Item
1A. Risk Factors
The
following is a summary of the risk factors, uncertainties and assumptions that we believe are most relevant to our business. These
are factors that, individually or in the aggregate, we think could cause our actual results to differ significantly from expected
or historical results and our forward-looking statements. We note these factors for investors as permitted by Section 21E of the
Securities Exchange Act of 1934, as amended and Section 27A of the Securities Act of 1933, as amended. Additional risks that we
currently believe are immaterial may also impair our business operations. Investors should carefully consider the risks described
below before making an investment decision and understand that it is not possible to predict or identify all such factors. Consequently,
investors should not consider the following to be a complete discussion of all potential risks or uncertainties that may impact
our business. Moreover, we operate in a competitive and rapidly changing environment. New factors emerge from time to time and
it is not possible to predict the impact of all of these factors on our business, financial condition or results of operations.
We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events,
or otherwise. The description provided in this Item 1A includes any material changes to and supersedes the description of the
risk factors associated with our business previously disclosed in Item 1A of our Annual Report on Form 10-K for the fiscal year
ended December 31, 2019 filed on March 25, 2020 with the SEC. In assessing these risks, investors should also refer to the other
information contained or incorporated by reference in this Quarterly Report and our other filings made from time to time with
the SEC.
RISKS
RELATED TO OUR BUSINESS
We
have a history of significant losses from operations and expect to continue to incur significant losses for the foreseeable future.
Since
our inception, our expenses have substantially exceeded our revenue, resulting in continuing losses and an accumulated deficit
of $296 million at March 31, 2020. For the year ended December 31, 2019 and the three months ended March 31, 2020, we incurred
net losses of $16.9 million and $5.1 million, respectively. We currently have no product revenue and do not expect to generate
any product revenue for the foreseeable future. Because we are committed to continuing our product research, development, clinical
trial and commercialization programs, we will continue to incur significant operating losses unless and until we complete the
development of ThermoDox®, GEN-1 and other new product candidates and these product candidates have been clinically tested,
approved by the United States Food and Drug Administration (FDA) and successfully marketed. The amount of future losses is uncertain.
Our ability to achieve profitability, if ever, will depend on, among other things, us or our collaborators successfully developing
product candidates, obtaining regulatory approvals to market and commercialize product candidates, manufacturing any approved
products on commercially reasonable terms, delays or setbacks we may experience associated with our preclinical studies, clinical
trials, third parties, or supply chain due to the COVID-19 pandemic, establishing a sales and marketing organization or suitable
third-party alternatives for any approved product and raising sufficient funds to finance business activities. If we or our collaborators
are unable to develop and commercialize one or more of our product candidates or if sales revenue from any product candidate that
receives approval is insufficient, we will not achieve profitability, which could have a material adverse effect on our business,
financial condition, results of operations and prospects.
We
do not expect to generate revenue for the foreseeable future.
We
have devoted our resources to developing a new generation of products and will not be able to market these products until we have
completed clinical trials and obtain all necessary governmental approvals. Our lead product candidate, ThermoDox® and the
product candidates we purchased in our acquisition of EGEN, including GEN-1, are still in various stages of development and trials
and cannot be marketed until we have completed clinical testing and obtained necessary governmental approval. Following our announcement
on January 31, 2013 that the HEAT Study failed to meet its primary endpoint of progression free survival, we continued to follow
the patients enrolled in the HEAT Study to the secondary endpoint, overall survival. Based on the overall survival data from the
post-hoc analysis of results from the HEAT Study, we launched a pivotal, double-blind, placebo-controlled Phase III trial of ThermoDox®
in combination with RFA in primary liver cancer, known as the OPTIMA Study, in the first half of 2014. GEN-1 is currently in an
early stage of clinical development for the treatment of ovarian cancer. We conducted a Phase I dose-escalation clinical trial
of GEN-1 in combination with the standard of care in neo-adjuvant ovarian cancer starting in the second half of 2015 and completing
enrollment in 2017. We also expanded our ovarian cancer development program to include a Phase I/II dose escalating trial evaluating
GEN-1 in ovarian cancer patients. Our delivery technology platforms, TheraPlas and TheraSilence, are in preclinical stages of
development. Accordingly, our revenue sources are, and will remain, extremely limited until our product candidates are clinically
tested, approved by the FDA or foreign regulatory agencies and successfully marketed. We cannot guarantee that any of our product
candidates will be approved by the FDA or any foreign regulatory agency or marketed, successfully or otherwise, at any time in
the foreseeable future or at all.
Drug
development is an inherently uncertain process with a high risk of failure at every stage of development. Our lead drug candidate
failed to meet its primary endpoint in our earlier Phase III clinical trial.
On
January 31, 2013, we announced that our lead product ThermoDox® in combination with radiofrequency ablation (RFA) failed to
meet the primary endpoint of the Phase III clinical trial for primary liver cancer, known as the HEAT study. We have not completed
our final analysis of the data and do not know the extent to which, if any, the failure of ThermoDox® to meet its primary
endpoint in the Phase III trial could impact our other ongoing studies of ThermoDox® including a pivotal, double-blind, placebo-controlled
Phase III trial of ThermoDox® in combination with RFA in primary liver cancer, known as the OPTIMA study, which we launched
in the first half of 2014. The trial design of the OPTIMA study is based on the overall survival data from the post-hoc analysis
of results from the HEAT study. ThermoDox® is also being evaluated in a Phase II clinical trial for recurrent chest wall breast
cancer and other preclinical studies. In addition, we have initiated a Phase I dose-escalation clinical trial of GEN-1 in combination
with the standard of care in neo-adjuvant ovarian cancer, known as the OVATION Study, and plan to expand our ovarian cancer development
program to include a Phase I/II dose escalating trial evaluating GEN-1, known as the OVATION II Study, in ovarian cancer patients.
Preclinical
testing and clinical trials are long, expensive and highly uncertain processes and failure can unexpectedly occur at any stage
of clinical development, as evidenced by the failure of ThermoDox® to meet its primary endpoint in the HEAT study. Drug development
is inherently risky and clinical trials take us several years to complete. The start or end of a clinical trial is often delayed
or halted due to changing regulatory requirements, manufacturing challenges, required clinical trial administrative actions, slower
than anticipated patient enrollment, changing standards of care, availability or prevalence of use of a comparator drug or required
prior therapy, clinical outcomes including insufficient efficacy, safety concerns, or our own financial constraints. The results
from preclinical testing or early clinical trials of a product candidate may not predict the results that will be obtained in
later phase clinical trials of the product candidate. We, the FDA or other applicable regulatory authorities may suspend clinical
trials of a product candidate at any time for various reasons, including a belief that subjects participating in such trials are
being exposed to unacceptable health risks or adverse side effects. We may not have the financial resources to continue development
of, or to enter into collaborations for, a product candidate if we experience any problems or other unforeseen events that delay
or prevent regulatory approval of, or our ability to commercialize, product candidates. The failure of one or more of our drug
candidates or development programs could have a material adverse effect on our business, financial condition and results of operations.
We
will need to raise additional capital to fund our planned future operations, and we may be unable to secure such capital without
dilutive financing transactions. If we are not able to raise additional capital, we may not be able to complete the development,
testing and commercialization of our product candidates.
We
have not generated significant revenue and have incurred significant net losses in each year since our inception. For the year
ended December 31, 2019 and the three months ended March 31, 2020, we incurred net losses of $16.9 million and $5.1 million, respectively.
We have incurred approximately $296 million of cumulative net losses. As of March 31, 2020, cash, cash equivalents and short-term
investments, related interest receivable on short-term investments and receivable on sale of its New Jersey net operating losses
of $17.5 million.
We
have substantial future capital requirements to continue our research and development activities and advance our product candidates
through various development stages. For example, ThermoDox® is being evaluated in a Phase III clinical trial in combination
with RFA for the treatment of primary liver cancer and other preclinical studies. We completed a Phase I dose-escalation clinical
trial of GEN-1 in combination with the standard of care in neo-adjuvant ovarian cancer in the third quarter of 2017 and expanded
our clinical development program for GEN-1 into a follow-on Phase I/II trial for newly diagnosed ovarian cancer in 2018.
To
complete the development and commercialization of our product candidates, we will need to raise substantial amounts of additional
capital to fund our operations. Our future capital requirements will depend upon numerous unpredictable factors, including, without
limitation, the cost, timing, progress and outcomes of clinical studies and regulatory reviews of our proprietary drug candidates,
including any unforeseen delays or increased costs we may incur as a result of the COVID-19 pandemic or other causes, our efforts
to implement new collaborations, licenses and strategic transactions, general and administrative expenses, capital expenditures
and other unforeseen uses of cash. We do not have any committed sources of financing and cannot assure you that alternate funding
will be available in a timely manner, on acceptable terms or at all. We may need to pursue dilutive equity financings, such as
the issuance of shares of common stock, convertible debt or other convertible or exercisable securities. Such dilutive equity
financings could dilute the percentage ownership of our current common stockholders and could significantly lower the market value
of our common stock. In addition, a financing could result in the issuance of new securities that may have rights, preferences
or privileges senior to those of our existing stockholders.
If we are unable to obtain additional
capital on a timely basis or on acceptable terms, we may be required to delay, reduce or terminate our research and development
programs and preclinical studies or clinical trials, if any, limit strategic opportunities or undergo corporate restructuring
activities. We also could be required to seek funds through arrangements with collaborators or others that may require us to relinquish
rights to some of our technologies, product candidates or potential markets or that could impose onerous financial or other terms.
Furthermore, if we cannot fund our ongoing development and other operating requirements, particularly those associated with our
obligations to conduct clinical trials under our licensing agreements, we will be in breach of these licensing agreements and
could therefore lose our license rights, which could have material adverse effects on our business.
If
we do not obtain or maintain FDA and foreign regulatory approvals for our drug candidates on a timely basis, or at all, or if
the terms of any approval impose significant restrictions or limitations on use, we will be unable to sell those products and
our business, results of operations and financial condition will be negatively affected.
To
obtain regulatory approvals from the FDA and foreign regulatory agencies, we must conduct clinical trials demonstrating that our
products are safe and effective. We may need to amend ongoing trials, or the FDA and/or foreign regulatory agencies may require
us to perform additional trials beyond those we planned. The testing and approval process require substantial time, effort and
resources, and generally takes a number of years to complete. The time to complete testing and obtaining approvals is uncertain,
and the FDA and foreign regulatory agencies have substantial discretion, at any phase of development, to terminate clinical studies,
require additional clinical studies or other testing, delay or withhold approval, and mandate product withdrawals, including recalls.
