ITEM 1A. RISK FACTORS
You should carefully consider these factors
that may affect future results, together with all the other information included in this Report in evaluating our business. The risks
and uncertainties described below are those that we currently believe may materially affect our business and results of operations. Additional
risks and uncertainties that we are unaware of or that we currently deem immaterial also may become important factors that affect our
business and results of operations. Our shares of common stock involve a high degree of risk and should be purchased only by investors
who can afford a loss of their entire investment. Prospective investors should carefully consider the following risk factors concerning
our business before making an investment.
In addition, you should carefully consider
these risks when you read “forward-looking” statements elsewhere in this Report. These are statements that relate to our expectations
for future events and time periods. Generally, the words “anticipate,” “expect,” “intend,” and similar
expressions identify forward-looking statements. Forward-looking statements involve risks and uncertainties, and future events and circumstances
could differ significantly from those anticipated in the forward-looking statements.
Forward-Looking Statements and Associated Risks
We operate in a competitive and rapidly changing
environment. New risks emerge from time to time. It is not possible for us to predict all of those risks, nor can we assess the impact
of all of those risks on our business or the extent to which any factor may cause actual results to differ materially from those contained
in any forward-looking statement. The forward-looking statements in this Report are based on assumptions management believes are reasonable.
However, due to the uncertainties associated with forward-looking statements, you should not place undue reliance on any forward-looking
statements. Further, forward-looking statements speak only as of the date they are made, and unless required by law, we expressly disclaim
any obligation or undertaking to publicly update any of them in light of new information, future events, or otherwise.
Summary of Risks Associated with Our Business
Our business is subject to numerous risks and uncertainties that you
should consider before investing in our company. These risks are described more in more detail in the section titled “Risk Factors”
in Item 1A of this Report. These risks include, but are not limited to, the following:
· We currently have no commercial revenue and may never become profitable.
· You may experience future dilution as a result of future equity offerings.
Risks Related to Our Financial Position, FDA
Clinical Hold, Need for Additional Capital and Overall Business
We are a biotechnology company
with limited resources, a limited operating history, and no products approved for clinical trials or commercial sale, which may make it
difficult to evaluate our current business and predict our future success and viability.
We are a biotechnology company focused on developing
cellular therapies for cancer based upon a proprietary cellulose-based live cell encapsulation technology known as “Cell-in-a-Box®.”
In recent years, we have devoted substantially all our resources to the development of our product candidates for LAPC. We have limited
resources, a limited operating history, no products approved for clinical trials or commercial sale and therefore have not produced any
revenues. We have generated significant operating losses since our inception. Our net losses for the years ended April 30, 2022, and 2021
were approximately $4.2 million and $3.6 million, respectively. As of April 30, 2022, we had an accumulated deficit of approximately $112
million. Substantially all our losses have resulted from expenses incurred relating to our research and development programs and from
general and administrative expenses and operating losses associated with our business.
We expect to continue to incur significant expenses
and operating losses for the foreseeable future. We anticipate these losses will increase as we continue our research and development
of, and, if approved by the FDA, commence clinical trials for, our product candidates. In addition to budgeted expenses, we may encounter
unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business.
We have no facilities to conduct fundamental research
and we have performed our research and development activities by collaboration with contract service providers, and contract manufacturers
and by designing and developing research programs in collaboration with university-based experts who work with us to evaluate mechanism(s)
of disease for which we have designed and developed product candidates. We have not maintained a principal laboratory or primary research
facility for the development of our product candidates.
Biotechnology product development is a highly
uncertain undertaking and involves a substantial degree of risk. We have not commenced or completed clinical trials for any of our product
candidates, obtained marketing approval for any product candidates, manufactured a commercial scale product, or arranged for a third party
to do so on our behalf, or conducted sales and marketing activities necessary for successful product commercialization. Given the highly
uncertain nature of biotechnology product development, we may never commence or complete clinical trials for any of our product candidates,
obtain marketing approval for any product candidates, manufacture a commercial scale product or arrange for a third party to do so on
our behalf, or conduct sales and marketing activities necessary for successful product commercialization.
Our limited operating history as a company makes
any assessment of our future success and viability subject to significant uncertainty. We will encounter risks and difficulties frequently
experienced by early-stage biotechnology companies in rapidly evolving fields, and we have not yet demonstrated an ability to successfully
overcome such risks and difficulties. If we do not address these risks and difficulties successfully, our business, operating results
and financial condition will suffer.
As a result of the clinical hold that has
been placed on our IND by the FDA, it has taken and may continue to take considerable time and expense to respond to the FDA and no assurance
can be given that the FDA will remove the clinical hold in which case our business and prospects will likely suffer material adverse consequences.
On October 1, 2020, we received notice from the
FDA that it had placed our IND for a planned Phase 2b clinical trial in LAPC on clinical hold. As part of the clinical hold process, the
FDA has asked for additional information, tasks to be performed by us and new preclinical studies and assays. It has taken and may continue
to take a considerable period of time, the length of which is not certain at this time, for us to conduct such tasks and preclinical studies
and to generate and prepare the requested information. It is possible that the service providers that we will utilize for such work may
have considerable backlogs and/or are suffering from slowdowns as a result of COVID-19 and supply chain disruptions and may not be able
to perform such work for an extended period of time. Even if we are able to fully respond to the FDA’s requests, they may subsequently
make additional requests that we would need to fulfill prior to the lifting of the clinical hold and we may never be able to begin our
clinical trial in LAPC, obtain regulatory approval or successfully commercialize our product candidates. An inability to conduct our clinical
trial in LAPC as a result of the clinical hold or otherwise, would likely force us to terminate our clinical development plans. It is
possible that we will be unable to fully respond to the FDA in a satisfactory manner, and as a result the clinical hold may never be lifted.
