Certain
factors may have a material adverse effect on our business, financial condition and results of operations, and you should carefully
consider them. Accordingly, in evaluating our business, we encourage you to consider the following discussion of risk factors
in its entirety, in addition to other information contained in this Quarterly Report on Form 10-Q, as well as our other public
filings with the SEC. The risks and uncertainties described below are those we currently believe to be material, but they are
not the only ones we face. If any of the following risks, or any other risks and uncertainties that we have not yet identified
or that we currently consider not to be material, actually occur or become material risks, our business and financial condition
could be materially and adversely affected.
Risks
Related to Our Business
We
are a clinical stage biopharmaceutical company with a limited operating history.
We
are a clinical-stage biopharmaceutical company formed in October 2016 and have a limited operating history. We do not lease or
own any laboratory space and we have historically had a remote work environment for our employees. We outsource our manufacturing,
clinical trial, information technology, payroll, legal and certain other functions.
We
have acquired or in-licensed four clinical stage assets and a late stage preclinical enteroviral vaccine platform. Marketing approval
of our product candidates will require extensive clinical testing data to support safety and efficacy requirements, as well as
pharmaceutical development, manufacturing and preclinical data, all of which are needed for regulatory approval. The likelihood
of success of our business plan must be considered in light of the challenges, substantial expenses, difficulties, complications
and delays frequently encountered in connection with developing and expanding early-stage businesses and the regulatory and competitive
environment in which we operate. Biopharmaceutical product development is a highly speculative undertaking, involves a substantial
degree of risk, and is a capital-intensive business.
Accordingly,
you should consider our prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by companies
in the early stages of development, especially clinical-stage biopharmaceutical companies such as ours. Potential investors should
carefully consider the risks and uncertainties that a company with a limited operating history will face. In particular, we may
not be able to:
|
●
|
successfully
implement or execute our current business plan;
|
|
●
|
successfully
start and complete clinical trials and obtain regulatory approval for the marketing of our product candidates;
|
|
●
|
successfully
contract for the manufacture of our clinical drug products and establish a commercial drug supply;
|
|
●
|
secure
market exclusivity and/or adequate intellectual property protection for our product candidates;
|
|
●
|
attract
and retain an experienced management and advisory team;
|
|
●
|
raise
sufficient funds in the capital markets to effectuate our business plan, including clinical development, regulatory approval
and commercialization for our product candidates;
|
|
●
|
successfully
recruit and retain a sales and marketing organization;
|
|
●
|
successfully
launch PRV-031 in
the U.S.;
|
|
●
|
successfully
execute our PRV-031 launch
plan for the At-Risk indication, including raising awareness and expanding screening to identify patients At-Risk of developing
clinical T1D; and
|
|
●
|
successfully
establish strategic partnerships to launch PRV-031 outside
the U.S.
|
If
we cannot successfully execute any one of the foregoing, our business may not succeed, and your investment will be adversely affected.
We
expect to incur substantial expenses and may never become profitable or be able to sustain profitability.
We
expect to incur substantial expenses without corresponding revenues unless and until we are able to obtain regulatory approval
and successfully commercialize our product candidates. We expect to incur significant expense to complete our clinical programs
for our product candidates in the United States and elsewhere. We may never be able to obtain regulatory approval for the marketing
of our product candidates in any indication in the United States or internationally. Even if we are able to commercialize our
product candidates, we may not be able to generate significant revenues or ever achieve profitability.
We
expect to incur significant research and development expenses as we advance clinical trials for our product candidates as well
as significant costs to build out our commercial infrastructure and conduct pre-commercial activities for PRV-031 as we prepare
for potential commercialization in 2021. As a result, we expect to incur substantial losses for the foreseeable future, and these
losses will be increasing. We are uncertain when or if we will be able to achieve or sustain profitability. If we achieve profitability
in the future, we may not be able to sustain profitability in subsequent periods. Failure to become and remain profitable may
impair our ability to sustain operations and adversely affect our business and our ability to raise capital.
We
need to raise additional funding. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate
certain or all of our product development programs or commercialization efforts.
We
expect our operating costs to be substantial as we incur costs to support our commercialization efforts for PRV-031, including
costs related to the buildout of an internal commercial infrastructure, and our ongoing and planned clinical trials for PRV-031
and our other product candidates. We will operate at a loss for the foreseeable future or until such time as we obtain regulatory
approval for and execute a successful commercial launch of PRV-031, if
ever. For the nine months ended September 30, 2020 and 2019, we had a net loss of $66.0 million and $32.7 million, respectively,
and as of September 30, 2020, we had an accumulated deficit of $145.1 million and $142.7 million in cash, cash equivalents and
marketable securities. We believe our current cash, cash equivalents and marketable securities will be sufficient to fund projected
operating requirements for at least the next 12 months from the issuance of these financial statements. We have based this estimate
on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. If
we obtain regulatory approval for PRV-031, we have substantial milestone payments that will become payable to our partners. We
will need substantial additional capital to fund these milestone payments, as well as to fund the clinical development programs
for all of our product candidates.