In addition, our drug candidates may have undesirable side effects or other unexpected characteristics that could cause us or
regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restricted label or the delay or
denial of regulatory approval by regulatory authorities.
Even
if we receive regulatory approval of a product, the approval may limit the indicated uses for which the drug may be marketed.
The failure to obtain timely regulatory approval of product candidates, the imposition of marketing limitations, or a product
withdrawal would negatively impact our business, results of operations and financial condition. Even if we receive approval, we
will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional
expense and subject us to restrictions, withdrawal from the market, or penalties if we fail to comply with applicable regulatory
requirements or if we experience unanticipated problems with our product candidates, when and if approved. Finally, even if we
obtain FDA approval of any of our product candidates, we may never obtain approval or commercialize such products outside of the
United States, given that we may be subject to additional or different regulatory burdens in other markets. This could limit our
ability to realize their full market potential.
Our
industry is highly regulated by the FDA and comparable foreign regulatory agencies. We must comply with extensive, strictly enforced
regulatory requirements to develop, obtain, and maintain marketing approval for any of our product candidates.
Securing
FDA or comparable foreign regulatory approval requires the submission of extensive preclinical and clinical data and supporting
information for each therapeutic indication to establish the product candidate’s safety and efficacy for its intended use.
It takes years to complete the testing of a new drug or biological product and development delays and/or failure can occur at
any stage of testing. Any of our present and future clinical trials may be delayed, halted, not authorized, or approval of any
of our products may be delayed or may not be obtained due to any of the following:
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factors
related to the COVID-19 pandemic, including regulators or institutional review boards, or IRBs, or ethics committees may not
authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site
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any
preclinical test or clinical trial may fail to produce safety and efficacy results satisfactory to the FDA or comparable foreign
regulatory authorities;
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preclinical
and clinical data can be interpreted in different ways, which could delay, limit or prevent marketing approval;
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negative
or inconclusive results from a preclinical test or clinical trial or adverse events during a clinical trial could cause a
preclinical study or clinical trial to be repeated or a development program to be terminated, even if other studies relating
to the development program are ongoing or have been completed and were successful;
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the
FDA or comparable foreign regulatory authorities can place a clinical hold on a trial if, among other reasons, it finds that
subjects enrolled in the trial are or would be exposed to an unreasonable and significant risk of illness or injury;
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the
facilities that we utilize, or the processes or facilities of third-party vendors, including without limitation the contract
manufacturers who will be manufacturing drug substance and drug product for us or any potential collaborators, may not satisfactorily
complete inspections by the FDA or comparable foreign regulatory authorities; and
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we
may encounter delays or rejections based on changes in FDA policies or the policies of comparable foreign regulatory authorities
during the period in which we develop a product candidate, or the period required for review of any final marketing approval
before we are able to market any product candidate.
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addition, information generated during the clinical trial process is susceptible to varying interpretations that could delay,
limit, or prevent marketing approval at any stage of the approval process. Moreover, early positive preclinical or clinical trial
results may not be replicated in later clinical trials. As more product candidates within a particular class of drugs proceed
through clinical development to regulatory review and approval, the amount and type of clinical data that may be required by regulatory
authorities may increase or change. Failure to demonstrate adequately the quality, safety, and efficacy of any of our product
candidates would delay or prevent marketing approval of the applicable product candidate. We cannot assure you that if clinical
trials are completed, either we or our potential collaborators will submit applications for required authorizations to manufacture
or market potential products or that any such application will be reviewed and approved by appropriate regulatory authorities
in a timely manner, if at all.
Separately,
in response to the COVID-19 global pandemic, on March 10, 2020, the FDA announced its intention to postpone most inspections of
foreign manufacturing facilities and products through at least April 2020, though no set end date has been determined. On March
18, 2020, the FDA announced its intention to temporarily postpone routine surveillance inspections of domestic manufacturing facilities.
Regulatory authorities outside the United States may adopt similar restrictions or other policy measures in response to the COVID-19
pandemic and provide guidance regarding the conduct of clinical trials , which guidance continues to evolve. In April 2020, the
FDA stated that its New Drug Program was continuing to meet program user fee performance goals, but due to many agency staff working
on COVID-19 activities, it was possible that the FDA would not be able to sustain that level of performance indefinitely. If global
health concerns continue to prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews
or other regulatory activities, it could significantly impact the ability of the FDA to timely review and process our regulatory
submissions, which could have a material adverse effect on our business
The
outbreak of the novel coronavirus disease, COVID-19, could adversely impact our business, including our preclinical studies and
clinical trials.
In
December 2019, a novel strain of coronavirus, severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), was identified in
Wuhan, China. This disease resulting from SARS-CoV-2, COVID-19, has now become a global pandemic. The outbreak and government
measures taken in response have had a significant impact, both directly and indirectly, on businesses and commerce throughout
the world generally: worker shortages have occurred; supply chains have been disrupted; facilities and production have been suspended;
and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and
services, such as travel, has fallen. In response to the spread of COVID-19, our personnel have mainly been continuing their work
outside of our offices. While, as of the date of this report, we have not experienced any material disruptions to the execution
of the clinical trials and the research and development activities that we currently have underway, as a result of the pandemic
we may experience disruptions that could severely impact research and development timelines and outcomes, including, but not limited
to:
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delays
or difficulties in enrolling patients in our clinical trials;
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delays
or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical
site staff;
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diversion
of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical
trial sites and hospital staff supporting the conduct of our clinical trials;
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interruption
of key clinical trial activities, such as clinical trial site data monitoring, due to limitations on travel imposed or recommended
by federal, state or foreign governments, employers and others or interruption of clinical trial subject visits and study
procedures (such as procedures that are deemed non-essential under law, regulation or institutional policies), which may impact
the integrity of subject data and clinical study endpoints;
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interruption
or delays in the operations of the FDA or other regulatory authorities, which may impact review and approval timelines;
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interruption
of, or delays in receiving, supplies of our product candidates from our contract manufacturing organizations due to staffing
shortages, production slowdowns or stoppages and disruptions in delivery systems;
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interruptions
in preclinical studies due to restricted or limited operations at our contracted research facilities;
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unforeseen
costs we may incur as a result of the impact of the COVID-19 pandemic, including the costs of mitigation efforts;
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deterioration
of worldwide credit and financial markets that could limit our ability to obtain external financing to fund our operations
and capital expenditures;
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investment-related
risks, including difficulties in liquidating investments due to current market conditions and adverse investment performance;
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limitations
on employee resources that would otherwise be focused on the conduct of our research and development activities, including
because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people;
or
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interruptions
or limitations of the types described affecting our service providers and collaboration partners, including contract research
organizations running clinical trials and collaboration partners sponsoring clinical trials in which we are supplying our
product candidates or otherwise participating.
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addition, the trading prices for common stock of other biopharmaceutical companies have been highly volatile as a result of the
COVID-19 pandemic. The COVID-19 pandemic continues
to rapidly evolve. The extent to which the outbreak impacts our business, preclinical studies and clinical trials will depend
on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread
of the disease, the duration of the pandemic, travel restrictions and social distancing in the United States and other countries,
business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to diagnose,
contain and treat the disease. If we or any of the third parties with whom we engage were to experience shutdowns or other business
disruptions, our ability to conduct our business and development activities in the manner and on the timelines presently planned
could be materially and negatively impacted. There can be no assurance that any such disruptions or delays will not materially
adversely impact our business, results of operations, access to financial resources and our financial condition.
New
gene-based products for therapeutic applications are subject to extensive regulation by the FDA and comparable agencies in other
countries. The precise regulatory requirements with which we will have to comply, now and in the future, are uncertain due to
the novelty of the gene-based products we are developing.
The
regulatory approval process for novel product candidates such as ours can be significantly more expensive and take longer than
for other, better known or more extensively studied product candidates. Limited data exist regarding the safety and efficacy of
DNA-based therapeutics compared with conventional therapeutics, and government regulation of DNA-based therapeutics is evolving.
Regulatory requirements governing gene and cell therapy products have changed frequently and may continue to change in the future.
The FDA has established the Office of Cellular, Tissue and Gene Therapies within its Center for Biologics Evaluation and Research
(CBER), to consolidate the review of gene therapy and related products, and has established the Cellular, Tissue and Gene Therapies
Advisory Committee to advise CBER in its review. It is difficult to determine how long it will take or how much it will cost to
obtain regulatory approvals for our product candidates in either the U.S. or the European Union or how long it will take to commercialize
our product candidates.
Adverse
events or the perception of adverse events in the field of gene therapy generally, or with respect to our product candidates specifically,
may have a particularly negative impact on public perception of gene therapy and result in greater governmental regulation, including
future bans or stricter standards imposed on gene-based therapy clinical trials, stricter labeling requirements and other regulatory
delays in the testing or approval of our potential products. For example, if we were to engage an NIH-funded institution to conduct
a clinical trial, we may be subject to review by the NIH Office of Biotechnology Activities’ Recombinant DNA Advisory Committee
(the RAC). If undertaken, RAC can delay the initiation of a clinical trial, even if the FDA has reviewed the trial design and
details and approved its initiation. Conversely, the FDA can put an investigational new drug (IND) application on a clinical hold
even if the RAC has provided a favorable review or an exemption from in-depth, public review. Such committee and advisory group
reviews and any new guidelines they promulgate may lengthen the regulatory review process, require us to perform additional studies,
increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization
of our product candidates or lead to significant post-approval limitations or restrictions. Any increased scrutiny could delay
or increase the costs of our product development efforts or clinical trials.
Even
if our products receive regulatory approval, they may still face future development and regulatory difficulties. Government regulators
may impose significant restrictions on a product’s indicated uses or marketing or impose ongoing requirements for potentially
costly post-approval studies. This governmental oversight may be particularly strict with respect to gene-based therapies.
Serious
adverse events, undesirable side effects or other unexpected properties of our product candidates may be identified during development
or after approval, which could lead to the discontinuation of our clinical development programs, refusal by regulatory authorities
to approve our product candidates or, if discovered following marketing approval, revocation of marketing authorizations or limitations
on the use of our product candidates thereby limiting the commercial potential of such product candidate.
As
we continue our development of our product candidates and initiate clinical trials of our additional product candidates, serious
adverse events, undesirable side effects or unexpected characteristics may emerge causing us to abandon these product candidates
or limit their development to more narrow uses or subpopulations in which the serious adverse events, undesirable side effects
or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective.
