequate additional funding may not be available
to us on acceptable terms, if at all. If we cannot raise the additional funds required for our anticipated operations or to support
our development efforts, we may be required to delay significantly, reduce the scope of or eliminate one or more of our research
or development programs, downsize our organization, or seek alternative measures to avoid insolvency, including arrangements with
collaborative partners or others that may require us to relinquish rights to certain of our technologies or our vaccine candidate.
If we raise additional funds through future offerings of shares of our common stock or other debt or equity securities, such offerings
would cause dilution of current stockholders’ percentage ownership in the Company, which could be substantial. Additionally,
future offerings also could have a material and adverse effect on the price of our common stock.
Our
vaccine product candidate is at the preclinical stage and has not been approved for sale. We have not conducted substantial research
and development for a vaccine product candidate, and we may be unable to produce a vaccine that successfully prevents the virus
in a timely and economical manner, if at all.
Our
Terra CoV-2 vaccine development program is in the early stages of research and development, and currently includes only one product
candidate, which is in the preclinical stage. Limited data exist regarding the safety and efficacy of our vaccine product candidate,
and we must conduct a substantial amount of additional research, development and clinical testing before any regulatory authority
will approve our vaccine product candidate. The success of our efforts to develop and commercialize our product candidates could
fail for a number of reasons. For example, we could experience delays in product development and clinical trials or unsatisfactory
clinical trial results.
In
addition, adverse events, or the perception of adverse events, relating to vaccine product candidates and delivery technologies
may negatively impact our ability to develop commercially successful products. For example, pharmaceutical companies have been
subject to claims that the use of some pediatric vaccines has caused personal injuries, including brain damage, central nervous
system damage and other ailments. Regardless of the veracity of or the data supporting these claims, these and other claims may
influence public perception of the use of vaccine product candidates and could result in greater governmental regulation, stricter
labeling requirements and potential regulatory delays in the testing or approval of our potential vaccine product candidate. Such
greater government regulation could have a material effect on our ability to develop and market our Terra CoV-2 vaccine product
candidate.
We
have not conducted substantial research on the Terra CoV-2 vaccine product candidate and we lack experience in the research, development,
manufacture, regulatory approval, marketing, commercialization and implementation of a vaccine product candidate. Also, uncertainties
exist surrounding the longevity and severity of COVID-19 as a global health concern. The success of our efforts to develop and
commercialize our product candidates could fail for a number of reasons. Accordingly, we may be unable to produce a vaccine that
successfully targets SARS-CoV-2 in a timely and economical manner, if at all.
For
example, we expect to commit significant financial resources and personnel to the development of our Terra CoV-2 vaccine product
candidate, which may cause delays in or otherwise negatively impact our other product candidate development program. The outcome
of any research and development program is highly uncertain. Only a small fraction of biotechnology and vaccine development programs
ultimately result in commercial products or even product candidates and a number of events could delay our development efforts
and negatively impact our ability to obtain regulatory approval for, and to manufacture, market and sell, a vaccine. Additionally,
our ability to develop an effective vaccine will depend on our ability to work on an accelerated timeline, with limited access
to financial resources beyond those that we currently possess, and in competition with a significant number of better-funded and
more experienced vaccine-development companies. Moreover, if the COVID-19 pandemic is effectively contained or the risk of further
spread is diminished or eliminated before we can successfully develop, manufacture and commercialize Terra CoV-2, we may be unable
to identify strategic partners willing to work with and support us in our development efforts and, even if we obtain regulatory
approval, the market that we anticipate for this product candidate may not exist or may be much smaller than we previously anticipated.
Alternatively, even if a market exists, our vaccine product candidate could be found to be ineffective or unsafe, or otherwise
fail to receive necessary regulatory clearances. Our vaccine product candidate, even if safe and effective, could be difficult
to manufacture on a large scale or uneconomical to market, or our competitors could develop superior products more quickly and
efficiently or more effectively market their competing products. Accordingly, our inability to develop a commercially-successful
vaccine product will materially harm our business. In addition, other parties are currently producing and administering vaccines
for the treatment for SARS-CoV-2 under the FDA’s Emergency Use Authorization and other competitive vaccines are expected
to seek such authorization as well. Such competitive vaccines already in the market may also lead to the diversion of governmental
and nongovernmental resources away from us and toward our competitors.