We
do not have any prospective financing arrangements or credit facilities as a source of future funds, and there can be no assurance
that we will be able to raise sufficient additional capital on acceptable terms, or at all. We may seek additional capital through
a combination of private equity offerings, public equity offerings, debt financings and strategic collaborations. If we raise
additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could
be significantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing
stockholders. Debt financing, if obtained, may involve agreements that include covenants limiting or restricting our ability to
take specific actions, such as incurring additional debt, could increase our expenses and could require that our assets secure
such debt. Moreover, any debt we incur must be repaid regardless of our operating results. If we choose to pursue additional indications
and/or geographies for our product candidates, in-license or acquire additional development assets, or otherwise expand more rapidly
than we presently anticipate, we may also need to raise additional capital sooner than expected.
If
we are unable to raise additional capital when required or on acceptable terms, we may need to significantly delay, scale back
or discontinue the development or commercialization of one or more of our product candidates or cease operations altogether, or
relinquish or license on unfavorable terms, our rights to technologies or any future product candidates that we otherwise would
seek to develop or commercialize.
Our
forecast of the period of time through which our financial resources will adequately support our operations is a forward-looking
statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors, including the
factors discussed elsewhere in this Risk Factors section. We have based this estimate on assumptions that may prove to be wrong,
and we could utilize our available capital resources sooner than we currently expect.
We
may not be able to correctly estimate or control our future operating expenses, which could lead to cash shortfalls.
Our
operating expenses may fluctuate significantly in the future as a result of a variety of factors, many of which are outside of
our control. These factors include:
|
●
|
the
success of our development strategy;
|
|
●
|
the
time, resources, and expense required to develop and conduct clinical trials and seek regulatory approvals for our product
candidates;
|
|
●
|
the
cost of preparing, filing, prosecuting, defending, and enforcing patent claims and other patent related costs, including litigation
costs and the results of such litigation;
|
|
●
|
the
cost of manufacturing and maintaining sufficient inventories of our products to meet anticipated demand;
|
|
●
|
any
product liability or other lawsuits related to our product candidates and the costs associated with defending them or the
results of such lawsuits;
|
|
●
|
the
cost of growing our ongoing development operations and establishing commercialization operations;
|
|
●
|
the
cost to attract and retain personnel with the skills required for effective operations;
|
|
●
|
the
costs associated with being a public company; and
|
|
●
|
the
costs associated with commercialization.
|
Any
material increases in our operating expenses will have a material impact on our financial condition and business operations. In
addition, if we are unable to correctly estimate or control our future operating expenses, we may need to raise additional capital,
delay or cease development of one or more of our product candidates, which could have a material adverse effect on our business,
operating results and prospects.
Risks
Related to Product Development, Regulatory Approval, Manufacturing and Commercialization
The
results of the PRV-031 CMC comparability plan may be unacceptable to the regulatory authorities. This may require further CMC
development activities and could affect the timing of BLA submission.
In
November 2019, we completed a Type B multidisciplinary meeting with the FDA to discuss the proposed contents of a BLA for PRV-031
(teplizumab) for the prevention or delay of T1D in individuals at-risk of developing T1D. Based on official
FDA meeting minutes, we do not anticipate the need to conduct any additional clinical trials in the at-risk population prior to
BLA submission. However, for the CMC module, the FDA confirmed that it would require the demonstration of comparability between
the study drug previously manufactured by MacroGenics and Eli Lilly and the to-be-commercialized drug substance and drug product
scheduled for production by Provention and its contract manufacturing partners.
If
we are unable to demonstrate the ability to manufacture drug substance and drug product that is comparable to the study drug previously
manufactured by MacroGenics and Eli Lilly, the timing of the FDA’s review and decision on the PRV-031 BLA could be delayed,
which could have a material impact on our business.
We
may not be successful in our efforts to develop and obtain regulatory approval for our product candidates. If we are unable to
obtain approval for or generate revenues from our product candidates, our ability to create stockholder value will be limited.
Our
product candidates are in various stages of clinical development and late stages of preclinical development. Our ability to generate
product revenue, which we do not expect will occur for many years, if ever, will depend heavily on the successful development
and eventual commercialization of our product candidates, which may never occur. For example, our potential product candidates
may be shown to have harmful side effects or may have other characteristics that may make the products impractical to manufacture,
unmarketable, or unlikely to receive marketing approval. We currently generate no revenue from sales of any product, and we may
never be able to develop or commercialize a marketable product.