If the clinical hold is not lifted or if the lifting takes an extended period of time, our business and prospects will likely suffer material
adverse consequences.
We contract with Austrianova for the manufacture
of our product candidates for preclinical studies and clinical trials, if allowed to proceed, and expect to continue to do so for commercialization.
This reliance on Austrianova increases the risk that we will not have sufficient quantities of our product candidates or such quantities
at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.
We do not currently own or operate manufacturing
facilities to produce our encapsulated live cell product candidates for cancer, diabetes and malignant ascites. We rely on and expect
to continue to rely on Austrianova to manufacture supplies of our product candidates for preclinical studies and clinical trials, if allowed
to proceed, as well as for commercial manufacture of our product candidates, and these must be maintained for us to receive marketing
approval for our product candidates.
Our encapsulated live cell product candidates
must be manufactured through complex, multi-step synthetic processes that are time-consuming and involve special conditions at certain
stages. Biologics and drug substance manufacture requires high potency containment, and containment under aseptic conditions. Any performance
failures on the part of our existing or future manufacturers could delay clinical development or marketing approval of our product candidates.
Moreover, the facilities that produce our Cell-in-a-Box® capsules are unique to us and would not be replicable or replaceable
promptly, if at all, if those facilities become unavailable or are damaged or destroyed through an accident, natural disaster, labor disturbance
or otherwise.
If Austrianova should become unavailable to us
for any reason, we may incur additional cost or delay in identifying or qualifying a replacement manufacturer. At this time, we are unaware
of any available substitute manufacturer other than Austrianova. In addition, while we believe that our existing manufacturer, Austrianova,
can produce our product candidates, if approved, in commercial quantities, we may also need to identify a third-party manufacturer capable
of providing commercial quantities of our product candidates. If we are unable to arrange for such a third-party manufacturing source
or fail to do so on commercially reasonable terms and in a timely manner, we may not be able to successfully produce and market our encapsulated
live cell and ifosfamide product or any other product candidate or may be delayed in doing so.
Even if we can establish such arrangements with
another third-party manufacturer, reliance on a new third-party manufacturer entails additional risks, including:
· Reliance on the third party for regulatory compliance and quality assurance;
· The possible breach of the manufacturing agreement by the third party;
A new third-party manufacturer may not be able
to comply with cGMP standards or the requirements of a regulatory agency. Our failure, or the failure of our third-party manufacturer,
to comply with these practices or requirements could result in sanctions being imposed on us, including additional clinical holds, fines,
injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates
or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our product
candidates.
Delays in the cGMP certification of the Austrianova
manufacturing facility in Bangkok, Thailand could affect its ability to manufacture encapsulated live cells on a timely basis and could
adversely affect supplies of our product candidates for clinical trials and to market.
Our product candidates that we may develop may
compete with other product candidates and products for access to manufacturing facilities. There are a limited number of manufacturers
that operate under cGMP regulations and that might be capable of manufacturing products for us.
In addition, we expect to rely on Austrianova
to purchase from third-party suppliers the materials necessary to produce our product candidates for our clinical studies, if allowed
to proceed. There are a small number of suppliers for certain equipment and raw materials that are used in the manufacture of our product
candidates. Such suppliers may not sell these raw materials to Austrianova at the times we need them or on commercially reasonable terms.
For example, there is from time to time a limited supply of acceptable cell media for production of our MCB. We do not have any control
over the process or timing of the acquisition of these raw materials by Eurofins or Austrianova. Moreover, we currently do not have any
agreements for the commercial production of these raw materials. Austrianova from time to time has experienced significant supply chain
disruptions, some of which may be related to COVID-19, and we believe it is experiencing liquidity issues. Any further significant delay
in the supply of a product candidate or the raw material components thereof our clinical trials, if allowed to proceed, due to the need
to replace a third-party supplier of these raw materials could considerably delay completion of our clinical studies, product testing
and potential regulatory approval of our product candidates. If Eurofins, Austrianova or we are unable to purchase these raw materials
after regulatory approval has been obtained for our product candidates, the commercial launch of our product candidates would be delayed
or there would be a shortage in supply, which would impair our ability to generate revenues from the sale of our product candidates.
Our current and anticipated future dependence
upon Austrianova and others for the manufacture of our product candidates may adversely affect our future profit margins and our ability
to commercialize any products that receive marketing approval on a timely and competitive basis.
Disruptions in the global economy and supply chains may have
a material adverse effect on our business, financial condition and results of operations and the financial condition of the third parties
on which we rely, including Austrianova.
The disruptions to the global economy in 2020, 2021 and into 2022 have
impeded global supply chains, resulting in longer lead times and also increased critical component costs and freight expenses. Austrianova,
a third-party supplier on whom we rely, from time to time has experienced significant supply chain disruptions, some of which may be related
to COVID-19, and we believe it may be experiencing liquidity issues. Despite any actions we have undertaken to minimize the impacts from
disruptions to the global economy, there can be no assurances that unforeseen future events in the global supply chain, inflationary pressures,
and delays our third parties face will not have a material adverse effect on our business, financial condition and results of operations.
Our business could be impacted as a result of actions by activist
shareholders, including as a result of a potential proxy contest for the election of directors at our annual meeting.
We recently received notice from Iroquois Capital
Management, LLC and certain of its affiliates nominating a slate of eight individuals for election to our Board of Directors for the 2022
annual meeting. If a proxy contest or consent solicitation results from this notice, our business could be adversely affected because:
(i) responding to proxy contests and other actions by activist shareholders can be costly and time-consuming, which could disrupt our
operations and divert the attention of management and our employees; (ii) perceived uncertainties as to our future direction could adversely
affect our relationships with customers, suppliers, investors, prospective and current team members and others, resulting in the loss
of potential business opportunities, or making it more difficult to attract and retain qualified personnel; and (iii) if individuals are
elected to our board of directors with a specific agenda, it may adversely affect our ability to effectively and timely implement our
strategic plan. These actions could also cause our stock price to experience periods of volatility. In addition, future proxy contests
and other actions by activist shareholders could require us to incur significant legal fees and solicitation expenses and require significant
time and attention by management and the Board of Directors and could materially and adversely affect our business and operating results.
