ODT Odonate Therapeutics Inc

Item 1A. Risk Factors

An investment in shares of our common stock involves a high degree of risk. You should carefully consider the material risks and uncertainties described below before deciding whether to purchase shares of our common stock. In assessing these risks, you should also refer to the other information contained in this Annual Report on Form 10-K, including our audited financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our business, financial condition, results of operations, cash flow, reputation and prospects could be materially and adversely affected by any of these risks and uncertainties, including risks and uncertainties not currently known to us or that we currently do not believe to be material. In any such case, the trading price of shares of our common stock could decline, and you could lose all or part of your investment.

Summary of Risk Factors

Below is a summary of the principal factors that make an investment in shares of our common stock speculative or risky. These factors, along with other general risk factors, are described in further detail under the heading “Risk Factors” below.

Risks Related to Our Business

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Risks Related to Our Industry

Risks Relating to Our Reliance on Third Parties

Risks Relating to Intellectual Property

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Risks Related to Ownership of Shares of Our Common Stock

Risk Factors

Risks Related to Our Business

We are substantially dependent on our ability to successfully develop and commercialize tesetaxel.

Since our inception, we have invested substantially all of our capital resources in the development of tesetaxel, which we initially are developing for the treatment of metastatic breast cancer (“MBC”). Tesetaxel currently is the subject of three studies in MBC, including a multinational, multicenter, randomized, Phase 3 study in patients with MBC, known as CONTESSA. We cannot assure you that the U.S. Food and Drug Administration (“FDA”), the European Commission or any other regulatory authority will approve tesetaxel for marketing.

Our ability to generate revenue and our future success depend in large part on the success of CONTESSA, the approval of tesetaxel, the nature of any potential requirements for post-approval studies and the successful commercialization of tesetaxel, if approved. Delays in obtaining regulatory approval for tesetaxel would, among other consequences, require further development expenditures, delay the launch of tesetaxel and impact our ability to raise additional capital, all of which would have a material adverse effect on our business and financial condition.

Results from CONTESSA and any other clinical studies we may undertake may not be sufficient to obtain regulatory approvals to market our product candidates on a timely basis, if at all.

Pharmaceutical product candidates are subject to extensive government regulations related to development, clinical studies, manufacturing and commercialization. In order to sell any product that is under development, we must first receive regulatory approval. To obtain regulatory approval, we must conduct nonclinical and clinical studies that demonstrate that our product candidates are safe and effective. The process of obtaining FDA, European Commission and other regulatory authority approvals is costly, time-consuming, uncertain and subject to unanticipated delays.

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The FDA, European Commission and other regulatory authorities have substantial discretion in the approval process and may not agree that we have demonstrated that our product candidates are safe and effective. If our product candidates are ultimately not found to be safe and effective, we would be unable to obtain regulatory approval to manufacture, market and sell them. We can provide no assurances that the FDA, European Commission or other regulatory authorities will approve our product candidates or, if approved, what the scope of the approved indication might be.

CONTESSA and other clinical studies that we may undertake may be delayed or halted.

CONTESSA and any other clinical studies of our product candidates that we may conduct in the future may be delayed or halted for various reasons, including:

If studies are delayed or halted, we may incur significant additional expenses, and the potential approval of our product candidates may be delayed, which would have a material adverse effect on our business and financial condition.

Even if we obtain regulatory approval for tesetaxel or another product candidate, our products will remain subject to regulatory scrutiny.

If tesetaxel or other product candidates are approved, they will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping, conduct of post-marketing studies and submission of safety, efficacy and other post-market information.

Manufacturers and manufacturers’ facilities are required to comply with extensive FDA, EMA and other regulatory authority requirements, including ensuring that quality control and manufacturing procedures conform to current Good Manufacturing Practices (“cGMPs”). As such, we and our contract manufacturers will be subject to continual review and inspections to assess compliance with cGMPs and adherence to commitments made in any New Drug Application (“NDA”), Market Authorization Application (“MAA”) or other marketing application. Accordingly, we and others with whom we work must continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production and quality control.

Any regulatory approvals we receive for our product candidates may be subject to limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or

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contain requirements for potentially costly post-marketing testing, including Phase 4 clinical studies, which must comply with applicable current Good Clinical Practice (“cGCPs”). We could also be asked to conduct post-marketing clinical studies to verify the safety and efficacy of our products in general or in specific patient subsets. If initial regulatory approval was obtained via the accelerated approval pathway, we could be required to conduct a successful post-marketing clinical study to confirm clinical benefit for our products. An unsuccessful post-marketing study or failure to complete such a study could result in the withdrawal of regulatory approval. We will be required to report certain adverse reactions and production problems, if any, to the FDA, EMA and other regulatory authorities. Any new legislation addressing drug safety or approval issues could result in delays in product development or commercialization, or increased costs to assure compliance. We will have to comply with requirements concerning advertising and promotion for our products. Promotional communications with respect to prescription drugs are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product’s approved label. As such, we may not promote our products for indications or uses for which they do not have approval. The holder of an approved NDA or MAA must submit new or supplemental applications and obtain approval for certain changes to the approved product, product labeling or manufacturing process.