Even
if our product candidates initially show promise in these early clinical trials, the side effects of drugs are frequently only
detectable after they are tested in large, Phase 3 clinical trials or, in some cases, after they are made available to patients
on a commercial scale after approval. Sometimes, it can be difficult to determine if the serious adverse or unexpected side effects
were caused by the product candidate or another factor, especially in oncology subjects who may suffer from other medical conditions
and be taking other medications. If serious adverse or unexpected side effects are identified during development and are determined
to be attributed to our product candidate, we may be required to develop a Risk Evaluation and Mitigation Strategy (REMS) to mitigate
those serious safety risks, which could impose significant distribution and use restrictions on our products.
In
addition, drug-related side effects could also affect subject recruitment or the ability of enrolled subjects to complete the
trial, result in potential product liability claims, reputational harm, withdrawal of approvals, a requirement to include additional
warnings on the label or to create a medication guide outlining the risks of such side effects for distribution to patients. It
can also result in patient harm, liability lawsuits, and reputational harm. Any of these occurrences could prevent us from achieving
or maintaining market acceptance and may harm our business, financial condition and prospects significantly.
If
we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise
adversely affected.
We
may experience difficulties in patient enrollment in our clinical trials for a variety of reasons. The timely completion of clinical
trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number of patients
who remain in the trial until its conclusion. The enrollment of patients depends on many factors, including:
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the
patient eligibility and exclusion criteria defined in the protocol;
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the
size of the patient population required for analysis of the trial’s primary endpoints and the process for identifying
patients;
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delays
in our research programs resulting from factors related to the COVID-19 pandemic;
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the
willingness or availability of patients to participate in our trials;
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the
proximity of patients to trial sites;
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the
design of the trial;
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our
ability to recruit clinical trial investigators with the appropriate competencies and experience;
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clinicians’
and patients’ perceptions as to the potential advantages and risks of the product candidate being studied in relation
to other available therapies, including any new products that may be approved for the indications we are investigating;
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the
availability of competing commercially available therapies and other competing drug candidates’ clinical trials;
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our
ability to obtain and maintain patient informed consents; and
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the
risk that patients enrolled in clinical trials will drop out of the trials before completion.
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addition, our clinical trials will compete with other clinical trials for product candidates that are in the same therapeutic
areas as our product candidates, and this competition will reduce the number and types of patients available to us, because some
patients who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one of our competitors.
Since the number of qualified clinical investigators is limited, we expect to conduct some of our clinical trials at the same
clinical trial sites that some of our competitors use, which will reduce the number of patients who are available for our clinical
trials in such clinical trial site. Certain of our planned clinical trials may also involve invasive procedures, which may lead
some patients to drop out of trials to avoid these follow-up procedures.
Further,
timely enrollment in clinical trials is reliant on clinical trial sites which may be adversely affected by global health matters,
including, among other things, pandemics. For example, our clinical trial sites may be located in regions currently being affected
by the COVID-19 coronavirus. Some factors from the COVID-19 coronavirus outbreak that we believe may adversely affect enrollment
in our trials include:
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the
diversion of healthcare resources away from the conduct of clinical trial matters to focus on pandemic concerns, including
the attention of infectious disease physicians serving as our clinical trial investigators, hospitals serving as our clinical
trial sites and hospital staff supporting the conduct of our clinical trials;
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patients
who would otherwise be candidates for enrollment in our clinical trials, may become infected with the COVID-19 coronavirus,
which may kill some patients and render others too ill to participate, limiting the available pool of participants for our
trials;
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limitations
on travel that interrupt key trial activities, such as clinical trial site initiations and monitoring;
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interruption
in global shipping affecting the transport of clinical trial materials, such as investigational drug product and comparator
drugs used in our trials; and
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employee
furlough days that delay necessary interactions with local regulators, ethics committees and other important agencies and
contractors.
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These
and other factors arising from the COVID-19 coronavirus could worsen in countries that are already afflicted with the virus or
could continue to spread to additional countries, each of which may further adversely impact our clinical trials. The global outbreak
of the COVID-19 coronavirus continues to evolve and the conduct of our trials may continue to be adversely affected, despite efforts
to mitigate this impact.
We
may not successfully engage in future strategic transactions, which could adversely affect our ability to develop and commercialize
product candidates, impact our cash position, increase our expense and present significant distractions to our management.
In
the future, we may consider strategic alternatives intended to further the development of our business, which may include acquiring
businesses, technologies or products, out- or in-licensing product candidates or technologies or entering into a business combination
with another company. Any strategic transaction may require us to incur non-recurring or other charges, increase our near- and
long-term expenditures and pose significant integration or implementation challenges or disrupt our management or business. These
transactions would entail numerous operational and financial risks, including exposure to unknown liabilities, disruption of our
business and diversion of our management’s time and attention in order to manage a collaboration or develop acquired products,
product candidates or technologies, incurrence of substantial debt or dilutive issuances of equity securities to pay transaction
consideration or costs, higher than expected collaboration, acquisition or integration costs, write-downs of assets or goodwill
or impairment charges, increased amortization expenses, difficulty and cost in facilitating the collaboration or combining the
operations and personnel of any acquired business, impairment of relationships with key suppliers, manufacturers or customers
of any acquired business due to changes in management and ownership and the inability to retain key employees of any acquired
business. Accordingly, although there can be no assurance that we will undertake or successfully complete any transactions of
the nature described above, any transactions that we do complete may be subject to the foregoing or other risks and have a material
adverse effect on our business, results of operations, financial condition and prospects. Conversely, any failure to enter any
strategic transaction that would be beneficial to us could delay the development and potential commercialization of our product
candidates and have a negative impact on the competitiveness of any product candidate that reaches market.
Strategic
transactions, such as acquisitions, partnerships and collaborations, including the EGEN asset acquisition, involve numerous risks,
including:
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the
failure of markets for the products of acquired businesses, technologies or product lines to develop as expected;
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uncertainties
in identifying and pursuing acquisition targets;
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the
challenges in achieving strategic objectives, cost savings and other benefits expected from acquisitions;
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the
risk that the financial returns on acquisitions will not support the expenditures incurred to acquire such businesses or the
capital expenditures needed to develop such businesses;
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difficulties
in assimilating the acquired businesses, technologies or product lines;
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the
failure to successfully manage additional business locations, including the additional infrastructure and resources necessary
to support and integrate such locations;
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the
existence of unknown product defects related to acquired businesses, technologies or product lines that may not be identified
due to the inherent limitations involved in the due diligence process of an acquisition;
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the
diversion of management’s attention from other business concerns;
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risks
associated with entering markets or conducting operations with which we have no or limited direct prior experience;
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risks
associated with assuming the legal obligations of acquired businesses, technologies or product lines;
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risks
related to the effect that internal control processes of acquired businesses might have on our financial reporting and management’s
report on our internal control over financial reporting;
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the
potential loss of key employees related to acquired businesses, technologies or product lines; and
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the
incurrence of significant exit charges if products or technologies acquired in business combinations are unsuccessful.
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We
may never realize the perceived benefits of the EGEN asset acquisition or potential future transactions. We cannot assure you
that we will be successful in overcoming problems encountered in connection with any transactions, and our inability to do so
could significantly harm our business, results of operations and financial condition. These transactions could dilute a stockholder’s
investment in us and cause us to incur debt, contingent liabilities and amortization/impairment charges related to intangible
assets, all of which could materially and adversely affect our business, results of operations and financial condition. In addition,
our effective tax rate for future periods could be negatively impacted by the EGEN asset acquisition or potential future transactions.
Our
business depends on license agreements with third parties to permit us to use patented technologies. The loss of any of our rights
under these agreements could impair our ability to develop and market our products.
Our
success will depend, in a substantial part, on our ability to maintain our rights under license agreements granting us rights
to use patented technologies. For instance, we are party to license agreements with Duke University, under which we have exclusive
rights to commercialize medical treatment products and procedures based on Duke’s thermo-sensitive liposome technology.
The Duke University license agreement contains a license fee, royalty and/or research support provisions, testing and regulatory
milestones, and other performance requirements that we must meet by certain deadlines. If we breach any provisions of the license
and research agreements, we may lose our ability to use the subject technology, as well as compensation for our efforts in developing
or exploiting the technology. Any such loss of rights and access to technology could have a material adverse effect on our business.
Further,
we cannot guarantee that any patent or other technology rights licensed to us by others will not be challenged or circumvented
successfully by third parties, or that the rights granted will provide adequate protection. We may be required to alter any of
our potential products or processes or enter into a license and pay licensing fees to a third party or cease certain activities.
There can be no assurance that we can obtain a license to any technology that we determine we need on reasonable terms, if at
all, or that we could develop or otherwise obtain alternate technology. If a license is not available on commercially reasonable
terms or at all, our business, results of operations, and financial condition could be significantly harmed, and we may be prevented
from developing and commercializing the product. Litigation, which could result in substantial costs, may also be necessary to
enforce any patents issued to or licensed by us or to determine the scope and validity of another’s claimed proprietary
rights.
If
any of our pending patent applications do not issue, or are deemed invalid following issuance, we may lose valuable intellectual
property protection.
The
patent positions of pharmaceutical and biotechnology companies, such as ours, are uncertain and involve complex legal and factual
issues. We own various U.S. and international patents and have pending U.S. and international patent applications that cover various
aspects of our technologies. There can be no assurance that patents that have issued will be held valid and enforceable in a court
of law through the entire patent term. Even for patents that are held valid and enforceable, the legal process associated with
obtaining such a judgment is time consuming and costly. Additionally, issued patents can be subject to opposition, interferences
or other proceedings that can result in the revocation of the patent or maintenance of the patent in amended form (and potentially
in a form that renders the patent without commercially relevant or broad coverage). Further, our competitors may be able to circumvent
and otherwise design around our patents. Even if a patent is issued and enforceable, because development and commercialization
of pharmaceutical products can be subject to substantial delays, patents may expire early and provide only a short period of protection,
if any, following the commercialization of products encompassed by our patents. We may have to participate in interference proceedings
declared by the U.S. Patent and Trademark Office, which could result in a loss of the patent and/or substantial cost to us.
We
have filed patent applications, and plan to file additional patent applications, covering various aspects of our technologies
and our proprietary product candidates. There can be no assurance that the patent applications for which we apply would actually
issue as patents or do so with commercially relevant or broad coverage. The coverage claimed in a patent application can be significantly
reduced before the patent is issued. The scope of our claim coverage can be critical to our ability to enter into licensing transactions
with third parties and our right to receive royalties from our collaboration partnerships. Since publication of discoveries in
scientific or patent literature often lags behind the date of such discoveries, we cannot be certain that we were the first inventor
of inventions covered by our patents or patent applications. In addition, there is no guarantee that we will be the first to file
a patent application directed to an invention.
