ITEM 1A. RISK FACTORS
Risks Relating to Our Business and Industry
Our business and operations may be
materially and adversely affected by the coronavirus pandemic.
In December 2019, a novel strain of coronavirus
that causes COVID-19 was reported to have surfaced in Wuhan, China and has since spread to other parts of the world, including
the United States. In March 2020, the World Health Organization declared the outbreak a pandemic. The coronavirus pandemic is affecting
the United States and global economies and as a result, government authorities have implemented restrictions and limited certain
operations, such as limits on the number of people at a gathering, travel restrictions and stay-at-home orders, to try to slow
the spread of coronavirus. The Company’s facilities remain operational and are operating in accordance with federal and state
governmental authority guidelines and with the implementation of safety measures such as social distancing protocols, suspending
travel, the wearing of masks and frequently disinfecting our workspaces. Employee personnel who do not need to be physically present
on our premises are continuing to work remotely, but have the ability to be on site as required. While the majority of these mandates
have specific end dates, they may be modified or extended and as a result there is uncertainty regarding the length of time that
such measures will be place. We believe the impact to our internal operations has not been material thus far, however, current
and future restrictions may further impact our operations and may slow or diminish our research and development activities.
As
a result of the coronavirus pandemic, certain of our third-party suppliers and service providers on which we rely have seen impacts
to their operations. If the impact to their operations continue or extend, it may in turn affect our operations. The
Company does not expect a material impact to its program’s anticipated timelines as a result of potential delays from our
third-party service providers and believes that we have a sufficient supply of our INTASYL compounds to conduct our ongoing preclinical
studies and initial clinical activities. However, the ultimate impact to the third parties on which we rely is highly uncertain
and subject to change. If the measures to contain the outbreak are extended or further expanded, it could reduce or delay the availability
of supplies and services that we purchase and outsource, which may in turn slow or delay our preclinical and clinical activities,
and/or result in higher costs. The extent to which the coronavirus pandemic impacts our results will depend on future developments,
which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus
and the actions to contain the coronavirus or treat its impact, among others.
Additionally, while the potential economic
impact brought by, and the duration of, the coronavirus pandemic is difficult to assess or predict, the impact of the coronavirus
pandemic on the global financial markets may reduce the Company’s ability to access capital and negatively affect our future
liquidity.
The coronavirus pandemic continues to evolve
and change rapidly. The ultimate impact of the coronavirus pandemic, or a similar public health emergency, is highly uncertain
and subject to change. The Company does not yet know the full extent of potential delays or impacts on its business, financing
activities, preclinical studies, clinical trial activities or the global economy as a whole. However, these effects could have
a material impact on the Company’s liquidity, results of operations and financial condition.
Our product
candidates are in an early stage of development and may fail or experience significant delays or may never advance to the clinic,
which may materially and adversely impact our business.
All of our pipeline programs are currently
in the preclinical development stage and our future success heavily depends on the successful development of our INTASYL product
candidates, which may never occur. These product candidates could be delayed, not advance into the clinic or unexpectedly fail
at any stage of development. Before we can commence clinical trials for a product candidate, we must conduct extensive preclinical
and other non-clinical tests in order to support an IND application, including IND-enabling good laboratory practice toxicology
studies, in the United States or their equivalents with regulatory authorities in other jurisdictions. Preclinical studies and
clinical trials are expensive, difficult to design and can take many years. There is no assurance that we will be able to successfully
develop our product candidates, and we may focus our efforts and resources on product candidates that may prove to be unsuccessful.
We cannot be certain of the outcome of preclinical
testing and clinical studies and results from these studies may not predict the results that will be obtained in later phase trials
of our product candidates. Even if we are able to complete our preclinical studies and planned clinical trials in line with our
projected timelines, results from such studies and trials may be not replicated in subsequent preclinical studies or clinical trial
results. Additionally, such studies may be delayed due to events beyond our control including as a result of natural disasters,
epidemics or pandemic outbreaks such as the novel coronavirus pandemic. While the steps for us to initiate our clinical trials
with PH-762 in the second half of 2021 are continuing and ongoing, the FDA, or equivalent regulatory authority, may not accept
the results of our preclinical studies or proposed clinical study designs and may require the Company to complete additional preclinical
studies or impose stricter approval conditions than we expect. As a result, we cannot guarantee that we will be able to submit
INDs, or similar applications, within our projected timelines, if at all, or that the FDA, or similar regulatory authorities, will
allow us to commence clinical trials.
We are dependent on collaboration
partners for the successful development of our adoptive cell therapy product candidates.
We are not a cell therapy company and expect
to depend on third-party collaborators to support the clinical development of our ACT product candidates. We have entered into
a clinical collaboration development agreement with AgonOx, Inc. for the clinical development of our PH-762 product candidate in
ACT and have entered into research agreements with our academic and industry collaborators, each of which is terminable by the
relevant party at any time, subject to applicable notice periods. The success of our collaborations depends upon the efforts of
our collaboration partners, and their performance in achieving the development activities to the extent they are responsible under
our collaboration agreements. Each of our partners may not be successful in performing these activities, including completing the
required preclinical studies and other information to be included in an IND application (or foreign equivalent), obtaining approval
to initiate clinical trials, conducting the necessary clinical trials and arranging for the manufacturing or contract research
organization (“CRO”) relationships and obtaining marketing authorization. Our partners work with other companies,
potentially including some of our competitors, and their corporate objectives may not align with ours, they may change their strategic
focus or pursue alternative technologies. If our collaborations are not successful or a partner terminates our collaboration agreement,
our business, financial condition, results of operations could be materially and adversely affected.