If a regulatory authority discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, or disagrees with the promotion, marketing or labeling of a product, such regulatory authority may impose restrictions on that product or us. If we fail to comply with applicable regulatory requirements, a regulatory or enforcement authority may, among other things:

Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to commercialize and generate revenue from our products. If regulatory sanctions are applied or if regulatory approval is withdrawn, this would have a material adverse effect on our business and financial condition.

The commercial adoption of tesetaxel and any other product candidates we develop will depend on the degree of their market acceptance.

Even with the requisite approvals from the FDA, the European Commission and other regulatory authorities, the commercial adoption of tesetaxel and any other product candidates we develop will depend on the degree of their acceptance by physicians, patients, third-party payors and others in the medical community. The degree of market acceptance will depend on a number of factors, including:

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Even if a potential product such as tesetaxel displays a favorable efficacy and safety profile in nonclinical and clinical studies, market acceptance of the product is not fully known until after its commercial launch. Our efforts to educate physicians, patients, third-party payors and others in the medical community on the benefits of our product candidates may require significant resources and may never be successful. If tesetaxel or other product candidates are approved but fail to achieve an adequate level of acceptance by physicians, patients, third-party payors and others in the medical community, we will not be able to generate sufficient revenue to become or remain profitable.

If we are unable to achieve and maintain coverage and adequate levels of reimbursement for tesetaxel and other product candidates, if approved, their commercial success may be severely hindered.

Successful sales of tesetaxel and any other product candidates that may receive regulatory approval depend on the availability of coverage and adequate reimbursement from third-party payors. Patients who are prescribed medications for the treatment of their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their prescription drugs. Coverage and adequate reimbursement from governmental healthcare programs, such as Medicare and Medicaid, and commercial payors is critical to new product acceptance. Coverage decisions may depend on clinical and economic standards that disfavor new products when more established or lower cost therapeutic alternatives are already available or subsequently become available. Assuming we obtain coverage for a given product, the resulting reimbursement payment rates might not be adequate or may require co-payments that patients find unacceptably high. Patients are unlikely to use our products unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our products.

The market for tesetaxel and any other product candidates that we attempt to commercialize will depend significantly on access to third-party payors’ drug formularies or lists of medications for which third-party payors provide coverage and reimbursement. The industry competition to be included in such formularies often leads to downward pricing pressures on pharmaceutical products. Also, third-party payors may refuse to include a particular branded drug in their formularies or otherwise restrict patient access through formulary controls or otherwise to a branded drug when a less costly generic equivalent or other alternative is available.

Third-party payors, whether foreign or domestic, or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs. In addition, in the U.S., no uniform policy requirement for coverage and reimbursement for products exists among third-party payors. Therefore, coverage and reimbursement for products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our products to each payor separately, with no

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assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.

Third-party coverage and reimbursement for our product candidates for which we may receive regulatory approval may not be available or adequate in either the U.S. or international markets, which could have a material adverse effect on our business, results of operations, financial condition and prospects.

We have only limited assets and will need to raise additional capital before we can expect to generate revenue or become profitable.

As of December 31, 2020, we had no revenue, an accumulated deficit of $366.4 million and cash of $157.3 million. We believe that our existing cash will be sufficient to meet our anticipated cash requirements through at least one year from the date this Annual Report on Form 10-K is filed with the U.S. Securities and Exchange Commission (the “SEC”). However, to fund future operations to the point at which we are able to generate positive cash flow from sales of tesetaxel or other potential product candidates, we will need to raise significant additional capital. The amount and timing of future funding requirements will depend on many factors, including the timing and results of our ongoing development efforts, the potential expansion of our current development programs, potential new development programs and related general and administrative support. We anticipate that we will seek to fund our operations through public and private equity and debt financings or other sources, such as potential licenses or other collaboration agreements. We cannot assure you that anticipated additional financing will be available to us on favorable terms, or at all. Although we have been successful in obtaining financing through the issuance of our equity securities, we cannot assure you that we will be able to do so in the future. If we are unable to raise additional capital to fund our clinical development and commercialization of tesetaxel, if approved, and other business activities, we could be forced to abandon one or more programs and curtail or cease our operations.

We have never generated any revenue and may never be profitable.

We have no products approved for marketing, have never generated any revenue from product sales and have incurred losses in each year since our inception. Our ability to generate revenue and achieve profitability depends on our ability, alone or with marketing partners, to successfully complete the development of, and obtain the regulatory approvals necessary to commercialize, tesetaxel. We expect to continue to incur losses for the foreseeable future, and we anticipate these losses will increase as we continue to develop tesetaxel. Our ability to generate revenue from product sales depends heavily on our success in many areas, including but not limited to:

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If tesetaxel or any other product candidates we may develop are approved for marketing, we anticipate incurring significant commercialization costs. Our expenses could increase beyond our current expectations if we are required by the FDA, the European Medicines Agency (“EMA”) or other regulatory authorities to change our manufacturing processes or quality procedures or perform additional or unanticipated nonclinical, clinical or other studies. In cases where we are successful in obtaining regulatory approvals to market tesetaxel or other product candidates, our revenue will be dependent, in part, on the size of the markets in the territories for which we gain regulatory approval, the acceptance of the price of the product in those markets and the ability to obtain reimbursement at any price. If the number of our addressable patients is not as significant as we estimate, the indication approved by regulatory authorities is narrower than we expect or the reasonably accepted population for treatment is narrowed by competition, physician choice or treatment guidelines, we may not generate significant revenue from sales of such products, even if approved. If we are not able to generate revenue from the sale of approved products, we may never become profitable.