An
adverse outcome in any judicial proceeding involving intellectual property, including patents, could subject us to significant
liabilities to third parties, require disputed rights to be licensed from or to third parties or require us to cease using the
technology in dispute. In those instances where we seek an intellectual property license from another, we may not be able to obtain
the license on a commercially reasonable basis, if at all, thereby raising concerns on our ability to freely commercialize our
technologies or products.
We
rely on trade secret protection and other unpatented proprietary rights for important proprietary technologies, and any loss of
such rights could harm our business, results of operations and financial condition.
We
rely on trade secrets and confidential information that we seek to protect, in part, by confidentiality agreements with our corporate
partners, collaborators, employees and consultants. We cannot assure you that these agreements are adequate to protect our trade
secrets and confidential information or will not be breached or, if breached, we will have adequate remedies. Furthermore, others
may independently develop substantially equivalent confidential and proprietary information or otherwise gain access to our trade
secrets or disclose such technology. Any loss of trade secret protection or other unpatented proprietary rights could harm our
business, results of operations and financial condition.
Our
products may infringe patent rights of others, which may require costly litigation and, if we are not successful, could cause
us to pay substantial damages or limit our ability to commercialize our products.
Our
commercial success depends on our ability to operate without infringing the patents and other proprietary rights of third parties.
There may be third party patents that relate to our products and technology. We may unintentionally infringe upon valid patent
rights of third parties. Although we currently are not involved in any material litigation involving patents, a third-party patent
holder may assert a claim of patent infringement against us in the future. Alternatively, we may initiate litigation against the
third-party patent holder to request that a court declare that we are not infringing the third party’s patent and/or that
the third party’s patent is invalid or unenforceable. If a claim of infringement is asserted against us and is successful,
and therefore we are found to infringe, we could be required to pay damages for infringement, including treble damages if it is
determined that we knew or became aware of such a patent and we failed to exercise due care in determining whether or not we infringed
the patent. If we have supplied infringing products to third parties or have licensed third parties to manufacture, use or market
infringing products, we may be obligated to indemnify these third parties for damages they may be required to pay to the patent
holder and for any losses they may sustain.
We
can also be prevented from selling or commercializing any of our products that use the infringing technology in the future, unless
we obtain a license from such third party. A license may not be available from such third party on commercially reasonable terms
or may not be available at all. Any modification to include a non-infringing technology may not be possible, or if possible, may
be difficult or time-consuming to develop, and require revalidation, which could delay our ability to commercialize our products.
Any infringement action asserted against us, even if we are ultimately successful in defending against such action, would likely
delay the regulatory approval process of our products, harm our competitive position, be expensive and require the time and attention
of our key management and technical personnel.
We
rely on third parties to conduct all of our clinical trials. If these third parties are unable to carry out their contractual
duties in a manner that is consistent with our expectations, comply with budgets and other financial obligations or meet expected
deadlines, we may not receive certain development milestone payments or be able to obtain regulatory approval for or commercialize
our product candidates in a timely or cost-effective manner.
We
do not independently conduct clinical trials for our drug candidates. We rely, and expect to continue to rely, on third-party
clinical investigators, clinical research organizations (CROs), clinical data management organizations and consultants to design,
conduct, supervise and monitor our clinical trials.
Because
we do not conduct our own clinical trials, we must rely on the efforts of others and have reduced control over aspects of these
activities, including, the timing of such trials, the costs associated with such trials and the procedures that are followed for
such trials. We do not expect to significantly increase our personnel in the foreseeable future and may continue to rely on third
parties to conduct all of our future clinical trials. If we cannot contract with acceptable third parties on commercially reasonable
terms or at all, if these third parties are unable to carry out their contractual duties or obligations in a manner that is consistent
with our expectations or meet expected deadlines, if they do not carry out the trials in accordance with budgeted amounts, if
the quality or accuracy of the clinical data they obtain is compromised due to their failure to adhere to our clinical protocols
or for other reasons, or if they fail to maintain compliance with applicable government regulations and standards, our clinical
trials may be extended, delayed or terminated or may become significantly more expensive, we may not receive development milestone
payments when expected or at all, and we may not be able to obtain regulatory approval for or successfully commercialize our product
candidates.
Despite
our reliance on third parties to conduct our clinical trials, we are ultimately 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 requires
clinical trials to be conducted in accordance with good clinical practices 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 clinical 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, ClinicalTrials.gov, within certain timeframes. Failure
to do so can result in fines, adverse publicity and civil and criminal sanctions. Our reliance on third parties that we do not
control does not relieve us of these responsibilities and requirements. If we or a third party we rely on fails to meet these
requirements, we may not be able to obtain, or may be delayed in obtaining, marketing authorizations for our drug candidates and
will not be able to, or may be delayed in our efforts to, successfully commercialize our drug candidates. This could have a material
adverse effect on our business, financial condition, results of operations and prospects.
Because
we rely on third party manufacturing and supply partners, our supply of research and development, preclinical and clinical development
materials may become limited or interrupted or may not be of satisfactory quantity or quality.
We
rely on third party supply and manufacturing partners to supply the materials and components for, and manufacture, our research
and development, preclinical and clinical trial drug supplies. We do not own manufacturing facilities or supply sources for such
components and materials. There can be no assurance that our supply of research and development, preclinical and clinical development
drugs and other materials will not be limited, interrupted, restricted in certain geographic regions or of satisfactory quality
or continue to be available at acceptable prices. Suppliers and manufacturers must meet applicable manufacturing requirements
and undergo rigorous facility and process validation tests required by FDA and foreign regulatory authorities in order to comply
with regulatory standards, such as current Good Manufacturing Practices. In the event that any of our suppliers or manufacturers
fails to comply with such requirements or to perform its obligations to us in relation to quality, timing or otherwise, or if
our supply of components or other materials becomes limited or interrupted for other reasons, we may be forced to manufacture
the materials ourselves, for which we currently do not have the capabilities or resources, or enter into an agreement with another
third party, which we may not be able to do on reasonable terms, if at all.
Our
business is subject to numerous and evolving state, federal and foreign regulations and we may not be able to secure the government
approvals needed to develop and market our products.
Our
research and development activities, pre-clinical tests and clinical trials, and ultimately the manufacturing, marketing and labeling
of our products, are all subject to extensive regulation by the FDA and foreign regulatory agencies. Pre-clinical testing and
clinical trial requirements and the regulatory approval process typically take years and require the expenditure of substantial
resources. Additional government regulation may be established that could prevent or delay regulatory approval of our product
candidates. Delays or rejections in obtaining regulatory approvals would adversely affect our ability to commercialize any product
candidates and our ability to generate product revenue or royalties.
The
FDA and foreign regulatory agencies require that the safety and efficacy of product candidates be supported through adequate and
well-controlled clinical trials. If the results of pivotal clinical trials do not establish the safety and efficacy of our product
candidates to the satisfaction of the FDA and other foreign regulatory agencies, we will not receive the approvals necessary to
market such product candidates. Even if regulatory approval of a product candidate is granted, the approval may include significant
limitations on the indicated uses for which the product may be marketed.
We
are subject to the periodic inspection of our clinical trials, facilities, procedures and operations and/or the testing of our
products by the FDA to determine whether our systems and processes, or those of our vendors and suppliers, are in compliance with
FDA regulations. Following such inspections, the FDA may issue notices on Form 483 and warning letters that could cause us to
modify certain activities identified during the inspection.
Failure
to comply with the FDA and other governmental regulations can result in fines, unanticipated compliance expenditures, recall or
seizure of products, total or partial suspension of production and/or distribution, suspension of the FDA’s review of product
applications, enforcement actions, injunctions and criminal prosecution. Under certain circumstances, the FDA also has the authority
to revoke previously granted product approvals. Although we have internal compliance programs, if these programs do not meet regulatory
agency standards or if our compliance is deemed deficient in any significant way, it could have a material adverse effect on the
Company.
We
are also subject to recordkeeping and reporting regulations. These regulations require, among other things, the reporting to the
FDA of adverse events alleged to have been associated with the use of a product or in connection with certain product failures.
Labeling and promotional activities also are regulated by the FDA. We must also comply with record keeping requirements as well
as requirements to report certain adverse events involving our products. The FDA can impose other post-marketing controls on us
as well as our products including, but not limited to, restrictions on sale and use, through the approval process, regulations
and otherwise.
Many
states in which we do or may do business, or in which our products may be sold, if at all, impose licensing, labeling or certification
requirements that are in addition to those imposed by the FDA. There can be no assurance that one or more states will not impose
regulations or requirements that have a material adverse effect on our ability to sell our products.
In
many of the foreign countries in which we may do business or in which our products may be sold, we will be subject to regulation
by national governments and supranational agencies as well as by local agencies affecting, among other things, product standards,
packaging requirements, labeling requirements, import restrictions, tariff regulations, duties and tax requirements. There can
be no assurance that one or more countries or agencies will not impose regulations or requirements that could have a material
adverse effect on our ability to sell our products.
We
have obtained Orphan Drug Designation for ThermoDox® and may seek Orphan Drug Designation for other product candidates, but
we may be unsuccessful or may be unable to maintain the benefits associated with Orphan Drug Designation, including the potential
for market exclusivity.
ThermoDox®
has been granted orphan drug designation for primary liver cancer in both the U.S. and Europe. As part of our business strategy,
we may seek Orphan Drug Designation for other product candidates, but we may be unsuccessful. Regulatory authorities in some jurisdictions,
including the U.S. and Europe, may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan
Drug Act, the FDA may designate a drug as an orphan drug if it is a drug intended to treat a rare disease or condition, which
is generally defined as a patient population of fewer than 200,000 individuals annually in the U.S., or a patient population greater
than 200,000 in the U.S. where there is no reasonable expectation that the cost of developing the drug will be recovered from
sales in the U.S.
Even
though we have obtained Orphan Drug Designation for ThermoDox® and may obtain such designation for other product candidates
in specific indications, we may not be the first to obtain marketing approval of these product candidates for the orphan-designated
indication due to the uncertainties associated with developing pharmaceutical products. In addition, exclusive marketing rights
in the U.S. may be limited if we seek approval for an indication broader than the orphan-designated indication or may be lost
if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure
sufficient quantities of the product to meet the needs of patients with the rare disease or condition. Further, even if we obtain
orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different
drugs with different active moieties can be approved for the same condition. Even after an orphan product is approved, the FDA
can subsequently approve the same drug with the same active moiety for the same condition if the FDA concludes that the later
drug is safer, more effective or makes a major contribution to patient care. Orphan Drug Designation neither shortens the development
time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval process. In addition,
while we may seek Orphan Drug Designation for other product candidates, we may never receive such designations.