Further, we may not be successful in negotiating
agreements with these collaborators or with future collaborators for the development and commercialization of our ACT product candidates
through collaborations such as joint development or licensing agreements. Our ability to successfully negotiate such agreements
will depend on, among other things, potential partners’ evaluation of the superiority of our technology over competing technologies,
the quality of preclinical data that we have generated, the perceived risks specific to developing our product candidates and our
partners’ own strategic and corporate objectives. If we fail to negotiate these agreements, we may not be able commence clinical
trials with our ACT product candidates or we may be required to obtain licenses from cell therapy companies and our business, financial
condition, results of operations and prospects could be materially and adversely affected.
We rely upon third-party relationships
to conduct preclinical studies, and any future clinical trials, for our product candidates and may not be able to establish or
maintain the third-party relationships that are necessary to support their development.
We depend upon third-party CROs, medical
institutions, clinical investigators, consultants and other third parties to support our preclinical research efforts such as
through managing and conducting research studies, formulating our product candidates and manufacturing our product candidates
and expect to rely on the same for our future clinical trials. Because we rely on these third parties, we cannot necessarily control
the timing, quality of work or amount of resources that our contract partners will devote to these activities and we cannot guarantee
that these parties will fulfill their obligations to us under these arrangements. Furthermore, we compete with many other companies
for the resources of these third parties, some of which may be our competitors, and may detract from our programs. Additionally,
as a result of the coronavirus pandemic, certain of our contracted CROs and other third parties are now facing impacts to their
operations, resulting in delays or interruptions. We previously had been able to engage
with third-party service providers in areas with limited or no impact (e.g. countries with limited or no restrictions), but
with the global spread of the virus and associated restrictions, this has been no longer possible. The Company has also undertaken
efforts to mitigate potential future impact by identifying and engaging alternative third-party service providers and suppliers.
However, the ultimate impact to the third parties on which we rely is highly uncertain and subject to change. If the measures
to contain the coronavirus outbreak are extended or further expanded, it could reduce or delay the availability of supplies and
services that we purchase and outsource, which may in turn slow or delay our preclinical and clinical activities, and/or result
in higher costs. If these third parties do not successfully carry out their responsibilities, as well as within a timely
fashion, our preclinical and clinical development may be delayed, unsuccessful or otherwise adversely affected.
We cannot guarantee that we will be able
to successfully negotiate agreements with or maintain relationships with these third parties on favorable terms, if at all. If
we are unable to obtain or maintain these agreements, we may not be able to develop, formulate, manufacture, obtain regulatory
approval(s) or commercialize our product candidates. The third parties whom we rely on generally may terminate their agreements
with us at any time, subject to applicable notice periods, and we may not be able to readily terminate any such agreements with
contract partners even if such partners do not fulfill their obligations to us. If we have to enter into alternative arrangements
it may delay or adversely affect the development of our product candidates and our business operations.
We rely upon third parties for the
manufacture of our product candidates.
We rely on third party suppliers and manufacturers
to provide us with the materials and services to manufacture our INTASYL compounds and product candidates for certain of our preclinical
research activities and expect that we will rely on them for the supply of our product candidates for our future clinical trials.
While we do have in-house expertise and capacity to manufacture our INTASYL compounds, we do not own or lease manufacturing facilities
or have our own supply source for the required materials. Accordingly, we will be dependent upon third party suppliers and our
contract manufacturers to obtain supplies, and we will need to either develop, contract for, or otherwise arrange for the necessary
manufacturers for these supplies. If for any reason we are unable to obtain the supplies for our INTASYL compounds from our current
manufacturer, we would have to seek to obtain it from another major manufacturer. There is no assurance that we will be able to
timely secure needed supply arrangements on satisfactory terms, or at all.
We currently contract with multiple manufacturers
for the supply of our clinical product candidates to reduce the risk of supply interruption or availability. However, there is
no assurance that our supply of our clinical drug product will not be limited, interrupted, of satisfactory quality or be available
at acceptable prices. If for any reason we are unable to obtain the clinical supply of our product candidates from our current
manufacturers, we would have to seek to contract with another major manufacturer. While we believe that we currently have sufficient
supply of our INTASYL compounds to conduct our ongoing preclinical studies and initial clinical activities, we have begun to see
some of our third-party supplies on which we rely becoming impacted from the coronavirus pandemic, which may result in delays or
shortages due to ongoing efforts to address the pandemic. The Company has also undertaken
efforts to mitigate potential future impact by identifying and engaging alternative third-party suppliers and manufacturers. However,
the ultimate impact to these third parties on which we rely is highly uncertain and subject to change. If the measures to
contain the outbreak are extended or further expanded, it could reduce or delay the availability
of supplies and services that we purchase and outsource, which may in turn slow or delay our preclinical and clinical activities,
and/or result in higher costs. Our failure to secure these arrangements as needed could have a material adverse effect on
our ability to complete the development of our clinical product candidates or, if we obtain regulatory approval, to commercialize
them.
The FDA, or equivalent regulatory authority,
governs the manufacturing process for product candidates and will inspect the facilities at which the product manufactured. Approval
of the product will not occur unless the manufacturing facilities are in compliance with the FDA’s cGMP regulations, or equivalent
foreign authority. If our suppliers or manufacturers do not comply with the FDA or foreign regulations for our product candidates,
we may experience delays in timing or supply, be forced to manufacture our product candidates ourselves or seek to enter contract
with another supplier or manufacturer. If we are required to switch suppliers or manufacturers, we will be required to verify that
the new supplier or manufacturer maintains facilities and processes in line with cGMP regulations, which may result in delays,
additional expenses, and may have a material adverse effect on our ability to complete the development of our product candidates.
