ITEM 1A. RISK FACTORS.
An investment in our common stock involves
a high degree of risk. You should carefully consider the following risk factors and the other information in this Annual Report on Form
10-K before investing in our common stock. Our business and results of operations could be seriously harmed by any of the following risks.
The risks set out below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently
deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. If any of the
following events occur, our business, financial condition and results of operations could be materially adversely affected. In such case,
the value and trading price of our common stock could decline, and you may lose all or part of your investment.
Risks Related to our Financial Position and
Need for Capital
We have generated no product revenue to
date and our future profitability is uncertain.
We were incorporated in August 2016 and have
a limited operating history, and our business is subject to all of the risks inherent in the establishment of a new business enterprise.
Our likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered
in connection with the development and expansion of a new business enterprise. Since inception, we have incurred losses and expect to
continue to operate at a net loss for at least the next several years as we continue our research and development efforts, conduct clinical
trials and develop manufacturing, sales, marketing and distribution capabilities. Our net loss for the years ended December 31, 2022
and 2023 was $18.1 million and $30.5 million, and our accumulated deficit as of December 31, 2023 was $64.5 million. There can be no
assurance that the product candidates currently under development or that may be under development by us in the future will be approved
for sale in the U.S. or elsewhere. Furthermore, there can be no assurance that if such products are approved, they will be successfully
commercialized, and the extent of our future losses and the timing of our profitability are highly uncertain. If we are unable to achieve
profitability, we may be unable to continue our operations.
If we fail to obtain the capital necessary
to fund our operations, we will be unable to continue or complete our product development and you will likely lose your entire investment.
We will need to continue to seek capital from time to time to continue
development of our product candidates. As of December 31, 2022 and 2023, we had cash of $0.5 million and $9.7 million, respectively. On
March 3, 2023, the Company signed a securities purchase agreement with certain healthcare-focused institutional investors that will provide
up to $130 million in gross proceeds to Unicycive through a private placement that included initial upfront funding of $30 million. We
expect our existing cash as of December 31, 2023 plus the $50 million funding received in March 2024 will enable us to fund our operating
expenses and capital expenditure requirements for at least 12 months from the date of filing of this Form 10-K. We believe that we
will need to raise substantial additional capital in the future to fund our continuing operations and the development and commercialization
of our current product candidates and future product candidates. Our business or operations may change in a manner that would consume
available funds more rapidly than anticipated and substantial additional funding may be required to maintain operations, fund expansion,
develop new or enhanced products, acquire complementary products, businesses or technologies or otherwise respond to competitive pressures
and opportunities, such as a change in the regulatory environment. In addition, we may need to accelerate the growth of our sales capabilities
and distribution beyond what is currently envisioned, and this would require additional capital. However, we may not be able to secure
funding when we need it or on favorable terms. We may not be able to raise sufficient funds to commercialize our current and future product
candidates we intend to develop.
If we cannot raise adequate funds to satisfy
our capital requirements, we will have to delay, scale back or eliminate our research and development activities, clinical studies or
future operations. We may also be required to obtain funds through arrangements with collaborators, which arrangements may require us
to relinquish rights to certain technologies or products that we otherwise would not consider relinquishing, including rights to future
product candidates or certain major geographic markets. This could result in sharing revenues which we might otherwise retain for ourselves.
Any of these actions may harm our business, financial condition and results of operations.
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The amount of capital we may need depends on
many factors, including the progress, timing and scope of our product development programs; the progress, timing and scope of our pre-clinical
studies and clinical trials; the time and cost necessary to obtain regulatory approvals; the time and cost necessary to further develop
manufacturing processes and arrange for contract manufacturing; our ability to enter into and maintain collaborative, licensing and other
commercial relationships; and our partners’ commitment of time and resources to the development and commercialization of our products.
We may consider strategic alternatives
in order to maximize stockholder value, including financings, strategic alliances, acquisitions or the possible sale of our business.
We may not be able to identify or consummate any suitable strategic alternatives.
We may consider all strategic alternatives that
may be available to us to maximize stockholder value, including financings, strategic alliances, acquisitions or the possible sale of
our business. We currently have no agreements or commitments to engage in any specific strategic transactions, and our exploration of
various strategic alternatives may not result in any specific action or transaction. To the extent that this engagement results in a
transaction, our business objectives may change depending upon the nature of the transaction. There can be no assurance that we will
enter into any transaction as a result of the engagement. Furthermore, if we determine to engage in a strategic transaction, we cannot
predict the impact that such strategic transaction might have on our operations or stock price. We also cannot predict the impact on
our stock price if we fail to enter into a transaction.
Raising additional capital may cause dilution
to our existing stockholders, restrict our operations or require us to relinquish rights to our product candidates on unfavorable terms
to us.
We may seek additional capital through a variety
of means, including through private and public equity offerings and debt financings, collaborations, strategic alliances and marketing,
distribution or licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt
securities, or through the issuance of shares under management or other types of contracts, or upon the exercise or conversion of outstanding
derivative securities, the ownership interests of our stockholders will be diluted, and the terms of such financings may include liquidation
or other preferences, anti-dilution rights, conversion and exercise price adjustments and other provisions that adversely affect
the rights of our stockholders, including rights, preferences and privileges that are senior to those of our holders of common stock
in the event of a liquidation. In addition, debt financing, if available, could include covenants limiting or restricting our ability
to take certain actions, such as incurring additional debt, making capital expenditures, entering into licensing arrangements, or declaring
dividends and may require us to grant security interests in our assets. If we raise additional funds through collaborations, strategic
alliances, or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our
technologies, future revenue streams, product or product candidates or grant licenses on terms that may not be favorable to us. If we
are unable to raise additional funds through equity or debt financings when needed, we may need to curtail or cease our operations.
