Item 1A. Risk Factors
Risk Factor Summary
Our business is subject to substantial risk and an investment in
our securities involves various risks. Some of the material risks
include those set forth below. You should consider carefully these
risks, and those discussed under “Risk Factors” below,
before investing in our securities. These risks include, among
others:
If we are unable to effectively manage the impact of these and
other risks, our ability to operate and execute our business plan
would be substantially impaired. In turn, the value of our
securities would be materially reduced.
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Risk Factors
You should consider carefully the risks and uncertainties described
below, together with all of the other information in this Annual
Report before investing in our securities. The risks described
below are not the only risks facing our
Company. Additional risks and uncertainties not
currently known to us or that we currently deem to be immaterial
may also materially adversely affect our business, financial
condition and/or operating results. If any of the following
risks are realized, our business, financial condition and
results of operations could be materially and adversely
affected.
The COVID-19 pandemic has adversely impacted, and may continue to
adversely impact our business.
Beginning in late 2019, a new strain of coronavirus
(COVID-19) spread across the world, and the outbreak has
since been declared a pandemic by the World Health Organization.
The U.S. Secretary of Health and Human Services has also declared a
public health emergency in the United States in response to the
outbreak. Considerable uncertainty still surrounds COVID-19 and its
potential effects, and the extent of and effectiveness of responses
taken on international, national and local levels. Measures taken
to limit the impact of COVID-19, including shelter-in-place orders,
social distancing measures, travel bans and restrictions, and
business and government shutdowns resulted in significant negative
economic impacts on a global basis.
Although the negative effects of the COVID-19 pandemic appear to be
lessening, we cannot at this time accurately predict the effects of
these conditions on our operations. Uncertainties remain as to the
duration of the pandemic, the success of treatments and vaccines
designed to combat the pandemic, and the length and scope of the
travel restrictions and business closures imposed by the
governments of impacted countries and localities. The continued
COVID-19 pandemic, the spread of variants of the COVID-19 virus or
another highly transmissible and pathogenic infectious disease may
lead to the implementation of further responses, including
additional travel restrictions, government-imposed quarantines or
stay-at-home orders, and other public health safety measures, which
may result in further disruptions to our business and operations.
The COVID-19 pandemic has impacted our business and may continue to
do so as the pandemic persists. Additionally, future outbreaks may
have several adverse effects on our business, results of operations
and financial condition.
COVID-19 has also created significant disruption and volatility in
national, regional and local economies and markets. Uncertainties
related to, and perceived or experienced negative effects from
COVID-19, may cause significant volatility or decline in the
trading price of our securities, capital markets conditions and
general economic conditions. Our future results of operations and
liquidity could be adversely impacted by supply chain disruptions
and operational challenges faced by our CROs, CMOs and other
contractors. The ongoing COVID-19 pandemic, or another highly
transmissible and pathogenic infectious disease,could result in a widespread health
crisis that could adversely affect the economies and financial
markets of many countries, resulting in a further economic downturn
or a global recession. Such events may limit or restrict our
ability to access capital on favorable terms, or at all, lead to
consolidation that negatively impacts our business, weaken demand,
increase competition, cause us to reduce our capital spend further,
or otherwise disrupt our business or make it more difficult to
implement our strategic plans.
Risks Related to Product Development, Regulatory Approval and
Commercialization
We depend heavily on the success of one or more of our current CNS
drug candidates and we cannot be certain that we will be able to
obtain regulatory approval for, or successfully commercialize any
of our product candidates.