Natural disasters, epidemic or pandemic
disease outbreaks, trade wars, political unrest or other events could disrupt our business or operations or those of our development
partners, manufacturers, regulators or other third parties with whom we conduct business now or in the future.
A wide variety of events beyond our control,
including natural disasters, epidemic or pandemic disease outbreaks (such as the coronavirus pandemic), trade wars, political unrest
or other events could disrupt our business or operations or those of our manufacturers, regulatory authorities, or other third
parties with whom we conduct business. These events may cause businesses and government agencies to be shut down, supply chains
to be interrupted, slowed, or rendered inoperable, and individuals to become ill, quarantined, or otherwise unable to work and/or
travel due to health reasons or governmental restrictions. These limitations could negatively affect our business operations and
continuity, and could negatively impact our development timelines and ability to timely perform basic business functions, including
making SEC filings and preparing financial reports. If our operations or those of third parties with whom we have business are
impaired or curtailed as a result of these events, the development and commercialization of our products and product candidates
could be impaired or halted, which could have a material adverse impact on our business.
The approach we are taking to discover
and develop novel therapeutics using RNAi may never lead to marketable products.
Our research and development efforts and
our future success is based on our INTASYL technology platform. We plan to develop our INTASYL products for the treatment of cancer
to be delivered via direct injection for use intratumorally and with ACT by isolating immune cells from patients, treating the
cells ex vivo and then returning them to the patient for treatment. We believe that our INTASYL compounds may offer a new
treatment option to current standards of care, such as antibodies, and potentially with a more cost-effective approach. Successful
development of our INTASYL compounds by us, or by our collaborative partners, is highly uncertain and depends on a number of factors,
many of which are beyond our control. The scientific research used to support our efforts and approach to developing RNAi therapeutics
is limited. Decisions made by the Company to advance the development of our pipeline, including those related to our technology
or manufacturing processes, may show to be incorrect based on further work by us or our collaborators.
The use of RNAi
is a relatively new scientific discovery and the scientific evidence to support the feasibility of developing drugs based on these
discoveries, or INTASYL, is limited. Therefore, it is difficult to accurately predict challenges we may face with our product candidates
as they move through the discovery, preclinical and clinical development stages. We may spend large amounts of money trying to
develop our INTASYL technology and may never succeed in doing so. In addition, our research methodology may be unsuccessful in
identifying product candidates and results from preclinical and clinical studies may not predict the results that will be obtained
in later phase trials of our product candidates or our product candidates may interact with patients in unforeseen or harmful ways
that may make it impractical to manufacture, market or receive regulatory approval. If we are not successful in bringing an INTASYL
product candidate to market, it could negatively impact our business and financial condition and we may not be able to identify
and successfully implement an alternative product development strategy.
A number of different factors could
prevent us from advancing into clinical development, obtaining regulatory approval, and ultimately commercializing our product
candidates on a timely basis, or at all.
Before obtaining regulatory approval for
the sale of any drug candidate, we must conduct extensive preclinical tests and successful clinical trials to demonstrate the safety
and efficacy of our product candidates in humans. Before human clinical trials may commence, we must submit to the FDA an IND application.
An IND application involves the completion of preclinical studies and the submission of the results, together with proposed clinical
protocols, manufacturing information, analytical data and other data in the IND submission. The FDA may require us to complete
additional preclinical studies or disagree with our clinical trial study design. Also, animal models may not exist for some of
the disease areas we choose to develop our INTASYL product candidates for. As a result, our clinical trials may be delayed or we
may be required to incur more expense than we anticipated.
Clinical trials require the review and oversight
of IRBs, which approve and continually review clinical investigations and protect the rights and welfare of human subjects. Before
our clinical trials can begin, we must also submit to the FDA a clinical protocol accompanied by the approval of the IRB at the
institution(s) participating in the clinical trial. An inability or delay in obtaining IRB approval could prevent or delay the
initiation and completion of our clinical trials, and the FDA may decide not to consider any data or information derived from a
clinical investigation not subject to initial and continuing IRB review and approval.
Clinical trials of a new drug candidate
require the enrollment of a sufficient number of subjects, including subjects who are suffering from the disease or condition the
drug candidate is intended to treat and who meet other eligibility criteria. Rates of subject enrollment are affected by many factors,
and delays in subject enrollment can result in increased costs and longer development times. With
the global spread of the coronavirus and the associated safety measures to contain the spread by governmental authorities, a delay
in the commencement of new clinical trials and in the enrollment and participation of patients in clinical trials may occur. The
steps required for us to initiate our clinical trials with PH-762 in the second half of 2021 are continuing and ongoing, however,
the Company does not yet know the full extent of potential delays or impacts related to its planned clinical activities from the
coronavirus pandemic.
Preclinical studies and clinical trials
are lengthy and expensive, and their outcome is highly uncertain. Historical failure rates are high due to number of factors, such
as safety and efficacy of drug candidates. We, our collaborators, the FDA, or an IRB may suspend clinical trials of a drug candidate
at any time for various reasons, including if we or they believe the subjects participating in such trials are being exposed to
unacceptable health risks. Among other reasons, adverse side effects of a drug candidate on subjects in a clinical trial could
result in the FDA or other regulatory authorities suspending or terminating the trial and refusing to approve a particular drug
candidate for any or all indications of use.