We may also be subject, from time to time, to other legal and business challenges in the operation of our company due to actions instituted
by activist shareholders. Responding to such actions could be costly and time-consuming.
The recent and ongoing COVID-19
pandemic could materially affect our operations, as well as the business or operations of third parties with whom we conduct business.
Our business could be adversely affected by the effects of other future health pandemics in regions where we or third parties on which
we rely have significant business operations.
Our business and its operations, including, but
not limited to, our proposed clinical development program, supply chain operations, research and development activities and fundraising
activities, has been and could continue to be adversely affected by the COVID-19 pandemic in areas where we have business operations,
including the U.S., India, Europe, Singapore and Thailand. Also, this pandemic could cause significant disruption in the operations of
third parties upon whom we rely on to conduct the Company’s business. In March 2020, the World Health Organization declared the
COVID-19 outbreak a pandemic. Shortly thereafter, the U.S. government-imposed restrictions on travel between the U.S., Europe, and certain
other countries. The President of the U.S. declared the COVID-19 pandemic a national emergency. Since March 2020, numerous state, regional
and local jurisdictions, including the jurisdictions where our headquarters are located, as well as foreign jurisdictions, have imposed,
and others in the future may impose, quarantines, shelter-in-place orders, executive, and similar government orders for their residents
to control the spread of COVID-19. The COVID-19 pandemic has had an impact upon our operations.
The effects of the executive orders, the shelter-in-place
orders and our work-from-home policies has and may continue to negatively impact productivity, disrupt our business, and delay our proposed
clinical development program and timeline, the magnitude of which will depend, in part, on the length and severity of the restrictions
and other limitations on our ability to conduct our business in the ordinary course. These and similar, and perhaps more severe, disruptions
in our operations could negatively impact our business, operating results and financial condition.
Quarantines, shelter-in-place, executive, and
similar government orders, or the perception that such orders, shutdowns or other restrictions on the conduct of business operations could
occur, related to COVID-19, could impact personnel at our third-party manufacturing facilities in Thailand, or the availability or cost
of materials we use or require to conduct our business, including product development, which would disrupt our supply chain. Some of our
suppliers and vendors of certain materials used in our operations and research and development activities are located in areas that are
subject to executive orders and shelter-in-place orders. While many of these materials may be obtained from more than one supplier, port
closures and other restrictions resulting from the COVID-19 pandemic may disrupt our supply chain or limit our ability to obtain sufficient
materials to operate our business. To date, we are aware of certain suppliers for our research and development activities that have experienced
operational delays related to the COVID-19 pandemic.
Depending upon the length of COVID-19 and whether
the FDA lifts the clinical hold on our IND, we anticipate our planned clinical trial in LAPC may be affected by COVID-19. If COVID-19
continues to spread in the U.S. and elsewhere, we may experience additional disruptions that could adversely impact our business and proposed
clinical trial, including: (i) delays or difficulties in enrolling patients in our Phase 2b clinical trial if the FDA allows us to go
forward with such trial; (ii) delays or difficulties in clinical site activation, including difficulties in recruiting clinical site investigators
and clinical site personnel; (iii) delays in clinical sites receiving the supplies and materials needed to conduct our clinical trial,
including interruption in global shipping that may affect the transport of our clinical trial product; (iv) changes in local regulations
as part of a response to COVID-19 which may require us to change the ways in which our clinical trial is to be conducted, which may result
in unexpected costs, or to discontinue the clinical trial altogether, if allowed to proceed; (v) diversion of healthcare resources away
from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting
the conduct of our clinical trial; (vi) interruption of key clinical trial activities, such as clinical trial site monitoring, due to
limitations on travel imposed or recommended by federal or state governments, employers and others, or interruption of clinical trial
subject visits and study procedures, the occurrence of which could affect the integrity of clinical trial data; (vii) risk that participants
enrolled in our proposed clinical trials will acquire COVID-19 while the clinical trial is ongoing, which could impact the results of
the clinical trial, including by increasing the number of observed adverse events; (viii) delays in necessary interactions with local
regulators, ethics committees, and other important agencies and contractors due to limitations in employee resources or forced furlough
of government employees; (ix) limitations in employee resources that would otherwise be focused on the conduct of our clinical trial because
of sickness of employees or their families or the desire of employees to avoid contact with large groups of people; (x) refusal of the
FDA to accept data from clinical trials in affected geographies; and (xi) interruption or delays to our clinical trial activities.
The spread of COVID-19, which has caused a widespread
impact throughout the world, may materially affect us economically. The potential economic impact brought about COVID-19, and the duration
of such impact, is difficult to assess or predict. The pandemic has resulted in significant disruption of global financial markets, which
could reduce our ability to access capital and negatively affect our future liquidity. Also, a recession or market correction resulting
from the spread of COVID-19 and related government orders and restrictions could materially affect our business and the value of our common
stock. COVID-19 continues to evolve. The ultimate impact of COVID-19 and the mitigation efforts to address it is highly uncertain and
subject to change. We do not yet know the full extent of potential delays or impacts on our business, our proposed clinical trial, healthcare
systems or the global economy.
If we are unable to successfully
raise additional capital, our future clinical trials and product development could be limited, and our long-term viability may be threatened.
