ITEM 1A. RISK FACTORS.
The
following risk factors, together with all of the other information included or incorporated in this Annual Report on Form 10-K, should
be carefully considered. If any of the following risks, either alone or taken together, or other risks not presently known to us or that
we currently believe to not be significant, develop into actual events, then our business, financial condition, results of operations
or prospects could be materially adversely affected. If that happens, the market price of our common stock could decline, and stockholders
may lose all or part of their investment.
Risk
Factor Summary
We
are providing the following summary of the risk factors contained in this Annual Report on Form 10-K to enhance the readability and accessibility
of our risk factor disclosures. We encourage you to carefully review the full risk factors contained in this Annual Report on Form 10-K
in their entirety for additional information regarding the material factors that make an investment in our securities speculative or
risky. These risks and uncertainties include, but are not limited to, the following:
● We have a history of net losses and may experience future losses;
Risks
Related to Our Business
We
have a history of net losses and may experience future losses.
We
have yet to establish any history of profitable operations. We reported a net loss of $18.8 million and $20.2 million for the fiscal
years ended December 31, 2022 and December 31, 2021, respectively. As of December 31, 2022, we had an accumulated deficit of $273.5
million. We expect to incur additional operating losses for the foreseeable future. There can be no assurance that we will be able to
achieve sufficient revenues throughout the year or be profitable in the future.
We
will need to raise additional capital to meet our business requirements in the future and such capital raises may be costly or difficult
to obtain and could dilute our stockholders’ ownership interests.
Our
current capital will be sufficient to enable us to continue operations for at least 12 months following the filing date of this Annual
Report. In order to continue our operations and to fully realize all of our business objectives, absent any non-dilutive funding from
a strategic partner or some other strategic transactions, we will need to raise additional capital, which may not be available on reasonable
terms, or at all. For instance, we will need to raise additional funds to accomplish the following:
● advancing the research and development of our therapeutic candidates;
● hiring and retaining qualified management and key employees;
● responding to competitive pressures; and
● maintaining compliance with applicable laws.
Any
additional capital raised through the sale of equity or equity backed securities will dilute our stockholders’ ownership percentages
and could also result in a decrease in the market value of our equity securities.
The
terms of any securities issued by us in future financing transactions may be more favorable to new investors, and may include preferences,
superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders
of any of our securities then outstanding.
Furthermore,
any additional capital financing that we may need in the future may not be available on terms favorable to us, or at all. If we are unable
to obtain such additional financing on a timely basis, we may have to curtail our development activities and growth plans and/or be forced
to sell assets, perhaps on unfavorable terms, which would have a material adverse effect on our business, financial condition and results
of operations, and ultimately could be forced to discontinue our operations and liquidate, in which event it is unlikely that stockholders
would receive any distribution on their shares. Further, we may not be able to continue operating if we do not generate sufficient revenues
from operations needed to stay in business.
In
addition, we may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting
fees, securities law compliance fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash
expenses in connection with certain securities we issue, such as convertible notes and warrants, which may adversely impact our financial
condition and cause further dilution to our stockholders.
We
are a clinical development stage biotechnology company and have never been profitable. We expect to incur additional losses in the future
and may never be profitable.
We
are a clinical development stage biotechnology company. We have not commercialized any product candidates or recognized any revenues
from our product sales. All of our product candidates are still in the preclinical or clinical development stage, and none have been
approved for marketing or are currently being marketed or commercialized. Our product candidates will require significant additional
development, clinical studies, regulatory clearances, and additional investments of time and capital before they can be commercialized.
We cannot be certain when or if any of our product candidates will obtain the required regulatory approval.
We
have never been profitable and have incurred net losses each year since our inception. Our losses are principally a result of research
and development and general administrative expenses in support of our operations. We may incur significant additional losses as we continue
to focus our resources on prioritizing, selecting and advancing our product candidates. Our ability to generate revenue and achieve profitability
depends mainly upon our ability, alone or with others, to successfully develop our product candidates, obtain the required regulatory
approvals in various territories and commercialize our product candidates. We may be unable to achieve any or all of these goals with
regard to our product candidates. As a result, we may never be profitable or achieve significant and/or sustained revenues.
All
of our product candidates are still under development, and there can be no assurance of successful commercialization of any of our products.
All
of our research and development programs are in developmental stages. One or more of our product candidates may fail to meet safety
and efficacy standards in human testing, even if those product candidates are found to be effective in animal studies. To develop
and commercialize inhaled therapeutic treatment for allergic bronchopulmonary aspergillosis (“ABPA”), acute migraine,
and other iSPERSETM-based product candidates, we must provide the FDA and foreign regulatory authorities with
human clinical and non-clinical animal data that demonstrate adequate safety and effectiveness. To generate these data, we will have
to subject our product candidates to significant additional research and development efforts, including extensive non-clinical
studies and clinical testing. Our approach to drug discovery may not be effective or may not result in the development of any drug.