An additional number of factors could affect
the timing, cost or outcome of our drug development efforts, including the following:
· Difficulty in securing centers to conduct clinical trials;
· The cost of our clinical trials being greater than we anticipate;
· The impact from the recent coronavirus pandemic;
· Adverse results obtained by other companies developing similar drugs.
A failure of any preclinical study
or clinical trial can occur at any stage of testing. The results of preclinical and initial clinical testing of these products
may not necessarily indicate the results that will be obtained from later or more extensive testing. Preliminary observations
made in early stages of clinical trials with small numbers of subjects are inherently uncertain and initial clinical trial results
are not necessarily indicative of results that will be obtained when full data sets are analyzed or in subsequent clinical trials.
Because of these factors, it is difficult to predict the time and cost of the development of our product candidates. Any delay
or failure in obtaining required approvals may prevent us from completing our preclinical or clinical studies and could have a
material adverse effect on our ability to initiate or commercialize any drug candidate on a timely basis, or at all. Additionally,
preclinical studies and clinical trials are lengthy and expensive and if our cash resources become limited we may not be able
to commence, continue or complete our clinical trials.
We also are subject to numerous foreign
regulatory requirements governing the conduct of clinical trials, manufacturing and marketing authorization, pricing and third-party
reimbursement. The foreign regulatory approval process includes all of the risks associated with the FDA approval described above,
as well as risks attributable to the satisfaction of local regulations in foreign jurisdictions. Approval by the FDA does not assure
approval by regulatory authorities outside of the United States.
We are dependent on the success of
our product candidates and even if we complete the necessary preclinical and clinical studies, we may not receive or be delayed
in receiving regulatory approval and as a result, we will not be able to commercialize or will be delayed in commercializing our
product candidates.
We have no commercial products and currently
generate no revenue from product sales and may never be able to develop marketable products. The FDA or similar foreign governmental
agencies must approve our products in development before they can be marketed. We, and any of our collaborators, must demonstrate
and establish our product candidate’s safety, purity and effectiveness to patients through extensive clinical trials before
we can submit an NDA or BLA to the FDA for approval. Even if we complete the necessary preclinical and clinical studies, it is
possible that none of the product candidates that we may attempt to develop will obtain the appropriate regulatory approvals needed
to begin selling them or they may be subject to limitations on the indicated uses for which we may market the product.
The process for obtaining FDA and other
approval is both time consuming and costly, with no certainty of a successful outcome, and can often take years following the commencement
of clinical trials, depending on the complexity of the drug candidate. Any analysis we perform of data from clinical activities
is subject to confirmation and interpretation by regulatory authorities, which could delay, limit or prevent regulatory approval.
The FDA has substantial discretion in the approval process and may deny our application, may decide our data is insufficient or
require additional information from us regarding our current or planned clinical trials at any time, and such information may be
costly to provide or cause potentially significant delays in development. Any changes in marketing approval policies or regulatory
statutes and regulations during product development, trials and the review process, may cause delays in the approval of an application.
There is no assurance that we will be able to successfully develop any of our product candidates, and we may spend large amounts
of money trying to resolve these issues and may never succeed in doing so.
We have no experience in filing the applications
necessary to obtain marketing approval and expect that we will need to rely on CROs and regulatory consultants to assist us with
this process. Regulatory approval also requires the submission about the product manufacturing process and inspection of the manufacturing
facilities, to the relevant regulatory authority. Any product candidates we develop may not be effective, 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.
If we experience delays or fail to obtain
marketing approval for any of our product candidates that we may develop, we would be prevented from being able to commercialize
our product candidates and our commercial prospects and ability to generate revenues may be materially impaired.
The FDA could impose a unique regulatory
regime for our therapeutics.
The compounds we intend to develop may represent
a new class of drug, and even though the first RNAi therapeutic was approved in August 2018, the FDA has not yet established any
definitive policies, practices or guidelines in relation to these drugs. While we expect any product candidates that we develop
will be regulated as a new drug under the Federal Food, Drug, and Cosmetic Act, the FDA could decide to regulate them or other
products we may develop as biologics under the Public Health Service Act. The lack of policies, practices or guidelines may hinder
or slow review by the FDA of any regulatory filings that we may submit. Moreover, the FDA may respond to these submissions by defining
requirements that we may not have anticipated.
Even if we receive regulatory approval
to market our product candidates, our product candidates may not be accepted commercially, which may prevent us from becoming profitable.
Even if we receive regulatory approval for
a product candidate, we may not generate or sustain revenues from sales of the product. The product candidates that we are developing
are based on new technologies and therapeutic approaches, which are largely unproven. Additionally, RNAi products do not readily
cross the so-called blood brain barrier, are rapidly eliminated from circulating blood and, for various applications, are likely
to require injection or implantation, which will make them less convenient to administer than drugs administered orally. Key participants
in the pharmaceutical marketplace, such as physicians, medical professionals working in large reference laboratories, public health
laboratories and hospitals, third-party payors and consumers may not accept products intended to improve therapeutic results based
on our technologies. For example, RNAi products may be more expensive to manufacture than traditional small molecule drugs, which
may make them costlier than competing small molecule drugs. As a result, it may be more difficult for us to convince the medical
community and third-party payors to accept and use our products or to provide favorable reimbursement. If medical professionals
working with large reference laboratories, public health laboratories and hospitals choose not to adopt and use our technologies,
our products may not achieve broader market acceptance.