We currently have no drug products for sale and may never be able
to develop and commercialize marketable drug products. Our business
currently depends heavily on the successful development,
manufacturing, regulatory approval and commercialization of one or
more of our current CNS drug candidates, as well as, but to a more
limited extent, our ability to acquire, license or produce, develop
and commercialize additional product candidates. Each of our
current CNS drug candidates will require substantial additional
nonclinical and clinical development, manufacturing and regulatory
approval before any of them may be commercialized, and there can be
no assurance that any of them will ever achieve regulatory
approval. Any new chemical entity (NCE) we may produce through drug rescue activities
will require substantial nonclinical development, all phases of
clinical development, manufacturing and regulatory approval before
it may be commercialized. The nonclinical and clinical development
of our product candidates are, and the manufacturing and marketing
of our product candidates will be, subject to extensive and
rigorous review and regulation by numerous government authorities
in the U.S. and in other countries where we or our collaborators
intend to test and, if approved, market any product candidate.
Before obtaining regulatory approvals for the commercial sale of
any product candidate, we must demonstrate through numerous
nonclinical and clinical studies that the product candidate is safe
and effective for use in each target indication. Research and
development of product candidates in the pharmaceutical industry is
a long, expensive and uncertain process, and delay or failure can
occur at any stage of any of nonclinical or clinical studies. This
process takes many years and may also include post-marketing
studies, surveillance obligations and drug safety programs, which
would require the expenditure of substantial resources beyond the
proceeds we have raised to date. Of the large number of drug
candidates in development in the U.S., only a small percentage will
successfully complete the required FDA regulatory approval process
and will be commercialized. Accordingly, we cannot assure you that
any of our current drug candidates or any future product candidates
will be successfully developed or commercialized in the U.S. or any
market outside the U.S.
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We are not permitted to market our product candidates in the U.S.
until we receive approval of a New Drug Application
(NDA) from the FDA, or in any foreign countries until
we receive the requisite approval from such countries. Obtaining
FDA approval of a NDA is a complex, lengthy, expensive and
uncertain process. The FDA may refuse to permit the filing of our
NDA, delay, limit or deny approval of a NDA for many reasons,
including, among others:
Any of these factors, many of which are beyond our control, could
jeopardize our ability to obtain regulatory approval for and
successfully commercialize any current or future drug product
candidate we may develop. Any such setback in our pursuit of
regulatory approval for any product candidate would have a material
adverse effect on our business and prospects.
In addition, we anticipate that certain of our product candidates,
including PH94B and PH10, will be subject to regulation as
combination products, which means that they are composed of both a
drug product and device product. Although we do not contemplate
doing so, if marketed individually, each component would be subject
to different regulatory pathways and reviewed by different centers
within the FDA. Our product candidates that are considered to be
drug-device combination products will require review and
coordination by FDA’s drug and device centers prior to
approval, which may delay approval. In the U.S.,a combination product with a drug
primary mode of action generally would be reviewed and approved
pursuant to the drug approval processes under the Federal Food,
Drug and Cosmetic Act of 1938. In reviewing the NDA application for
such a product, however, FDA reviewers in the drug center could
consult with their counterparts in the device center to ensure that
the device component of the combination product met applicable
requirements regarding safety, effectiveness, durability and
performance. Under FDA
regulations, combination products are subject to cGMP requirements
applicable to both drugs and devices, including the Quality System
(QS) regulations applicable to medical devices.
Problems associated with the device component of the combination
product candidate may delay or prevent
approval.
We have been granted Fast Track designation from the FDA for
development of PH94B for the treatment of social anxiety disorder
(SAD) and AV-101 for the adjunctive treatment of major depressive
disorder (MDD) and for the treatment of neuropathic pain (NP).
However, these designations may not actually lead to faster
development or regulatory review or approval processes for PH94B or
AV-101. Further, there is no guarantee the FDA will grant Fast
Track designation for PH94B or AV-101 as a treatment option for
other CNS indications or for any of our other product candidates in
the future.
The Fast Track designation is a program offered by the FDA,
pursuant to certain mandates under the FDA Modernization Act of
1997, designed to facilitate drug development and to expedite the
review of new drugs that are intended to treat serious or
life-threatening conditions. Compounds selected must demonstrate
the potential to address unmet medical needs. The FDA’s Fast
Track designation allows for close and frequent interaction with
the FDA. A designated Fast Track drug may also be considered for
priority review with a shortened review time, rolling submission,
and accelerated approval if applicable. The designation does not,
however, guarantee FDA approval or expedited approval of any
application for the product candidate.