We currently have no sales, marketing or distribution capabilities. If we elect to commercialize tesetaxel ourselves and we are unable to establish effective sales, marketing or distribution capabilities or if we are unable to enter into agreements with third parties to commercialize tesetaxel or other product candidates that we may develop, we may not be able to effectively generate product revenues.

We currently do not have sales, marketing or distribution capabilities. In order to commercialize tesetaxel, if approved, or any other product candidates that we may develop, we must build marketing, sales and distribution capabilities or make arrangements with third parties to perform these services, and we may not be successful in doing so. If tesetaxel receives regulatory approval and we decide to commercialize tesetaxel ourselves, building the requisite sales, marketing or distribution capabilities will be expensive and time-consuming and will require significant attention of our leadership team to manage. Any failure or delay in the development of our sales, marketing or distribution capabilities would adversely affect the commercialization of any product. The competition for talented individuals experienced in selling and marketing pharmaceutical products is intense, and we cannot assure you that we can assemble an effective team. Additionally, we may choose to collaborate, either globally or on a territory-by-territory basis, with third parties on the commercialization of tesetaxel or any other product candidates that we may develop. If we are unable to enter into such arrangements on acceptable terms or at all, we may not be able to successfully commercialize any of our product candidates that receive regulatory approval or any such commercialization may experience delays or limitations.

We may be subject to additional risks related to operating in foreign countries either ourselves or through a third-party, including:

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If we are not successful in commercializing tesetaxel or other product candidates, our future product revenue will suffer and we may incur significant additional losses.

Because a number of companies compete with us, many of which have greater resources than we do, and because we face rapid changes in science in our industry, we cannot be certain that our products will be accepted in the marketplace or capture market share.

Competition from other biotechnology and pharmaceutical companies is intense and is expected to increase. A number of companies are pursuing the development of pharmaceuticals in oncology, our area of focus. Many of these companies are very large and have financial, technical, sales and distribution and other resources substantially greater than ours. The greater resources of these competitors may enable them to develop, obtain regulatory approval for or market competing products more quickly or effectively, making it extremely difficult for us to capture a share of the market for our products. Additionally, the biotechnology and pharmaceutical industries are subject to rapid changes in science, and our competitors may develop and market products with improved therapeutic profiles relative to our product candidates that would render our product candidates noncompetitive.

Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, reduce the commercial attractiveness of a prescribing label or result in significant negative consequences following regulatory approval, if approved.

Clinical studies of tesetaxel or other product candidates we may develop could reveal a high and unacceptable incidence and severity of undesirable side effects. Undesirable side effects could adversely affect patient enrollment in clinical studies, cause us or regulatory authorities to interrupt, delay or halt clinical studies or result in the delay, denial or withdrawal of regulatory approval by the FDA, the European Commission or other regulatory authorities. For example, in 2007, tesetaxel was placed on clinical hold by the FDA while in development by the original sponsor due to the occurrence of several fatalities in the setting of severe neutropenia (a low level of neutrophils, a type of white blood cell) in patients with advanced cancer. While this clinical hold was lifted in 2008, and tesetaxel has since been evaluated in multiple clinical studies in more than 1,000 patients without any interruption due to safety issues, we cannot assure you that safety-related interruptions in tesetaxel’s clinical development will not occur again in the future. Any such recurrence could potentially delay or prevent the ultimate approval of our product candidate. Undesirable or adverse side effects also could result in regulatory authorities mandating a more restrictive prescribing label for the product, which, in turn, could limit the market acceptance of the product even if approved for marketing and commercialization. In patients treated with tesetaxel plus capecitabine in CONTESSA, the rate of Grade ≥3 neutropenia was 70.9%, and the rate of febrile neutropenia was 13.1%.

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Drug-related side effects could result in potential product liability claims. We carry product liability insurance in the amount of $10.0 million in the aggregate. We believe that our product liability insurance coverage is sufficient in light of our clinical programs; however, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts or maintain coverage at all to protect us against losses due to liability. A successful product liability claim or series of claims brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could adversely affect our results of operations, business and financial condition. In addition, regardless of merit or eventual outcome, product liability claims may result in impairment of our business reputation, withdrawal of clinical study participants, costs due to related litigation, distraction of management’s attention from our primary business, initiation of investigations by regulators, substantial monetary awards to patients or other claimants, the inability to commercialize our product candidates and decreased demand for our product candidates, if approved for marketing.

Additionally, if one or more of our product candidates receives regulatory approval, and we or others later identify undesirable side effects caused by such products, a number of potentially significant negative consequences could result, including but not limited to:

Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate and could significantly harm our business, results of operations, financial condition and prospects.

We may not be successful in our efforts to identify, in-license or acquire, discover, develop or commercialize additional product candidates.