Additionally, although we expect that we
will have intellectual property protection for our technology, certain governments may elect to deny patent protection for drugs
targeting diseases with high unmet medical need (e.g., as in the case of HIV) and allow in their country internationally unauthorized
generic competition. If this were to happen, our commercial prospects for developing any such drugs would be substantially diminished
in these countries.
We are dependent on technologies we
license, and if we lose the right to license such technologies or fail to license new technologies in the future, our ability to
develop new products would be harmed.
Many patents in the fields we are pursuing
have already been exclusively licensed to third parties, including our competitors. If any of our existing licenses are terminated,
the development of the products contemplated by the licenses could be delayed or terminated and we may not be able to negotiate
additional licenses on acceptable terms, if at all, which would have a material adverse effect on our business.
We may be unable to protect our intellectual
property rights licensed from other parties; our intellectual property rights may be inadequate to prevent third parties from using
our technologies or developing competing products; and we may need to license additional intellectual property from others.
Therapeutic applications of gene silencing
technologies, formulations, delivery methods and other technologies that we license from third parties are claimed in a number
of pending patent applications, but there is no assurance that these applications will result in any issued patents or that those
patents would withstand possible legal challenges or protect our technologies from competition. The United States Patent and Trademark
Office and patent granting authorities in other countries have upheld stringent standards for the RNAi patents that have been prosecuted
so far. Consequently, pending patents that we have licensed and those that we own may continue to experience long and difficult
prosecution challenges and may ultimately issue with much narrower claims than those in the pending applications. Third parties
may hold or seek to obtain additional patents that could make it more difficult or impossible for us to develop products based
on our technologies without obtaining a license to such patents, which licenses may not be available on attractive terms, or at
all.
In addition, others may challenge the patents
or patent applications that we currently license or may license in the future or that we own and, as a result, these patents could
be narrowed, invalidated or rendered unenforceable, which would negatively affect our ability to exclude others from using the
technologies described in these patents. There is no assurance that these patent or other pending applications or issued patents
we license or that we own will withstand possible legal challenges. Moreover, the laws of some foreign countries may not protect
our proprietary rights to the same extent as do the laws of the United States. Any patents issued to us or our licensors may not
provide us with any competitive advantages, and there is no assurance that the patents of others will not have an adverse effect
on our ability to do business or to continue to use our technologies freely. Our efforts to enforce and maintain our intellectual
property rights may not be successful and may result in substantial costs and diversion of management time. Even if our rights
are valid, enforceable and broad in scope, competitors may develop products based on technology that is not covered by our licenses
or patents or patent applications that we own.
There is no guarantee that future licenses
will be available from third parties for our product candidates on timely or satisfactory terms, or at all. To the extent that
we are required and are able to obtain multiple licenses from third parties to develop or commercialize a product candidate, the
aggregate licensing fees and milestones and royalty payments made to these parties may materially reduce our economic returns or
even cause us to abandon development or commercialization of a product candidate.
Our success depends upon our ability to
obtain and maintain intellectual property protection for our products and technologies.
The applications based on RNAi technologies
claim many different methods, compositions and processes relating to the discovery, development, delivery and commercialization
of RNAi therapeutics. Because this field is so new, very few of these patent applications have been fully processed by government
patent offices around the world, and there is a great deal of uncertainty about which patents will issue, when, to whom and with
what claims. Although we are not aware of any blocking patents or other proprietary rights, it is likely that there will be significant
litigation and other proceedings, such as interference and opposition proceedings in various patent offices, relating to patent
rights in the RNAi field. It is possible that we may become a party to such proceedings.
We are subject to significant competition
and may not be able to compete successfully.
The biotechnology and pharmaceutical industries,
including immuno-oncology, have intense competition and contain a high degree of risk. We face a number of competitors that have
substantially greater experience and greater research and development capabilities, staffing, financial, manufacturing, marketing,
technical and other resources than us, and we may not be able to successfully compete with them. These companies include large
and small pharmaceutical and biotechnology companies, academic institutions, government agencies and other private and public research
organizations.
In addition, even if we are successful in
developing our product candidates, in order to compete successfully we may need to be first to market or to demonstrate that our
products are superior to therapies based on different technologies. Some of our competitors may develop and commercialize products
that are introduced to market earlier than our product candidates or on a more cost-effective basis. A number of our competitors
have already commenced clinical testing of product candidates and may be more advanced than we are in the process of developing
products. If we are not first to market or are unable to demonstrate superiority, on a cost-effective basis or otherwise, any products
for which we are able to obtain approval may not be successful.
Our competitors also compete with us in
acquiring technologies complementary to our INTASYL technology. We may face competition with respect to product efficacy and safety,
ease of use and adaptability to modes of administration, acceptance by physicians, timing and scope of regulatory approvals, reimbursement
coverage, price and patent position, including dominant patent positions of others. If we are not able to successfully obtain regulatory
approval or commercialize our product candidates, we may not be able to establish market share and generate revenues from our technology.
We are subject to potential liabilities
from clinical testing and future product liability claims.
If any of our future products are alleged
to be defective, they may expose us to claims for personal injury by subjects in clinical trials of our products. If our products
are approved by the FDA, users may claim that such products caused unintended adverse effects. We will seek to obtain clinical
trial insurance for clinical trials that we conduct, as well as liability insurance for any products that we market. There is no
assurance that we will be able to obtain insurance in the amounts we seek, or at all. We anticipate that licensees who develop
our products will carry liability insurance covering the clinical testing and marketing of those products. There is no assurance,
however, that any insurance maintained by us or our licensees will prove adequate in the event of a claim against us. Even if claims
asserted against us are unsuccessful, they may divert management’s attention from our operations and we may have to incur
substantial costs to defend such claims.