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In December 2017, the FDA granted Fast Track designation for
development of AV-101 for the adjunctive (add-on) treatment of MDD
in patients with an inadequate response to current antidepressants.
In September 2018, the FDA granted Fast Track designation for
development of AV-101 for the treatment of NP. In December 2019,
the FDA granted Fast Track designation for development of PH94B for
the treatment of SAD. However, these FDA Fast Track designations
may not lead to a faster development or regulatory review or
approval process for PH94B or AV-101 and the FDA may withdraw Fast
Track designation of PH94B or AV-101 if it believes that the
respective designation is no longer supported by data from our
clinical development programs.
In addition, we may apply for Fast Track designation for PH94B,
PH10 and AV-101 as a treatment option for other CNS indications.
The FDA has broad discretion whether or not to grant a Fast Track
designation, and even if we believe PH94B, PH10, AV-101 or other
product candidates may be eligible for this designation, we cannot
be sure that the FDA will grant it.
Results of earlier clinical trials may not be predictive of the
results of later-stage clinical trials.
The results of preclinical studies and early clinical trials of
PH94B, PH10, AV-101 and/or our other future product candidates, if
any, including positive results, may not be predictive of the
results of later-stage clinical trials. PH94B, PH10, AV-101 or any
other future product candidates in later stages of clinical
development may fail to show the desired safety and efficacy
results despite having progressed through nonclinical studies and
initial clinical trials. Many companies in the biopharmaceutical
industry have suffered significant setbacks in later-stage clinical
trials due to adverse safety profiles or lack of efficacy,
notwithstanding promising results in earlier studies. Similarly,
our future clinical trial results may not be successful for these
or other reasons.
Moreover, nonclinical and clinical data are often susceptible to
varying interpretations and analyses, and many companies that
believed their product candidates performed satisfactorily in
nonclinical studies and clinical trials nonetheless failed to
obtain FDA approval or approval from a similar regulatory authority
in another country. With respect to our current product candidates,
if our PALISADE Phase 3 program, including the PALISADE-1 Phase 3
clinical study of PH94B for acute treatment of anxiety in adults
with SAD, any future nonclinical or clinical study of PH94B, PH10
or AV-101 fail(s) to produce positive results, the development
timeline and regulatory approval and commercialization prospects
for PH94B, PH10 or AV-101 and, correspondingly, our business and
financial prospects, could be materially adversely
affected.
This drug candidate development risk is heightened by any changes
in planned timing or nature of clinical trials compared to
completed clinical trials. As product candidates are developed
through preclinical to early- and late-stage clinical trials
towards regulatory approval and commercialization, it is customary
that various aspects of the development program, such as
manufacturing and methods of administration, are altered along the
way in an effort to optimize processes and results. While these
types of changes are common and are intended to optimize the
product candidates for later stage clinical trials, approval and
commercialization, such changes do carry the risk that they will
not achieve these intended objectives.
For example, the results of planned clinical trials have been
affected by supply chain disruptions experienced by certain of our
CMOs as a result of the ongoing COVID-19 pandemic. In addition,
clinical development of our products may be further affected if we
or any of our collaborators seek to optimize and scale-up
production of a product candidate. In such case, we will need to
demonstrate comparability between the newly manufactured drug
substance and/or drug product relative to the previously
manufactured drug substance and/or drug product. Demonstrating
comparability may cause us to incur additional costs or delay
initiation or completion of our clinical trials, including the need
to initiate a dose escalation study and, if unsuccessful, could
require us to complete additional nonclinical or clinical studies
of our product candidates. In addition, health and safety
precautions at clinical sites related to the COVID-19 pandemic
could cause us to incur additional costs or delay initiation or
completion of planned nonclinical and clinical trials.