Although a substantial amount of our effort will focus on the development and potential commercialization of tesetaxel, we also may seek to identify, in-license or acquire, discover, develop and commercialize additional product candidates in the oncology field. We cannot assure you that our efforts to in-license or acquire additional product candidates will be successful. Even if we are successful in in-licensing or acquiring additional product candidates, their requisite development activities may require substantial resources, and we cannot assure you that these development activities will result in regulatory approvals.

We will need to increase the size and capabilities of our organization, and we may experience difficulties in managing our growth.

Odonate was formed in 2013 and had 153 employees as of December 31, 2020. As we advance the development of tesetaxel, we must continue to grow the size of the organization. Future growth will impose significant added responsibilities on members of management, including:

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Our future financial performance and our ability to successfully develop and commercialize our product candidates will depend, in part, on our ability to effectively and efficiently manage any future growth. Our management will have to dedicate a significant amount of its attention to managing these growth activities. In addition, we expect to incur additional costs in hiring, training and retaining such additional personnel.

If we are not able to effectively expand our organization by hiring new employees and expanding our groups of consultants and contractors, we may not be able to successfully execute the tasks necessary to further develop and commercialize our product candidates and, accordingly, may not achieve our research, development and commercialization goals.

Our future success depends on our ability to retain our key executives and to attract, retain and motivate qualified personnel.

We are highly dependent on the principal members of our management and scientific teams. We do not maintain “key person” insurance for any of our executives or other employees. The loss of the services of any of these persons could impede the achievement of our research, development and commercialization objectives.

To induce valuable employees to remain at our company, in addition to salary and cash incentives, we grant equity awards that vest over time. The value to employees of these equity awards that vest over time may be significantly affected by changes in the price of shares of our common stock that are beyond our control, and may at any time be insufficient to retain employees who receive more lucrative offers from other companies. Any of our employees could leave our employment at any time, with or without notice.

Recruiting and retaining qualified scientific, clinical, manufacturing and sales and marketing personnel or consultants will also be critical to our success. We rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our discovery, development and commercialization strategies. The loss of the services of any of our executive officers, key employees or consultants could impede the achievement of our research, development and commercialization objectives and seriously harm our ability to successfully implement our business strategy.

Replacing executive officers, key employees or consultants may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to successfully develop, gain regulatory approval of and commercialize products. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these key personnel or consultants on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel.

We may hire part-time employees or use consultants. As a result, certain of our employees, officers, directors or consultants may not devote all of their time to our business, and may from time to time serve as employees, officers, directors and consultants of other companies.

We are a defendant in a putative class action lawsuit, which could divert the attention of management, result in negative press reports and, if adversely determined, have an adverse effect on our results of operations and financial condition.

As described in Note 4 to our audited financial statements included in Item 8 of this Annual Report on Form 10-K, a putative class action lawsuit has been filed against us and certain of our current and former officers. The lawsuit seeks damages allegedly sustained by the class and an award of plaintiffs’ costs and attorney fees. While we believe that the complaint is without merit and that we have substantive defenses to the claims of liability and damages, this lawsuit, like any lawsuit, is subject to inherent uncertainties,

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and we might not prevail. This lawsuit could divert the attention of management, result in negative press reports and, if adversely determined, have an adverse effect on our results of operations and financial condition.

Risks Related to Our Industry

Drug development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies may not be predictive of future study results.

Clinical testing is expensive, can take many years to complete and its outcome is inherently uncertain. Failure can occur at any time during the clinical study process. The results of nonclinical studies and early clinical studies of our product candidates may not be predictive of the results of later-stage clinical studies. Product candidates that have shown promising results in early-stage clinical studies may still suffer significant setbacks in subsequent clinical studies. For example, the safety or efficacy results generated to date in our clinical studies do not ensure that later clinical studies will demonstrate similar results. There is a high failure rate for pharmaceutical product candidates proceeding through clinical studies, and product candidates in later stages of clinical studies may fail to show the desired safety and efficacy, despite having progressed through nonclinical studies and initial clinical studies.

A number of companies in the pharmaceutical industry have suffered significant setbacks in advanced clinical studies due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier studies. Moreover, nonclinical and clinical data often are susceptible to varying interpretations and analyses. We do not know whether any clinical studies we may conduct will demonstrate consistent or adequate efficacy and safety sufficient to obtain regulatory approval to market our product candidates.

The ongoing COVID-19 pandemic may disrupt our operations and affect our ability to successfully conduct clinical studies.

We are unable to accurately predict the full impact that the ongoing Coronavirus Disease 2019 (“COVID-19”) pandemic will have on our results from operations, financial condition and clinical studies due to numerous factors that are not within our control, including its duration and severity. Stay-at-home orders, business closures, travel restrictions, supply chain disruptions and employee illness or quarantines could result in disruptions to our operations, which could adversely impact our results from operations and financial condition. In addition, the COVID-19 pandemic has resulted in ongoing volatility in financial markets. If our access to capital is restricted or associated borrowing costs increase as a result of developments in financial markets relating to the COVID-19 pandemic, our operations and financial condition could be adversely impacted.

We will be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws and health information privacy, security laws and other healthcare laws and regulations. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.