We have experienced negative operating cash flows
since our inception and have funded our operations primarily through sales of our equity securities. We may need to seek additional funds
in the future through equity or debt financings, or strategic alliances with third parties, either alone or in combination with equity
financings to complete our product development initiatives. These financings could result in substantial dilution to the holders of our
common stock or require contractual or other restrictions on our operations or on alternatives that may be available to us. If we raise
additional funds by issuing debt securities, these debt securities could impose significant restrictions on our operations. Any such required
financing may not be available in amounts or on terms acceptable to us, and the failure to procure such required financing could have
a material and adverse effect on our business, financial condition and results of operations, or threaten our ability to continue as a
going concern.
Our operating and capital requirements during
this fiscal year and thereafter will vary based on several factors, including whether we can complete the studies requested by the FDA
with respect to our IND filing, whether the FDA allows us to commence our planned clinical trial for LAPC, how quickly enrollment of patients
in our such trial can be commenced, the duration of the clinical trial and any change in the clinical development plans for our product
candidates and the outcome, timing and cost of meeting regulatory requirements established by the FDA and the EMA or other comparable
foreign regulatory authorities.
Our present and future capital requirements will be significant and
will depend on many factors, including:
· whether the FDA lifts the clinical hold on our IND filing for LAPC;
· the costs, timing and outcome of regulatory review of our product candidates;
· the effect of competing technological and market developments;
· market acceptance of our product candidates;
We may not be able to acquire additional funds
on acceptable terms, or at all. If we are unable to raise adequate funds, we may have to liquidate some or all of our assets, or delay
or reduce the scope of or eliminate some or all of our development programs. Further, if we do not have, or are not able to obtain, sufficient
funds, we may be required to delay planned and future clinical trials, including the pig study, and development or commercialization of
our product candidates. We also may have to reduce the resources devoted to our product candidates or cease operations. Any of these factors
could harm our operating results.
Due to the significant resources required for the development
of our programs, and depending on our ability to access capital, we must prioritize development of certain product candidates. We may
expend our limited resources on programs that do not yield a successful product candidate and fail to capitalize on product candidates
or indications that may be more profitable or for which there is a greater likelihood of success.
We seek to maintain a process of prioritization
and resource allocation to maintain an optimal balance between aggressively advancing lead programs and ensuring replenishment of our
portfolio. Until such time, if ever, as the FDA lifts its clinical hold on our IND related to our planned Phase 2b clinical trial in LAPC,
our Cell-in-a-Box® encapsulation technology is validated in our planned Phase 2b clinical trial, and sufficient additional
funding is available, we have halted spending on behalf of our development program with respect to cannabinoids.
Due to the significant resources required for
the development of our programs, we must focus our programs on specific diseases and decide which product candidates to pursue and advance
and the amount of resources to allocate to each. Our decisions concerning the allocation of research, development, collaboration, management
and financial resources toward particular product candidates or therapeutic areas may not lead to the development of any viable commercial
product and may divert resources away from better opportunities. Similarly, our potential decisions to delay, terminate or collaborate
with third parties in respect of certain programs may subsequently also prove to be suboptimal and could cause us to miss valuable opportunities.
We may fail to capitalize on viable commercial products or profitable market opportunities, be required to forego or delay pursuit of
opportunities with other product candidates or other diseases that may later prove to have greater commercial potential than those we
choose to pursue, or relinquish valuable rights to such product candidates through collaboration, licensing or other royalty arrangements
in cases in which it would have been advantageous for us to invest additional resources to retain sole development and commercialization
rights. If we make incorrect determinations regarding the viability or market potential of any or all of our programs or product candidates
or misread trends in the biotechnology industry, our business, prospects, financial condition and results of operations could be materially
adversely affected.
We currently have no commercial revenue
and may never become profitable.
Even if we can successfully achieve regulatory
approval for our product candidates, we do not know what the reimbursement status of our product candidates will be or when any of these
products will generate revenue for us, if at all. We have not generated, and do not expect to generate, any product revenue for the foreseeable
future. We expect to continue to incur significant operating losses for the foreseeable future due to the cost of our research and development,
preclinical studies and clinical trials and the regulatory approval process for our product candidates. The amount of future losses is
uncertain and will depend, in part, on the rate of growth of our expenses.
Our ability to generate revenue from our product
candidates also depends on numerous additional factors, including our ability to:
We are unable to predict the timing or amount
of increased expenses, or when or if we will be able to achieve or maintain profitability. Even if we can complete the processes described
above, we anticipate incurring significant costs associated with commercializing our product candidates.
To date, we have generated no revenue. Our ability
to generate revenue and become profitable depends upon our ability to obtain regulatory approval for, and successfully commercialize,
our product candidates that we may develop, in-license or acquire in the future.
We face substantial competition, which may result in others discovering,
developing or commercializing competing products before or more successfully than we do.
The development and commercialization of new drug
products is highly competitive. We face competition with respect to our current product candidates. We will face competition with respect
to any product candidates that we may seek to develop or commercialize in the future. Such competition may arise from major pharmaceutical
companies, specialty pharmaceutical companies and biotechnology companies worldwide. There are several large pharmaceutical and biotechnology
companies that currently market products or are pursuing the development of products for the treatment of the disease indications for
which we are developing our product candidates. Some of these competitive products and therapies are based on scientific approaches that
are entirely different from our approach. Potential competitors also include academic institutions, government agencies and other public
and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research,
development, manufacturing and commercialization.
Specifically, there are numerous companies developing
or marketing therapies for cancer, diabetes and malignant ascites, including many major pharmaceutical and biotechnology companies. Our
commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective,
have fewer or less severe side effects, are more convenient or are less expensive than any products that we may develop. Our competitors
also may obtain regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors
establishing a strong market position before we can enter the market.
Many of the companies against which we are competing
or against which we may compete in the future have significantly greater financial resources and expertise in research and development,
manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we
do. Mergers and acquisitions in the pharmaceutical and biotechnology sectors may result in even more resources being concentrated among
a smaller number of our competitors. Smaller and other early-stage companies may also prove to be significant competitors, particularly
through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining
qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well
as in acquiring technologies complementary to, or necessary for, our programs.