We
will be required to submit our clinical trial protocols and receive approvals from the regulatory authorities before we can commence
any clinical trials with PRV-101 and PRV-015, and any additional studies with PRV-3279. Nonclinical study results for our product
candidates, including toxicology studies, may not support the filing of an IND or foreign equivalent for the product candidate.
Moreover,
we may not be successful in obtaining acceptance from the regulatory authorities to start our clinical trials. Prior to
commencing any clinical trials, we will also have to obtain approval from the Institutional Review Board (“IRB”),
or ethics committee for each of the institutions at which we plan to conduct our clinical trials. If we do not obtain such
acceptance, the time in which we expect to commence clinical programs for any product candidate will be extended and such
extension will increase our expenses and increase our need for additional capital.
Further,
there is no guarantee that our clinical trials will be successful or that we will continue clinical development in support of
an approval from the regulatory authorities for any indication. For example, our clinical trial results may show our product candidates
to be less effective than expected or have unacceptable side effects or toxicities. For example, our Phase 2a PRINCE trial did
not achieve its primary endpoint of a change in Crohn’s Disease Activity Index Score at week 12 as compared to placebo.
We note that most drug candidates never reach the clinical development stage and even those that do commence clinical development
have only a small chance of successfully completing clinical development and gaining regulatory approval.
Our
business currently depends entirely on the successful development, regulatory approval and commercialization of our product candidates.
Our product candidates will require additional preclinical and clinical development, regulatory and marketing approval in multiple
jurisdictions, obtaining sufficient manufacturing capacity and expertise for both clinical development and commercial production
and substantial investment and significant commercialization efforts before we generate any revenue from product sales.
The
success of our current and future product candidates will depend on several factors, including the following:
|
●
|
successful
completion of preclinical and clinical studies with positive results;
|
|
●
|
sufficiency
of our financial and other resources to complete the necessary preclinical studies and clinical trials;
|
|
●
|
entry
into collaborations to further the development of our product candidates;
|
|
●
|
Investigational
new drug or clinical trial applications, being
cleared such that our product candidates can commence clinical trials;
|
|
●
|
successful
initiation of, enrollment in and completion of clinical trials;
|
|
●
|
successful
data from our clinical programs that support a finding of safety and effectiveness and an acceptable risk-benefit profile
of our product candidates in the intended populations;
|
|
●
|
receipt
of regulatory and marketing approvals from applicable regulatory authorities;
|
|
●
|
establishment
of arrangements with third-party manufacturers for clinical supply and commercial manufacturing and, where applicable, commercial
manufacturing capabilities;
|
|
●
|
successful
development of our internal manufacturing processes and transfer, where applicable, from our reliance on CMOs, to our own manufacturing facility, or from our own manufacturing facility to CMOs or the facilities
of collaboration partners;
|
|
●
|
establishment
and maintenance of patent and trade secret protection or regulatory exclusivity for our product candidates;
|
|
●
|
commercial
launch of our product candidates, if and when approved, whether alone or in collaboration with others;
|
|
●
|
acceptance
of our product candidates and their therapeutic uses, if and when approved, by patients, the medical community and third-party
payors;
|
|
●
|
effective
competition with other therapies and treatment options;
|
|
●
|
establishment
and maintenance of healthcare coverage and adequate reimbursement from third-party payors for any approved products;
|
|
●
|
enforcement
and defense of intellectual property rights and claims;
|
|
●
|
maintenance
of a continued acceptable safety profile of the product candidates following approval; and
|
|
●
|
achieving
desirable medicinal properties for the intended indications.
|
If
we do not succeed in one or more of these factors in a timely manner or at all, we could experience significant delays or an inability
to successfully commercialize our product candidates. We cannot assure you that our product candidates will be successfully developed
or commercialized. If we are unable to develop, or obtain regulatory approval for, or, if approved, to successfully commercialize
our product candidates, it could have a material adverse effect on our business, operating results and prospects.
The
recent outbreak of the novel coronavirus 2019 (COVID-19) has caused delays to our clinical trials. Moreover, the longer the pandemic
persists, the more impact it will have on our clinical trial and other business plans and timelines. In
addition, this pandemic has caused substantial disruption in the financial markets and may adversely impact economies worldwide,
both of which could result in adverse effects on our business, operations and ability to raise capital.
