Item 1A. Risk Factors.
You should consider carefully
the following information about the risks described below, together with the other information contained in this Annual Report on Form
10-K and in our other public filings, in evaluating our business. If any of the following risks actually occurs, our business, financial
condition, results of operations, and future growth prospects would likely be materially and adversely affected. In these circumstances,
the market price of our common stock would likely decline.
Risks Related to Our Financial Condition
We have a limited operating history and have never generated
any revenues.
We are a clinical stage
biopharmaceutical company with a limited operating history that may make it difficult to evaluate the success of our business to date
and to assess our future viability. Our operations have been limited to organizing and staffing the company, business planning, raising
capital, developing our pipeline assets (TARA-002 and IV Choline Chloride), identifying product candidates, and other research and development.
Although our employees have made regulatory submissions and conducted successful clinical trials in the past across many therapeutic
areas while employed at other companies, we have not yet demonstrated an ability to successfully complete any clinical trials and have
never completed the development of any product candidate, nor have we ever generated any revenue from product sales or otherwise. Consequently,
we have no meaningful operations upon which to evaluate our business, and predictions about our future success or viability may not be
as accurate as they could be if we had a longer operating history or a history of successfully developing and commercializing biopharmaceutical
products.
We expect to incur significant
expenses and significant losses for the foreseeable future and may never generate revenue or achieve or maintain profitability.
Investment in biopharmaceutical
product development is highly speculative because it entails substantial upfront capital and significant risk that a product candidate
will fail to gain regulatory approval or become commercially viable. We have never generated any revenues, and cannot estimate with precision
the extent of our future losses. We expect to incur increasing levels of operating losses for the foreseeable future as we execute on
the plan to continue research and development activities, including the ongoing and planned clinical development of our product candidates,
potentially acquire new products and/or product candidates, seek regulatory approvals of and potentially commercialize any approved product
candidates, hire additional personnel, protect our intellectual property, and incur the additional costs of operating as a public company.
We expect to continue to incur significant and increasing operating losses and negative cash flows for the foreseeable future. These
losses have had and will continue to have an adverse effect on our financial position and working capital.
To become and remain profitable,
we must develop or acquire and eventually commercialize a product with significant market potential. This will require us to be successful
in a range of challenging activities, including completing preclinical studies and clinical trials, obtaining marketing approval, manufacturing,
marketing and selling any product candidate for which we obtain marketing approval, and satisfying post-marketing requirements, if any.
We may never succeed in these activities and, even if we succeed in obtaining approval for and commercializing one or more products,
we may never generate revenues that are significant enough to achieve profitability. In addition, as a young business, we may encounter
unforeseen expenses, difficulties, complications, delays and other known and unknown challenges. Furthermore, because of the numerous
risks and uncertainties associated with biopharmaceutical product development, we are unable to accurately predict the timing or amount
of increased expenses or when, or if, we will be able to achieve profitability. If we achieve profitability, we may not be able to sustain
or increase profitability on a quarterly or annual basis and may continue to incur substantial research and development and other expenditures
to develop and market additional product candidates. Our failure to become and remain profitable would decrease the value of us and could
impair our ability to raise capital, maintain our research and development efforts, expand the business or continue operations. A decline
in our value could also cause you to lose all or part of your investment.
The effects of the COVID-19 pandemic and
resulting macroeconomic factors could materially and adversely impact our business, including our clinical development plans and non-clinical
research.
Following the COVID-19 pandemic
and associated health and safety measures imposed from time to time to contain the continue globally, we have and, in the event of a resurgence
of the pandemic or the onset of another public health crisis, may again experience disruptions that could severely impact our business,
including but not limited to delays or difficulties in clinical trial site operations and in the enrollment, scheduling and retention
of patients in our clinical trials; interruption of key manufacturing, research and clinical development and other activities; and delays
or difficulties conducting and completing non-clinical studies.
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If we are not able to respond
to and manage the impact of such events effectively, our business will be harmed.
In addition, macroeconomic
factors, including supply chain disruptions, rising inflation and resulting increases in interest rates, which are, in part, tied to
the lasting impacts of the COVID-19 pandemic, have and will continue to have an impact on our operations.
To the extent the impacts
of the COVID-19 pandemic adversely affect our business and results of operations, they may also have the effect of heightening many of
the other risks and uncertainties described elsewhere in this “Risk Factors” section.
We will need to raise additional financing
in the future to fund our operations, which may not be available to us on favorable terms or at all.
We will require substantial
additional funds to conduct the costly and time-consuming preclinical studies and clinical trials necessary to pursue regulatory approval
of each potential product candidate and to continue the development of TARA-002 and IV Choline Chloride in new indications or uses. Our
future capital requirements will depend upon a number of factors, including: the number and timing of future product candidates in the
pipeline; progress with and results from preclinical testing and clinical trials; the ability to manufacture sufficient drug supplies
to complete preclinical and clinical trials; the costs involved in preparing, filing, acquiring, prosecuting, maintaining and enforcing
patent and other intellectual property claims; and the time and costs involved in obtaining regulatory approvals and favorable reimbursement
or formulary acceptance. Raising additional capital may be costly or difficult to obtain and could significantly dilute stockholders’
ownership interests and divert our management’s focus on achieving our business objectives. As a result of economic conditions,
general global economic uncertainty, U.S. and foreign political conditions, and other factors, including the effects of the COVID-19
pandemic, we do not know whether additional capital will be available when needed, or that, if available, we will be able to obtain additional
capital on reasonable terms. Specifically, because the COVID-19 pandemic has at times significantly disrupted financial markets, it may
limit our ability to access capital, which could in the future negatively affect our liquidity. Further, rising inflation has, in part,
caused a disruption in the capital markets and an increase in interest rates, which may lead to a recession or market correction that
could impact our access to capital, increase the cost of capital, and could in the future negatively affect our liquidity. A recession
or market correction, inflation and/or further increases in interest rates could materially affect our business and the value of our
common stock.