You will experience dilution, subordination
of stockholder rights, preferences, and privileges, and decrease in market price of our common stock as a result of our private placement
financing efforts in March 2023 and March 2024.
On March 3, 2023, we signed a securities purchase
agreement with certain healthcare-focused institutional investors pursuant to which we issued and sold 30,190 shares of Series A-1 Preferred
Stock. Such Series A-1 Preferred Stock and the securities issuable upon conversion of the Series A-1 Preferred Stock are potentially dilutive
instruments and the conversion of these securities upon Stockholder Approval resulted in dilution to our existing stockholders: Following
Stockholder Approval, the Series A-1 Preferred Stock was converted into 19,516,205 shares of common stock as well as 43,649 shares of
Series A-2 Preferred Stock. In addition, on March 13, 2024, we entered into a securities purchase agreement with certain accredited investors,
pursuant to which we agreed to issue and sell, in a private placement, 50,000 shares of our Series B Convertible Preferred Stock, par
value $0.001 per share, at a purchase price of $1,000 per share with an initial conversion price of $1.00 per share, subject to adjustment,
for an aggregate purchase price of $50 million. As a result, these stockholders, acting together, may have the ability to control the
outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation or sale
of all or substantially all of our assets. In addition, these stockholders, acting together, may have the ability to control the management
and affairs of our company.
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Our cash could be adversely impacted if
a financial institution with which we have deposits or other accounts fails.
Our cash and cash equivalents we use to satisfy
our working capital and operating expense needs are held in accounts at various financial institutions. The balance held in deposit accounts
often exceeds the Federal Deposit Insurance Corporation (“FDIC”) deposit insurance limit or similar government deposit insurance
schemes. Our cash and cash equivalents could be adversely impacted, including the loss of uninsured deposits and other uninsured financial
assets, if one or more of the financial institutions in which we hold our cash or cash equivalents fails or is subject to other adverse
conditions in the financial or credit markets. Any loss of our cash or cash equivalents or any delay in our access thereto could, among
other risks, adversely impact our ability to pay our operating expenses, result in breaches of our contractual obligations, or result
in violations of federal or state wage and hour laws if we are unable to pay our employees on a timely basis.
Risks Related to Our Business
The marketing approval process of the FDA
is lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain marketing approval for our current
product candidates and future product candidates we intend to develop, our business will be substantially harmed.
The product candidates we intend to develop have
not gained marketing approval in the U.S., and we cannot guarantee that we will ever have marketable products. Our business is substantially
dependent on our ability to complete the development of, obtain marketing approval for, and successfully commercialize our current and
future product candidates in a timely manner. We cannot commercialize our product candidates in the United States without first obtaining
approval from the FDA to market each product candidate. Our product candidates could face substantial delays or even fail to receive
marketing approval for many reasons, including among others:
In addition, the process of seeking regulatory
clearance or approval to market the product candidates we intend to develop is expensive and time consuming and, notwithstanding the
effort and expense incurred, clearance or approval is never guaranteed. If we are not successful in obtaining timely clearance or approval
of our product candidates from the FDA, we may never be able to generate anticipated revenue and may be forced to cease operations. The
NDA process is costly, lengthy and uncertain. Any NDA application filed by us will have to be supported by extensive data, including,
but not limited to, technical, pre-clinical, clinical, manufacturing, and labeling data, to demonstrate to the FDA’s satisfaction
the safety and efficacy of the product for its intended use.
Obtaining clearances or approvals from the FDA
and from the regulatory agencies in other countries is an expensive and time-consuming process and is uncertain as to outcome. The FDA
and other agencies could ask us to supplement our submissions, collect new CMC or non-clinical data, conduct additional clinical trials
or engage in other time-consuming actions, or it could simply deny our applications. In addition, even if we obtain an NDA approval or
pre-market approvals in other countries, the approval could be revoked, or other restrictions imposed if post-market data demonstrate
safety issues or lack of effectiveness. We cannot predict with certainty how, or when, the FDA or other regulatory agencies will act.
If we are unable to obtain the necessary regulatory approvals, our financial condition and cash flow may be adversely affected, and our
ability to grow domestically and internationally may be limited. Additionally, even if cleared or approved, our products may not be approved
for the specific indications that are most necessary or desirable for successful commercialization or profitability.
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We may encounter substantial delays in
completing our clinical studies which in turn will require additional costs, or we may fail to demonstrate adequate safety and efficacy
to the satisfaction of applicable regulatory authorities.
It is impossible to predict if or when our current
or future product candidates will prove safe or effective in humans or will receive regulatory approval. Before obtaining marketing
approval from regulatory authorities for the sale of our product candidates, we must conduct extensive clinical studies to demonstrate
the safety and efficacy of the product candidates in humans. Clinical testing is expensive, time-consuming and uncertain as to outcome.