Any drugs we develop may become subject
to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, which could have a material
adverse effect on our business.
If approved, we intend to sell our products
primarily to hospitals, oncologists and clinics, which receive reimbursement for the healthcare services they provide to their
patients from third-party payors, such as Medicare, Medicaid and other domestic and international government programs, private
insurance plans and managed care programs. Most third-party payors may deny reimbursement if they determine that a medical product
was not used in accordance with cost-effective treatment methods, as determined by the third-party payor, was used for an unapproved
indication or if they believe the cost of the product outweighs its benefits. Third-party payors also may refuse to reimburse for
experimental procedures and devices. Furthermore, because our programs are still in development, we are unable at this time to
determine their cost-effectiveness and the level or method of reimbursement for them. Increasingly, the third-party payors who
reimburse patients are requiring that drug companies provide them with predetermined discounts from list prices and are challenging
the prices charged for medical products. If the price we are able to charge for any products we develop is inadequate in light
of our development and other costs, our profitability could be adversely affected.
We currently expect that any drugs we develop
may need to be administered under the supervision of a physician. Under currently applicable law, drugs that are not usually self-administered
may be eligible for coverage by the Medicare program if:
· They are “incidental” to a physician’s services;
· They are not excluded as immunizations; and
· They have been approved by the FDA.
Insurers may refuse to provide insurance
coverage for newly approved drugs, including drugs in our clinical pipeline, or insurance coverage may be delayed or be more limited
than the purpose for which the drugs are approved by the FDA. Moreover, eligibility for insurance coverage does not imply that
any drug will be reimbursed in all cases or at a rate that covers our costs, including research, development, manufacture, sale
and distribution costs. Interim payments for new drugs, if applicable, may also not be sufficient to cover our costs and may not
be made permanent. Reimbursement may be based on payments for other services and may reflect budgetary constraints or imperfections
in Medicare data. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs
or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be
sold at lower prices than in the United States. Third-party payors often rely upon Medicare coverage policy and payment limitations
in setting their own reimbursement rates. Our inability to promptly obtain coverage and profitable reimbursement rates from both
government-funded and private payors for new drugs that we develop could have a material adverse effect on our operating results,
our ability to raise capital needed to develop products and our overall financial condition.
Additionally, third-party payors are increasingly
attempting to contain healthcare costs by limiting both coverage and the level of reimbursement for medical products and services.
Levels of reimbursement may decrease in the future, and future legislation, regulation or reimbursement policies of third-party
payors may adversely affect the demand for and price levels of our products. If our customers are not reimbursed for our products,
they may reduce or discontinue purchases of our products, which could have a material adverse effect on our business, financial
condition and results of operations.
Comprehensive healthcare reform legislation,
which became law in 2010, and any revisions to this legislation, could adversely affect our business and financial condition. Among
other provisions, the legislation provides that a “biosimilar” product may be approved by the FDA on the basis of analytical
tests and certain clinical studies demonstrating that such product is highly similar to an existing, approved product and that
switching between an existing product and the biosimilar product will not result in diminished safety or efficacy. This abbreviated
regulatory approval process may result in increased competition if we are able to bring a product to market. The legislation also
includes more stringent compliance programs for companies in various sectors of the life sciences industry with which we may need
to comply and enhanced penalties for non-compliance with the new healthcare regulations. Complying with new regulations may divert
management resources, and inadvertent failure to comply with new regulations may result in penalties being imposed on us.
Some states and localities have established
drug importation programs for their citizens, and federal drug import legislation has been introduced in Congress. The Medicare
Prescription Drug Plan legislation, which became law in 2003, required the Secretary of Health and Human Services to promulgate
regulations for drug reimportation from Canada into the United States under some circumstances, including when the drugs are sold
at a lower price than in the United States. The Secretary, however, retained the discretion not to implement a drug reimportation
plan, if the Secretary finds that the benefits do not outweigh the costs, and has so far declined to approve a reimportation plan.
Proponents of drug reimportation may attempt to pass legislation that would directly allow reimportation under certain circumstances.
Legislation or regulations allowing the reimportation of drugs, if enacted, could decrease the price we receive for any products
that we may develop and adversely affect our future revenues and prospects for profitability.
With the current U.S. administration and
Congress, there may be additional legislative changes, including repeal and replacement of certain provisions of the Affordable
Care Act. It remains to be seen, however, precisely what new legislation will provide, when it will be enacted and what impact
it will have on the availability of healthcare and containing or lowering the cost of healthcare. Such reforms could have an adverse
effect on anticipated revenue from product candidates that we may successfully develop and for which we may obtain marketing approval
and may affect our overall financial condition and ability to develop product candidates.
Even if we obtain regulatory approvals,
our marketed drugs will be subject to ongoing regulatory review. If we fail to comply with continuing U.S. and foreign regulations,
we could lose our approvals to market drugs and our business would be materially and adversely affected.
Following regulatory approval of any drugs
we may develop, we will remain subject to continuing regulatory review, including the review of adverse drug experiences and clinical
results that are reported after our drug products are made available to patients. This would include results from any post-marketing
tests or vigilance required as a condition of approval. The manufacturer and manufacturing facilities we use to make any of our
drug products will also be subject to periodic review and inspection by the FDA. The discovery of any new or previously unknown
problems with the product, manufacturer or facility may result in restrictions on the drug or manufacturer or facility, including
withdrawal of the drug from the market. We would continue to be subject to the FDA requirements governing the labeling, packaging,
storage, advertising, promotion, recordkeeping and submission of safety and other post-market information for all of our product
candidates, even those that the FDA had approved. If we fail to comply with applicable continuing regulatory requirements, we may
be subject to fines, suspension or withdrawal of regulatory approval, product recalls and seizures, operating restrictions and
other adverse consequences.