If we raise additional funds
through public or private equity offerings, the terms of these securities may include liquidation or other preferences that adversely
affect the rights of our common stockholders. Further, to the extent that we raise additional capital through the sale of common stock
or securities convertible or exchangeable into common stock, the ownership interests of our common stockholders will be diluted. In addition,
any debt financing may subject us to fixed payment obligations and covenants limiting or restricting our ability to take specific actions,
such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional capital through marketing
and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have
to relinquish certain valuable intellectual property or other rights to our product candidates, technologies, future revenue streams
or research programs or grant licenses on terms that may not be favorable to us. Even if we were to obtain sufficient funding, there
can be no assurance that it will be available on terms acceptable to us or our stockholders.
Our ability to use our net operating loss
carryforwards and certain other tax attributes to offset future taxable income or taxes may be limited.
Under current law, federal
net operating losses incurred in tax years beginning after December 31, 2017, may be carried forward indefinitely, but the deductibility
of such federal net operating losses in tax years beginning after December 31, 2020 is limited to 80% of taxable income. It is uncertain
if and to what extent various states and localities will conform to federal tax laws. In addition, under Sections 382 and 383 of the Internal
Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change”
which is generally defined as a greater than 50% change in its equity ownership value over a six-year period, the corporation’s
ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post- change income or
taxes may be limited. We have experienced ownership changes in the past and we may also experience additional ownership changes in the
future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control. If an ownership change occurs
and our ability to use our net operating loss carryforwards is materially limited, it would harm our future operating results by effectively
increasing our future tax obligations. In addition, at the state level, there may be periods during which the use of net operating loss
carryforwards is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed. As a result, if we earn
net taxable income, we may be unable to use all or a material portion of our net operating loss carryforwards and other tax attributes,
which could potentially result in increased future tax liability to us and adversely affect our future cash flows.
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Risks Related to Drug/Biologics
Development and Commercialization
Our business depends on the successful
clinical development and regulatory approval of our product candidates, including TARA-002 and IV Choline Chloride.
The success of our business,
including our ability to finance our operations and generate revenue in the future, primarily depends on the successful development and
regulatory approval of our product candidates, including of TARA-002 and IV Choline Chloride. The clinical success of TARA-002 and IV
Choline Chloride depend on a number of factors, including the following:
If any one of these factors
is not present, many of which are beyond our control, we could experience significant delays or an inability to obtain regulatory approval
of TARA-002 or IV Choline Chloride.
Our clinical trials
may fail to demonstrate the safety and efficacy of our product candidates, or serious adverse or unacceptable side effects may be identified
during their development, which could increase our costs or necessitate the abandonment or limitation of the development of the product
candidate.
We have never completed a clinical trial or made a BLA or NDA
submission and may be unable to successfully do so for TARA-002 or IV Choline Chloride.
The conduct of a clinical
trial is a long, expensive, complicated and highly regulated process. Although our employees have conducted successful clinical trials
and made regulatory submissions in the past across many therapeutic areas while employed at other companies, we, as a company, have not
completed any clinical trials, or submitted a BLA or NDA and as a result may require more time and incur greater costs than we anticipate.
Failure to commence or complete, or delays in clinical trials or planned regulatory submissions would prevent us from, or delay us, in
obtaining regulatory approval of and commercializing TARA-002 or IV Choline Chloride, which would adversely impact our financial performance.
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We rely and expect to continue to rely
on third-party CROs and other third parties to conduct and oversee our clinical trials. If these third parties do not meet our requirements
or otherwise conduct the trials as required, we may not be able to satisfy our contractual obligations or obtain regulatory approval
for, or commercialize, our product candidates.
We rely and expect to continue
to rely on third-party CROs, to conduct and oversee our TARA-002 and IV Choline Chloride clinical trials and studies and other aspects
of product development. We also rely on various medical institutions, clinical investigators and contract laboratories to conduct our
trials in accordance with our clinical protocols and all applicable regulatory requirements, including the FDA’s regulations and
cGCP, requirements, which are an international standard meant to protect the rights and health of patients and to define the roles of
clinical trial sponsors, administrators and monitors, and state regulations governing the handling, storage, security and record-keeping
for drug and biologic products. These CROs and other third parties have and will continue to play a significant role in the conduct of
these trials and the subsequent collection and analysis of data from the clinical trials. We will rely heavily on these parties for the
execution of our clinical trials and preclinical studies and will control only certain aspects of their activities. We and our CROs and
other third-party contractors will be required to comply with cGCP and cGLP, requirements, which are regulations and guidelines enforced
by the FDA and comparable foreign regulatory authorities. Regulatory authorities enforce these cGCP and cGLP requirements through periodic
inspections of trial sponsors, principal investigators and trial sites. If we or any of these third parties fail to comply with applicable
cGCP and cGLP requirements, or reveal non-compliance from an audit or inspection, including due to COVID-19 and related health and safety
measures and business closures and disruptions, or if the same prevents the FDA or comparable foreign regulatory authorities from conducting
inspections or other regulatory activities, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or
other regulatory authorities may require us to perform additional clinical trials before approving our or our partners’ marketing
applications. We cannot assure that upon inspection by a given regulatory authority, such regulatory authority will determine that any
of our clinical trials or preclinical studies comply with applicable cGCP and cGLP requirements. In addition, our clinical trials generally
must be conducted with product candidate produced under cGMP regulations. Our failure to comply with these regulations and policies may
require us to repeat clinical trials, which would delay the regulatory approval process.