We cannot guarantee that any clinical studies will be conducted as planned or completed on schedule, if at all. A failure of one or more
clinical studies can occur at any stage of testing. Events that may prevent successful or timely completion of clinical development include:
● clinical study sites or patients dropping out of a study;
We could also encounter delays if a clinical
trial is suspended or terminated by us, by the Institutional Review Board (“IRB”) or Ethics Commission (“EC”)
of the institutions in which such trials are being conducted, by an independent Safety Review Board (“SRB”) for such trial
or by the FDA or other regulatory authorities. Such authorities may suspend or terminate a clinical trial due to a number of
factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection
of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold,
unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations
or administrative actions or lack of adequate funding to continue the clinical trial.
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Any inability to successfully complete pre-clinical
and clinical development could result in additional costs to us or impair our ability to generate revenues from product sales, regulatory
and commercialization milestones and royalties. In addition, if we make manufacturing or formulation changes to our product candidates,
we may need to conduct additional studies to bridge our modified product candidates to earlier versions.
Clinical study delays could also shorten any
periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products
to market before we do, which could impair our ability to successfully commercialize our product candidates. In addition, any delays
in completing our clinical trials will increase our costs, slow down our product candidates’ development and approval
process and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may significantly harm our
business, financial condition and prospects. In addition, many of the factors that cause, or lead to, a delay in the commencement or
completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.
The outcome of pre-clinical studies and early
clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily
predict final results. Further, pre-clinical and clinical data are often susceptible to various interpretations and analyses, and many
companies that have believed their product candidates performed satisfactorily in pre-clinical studies and clinical trials have nonetheless
failed to obtain marketing approval. If the results of our clinical studies are inconclusive or if there are safety concerns or
adverse events associated with our product candidates, we may:
● be required to change the way the product is administered;
● be sued; or
● experience damage to our reputation.
Additionally, our product candidates could potentially
cause other adverse events that have not yet been predicted. The inclusion of ill patients in our clinical studies may result in deaths
or other adverse medical events due to other therapies or medications that such patients may be using. As described above, any of these
events could prevent us from achieving or maintaining market acceptance of our product candidates and impair our ability to commercialize
our products.
If we are not able to obtain, or if there
are delays in obtaining, required regulatory approvals, we will not be able to commercialize, or will be delayed in commercializing,
our product candidates and our ability to generate revenue will be impaired.
Our product candidates and the activities associated
with its development and commercialization, including its design, testing, manufacture, release, safety, efficacy, regulatory filings,
recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, is subject to comprehensive regulation by
the FDA and other regulatory authorities in the United States and by comparable authorities in other countries. For example, in order
to commence clinical trials of our product candidates in the United States, we must file an IND and obtain FDA agreement to proceed.
The FDA may place our development program on clinical hold and require further pre-clinical testing prior to allowing our clinical trials
to proceed.
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We must obtain marketing approval in each jurisdiction
in which we market our products. Failure to obtain marketing approval for a product candidate will prevent us from commercializing the
product candidate. We have not submitted a marketing application or received approval to market any of our product candidates from regulatory
authorities in any jurisdiction. We have only limited experience in filing and supporting the applications necessary to gain marketing
approvals and expect to rely on third-party CROs to assist us in this process. Securing regulatory approval requires the submission of
extensive pre-clinical and clinical data and supporting information to the various regulatory authorities for each indication to establish
the product candidate’s safety and efficacy. Securing regulatory approval also requires the submission of information about the
product manufacturing process, testing and release and inspection of manufacturing facilities and personnel by the relevant regulatory
authority. Our product candidates may not be effective, may be only moderately effective or may prove to have undesirable or unintended
side effects, toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use.
The process of obtaining marketing approvals,
both in the United States and elsewhere, is expensive, may take many years and can vary substantially based upon a variety of factors,
including the type, complexity and novelty of the product candidate involved. We cannot assure you that we will ever obtain any marketing
approvals in any jurisdiction. Changes in marketing approval policies during the development period, changes in or the enactment of additional
statutes or regulations or changes in regulatory review for each submitted product application may cause delays in the approval or rejection
of an application. The FDA and comparable authorities in other countries have substantial discretion in the approval process and may
refuse to accept any application or may decide that our data are insufficient for approval and require additional pre-clinical or other
studies, changes in the manufacturing process or facilities or clinical trials. Moreover, approval by the FDA or an equivalent foreign
authority, including the HSA, does not ensure approval by regulatory authorities in any other countries or jurisdictions, but a failure
to obtain marketing approval in one jurisdiction may adversely impact the likelihood of approval in other jurisdictions. In addition,
varying interpretations of the data obtained from pre-clinical testing, manufacturing and product testing and clinical trials could delay,
limit or prevent marketing approval of a product candidate. Additionally, any marketing approval we ultimately obtain may be limited
or subject to restrictions or post-approval commitments that render the approved product not commercially viable.
Modifications to our products may require
new NDA approvals.
Once a particular product receives FDA approval
or clearance, expanded uses or uses in new indications of our products may require additional human clinical trials and new regulatory
approvals or clearances, including additional IND and NDA submissions and premarket approvals before we can begin clinical development,
and/or prior to marketing and sales. If the FDA requires new clearances or approvals for a particular use or indication, we may be required
to conduct additional clinical studies, which would require additional expenditures and harm our operating results. If the products are
already being used for these new indications, we may also be subject to significant enforcement actions. Conducting clinical trials and
obtaining clearances and approvals can be a time-consuming process, and delays in obtaining required future clearances or approvals could
adversely affect our ability to introduce new or enhanced products in a timely manner, which in turn would harm our future growth.