Our future revenues are unpredictable which
causes potential fluctuations in operating results.
Because of our limited operating history as a
biotech company; we are currently unable to accurately forecast our revenues. Future expense levels will likely be based largely on our
marketing and development plans and estimates of future revenue. Any sales or operating results will likely generally depend on volume
and timing of orders, which may not occur and on our ability to fulfill such orders, which we may not be able to do. We may be unable
to adjust spending in a timely manner to compensate for any unexpected revenue shortfall. Accordingly, any significant shortfall in revenues
in relation to planned expenditures could have an immediate adverse effect on our business, prospects, financial condition and results
of operations. Further, as a strategic response to changes in the competitive environment, we may from time to time make certain pricing,
service or marketing decisions that could have a material adverse effect on our business, prospects, financial condition and results of
operations.
We may experience significant fluctuations in
future operating results due to a variety of factors, many of which are outside of our control. Factors that may affect operating results
include: (i) the ability to obtain and retain customers; (ii) our ability to attract new customers at a steady rate and maintain customer
satisfaction with products; (iii) our announcement or introduction of new products by us or our competitors; (iv) price competition; (v)
the level of use and consumer acceptance of its products; (vi) the amount and timing of operating costs and capital expenditures relating
to expansion of the business, operations and infrastructure; (vii) governmental regulations; (viii) general economic conditions; (ix)
delays or disruptions in our supply chain; and (x) the adverse impacts caused by COVID-19 discussed in more detail below.
Additional Risks Related to Regulatory Matters
If we are unable to obtain, or if there are delays in obtaining,
required approval from the applicable regulatory agencies, we will not be able to commercialize our product candidates and our ability
to generate revenue will be materially impaired.
Our product candidates must obtain marketing approval
from the FDA for commercialization in the U.S. and from foreign regulatory agencies for commercialization in countries outside the U.S.
The process of obtaining marketing approvals in the countries in which we intend to sell and distribute our product candidates is expensive
and can take many years if approval is obtained at all. This process can vary substantially based upon a variety of factors, including
the type, complexity and novelty of the product candidates involved. Failure to obtain marketing approval for a product candidate will
prevent us from commercializing that product candidate. To date, we have not received approval to market any of our product candidates
from regulatory agencies in any jurisdiction. We have no experience in filing and supporting the applications necessary to gain marketing
approvals and expect to rely on third-party contract research organizations to assist us in this process. Securing marketing approval
requires the submission of extensive preclinical and clinical data and supporting information to the regulatory agencies for each product
candidate to establish the product candidate’s safety and efficacy. Securing marketing approval also requires the submission of
information about the product manufacturing process to, and inspection of manufacturing facilities by, the regulatory agencies.
Our product candidates may not be effective, may
be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may
preclude our obtaining marketing approval or prevent or limit commercial use. Regulatory agencies have substantial discretion in the approval
process and may refuse to accept any application or may decide that our data are insufficient for approval and require additional preclinical,
clinical or other studies. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay,
limit or prevent marketing approval of a product candidate. Changes in marketing approval policies during the development period, changes
in or the enactment of additional statutes or regulations, or changes in regulatory review for each submitted product application, may
also cause delays in or prevent the approval of an application. New cancer drugs frequently are indicated only for patient populations
that have not responded to an existing therapy or have relapsed after such therapies. If we experience delays in obtaining approval or
if we fail to obtain approval of our product candidates, the commercial prospects for our product candidates may be harmed and our ability
to generate revenues will be materially impaired.
If allowed to proceed with our clinical
development programs, we intend to conduct clinical trials for certain of our product candidates at sites outside of the U.S., and the
U.S. regulatory agencies may not accept data from trials conducted in such locations.
Although the FDA may accept data from clinical
trials conducted outside the U.S., acceptance of this data is subject to certain conditions imposed by the regulatory agencies outside
of the U.S. For example, the clinical trial must be well designed and conducted and performed by qualified investigators in accordance
with ethical principles. The trial population must also adequately represent the population in the country in which the clinical trial
is being conducted. The data must be applicable to the U.S. population and medical practice in the U.S. in ways that the FDA deems clinically
meaningful. Generally, the patient population for any clinical trial conducted outside of the U.S. must be representative of the population
for whom we intend to seek approval in the U.S.
In addition, while these clinical trials are subject
to the applicable local laws, the FDA acceptance of the data will be dependent upon its determination that the trials also complied with
all applicable U.S. laws and regulations. There can be no assurance that the FDA will accept data from trials conducted outside of the
U.S. If the FDA does not accept the data from any of our clinical trials that we determine to conduct outside the U.S., it would likely
result in the need for additional trials that would be costly and time-consuming and delay or permanently halt the development of our
product candidate.
In addition, the conduct of clinical trials outside
the U.S. could have a significant impact on us. Risks inherent in conducting international clinical trials include:
· Foreign exchange fluctuations; and
· Diminished protection of intellectual property in some countries.
Our plan to first pursue a Phase 2b clinical
trial before a pivotal Phase 3 trial will likely result in additional costs to us and resultant delays in the FDA review process and any
future commercialization and marketing if regulatory approval is obtained.
If the FDA allows us to begin a clinical trial
by lifting its clinical hold on our IND, we have determined that the data contained in previous clinical trial reports using the Cell-in-a-Box®
and its Associated Technologies are not enough to advance the program to a Phase 3 pivotal trial. Therefore, we are designing a
Phase 2b clinical trial that, if successful, we believe will provide the information necessary to plan a Phase 3 pivotal trial. Our determination
to first conduct a Phase 2b clinical trial before conducting a pivotal Phase 3 clinical trial will likely result in additional costs to
us and resultant delays in the regulatory review process and any future commercialization and marketing if regulatory approval is obtained.