If any of our CROs or clinical
trial sites fail to comply with their contractual commitments or terminate their involvement in one of our clinical trials for any reason,
including due to COVID-19 disruptions, we may not be able to enter into arrangements with alternative CROs or clinical trial sites or
do so on commercially reasonable terms. In addition, if our relationship with clinical trial sites is terminated, we may experience the
loss of follow-up information on patients enrolled in our clinical trials unless we are able to transfer the care of those patients to
another qualified clinical trial site. In addition, principal investigators for our clinical trials may serve as scientific advisors
or consultants to us from time to time and could receive cash or equity compensation in connection with such services. If these relationships
and any related compensation result in perceived or actual conflicts of interest, the integrity of the data generated at the applicable
clinical trial site may be questioned by the FDA.
Interim, topline and preliminary data from
our clinical trials may change as more patient data become available, and are subject to audit and verification procedures that could
result in material changes in the final data.
From time to time, we may
publicly disclose preliminary, interim or topline data from our preclinical studies and clinical trials, which is based on a preliminary
analysis of then-available data, and the results and related findings and conclusions are subject to change as patient enrollment and
treatment continues and more patient data become available. Adverse differences between previous preliminary or interim data and future
interim or final data could significantly harm our business prospects. We may also announce topline data following the completion of
a preclinical study or clinical trial, which may be subject to change following a more comprehensive review of the data related to the
particular study or trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we
may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the interim, topline or preliminary
results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such
results, once additional data have been received and fully evaluated. Preliminary, interim, or topline data also remain subject to audit
and verification procedures that may result in the final data being materially different from the data we previously published. Accordingly,
preliminary, interim, and topline data should be viewed with caution until the final data are available.
Further, others, including
regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret
or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization
of the particular product candidate or product and our company in general. In addition, the information we choose to publicly disclose
regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with
what we determine to be material or otherwise appropriate information to include in our disclosure.
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We may in the future conduct clinical trials
for our product candidates outside the United States, and the FDA and applicable foreign regulatory authorities may not accept data from
such trials.
We may in the future choose
to conduct one or more of our clinical trials outside of the United States. Although the FDA or applicable foreign regulatory authority
may accept data from clinical trials conducted outside the United States or the applicable jurisdiction, acceptance of such study data
by the FDA or applicable foreign regulatory authority may be subject to certain conditions or exclusion. Where data from foreign clinical
trials are intended to serve as the basis for marketing approval in the United States, the FDA will not approve the application on the
basis of foreign data alone unless such data are applicable to the U.S. population and U.S. medical practice; the studies were performed
by clinical investigators of recognized competence; and the data are considered valid without the need for an on-site inspection by the
FDA or, if the FDA considers such an inspection to be necessary, the FDA is able to validate the data through an on-site inspection or
other appropriate means. Many foreign regulatory bodies have similar requirements. In addition, such foreign studies would be subject
to the applicable local laws of the foreign jurisdictions where the studies are conducted. There can be no assurance the FDA or applicable
foreign regulatory authority will accept data from trials conducted outside of the United States or the applicable home country. If the
FDA or applicable foreign regulatory authority does not accept such data, it would likely result in the need for additional trials, which
would be costly and time-consuming and delay aspects of our business plan.
TARA-002 is an immunopotentiator, and one indication that we
plan to pursue is the treatment of LMs. There are no FDA-approved therapies for the treatment of LMs and it is difficult to predict the
timing and costs of clinical development for TARA-002 for LMs.
To date, there are no FDA-approved
therapies for the treatment of LMs. The regulatory approval process for novel product candidates such as TARA-002 can be more expensive
and take longer than for other, better known or extensively studied therapeutic approaches. Delay or failure to obtain, or unexpected
costs in obtaining, the regulatory approval necessary to bring TARA-002 to market in LMs could decrease our ability to generate sufficient
revenue to maintain our business.
Our product candidates may cause undesirable
side effects or have other unexpected properties that could delay or prevent their regulatory approval, limit the commercial profile
of an approved label, or result in post-approval regulatory action.
Unforeseen side effects
from TARA-002 or IV Choline Chloride could arise either during clinical development or, if approved, after the product has been marketed.
Undesirable side effects could cause us, any partners with which we may collaborate, or regulatory authorities to interrupt, extend,
modify, delay or halt clinical trials and could result in a more restrictive or narrower label or the delay or denial of regulatory approval
by the FDA or comparable foreign authorities.
Results of clinical trials
could reveal a high and unacceptable severity and prevalence of side effects. In such an event, trials could be suspended or terminated,
and the FDA or comparable foreign regulatory authorities could order us to cease further development of or deny approval of a product
candidate for any or all targeted indications. Any side effects could affect patient recruitment or the ability of enrolled patients
to complete the trial or result in product liability claims. Any of these occurrences may harm our business, financial condition, operating
results and prospects.
Additionally, if we or others
identify undesirable side effects, or other previously unknown problems, in connection with a product after obtaining U.S. or foreign
regulatory approval, a number of potentially negative consequences could result, which could prevent us or our potential partners from
achieving or maintaining market acceptance of the product and could substantially increase the costs of commercializing such product.
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A fast track designation by the FDA may
not actually lead to a faster development or regulatory review or approval process for IV Choline Chloride for the treatment of IFALD.
The FDA has granted fast
track designation to IV Choline Chloride for the treatment of IFALD. If a drug is intended for the treatment of a serious or life-threatening
condition and the drug demonstrates the potential to address unmet medical needs for this condition, the drug sponsor may apply for fast
track designation. Even though we have received fast track designation for IV Choline Chloride for the treatment of IFALD, we may not
experience a faster development process, review or approval. The FDA may withdraw fast track designation if it believes that the designation
is no longer supported by data from our clinical development program.