If we fail to attract, hire and retain
qualified personnel, we may not be able to design, develop, market or sell our products or successfully manage our business.
Our business prospects are dependent on
the principal members of our executive team, the loss of whose services could make it difficult for us to manage our business successfully
and achieve our business objectives. While we have entered into employment agreements with each of our executive officers, they
could leave at any time, in addition to our other employees, who are all “at will” employees. Our ability to identify,
attract, retain and integrate additional qualified key personnel is also critical to our success. Competition for skilled research,
product development, regulatory and technical personnel is intense, and we may not be able to recruit and retain the personnel
we need. The loss of the services of any key research, product development, regulatory and technical personnel, or our inability
to hire new personnel with the requisite skills, could restrict our ability to develop our product candidates.
Risks Relating to Our Financial Condition
We have a
history of net losses, and we expect to continue to incur net losses for the foreseeable future and may not achieve or maintain
profitability.
We have generated
significant losses to date, have not generated any product revenue and may not generate product revenue in the foreseeable future,
or ever. We expect to incur significant operating losses as we advance our product candidates through drug development and the
regulatory process. Our ability to achieve profitability, if ever, will depend on, among
other things, us or our collaborators, obtaining regulatory approvals and successfully commercializing our drug candidates. Even
if we are able to successfully commercialize our drug candidates, we may not be able to achieve or sustain profitability, which
could have a material adverse effect on our business, financial condition and results of operations.
We
will require substantial additional funds to complete our research and development activities.
We
have used substantial funds to develop our product candidates and will need to raise additional substantial funds to continue
our drug development efforts and support our operations. Based on our current operating plans and liquidity, we believe that
our existing cash at December 31, 2020 and the proceeds received from our capital raise activities subsequent to the balance
sheet date, will be sufficient to fund our currently planned operations for at least the next 12 months from the date of
release of the associated financial statements. However, our future capital requirements and the period for which our
existing resources are able to support our operations may vary significantly from what we expect. We anticipate
that we will need to raise substantial amounts of money to fund a variety of future activities integral to the development of
our business, which may include but is not limited to the following:
· To conduct research and development to successfully develop our technologies;
· To obtain regulatory approval for our products;
· To manufacture products ourselves or through third parties;
· To acquire new technologies, licenses or products.
In the future, we will need to obtain funding
from third parties, such as proceeds from the issuance of debt, sale of equity or strategic opportunities in order to fund our
planned expenditures, as well as to make acquisitions and other investments. Historically, the Company’s primary source of
funding has been through the sale of its securities. We cannot assure you that equity or debt financing will be available to us
on acceptable terms, or at all. If we cannot, or are limited in the ability to, issue equity, incur debt or enter into strategic
collaborations, we may be unable to fund the discovery and development of our product candidates, address gaps in our product offerings
or improve our technology. Moreover, the global coronavirus pandemic has led to significant uncertainty and increased volatility
in the capital markets. If these conditions in the capital markets continue for an extended period of time it may impact our ability
to raise capital. If we fail to obtain additional funding when needed, we may ultimately be unable to continue to develop
and potentially commercialize our product candidates, and we may be forced to scale back or terminate our operations or seek to
merge with or be acquired by another company.
Future financing may be obtained through,
and future development efforts may be paid for by, the issuance of debt or equity, which may have an adverse effect on our stockholders
or may otherwise adversely affect our business.
If we raise funds through the issuance of
debt or equity, any debt securities or preferred stock issued will have rights, preferences and privileges senior to those of holders
of our common stock in the event of a liquidation. In such event, there is a possibility that once all senior claims are settled,
there may be no assets remaining to pay out to the holders of common stock. In addition, if we raise funds through the issuance
of additional equity, whether through private placements or public offerings, such an issuance would dilute current stockholders’
ownership in us.
The terms of debt securities may also impose
restrictions on our operations, which may include limiting our ability to incur additional indebtedness, to pay dividends on or
repurchase our capital stock, or to make certain acquisitions or investments. In addition, we may be subject to covenants requiring
us to satisfy certain financial tests and ratios, and our ability to satisfy such covenants may be affected by events outside of
our control.
We expect to continue to incur significant
research and development expenses, which may make it difficult for us to attain profitability, and may lead to uncertainty as to
our ability to continue as a going concern.
We expend substantial funds to develop our
technologies, and additional substantial funds will be required for further research and development, including preclinical testing
and clinical trials of any product candidates, and to manufacture and market any products that are approved for commercial sale.
Because the successful development of our products is uncertain, we are unable to precisely estimate the actual funds we will require
to develop and potentially commercialize them. In addition, we may not be able to generate enough revenue, even if we are able
to commercialize any of our product candidates, to become profitable.
If we are unable to achieve or sustain profitability
or to secure additional financing, we may not be able to meet our obligations as they come due, raising substantial doubts as to
our ability to continue as a going concern. Any such inability to continue as a going concern may result in our common stockholders
losing their entire investment. There is no guarantee that we will become profitable or secure additional financing. Our financial
statements do not include any adjustments to, or classification of, recorded asset amounts and classification of liabilities that
might be necessary if we were unable to continue as a going concern. Changes in our operating plans, our existing and anticipated
working capital needs, the acceleration or modification of our expansion plans, increased expenses, potential acquisitions or other
events will all affect our ability to continue as a going concern.