The
COVID-19 pandemic continues to drive global uncertainty and has caused, and may continue to cause, delays to the development of
certain of our product candidates. Delays in completing our clinical trials are expected to increase our costs, slow our development
and approval process and could negatively impact our ability to commence product sales and generate revenues. Out of an abundance
of caution to protect patients, caregivers, clinical site staff, company employees as well as due to facility closures, quarantine,
travel restrictions and other governmental restrictions in March 2020 we temporarily paused the enrollment and randomization of
new patients with newly diagnosed T1D into our global Phase 3 PROTECT study of teplizumab. During the second quarter of 2020,
we began enrolling patients in the PROTECT study on a country by country and site by site basis and as of September 30, 2020,
all sites have been activated, with a majority of the sites actively enrolling patients. As a result of the delay, we now expect
to report top line results from the Phase 3 PROTECT study in mid-2023, subject to change for any further COVID-19-related or other
interruptions. In addition, we, with our development partner Amgen, collectively decided that, to protect the integrity and quality
of the PRV-015 Phase 2b trial in gluten free diet non-responsive celiac disease, we would stagger study startup throughout the
third quarter of 2020 rather than initiating screening in the second quarter of 2020, as had originally been scheduled. We initiated
the Phase 2b trial in August 2020. Additionally, our plans to initiate the Phase 2a portion of the PREVAIL study in lupus patients
has been delayed from the first half to the second half of 2021 predominantly due to COVID-19 related impacts on our plans
Timely
enrollment in our clinical trials is dependent upon global clinical trial sites which may be adversely affected by global health
matters, such as pandemics. We are currently conducting clinical trials for our product candidates in many countries, including
the United States, European Union, and Canada and may expand to other geographies. Many of these regions in which we operate are
currently being or may in the future be affected by COVID-19. Some factors from the COVID-19 outbreak that may delay or otherwise
adversely affect enrollment in the clinical trials of our product candidates, as well as adversely impact our business generally,
include:
|
●
|
delays
or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical
site staff, and delays enrolling patients in our clinical trials or increased rates of patients withdrawing from our clinical
trials following enrollment as a result of contracting COVID-19, being forced to quarantine, or not accepting home health
visits, particularly for older patients with a higher risk of contracting COVID-19;
|
|
●
|
limitations
on travel that could interrupt key trial activities, such as clinical trial site initiations and monitoring, domestic and
international travel by employees, contractors or patients to clinical trial sites, including any government-imposed travel
restrictions or quarantines that may impact the ability or willingness of patients, employees or contractors to travel to
our clinical trial sites or secure visas or entry permissions, any of which could delay or adversely impact the conduct or
progress of our clinical trials;
|
|
●
|
interruption
or delays in the operations of the U.S. Food and Drug Administration and foreign regulatory authorities, which may impact
review and approval timelines;
|
|
●
|
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; and
|
|
●
|
business
disruptions caused by potential workplace, laboratory and office closures and an increased reliance on employees working from
home, disruptions to or delays in ongoing laboratory experiments and operations, staffing shortages, travel.
|
The
pandemic has already caused significant disruptions in the financial markets, and may continue to cause such disruptions, which
could adversely impact our ability to raise additional funds through public offerings or private placements and may also impact
the volatility of our stock price and trading in our stock. Moreover, it is possible the pandemic will significantly impact economies
worldwide, which could result in adverse effects on our business and operations. The rapid
development and fluidity of the pandemic precludes any prediction as to the ultimate impact of COVID-19. Additionally, the pandemic
could negatively impact our ability to execute a successful launch of PRV-031 if we receive marketing approval, which could impact
our revenue making potential and have other negative material adverse impacts on our business. The full extent of the impact and
effects of COVID-19 on our business, operations, liquidity, financial condition and results of operations remain uncertain at
this time.
Clinical
drug development involves a risky, lengthy and expensive process, with an uncertain outcome. We may encounter substantial delays
in completing our clinical trials which in turn will require additional costs, or we may fail to demonstrate adequate safety and
efficacy to the satisfaction of applicable regulatory authorities.
It
is impossible to predict if or when any of our product candidates will prove safe or effective in humans or will
receive regulatory approval and the risk of failure through the development process is high.
Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must conduct extensive
clinical trials to demonstrate the safety and efficacy of the product candidates in humans. Clinical testing is expensive, time-consuming
and uncertain as to outcome. We cannot guarantee that any clinical trials will be conducted as planned or completed on schedule,
if at all. A failure of one or more clinical trials can occur at any stage of testing. Events that may prevent successful or timely
completion of clinical development include:
|
●
|
delays
in reaching, or failing to reach, a consensus with regulatory agencies on study design;
|
|
●
|
delays
in reaching, or failing to reach, agreement on acceptable terms with a sufficient number of prospective CROs and clinical
trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and
trial sites;
|
|
●
|
delays
in obtaining required IRB or Ethics Committee (“EC”) approval at each clinical trial site;
|
|
●
|
delays
in recruiting a sufficient number of suitable patients to participate in our clinical trials;
|
|
●
|
delays
as a result of the impact of the COVID-19 pandemic on clinical trial recruitment;
|
|
●
|
imposition
of a clinical hold by regulatory agencies, IRBs, or ECs;
|
|
●
|
failure
by our CROs, other third parties or us to adhere to clinical trial, regulatory or legal requirements;
|
|
●
|
failure to perform in accordance with the FDA’s
good clinical practices (“GCP,” or current good clinical practices “cGCP”), or applicable regulatory
guidelines in other countries;
|
|
●
|
delays
in the testing, validation, manufacturing and delivery of sufficient quantities of our product candidates to the clinical
sites;
|
|
●
|
delays
in having patients’ complete participation in a study or return for post-treatment follow-up;
|
|
●
|
subjects
choosing an alternative treatment for the indications for which we are developing our product candidates, or participating
in competing clinical trials;
|
|
●
|
clinical
study sites or patients dropping out of a study;
|
|
●
|
delay
or failure to address any patient safety concerns that arise during the course of a trial;
|
|
●
|
unanticipated
costs or increases in costs of clinical trials of our product candidates;
|
|
●
|
occurrence
of serious adverse events associated with the product candidate that are viewed to outweigh its potential benefits; or
|
|
●
|
changes
in regulatory requirements and guidance that require amending or submitting new clinical protocols.
|
We
could also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs or ECs of the institutions in which
such trials are being conducted, by an independent Safety Review Board for such trial or by the FDA, EMA, or other regulatory
authorities. Such authorities may suspend or terminate a clinical trial due to a
number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical
protocols, inspection of the clinical trial operations or trial site by the FDA, EMA, or other regulatory authorities resulting
in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from
using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical
trial.
Product
development costs for any of our product candidates will increase if we have delays in testing or approval or if we need to perform
more or larger clinical trials than planned. Additionally, changes in regulatory requirements and policies may occur and we may
need to amend study protocols to reflect these changes. Amendments may require us to resubmit our study protocols to the FDA,
comparable foreign regulatory authorities, and IRBs for reexamination, which may impact the costs, timing or successful completion
of that study. If we experience delays in completion of, or if we, the FDA or other regulatory authorities, the IRB, or other
reviewing entities, or any of our clinical trial sites suspend or terminate any of our clinical trials of any of our product candidates,
its commercial prospects may be materially harmed and our ability to generate product revenues will be delayed. Any delays in
completing our clinical trials will increase our costs, slow down our development and approval process and jeopardize our ability
to commence product sales and generate revenues. Any of these occurrences may harm our business, financial condition and prospects
significantly. In addition, many of the factors that cause, or lead to, termination or suspension of, or a delay in the commencement
or completion of, clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates. In
addition, if one or more clinical trials are delayed, our competitors may be able to bring products to market before we do, and
the commercial viability of any of our product candidates could be significantly reduced.
Clinical
trial delays could also shorten any periods during which we may have the exclusive right to commercialize our product candidates
or allow our competitors to bring products to market before we do, which could impair our ability to successfully commercialize
our product candidates. In addition, any delays
in completing our clinical trials will increase our costs, slow down our product
candidate development and approval process and jeopardize our ability to commence product sales and generate revenues. Any of
these occurrences may significantly harm our business, financial condition and prospects. In addition, many of the factors that
cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory
approval of our product candidates.
The
outcome of preclinical studies and early clinical trials may not be predictive of the success of later clinical trials, and interim
results of a clinical trial do not necessarily predict final results. We cannot assure you that the FDA, EMA or comparable foreign
regulatory authorities will view the results as we do or that any future trials of any of our product candidates will achieve
positive results. Further, product candidates in later stages of clinical trials may fail to show the desired safety and efficacy
traits despite having progressed through pre-clinical studies and initial clinical trials. A number of companies in the pharmaceutical
and biotechnology industries have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse
safety profiles, notwithstanding promising results in earlier studies, and we cannot be certain that we will not face similar
setbacks.