The same is true to a greater extent if the FDA requires us to commence a Phase 1 or other Phase 2 clinical trial instead of the planned
Phase 2b clinical trial currently under clinical hold.
If we are unable to obtain, or if there
are delays in obtaining, required approval from the regulatory agencies, we will not be able to commercialize our product candidates and
our ability to generate revenue will be materially impaired.
Our product candidates must obtain marketing approval
from the FDA for commercialization in the U.S. and from foreign regulatory agencies for commercialization in countries outside the U.S.
The process of obtaining marketing approvals in the countries in which we intend to sell and distribute our product candidates is expensive
and can take several years if approval is obtained at all. This process can vary substantially based upon a variety of factors, including
the type, complexity and novelty of the product candidates involved. Failure to obtain marketing approval for a product candidate will
prevent us from commercializing that product candidate. To date, we have not received approval to market any of our product candidates
from regulatory agencies in any jurisdiction. We have no experience in filing and supporting the applications necessary to gain marketing
approvals and expect to rely on third-party contract research organizations to assist us in this process. Securing marketing approval
requires the submission of extensive preclinical and clinical data and supporting information to the regulatory agencies for each product
candidate to establish the product candidate’s safety and efficacy. Securing marketing approval also requires the submission of
information about the product manufacturing process to, and inspection of manufacturing facilities by, the regulatory agencies.
Our product candidates may not be effective, may
be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may
preclude our obtaining marketing approval or prevent or limit commercial use. Regulatory agencies have substantial discretion in the approval
process and may refuse to accept any application or may decide that our data are insufficient for approval and require additional preclinical,
clinical or other studies. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay,
limit or prevent marketing approval of a product candidate. Changes in marketing approval policies during the development period, changes
in or the enactment of additional statutes or regulations, or changes in regulatory review for each submitted product application, may
also cause delays in or prevent the approval of an application. New cancer drugs frequently are indicated only for patient populations
that have not responded to an existing therapy or have relapsed after such therapies. If we experience delays in obtaining approval or
if we fail to obtain approval of our product candidates, the commercial prospects for our product candidates may be harmed and our ability
to generate revenues will be materially impaired.
Development of a biologic involves a lengthy
and expensive process with an uncertain outcome. We may incur additional costs or experience delays in completing or be unable to complete
the development and commercialization of our product candidates.
Our Cell-in-a-Box® and ifosfamide
combination product candidate has not begun clinical development, and, like others’ candidates in a similar phase of development,
the risk of failure is high. It is impossible to predict when or if this product candidate or any other product candidate will prove effective
or safe in humans or will receive regulatory approval. Before obtaining marketing approval from regulatory agencies for the sale of any
product candidate, if allowed to proceed, we must complete preclinical development and then conduct extensive clinical trials to demonstrate
the safety and efficacy of our product candidates in humans. Clinical trials are expensive, difficult to design and implement, can take
several years to complete and are uncertain as to their outcome. A failure of one or more clinical trials can occur at any stage of a
clinical trial. The clinical development of our product candidates is susceptible to the risk of failure inherent at any stage of drug
development, including failure to demonstrate efficacy in a clinical trial or across a broad population of patients, the occurrence of
severe or medically or commercially unacceptable adverse events, failure to comply with protocols or applicable regulatory requirements
or determination by the regulatory agencies that a drug or biologic product is not approvable. It is possible that even if one or more
of our product candidates has a beneficial effect, that effect will not be detected during clinical evaluation because of one or more
of a variety of factors, including the size, duration, design, measurements, conduct or analysis of our clinical trials. Conversely, because
of the same factors, our clinical trials if allowed to proceed, may indicate an apparent positive effect of a product candidate that is
greater than the actual positive effect, if any. Similarly, in our clinical trials if allowed to proceed, we may fail to detect toxicity
of, or intolerability caused by, our product candidates, or mistakenly believe that our product candidates are toxic or not well tolerated
when that is not, in fact, the case.
The outcome of preclinical studies and early and
mid-phase clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not
necessarily predict overall results. Many companies in the pharmaceutical and biotechnology sectors have suffered significant setbacks
in late-stage clinical trials after achieving positive results in earlier stages of development, and we cannot be certain that we will
not face similar setbacks.
The design of a clinical trial can determine whether
its results will support approval of a product; however, flaws in the design of a clinical trial may not become apparent until the clinical
trial is well advanced or completed. We have limited experience in designing clinical trials and may be unable to design and execute a
clinical trial to support marketing approval. In addition, preclinical and clinical data are often susceptible to varying interpretations
and analyses. Many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials
have nonetheless failed to obtain marketing approval for their product candidates. Even if we believe that the results of clinical trials
for our product candidates warrant marketing approval, the regulatory agencies may disagree and may not grant marketing approval of our
product candidates or may require that we conduct initial clinical studies; the latter would require that we incur significantly increased
costs and would significantly extend the clinical development timeline for our product candidates.
In some instances, there can be significant variability
in safety or efficacy results between different clinical trials of the same product candidate due to numerous factors, including changes
in trial procedures set forth in protocols, differences in the size and type of the patient populations, changes in and adherence to the
clinical trial protocols and the rate of dropout among clinical trial participants. Any Phase 1, Phase 2 or Phase 3 clinical trial we
may conduct may not demonstrate the efficacy and safety necessary to obtain regulatory approval to market our product candidates.
We are seeking FDA approval to commence
clinical trials in the U.S. of certain of our product candidates based on clinical data that was obtained in trials conducted outside
the U.S., and it is possible that the FDA may not accept data from trials conducted in such locations or conducted nearly 20 years ago.