Although the FDA has granted Rare Pediatric
Disease Designation for TARA-002 for the treatment of LMs, a BLA for TARA-002, if approved, may not meet the eligibility criteria for
a priority review voucher.
Rare Pediatric Disease Designation
has been granted for TARA-002 for the treatment of LMs. In 2012, Congress authorized the FDA to award priority review vouchers to sponsors
of certain rare pediatric disease product applications. This provision is designed to encourage development of new drug and biological
products for prevention and treatment of certain rare pediatric diseases. Specifically, under this program, a sponsor who receives an
approval for a drug or biologic for a “rare pediatric disease” may qualify for a voucher that can be redeemed to receive
a priority review of a subsequent marketing application for a different product. The sponsor of a rare pediatric disease drug product
receiving a priority review voucher may transfer (including by sale) the voucher to another sponsor. The voucher may be further transferred
any number of times before the voucher is used, as long as the sponsor making the transfer has not yet submitted the application. The
FDA may also revoke any priority review voucher if the rare pediatric disease drug for which the voucher was awarded is not marketed
in the U.S. within one year following the date of approval.
For the purposes of this
program, a “rare pediatric disease” is a (a) serious or life-threatening disease in which the serious or life-threatening
manifestations primarily affect individuals aged from birth to 18 years, including age groups often called neonates, infants, children,
and adolescents; and (b) rare disease or conditions within the meaning of the Orphan Drug Act. Congress has only authorized the Rare
Pediatric Disease Priority Review Voucher program until September 30, 2024. However, if a drug candidate received Rare Pediatric Disease
Designation before September 30, 2024, it is eligible to receive a voucher if it is approved before September 30, 2026.
TARA-002 for the treatment
of LMs may not be approved by that date, or at all, and, therefore, we may not be in a position to obtain a priority review voucher prior
to expiration of the program, unless Congress further reauthorizes the program. Additionally, designation of a drug for a rare pediatric
disease does not guarantee that a BLA will meet the eligibility criteria for a rare pediatric disease priority review voucher at the
time the application is approved. Finally, a Rare Pediatric Disease Designation does not lead to faster development or regulatory review
of the product or increase the likelihood that it will receive marketing approval. We may or may not realize any benefit from receiving
a voucher.
Even if a product
candidate obtains regulatory approval, it may fail to achieve the broad degree of physician and patient adoption and use necessary for
commercial success.
The commercial success of
both TARA-002 and IV Choline Chloride, if approved, will depend significantly on the broad adoption and use of them by physicians and
patients for approved indications, and neither may be commercially successful even though the product is shown to be safe and effective.
The degree and rate of physician and patient adoption of a product, if approved, and successful commercialization will depend on a number
of factors, including but not limited to:
● the effectiveness of the product compared to other available therapies;
● proper administration;
39
● any FDA requirement to undertake a Risk Evaluation and Mitigation Strategy;
● potential product liability claims or other product-related litigation.
If either TARA-002 or IV
Choline Chloride is approved for use but fails to achieve the broad degree of physician and patient adoption necessary for commercial
success, our operating results and financial condition will be adversely affected, which may delay, prevent or limit our ability to generate
revenue and continue our business.
Further, even if regulatory
approvals are obtained, we may never be able to successfully commercialize TARA-002 or IV Choline Chloride, or the FDA or comparable
foreign regulatory authorities may require labeling changes or impose significant restrictions on a product’s indicated uses or
marketing or impose ongoing requirements for potentially costly post-approval studies or post-market surveillance. Accordingly, we cannot
assure you that we will be able to generate sufficient revenue through the sale of TARA-002 or IV Choline Chloride to continue our business.
Before obtaining marketing
approvals for the commercial sale of any product candidate, we must demonstrate through lengthy, complex and expensive preclinical testing
and clinical trials that such product candidate is both safe and effective for use in the applicable indication, and failures can occur
at any stage of testing. Clinical trials often fail to demonstrate safety and are associated with side effects or have characteristics
that are unexpected. Based on the safety profile seen in clinical testing, we may need to abandon development or limit development to
more narrow uses in which the side effects or other characteristics are less prevalent, less severe or more tolerable from a risk-benefit
perspective. The FDA or an IRB may also require that we suspend, discontinue, or limit clinical trials based on safety information. Such
findings could further result in regulatory authorities failing to provide marketing authorization for the product candidate. Many pharmaceutical
candidates that initially showed promise in early stage testing and which were efficacious have later been found to cause side effects
that prevented further development of the drug candidate and, in extreme cases, the side effects were not seen until after the drug was
marketed, causing regulators to remove the drug from the market post-approval.
Any adverse developments that occur in
patients undergoing treatment with OK-432 / Picibanil or in patients participating in clinical trials conducted by third parties may
affect our ability to obtain regulatory approval or commercialize TARA-002.
Chugai Pharmaceutical Co.,
Ltd., over which we have no control, has the rights to commercialize TARA-002 and the originator therapy to TARA-002, OK-432, which is
currently marketed under the name Picibanil, in Japan and Taiwan for various indications. In addition, clinical trials using Picibanil
are currently ongoing in various countries around the world. If SAEs occur with patients using Picibanil or during any clinical trials
of Picibanil conducted by third parties, the FDA may delay, limit or deny approval of TARA-002 or require us to conduct additional clinical
trials as a condition to marketing approval, which would increase our costs. If we receive FDA approval for TARA-002 and a new and serious
safety issue is identified in connection with use of Picibanil or in clinical trials of Picibanil conducted by third parties, the FDA
may withdraw the approval of the product or otherwise restrict our ability to market and sell TARA-002. In addition, treating physicians
may be less willing to administer TARA-002 due to concerns over such adverse events, which would limit our ability to commercialize TARA-002.