Our operations may be directly, or indirectly through our customers, subject to various federal and state fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute, the federal False Claims Act and physician sunshine laws and regulations. These laws will impact, among other things, our clinical development, proposed sales, marketing and education programs. In addition, we may be subject to patient privacy regulation by both the federal government and the states in which we conduct our business. The U.S. laws that will affect our ability to operate include:

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Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available thereunder, it is possible that some of our business activities could be subject to challenge under one or more of such laws. In addition, recent healthcare reform legislation has strengthened these laws. For example, the PPACA, among other things, amended the previous intent requirement of the federal Anti-Kickback Statute and criminal healthcare fraud statutes. Now, a person or entity does not have to have actual knowledge of the statutes or specific intent to violate them. The PPACA also provides that the federal government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act.

If our operations are found to be in violation of any of these laws or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from participation in government healthcare programs, such as Medicare and Medicaid, imprisonment, disgorgement, contractual damages, reputational harm, diminished profits and future earnings, additional reporting requirements and oversight if a person becomes subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

Current and future legislation may increase the difficulty and cost of obtaining regulatory approval, and the subsequent commercialization, of our product candidates, if approved, and may affect the prices we may obtain.

In the U.S. and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay regulatory approval of our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any product candidates for which we obtain regulatory approval.

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For example, in 2010, President Obama signed into law the PPACA, which contains provisions, among others, that may impact our potential product candidates, including:

Other legislative changes have been proposed and adopted since the PPACA was enacted. These changes included aggregate reductions of Medicare payments to providers of up to two percent per year. Additionally, the American Taxpayer Relief Act of 2012 reduced Medicare payments to certain providers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. There have been judicial, Congressional and Executive Branch challenges to certain aspects of the PPACA, and we expect there will be additional challenges and/or amendments to the PPACA in the future. Further, it is possible that additional regulatory changes, as well as the repeal (in whole or in part) of the PPACA, could negatively affect insurance coverage and/or drug prices. These new laws also may result in additional reductions in Medicare and other healthcare funding as well as insurance coverage and payments.

We expect that the PPACA, as well as other healthcare reform measures that may be adopted in the future, may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, new payment methodologies and additional downward pressure on the reimbursement received for any approved product. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our products.

Moreover, there recently has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed bills designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. Individual states in the U.S. have also become increasingly active in implementing regulations designed to control pharmaceutical product pricing,

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including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, encourage importation from other countries and bulk purchasing. Legally mandated price controls on payment amounts by third-party payors or other restrictions could harm our business, results of operations, financial condition and prospects.

Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. Additionally, legislation has been introduced to repeal the PPACA. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the regulatory approvals of our product candidates, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent regulatory approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.

Governments outside the U.S. tend to impose strict price controls, which may adversely affect our revenues, if any.

In some countries, particularly certain countries of the European Union (“EU”), the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of regulatory approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical study that compares the cost-effectiveness of our product candidate to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be harmed, possibly materially.

Risks Relating to Our Reliance on Third Parties

We rely on CDMOs to manufacture our product candidates. If these CDMOs fail to produce our product candidates on a timely basis or comply with stringent regulations applicable to pharmaceutical drug manufacturers, we may face delays in the studies, regulatory submissions, regulatory approval or commercialization of our product candidates.

We contract with CDMOs to manufacture our product candidates, and we would expect to rely on these CDMOs to produce commercial quantities of tesetaxel. The manufacture of pharmaceutical products requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers of pharmaceutical products often encounter difficulties in production, which include difficulties with production costs and yields, supply chain issues, quality control and assurance and shortages of qualified personnel, as well as compliance with strictly enforced governmental regulations, including cGMPs. The CDMOs we contract with may not perform as agreed or may terminate their agreements with us.

In addition to product approval, any facilities in which our product candidates are manufactured or tested for their ability to meet required specifications must be inspected and approved by regulatory authorities before a commercial product can be manufactured. Failure of such a facility to be approved could delay the approval of one or more of our product candidates.

Any of these factors could cause us to delay or suspend any clinical studies, regulatory submissions, required approvals or commercialization of one or more of our product candidates, entail higher costs and result in our being unable to effectively commercialize products.

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We rely on clinical sites to conduct our clinical studies. If these clinical sites do not enroll patients in a timely manner or comply with study protocols and regulations applicable to clinical study conduct, we may face delays in the studies, regulatory submissions, regulatory approval or commercialization of our product candidates.

We rely on clinical sites to enroll patients in our clinical studies. The rate of enrollment of patients into our clinical studies at these clinical sites is dependent on a number of factors, including the number of eligible patients and the interest level of investigators, study staff and patients in our clinical studies relative to other enrolling studies. If the clinical sites participating in our clinical studies do not enroll patients in a timely manner, we may face delays in the studies, regulatory submissions, regulatory approval or commercialization of our product candidates.

We rely on clinical sites to comply with study protocols and regulations applicable to clinical study conduct. We and these clinical sites are required to comply with cGCPs, which are regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities for products in clinical development. Regulatory authorities enforce these cGCPs through periodic inspections of study sponsors, principal investigators and clinical sites. If we, the investigators or the clinical sites fail to comply with applicable cGCPs, the clinical data generated in our clinical studies may be deemed unreliable and the regulatory authorities may require us to perform additional clinical studies before approving our marketing applications, which would delay or compromise the regulatory approval process.