Additional delays to the completion of
clinical studies may result from modifications being made to the protocol during the clinical trial, if such modifications are warranted
and/or required by the occurrences in the given trial.
Each modification to the protocol during a clinical
trial has to be submitted to the FDA. This could result in the delay or halt of a clinical trial while the modification is evaluated.
In addition, depending on the quantity and nature of the changes made, the FDA could take the position that the data generated by the
clinical trial are not poolable because the same protocol was not used throughout the trial. This might require the enrollment of additional
subjects, which could result in the extension of the clinical trial and the FDA delaying clearance or approval of a product. Any such
delay could have a material adverse effect on our business and results of operations.
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There can be no assurance that the data
generated from our clinical trials using modified protocols will be acceptable to the FDA or other regulatory authorities.
There can be no assurance that the data generated
using modified protocols will be acceptable to the FDA or other regulatory authorities or that if future modifications during the trial
are necessary, that any such modifications will be acceptable to the FDA or other regulatory authorities. If the FDA or other regulatory
authorities believe that prior approval is required for a particular modification, they can delay or halt a clinical trial while they
evaluate additional information regarding the change.
Serious injury or death resulting from a failure
of our product candidates during current or future clinical trials could also result in the FDA or other regulatory authority delaying
our clinical trials or denying or delaying clearance or approval of a product.
Even though an adverse event may not be the result
of the failure of our product candidate, the FDA or other regulatory authority could delay or halt a clinical trial for an indefinite
period of time while an adverse event is reviewed, and likely would do so in the event of multiple such events.
Any delay or termination of our current or future
clinical trials as a result of the risks summarized above, including delays in obtaining or maintaining required approvals from the FDA
or other regulatory authorities, delays in patient enrollment, the failure of patients to continue to participate in a clinical trial,
and delays or termination of clinical trials as a result of protocol modifications or adverse events during the trials, may cause an
increase in costs and delays in the filing of any product submissions with the FDA or other regulatory authorities, delay the approval
and commercialization of our products or result in the failure of the clinical trial, which could adversely affect our business, operating
results and prospects.
Conducting successful clinical studies
may require the enrollment of large numbers of patients, and suitable patients may be difficult to identify and recruit.
Patient enrollment in clinical trials and completion
of patient participation and follow-up depends on many factors, including the size of the patient population; the nature of the trial
protocol; the attractiveness of, or the discomforts and risks associated with, the treatments received by enrolled subjects; the availability
of appropriate clinical trial investigators; support staff; and the proximity of patients to clinical sites and ability to comply with
the eligibility and exclusion criteria for participation in the clinical trial and patient compliance. For example, patients may be discouraged
from enrolling in our clinical trials if the trial protocol requires them to undergo extensive post-treatment procedures or follow-up
to assess the safety and effectiveness of our products or if they determine that the treatments received under the trial protocols are
not attractive or involve unacceptable risks or discomforts. Patients may also not participate in our clinical trials if they choose
to participate in contemporaneous clinical trials of competitive products.
The future results of our current or future
clinical trials may not support our product candidates claims or may result in the discovery of unexpected adverse side effects.
Even if our clinical trials are completed as
planned, we cannot be certain that their results will support our product candidates claims or that the FDA or foreign authorities will
agree with our conclusions regarding them. Success in pre-clinical studies and early clinical trials does not ensure that later clinical
trials will be successful, and we cannot be sure that the later trials will replicate the results of prior trials and pre-clinical studies.
The clinical trial process may fail to demonstrate that our product candidates are safe and effective for the proposed indicated uses.
If the FDA concludes that the clinical trials for any product for which we might seek clearance, has failed to demonstrate safety and
effectiveness, we would not receive FDA clearance to market that product in the United States for the indications sought.
In addition, such an outcome could cause us to
abandon a product candidate and might delay development of others. Any delay or termination of our clinical trials will delay the filing
of any product submissions with the FDA and, ultimately, our ability to commercialize our product candidates and generate revenues. It
is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of our product
candidate’s profile.
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Adverse events involving our products may
lead the FDA or other regulatory authorities to delay or deny clearance for our products or result in product recalls that could harm
our reputation, business and financial results.
Once a product receives FDA clearance or approval,
the agency has the authority to require the recall of commercialized products in the event of adverse side effects, material deficiencies
or defects in design or manufacture. The authority to require a recall must be based on an FDA finding that there is a reasonable probability
that the product would cause serious injury or death. Manufacturers may, under their own initiative, recall a product if any material
deficiency in a product is found. A government-mandated or voluntary recall by us or one of our distributors could occur as a result
of adverse side effects, impurities or other product contamination, manufacturing errors, design or labeling defects or other deficiencies
and issues. Recalls of any of our products would divert managerial and financial resources and have an adverse effect on our financial
condition and results of operations. The FDA requires that certain classifications of recalls be reported to FDA within ten working days
after the recall is initiated. Companies are required to maintain certain records of recalls, even if they are not reportable to the
FDA. We may initiate voluntary recalls involving our products in the future. A future recall announcement could harm our reputation with
customers and negatively affect our sales. In addition, the FDA and/or other regulatory agencies could take enforcement action for failing
to report the recalls when they were conducted.