Our ability
to utilize net operating loss carryforwards and other tax benefits may be limited.
We have historically
incurred net losses. Under the Internal Revenue Code of 1986, as amended (the “Code”), a corporation is generally
allowed a deduction for net operating losses carried forward from a prior taxable year. Under that provision, we can carryforward
our net operating losses to offset our future taxable income, if any, until such net operating losses are used or expire. These
net operating loss carryforwards could expire unused before offsetting potential future income tax liabilities.
Additionally, an
ownership change, as defined by Section 382 of the Code, results from transactions increasing the ownership of certain stockholders
or public groups in the stock of a corporation by more than 50% over a three-year period. If the Company has experienced a change
of control, as defined by Section 382 of the Code, at any time since inception, utilization of the Company’s net operating
loss carryforwards would be subject to an annual limitation. Any limitation may result in expiration of a portion of the net operating
loss carryforwards before utilization. The Company has not conducted a study to assess whether a change of control, as defined
by Section 382 of the Code, has occurred and it is possible that we have experienced an ownership change limitation. We may experience
ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control.
If an ownership change occurs and our ability to use our net operating loss carryforwards is materially limited, it would harm
our future operating results by effectively increasing our future tax obligations.
Risks Relating to Our Securities
The price of our common stock has
been and may continue to be volatile.
Our stock price has historically fluctuated
widely and is likely to continue to be volatile. Because we are at an early stage of development and in the absence of product
revenue as a measure of operating performance, we anticipate that the market price for our common stock may be influenced by, but
not limited to, such factors as:
· Regulatory or legal developments in the United States and other countries;
· The recruitment or departure of key personnel;
· To acquire new technologies, licenses or products;
· Natural disasters and calamities, including the coronavirus pandemic; and
· General economic, industry and market conditions.
The stock markets, in general, and the markets
for drug delivery and pharmaceutical company stocks, in particular, have experienced extreme volatility, that has often been unrelated
to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of
our common stock. In addition, the limited trading volume of our stock may contribute to its volatility.
We
may incur significant costs from class action litigation due to our historical or expected stock volatility.
Our stock price has historically fluctuated
significantly and may continue to do so in the future. This risk is relevant to us as in the past, following periods of volatility
in the market price of a particular company’s securities, litigation has often been brought against that company that issued
the stock. If litigation of this type is brought against us by any of our stockholders, even if the lawsuit is without merit, it
could be extremely expensive and divert management’s attention and the Company’s resources.
Our Board of Directors has the authority
to issue shares of “blank check” preferred stock and the terms of the preferred stock may reduce the value of our common
stock.
We are authorized to issue up to 10,000,000
shares of preferred stock in one or more series. Our Board of Directors may determine the terms of future preferred stock offerings
without further action by our stockholders. The issuance of our preferred stock could affect the rights of existing stockholders
or reduce the value of our outstanding preferred stock or common stock. In particular, rights granted to holders of certain series
of preferred stock may include voting rights, preferences as to dividends and liquidation, conversion and redemption rights and
restrictions on our ability to merge with or sell our assets to a third party.
We may acquire other businesses or
form joint ventures that may be unsuccessful and could dilute your ownership interest in the Company.
As part of our business strategy, we may
pursue future acquisitions of other complementary businesses and technology licensing arrangements. We also may pursue strategic
alliances. We have limited experience with respect to acquiring other companies and with respect to the formation of collaborations,
strategic alliances and joint ventures. We may not be able to integrate such acquisitions successfully into our existing business,
and we could assume unknown or contingent liabilities. We also could experience adverse effects on our reported results of operations
from acquisition related charges, amortization of acquired technology and other intangibles and impairment charges relating to
write-offs of goodwill and other intangible assets from time to time following the acquisition. Integration of an acquired company
requires management resources that otherwise would be available for ongoing development of our existing business. We may not realize
the anticipated benefits of any acquisition, technology license or strategic alliance. There is no assurance that we will be successful
in developing such assets, and a failure to successfully develop such assets could diminish our prospects.
To finance future acquisitions, we may choose
to issue shares of our common stock or preferred stock as consideration, which would dilute current stockholders’ ownership
interest in us. Alternatively, it may be necessary for us to raise additional funds through public or private financings. Additional
funds may not be available on terms that are favorable to us and, in the case of equity financings, may result in dilution to our
stockholders. Any future acquisitions by us also could result in large and immediate write-offs, the incurrence of contingent liabilities
or amortization of expenses related to acquired intangible assets, any of which could harm our operating results.
We do not anticipate paying cash dividends
in the foreseeable future.
Our business requires significant funding.
We currently plan to invest all available funds and future earnings in the development and growth of our business and do not anticipate
paying any cash dividends on our common stock in the foreseeable future. As a result, capital appreciation, if any, of our common
stock will be the sole source of potential gain for our stockholders for the foreseeable future.
Provisions of our certificate of incorporation
and bylaws and Delaware law might discourage, delay or prevent a change of control of the Company or changes in our management
and, as a result, depress the trading price of our common stock.
Our certificate of incorporation and bylaws
contain provisions that could discourage, delay or prevent a change of control of the Company or changes in our management that
the stockholders of the Company may deem advantageous. These provisions:
Although we believe these provisions collectively
provide for an opportunity to receive higher bids by requiring potential acquirers to negotiate with our Board of Directors, they
would apply even if the offer may be considered beneficial by some stockholders. In addition, these provisions may frustrate or