We rely on third parties to provide certain services relating to our clinical studies and other activities. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may face delays in the studies, regulatory submissions, regulatory approval or commercialization of our product candidates.

We have agreements with third parties to provide legal representation and regulatory reporting for our clinical programs. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on third parties does not relieve us of our regulatory responsibilities. If these third parties do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the work they perform is compromised due to the failure to adhere to regulatory requirements or for other reasons, we may face delays in the studies, regulatory submissions, regulatory approval or commercialization of our product candidates.

We have agreements with other third parties that provide various services in connection with our development and business activities. If these third parties do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the work they perform is compromised, we may face delays in the studies, regulatory submissions, regulatory approval or commercialization of our product candidates.

Risks Relating to Intellectual Property

Our success in developing and marketing our product candidates depends significantly on our ability to obtain and maintain patent protection and operate without infringing on the rights of others.

We depend on patents and other intellectual property rights to prevent others from improperly benefiting from products or inventions that we developed or acquired. For details about our intellectual property portfolio protecting our tesetaxel program, see the section titled “Business—Patent and Proprietary Rights.”

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The patent position of pharmaceutical firms like ours is highly uncertain and involves complex legal and factual questions. We intend to continue to file patent applications because we believe it is appropriate to seek to obtain patents covering our products and their manufacture and use. There can be no assurance, however, that any additional patents will issue, that the scope of any patent that has issued or may issue will be sufficient to protect our product candidates, or that any current or future issued patent will not be held invalid if challenged. Additionally, we may have to incur significant expense and expend management time defending or enforcing our patents. If we cannot obtain and maintain effective patent rights and/or regulatory exclusivity for our product candidates, we may not be able to compete effectively, and our business and results of operations would be harmed.

The scope and terms of our patents may be insufficient to protect our product candidates for an adequate amount of time.

In the U.S., the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such product candidates might expire before or shortly after such product candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing product candidates similar or identical to ours.

Patents may be eligible for limited patent term extension in the U.S. under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Act. Similar patent extensions exist in the EU and Japan. The Hatch-Waxman Act permits a patent term extension of up to 5 years for a patent covering a qualified approved product as compensation for patent term that elapsed during product development and the FDA regulatory review process, provided the extension does not extend the total patent term beyond a total of 14 years from the product’s approval date, and only one patent per approved product is extended. We may not receive an extension if we fail to apply within applicable deadlines or fail to apply prior to expiration of relevant patents. Moreover, the length of the extension could be less than we request. If we are unable to obtain patent term extension or the term of any such extension is less than we request, the period during which we can enforce our patent rights for that product will be shortened and our competitors may obtain approval to market competing products sooner, impacting our revenue.

If the FDA or foreign regulatory authorities approve generic versions of any of our products that receive marketing approval or such authorities do not grant our products appropriate periods of exclusivity before approving generic versions of our products, the sales of our products could be adversely affected.

NDA applicants are required to list with the FDA each patent with claims covering the applicant’s product or method of using the product for which approval is sought. Upon approval of a drug, each of the patents listed in the application for the drug that cover the drug or an approved use of the drug is then published in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book. Drugs listed in the Orange Book can, in turn, be cited by potential generic or 505(b)(2) NDA applicants in support of approval of an Abbreviated New Drug Application (“ANDA”) or a 505(b)(2) NDA. An ANDA is a streamlined way to seek approval for marketing a drug product that has the same active ingredient in the same strength and dosage form as the listed drug and has been shown to be bioequivalent to the listed drug. Other than the requirement for bioequivalence testing, ANDA applicants are not required to conduct or submit results of nonclinical or clinical studies to prove the safety or effectiveness of their drug product. Drugs approved in this way can often be substituted by pharmacists under prescriptions written for the original listed drug.

Both ANDA and 505(b)(2) NDA applicants are required to make a certification to the FDA concerning any patents listed for the approved NDA product in the FDA’s Orange Book. Specifically, ANDA and 505(b)(2) NDA applicants must certify that: (i) the required patent information has not been filed; (ii) the listed patent has expired; (iii) the listed patent has not expired, but will expire on a particular date and approval is sought after patent expiration; or (iv) the listed patent is invalid or will not be infringed by the

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new product. The ANDA applicant may also elect to submit a statement certifying that its proposed ANDA labeling does not contain (or carves out) any language regarding patented methods-of-use rather than certify to a listed method-of-use patent. If the applicant does not challenge the listed patents, the submitted application will not be approved until all the listed patents claiming the referenced product have expired.

A certification that the proposed product will not infringe the already approved product’s listed patents, or that such patents are invalid or unenforceable, is called a “paragraph IV” certification. If the applicant has provided a “paragraph IV” certification to the FDA, the applicant must also notify each patent holder and the NDA holder of the “paragraph IV” certification within 20 days after the postmark on the FDA letter acknowledging receipt of the ANDA or 505(b)(2) NDA. The patent holder and the NDA holder may then initiate patent infringement lawsuits in response to the notice of the ”paragraph IV” certification. The filing of a patent infringement lawsuit within 45 days after receipt of the notice of a “paragraph IV” certification automatically prevents the FDA from approving the ANDA or 505(b)(2) NDA until the earliest of 30 months, expiration of the relevant patent(s), settlement of the lawsuit or a decision in the infringement case that is favorable to the ANDA applicant or 505(b)(2) applicant.