Even if our product candidates receive
marketing approval, they may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in
the medical community necessary for commercial success.
If our product candidates receive marketing approval,
they may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical
community for us to achieve commercial success. If our product candidates do not achieve an adequate level of acceptance, we may not
generate sufficient product revenue to become profitable. The degree of market acceptance of our product candidates, if approved for
commercial sale, will depend on a number of factors, including:
● the efficacy and potential advantages compared to alternative therapies;
● the size of the markets in the countries in which approvals are obtained;
● our ability to offer any approved products for sale at competitive prices;
● convenience and ease of administration compared to alternative treatments;
● the willingness of physicians to prescribe these therapies;
● the strength of marketing and distribution support;
● sufficient third-party payor coverage and adequate reimbursement; and
● the prevalence and severity of any side effects.
Even if we are able to commercialize our
product candidates, such products may become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare
reform initiatives, which would harm our business.
The regulations that govern marketing approvals,
pricing, coverage, and reimbursement for new drugs vary widely from country to country. In the United States, new and future legislation
may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals.
Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins
after marketing or product-licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject
to continuing governmental control even after initial marketing approval is granted. As a result, we might obtain marketing approval
for a drug in a particular country but then be subject to price regulations that delay its commercial launch, possibly for lengthy time
periods, and negatively impact the revenue we are able to generate from the sale of the drug in that country. Adverse pricing limitations
may hinder our ability to commercialize and generate revenue from our product candidates, even if our product candidates obtain marketing
approval.
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Our ability to commercialize our current and
any future product candidates successfully also will depend in part on the extent to which coverage and adequate reimbursement for these
products and related treatments will be available from government health programs, private health insurers, integrated delivery networks
and other third-party payors. Third-party payors decide which medications they will pay for and establish reimbursement levels. A significant
trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and third-party payors have attempted
to control costs by limiting coverage and the amount of payment for particular medications. Increasingly, third-party payors are requiring
that drug companies provide predetermined discounts from list prices and are challenging the prices charged for medical products. Coverage
and reimbursement may not be available for any product that we commercialize and, if reimbursement is available, the level of reimbursement
may not be sufficient for commercial success. Coverage and reimbursement may impact the demand for, or the price of, any product candidate
for which we obtain marketing approval. If coverage and reimbursement is not available or is available only to limited levels, we may
not be able to successfully commercialize any product candidate for which we obtain marketing approval.
There may be significant delays in obtaining
coverage and adequate reimbursement for newly approved products, and coverage may be more limited than the purposes for which the product
is approved by the FDA or similar regulatory authorities outside the United States. Moreover, eligibility for coverage and reimbursement
does not imply that any product will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture,
sale and distribution. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may
not be made permanent. Coverage and reimbursement rates may vary according to the use of the drug and the medical circumstances under
which it is used may be based on reimbursement levels already set for lower cost products or procedures or may be incorporated into existing
payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare
programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may
be sold at lower prices than in the United States. Commercial third-party payors often rely upon Medicare coverage policies and payment
limitations in setting their own reimbursement policies. Our inability to promptly obtain coverage and profitable payment rates from
both government-funded programs and private payors for any approved products that we develop could have a material adverse effect on
our operating results, our ability to raise capital needed to commercialize our approved products and our overall financial condition.
Any product candidate for which we obtain
marketing approval could be subject to marketing restrictions or withdrawal from the market and we may be subject to penalties if we
fail to comply with regulatory requirements or if we experience unanticipated problems with our products.
Any product candidate for which we obtain marketing
approval, along with the manufacturing processes and facilities, post-approval clinical data, labeling, advertising and promotional activities
for such product, will be subject to continual requirements of and review by the FDA and other regulatory authorities. These requirements
include submissions of promotional materials and safety and other post-marketing information and reports, registration and listing requirements,
current Good Manufacturing Practice (“cGMP”) requirements for product facilities, quality assurance and corresponding maintenance
of records and documents and requirements regarding the distribution of samples to physicians and related recordkeeping. Even if marketing
approval of a product candidate is granted, the approval may be subject to limitations on the indicated uses for which the product may
be marketed or to the conditions of approval or contain requirements for costly post-marketing testing and surveillance to monitor the
safety or efficacy of the medicine. The FDA closely regulates the post-approval marketing and promotion of drugs to ensure that
they are marketed only for the approved indications and in accordance with the provisions of the approved labeling. However, companies
may share truthful and not misleading information that is otherwise consistent with the product’s FDA approved labeling. The FDA
imposes stringent restrictions on manufacturers’ communications regarding off-label use and if we do not comply with these restrictions,
we may be subject to enforcement actions.
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In addition, later discovery of previously unknown
problems with our products, manufacturers or manufacturing processes and facilities or failure to comply with regulatory requirements,
may result in, among other things:
● restrictions on the labeling, marketing, distribution or use of a product;
● warning or untitled letters;
● withdrawal or recall of the products from the market;
● fines, restitution or disgorgement of profits or revenue;
● suspension or withdrawal of marketing approvals;
● refusal to permit the import or export of our products;
● product seizure; and
● injunctions or the imposition of civil or criminal penalties.
We may expend our limited resources to
pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable
or for which there is a greater likelihood of success.