Currently our development efforts are primarily focused on PUR1900, PUR3100 and PUR1800. Even if PUR1900, PUR3100 and PUR1800 or our other product candidates are successful when tested in animals, such success would not be a guarantee of the safety
or effectiveness of such product candidates in humans. It can take several years for a product to be approved and we may not be
successful in bringing any therapeutic candidates to the market. A new drug may appear promising at an early stage of development or
after clinical trials and never reach the market, or it may reach the market and not sell, for a variety of reasons. For example,
the drug may:
● fail to receive regulatory approval on a timely basis or at all;
● be difficult to manufacture on a large scale;
● not be economically viable;
● not be prescribed by doctors or accepted by patients;
● infringe on intellectual property rights of any other party.
If
our delivery platform technologies or product development efforts fail to generate product candidates that lead to the successful development
and commercialization of products, our business and financial condition will be materially adversely affected.
Drug
development is a long, expensive and inherently uncertain process with a high risk of failure at every stage of development, and results
of earlier studies and trials may not be predictive of future trial results.
We
have a number of proprietary drug candidates in research and development ranging from the early discovery research phase through
preclinical testing and clinical trials. Preclinical testing and clinical trials are long, expensive and highly uncertain processes.
It will take us several years to complete clinical trials and we may not have the resources to complete the development and
commercialization of any of our proposed drug candidates. The start or end of a clinical trial, such as our Phase 2b trial for
PUR1900 and future trials, can often be delayed or halted due to changing regulatory requirements, manufacturing challenges,
required clinical trial administrative actions, slower than anticipated patient enrollment, changing standards of care, availability
or prevalence of use of a competitor drug or required prior therapy, clinical outcomes, or financial constraints of us and our
partners.
Drug
development is a highly uncertain scientific and medical endeavor, and failure can unexpectedly occur at any stage of preclinical
and clinical development. Typically, there is a high rate of attrition for drug candidates in preclinical and clinical trials due to
scientific feasibility, safety, efficacy, changing standards of medical care and other variables. The risk of failure is heightened
for our drug candidates that are based on new technologies, such as the application of our dry powder delivery platform,
iSPERSETM, including PUR1900, PUR3100, PUR1800 and other iSPERSETM-based drug
candidates currently in discovery research or preclinical development. The failure of one or more of our
iSPERSETM-based drug candidates could have a material adverse effect on our business, financial condition,
and results of operations.
In
addition, the results of preclinical studies and clinical trials of previously published iSPERSETM-based products
may not necessarily be indicative of the results of our future clinical trials. The design of our clinical trials is based on many assumptions
about the expected effects of inhaled drugs used historically in the industry and if those assumptions are incorrect, the trials may
not produce statistically significant results. Preliminary results may not be confirmed upon full analysis of the detailed results of
an early clinical trial. Product candidates in later stages of clinical trials may fail to show safety and efficacy sufficient to support
intended use claims despite having progressed through initial clinical trials. The data collected from clinical trials of our product
candidates may not be sufficient to obtain regulatory approval in the United States or elsewhere. Because of the uncertainties associated
with drug development and regulatory approval, we cannot determine if, or when, we may have an approved product for commercialization
or whether we will ever achieve sales of or profits on our product candidates or those we may pursue in the future.
If
our collaborators are not successful, or breach their agreements with us, we may not effectively develop and market some of our therapeutic
candidates.
At
this time, we have entered into a co-development agreement regarding one of our therapeutic candidates and, as a result, we no longer
have complete control over the development of this candidate. If our collaborators do not successfully carry out their contractual duties
or meet expected deadlines, or they otherwise breach their contractual obligations to us, we may be delayed or may not obtain regulatory
approval for, or commercialize, our product candidates. We are also subject to the terms of such co-development agreements that may affect
our ability to develop and manufacture our therapeutic candidates. For example, under the Amendment to the Cipla Agreement, if we do
not meet our development milestones on time, we may be required to repurchase Cipla’s interest or may not be able to further the
development program. As a result of such limitations, we may be unable to pursue the most efficient or profitable path in developing
our therapeutic candidates.
If
our relationships with these collaborators terminate, we believe that we would be able to enter into arrangements with alternative third
parties. However, replacing any collaborator could delay our clinical trials and could jeopardize our ability to obtain regulatory approvals
and commercialize our product candidates on a timely basis, if at all.
We
may not be able to attract, retain, or manage highly qualified personnel, which could adversely impact our business.
Our
future success and ability to compete in the biotechnology industry is substantially dependent on our ability to identify, attract, and
retain highly qualified key managerial, scientific, medical, and operations personnel. The market for key employees in the pharmaceutical
and biotechnology industries is competitive. The loss of the services of any of our principal members of management or key employees
without an adequate replacement or our inability to hire new employees as needed could delay our product development efforts, harm our
ability to sell our products or otherwise negatively impact our business.
The
scientific, research and development personnel upon whom we rely to operate our business have expertise in certain aspects of drug development
and clinical development, and it may be difficult to retain or replace these individuals. We conduct our operations at our facilities
in Lexington, Massachusetts, within the greater Boston area, and this region is headquarters to many other biotechnology, pharmaceutical,
and medical technology companies, as well as many academic and research institutions, and, therefore, we face increased competition for
technical and managerial personnel in this region.
In
addition, we have scientific, medical and clinical advisors who assist us in designing and formulating our products and with development
and clinical strategies. These advisors are not our employees and may have commitments to, or consulting or advisory contracts with,
other entities that may limit their availability to us, or may have arrangements with other companies to assist in the development of
products that may compete with ours.