We may choose not to continue developing
or commercializing any of our product candidates at any time during development or after approval, which would reduce or eliminate the
potential return on investment for those product candidates.
At any time, we may decide
to discontinue the development of any of our product candidates for a variety of reasons, including the appearance of new technologies
that make our product candidates obsolete, competition from a competing product or changes in or failure to comply with applicable regulatory
requirements.
If we terminate a program
in which we have invested significant resources, we will not receive any return on our investment and we will have missed the opportunity
to have allocated those resources to potentially more productive uses.
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Other Risks Related to Our Business
Our product candidates,
if approved, will face significant competition and their failure to compete effectively may prevent them from achieving significant market
penetration.
The pharmaceutical industry
is characterized by rapidly advancing technologies, intense competition, uncertain and complex patent terms, and a strong emphasis on
developing newer, fast-to-market proprietary therapeutics. Numerous companies are engaged in the development, patenting, manufacturing
and marketing of healthcare products competitive with those that we are developing, including TARA-002 and IV Choline Chloride. We will
face competition from a number of sources, such as pharmaceutical companies, biotechnology companies, generic drug companies, consumer
products companies and academic and research institutions, many of which have greater financial resources, marketing capabilities, sales
forces, manufacturing capabilities, research and development capabilities, regulatory expertise, clinical trial expertise, intellectual
property portfolios, international reach, experience in obtaining patents and regulatory approvals for product candidates and other resources
than we have. Some of the companies that offer competing products also have a broad range of other product offerings, large direct sales
forces and long-term customer relationships with our target physicians, which could inhibit our market penetration efforts.
With respect to our lead
product candidate, TARA-002, for the treatment of NMIBC and LMs, the active ingredient in TARA-002 is a genetically distinct strain of
Streptococcus pyogenes (group A, type 3) Su strain. TARA-002 is produced through a proprietary manufacturing process. We anticipate
that, if approved by the FDA, TARA-002 will be protected by 12 years of biologic exclusivity. There are no approved pharmacotherapies
currently available for the treatment of LMs and the current treatment options include a high-risk surgical procedure and off-label use
of sclerosants, including doxycycline, bleomycin, ethanol and sodium tetradecyl sulfate. There are a number of drug development companies
and academic researchers exploring oral formulations of various agents including macrolides, phosphodiesterase inhibitors, and calcineurin/mTOR
inhibitors. These are in early development. TARA-002, if approved for the treatment of NMIBC, would be subject to competition from existing
treatment methods of surgery, chemotherapy and immunomodulatory therapy. For example, the current standard of care for NMIBC includes
intravesical BCG TICE (manufactured by Merck & Co. Inc.). Other products approved for the treatment of NMIBC include Merck & Co.,
Inc.’s Keytruda, Endo International plc’s Valstar, and Ferring B.V.’s Adstiladrin. Additional product candidates in
development include Japanese BCG Laboratory’s BCG Tokyo, Pfizer Inc.’s Sasanlimab in combination with BCG, ImmunityBio, Inc.’s
VesAnktiva in combination with BCG, CG Oncology Inc.’s CG0070, Sesen Bio, Inc.’s Vicineum, enGene Inc.’s, EG-70, Seagen
Inc.’s PADCEV, Janssen’s TAR200 combined with gemcitabine plus or minus Cetrelimab, Urogen Pharma Ltd.’s Jelmyto,and
Auro BioSciences, Inc.’s Aura-0011. Additional pharmaceutical and biotechnology companies with product candidates in development
for the treatment of NMIBC include but may not be limited to Verity, AstraZeneca PLC, Bristol-Myers Squibb Company, Roche Group, Asieris
Pharmaceuticals, BeiGene, Ltd, NanOlogy, LLC, Linton Pharm Co., Ltd., Lindis Biotech GmbH, Theralase Technologies Inc., Taizhou Hanzhong
biomedical co. Ltd., Shionogi & Co. Ltd., Rapamycin Holdings, Inc., Vaxiion Therapeutics Inc., Incyte Corporation, LiPac Oncology,
Inc., Anika Therapeutics Inc., Surge Pharmaceuticals Pvt. Ltd., and Istari Oncology, Inc..
There are no treatments
currently available for IFALD. With respect to IV Choline Chloride for the treatment of IFALD, IV Choline Chloride is the only sterile
injectable form of choline chloride that can be combined with parenteral nutrition. Further, if approved, IV Choline Chloride will be
protected by Orphan Drug Designation exclusivity for seven years.
TARA-002 and any future product candidates
for which we intend to seek approval as biologic products may face competition sooner than anticipated.
The Biologics Price Competition
and Innovation Act of 2009, or BPCIA, created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable
with an FDA-licensed reference biological product. Under the BPCIA, an application for a biosimilar product may not be submitted to the
FDA until four years following the date that the reference product was first licensed by the FDA. In addition, the approval of a biosimilar
product may not be made effective by the FDA until 12 years from the date on which the reference product was first licensed. During this
12-year period of exclusivity, another company may still market a competing version of the reference product if the FDA approves a full
BLA for the competing product containing the sponsor’s own preclinical data and data from adequate and well-controlled clinical
trials to demonstrate the safety, purity and potency of their product. The law is complex and is still being interpreted and implemented
by the FDA. As a result, its ultimate impact, implementation and meaning are subject to uncertainty. While it is uncertain when such
processes are intended to be implemented, the BPCIA may be fully adopted by the FDA, and any such processes could have a material adverse
effect on the future commercial prospects for our biological products.
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We believe that any of our
product candidates approved as a biological product under a BLA should qualify for the 12-year period of exclusivity. However, there
is a risk that this exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider our product
candidates to be reference products for competing products, potentially creating the opportunity for biosimilar competition sooner than
anticipated. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent
litigation. Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of our reference products in a
way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of
marketplace and regulatory factors that are still developing.