We have limited financial resources. As a result,
we may forego or delay pursuit of opportunities with future product candidates or for other indications that later prove to have greater
commercial potential than opportunities we pursue. Our resource allocation decisions may cause us to fail to capitalize on viable commercial
products or profitable market opportunities. Our spending on current and future research and development programs and product candidates
for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or
target markets for a particular product candidate or opportunity, we may relinquish valuable rights to that product candidate or opportunity
through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain
sole development and commercialization rights to such product candidate or opportunity.
We may be adversely affected by the coronavirus-type
pandemic.
The outbreak of the novel coronavirus (“COVID-19”)
has evolved into a global pandemic. The extent to which COVID-19 impacts our business and operating results will depend on future developments
that are highly uncertain and cannot be accurately predicted.
Due to COVID-19, our planned project timelines may be delayed due
to reduced availability of human resources or critical supplies needed to carry out such plans.
Moreover, our clinical trials may be affected
by COVID-19. Site initiation, participant recruitment and enrollment, participant dosing, availability and distribution of clinical trial
materials, study monitoring and data analysis may be paused or delayed due to changes in hospital or university policies, federal, state
or local regulations, prioritization of hospital resources toward pandemic efforts, or other reasons related to COVID-19.
The ultimate impact of COVID-19, or any other
health epidemic, is highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our
business, our clinical trials, our research programs, healthcare systems or the global economy as a whole. However, these effects could
have a material impact on our operations, and we will continue to monitor the situation closely.
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Our reliance on
third parties heightens the risks faced by our business.
We rely on suppliers, vendors and partners for
certain key aspects of our business, including support for information technology systems and certain human resource functions. We do
not control these partners, but we depend on them in ways that may be significant to us. If these parties fail to meet our expectations
or fulfill their obligations to us, we may fail to receive the expected benefits. In addition, if any of these third parties fails to
comply with applicable laws and regulations in the course of its performance of services for us, there is a risk that we may be held
responsible for such violations as well. This risk is particularly serious in emerging markets, where corruption is often prevalent and
where many of the third parties on which we rely do not have internal compliance resources comparable to our own. Any such failures by
third parties, in emerging markets or elsewhere, could adversely affect our business, reputation, financial condition or results of operations.
We intend to rely on third parties to conduct
our clinical trials and to conduct some aspects of our research and pre-clinical testing and those third parties may not perform satisfactorily,
including failing to meet deadlines for the completion of such trials, research or testing.
We expect to rely on third parties, such as CROs (contract research
organizations), CMOs (contract manufacturers) of clinical supplies, clinical data management organizations, medical institutions and clinical
investigators, to conduct our clinical trials and to conduct some aspects of our research and pre-clinical testing. These third parties
may terminate their engagements with us at any time. If these third parties do not successfully carry out their duties, meet expected
deadlines or conduct our studies in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or
may be delayed in obtaining, marketing approvals for our product candidates and will not be able to, or may be delayed in our efforts
to, successfully commercialize our product candidates. Furthermore, these third parties may also have relationships with other entities,
some of which may be our competitors. If we are required to enter into alternative arrangements, it could delay our product development
activities.
Our reliance on third parties for research and
development activities will reduce our control over these activities but will not relieve us of our responsibilities. For example, we
will remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan
and protocols for the trial. Moreover, the FDA and other international regulatory authorities require us to comply with GCP standards
for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate
and that the rights, integrity and confidentiality of trial participants are protected. We also are required to register ongoing clinical
trials and post the results of completed clinical trials on a government-sponsored database, available at www.clinicaltrials.gov, within
certain timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.
Upon commercialization of our products,
we may be dependent on third parties to market, distribute and sell our products.
Our ability to receive revenues may be dependent
upon the sales and marketing efforts of any future co-marketing partners and third-party distributors. At this time, we have not entered
into an agreement with any commercialization partner and only plan to do so prior to commercialization. If we fail to reach an agreement
with any commercialization partner, or upon reaching such an agreement that partner fails to sell a large volume of our products, it
may have a negative impact on our business, financial condition and results of operations.
We have no experience manufacturing product
candidates on a clinical or commercial scale and will be dependent on third parties for the manufacture of our product candidates. If
we experience problems with any of these third parties, they could delay clinical development or marketing approval of our product candidates
or our ability to sell any approved products.
We do not have any manufacturing facilities.
We expect to rely on third-party manufacturers for the manufacture of our product candidates for clinical trials and for commercial supply
of any product candidate for which we obtain marketing approval.
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We may be unable to establish agreements with
third-party manufacturers for clinical or commercial supply on terms favorable to us, or at all. Even if we are able to establish agreements
with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including:
● reliance on the third party for regulatory compliance and quality assurance;
Third-party manufacturers may not be able to
comply with U.S. cGMPs or similar regulatory requirements outside the United States. Our failure, or the failure of our third-party manufacturers,
to comply with cGMPs or other applicable regulations, even if such failures do not relate specifically to our product candidates or approved
products, could result in sanctions being imposed on us or the manufacturers, including fines, injunctions, civil penalties, delays,
suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates, operating restrictions and criminal
prosecutions, any of which could adversely affect supplies of our product candidates and harm our business and results of operations.
Any product that we develop may compete with
other product candidates and products for access to these manufacturing facilities. There are a limited number of manufacturers that
operate under cGMPs and that might be capable of manufacturing for us.