Despite
our efforts to retain valuable employees, members of our management and scientific and development teams may terminate their
employment with us at any time. Although we have written employment offer letter agreements with our executive officers, our
executive officers can leave their employment at any time, for any reason, with 30 days’ notice. A sustained labor shortage or
increased turnover rates within our employee base, caused by the COVID-19 pandemic and its ongoing effects or as a result of general
macroeconomic factors, could lead to increased costs, such as increased overtime to meet demand and increased wage rates to attract
and retain employees, and could negatively affect our ability to efficiently operate our manufacturing and distribution facilities
and overall business. If we are unable to hire and retain employees capable of performing at a high-level, or if mitigation measures
we may take to respond to a decrease in labor availability, such as overtime and third-party outsourcing, have unintended negative
effects, our business could be adversely affected. An overall labor shortage, lack of skilled labor, increased turnover or labor
inflation, caused by the COVID-19 pandemic and its ongoing effects or as a result of general macroeconomic factors, could have a
material adverse impact on our operations, results of operations, liquidity or cash flows. The loss of the services of any of our
executive officers or our other key employees and our inability to find suitable replacements could potentially harm our business,
financial condition and prospects. We do not maintain “key man” insurance policies on the lives of these individuals or
the lives of any of our other employees.
We
face substantial competition in the development of our product candidates and may not be able to compete successfully, and our product
candidates may be rendered obsolete by rapid technological change.
The
pharmaceutical and biotechnology industry is highly competitive, and we face significant competition from many pharmaceutical, biopharmaceutical
and biotechnology companies that are researching and marketing products designed to address the indications for which we are currently
developing therapeutic candidates or for which we may develop product candidates in the future.
Many
of our existing or potential competitors have, or have access to, substantially greater financial, research and development, production,
and sales and marketing resources than we do and have a greater depth and number of experienced managers. As a result, our competitors
may be better equipped than us to develop, manufacture, market and sell competing products. In addition, gaining favorable reimbursement
is critical to the success of our product candidates. We are aware of many established pharmaceutical companies in the United States
and other parts of the world that have or are developing technologies for inhaled drug delivery for the prevention and treatment of respiratory
diseases, including GlaxoSmithKline, Mereo BioPharma, Mylan, Savara, Insmed, Satsuma, Bristol-Meyers, TFF Pharmaceuticals, Zambon Pharma
and Pulmocide, which we consider our potential competitors in this regard. If we are unable to compete successfully with these and other
potential future competitors, we may be unable to grow or generate revenue.
The
rapid rate of scientific discoveries and technological changes could result in one or more of our product candidates becoming obsolete
or noncompetitive. Our competitors may develop or introduce new products that render our iSPERSETM delivery technology
and other product candidates less competitive, uneconomical or obsolete. Some of these technologies may have an entirely different approach
or means of accomplishing similar therapeutic effects compared to our drug candidates. Our future success will depend not only on our
ability to develop our product candidates but to improve them and keep pace with emerging industry developments. We cannot assure you
that we will be able to do so.
We
also expect to face increasing competition from universities and other non-profit research organizations. These institutions carry out
a significant amount of research and development in the areas of respiratory diseases. These institutions are becoming increasingly aware
of the commercial value of their findings and are more active in seeking patent and other proprietary rights as well as licensing revenues.
The
potential acceptance of therapeutics that are alternatives to ours may limit market acceptance of our product candidates, even if commercialized.
Respiratory diseases, including our targeted diseases and conditions, can also be treated by other medication or drug delivery technologies.
These treatments may be widely accepted in medical communities and have a longer history of use. The established use of these competitive
drugs may limit the potential for our product candidates to receive widespread acceptance if commercialized.
If
the third parties on which we rely to conduct our clinical trials and to assist us with preclinical development do not perform as contractually
required or expected, we may not be able to obtain regulatory clearance or approval for, or to commercialize, our products.
We
do not have the ability to independently conduct our preclinical and clinical trials for our products and we must rely on third parties,
such as contract research organizations, medical institutions, clinical investigators and contract laboratories to conduct such trials.
If these third parties do not successfully carry out their contractual duties or regulatory obligations or meet expected deadlines, if
these third parties need to be replaced, or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere
to our clinical protocols or regulatory requirements or for other reasons, our preclinical development activities or clinical trials
may be extended, delayed, suspended or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize,
our products on a timely basis, if at all, and our business, operating results and prospects may be adversely affected. Furthermore,
our third-party clinical trial investigators may be delayed in conducting our clinical trials for reasons outside of our control, such as, but not limited to, patient enrollment.
We
rely on third-party contract vendors to manufacture and supply us with high quality active pharmaceutical ingredients and manufacture
our therapeutic candidates in the quantities we require on a timely basis.
We
currently do not manufacture any active pharmaceutical ingredients (“APIs”). Instead, we rely on third-party vendors for
the manufacture and supply of our APIs that are used to formulate our therapeutic candidates. We also do not currently own or operate
manufacturing facilities and therefore rely, and expect to continue to rely, on third parties to manufacture clinical and commercial
quantities of our therapeutic candidates and for quality assurance related to regulatory compliance. If these suppliers or manufacturers
are incapable or unwilling to meet our current or future needs at our standards or on acceptable terms, if at all, we may be unable to
locate alternative suppliers or manufacturers on acceptable terms, if at all, or produce necessary materials or components on our own.