In addition to the protections from competitors that may be afforded by patents, pharmaceutical products may also be eligible for regulatory exclusivity, such as the exclusivity that may be granted to New Chemical Entities (“NCEs”). While we believe that tesetaxel will qualify as an NCE, such determination is only made at, or after, the time of approval. Accordingly, we do not have any agreement with the FDA, EMA or other regulatory body that tesetaxel will in fact be regarded as an NCE, and there can be no assurance that it will be treated as such at the time of approval (if approval is granted).

Competition that our products may face from generic versions of our products could materially and adversely impact our future revenue, profitability and cash flows and substantially limit our ability to obtain a return on the investments we have made in those product candidates.

If we fail to comply with our obligations under our license, we may lose rights to critical patents that are important to the commercialization and revenue potential of tesetaxel.

We have licensed patent rights covering tesetaxel from Daiichi Sankyo. If, for any reason, our license agreement with Daiichi Sankyo is terminated or we otherwise lose those rights, it would materially and adversely affect our business. Our license agreement with Daiichi Sankyo imposes, and any future collaboration agreements or license agreements we enter into are likely to impose, various development, commercialization, funding, milestone, royalty, diligence, sublicensing, insurance, patent prosecution and enforcement or other obligations on us. Failure to fulfill these obligations could pose a material risk to our patent protection for tesetaxel and any future product candidates.

If our product candidates infringe the rights of others, we could be subject to expensive litigation, become liable for substantial damages, be required to obtain licenses from others or be prohibited from selling our product candidates altogether.

Our competitors or others may have patent rights that they choose to assert against us or our licensors, licensees, suppliers, customers or potential marketing partners. Moreover, we may not know about patents or patent applications that our products would infringe. Because patent applications do not publish for at least 18 months, if at all, and can take many years to issue, there may be currently pending applications unknown to us that may later result in issued patents that our product candidates would infringe. In addition, if third parties file patent applications or obtain patents claiming inventions also claimed by us or our licensors in issued patents or pending applications, we may have to participate in interference proceedings in the U.S. Patent and Trademark Office (“USPTO”) to determine priority of invention. If third parties file oppositions in foreign countries, we may also have to participate in opposition proceedings in foreign tribunals to defend the patentability of claims in our foreign patent applications.

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If a third party claims that we infringe its proprietary rights, any of the following may occur:

Any of these events would have a material adverse effect on our business, results of operations and financial condition.

Patent policy and rule changes could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.

Changes in either the patent laws or interpretation of the patent laws in the U.S. or other countries may diminish the value of our patents or narrow the scope of our patent protection. The laws of foreign countries may not protect our rights to the same extent as the laws of the U.S. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the U.S. and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. We therefore cannot be certain that we or our licensors were the first to make the inventions claimed in our owned and licensed patents or pending applications, or that we or our licensor were the first to file for patent protection of such inventions.

Assuming the other requirements for patentability are met, in the U.S., prior to March 15, 2013, the first to make the claimed invention is entitled to the patent, while, outside the U.S., the first to file a patent application is entitled to the patent. After March 15, 2013, under the Leahy-Smith America Invents Act (“Leahy-Smith Act”), enacted on September 16, 2011, the U.S. has moved to a first-to-file system. The Leahy-Smith Act also includes a number of significant changes that affect the way patent applications will be prosecuted and may also affect patent litigation. In general, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, results of operations and financial condition.

Among some of the other changes introduced by the Leahy-Smith Act are changes that limit where a patentee may file a patent infringement suit and provide new opportunities for third parties to challenge issued patents in the USPTO. We may be subject to the risk of third-party prior art submissions on pending applications or become a party to opposition, derivation, reexamination, inter partes review, post-grant review or interference proceedings challenging our patents for tesetaxel. There is a lower standard of evidence necessary to invalidate a patent claim in a USPTO proceeding relative to the standard in U.S. federal courts. This could lead third parties to challenge and successfully invalidate our patents that would not otherwise be invalidated if challenged through the court system.

In addition to patent protection, we will need to successfully preserve our trade secrets. If we are unable to maintain effective proprietary rights for tesetaxel or any future product candidates, we may not be able to compete effectively in our markets.

In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable or that we elect not to patent, processes for which patents are difficult to enforce and any other elements of our product candidate

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discovery and development processes that involve information or know-how that is not covered by patents. However, trade secrets can be difficult to protect. We seek to protect our proprietary science and processes, in part, by entering into confidentiality agreements with our employees, consultants, scientific advisors and contractors. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems. Our agreements and security measures may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. For instance, the FDA has introduced its Transparency Initiative and is currently considering whether to publicly disclose additional information from drug sponsors; in such case, we cannot guarantee that our trade secrets will not be disclosed.

Although we expect all of our employees and consultants to assign their inventions to us and we expect all of our employees, consultants, advisors and any third parties who have access to our proprietary know-how, science or information to enter into confidentiality agreements, we cannot provide any assurances that all such agreements have been duly executed, that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. Misappropriation or unauthorized disclosure of our trade secrets could impair our competitive position and may have a material adverse effect on our business. Additionally, if the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for misappropriating our trade secrets.