Fast
Track designation may not actually lead to a faster development or regulatory review or approval process.
ThermoDox®
has received U.S. FDA Fast Track Designation. However, we may not experience a faster development process, review, or approval
compared to conventional FDA procedures. The FDA may withdraw our Fast Track designation if the FDA believes that the designation
is no longer supported by data from our clinical or pivotal development program. Our Fast Track designation does not guarantee
that we will qualify for or be able to take advantage of the FDA’s expedited review procedures or that any application that
we may submit to the FDA for regulatory approval will be accepted for filing or ultimately approved.
Our
relationships with healthcare providers and physicians and third-party payors will be subject to applicable anti-kickback, fraud
and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual
damages, reputational harm and diminished profits and future earnings.
Healthcare
providers, physicians and third-party payors in the United States and elsewhere play a primary role in the recommendation and
prescription of biopharmaceutical products. Arrangements with third-party payors and customers can expose biopharmaceutical manufacturers
to broadly applicable fraud and abuse and other healthcare laws and regulations, including, without limitation, the federal Anti-Kickback
Statute and the federal False Claims Act, which may constrain the business or financial arrangements and relationships through
which such companies sell, market and distribute biopharmaceutical products. In particular, the research of our product candidates,
as well as the promotion, sales and marketing of healthcare items and services, as well as certain business arrangements in the
healthcare industry, are subject to extensive laws designed to prevent fraud, kickbacks, self-dealing and other abusive practices.
These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, structuring
and commission(s), certain customer incentive programs and other business arrangements generally. Activities subject to these
laws also involve the improper use of information obtained in the course of patient recruitment for clinical trials. The applicable
federal, state and foreign healthcare laws and regulations laws that may affect our ability to operate include, but are not limited
to:
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the
federal Anti-Kickback Statute, which prohibits, among other things, knowingly and willfully soliciting, receiving, offering
or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash
or in kind, to induce or reward, or in return for, either the referral of an individual, or the purchase, lease, order or
recommendation of any good, facility, item or service for which payment may be made, in whole or in part, under a federal
healthcare program, such as the Medicare and Medicaid programs. A person or entity can be found guilty of violating the statute
without actual knowledge of the statute or specific intent to violate it. In addition, a claim submitted for payment to any
federal health care program that includes items or services that were made as a result of a violation of the federal Anti-Kickback
Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act, or FCA. The Anti-Kickback Statute
has been interpreted to apply to arrangements between biopharmaceutical manufacturers on the one hand and prescribers, purchasers,
and formulary managers, among others, on the other. There are a number of statutory exceptions and regulatory safe harbors
protecting some common activities from prosecution;
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the
federal civil and criminal false claims laws, including the FCA, and civil monetary penalty laws which prohibit, among other
things, individuals or entities from knowingly presenting, or causing to be presented, false, fictious or fraudulent claims
for payment to, or approval by Medicare, Medicaid, or other federal healthcare programs; knowingly making, using or causing
to be made or used a false record or statement material to a false or fraudulent claim or an obligation to pay or transmit
money or property to the federal government; or knowingly concealing or knowingly and improperly avoiding or decreasing or
concealing an obligation to pay money to the federal government. A claim that includes items or services resulting from a
violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim under the FCA. Manufacturers can be
held liable under the FCA even when they do not submit claims directly to government payors if they are deemed to “cause”
the submission of false or fraudulent claims. The FCA also permits a private individual acting as a “whistleblower”
to bring qui tam actions on behalf of the federal government alleging violations of the FCA and to share in any monetary recovery;
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the
federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created additional federal criminal statutes
that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program
or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by,
or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and
knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially
false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare
matters. Similar to the federal Anti-Kickback Statute, a person or entity can be found guilty of violating HIPAA without actual
knowledge of the statute or specific intent to violate it;
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HIPAA,
as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and their respective
implementing regulations, which impose, among other things, requirements relating to the privacy, security and transmission
of individually identifiable health information on certain covered healthcare providers, health plans, and healthcare clearinghouses,
known as covered entities, as well as their respective “business associates,” those independent contractors or
agents of covered entities that perform services for covered entities that involve the creation, use, receipt, maintenance
or disclosure of individually identifiable health information. HITECH also created new tiers of civil monetary penalties,
amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general
new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek
attorneys’ fees and costs associated with pursuing federal civil actions;
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the
federal Physician Payments Sunshine Act, created under the ACA, and its implementing regulations, which require some manufacturers
of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s
Health Insurance Program (with certain exceptions) to report annually to CMS information related to payments or other transfers
of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching
hospitals, as well as ownership and investment interests held by physicians and their immediate family members. Effective
January 1, 2022, these reporting obligations will extend to include transfers of value made in the previous year to certain
non-physician providers such as physician assistants and nurse practitioners;
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federal
consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially
harm consumers; and
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analogous
state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing
arrangements and claims involving healthcare items or services reimbursed by third-party payors, including private insurers,
and may be broader in scope than their federal equivalents; state and foreign laws that require biopharmaceutical companies
to comply with the biopharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance
promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential
referral sources; state and foreign laws that require drug manufacturers to report information related to payments and other
transfers of value to physicians and other healthcare providers, marketing expenditures or drug pricing; state and local laws
that require the registration of biopharmaceutical sales representatives; and state and foreign laws governing the privacy
and security of health information in certain circumstances, many of which differ from each other in significant ways and
often are not preempted by HIPAA, thus complicating compliance efforts.
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distribution of biopharmaceutical products is subject to additional requirements and regulations, including extensive record-keeping,
licensing, storage and security requirements intended to prevent the unauthorized sale of biopharmaceutical products.
The
scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare
reform, especially in light of the lack of applicable precedent and regulations. Ensuring business arrangements comply with applicable
healthcare laws, as well as responding to possible investigations by government authorities, can be time- and resource-consuming
and can divert a company’s attention from the business.
It
is possible that governmental and enforcement authorities will conclude that our business practices may not comply with current
or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws and regulations.
If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those
actions could have a significant impact on our business, including the imposition of significant civil, criminal and administrative
penalties, damages, fines, disgorgement, imprisonment, reputational harm, possible exclusion from participation in federal and
state funded healthcare programs, contractual damages and the curtailment or restricting of our operations, as well as additional
reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations
of non-compliance with these laws. Further, if any of the physicians or other healthcare providers or entities with whom we expect
to do business is found to be not in compliance with applicable laws, they may be subject to significant criminal, civil or administrative
sanctions, including exclusions from government funded healthcare programs. Any action for violation of these laws, even if successfully
defended, could cause a biopharmaceutical manufacturer to incur significant legal expenses and divert management’s attention
from the operation of the business. Prohibitions or restrictions on sales or withdrawal of future marketed products could materially
affect business in an adverse way.
Ongoing
legislative and regulatory changes affecting the healthcare industry could have a material adverse effect on our business.
Political,
economic and regulatory influences are subjecting the healthcare industry to potential fundamental changes that could substantially
affect our results of operations by requiring, for example: (i) changes to our manufacturing arrangements; (ii) additions or modifications
to product labeling; (iii) the recall or discontinuation of our products; or (iv) additional record-keeping requirements.
In
the United States, there have been and continue to be a number of legislative initiatives to contain healthcare costs. For example,
in March 2010, the ACA was passed, which substantially changed the way health care is financed by both governmental and private
insurers, and significantly impacted the U.S. biopharmaceutical industry. The ACA, among other things, addressed a new methodology
by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused,
instilled, implanted or injected, increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate
Program and extended the rebate program to individuals enrolled in Medicaid managed care organizations, established annual fees
and taxes on manufacturers of certain branded prescription drugs, and created a new Medicare Part D coverage gap discount program,
in which manufacturers must agree to offer 70% (increased pursuant to the Bipartisan Budget Act of 2018, effective as of 2019)
point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period,
as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D.
Since
its enactment, some of the provisions of the ACA have yet to be fully implemented, while certain provisions have been subject
to judicial, congressional, and executive challenges. As a result, there have been delays in the implementation of, and action
taken to repeal or replace, certain aspects of the ACA. Since January 2017, President Trump has signed two Executive Orders designed
to delay the implementation of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance
mandated by the ACA. One Executive Order directs federal agencies with authorities and responsibilities under the ACA to waive,
defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory
burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices.
The second Executive Order terminates the cost-sharing subsidies that reimburse insurers under the ACA. Several state Attorneys
General filed suit to stop the administration from terminating the subsidies, but their request for a restraining order was denied
by a federal judge in California on October 25, 2017. The loss of the cost share reduction payments is expected to increase premiums
on certain policies issued by qualified health plans under the ACA. Further, on June 14, 2018, U.S. Court of Appeals for the Federal
Circuit ruled that the federal government was not required to pay more than $12 billion in ACA risk corridor payments to third-party
payors who argued were owed to them. On December 10, 2019, the U.S. Supreme Court heard arguments in Moda Health Plan, Inc.
v. United States, which will determine whether the government must make risk corridor payments. The U.S. Supreme Court’s
decision will be released in the coming months, but we cannot predict how the U.S. Supreme Court will rule. The effects of this
gap in reimbursement on third-party payors, the viability of the ACA marketplace, providers, and potentially our business, are
not yet known. While Congress has not passed comprehensive repeal legislation, it has enacted laws that modify certain provisions
of the Affordable Care Act such as removing penalties, starting January 1, 2019, for not complying with the Affordable Care Act’s
individual mandate to carry health insurance, delaying the implementation of certain Affordable Care Act-mandated fees, and increasing
the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D. On December 14, 2018,
a Texas U.S. District Court Judge ruled that the ACA is unconstitutional in its entirety because the “individual mandate”
was repealed by Congress as part of the Tax Cuts and Jobs Act of 2017. Additionally, on December 18, 2019, the U.S. Court of Appeals
for the 5th Circuit upheld the District Court ruling that the individual mandate was unconstitutional and remanded the case back
to the District Court to determine whether the remaining provisions of the ACA are invalid as well. On March 2, 2020, the United
States Supreme Court granted the petitions for writs of certiorari to review this case, and has allotted one hour for oral arguments,
which are expected to occur in the fall. We cannot predict what affect further changes to the ACA would have on our business.