While
there may be several alternative suppliers of API in the market, changing API suppliers or finding and qualifying new API suppliers
can be costly and can take a significant amount of time. Many APIs require significant lead time to manufacture. There can also be
challenges in maintaining similar quality or technical standards from one manufacturing batch to the next. We could experience a
delay in conducting clinical trials of or obtaining regulatory approval for PUR1900, PUR3100 and PUR1800 or our other drug
candidates and incur additional costs if we changed API suppliers for any reason. Similarly, replacing our manufacturers could cause
us to incur added costs and experience delays in identifying, engaging, qualifying and training any such replacements.
If
we are not able to find stable, affordable, high quality, or reliable supplies of the APIs, or if we are unable to maintain our existing
or future third-party manufacturing arrangements, we may not be able to produce enough supply of our therapeutic candidates or commercialize
any therapeutic candidates on a timely and competitive basis, which could adversely affect our business, financial condition or results
of operations.
Supply
chain and shipping disruptions may result in shipping delays, a significant increase in shipping costs, and could increase product costs
and result in lost sales and reputational damage, which may have a material adverse effect on our business, operating results and financial
condition.
Our
third-party manufacturers and suppliers have experienced, and expect to continue to experience, supply chain disruption and shipping
disruptions, including disruptions or delays in loading container cargo in ports of origin or off-loading cargo at ports of
destination, as a result of the COVID-19 pandemic and its ongoing effects, congestion in port terminal facilities, labor supply and shipping container
shortages, inadequate equipment and persons to load, dock and offload container vessels and for other reasons. These disruptions may
impact our ability to receive our raw materials and certain components required for the manufacture of our clinical trial materials
or products in the future, to distribute our products in a cost-effective and timely manner and to meet demand, all of which could
have an adverse effect on our financial condition and results of operations. There can be no assurance that further unforeseen
events impacting the supply chain will not have a material adverse effect on us in the future. Additionally, the impacts that supply
chain disruptions have on our third-party manufacturers and suppliers are not within our control. It is not currently possible to
predict how long it will take for these supply chain disruptions to cease or ease. Prolonged supply chain disruption that may impact
us or our manufacturers and suppliers could interrupt or delay our clinical trials, product manufacturing, increase raw material and
product lead times, increase raw material and product costs, impact our ability to meet customer demand and result in lost sales and
reputational damage, all of which could have a material adverse effect on our business, financial condition and results of
operations.
We
may not be successful in negotiating for an appropriate price in a future sale or assignment of our rights related to our current drug
candidates.
We
may seek to sell or assign our rights related to our current drug candidates. If completed, any such sale or assignment may be at a substantial
discount, the consideration received may not accurately represent the value of the assets sold or assigned and our stockholders may not
be entitled to participate in the future prospects of such drug candidates.
Our
failure to successfully acquire, develop and market additional drug candidates or approved drug products could impair our ability to
grow.
As
part of our growth strategy, we may evaluate, acquire, license, develop and/or market additional product candidates and technologies,
subject to the availability of adequate financing. However, our internal research capabilities are limited, and we may be dependent upon
pharmaceutical and biotechnology companies, academic scientists and other researchers to sell or license products or technology to us.
The success of this strategy depends partly upon our ability to identify, select and acquire promising pharmaceutical product candidates
and products. The process of proposing, negotiating and implementing a license or acquisition of a product candidate or approved product
is lengthy and complex. Other companies, including some with substantially greater financial, marketing and sales resources, may compete
with us for the license or acquisition of product candidates and approved products. We have limited resources to identify and execute
the acquisition or in-licensing of third-party products, businesses and technologies and integrate them into our current infrastructure.
Moreover, we may devote resources to potential acquisitions or in-licensing opportunities that are never completed, or we may fail to
realize the anticipated benefits of such efforts. We may not be able to acquire the rights to additional product candidates on terms
that we find acceptable, or at all.
Any
product candidate that we acquire may require additional development efforts prior to commercial sale, including extensive clinical testing
and approval by the FDA and applicable foreign regulatory authorities. All product candidates are prone to risks of failure typical of
pharmaceutical product development, including the possibility that a product candidate will not be shown to be sufficiently safe and
effective for approval by regulatory authorities. In addition, we cannot provide assurance that any products that we develop or approved
products that we acquire will be manufactured profitably or achieve market acceptance. We cannot guarantee that we will be able to successfully
conduct the preclinical studies of the identified potential product candidates as anticipated.
Our
business strategy may include entry into additional collaborative or license agreements. We may not be able to enter into collaborative
or license agreements or may not be able to negotiate commercially acceptable terms for these agreements.
Our
current business strategy may include the entry into additional collaborative or license agreements for the development and commercialization
of our product candidates and technologies. The negotiation and consummation of these types of agreements typically involve simultaneous
discussions with multiple potential collaborators or licensees and require significant time and resources. In addition, in attracting
the attention of pharmaceutical and biotechnology company collaborators or licensees, we compete with numerous other third parties with
product opportunities as well as the collaborators’ or licensees’ own internal product opportunities. We may not be able
to consummate collaborative or license agreements, or we may not be able to negotiate commercially acceptable terms for these agreements.