If serious adverse events or other undesirable side effects or
safety concerns attributable to our product candidates occur,
including PH94B in the PALISADE Phase 3 program, they may adversely
affect or delay our clinical development and commercialization of
PH94B, PH10 or AV-101.
Undesirable side effects or safety concerns caused by our product
candidates could cause us or regulatory authorities to interrupt,
delay or halt our clinical trials and could result in a more
restrictive label or the delay or denial of regulatory
approval. Although no treatment-related serious adverse events
(SAEs) were observed in any clinical trials of any of
our product candidates to date, if treatment-related SAEs or other
undesirable side effects or safety concerns, or unexpected
characteristics attributable to PH94B, PH10 and/or AV-101, are
observed in any future clinical trials, including clinical studies
in the PALISADE Phase 3 program, and/or other clinical trials
involving our drug candidates, they may adversely affect or delay
our clinical development and commercialization of the effected
product candidate, and the occurrence of these events could have a
material adverse effect on our business and financial prospects.
Results of our future clinical trials could reveal a high and
unacceptable severity and prevalence of adverse side effects. In
such an event, our trials could be suspended or terminated and the
FDA or other regulatory agency could order us to cease further
development of or deny approval of our product candidates for any
or all targeted indications. The drug-related side effects could
affect patient recruitment or the ability of enrolled patients to
complete the trial or result in potential product liability
claims.
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Additionally, if any of our product candidates receives marketing
approval and we or others later identify undesirable or
unacceptable side effects or safety concerns caused by these
product candidates, a number of potentially significant negative
consequences could result, including:
●
regulatory
authorities may withdraw, suspend, or limit approvals of such
product and require us to take them off the market;
●
regulatory
authorities may require the addition of labeling statements,
specific warnings, a contraindication or field alerts to physicians
and pharmacies;
●
regulatory
authorities may require a medication guide outlining the risks of
such side effects for distribution to patients, or that we
implement a REMS or REMS-like plan to ensure that the benefits of
the product outweigh its risks;
●
we
may be required to change the way a product is distributed or
administered, conduct additional clinical trials or change the
labeling of a product;
●
we
may be required to conduct additional post-marketing studies or
surveillance;
●
we may be subject to limitations on how we may promote the
product;
●
sales
of the product may decrease significantly;
●
we
may be subject to regulatory investigations, government enforcement
actions, litigation or product liability claims; and
●
our
products may become less competitive or our reputation may
suffer.
Any of these events could prevent us or any collaborators from
achieving or maintaining market acceptance of our product
candidates or could substantially increase commercialization costs
and expenses, which in turn could delay or prevent us from
generating significant revenue from the sale of our product
candidates.
Failures or delays in the commencement or completion of our planned
nonclinical and clinical studies of PH94B, PH10, AV-101 or other
our product candidates could result in increased costs to us and
could delay, prevent or limit our ability to generate revenue and
continue our business.