Any performance failure on the part of our manufacturers,
including a failure that may not relate specifically to our product candidates or approved products, could delay clinical development
or marketing approval or adversely impact our ability to generate commercial sales. If our contract manufacturers cannot perform as agreed,
we may be required to replace that manufacturer.
Our anticipated future dependence upon others
for the manufacture and supply of our current and future product candidates or products may adversely affect our future profit margins
and our ability to commercialize any product candidates that receive marketing approval on a timely and competitive basis.
Furthermore, we expect to rely on third parties
to release, label, store and distribute drug supplies for our clinical trials. Any performance failure on the part of these third parties,
including a failure that may not relate specifically to our product candidates, could delay or otherwise adversely impact clinical development
or marketing approval of our product candidates or commercialization of our drug, producing losses and depriving us of potential revenue.
Moreover, our manufacturers and suppliers may
experience difficulties related to their overall businesses and financial stability, which could result in delays or interruptions of
supply of our product candidates.
We may have conflicts with our partners
that could delay or prevent the development or commercialization of our current and future product candidates.
We may have conflicts with our partners, such
as conflicts concerning the interpretation of pre-clinical or clinical data, the achievement of milestones, the interpretation of contractual
obligations, payments for services, development obligations or the ownership of intellectual property developed during our collaboration.
If any conflicts arise with any of our partners, such partner may act in a manner that is adverse to our best interests. Any such disagreement
could result in one or more of the following, each of which could delay or prevent the development or commercialization of our current
and future product candidates, and in turn prevent us from generating revenues:
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● attempts by either party to terminate the agreement.
Our products will face significant competition,
and if they are unable to compete successfully, our business will suffer.
Our current product candidates and future candidates
face, and will continue to face, intense competition from large pharmaceutical companies, as well as academic and research institutions.
We compete in an industry that is characterized by: (i) rapid technological change, (ii) evolving industry standards, (iii) emerging
competition and (iv) new product introductions. Our competitors have existing products and technologies that will compete with our products
and technologies and may develop and commercialize additional products and technologies that will compete with our products and technologies.
Because several competing companies and institutions have greater financial resources than us, they may be able to: (i) provide broader
services and product lines, (ii) make greater investments in research and development and (iii) carry on larger research and development
initiatives than us. Our competitors also have greater development capabilities than we do and have substantially greater experience
in undertaking pre-clinical and clinical testing of products, obtaining regulatory approvals, and manufacturing and marketing pharmaceutical
products. They also have greater name recognition and better access to customers than us.
Product liability lawsuits against us could
cause us to incur substantial liabilities and to limit commercialization of any products that we may develop.
We face an inherent risk of product liability
exposure related to the testing of our current product candidates or future product candidates in human clinical trials and will face
an even greater risk if we commercially sell any products that we may develop. Product liability claims may be brought against us by
subjects enrolled in our clinical trials, patients, healthcare providers or others using, administering or selling our product. If we
cannot successfully defend ourselves against claims that our product candidates or product caused injuries, we could incur substantial
liabilities. Regardless of merit or eventual outcome, liability claims may result in:
● decreased demand for any product candidates or products that we may develop;
● termination of clinical trial sites or entire clinical trial programs;
● injury to our reputation and significant negative media attention;
● withdrawal of clinical trial participants;
● significant costs to defend the related litigation;
● substantial monetary awards to trial subjects or patients;
● loss of revenue;
● the inability to commercialize any products that we may develop.
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Prior to engaging in future clinical trials,
we intend to obtain product liability insurance coverage at a level that we believe is customary for similarly situated companies and
adequate to provide us with insurance coverage for foreseeable risks; however, we may be unable to obtain such coverage at a reasonable
cost, if at all. If we are able to obtain product liability insurance, we may not be able to maintain insurance coverage at a reasonable
cost or in an amount adequate to satisfy any liability that may arise, and such insurance may not be adequate to cover all liabilities
that we may incur. Furthermore, we intend to expand our insurance coverage for products to include the sale of commercial products if
we obtain regulatory approval for our product candidates in development, but we may be unable to obtain commercially reasonable product
liability insurance for any products that receive regulatory approval. Large judgments have been awarded in class action lawsuits
based on drugs that had unanticipated side effects. A successful product liability claim or series of claims brought against us, particularly
if judgments exceed our insurance coverage, could decrease our cash and adversely affect our business.
We may engage in acquisitions that could
disrupt our business, cause dilution to our stockholders or reduce our financial resources.
In the future, we may enter into transactions
to acquire other businesses, products or technologies. If we do identify suitable candidates, we may not be able to make such acquisitions
on favorable terms, or at all. Any acquisitions we make may fail to strengthen our competitive position and these transactions may be
viewed negatively by customers or investors. We may decide to incur debt in connection with an acquisition or issue our common stock
or other equity securities to the stockholders of the acquired company, which would reduce the percentage ownership of our existing stockholders.
We could incur losses resulting from undiscovered liabilities of the acquired business that are not covered by the indemnification we
may obtain from the seller. In addition, we may not be able to successfully integrate the acquired personnel, technologies, and operations
into our existing business in an effective, timely and non-disruptive manner. Acquisitions may also divert management attention from
day-to-day responsibilities, increase our expenses and reduce our cash available for operations and other uses. We cannot predict the
number, timing or size of future acquisitions or the effect that any such transactions might have on our operating results.