If
we do enter into such arrangements, we could be dependent upon the subsequent success of these other parties in performing their respective
responsibilities and the cooperation of our partners. Our collaborators may not cooperate with us or perform their obligations under
our agreements with them. We cannot control the amount and timing of our collaborators’ resources that will be devoted to researching
our product candidates pursuant to our collaborative agreements with them. Our collaborators may choose to pursue existing or alternative
technologies in preference to those being developed in collaboration with us. If we do not consummate collaborative or license agreements,
we may use our financial resources more rapidly on our product development efforts, continue to defer certain development activities
or forego the exploitation of certain geographic territories, any of which could have a material adverse effect on our business prospects.
Further, we may not be successful in overseeing any such collaborative arrangements. If we fail to establish and maintain necessary collaborative
or license relationships, our business prospects could suffer.
We
may be subject to claims that our employees, independent consultants or agencies have wrongfully used or inadvertently disclosed confidential
information of third parties.
We
employ individuals and contract with independent consultants and agencies that may have previously worked at or conducted business with
third parties; and, we may be subject to claims that we or our employees, consultants or agencies have inadvertently or otherwise used
or disclosed confidential information of our employees’ former employers or other third parties. We may also be subject to claims
that our employees’ former employers or other third parties have an ownership interest in our patents. Litigation may be necessary
to defend against these claims. There is no guarantee of success in defending these claims, and if we are successful, litigation could
result in substantial cost and be a distraction to our management and other employees.
Market
and economic conditions may negatively impact our business, financial condition and share price.
Concerns
over inflation, geopolitical issues, the U.S. financial markets and a declining real estate market, unstable global
credit markets and financial conditions, and volatile oil prices have led to periods of significant economic instability, diminished
liquidity and credit availability, declines in consumer confidence and discretionary spending, diminished expectations for the global
economy and expectations of slower global economic growth going forward, increased unemployment rates, and increased credit defaults
in recent years. Our general business strategy may be adversely affected by any such economic downturns, volatile business environments
and continued unstable or unpredictable economic and market conditions. If these conditions continue to deteriorate or do not improve,
it may make any necessary debt or equity financing more difficult to complete, more costly, and more dilutive. In addition, there is
a risk that one or more of our current and future service providers, manufacturers, suppliers, hospitals and other medical facilities,
our third-party payors, and other partners could be negatively affected by difficult economic times, which could adversely affect our
ability to attain our operating goals on schedule and on budget or meet our business and financial objectives.
The
COVID-19 pandemic and its ongoing effects have caused interruptions or delays of our clinical studies and may continue to have a significant adverse effect on
our business.
The
global health crisis caused by the COVID-19 pandemic and its ongoing effects has and may continue to negatively impact global
economic activity, which, despite progress in vaccination efforts, remains uncertain and cannot be predicted with confidence. The
ultimate impact of current and new COVID-19 variants cannot be predicted at this time and could depend on numerous factors,
including vaccination rates among the population, the effectiveness of COVID-19 vaccines against new variants and the response by
governmental bodies and regulators. Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the impact
of the COVID-19 pandemic and its ongoing effects on our business.
A
continuation or worsening of the levels of market disruption and volatility seen in the recent past could have an adverse effect on our
ability to access capital, on our business, results of operations and financial condition, and on the market price of our common stock.
In April 2020, we
were notified that 11 out of 21 clinical sites suspended enrollment in the PUR1900 clinical study due to issues associated with the
COVID-19 pandemic. In July 2020, we terminated our Phase 2 clinical study for PUR1900 as a result of the disruptions and safety concerns
caused by the COVID-19 pandemic.
The
COVID-19 pandemic has delayed enrollment in our clinical trials and its ongoing effects could, in the future, delay these dates or
impact enrollment generally for clinical trials to the extent we cannot secure sites to enroll patients, patients remain or become
subject again to government “stay at home” mandates, patients feel like they cannot safely visit trial sites or patients
drop out due to COVID-19 related issues.
Moreover,
the COVID-19 pandemic has had and may continue to have indeterminable adverse effects on general commercial activity and the
world economy, and our business and results of operations have been and may continue to be adversely affected to the extent that COVID-19
or any other epidemic harms the global economy generally.
We
do not yet know the full extent of potential delays or impact on our business, our relationship with our business partners, our clinical
trials or the global economy as a whole. However, any one or a combination of these events could have an adverse effect on the operation
of and results from our clinical trials and on our other business operations.
If
we fail to maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be
impaired, which could harm our operating results, our ability to operate our business and investors’ views of us.
Ensuring
that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements
on a timely basis is a costly and time-consuming effort that will need to be evaluated frequently. Section 404 of the Sarbanes-Oxley
Act of 2002 (the “Sarbanes-Oxley Act”) requires public companies to conduct an annual review and evaluation of their internal
controls. Our failure to maintain the effectiveness of our internal controls in accordance with the requirements of the Sarbanes-Oxley
Act could have a material adverse effect on our business. We could lose investor confidence in the accuracy and completeness of our financial
reports, which could have an adverse effect on the price of our common stock.