In support of our IND application to commence
a Phase 2b clinical trial in LAPC using genetically -engineered live human cells encapsulated using our Cell-in-a-Box® technology
in combination with ifosfamide we are relying on a Phase 1/2 clinical trial and a Phase 2 clinical trial previously conducted using the
same technology in combination with ifosfamide between 1998 and 1999 and between 1999 and 2000, respectively. The Phase 1/2 clinical trial
was carried out at the Division of Gastroenterology, University of Rostock, Germany, and the Phase 2 clinical trial was carried out at
four centers in two countries in Europe: Berne, Switzerland, and in Rostock, Munich and Berlin, Germany.
Although the FDA may accept data from clinical
trials conducted outside the U.S., acceptance of this data is subject to certain conditions imposed by the FDA. There is a risk that the
FDA may not accept the data from the two previous trials. In that case, we may be required to conduct a Phase 1 or a Phase 1/2b clinical
trial rather than the planned Phase 2b clinical trial in LAPC, currently under clinical hold. This may result in additional costs to us
and resultant delays in the regulatory review process and any future commercialization and marketing if regulatory approval is obtained.
It is not known whether the FDA would be likely to reject the use of such clinical data due to the significant time that has elapsed since
the earlier clinical trials were conducted or because the clinical trial material for our proposed Phase 2b clinical trial is different
from that used in the earlier clinical trials because of cloning the cells used in the earlier trials and certain other modifications
and improvements that have been made to the Cell-in-a-Box® technology since the time of the earlier trials.
We intend to conduct clinical trials for
certain of our product candidates at sites outside of the U.S., and the U.S. regulatory agencies may not accept data from trials conducted
in such locations.
Although the FDA may accept data from clinical
trials conducted outside the U.S., acceptance of this data is subject to certain conditions imposed by the regulatory agencies outside
of the U.S. For example, the clinical trial must be well designed and conducted and performed by qualified investigators in accordance
with ethical principles. The trial population must also adequately represent the population in the country in which the clinical trial
is being conducted. The data must be applicable to the U.S. population and medical practice in the U.S. in ways that the FDA deems clinically
meaningful. Generally, the patient population for any clinical trial conducted outside of the U.S. must be representative of the population
for whom we intend to seek approval in the U.S.
In addition, while these clinical trials are subject
to the applicable local laws, the FDA acceptance of the data will be dependent upon its determination that the trials also complied with
all applicable U.S. laws and regulations. There can be no assurance that the FDA will accept data from trials conducted outside of the
U.S. If the FDA does not accept the data from any of our clinical trials that we determine to conduct outside the U.S., it would likely
result in the need for additional trials that would be costly and time-consuming and delay or permanently halt the development of our
product candidate.
In addition, the conduct of clinical trials outside
the U.S. could have a significant impact on us. Risks inherent in conducting international clinical trials include:
· Foreign exchange fluctuations; and
· Diminished protection of intellectual property in some countries.
If clinical trials of our product candidates
fail to demonstrate safety and efficacy to the satisfaction of the regulatory agencies, we may incur additional costs or experience delays
in completing or be unable to complete the development and commercialization of these product candidates.
We are not permitted to commercialize, market,
promote or sell any product candidate in the U.S. without obtaining marketing approval from the FDA. Comparable regulatory agencies outside
of the U.S., such as the EMA in the European Union, impose similar restrictions. We may never receive such approvals. We may be required
to complete additional preclinical development and clinical trials to demonstrate the safety and efficacy of our product candidates in
humans before we will be able to obtain these approvals.
Clinical testing is expensive, difficult to design
and implement, can take many years to complete and is inherently uncertain as to outcome. We have not previously submitted an NDA, a BLA
or a MAA to regulatory agencies for any of our product candidates.
Any inability to successfully complete preclinical
and clinical development could result in additional costs to us and impair our ability to generate revenues from product sales, regulatory
and commercialization milestones and royalties. In addition, if: (i) we are required to conduct additional clinical trials or other testing
of our product candidates beyond the trials and testing that we contemplate; (ii) we are unable to successfully complete our planned clinical
trials of our product candidates or other testing; (iii) the results of these trials or tests are unfavorable, uncertain or are only modestly
favorable; or (iv) there are unacceptable safety concerns associated with our product candidates, we, in addition to incurring additional
costs, may:
· Be delayed in obtaining marketing approval for our product candidates;
· Not obtain marketing approval at all;
· Be subject to additional post-marketing testing or other requirements; or
Results in previous clinical trials of our
encapsulated live cell and ifosfamide combination for pancreatic cancer may not be replicated in future clinical trials which could result
in development delays or a failure to obtain marketing approval.
Results in the previous Phase 1/2 and Phase 2
clinical trials of the encapsulated live cell and ifosfamide combination product may not be predictive of similar results in future clinical
trials such as our planned Phase 2b clinical trial in LAPC, if allowed to proceed. The previous Phase 1/2 and Phase 2 clinical trials
had a relatively limited number of patients in each trial. These trials resulted in outcomes that were not statistically significant and
may not be representative of future results. In addition, interim results obtained after a clinical trial has commenced do not necessarily
predict results in future clinical trials. Numerous companies in the pharmaceutical and biotechnology industries have suffered significant
setbacks in late-stage clinical trials even after achieving promising results in early-stage clinical development. Our clinical trials,
if allowed to proceed, may produce negative or inconclusive results and we may decide, or regulatory agencies may require us, to conduct
additional clinical trials. Moreover, clinical data are often susceptible to varying interpretations and analyses, and many companies
that believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to
obtain the approval for their products by the regulatory agencies.
If we experience any unforeseen events in
the clinical trials of our product candidates, potential marketing approval or commercialization of our product candidates could be delayed
or prevented.