We currently have limited marketing capabilities
and no sales organization. If we are unable to grow our sales and marketing capabilities on our own or through third parties, we will
be unable to successfully commercialize our product candidates, if approved, or generate product revenue.
We currently have limited
marketing capabilities and no sales organization. To commercialize our product candidates, if approved, in the United States, Canada,
the European Union, Latin America and other jurisdictions we may seek to enter, we must build our marketing, sales, distribution, managerial
and other non-technical capabilities or make arrangements with third parties to perform these services, and we may not be successful
in doing so. Although our employees have experience in the marketing, sale and distribution of pharmaceutical products, and business
development activities involving external alliances, from prior employment at other companies, we, as a company, have no prior experience
in the marketing, sale and distribution of pharmaceutical products, and there are significant risks involved in building and managing
a sales organization, including our ability to hire, retain and incentivize qualified individuals, generate sufficient sales leads, provide
adequate training to sales and marketing personnel, and effectively manage a geographically dispersed sales and marketing team. Any failure
or delay in the development of our internal sales, marketing, distribution and pricing/reimbursement/access capabilities would impact
adversely the commercialization of these products.
We have only received the exclusive rights
to the materials required to commercialize TARA-002 in territories other than Japan and Taiwan until June 17, 2030, or an earlier date
if Chugai terminates the agreement with us for any number of reasons, following which such rights become non-exclusive.
Pursuant to an agreement
with Chugai Pharmaceutical dated June 17, 2019, as amended on July 14, 2020 (effective as of June 30, 2020), Chugai Pharmaceutical agreed
to provide us with exclusive access to the starting material necessary to manufacture TARA-002 as well as technical support necessary
for us to develop and commercialize TARA-002 anywhere in the world other than Japan and Taiwan. However, this agreement does not prevent
Chugai from providing such materials and support to any third-party for medical, compassionate use and/or non-commercial research purposes
and this agreement is exclusive only through June 17, 2030 or, the earlier termination of the agreement by either party. Once our rights
to the materials and technology necessary to manufacture, develop and commercialize TARA-002 are not exclusive, third parties, including
those with greater expertise and greater resources, could obtain such materials and technology and develop a competing therapy, which
would adversely affect our ability to generate revenue and achieve or maintain profitability.
Even if we obtain regulatory approval to
begin commercializing any of our products, we would remain subject to ongoing regulatory review, which could subsequently result in a
suspension or termination of sale of these products.
Even after we achieve U.S.
regulatory approval for a product candidate, if any, we will be subject to continued regulatory review and compliance obligations. For
example, with respect to our product candidates, the FDA may impose significant restrictions on the approved indicated uses for which
the product may be marketed or on the conditions of approval. A product candidate’s approval may contain requirements for potentially
costly post-approval studies and surveillance, including Phase 4 clinical trials, to monitor the safety and efficacy of the product.
We will also be subject to ongoing FDA obligations and continued regulatory review with respect to, among other things, the manufacturing,
processing, labeling, packaging, distribution, pharmacovigilance and adverse event reporting, storage, advertising, promotion and recordkeeping
for our product candidates. In addition, manufacturers of drug and biologic products and their facilities are subject to continual review
and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP regulations. If we or a regulatory agency
discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with
the manufacturing, processing, distribution or storage facility where, or processes by which, the product is made, a regulatory agency
may impose restrictions on that product or us, including requesting that we initiate a product recall, or requiring notice to physicians
or the public, withdrawal of the product from the market, or suspension of manufacturing.
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We face product liability exposure, and if successful claims
are brought against us, we may incur substantial liability if our insurance coverage for those claims is inadequate.
We face an inherent risk
of product liability or similar causes of action as a result of the clinical testing of our product candidates and will face an even
greater risk if we commercialize any products. This risk exists even if a product is approved for commercial sale by the FDA and manufactured
in facilities licensed and regulated by the FDA or an applicable foreign regulatory authority and notwithstanding that we comply with
applicable laws on promotional activity. Our products and product candidates are designed to affect important bodily functions and processes.
Any side effects, manufacturing defects, misuse or abuse associated with our product candidates could result in injury to a patient or
potentially even death. We cannot offer any assurance that we will not face product liability suits in the future, nor can we assure
you that our insurance coverage will be sufficient to cover our liability under any such cases.
In addition, a liability
claim may be brought against us even if our product candidates merely appear to have caused an injury. Product liability claims may be
brought against us by consumers, healthcare providers, pharmaceutical companies or others selling or otherwise coming into contact with
our product candidates, among others, and under some circumstances even government agencies. If we cannot successfully defend ourselves
against product liability or similar claims, we will incur substantial liabilities, reputational harm and possibly injunctions and punitive
actions. In addition, regardless of merit or eventual outcome, product liability claims may result in:
● the inability to commercialize our product candidates;
● decreased demand for our product candidates;
● impairment of our business reputation;
● substantial costs of any related litigation or similar disputes;
● significant delay in product launch;
● withdrawal of reimbursement or formulary inclusion; or
● loss of revenue.
We have obtained product
liability insurance coverage for our clinical trials. Large judgments have been awarded in class action or individual lawsuits based
on drugs that had unanticipated side effects. Our insurance coverage may not be sufficient to cover all of our product liability-related
expenses or losses and may not cover us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly
expensive, restrictive and narrow, and, in the future, we may not be able to maintain adequate insurance coverage at a reasonable cost,
in sufficient amounts or upon adequate terms to protect us against losses due to product liability or other similar legal actions. We
will need to increase our product liability coverage if any of our product candidates receive regulatory approval, which will be costly,
and we may be unable to obtain this increased product liability insurance on commercially reasonable terms or at all and for all geographies
in which we wish to launch. A successful product liability claim or series of claims brought against us, if judgments exceed our insurance
coverage, could decrease our cash and harm our business, financial condition, operating results and future prospects.