In addition to the PALISADE-1 Phase 3 clinical study, we will need
to complete at least one additional Phase 3 clinical study of
PH94B, additional toxicology and other standard nonclinical and
clinical safety studies, as well as certain other clinical studies
prior to our submission of an NDA for regulatory approval of PH94B
as an acute treatment of anxiety in adults with SAD, or for any
other anxiety disorder or phobia. For PH10, at present, we believe
we will need to complete at least one additional Phase 2 clinical
study, two pivotal Phase 3 clinical trials, additional toxicology
and other standard nonclinical and clinical safety studies, as well
as certain standard smaller clinical studies prior to the
submission of an NDA for regulatory approval of PH10 as a
stand-alone rapid-onset treatment for MDD, or any other depression
disorder. For AV-101 in combination with probenecid, at present,
for treatment of any CNS indication, we believe we will need to
complete at least one Phase 1B clinical study, two Phase 2 clinical
studies, two pivotal Phase 3 clinical trials, additional toxicology
and other standard nonclinical and clinical safety studies, as well
as certain standard smaller clinical studies prior to the
submission of an NDA for regulatory approval. Successful completion
of our nonclinical and clinical trials is a prerequisite to
submitting an NDA and, consequently, the ultimate approval required
before commercial marketing of any product candidate we may
develop. We do not know whether any of our future-planned
nonclinical and clinical trials of PH94B, PH10, AV-101 or any other
product candidate will be completed on schedule, if at all, as the
commencement and completion of nonclinical and clinical trials can
be delayed or prevented for a number of reasons, including, among
others:
● delays due to events resulting from the ongoing COVID-19 pandemic;
● negative or ambiguous results from nonclinical or clinical studies;
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● delays in validating any endpoints utilized in a clinical trial;
Clinical trials may also be delayed or terminated prior to
completion as a result of ambiguous or negative interim results. In
addition, a clinical trial may be suspended or terminated by us,
the regulatory authority, the IRBs at the sites where the IRBs are
overseeing a clinical trial, a data and safety monitoring board
(DSMB), overseeing the clinical trial at issue or other
regulatory authorities due to a number of factors, including, among
others:
● changes in government regulations or administrative actions;
● lack of adequate funding to continue nonclinical or clinical studies.
Changes in regulatory requirements, regulatory guidance or
unanticipated events during our nonclinical studies and clinical
trials of PH94B, PH10, AV-101 or other CNS product candidates may
occur, which may result in changes to nonclinical studies and
clinical trial protocols or additional nonclinical studies and
clinical trial requirements, which could result in increased costs
to us and could delay our development timeline.
Changes in regulatory requirements, guidance or unanticipated
events during our nonclinical studies and clinical trials of PH94B,
PH10, AV-101 or other CNS product candidates may force us to amend
nonclinical studies and clinical trial protocols or the regulatory
authority may impose additional nonclinical studies and clinical
trial requirements. Amendments or changes to our clinical trial
protocols would require resubmission to the regulatory authority
and IRBs for review and approval, which may adversely impact the
cost, timing or successful completion of clinical trials.
Similarly, amendments to our nonclinical studies may adversely
impact the cost, timing, or successful completion of those
nonclinical studies. If we experience delays completing, or if we
terminate, any of our nonclinical studies or clinical trials, or if
we are required to conduct additional nonclinical studies or
clinical trials, the commercial prospects for PH94B, PH10, AV-101
or other CNS product candidates may be harmed and our ability to
generate product revenue will be delayed.
We rely, and expect that we will continue to rely, on third parties
to conduct our nonclinical and clinical trials of our current CNS
product candidates and will continue to do so for any other future
CNS product candidates. If these third parties do not successfully
carry out their contractual duties and/or meet expected deadlines,
completion of our nonclinical or clinical trials and development of
PH94B, PH10, AV-101 or other CNS future product candidates may be
delayed and we may not be able to obtain regulatory approval for or
commercialize PH94B, PH10, AV-101 or other future CNS product
candidates and our business could be substantially
harmed.
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By strategic design, we do not have the extensive internal staff
resources to independently conduct nonclinical and clinical trials
of our product candidates completely on our own. We rely on our
network of strategic relationships with various academic research
centers, medical institutions, nonclinical and clinical
investigators, contract laboratories, CROs and other third parties
to assist us to conduct and complete nonclinical and clinical
trials of our product candidates. We enter into agreements with
third-party CROs to provide monitors for and to manage data for our
clinical trials, as well as provide other services necessary to
prepare for, conduct and complete clinical trials. We rely heavily
on these and other third-parties for execution of nonclinical and
clinical trials for our product candidates and we control only
certain aspects of their activities. As a result, we have less
direct control over the conduct, timing and completion of these
nonclinical and clinical trials and the management of data
developed through nonclinical and clinical trials than would be the
case if we were relying entirely upon our own internal staff
resources. Communicating with outside parties can also be
challenging, potentially leading to mistakes as well as
difficulties in coordinating activities. CROs and other outside
parties may:
● fail to comply with contractual obligations;
● experience regulatory compliance issues;
● undergo changes in priorities or become financially distressed; or
● form relationships with other entities, some of which may be our competitors.