Risks Related to Ownership of Shares of Our Common Stock

The price of shares of our common stock may be volatile, and you may lose all or part of your investment.

The market price of shares of our common stock could fluctuate significantly, and you may not be able to resell your shares near, at or above the price that you purchased them. Those fluctuations could be based on various factors in addition to those otherwise described in this Annual Report on Form 10-K, including those described throughout the section titled “Risk Factors” and the following:

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Any of these factors may result in large and sudden changes in the volume and trading price of shares of our common stock. In addition, the Nasdaq Global Select Market, in general, and the stocks of small pharmaceutical and biotechnology companies, in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of shares of our common stock, regardless of our actual operating performance. Further, a decline in the financial markets and related factors beyond our control may cause the market price of shares of our common stock to decline rapidly and unexpectedly.

Because we do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of shares of our common stock for return on your investment.

We intend to retain most, if not all, of our available funds and earnings to fund the development and growth of our business. As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in shares of our common stock as a source for any future dividend income.

Our board of directors (“Board”) has significant discretion as to whether to distribute dividends and in what amounts. Even if our Board decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on, among other things, our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant by our Board.

Our directors, executive officers and principal stockholders have substantial control over the Company, which could limit your ability to influence the outcome of key transactions, including a change of control.

Our current directors, officers and stockholders who own greater than 5% of our outstanding shares of common stock, together with their affiliates, beneficially own, in the aggregate, approximately 75% of our outstanding shares of common stock, based on the number of shares outstanding as of February 8, 2021. As a result, these current directors, officers and stockholders, if they act, will be able to influence or control matters requiring approval by our stockholders, including the election of directors and the approval of mergers, acquisitions or other extraordinary transactions. In addition, our current directors, officers and stockholders, acting together, would have the ability to control the management and affairs of our company. They may also have interests that differ from yours and may vote in a way with which you disagree and that may be adverse to your interests. This concentration of ownership may have the effect of delaying, preventing or deterring a change of control of our company, could deprive our stockholders of an opportunity to receive a premium for their shares of common stock as part of a sale of our company and could affect the market price of shares of our common stock.

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General Risk Factors

Future sales of shares of our common stock, or the perception that such sales may occur, could depress the market price of shares of our common stock.

We will need additional capital in the future to continue our planned operations. Sales of a substantial number of shares of our common stock in the public market, or the perception that such sales may occur, could depress the market price of shares of our common stock. All of our outstanding shares are freely tradable except for any shares held or acquired by persons who may be deemed to be our affiliates. Shares of our common stock held by our affiliates continue to be subject to the volume and other restrictions of Rule 144 under the U.S. Securities Act of 1933 (the “Securities Act”). Sales of a substantial number of such shares, or the perception that such sales may occur, could cause our market price to fall or make it more difficult for you to sell your shares of common stock at a time and price that you deem appropriate.

Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

We are subject to the periodic reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Our disclosure controls and procedures are designed to reasonably assure that information required to be disclosed by us in reports we file or submit under the Exchange Act is accumulated and communicated to management and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.

Disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected.

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Our business and operations may be materially adversely affected in the event of computer system failures or security breaches.

Despite the implementation of security measures, our internal computer systems, and those of other third parties on which we rely, are vulnerable to damage from computer viruses, unauthorized access, cyber-attacks, natural disasters, fire, terrorism, war and telecommunication and electrical failures. If such an event were to occur and interrupt our operations, it could result in a material disruption of our development programs. For example, the loss of data from ongoing or planned clinical studies could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, loss of trade secrets or inappropriate disclosure of confidential or proprietary information, including protected health information or personal data of employees or former employees, access to our clinical data or disruption of the manufacturing process, we could incur liability and the further development of our product candidates could be delayed. We may also be vulnerable to cyber-attacks or other malfeasance by hackers, employees and others. This type of breach of our cybersecurity may compromise our confidential information or our financial information and adversely affect our business or result in legal proceedings.

We are an emerging growth company, as defined in the Securities Act, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make shares of our common stock less attractive to investors.

We are an emerging growth company, as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and we may take advantage of certain exemptions from various reporting requirements that are otherwise applicable to public companies, including, among others, an exemption from the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended; reduced disclosure about executive compensation arrangements in our registration statements, periodic reports and proxy statements; and an exemption from the requirement to seek non-binding advisory votes on executive compensation and golden parachute arrangements. As a result, our stockholders may not have access to certain information that they may deem important. We will remain an emerging growth company until December 31, 2023 unless, prior to that time, we: (i) have more than $1.07 billion in annual gross revenue; (ii) have a market value for shares of our common stock held by non-affiliates of more than $700 million as of the last day of our second quarter of any year; or (iii) issue more than $1.0 billion of non-convertible debt over a three-year period.

Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. An emerging growth company can therefore delay the adoption of certain new or revised accounting standards issued subsequent to the enactment of the JOBS Act until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

We cannot predict if investors will find shares of our common stock less attractive because we may rely on these exemptions. If some investors find shares of our common stock less attractive as a result, there may be a less active trading market for shares of our common stock and our stock price may be more volatile.

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