Other
legislative changes have been proposed and adopted in the United States since the ACA was enacted. The Budget Control Act of 2011,
among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked
with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach
required goals, thereby triggering the legislation’s automatic reduction to several government programs, including aggregate
reductions of Medicare payments to providers of 2% per fiscal year. These reductions went into effect on April 1, 2013 and, due
to subsequent legislative amendments to the statute, including the Bipartisan Budget Act of 2018, or BBA, will remain in effect
through 2030, unless additional congressional action is taken. The BBA also amended the ACA, effective January 1, 2019, by increasing
the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D and closing the coverage
gap in most Medicare drug plans, commonly referred to as the “donut hole”. However, pursuant to the CARES Act, these
reductions will be suspended from May 1, 2020 through December 31, 2020 due to the COVID-19 pandemic. On January 2, 2013, the
American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several
types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations
period for the government to recover overpayments to providers from three to five years.
Moreover,
increasing efforts by governmental and third-party payors in the United States and abroad to cap or reduce healthcare costs may
cause such organizations to limit both coverage and the level of reimbursement for newly approved products and, as a result, they
may not cover or provide adequate payment for our product candidates. There has been increasing legislative and enforcement interest
in the United States with respect to specialty drug pricing practices. Specifically, there have been several recent U.S. Congressional
inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug
pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient
programs, and reform government program reimbursement methodologies for drugs. Several states have adopted price transparency
requirements and those as well as any future federal price transparency requirements that may be implemented in the future could
have a negative effect on our business. Additionally, we expect to experience pricing pressures in connection with the sale of
any future approved product candidates due to the trend toward managed healthcare, the increasing influence of health maintenance
organizations, cost containment initiatives and additional legislative changes.
At
the federal level, the Trump administration’s budget for fiscal year 2021 includes a $135 billion allowance to support legislative
proposals seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient
access to lower-cost generic and biosimilar drugs. The Trump administration previously released a “Blueprint” to lower
drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase manufacturer competition, increase
the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products
and reduce the out of pocket costs of drug products paid by consumers. The U.S. Department of Health and Human Services, or HHS,
has solicited feedback on some of these measures and has implemented others under its existing authority. For example, in May
2019, CMS issued a final rule that would allow Medicare Advantage Plans the option of using step therapy, a type of prior authorization,
for Part B drugs beginning January 1, 2020. This final rule codified CMS’s policy change that was effective January 1, 2019.
Although a number of these and other measures may require additional authorization to become effective, Congress and the Trump
administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug
costs. For example, the Lower Drug Costs Now Act of 2019 was introduced in the House of Representatives on September 19, 2019
and would require HHS to directly negotiate drug prices with manufacturers. The Lower Drugs Costs Now Act of 2019 has passed out
of the House and was delivered to the Senate on December 16, 2019. However, it is unclear whether this bill will make it through
both chambers and be signed into law, and if enacted, what effect it would have on our business. Individual states in the United
States have also increasingly passed legislation and implemented regulations designed to control pharmaceutical product pricing,
including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure
and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. At
the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical
and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product
access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other
countries and bulk purchasing
At
the state level, legislatures are increasingly passing legislation and implementing regulations designed to control biopharmaceutical
and biologic product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product
access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other
countries and bulk purchasing.
We
cannot predict what healthcare reform initiatives may be adopted in the future. Further, federal and state legislative and regulatory
developments are likely, and we expect ongoing initiatives in the United States to increase pressure on drug pricing. Such reforms
could have an adverse effect on anticipated revenues from reloxaliase and any other product candidates that we may successfully
develop and for which we may obtain regulatory approval and may affect our overall financial condition and ability to develop
product candidates.
We
may fail to comply with evolving European and other privacy laws.
Since
we conduct clinical trials in the European Economic Area (“EEA”), we are subject to additional European data-privacy
laws. The General Data Protection Regulation, (EU) 2016/679 (“GDPR”) became effective on May 25, 2018 and deals with
the processing of personal data and on the free movement of such data. The GDPR imposes a broad range of strict requirements on
companies subject to the GDPR, including requirements relating to having legal bases for processing personal information relating
to identifiable individuals and transferring such information outside the EEA, including to the United States, providing details
to those individuals regarding the processing of their personal information, keeping personal information secure, having data
processing agreements with third parties who process personal information, responding to individuals’ requests to exercise
their rights in respect of their personal information, reporting security breaches involving personal data to the competent national
data protection authority and affected individuals, appointing data protection officers, conducting data protection impact assessments,
and record-keeping. The GDPR increases substantially the penalties to which we could be subject in the event of any non-compliance,
including fines of up to 10,000,000 Euros or up to 2% of our total worldwide annual turnover for certain comparatively minor offenses,
or up to 20,000,000 Euros or up to 4% of our total worldwide annual turnover for more serious offenses. Given the limited enforcement
of the GDPR to date, we face uncertainty as to the exact interpretation of the new requirements on our trials and we may be unsuccessful
in implementing all measures required by data protection authorities or courts in interpretation of the new law.
In
particular, national laws of member states of the EU are in the process of being adapted to the requirements under the GDPR, thereby
implementing national laws which may partially deviate from the GDPR and impose different obligations from country to country,
so that we do not expect to operate in a uniform legal landscape in the EEA. Also, as it relates to processing and transfer of
genetic data, the GDPR specifically allows national laws to impose additional and more specific requirements or restrictions,
and European laws have historically differed quite substantially in this field, leading to additional uncertainty. Further, the
impact of the impending “Brexit”, (whereby the United Kingdom is planning to leave the EEA in March of 2019), either
with or without a “deal” is uncertain and cannot be predicted at this time.
In
the event we continue to conduct clinical trials in the EEA, we must also ensure that we maintain adequate safeguards to enable
the transfer of personal data outside of the EEA, in particular to the United States, in compliance with European data protection
laws. We expect that we will continue to face uncertainty as to whether our efforts to comply with our obligations under European
privacy laws will be sufficient. If we are investigated by a European data protection authority, we may face fines and other penalties.
Anype1 such investigation or charges by European data protection authorities could have a negative effect on our existing business
and on our ability to attract and retain new clients or pharmaceutical partners. We may also experience hesitancy, reluctance,
or refusal by European or multi-national clients or pharmaceutical partners to continue to use our products and solutions due
to the potential risk exposure as a result of the current (and, in particular, future) data protection obligations imposed on
them by certain data protection authorities in interpretation of current law, including the GDPR. Such clients or pharmaceutical
partners may also view any alternative approaches to compliance as being too costly, too burdensome, too legally uncertain, or
otherwise objectionable and therefore decide not to do business with us. Any of the foregoing could materially harm our business,
prospects, financial condition and results of operations
The
success of our products may be harmed if the government, private health insurers and other third-party payers do not provide sufficient
coverage or reimbursement.
Our
ability to commercialize our new cancer treatment systems successfully will depend in part on the extent to which reimbursement
for the costs of such products and related treatments will be available from third-party payors, which include government authorities
such as Medicare, Medicaid, TRICARE, and the Veterans Administration, managed care providers, private health insurers, and other
organizations. Patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse
all or part of the costs associated with their treatment. Coverage and adequate reimbursement from governmental healthcare programs,
such as Medicare and Medicaid, and commercial payors is critical to new product acceptance. Patients are unlikely to use our product
candidates unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost. The reimbursement
status of newly approved medical products is subject to significant uncertainty We cannot be sure that coverage and reimbursement
will be available for, or accurately estimate the potential revenue from, our product candidates or assure that coverage and reimbursement
will be available for any product that we may develop. Further, due to the COVID-19 pandemic, millions of individuals have lost
or will be losing employer-based insurance coverage, which may adversely affect our ability to commercialize our product candidates
even if there is adequate coverage and reimbursement from third-party payors.
Government
authorities and other third-party payors decide which drugs and treatments they will cover and the amount of reimbursement. In
the United States, the principal decisions about reimbursement for new medicines are typically made by the Centers for Medicare
& Medicaid Services, or CMS, an agency within the U.S. Department of Health and Human Services. CMS decides whether and to
what extent a new medicine will be covered and reimbursed under Medicare and private payors tend to follow CMS to a substantial
degree. No uniform policy of coverage and reimbursement for drug products exists among third-party payors. Therefore, coverage
and reimbursement for drug products can differ significantly from payor to payor. The process for determining whether a third-party
payor will provide coverage for a product may be separate from the process for setting the price or reimbursement rate that the
payor will pay for the product once coverage is approved. Coverage and reimbursement by a third-party payor may depend upon a
number of factors, including the third-party payor’s determination that use of a product is:
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neither
experimental nor investigational.
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In
order to secure coverage and reimbursement for any product that might be approved for sale, a company may need to conduct expensive
pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of the product, in addition to the
costs required to obtain FDA or other comparable regulatory approvals. Additionally, companies may also need to provide discounts
to purchasers, private health plans or government healthcare programs. Nonetheless, product candidates may not be considered medically
necessary or cost effective. A decision by a third-party payor not to cover a product could reduce physician utilization once
the product is approved and have a material adverse effect on sales, our operations and financial condition.
Government,
private health insurers and other third-party payors are increasingly attempting to contain healthcare costs by limiting both
coverage and the level of reimbursement for new therapeutic products approved for marketing by the FDA. For example, Congress
passed the Affordable Care Act in 2010 which enacted a number of reforms to expand access to health insurance while also reducing
or constraining the growth of healthcare spending, enhancing remedies against fraud and abuse, adding new transparency requirements
for healthcare industries, and imposing new taxes on fees on healthcare industry participants, among other policy reforms. Federal
agencies, Congress and state legislatures have continued to show interest in implementing cost containment programs to limit the
growth of health care costs, including price controls, price disclosures, restrictions on reimbursement and other fundamental
changes to the healthcare delivery system. In addition, in recent years, Congress has enacted various laws seeking to reduce the
federal debt level and contain healthcare expenditures, and the Medicare and other healthcare programs are frequently identified
as potential targets for spending cuts. New government legislation or regulations related to pricing or other fundamental changes
to the healthcare delivery system as well as a government or third-party payer decision not to approve pricing for, or provide
adequate coverage or reimbursement of, our product candidates hold the potential to severely limit market opportunities of such
products. Accordingly, even if coverage and reimbursement are provided by government, private health insurers and third-party
payors for uses of our products, market acceptance of these products would be adversely affected if the reimbursement available
proves to be unprofitable for health care providers.
Our
products may not achieve sufficient acceptance by the medical community to sustain our business.