These factors may materially adversely affect the willingness or
ability of third parties to conduct our nonclinical and clinical
trials and may subject us to unexpected cost increases that are
beyond our control. Nevertheless, we are responsible for ensuring
that each of our nonclinical studies and clinical trials is
conducted and completed in accordance with the applicable protocol,
legal, regulatory and scientific requirements and standards, and
our reliance on CROs, or independent investigators does not relieve
us of our regulatory responsibilities. We and our CROs, and any
investigator in an investigator-sponsored study are required to
comply with regulations and guidelines, including current Good
Clinical Practice regulations (cGCPs) for conducting, monitoring, recording and
reporting the results of clinical trials to ensure that the data
and results are scientifically credible and accurate, and that the
trial patients are adequately informed of the potential risks of
participating in clinical trials. These regulations are enforced by
the FDA, the Competent Authorities of the Member States of the
European Economic Area and comparable foreign regulatory
authorities for any products in clinical development. The FDA
enforces cGCP regulations through periodic inspections of clinical
trial sponsors, principal investigators and trial sites. If we, any
of our CROs or any of our third-party collaborators fail to comply
with applicable cGCPs, the clinical data generated in clinical
trials involving our product candidates may be deemed unreliable
and the FDA or comparable foreign regulatory authorities may
require us to perform additional clinical trials before approving
our marketing applications. We cannot assure you that, upon
inspection, the FDA will determine that any of our clinical trials
comply with cGCPs. In addition, our clinical trials must be
conducted with product candidates produced under cGMPs and will
require a large number of test patients. Our failure or the failure
of our CROs or other third-party collaborators to comply with these
regulations may require us to repeat clinical trials, which would
delay the regulatory approval process and could also subject us to
enforcement action up to and including civil and criminal
penalties.
Although we design our clinical trials for our product candidates,
our clinical development strategy involves having CROs and other
third-party investigators and medical institutions conduct clinical
trials of our product candidates. As a result, many important
aspects of our drug development programs are outside of our direct
control. In addition, although CROs, or independent investigators
or medical institutions, as the case may be, may not perform all of
their obligations under arrangements with us or in compliance with
applicable regulatory requirements, under certain circumstances, we
may be responsible and subject to enforcement action that may
include civil penalties up to and including criminal prosecution
for any violations of FDA laws and regulations during the conduct
of clinical trials of our product candidates. If such third parties
do not perform clinical trials of our product candidates in a
satisfactory manner, breach their obligations to us or fail to
comply with applicable regulatory requirements, the development and
commercialization of our product candidates may be delayed or our
development program materially and irreversibly harmed. In certain
cases, including the Baylor Study and other investigator-sponsored
clinical studies, we cannot control the amount and timing of
resources these third-parties devote to clinical trials involving
our product candidates. If we are unable to rely on nonclinical and
clinical data collected by our third-party collaborators, we could
be required to repeat, extend the duration of, or increase the size
of our clinical trials and this could significantly delay
commercialization and require significantly greater
expenditures.
If our relationships with one or more of our third-party
collaborators terminates, we may not be able to enter into
arrangements with alternative third-party
collaborators. If such third-party collaborators,
including our CROs, do not successfully carry out their contractual
duties or obligations or meet expected deadlines, if they need to
be replaced or if the quality or accuracy of the clinical data they
obtain is compromised due to their failure to adhere to applicable
clinical protocols, regulatory requirements or for other reasons,
any clinical trials that such third-parties are associated with may
be extended, delayed or terminated, and we may not be able to
obtain regulatory approval for or successfully develop and
commercialize our product candidates. As a result, we believe that
our financial results and the commercial prospects for our product
candidates in the subject indication would be harmed, our costs
would increase and our ability to generate revenue would be
delayed.