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Our employees, independent contractors,
principal investigators, other clinical trial staff, consultants, vendors, CROs and any partners with whom we may collaborate may engage
in misconduct or other improper activities, including non-compliance with regulatory standards and requirements.
We are exposed to the risk
that our employees, independent contractors, principal investigators, other clinical trial staff, consultants, vendors, CROs and any
partners with which we may collaborate may engage in fraudulent or other illegal activity. Misconduct by these persons could include
intentional, reckless, gross or negligent misconduct or unauthorized activity that violates: laws or regulations, including those laws
requiring the reporting of true, complete and accurate information to the FDA or foreign regulatory authorities; manufacturing standards;
federal, state and foreign healthcare fraud and abuse laws and data privacy; anticorruption laws, anti-kickback and Medicare/Medicaid
rules, or laws that require the true, complete and accurate reporting of financial information or data, books and records. If any such
or similar actions are instituted against us and we are not successful in defending ourselves or asserting our rights, those actions
could have a significant impact on our business, including the imposition of significant civil, criminal and administrative and punitive
penalties, damages, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs,
debarments, contractual damages, imprisonment, reputational harm, diminished profits and future earnings, injunctions, and curtailment
or cessation of our operations, any of which could adversely affect our ability to operate our business and our operating results.
We may
be subject to risks related to off-label use of our product candidates, if approved.
The FDA strictly regulates
the advertising and promotion of drug products, and drug products may only be marketed or promoted for their FDA approved uses, consistent
with the product’s approved labeling. Advertising and promotion of any product candidate that obtains approval in the United States
will be heavily scrutinized by the FDA, the Department of Justice, the Office of Inspector General of the Department of Health and Human
Services, state attorneys general, members of Congress and the public. For example, the FDA and other agencies actively enforce the laws
and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may
be subject to significant liability. Although physicians may prescribe products for off-label uses as the FDA and other regulatory agencies
do not regulate a physician’s choice of drug treatment made in the physician’s independent medical judgment, they do restrict
promotional communications from companies or their sales force with respect to off-label uses of products for which marketing clearance
has not been issued. Companies may only share truthful and not misleading information that is otherwise consistent with a product’s
FDA approved labeling. Violations, including promotion of our products for unapproved or off-label uses, are subject to enforcement letters,
inquiries and investigations, and civil, criminal and/or administrative sanctions by the FDA. Additionally, advertising and promotion
of any product candidate that obtains approval outside of the United States will be heavily scrutinized by relevant foreign regulatory
authorities.
In the United States, engaging
in impermissible promotion of our product candidates for off-label uses can also subject us to false claims litigation under federal
and state statutes, which can lead to significant civil, criminal and/or administrative penalties and fines and agreements, such as a
corporate integrity agreement, that materially restrict the manner in which we promote or distribute our product candidates. If we do
not lawfully promote our products once they have received regulatory approval, we may become subject to such litigation and, if we are
not successful in defending against such actions, those actions could have a material adverse effect on our business, financial condition
and operating results and even result in having an independent compliance monitor assigned to audit our ongoing operations for a lengthy
period of time.
If we or any partners with which we may
collaborate are unable to achieve and maintain coverage and adequate levels of reimbursement for TARA-002 or IV Choline Chloride following
regulatory approval, their commercial success may be hindered severely.
If TARA-002 or IV Choline
Chloride only becomes available by prescription, successful sales by us or by any partners with which we may collaborate depend on the
availability of coverage and adequate reimbursement from third-party payors. Patients who are prescribed medicine for the treatment of
their conditions generally rely on third-party payors to reimburse most or part of the costs associated with their prescription drugs.
The availability of coverage and adequate reimbursement from governmental healthcare programs, such as Medicare and Medicaid in the United
States, and private third-party payors is often critical to new product acceptance. Coverage decisions may depend on clinical and economic
standards that disfavor new drug products when more established or lower-cost therapeutic alternatives are already available or subsequently
become available, or may be affected by the budgets and demands on the various entities responsible for providing health insurance to
patients who will use TARA-002 or IV Choline Chloride. Even if we obtain coverage for our products, the resulting reimbursement payment
rates might not be adequate or may require co-payments that patients find unacceptably high. Patients are unlikely to use a product unless
coverage is provided, and reimbursement is adequate to cover a significant portion of the cost.
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In addition, the market
for our products will depend significantly on access to third-party payors’ drug formularies or lists of medications for which
third-party payors provide coverage and reimbursement. The industry competition to be included in such formularies often leads to downward
pricing pressures on pharmaceutical companies and there may be time limitations on when a new drug may even apply for formulary inclusion.
Also, third-party payors may refuse to include products in their formularies or otherwise restrict patient access to such products when
a less costly biosimilar or generic equivalent or other treatment alternative is available in the discretion of the formulary.
Third-party payors, whether
foreign or domestic, or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs.
In addition, in the United States, although private third-party payors tend to follow Medicare practices, no uniform or consistent policy
of coverage and reimbursement for drug products exists among third-party payors. Therefore, coverage and reimbursement for drug products
can differ significantly from payor to payor as well as from state to state. Consequently, the coverage determination process is often
a time-consuming and costly process that must be played out across many jurisdictions and different entities and that will require us
to provide scientific, clinical and health economics support for the use of our products compared to current alternatives and do so to
each payor separately, with no assurance that coverage and adequate reimbursement will be obtained and in what time frame.
Further, we believe that
future coverage and reimbursement likely will be subject to increased restrictions both in the United States and in international markets.