The
commercial success of our products will depend upon their acceptance by the medical community and third-party payors as clinically
useful, cost effective and safe. Any of our drug candidates or similar product candidates being investigated by our competitors
may prove not to be effective in trial or in practice, cause adverse events or other undesirable side effects. Our testing and
clinical practice may not confirm the safety and efficacy of our product candidates or even if further testing and clinical practice
produce positive results, the medical community may view these new forms of treatment as effective and desirable or our efforts
to market our new products may fail. Market acceptance depends upon physicians and hospitals obtaining adequate reimbursement
rates from third-party payors to make our products commercially viable. Any of these factors could have an adverse effect on our
business, financial condition and results of operations.
The
commercial potential of a drug candidate in development is difficult to predict. If the market size for a new drug is significantly
smaller than we anticipate, it could significantly and negatively impact our revenue, results of operations and financial condition.
It
is very difficult to predict the commercial potential of product candidates due to important factors such as safety and efficacy
compared to other available treatments, including potential generic drug alternatives with similar efficacy profiles, changing
standards of care, third party payor reimbursement standards, patient and physician preferences, the availability of competitive
alternatives that may emerge either during the long drug development process or after commercial introduction, and the availability
of generic versions of our successful product candidates following approval by government health authorities based on the expiration
of regulatory exclusivity or our inability to prevent generic versions from coming to market by asserting our patents. If due
to one or more of these risks the market potential for a drug candidate is lower than we anticipated, it could significantly and
negatively impact the revenue potential for such drug candidate and would adversely affect our business, financial condition and
results of operations.
Several
of our current clinical trials are being conducted outside the United States, and the FDA may not accept data from trials conducted
in foreign locations.
Several
of our current clinical trials are being conducted outside the United States. Although the FDA may accept data from clinical trials
conducted outside the United States, acceptance of these data is subject to certain conditions imposed by the FDA. For example,
the clinical trial must be well designed and conducted and performed by qualified investigators in accordance with ethical principles.
The trial population must also adequately represent the U.S. population, and the data must be applicable to the U.S. population
and U.S. medical practice in ways that the FDA deems clinically meaningful. In general, the patient population for any clinical
trials conducted outside of the United States must be representative of the population for whom we intend to label the product
in the United States. In addition, while these clinical trials are subject to the applicable local laws, FDA acceptance of the
data will be dependent upon its determination that the trials also complied with all applicable U.S. laws and regulations. We
cannot assure you that the FDA will accept data from trials conducted outside of the United States. If the FDA does not accept
the data from such clinical trials, it would likely result in the need for additional trials, which would be costly and time-consuming
and delay or permanently halt our development of our product candidates.
We
have no internal sales or marketing capability. If we are unable to create sales, marketing and distribution capabilities or enter
into alliances with others possessing such capabilities to perform these functions, we will not be able to commercialize our products
successfully.
We
currently have no sales, marketing or distribution capabilities. We intend to market our products, if and when such products are
approved for commercialization by the FDA and foreign regulatory agencies, either directly or through other strategic alliances
and distribution arrangements with third parties. If we decide to market our products directly, we will need to commit significant
financial and managerial resources to develop a marketing and sales force with technical expertise and with supporting distribution,
administration and compliance capabilities. If we rely on third parties with such capabilities to market our products, we will
need to establish and maintain partnership arrangements, and there can be no assurance that we will be able to enter into third-party
marketing or distribution arrangements on acceptable terms or at all. To the extent that we do enter into such arrangements, we
will be dependent on our marketing and distribution partners. In entering into third-party marketing or distribution arrangements,
we expect to incur significant additional expenses and there can be no assurance that such third parties will establish adequate
sales and distribution capabilities or be successful in gaining market acceptance for our products and services.
Technologies
for the treatment of cancer are subject to rapid change, and the development of treatment strategies that are more effective than
our technologies could render our technologies obsolete.
Various
methods for treating cancer currently are, and in the future, are expected to be, the subject of extensive research and development.
Many possible treatments that are being researched, if successfully developed, may not require, or may supplant, the use of our
technologies. The successful development and acceptance of any one or more of these alternative forms of treatment could render
our technology obsolete as a cancer treatment method.
We
may not be able to hire or retain key officers or employees that we need to implement our business strategy and develop our product
candidates and business, including those purchased in the EGEN asset acquisition.
Our
success depends significantly on the continued contributions of our executive officers, scientific and technical personnel and
consultants, including those retained in the EGEN asset acquisition, and on our ability to attract additional personnel as we
seek to implement our business strategy and develop our product candidates and businesses. Our operations associated with the
EGEN asset acquisition are located in Huntsville, Alabama. Key employees may depart if we fail to successfully manage this additional
business location or in relation to any uncertainties or difficulties of integration with Celsion. We cannot guarantee that we
will retain key employees to the same extent that we and EGEN retained each of our own employees in the past, which could have
a negative impact on our business, results of operations and financial condition. Our integration of EGEN and ability to operate
in the fields we acquired from EGEN may be more difficult if we lose key employees. Additionally, during our operating history,
we have assigned many essential responsibilities to a relatively small number of individuals. However, as our business and the
demands on our key employees expand, we have been, and will continue to be, required to recruit additional qualified employees.
The competition for such qualified personnel is intense, and the loss of services of certain key personnel or our inability to
attract additional personnel to fill critical positions could adversely affect our business. Further, we do not carry “key
man” insurance on any of our personnel. Therefore, loss of the services of key personnel would not be ameliorated by the
receipt of the proceeds from such insurance.
Our
success will depend in part on our ability to grow and diversify, which in turn will require that we manage and control our growth
effectively.
Our
business strategy contemplates growth and diversification. Our ability to manage growth effectively will require that we continue
to expend funds to improve our operational, financial and management controls, reporting systems and procedures. In addition,
we must effectively expand, train and manage our employees. We will be unable to manage our business effectively if we are unable
to alleviate the strain on resources caused by growth in a timely and successful manner. There can be no assurance that we will
be able to manage our growth and a failure to do so could have a material adverse effect on our business.
We
face intense competition and the failure to compete effectively could adversely affect our ability to develop and market our products.
There
are many companies and other institutions engaged in research and development of various technologies for cancer treatment products
that seek treatment outcomes similar to those that we are pursuing. We believe that the level of interest by others in investigating
the potential of possible competitive treatments and alternative technologies will continue and may increase. Potential competitors
engaged in all areas of cancer treatment research in the U.S. and other countries include, among others, major pharmaceutical,
specialized technology companies, and universities and other research institutions. Most of our current and potential competitors
have substantially greater financial, technical, human and other resources, and may also have far greater experience than do we,
both in pre-clinical testing and human clinical trials of new products and in obtaining FDA and other regulatory approvals. One
or more of these companies or institutions could succeed in developing products or other technologies that are more effective
than the products and technologies that we have been or are developing, or which would render our technology and products obsolete
and non-competitive. Furthermore, if we are permitted to commence commercial sales of any of our products, we will also be competing,
with respect to manufacturing efficiency and marketing, with companies having substantially greater resources and experience in
these areas.
We
may be subject to significant product liability claims and litigation.
Our
business exposes us to potential product liability risks inherent in the testing, manufacturing and marketing of human therapeutic
products. We presently have product liability insurance limited to $10 million per incident and $10 million annually. If we were
to be subject to a claim in excess of this coverage or to a claim not covered by our insurance and the claim succeeded, we would
be required to pay the claim with our own limited resources, which could have a severe adverse effect on our business. Whether
or not we are ultimately successful in any product liability litigation, such litigation would harm the business by diverting
the attention and resources of our management, consuming substantial amounts of our financial resources and by damaging our reputation.
Additionally, we may not be able to maintain our product liability insurance at an acceptable cost, if at all.
We
or the third parties upon whom we depend may be adversely affected by earthquakes, global pandemics or other natural disasters
and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster, including earthquakes,
outbreak of disease or other natural disasters.
Our
current operations are located in our facilities in Lawrenceville, New Jersey. Any unplanned event, such as flood, fire, explosion,
earthquake, extreme weather condition, medical epidemics, power shortage, telecommunication failure or other natural or manmade
accidents or incidents that result in us being unable to fully utilize our facilities, or the manufacturing facilities of our
third-party contract manufacturers, may have a material and adverse effect on our ability to operate our business, particularly
on a daily basis, and have significant negative consequences on our financial and operating conditions. Loss of access to these
facilities may result in increased costs, delays in the development of our product candidates or interruption of our business
operations. Earthquakes or other natural disasters could further disrupt our operations and have a material and adverse effect
on our business, financial condition, results of operations and prospects. If a natural disaster, power outage or other event
occurred that prevented us from using all or a significant portion of our headquarters, that damaged critical infrastructure,
such as our research facilities or the manufacturing facilities of our third-party contract manufacturers, or that otherwise disrupted
operations, it may be difficult or, in certain cases, impossible, for us to continue our business for a substantial period of
time. For example, in December 2019, an outbreak of a novel strain of coronavirus, or the COVID-19 coronavirus, originated in
Wuhan, China. To date, this outbreak has already resulted in extended shutdowns of certain businesses in the Wuhan region and
has had ripple effects to businesses around the world. An outbreak of communicable diseases in China or elsewhere, or the perception
that such an outbreak could occur, and the measures taken by the governments of countries affected, could adversely affect our
business, financial condition or results of operations by limiting our ability to manufacture products within or outside China,
forcing temporary closure of facilities that we rely upon or increasing the costs associated with obtaining clinical supplies
of our product candidates. The extent to which the COVID-19 coronavirus impacts our results will depend on future developments,
which are highly uncertain and cannot be accurately predicted, including new information which may emerge concerning the severity
of the COVID-19 coronavirus and the actions to contain the COVID-19 coronavirus or treat its impact, among others. Global health
concerns, such as the COVID-19 coronavirus, could also result in social, economic, and labor instability in the countries in which
we or the third parties with whom we engage operate.
The
disaster recovery and business continuity plans we have in place may prove inadequate in the event of a serious disaster or similar
event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans,
which, could have a material adverse effect on our business. As part of our risk management policy, we maintain insurance coverage
at levels that we believe are appropriate for our business. However, in the event of an accident or incident at these facilities,
we cannot assure you that the amounts of insurance will be sufficient to satisfy any damages and losses. If our facilities, or
the manufacturing facilities of our third-party contract manufacturers, are unable to operate because of an accident or incident
or for any other reason, even for a short period of time, any or all of our research and development programs may be harmed.
Our
internal computer systems, or those of our CROs or other contractors or consultants, may fail or suffer security breaches, which
could result in a material disruption of our product development programs.