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We rely completely on third-parties to manufacture, formulate,
analyze, hold and distribute supplies of our CNS product candidates
for all nonclinical and clinical studies, and we intend to continue
to rely on third parties to produce all nonclinical, clinical and
commercial supplies of our CNS product candidates in the
future.
By strategic design, we do not currently have, nor do we plan to
acquire or develop, extensive internal infrastructure or technical
capabilities to manufacture, formulate, analyze, hold or distribute
supplies of our product candidates, for use in nonclinical and
clinical studies or commercial scale. As a result, with
respect to all of our product candidates, we rely, and will
continue to rely, completely on CMOs to manufacture API and
formulate, hold and distribute final drug product. The facilities
used by our CMOs to manufacture PH94B, PH10 and AV-101 API and
formulate PH94B, PH10 and AV-101 final drug product are subject to
a pre-approval inspection by the FDA and other comparable foreign
regulatory agencies to assess compliance with applicable regulatory
guidelines and requirements, including cGMPs, and may be required
to undergo similar inspections by the FDA or other comparable
foreign regulatory agencies, after we submit INDs, NDAs or relevant
foreign regulatory submission equivalent to the applicable
regulatory agency.
We do not directly control the manufacturing process or the supply
or quality of materials used in the manufacturing, analysis and
formulation of our product candidates, and, with respect to all of
our product candidates, we are completely dependent on our CMOs to
comply with all applicable cGMPs for the manufacturing of both API
and finished drug product. If our CMOs cannot secure adequate
supplies of suitable raw materials or successfully manufacture our
product candidates, including PH94B, PH10 and AV-101 API and
finished drug product, that conforms to our specifications and the
strict regulatory requirements of the FDA or applicable foreign
regulatory agencies, production of sufficient supplies of our
product candidates, including PH94B, PH10 and AV-101 API and
finished drug product, may be delayed and our CMOs may not be able
to secure and/or maintain regulatory approval for their
manufacturing facilities, or the FDA may take other actions,
including the imposition of a clinical hold. In addition, we have
no direct control over our CMOs’ ability to maintain adequate
quality control, quality assurance and qualified personnel. All of
our CMOs are engaged with other companies to supply and/or
manufacture materials or products for such other companies, which
exposes our CMOs to regulatory risks for the production of such
materials and products. As a result, failure to satisfy the
regulatory requirements for the production of those materials and
products may affect the regulatory clearance of our CMO’s
facilities generally or affect the timing of manufacture of PH94B,
PH10 and AV-101 for required or planned nonclinical and/or clinical
studies. If the FDA or an applicable foreign regulatory agency
determines now or in the future that our CMOs’ facilities are
noncompliant, we may need to find alternative manufacturing
facilities, which would adversely impact our ability to develop,
obtain regulatory approval for or market our product candidates.
Our reliance on CMOs also exposes us to the possibility that they,
or third parties with access to their facilities, will have access
to and may appropriate our trade secrets or other proprietary
information.
With respect to PH94B, PH10 and AV-101, we do not yet have
long-term supply agreements in place with our CMOs and each batch
of PH94B, PH10 and AV-101 is or will be individually contracted
under a separate supply agreement. If we engage new CMOs, such
contractors must complete an inspection by the FDA and other
applicable foreign regulatory agencies. We plan to continue to rely
upon CMOs and, potentially, collaboration partners, to manufacture
research and development scale, and, if approved, commercial
quantities of our product candidates. Although we believe our
current scale of API manufacturing for AV-101, and our contemplated
scale of API manufacturing for PH94B and PH10, and the current and
projected supply of PH94B, PH10 and AV-101 API and finished drug
product will be adequate to support our planned nonclinical and
clinical studies of PH94B, PH10 and AV-101, no assurance can be
given that unanticipated supply shortages or CMO-related delays in
the manufacture and formulation of PH94B, PH10 or AV-101 API and/or
finished drug product will not occur in the future.