The
market opportunities for our vaccine product candidate may be smaller than we believe them to be. Moreover, any pandemic threat
may abate, or alternative vaccines currently being broadly disseminated under the FDA’s Emergency Use Authorization could
become widely accepted and adopted before our vaccines achieve regulatory approval.
The
primary area of focus for our future research and product development activities is the development of a vaccine candidate to
prevent SARS-CoV-2 and the disease it principally causes, COVID-19. Our current projections of both the number of people who are
or will be affected this disease, as well as the subset of people who may be affected by this disease and who have the potential
to benefit from immunity through our Terra CoV-2 vaccine product candidate, are based on estimates. These estimates have been
derived from a variety of sources, including scientific literature, surveys of clinics, patient foundations, or market research,
and may prove to be incorrect. Further, because coronaviruses have evolved in recent decades and research on SARS-CoV-2 and COVID-19
are continuously changing due to the complicated nature of the virus, new studies may change the estimated incidence or prevalence
of COVID-19. The number of clinical trial participants in the United States, Europe, and elsewhere may turn out to be lower than
expected, potential clinical trial participants may not be otherwise amenable to treatment with our products, or new clinical
trial participants may become increasingly difficult to identify or gain access to, all of which would adversely affect our ability
to conduct the research and development necessary to complete the vaccine product candidate.
Moreover,
the threat of the COVID-19 pandemic outbreak may subside before we are able to complete research and development for our Terra
CoV-2 vaccine product candidate, obtain regulatory approval for the vaccine product candidate and realize any return on our investment
in the research and development. Other organizations some of which are currently broadly administering vaccines under the FDA’s
Emergency Use Authorization authority, may obtain broad acceptance, or government health organizations may acquire
adequate stockpiles of pandemic vaccines or adopt other technologies or strategies to prevent or limit outbreaks before
our Terra CoV-2 vaccine product candidate reaches the marketplace, if at all. We may not achieve a return on our investment
before the threat of the COVID-19 pandemic subsides or competing products are widely adopted.
If
we are unable to successfully develop our product candidates, our operating results and competitive position could be harmed.
Research and development involves a lengthy and complex process, and we may not be successful in our efforts to develop and commercialize
our product candidates. The further development and ultimate commercialization of product candidates for SARS-CoV-2 and COVID-19,
as well as our other product candidates, are keys to our growth strategy.
A
key element of our business strategy is to discover, develop, validate and commercialize (i) a vaccine product candidate
to provide specific lifetime immunity from SARS-CoV-2, which we aim to market globally to both public and private payers (ii)
the development of a portfolio of additional antibiotic product candidates to combat multi drug resistant organism, or MDRO,
outbreaks and the associated costs to patients, inpatient facilities and the health care industry. We cannot assure you that we
will be able to successfully complete development of, or commercialize any or all of our planned future product candidates,
or that they will be clinically usable. For example, we previously attempted to develop an oral mucositis product candidate
(or AG013 product candidate) and conducted a Phase 2 clinical trial that was not successful and we ceased further development
and terminated our license with a third party to develop such technology. The product development process involves a high
degree of risk and may take up to several years or more. Our new product development efforts may fail for many reasons, including:
● our recent entry into the vaccine research and development industry;
● failure of future tests at the research or development stages;
● lack of clinical validation data to support effectiveness;
● lack of commercial acceptance by the health care marketplace.
Few
research and development projects result in commercial products, and success in early clinical trials often is not replicated
in later trials. At any point, we may abandon development of products (as we did with our oral mucositis product
candidate) in favor of the development or acquisition of new products (as we did with our vaccine product
candidate), or we may be required to expend considerable resources repeating clinical studies or trials, which would
adversely impact the timing for generating potential revenues from those new products. In addition, as we advance the
development of new products through to the commercialization stage, we will have to make additional investments in our sales
and marketing operations, which may be prematurely or unnecessarily incurred if the commercial launch of a product is
abandoned or delayed.
If
we are successful in producing a vaccine against SARS-CoV-2, we may need to devote significant resources to its scale-up and development,
including for use by the U.S. government or other foreign authorities. Moreover, government involvement may limit the commercial
success of our vaccine product candidate.
Because
the COVID-19 outbreak has been classified as a pandemic by public health authorities, it is possible that one or more government
entities may take actions that directly or indirectly have the effect of abrogating some of our rights or opportunities with respect
to the research, development and commercialization of our Terra CoV-2 vaccine product candidate. We have not manufactured a pandemic
vaccine to date, but if we were to do so, the economic value of such a vaccine to us could be limited by such government action