Despite
the implementation of security measures, our internal computer systems and those of our CROs and other contractors and consultants
are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and
electrical failures. Such events could cause interruptions of our operations. For instance, the loss of preclinical data or data
from any clinical trial involving our product candidates could result in delays in our development and regulatory filing efforts
and significantly increase our costs. To the extent that any disruption or privacy or security breach were to result in a loss
of, or damage to, our data, or inappropriate disclosure of confidential or proprietary information, we could be subject to reputational
harm, monetary fines, civil suits, civil penalties or criminal sanctions and requirements to disclose the breach, and other forms
of liability and the development of our product candidates could be delayed.
Pandemics
such as the COVID-19 coronavirus could have an adverse impact on our developmental programs and our financial condition.
In
December 2019, a novel strain of the COVID-19 coronavirus was first identified in Wuhan, Hubei Province, China. Any outbreak of
contagious diseases, or other adverse public health developments, could have a material and adverse effect on our business operations.
These could include disruptions or restrictions on our ability to travel, pursue partnerships and other business transactions,
conduct clinical trials, make shipments of biologic materials, as well as be impacted by the temporary closure of the facilities
of suppliers and clinical trial sites. Any disruption of suppliers, clinical trial sites or access to patients would likely impact
our clinical trial enrollment progress and rates as well as our ability to access capital through the financial markets. The extent
to which the COVID-19 coronavirus impacts our business will depend on future developments, which are highly uncertain and cannot
be predicted, including new information which may emerge concerning the severity of the COVID-19 coronavirus and the actions to
contain the COVID-19 coronavirus or treat its impact, among others.
RISKS
RELATED TO OUR SECURITIES
The
market price of our common stock has been, and may continue to be volatile and fluctuate significantly, which could result in
substantial losses for investors and subject us to securities class action litigation.
The
trading price for our common stock has been, and we expect it to continue to be, volatile. The price at which our common stock
trades depends upon a number of factors, including our historical and anticipated operating results, our financial situation,
announcements of technological innovations or new products by us or our competitors, our ability or inability to raise the additional
capital we may need and the terms on which we raise it, and general market and economic conditions. Some of these factors are
beyond our control. Broad market fluctuations may lower the market price of our common stock and affect the volume of trading
in our stock, regardless of our financial condition, results of operations, business or prospect. The closing price of our common
stock as reported on The Nasdaq Capital Market had a high price of $3.48 and a low price of $1.35 in the 52-week period ended
December 31, 2018, a high price of $2.47 and a low price of $1.08 in the 52-week period ended December 31, 2019, and a high price
of $1.73 and a low price of $0.72 from January 1, 2020 through May 14, 2020. Among the factors that may cause
the market price of our common stock to fluctuate are the risks described in this “Risk Factors” section and other
factors, including:
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results
of preclinical and clinical studies of our product candidates or those of our competitors;
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regulatory
or legal developments in the U.S. and other countries, especially changes in laws and regulations applicable to our product
candidates;
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actions
taken by regulatory agencies with respect to our product candidates, clinical studies, manufacturing process or sales and
marketing terms;
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introductions
and announcements of new products by us or our competitors, and the timing of these introductions or announcements;
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announcements
by us or our competitors of significant acquisitions or other strategic transactions or capital commitments;
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fluctuations
in our quarterly operating results or the operating results of our competitors;
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variance
in our financial performance from the expectations of investors;
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changes
in the estimation of the future size and growth rate of our markets;
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changes
in accounting principles or changes in interpretations of existing principles, which could affect our financial results;
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failure
of our products to achieve or maintain market acceptance or commercial success;
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conditions
and trends in the markets we serve;
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changes
in general economic, industry and market conditions;
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success
of competitive products and services;
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changes
in market valuations or earnings of our competitors;
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changes
in our pricing policies or the pricing policies of our competitors;
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changes
in legislation or regulatory policies, practices or actions;
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the
commencement or outcome of litigation involving our company, our general industry or both;
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recruitment
or departure of key personnel;
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changes
in our capital structure, such as future issuances of securities or the incurrence of additional debt;
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actual
or anticipated changes in earnings estimates or changes in stock market analyst recommendations regarding our common stock,
other comparable companies or our industry generally;
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or expected sales of our common stock by our stockholders;
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acquisitions
and financings, including the EGEN asset acquisition; and
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the
trading volume of our common stock.
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In
addition, the stock markets, in general, The Nasdaq Capital Market and the market for pharmaceutical companies in particular,
may experience a loss of investor confidence. Such loss of investor confidence may result in extreme price and volume fluctuations
in our common stock that are unrelated or disproportionate to the operating performance of our business, financial condition or
results of operations. These broad market and industry factors may materially harm the market price of our common stock and expose
us to securities class action litigation. Such litigation, even if unsuccessful, could be costly to defend and divert management’s
attention and resources, which could further materially harm our financial condition and results of operations.
Future
sales of our common stock in the public market could cause our stock price to fall.
Sales
of a substantial number of shares of our common stock in the public market, or the perception that these sales might occur, could
depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity
securities. As of May 14, 2020, we had 29,257,435 shares of common stock outstanding, all of which, other than shares held by
our directors and certain officers, were eligible for sale in the public market, subject in some cases to compliance with the
requirements of Rule 144, including the volume limitations and manner of sale requirements. In addition, all of the shares of
common stock issuable upon exercise of warrants will be freely tradable without restriction or further registration upon issuance.
Our
stockholders may experience significant dilution as a result of future equity offerings or issuances and exercise of outstanding
options and warrants.
In
order to raise additional capital or pursue strategic transactions, we may in the future offer, issue or sell additional shares
of our common stock or other securities convertible into or exchangeable for our common stock, including the issuance of common
stock in relation to the achievement, if any, of milestones triggering our payment of earn-out consideration in connection with
the EGEN asset acquisition. Our stockholders may experience significant dilution as a result of future equity offerings or issuances.
Investors purchasing shares or other securities in the future could have rights superior to existing stockholders. As of May 14,
2020, we have a significant number of securities convertible into, or allowing the purchase of, our common stock, including 3,826,098
shares of common stock issuable upon exercise of warrants outstanding, 4,266,890 options to purchase shares of our common stock
and restricted stock awards outstanding, and 24,152 shares of common stock reserved for future issuance under our stock incentive
plan.
The
adverse capital and credit market conditions could affect our liquidity.
Adverse
capital and credit market conditions could affect our ability to meet liquidity needs, as well as our access to capital and cost
of capital. The capital and credit markets have experienced extreme volatility and disruption in recent years. Our results of
operations, financial condition, cash flows and capital position could be materially adversely affected by continued disruptions
in the capital and credit markets.
Changes
in tax law could adversely affect our financial condition and results of operations.
The
rules dealing with U.S. federal, state, and local income taxation are constantly under review by persons involved in the legislative
process and by the Internal Revenue Service and the U.S. Treasury Department. Changes to tax laws (which changes may have retroactive
application) could adversely affect us or holders of our common stock. In recent years, many such changes have been made and changes
are likely to continue to occur in the future. For example, on March 27, 2020, President Trump signed into law the “Coronavirus
Aid, Relief, and Economic Security Act” or the CARES Act, which included certain changes in tax law intended to stimulate
the U.S. economy in light of the COVID-19 coronavirus outbreak, including temporary beneficial changes to the treatment of net
operating losses, interest deductibility limitations and payroll tax matters. Future changes in tax laws could have a material
adverse effect on our business, cash flow, financial condition or results of operations. We urge investors to consult with their
legal and tax advisers regarding the implications of potential changes in tax laws on an investment in our common stock.
Our
ability to use net operating losses to offset future taxable income are subject to certain limitations.
On
December 22, 2017, the President of the United States signed into law the Tax Reform Act. The Tax Reform Act significantly changes
U.S. tax law by, among other things, lowering corporate income tax rates, implementing a quasi-territorial tax system, providing
a one-time transition toll charge on foreign earnings, creating a new limitation on the deductibility of interest expenses and
modifying the limitation on officer compensation. The Tax Reform Act permanently reduces the U.S. corporate income tax rate from
a maximum of 35% to a flat 21% rate, effective January 1, 2018. Net operating losses generated after December 31, 2017 are not
subject to expiration, and generally but may not be carried back to prior taxable years except that, under the
CARES Act, net operating losses generated in 2018, 2019 and 2020 may be carried back five taxable years. Additionally, for taxable
years beginning after December 31, 2020, the deductibility of such federal net operating losses is limited to 80% of our taxable
income in any future taxable year. We currently have significant net operating losses (NOLs) that may be used to offset future
taxable income. In general, under Section 382 of the Internal Revenue Code of 1986, as amended (the Code), a corporation that
undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change NOLs to offset
future taxable income. During 2018, 2017 and years prior, we performed analyses to determine if there were changes in ownership,
as defined by Section 382 of the Internal Revenue Code that would limit our ability to utilize certain net operating loss and
tax credit carry forwards. We determined we experienced ownership changes, as defined by Section 382, in connection with certain
common stock offerings in 2011, 2013, 2015, 2017 and 2018. As a result, the utilization of our federal tax net operating loss
carry forwards generated prior to the ownership changes is limited. Future changes in our stock ownership, some of which are outside
of our control, could result in an ownership change under Section 382 of the Code, which would significantly limit our ability
to utilize NOLs to offset future taxable income.
We
have never paid cash dividends on our common stock in the past and do not anticipate paying cash dividends on our common stock
in the foreseeable future.
We
have never declared or paid cash dividends on our common stock. We do not anticipate paying any cash dividends on our common stock
in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and
growth of our business. As a result, capital appreciation, if any, of our common stock will be the sole source of gain for the
foreseeable future for holders of our common stock.
Anti-takeover
provisions in our charter documents and Delaware law could prevent or delay a change in control.
Our
certificate of incorporation and bylaws may discourage, delay or prevent a merger or acquisition that a stockholder may consider
favorable by authorizing the issuance of “blank check” preferred stock. This preferred stock may be issued by our
Board of Directors on such terms as it determines, without further stockholder approval. Therefore, our Board of Directors may
issue such preferred stock on terms unfavorable to a potential bidder in the event that our Board of Directors opposes a merger
or acquisition. In addition, our Board of Directors may discourage such transactions by increasing the amount of time necessary
to obtain majority representation on our Board of Directors. Certain other provisions of our bylaws and of Delaware law may also
discourage, delay or prevent a third party from acquiring or merging with us, even if such action were beneficial to some, or
even a majority, of our stockholders.