Our
ability to use our net operating loss carryforwards to offset future taxable income may be subject to certain limitations
Our
ability to use our net operating loss carryforwards to offset future taxable income may be subject to certain limitations. In general,
under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”) a corporation that undergoes an “ownership
change” is subject to annual limitations on its ability to use its pre-change net operating loss carryforwards or other tax attributes
(“NOLs”), to offset future taxable income or reduce taxes. Our past issuances of stock and other changes in our stock ownership
may have resulted in ownership changes within the meaning of Section 382 of the Code; accordingly, our pre-change NOLs may be subject
to limitation under Section 382. If we determine that we have not undergone an ownership change, the Internal Revenue Service could challenge
our analysis, and our ability to use our NOLs to offset taxable income could be limited by Section 382 of the Code. Future changes in
our stock ownership, some of which are outside of our control, could result in ownership changes under Section 382 of the Code further
limiting our ability to utilize our NOLs. Furthermore, our ability to use NOLs of companies that we may acquire in the future may be
subject to limitations. For these reasons, we may not be able to use a material portion of the NOLs, even if we attain profitability.
Risks
Related to Regulatory Matters
Our
product candidates must undergo rigorous nonclinical and clinical testing, and we must obtain regulatory approvals, which could be costly
and time-consuming and subject us to unanticipated delays or prevent us from marketing any products. We cannot be certain that any of
our current and future product candidates will receive regulatory approval, and without regulatory approval we will not be able to market
our product candidates.
Our
ability to generate revenue related to product sales, if ever, will depend on the successful development and regulatory approval of our
product candidates. We currently have no products approved for sale, and we cannot guarantee that we will ever have marketable products.
The development of a product candidate and issues relating to its approval and marketing are subject to extensive regulation, including
regulation for safety, efficacy and quality, by the FDA in the United States and comparable regulatory authorities in other countries,
with regulations differing from country to country. The FDA regulations and the regulations of comparable foreign regulatory authorities
are wide-ranging and govern, among other things:
● product design, development, manufacture and testing;
● product labeling;
● product storage and shipping;
● pre-market clearance or approval;
● advertising and promotion; and
● product sales and distribution.
Clinical
testing can be costly and take many years, and the outcome is uncertain and susceptible to varying interpretations. We cannot predict
whether our current or future trials and studies will adequately demonstrate the safety and efficacy of any of our product candidates
or whether regulators will agree with our conclusions regarding the preclinical studies and clinical trials we have conducted to date,
including the clinical trials for PUR1900. The clinical trials of our product candidates may not be completed on schedule, the FDA or
foreign regulatory agencies may order us to stop or modify our research, or these agencies may not ultimately approve any of our product
candidates for commercial sale. The data collected from our clinical trials may not be sufficient to support regulatory approval of our
various product candidates. Even if we believe the data collected from our clinical trials are sufficient, the FDA has substantial discretion
in the approval process and may disagree with our interpretation of the data.
We
are not permitted to market our product candidates in the United States until we receive approval of a NDA from the FDA. Obtaining approval
of a NDA is a lengthy, expensive and uncertain process, and we may not be successful in obtaining approval. The FDA review processes
can take years to complete and approval is never guaranteed. We cannot be certain that any of our submissions will be accepted for filing
and review by the FDA.
The
requirements governing the conduct of clinical trials and manufacturing and marketing of our product candidates outside the United States
vary widely from country to country. Foreign approvals may take longer to obtain than FDA approvals and can require, among other things,
additional testing and different clinical trial designs. Foreign regulatory approval processes include essentially all of the risks associated
with the FDA approval processes. Some of those agencies also must approve prices of the products. Approval of a product by the FDA does
not ensure approval of the same product by the health authorities of other countries, or vice versa. In addition, changes in regulatory
policy in the United States or in foreign countries for product approval during the period of product development and regulatory agency
review of each submitted new application may cause delays or rejections.
If
we are unable to obtain approval from the FDA or other regulatory agencies for our product candidates, or if, subsequent to approval,
we are unable to successfully market and commercialize our product candidates, we will not be able to generate sufficient revenue to
become profitable.
We
have limited experience in filing and pursuing applications necessary to gain regulatory approvals, which may impede our ability to obtain
timely approvals from the FDA or foreign regulatory agencies, if at all.
As
a company, we have no experience in late-stage regulatory filings, such as preparing and submitting NDAs, which may place us at risk
of delays, overspending and human resources inefficiencies. Any delay in obtaining, or inability to obtain, regulatory approval could
harm our business.
Any
failure by us to comply with existing regulations could harm our reputation and operating results.
We
will be subject to extensive regulation by U.S. federal and state and foreign governments in each of the markets where we intend to sell
our product candidates if and after we are approved. If we fail to comply with applicable regulations, including the FDA’s pre-or
post-approval cGMP requirements, then the FDA or other foreign regulatory authorities could sanction us. Even if a drug is FDA-approved,
regulatory authorities may impose significant restrictions on a product’s indicated uses or marketing or impose ongoing requirements
for potentially costly post-marketing studies.
If
a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency,
or problems with the facility where the product is manufactured, or disagrees with the promotion, marketing or labeling of the product,
the regulatory agency may impose restrictions on that product or us, including requiring withdrawal of the product from the market. If
we fail to comply with applicable regulatory requirements, a regulatory agency or enforcement authority may:
● issue warning letters;
● impose civil or criminal penalties;
● suspend regulatory approval;
● suspend any of our ongoing clinical trials;
● seize or detain products or require a product recall.