We may experience numerous unforeseen events during
our clinical trials, if allowed to proceed, that could delay or prevent marketing approval of our product candidates, including:
Product development costs for us will increase
if we experience delays in testing or pursuing marketing approvals. We may also be required to obtain additional funds to complete clinical
trials and prepare for possible commercialization of our product candidates. We do not know whether any preclinical studies or clinical
trials will begin as planned, will need to be restructured or will be completed on schedule or at all. Significant preclinical study or
clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates
or allow our competitors to bring products to market before we do and impair our ability to successfully commercialize our product candidates
and may harm our business and results of operations. In addition, many of the factors that cause, or lead to, clinical trial delays may
ultimately lead to the denial of marketing approval of any of our product candidates.
If we experience delays or difficulties
in the enrollment of patients in clinical trials, we may not achieve our clinical development timeline and our receipt of necessary regulatory
approvals could be delayed or prevented.
We may not be able to initiate or continue clinical
trials for our product candidates if we are unable to locate and enroll enough eligible patients to participate in our clinical trials.
Patient enrollment is a significant factor in the overall duration of a clinical trial and is affected by many factors, including:
· The size and nature of the patient population;
· The severity of the disease under investigation;
· The proximity of patients to clinical sites;
· The eligibility criteria for the trial;
· The design of the clinical trial;
· Efforts to facilitate timely enrollment;
· Competing clinical trials for the same patient population; and
Our inability to enroll enough patients for our
clinical trials could result in significant delays or may require us to abandon one or more clinical trials altogether. Enrollment delays
in our clinical trials may result in increased development costs for our product candidates, delay or halt the development of and approval
processes for our product candidates and jeopardize our ability to achieve our clinical development timeline and goals, including the
dates by which we will commence, complete and receive results from clinical trials. Enrollment delays may also delay or jeopardize our
ability to commence sales and generate revenues from our product candidates. Any of the foregoing could cause the value of our company
to decline and limit our ability to obtain additional financing, if needed.
We may request priority review for our product
candidates in the future. The regulatory agencies may not grant priority review for any of our product candidates. Moreover, even if the
regulatory agencies designated such products for priority review, that designation may not lead to a faster regulatory review or approval
process and, in any event, does not assure approval by the regulatory agencies.
We may be eligible for priority review designation
for our product candidates if the regulatory agencies determine such product candidates offer major advances in treatment or provide a
treatment where no adequate therapy exists. A priority review designation means that the time required for the regulatory agencies to
review an application is less than the standard review period. The regulatory agencies have broad discretion with respect to whether to
grant priority review status to a product candidate, so even if we believe a product candidate is eligible for such designation or status,
the regulatory agencies may decide not to grant it. Thus, while the regulatory agencies have granted priority review to other oncology
and diabetes products, our product candidates, should we determine to seek priority review of them, may not receive similar designation.
Moreover, even if one of our product candidates is designated for priority review, such a designation does not necessarily mean a faster
overall regulatory review process or necessarily confer any advantage with respect to approval compared to conventional procedures of
the regulatory agencies.
Receiving priority review from the regulatory
agencies does not guarantee approval within an accelerated timeline or thereafter.
In some instances, we believe we may be
able to secure approval from the regulatory agencies to use accelerated development pathways. If we are unable to obtain such approval,
we may be required to conduct additional preclinical studies or clinical trials beyond those that we contemplate which could increase
the expense of obtaining and delay the receipt of necessary marketing approvals.
We anticipate that we may seek an accelerated
approval pathway for certain of our product candidates. Under the accelerated approval provisions or their implementing regulations of
the regulatory agencies, they may grant accelerated approval to a product designed to treat a serious or life-threatening condition that
provides meaningful therapeutic benefit over available therapies upon a determination that the product influences a surrogate endpoint
or intermediate clinical endpoint that is reasonably likely to predict clinical benefit. Regulatory agencies consider a clinical benefit
to be a positive therapeutic effect that is clinically meaningful in the context of a given disease, such as irreversible morbidity or
mortality. For the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement, radiographic
image, physical sign or other measure that is thought to predict clinical benefit but is not itself a measure of clinical benefit. An
intermediate clinical endpoint is a clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality
that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit. The accelerated approval
pathway may be used in cases in which the advantage of a new drug over available therapy may not be a direct therapeutic advantage but
is a clinically important improvement from a patient and public health perspective. If granted, accelerated approval is usually contingent
on the sponsor’s agreement to conduct, in a diligent manner, additional post-approval confirmatory studies to verify and describe
the drug’s clinical benefit. If such post-approval studies fail to confirm the drug’s clinical benefit, regulatory agencies
may withdraw their approval of the drug.
Prior to seeking such accelerated approval, we
will seek feedback from the regulatory agencies and will otherwise evaluate our ability to seek and receive such accelerated approval.
There can also be no assurance that after our evaluation of the feedback and other factors we will decide to pursue or submit an NDA,
a BLA or an MAA for accelerated approval or any other form of expedited development, review or approval. Similarly, there can be no assurance
that after subsequent feedback from regulatory agencies that we will continue to pursue or apply for accelerated approval or any other
form of expedited development, review or approval, even if we initially decide to do so. Furthermore, if we decide to apply for accelerated
approval or under another expedited regulatory designation (such as the Breakthrough Therapy designation or Fast Track designation), there
can be no assurance that such submission or application will be accepted or that any expedited development, review or approval will be
granted on a timely basis or at all. Regulatory agencies could also require us to conduct further studies prior to considering our application
or granting approval of any type. A failure to obtain accelerated approval or any other form of expedited development, review or approval
for any of our product candidates that we determine to seek accelerated approval for would result in a longer time to commercialization
of such product candidate, could increase the cost of development of such product candidate and could harm our competitive position in
the marketplace.
We may seek Orphan Drug designation for
some of our product candidates, and we may be unsuccessful.
Regulatory agencies may designate drugs for relatively
small patient populations as Orphan Drugs. Under the standards and requirements of regulatory agencies, they may designate a product as