Security threats to our information technology
infrastructure and/or our physical buildings could expose us to liability and damage our reputation and business.
It is essential to our business strategy that
our technology and network infrastructure and our physical buildings remain secure and are perceived by our customers and corporate partners
to be secure. Despite security measures, however, any network infrastructure may be vulnerable to cyber-attacks by hackers and other
security threats. We may face cyber-attacks that attempt to penetrate our network security, sabotage, or otherwise disable our research,
products and services, misappropriate our or our customers’ and partners’ proprietary information, which may include personally
identifiable information, or cause interruptions of our internal systems and services. Despite security measures, we also cannot guarantee
security of our physical buildings. Physical building penetration or any cyber-attacks could negatively affect our reputation, damage
our network infrastructure and our ability to deploy our products and services, harm our relationship with customers and partners that
are affected, and expose us to financial liability.
Additionally, there are a number of state, federal
and international laws protecting the privacy and security of health information and personal data. For example, the Health Insurance
Portability and Accountability Act of 1996 (“HIPAA”) imposes limitations on the use and disclosure of an individual’s
healthcare information by healthcare providers, healthcare clearinghouses, and health insurance plans, or, collectively, covered entities,
and also grants individuals rights with respect to their health information. HIPAA also imposes compliance obligations and corresponding
penalties for non-compliance on individuals and entities that provide services to healthcare providers and other covered entities.
As part of the American Recovery and Reinvestment Act of 2009 (“ARRA”) the privacy and security provisions of HIPAA were
amended. ARRA also made significant increases in the penalties for improper use or disclosure of an individual’s health information
under HIPAA and extended enforcement authority to state attorneys general. As amended by ARRA and subsequently by the final omnibus rule
adopted in 2013, HIPAA also imposes notification requirements on covered entities in the event that certain health information has been
inappropriately accessed or disclosed, notification requirements to individuals, federal regulators, and in some cases, notification
to local and national media. Notification is not required under HIPAA if the health information that is improperly used or disclosed
is deemed secured in accordance with encryption or other standards developed by the U.S. Department of Health and Human Services. Most
states have laws requiring notification of affected individuals and/or state regulators in the event of a breach of personal information,
which is a broader class of information than the health information protected by HIPAA. Many state laws impose significant data security
requirements, such as encryption or mandatory contractual terms, to ensure ongoing protection of personal information. Activities outside
of the U.S. implicate local and national data protection standards, impose additional compliance requirements and generate additional
risks of enforcement for non-compliance. We may be required to expend significant capital and other resources to
ensure ongoing compliance with applicable privacy and data security laws, to protect against security breaches and hackers or to alleviate
problems caused by such breaches.
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We will need to grow the size of our organization
in the future, and we may experience difficulties in managing this growth.
As of December 31, 2023, we had 14 full-time employees.
We will need to grow the size of our organization in order to support our continued development and potential commercialization of our
product candidates. As our development and commercialization plans and strategies continue to develop, our need for additional managerial,
operational, manufacturing, sales, marketing, financial and other resources may increase. Our management, personnel, and systems currently
in place may not be adequate to support this future growth. Future growth would impose significant added responsibilities on members
of management, including:
● managing our clinical trials effectively;
● expanding our facilities.
If our operations expand, we will also need to
manage additional relationships with various strategic partners, suppliers and other third parties. Our future financial performance
and our ability to commercialize our product candidates and to compete effectively will depend, in part, on our ability to manage any
future growth effectively, as well as our ability to develop a sales and marketing force when appropriate. To that end, we must be able
to manage our development efforts and pre-clinical studies and clinical trials effectively and hire, train and integrate additional management,
research and development, manufacturing, administrative and sales and marketing personnel. The failure to accomplish any of these tasks
could prevent us from successfully growing our company.
Our future success depends on our ability
to retain our executive officers and to attract, retain and motivate qualified personnel.
We are highly dependent upon our personnel, including
Dr. Shalabh Gupta, our Chief Executive Officer and members of our board of directors. The loss of Dr. Gupta’s services could
impede the achievement of our research, development and commercialization objectives. We have not obtained, do not own, nor are we the
beneficiary of, key-person life insurance. Our future growth and success depend on our ability to recruit, retain, manage and motivate
our employees. The loss of any member of our senior management team or the inability to hire or retain experienced management personnel
could compromise our ability to execute our business plan and harm our operating results. Because of the specialized scientific and managerial
nature of our business, we rely heavily on our ability to attract and retain qualified scientific, technical and managerial personnel.
The competition for qualified personnel in the pharmaceutical field is intense and as a result, we may be unable to continue to attract
and retain qualified personnel necessary for the development of our business.
Our Chief Executive
Officer, Dr. Shalabh Gupta, is also the Chief Executive Officer of Globavir Biosciences, Inc. (“Globavir”) and may allocate
his time to such other business thereby causing conflicts of interest in his determination as to how much time to devote to our affairs.
Furthermore, certain members of our Board of Directors are members of the board of directors of Globavir and may allocate their time
to, among other ventures, the business of Globavir which may cause conflicts of interest with respect to their determination as to how
much time to devote to our affairs. This could have a negative impact on our ability to implement our plan of operation.
Our Chief Executive
Officer, Dr. Shalabh Gupta, is also the Chief Executive Officer of Globavir and may not commit his full time to our affairs, which may