Any
government investigation of alleged violations of law could require us to expend significant time and resources in response and could
generate negative publicity. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability
to commercialize and generate revenue from our product candidates. If regulatory sanctions are applied or if regulatory approval is withdrawn,
our value and operating results will be adversely affected. Additionally, if we are unable to generate revenue from sales of our product
candidates, our potential for achieving profitability will be diminished and the capital necessary to fund our operations will be increased.
Any
action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses,
divert management’s attention from the operation of our business and damage our reputation. We expend significant resources on
compliance efforts and such expenses are unpredictable and might adversely affect our results. Changing laws, regulations and standards
might also create uncertainty, higher expenses and increase insurance costs.
We
and our third-party manufacturers are, and will be, subject to regulations of the FDA and other foreign regulatory authorities.
We
and our contract manufacturers are, and will be, required to adhere to laws, regulations and guidelines of the FDA or other foreign regulatory
authorities setting forth current good manufacturing practices. These laws, regulations and guidelines cover all aspects of the manufacturing,
testing, quality control and recordkeeping relating to our therapeutic candidates. We and our third-party manufacturers may not be able
to comply with applicable laws, regulations and guidelines. We and our contract manufacturers are and will be subject to unannounced
inspections by the FDA, state regulators and similar foreign regulatory authorities outside the United States. Our failure, or the failure
of our third-party manufacturers, to comply with applicable laws, regulations and guidelines could result in the imposition of sanctions
on us, including fines, injunctions, civil penalties, refusal of regulatory authorities to grant marketing approval of our therapeutic
candidates, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of our therapeutic candidates, operating
restrictions and criminal prosecutions, any of which could significantly and adversely affect regulatory approval and supplies of our
therapeutic candidates, and materially and adversely affect our business, financial condition and results of operations.
Even
if we obtain regulatory approvals, our therapeutic candidates will be subject to ongoing regulatory review. If we fail to comply with
continuing U.S. and applicable foreign laws, regulations and guidelines, we could lose those approvals, and our business would be seriously
harmed.
Even
if our therapeutic candidates receive regulatory approval, we or our commercialization partners, as applicable, will be subject to ongoing
reporting obligations, including pharmacovigilance, and the therapeutic candidates and the manufacturing operations will be subject to
continuing regulatory review, including inspections by the FDA or other foreign regulatory authorities. The results of this ongoing review
may result in the withdrawal of a therapeutic candidate from the market, the interruption of the manufacturing operations and/or the
imposition of labeling and/or marketing limitations. Since many more patients are exposed to drugs following their marketing approval,
serious but infrequent adverse reactions that were not observed in clinical trials may be observed during the commercial marketing of
the therapeutic candidate. In addition, the manufacturer and the manufacturing facilities that we or our commercialization partners use
to produce any therapeutic candidate will be subject to periodic review and inspection by the FDA and other foreign regulatory authorities.
Later discovery of previously unknown problems with any therapeutic candidate, manufacturer or manufacturing process, or failure to comply
with rules and regulatory requirements, may result in actions, including but not limited to the following:
● warning letters from the FDA or other foreign regulatory authorities;
● withdrawal of the therapeutic candidate from the market;
● suspension or withdrawal of regulatory approvals;
● voluntary or mandatory recall;
● fines;
● refusal to permit the import or export of our therapeutic candidates;
● product seizure or detentions;
● injunctions or the imposition of civil or criminal penalties; or
● adverse publicity.
If
we or our commercialization partners, suppliers, third-party contractors or clinical investigators are slow to adapt, or are unable to
adapt, to changes in existing regulatory requirements or the adoption of new regulatory requirements or policies, we or our commercialization
partners may lose marketing approval for any of our therapeutic candidates if any of our therapeutic candidates are approved, resulting
in decreased or lost revenue from milestones, product sales or royalties.
Our
employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements and
insider trading.
We
are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with
any regulations applicable to us, to provide accurate information to regulatory authorities, to comply with manufacturing standards we
may have established, to comply with federal and state healthcare fraud and abuse laws and regulations, or to report financial information
or data accurately or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare
industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive
practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission,
customer incentive programs and other business arrangements. Employee misconduct could also involve the improper use of information obtained
in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. We have adopted a Code
of Business Conduct, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and
prevent this activity may not be effective in controlling unknown or unmanaged risk.
If
we fail to comply with federal or state “fraud and abuse” laws, the failure to comply with these laws may adversely affect
our business, financial condition and results of operations.