Third-party coverage and reimbursement for our products may not be available or adequate in either the United States or international
markets, which could harm our business, financial condition, operating results and prospects. Further, coverage policies and third-party
reimbursement rates may change at any time. Therefore, even if favorable coverage and reimbursement status is attained, less favorable
coverage policies and reimbursement rates may be implemented in the future.
Healthcare
reform measures could hinder or prevent the commercial success of our product candidates.
Existing regulatory policies
may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of any future
product candidates we may develop. For example, the Trump administration and certain members of the U.S. Congress sought to repeal all
or part of the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act, or collectively,
the Affordable Care Act, and implement a replacement program. In another example, the so-called “individual mandate” was
repealed as part of tax reform legislation adopted in December 2017, informally titled the Tax Cuts and Jobs Act, or Tax Act, such that
the shared responsibility payment for individuals who fail to maintain minimum essential coverage under section 5000A of the Internal
Revenue Code was eliminated beginning in 2019. Additionally, on June 17, 2021 the U.S. Supreme Court dismissed a challenge on procedural
grounds that argued the Affordable Care Act is unconstitutional in its entirety because the individual mandate was repealed by Congress.
Thus, the Affordable Care Act will remain in effect in its current form. Further, prior to the U.S. Supreme Court ruling, on January
28, 2021, President Biden issued an executive order that initiated a special enrollment period for purposes of obtaining health insurance
coverage through the Affordable Care Act marketplace. The executive order also instructed certain governmental agencies to review and
reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration
projects and waiver programs that include work requirements, and policies that create barriers to obtaining access to health insurance
coverage through Medicaid or the Affordable Care Act. It is possible that the Affordable Care Act will be subject to judicial or Congressional
challenges in the future. It is unclear how such challenges and the healthcare reform measures of the Biden administration will impact
the Affordable Care Act and our business.
Additionally, there has
been increasing legislative and enforcement interest in the United States with respect to drug pricing practices. For example, the Trump
administration used several means to propose or implement drug pricing reform, including through federal budget proposals, executive
orders and policy initiatives. For example, on July 24, 2020 and September 13, 2020, the Trump administration announced several executive
orders related to prescription drug pricing that attempted to implement several of the administration’s proposals. The FDA also
released a final rule and guidance implementing a portion of the importation executive order providing pathways for states to build and
submit importation plans for drugs from Canada. Further, on November 20, 2020, the Department of Health and Human Services, or HHS, finalized
a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either
directly or through pharmacy benefit managers, unless the price reduction is required by law. The rule also creates a new safe harbor
for price reductions reflected at the point-of-sale, as well as a new safe harbor for certain fixed fee arrangements between pharmacy
benefit managers and manufacturers. The implementation of the rule has been delayed until January 1, 2026. On November 20, 2020, the
Centers for Medicare & Medicaid Services, or CMS, issued an interim final rule implementing former President Trump’s Most Favored
Nation, or MFN, executive order, which would tie Medicare Part B payments for certain physician-administered drugs to the lowest price
paid in other economically advanced countries, and was effective as of January 1, 2021. As a result of litigation challenging the MFN
model, on December 27, 2021, CMS published a final rule that rescinded the MFN model interim final rule. Further, in July 2021, the Biden
administration released an executive order that included multiple provisions aimed at prescription drugs. In response to Biden’s
executive order, on September 9, 2021, HHS released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for
drug pricing reform. The plan sets out a variety of potential legislative policies that Congress could pursue as well as potential administrative
actions HHS could take to advance these principles. No legislation or administrative actions have been finalized to implement these principles.
In addition, on August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022, which, among other things, contains
substantial drug pricing reforms that will reduce drug spending by the federal government. For example, the Inflation Reduction Act of
2022 limits the prices paid by Medicare for various prescription drugs and requires drug manufacturers to pay rebates to Medicare if
they increase prices faster than inflation for drugs used by Medicare beneficiaries. Although the effect of the Inflation Reduction Act
of 2022 on our business and the pharmaceutical industry in general is not yet known, the Inflation Reduction Act of 2022 could affect
the prices we can charge and the reimbursement we can receive for our product candidates, if approved, thereby reducing our profitability.
We also expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the
amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our
product candidates if approved or additional pricing pressures.
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There are also calls to
place additional restrictions on or to ban direct-to-consumer advertising of pharmaceuticals, which would limit our ability to market
our product candidates. The United States is in a minority of jurisdictions that allow this kind of advertising and its removal could
limit the potential reach of a marketing campaign. Further, it is possible that additional government action is taken in response to
the COVID-19 pandemic.
We are subject to
strict healthcare laws, regulation and enforcement, and our failure to comply with those laws could adversely affect our business, operations
and financial condition.
Certain federal and state
healthcare laws and regulations pertaining to fraud and abuse, privacy, transparency, and patients’ rights are and will be applicable
to our business. We are subject to regulation by both the federal government and the states in which we or our partners conduct business.
The healthcare laws and regulations that may affect our ability to operate include but are not limited to: the federal Anti-Kickback
Statute; federal civil and criminal false claims laws and civil monetary penalty laws; the federal Health Insurance Portability and Accountability
Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act; the Prescription Drug Marketing Act
(for sampling of drug product among other things); the federal physician sunshine requirements under the Affordable Care Act; the Foreign
Corrupt Practices Act as it applies to activities outside of the United States; the federal Right-to-Try legislation; and similar state
laws of such federal laws, which may be broader in scope.
Because of the breadth of
these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities
could be subject to challenge under one or more of such laws. In addition, recent healthcare reform legislation has strengthened these
laws. For example, the Affordable Care Act, among other things, amended the intent requirement of the federal Anti-Kickback Statute and
certain criminal healthcare fraud statutes. A person or entity no longer needs to have actual knowledge of the statute or specific intent
to violate it. In addition, the Affordable Care Act provided that the government may assert that a claim including items or services