Further,
preclinical and clinical data are often susceptible to various interpretations and analyses, and many companies that have believed
their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain
marketing approval. If the results of our clinical
trials are inconclusive, only modestly positive or if there are safety concerns or adverse events associated with our other product
candidates, we may:
|
●
|
be
delayed in obtaining marketing approval for our product candidates, if approved at all;
|
|
●
|
obtain
marketing approval in some countries and not in others;
|
|
●
|
obtain
approval for indications or patient populations that are not as broad as intended or desired;
|
|
●
|
obtain
approval with labeling that includes significant use or distribution restrictions or safety warnings;
|
|
●
|
be
required to change the way the product is administered;
|
|
●
|
be
required to perform additional preclinical or clinical trials to support approval or be subject to additional post-marketing
testing requirements;
|
|
●
|
have
regulatory authorities withdraw their approval of a product or impose restrictions on its distribution in the form of a modified
risk evaluation and mitigation strategy;
|
|
●
|
be
sued; or
|
|
●
|
experience
damage to our reputation.
|
Additionally,
our product candidates could potentially cause other adverse events that have not yet been predicted. The inclusion of ill patients
in our clinical trials may result in deaths or other adverse medical events due to other therapies or medications that such patients
may be using. Furthermore, a competitor is currently in early-stage clinical testing of teplizumab as a combination therapy for
the treatment of T1D. Any adverse events observed in such clinical testing by our competitor may delay or otherwise adversely
impact regulatory approval for our PRV-031 product
candidate. As described above, any of these events could prevent us from obtaining marketing approval or achieving or maintaining
market acceptance of our product candidates and impair our ability to commercialize our products.
We
have conducted and are conducting clinical trials outside the United States and anticipate conducting additional clinical trials
outside the United States, and the FDA may not accept data from such trials.
We
are currently conducting clinical trials for our product candidates in countries outside of the United States and we anticipate
that we will conduct additional clinical trials in countries outside the United States. Although the FDA may accept data from
clinical trials conducted outside the United States, acceptance of such study data by the FDA is subject to certain conditions.
For example, the clinical trial must be conducted in accordance with GCP requirements and the FDA must be able to validate the
data from the clinical trial through an onsite inspection if it deems such inspection necessary. Where data from foreign clinical
trials are intended to serve as the sole basis for marketing approval in the United States, the FDA will not approve the application
on the basis of foreign data alone unless those data are considered applicable to the U.S. patient population and U.S. medical
practice, the clinical trials were performed by clinical investigators of recognized competence, and the data is considered valid
without the need for an on-site inspection by the FDA or, if the FDA considers such an inspection to be necessary, the FDA is
able to validate the data through an on-site inspection or other appropriate means. In addition, such clinical trials would be
subject to the applicable local laws of the foreign jurisdictions where the clinical trials are conducted. A description of any
studies related to overdosage is also required, including information on dialysis, antidotes, or other treatments, if known. There
can be no assurance the FDA will accept data from clinical trials conducted outside of the United States. If the FDA does not
accept any such data, it would likely result in the need for additional clinical trials, which would be costly and time-consuming
and delay aspects of our development plan.
Risks
inherent in conducting international clinical trials include, but are not limited to:
|
●
|
foreign
regulatory requirements that could burden or limit our ability to conduct our clinical trials;
|
|
●
|
administrative
burdens of conducting clinical trials under multiple foreign regulatory schema;
|
|
●
|
foreign
currency fluctuations which could negatively impact our financial condition since certain payments are paid in local currencies;
|
|
●
|
manufacturing,
customs, shipment and storage requirements;
|
|
●
|
cultural
differences in medical practice and clinical research; and
|
|
●
|
diminished
protection of intellectual property in some countries.
|
Biologics
carry unique risks and uncertainties, which could have a negative impact on future results of operations.
The
successful discovery, development, manufacturing and sale of biologics is a long, expensive and uncertain process. There are unique
risks and uncertainties with biologics. For example, access to and supply of necessary biological materials, such as cell lines,
may be limited and governmental regulations restrict access to and regulate the transport and use of such materials. In addition,
the development, manufacturing and sale of biologics is subject to regulations that are often more complex and extensive than
the regulations applicable to other pharmaceutical products. Manufacturing biologics, especially in large quantities, is often
complex and may require the use of innovative technologies. Such manufacturing also requires facilities specifically designed
and validated for this purpose and sophisticated quality assurance and quality control procedures. Biologics are also frequently
costly to manufacture because production inputs are derived from living animal or plant material, and some biologics cannot be
made synthetically. Failure to successfully discover, develop, manufacture and sell biologics could adversely impact our business
and results of operations.
If
we are not able to obtain any required regulatory approvals for our product candidates, we will not be able to commercialize our
product candidates and our ability to generate revenue will be limited.