In
the United States, we will be subject to various federal and state health care “fraud and abuse” laws, including anti-kickback
laws, false claims laws and other laws intended to reduce fraud and abuse the healthcare industry, which could affect us, particularly
upon successful commercialization of our products in the United States. The federal Anti-Kickback Statute makes it illegal for any person,
including a prescription drug manufacturer (or a party acting on our behalf), to knowingly and willfully solicit, receive, offer or pay
any remuneration in exchange for or to induce the referral of an individual for, or the purchase, order or recommendation of, any good
or service, including the purchase, order or prescription of a particular drug for which payment may be made under a federal health care
program, such as Medicare or Medicaid. Under federal government regulations, some arrangements, known as safe harbors, are deemed not
to violate the federal Anti-Kickback Statute. However, these laws are broadly written, and it is often difficult to determine precisely
how the law will be applied in specific circumstances. Accordingly, it is possible that our practices may be challenged under the federal
Anti-Kickback Statute. False claims laws prohibit anyone from knowingly and willfully presenting or causing to be presented for payment
to third-party payers, including government payers, claims for reimbursed drugs or services that are false or fraudulent, claims for
items or services that were not provided as claimed, or claims for medically unnecessary items or services. Cases have been brought under
false claims laws alleging that off-label promotion of pharmaceutical products or the provision of kickbacks has resulted in the submission
of false claims to governmental health care programs. Under the Health Insurance Portability and Accountability Act of 1996, we are prohibited
from knowingly and willfully executing a scheme to defraud any health care benefit program, including private payers, or knowingly and
willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in
connection with the delivery of or payment for health care benefits, items or services. Violations of fraud and abuse laws may be punishable
by criminal and/or civil sanctions, including fines, penalties and/or exclusion or suspension from federal and state health care programs
such as Medicare and Medicaid and debarment from contracting with the U.S. government. In addition, private individuals have the ability
to bring actions on behalf of the government under the federal False Claims Act as well as under the false claims laws of several states.
Many
states have adopted laws similar to the federal Anti-Kickback Statute, some of which apply to the referral of patients for, or purchase,
order or recommendation of, goods or services reimbursed by any source, not just governmental payers. The scope and enforcement of these
laws are uncertain and subject to change in the current environment of healthcare reform. We cannot predict the impact on our business,
financial condition nor results of operations of any changes in these laws. Any state or federal regulatory review of us, regardless
of the outcome, would be costly and time-consuming. Law enforcement authorities are increasingly focused on enforcing these laws, and
if we are challenged under of one of these laws, we could be required to pay a fine and/or penalty and could be suspended or excluded
from participation in federal or state health care programs, and our business, results of operations and financial condition may be adversely
affected.
Risks
Related to Our Financial Position and Need for Additional Capital
We
will be required to raise additional capital to fund our operations, and we may not be able to continue as a going concern if we are
unable to do so.
Pharmaceutical
product development, which includes research and development, preclinical and clinical studies and human clinical trials, is a time-consuming
and expensive process that takes years to complete. We anticipate that our expenses will increase substantially as we
advance PUR1900 to a new Phase 2b trial and pursue development of PUR3100 and PUR1800 or other iSPERSETM-based
product candidates, and/or pursue development of iSPERSETM-based pharmaceuticals in additional indications. Based
upon our current expectations, we believe that our existing capital resources will enable us to continue planned operations for at least
12 months following the filing date of this Annual Report. We cannot assure you, however, that our plans will not change or that changed
circumstances will not result in the depletion of our capital resources more rapidly than we currently anticipate. We will need to raise
additional funds, whether through the sale of equity or debt securities, the entry into strategic business collaborations, the establishment
of other funding facilities, licensing arrangements, or asset sales or other means, in order to continue our research and development
and clinical trial programs for our iSPERSETM-based product candidates and to support our other ongoing activities.
However, it may be difficult for us to raise additional funds on reasonable terms or at all. Since inception, we have incurred losses
each year and have an accumulated deficit of $273.5 million as of December 31, 2022, which may raise concerns about our solvency and
affect our ability to raise additional capital.
The
amount of additional funds we need will depend on a number of factors, including:
● our degree of success in commercializing any of our product candidates;
● the level of our legal expenses; and
● the costs of discontinuing projects and technologies.
We
have raised capital in the past primarily through debt and public offerings and private placements of stock. We may in the future pursue
the sale of additional equity and/or debt securities, or the establishment of other funding facilities including asset-based borrowings.
There can be no assurances, however, that we will be able to raise additional capital through such an offering on acceptable terms, or
at all. Issuances of additional debt or equity securities could impact the rights of the holders of our common stock and may dilute their
ownership percentage. Moreover, the establishment of other funding facilities may impose restrictions on our operations. These restrictions
could include limitations on additional borrowing and specific restrictions on the use of our assets, as well as prohibitions on our
ability to create liens, pay dividends, redeem our stock or make investments. We also may seek to raise additional capital by pursuing
opportunities for the licensing or sale of certain intellectual property and other assets. We cannot offer assurances, however, that
any strategic collaborations, sales of securities or sales or licenses of assets will be available to us on a timely basis or on acceptable
terms, if at all.
In
the event that sufficient additional funds are not obtained through strategic collaboration opportunities, sales of securities, funding
facilities, licensing arrangements and/or asset sales on a timely basis, we will be required to reduce expenses through the delay, reduction
or curtailment of our projects, including PUR1900, PUR3100 or PUR1800 development activities, or reduction of costs for facilities and
administration. Moreover, if we do not obtain such additional funds, there will be continued doubt about our ability to continue as a
going concern and increased risk of insolvency and loss of investment to the holders of our securities. If we are or become insolvent,
investors in our stock may lose the entire value of their investment.
Our
long-term capital requirements are subject to numerous risks.