The research, testing,
manufacturing, labeling, packaging, storage, approval, sale, marketing, advertising and promotion, pricing, export, import and
distribution of drug products are subject to extensive regulation by the FDA, EMA, and other regulatory authorities in the United
States, European Union, and other countries, where regulations differ from country to country. We are not permitted to market
our product candidates as prescription pharmaceutical products in the United States until we receive approval of a New Drug Application
(“NDA”) or BLA from the FDA, or in any foreign countries until we receive the requisite approval from such
countries. In the United States, the FDA generally requires the completion of clinical trials of each drug to establish its safety
and efficacy and extensive pharmaceutical development to ensure its quality before an NDA or a BLA is approved. Regulatory authorities
in other jurisdictions impose similar requirements. Of the large number of drugs in development, only a small percentage result
in the submission of an NDA or a BLA to the FDA or other regulatory authorities and even fewer are eventually approved for commercialization.
Changes in regulatory approval policies during the development period, changes in or the enactment of additional statutes or regulations,
or changes in regulatory review for a submitted product application may cause delays in the approval or rejection of an application.
We
have only limited experience in filing the applications necessary to gain regulatory approvals and expect to rely on consultants
and third party CROs with expertise in this area to assist us in this process. Securing marketing approval requires the submission
of extensive preclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication
to establish the product candidate’s safety and efficacy. Securing marketing approval also requires the submission of information
about the product manufacturing process to, and inspection of manufacturing facilities by, the regulatory authorities. Our product
candidates may not be effective, may be only moderately effective or may prove to have undesirable or unintended side effects,
toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use. If
our development efforts for our product candidates, including regulatory approval, are not successful for their planned indications,
our business will be materially adversely affected.
Our
success depends on the receipt of regulatory approval and the issuance of such regulatory approvals is uncertain and subject to
a number of risks, including the following:
|
●
|
the
results of our clinical trials may not be satisfactory or may not meet the level of statistical or clinical significance required
by the FDA, EMA, or other regulatory agencies for marketing approval;
|
|
●
|
the
dosing of our product candidates in a particular clinical trial may not be at an optimal level;
|
|
●
|
we
may be required to provide additional analysis or data for already completed clinical studies, or conduct additional studies;
|
|
●
|
the
FDA, EMA, or comparable foreign regulatory authorities may require us to obtain clearance or approval of companion diagnostic
tests;
|
|
●
|
the
FDA, EMA, or comparable foreign regulatory authorities may disagree on the design or implementation of our clinical trials,
including the methodology used in our studies, our chosen endpoints, our statistical analysis, or our proposed product indication;
|
|
●
|
our
failure to demonstrate to the satisfaction of the FDA, EMA, or comparable regulatory authorities that a product candidate
is safe and effective for its proposed indication;
|
|
●
|
we
may fail to demonstrate that a product candidate’s clinical benefits outweigh its safety risks;
|
|
●
|
immunogenicity
might affect a product candidate efficacy and/or safety;
|
|
●
|
the
FDA, EMA, or comparable foreign regulatory authorities may disagree with our interpretation of data from nonclinical studies
or clinical trials;
|
|
●
|
the
FDA, EMA, or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party
manufacturers with whom we contract for clinical and commercial supplies;
|
|
●
|
there
may be changes in the approval policies or regulations that render our nonclinical and clinical data insufficient for approval;
or
|
Additionally,
even if we obtain regulatory approval for one indication, there is no guarantee we will be able to gain regulatory approval for
additional indications. For example, we intend to initially seek regulatory approval for our CVB vaccine product candidate for
the prevention of acute CVB infection. The results of longitudinal studies demonstrating the connection between CVB and T1D and
T1D-associated celiac disease will be necessary to expand the indicated use of this vaccine to T1D. These studies must be completed
and submitted to the FDA or EMA prior to receiving approval in the United States or European Union to market the CVB vaccine for
additional indications such as prevention of T1D. Such studies will be costly and time consuming and may not demonstrate to the
FDA’s satisfaction the connection between the CVB virus and the onset of T1D
Failure
or delay in obtaining regulatory approval for our product candidates for the foregoing, or any other reasons, will prevent or
delay us from commercializing our product candidates, and our ability to generate revenue will be materially impaired. We cannot
guarantee that regulators will agree with our assessment of the results of the clinical trials we have conducted or intend to
conduct in the future or that such future trials will be successful. The FDA, EMA and other regulators have substantial discretion
in the approval process and may refuse to accept any application or may decide that our data is insufficient for approval and
require additional clinical trials, or pre-clinical or other studies. In addition, varying interpretations of the data obtained
from pre-clinical and clinical testing could delay, limit or prevent regulatory approval of our product candidates.
The
FDA, EMA, or comparable foreign regulatory authorities could require the clearance or approval of a companion diagnostic device
as a condition of approval of PRV-031, which may require substantial financial resources and could delay regulatory approval of
PRV-031.
Companion
diagnostics, which provide information that is essential for the safe and effective use of a corresponding therapeutic product,
may be co-developed with a device manufacturer or with a laboratory, and generally require FDA clearance or approval as well.
Given the availability of autoantibody tests commercially and the binary nature of these tests we do not believe a companion diagnostic
should be required in connection with PRV-031. Should
the FDA, EMA, or comparable foreign regulatory authorities disagree with us and require the use of a companion diagnostic, we
may face delays or obstacles in obtaining approval of a BLA for PRV-031 as the FDA may take the position that a companion diagnostic
device is required prior to granting approval of the BLA. In addition, if a companion diagnostic is required, we may be dependent
on the cooperation and effort of third-party collaborators to develop companion diagnostics. We and our potential and future collaborators
may encounter difficulties in developing or validating such tests. Any delay or failure by us or our potential and future collaborators
to develop or obtain regulatory clearance or approval of such tests, if necessary, could delay or prevent approval of PRV-031
or our other product candidate.
Even
if we obtain marketing approval for any of our product candidates, we will be subject to ongoing obligations and continued regulatory
review, which may result in significant additional expense. Additionally, our product candidates could be subject to labeling
and other restrictions and withdrawal from the market and we may be subject to penalties if we fail to comply with regulatory
requirements or if we experience unanticipated problems with our product candidates.
Even
if we obtain regulatory approval for any of our product candidates for an indication, the FDA, EMA, or foreign equivalent may
still impose significant restrictions on their indicated uses or marketing or the conditions of approval or impose ongoing requirements
for potentially costly and time-consuming post-approval studies, including Phase 4 clinical trials, post-market surveillance to
monitor safety and efficacy and a Risk Evaluation and Mitigation Strategy (“REMS”). If the FDA concludes a
REMS is needed, the sponsor of the NDA or BLA must submit a proposed REMS; the FDA will not approve the NDA or BLA without an
approved REMS, if required. A REMS could include medication guides, physician communication plans, or elements to assure safe
use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDA may also require a
REMS for an approved product when new safety information emerges. Any such post-marketing requirements may negatively impact our
commercialization plans or require us to raise additional capital to support the execution of such requirements. Additionally,
if we face challenges or are unable to comply with post-marketing requirements, we may not be able to maintain marketing approval,
or we may decide to abandon the program.
Our
product candidates will also be subject to ongoing regulatory requirements governing the manufacturing, labeling, packaging, storage,
distribution, safety surveillance, advertising, promotion, recordkeeping and reporting of adverse events and other post-market
information. These requirements include registration with the FDA, as well as continued compliance with current GCP regulations
for any clinical trials that we conduct post-approval. In addition, manufacturers of drug products and their facilities are subject
to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with current Good
Manufacturing Practices (“cGMP” or “GMP”) requirements relating to manufacturing, quality control,
quality assurance and corresponding maintenance of records and documents.
With
respect to sales and marketing activities by us or any future licensor, advertising and promotional materials must comply with
FDA rules in addition to other applicable federal, state and local laws in the United States and similar legal requirements in
other countries. In the United States, the distribution of product samples to physicians must comply with the requirements of
the U.S. Prescription Drug Marketing Act. Application holders must obtain FDA approval for product and manufacturing changes,
depending on the nature of the change. We may also be subject, directly or indirectly through our customers and licensors, to
various fraud and abuse laws, including, without limitation, the U.S. Anti-Kickback Statute, U.S. False Claims Act, and similar
state laws, which impact, among other things, our proposed sales, marketing, and scientific/educational grant programs. If we
participate in the U.S. Medicaid Drug Rebate Program, the Federal Supply Schedule of the U.S. Department of Veterans Affairs,
or other government drug programs, we will be subject to complex laws and regulations regarding reporting and payment obligations.
All of these activities are also potentially subject to U.S. federal and state consumer protection and unfair competition laws.
Similar requirements exist in many of these areas in other countries.
In
addition, if any of our product candidates are approved for a particular indication, our product labeling, advertising and promotion
would be subject to regulatory requirements and continuing regulatory review. The FDA strictly regulates the promotional claims
that may be made about prescription products. In particular, a product may not be promoted for uses that are not approved by the
FDA as reflected in the product’s approved labeling. If we receive marketing approval for our product candidates, physicians
may nevertheless legally prescribe our products to their patients in a manner that is inconsistent with the approved label. If
we are found to have promoted such off-label uses, we may become subject to significant liability and government fines. The FDA
and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is
found to have improperly promoted off-label uses may be subject to significant sanctions. The federal government has levied large
civil and criminal fines against companies for alleged improper promotion and has enjoined several companies from engaging in
off-label promotion. The FDA has also requested that companies enter into consent decrees of permanent injunctions under which
specified promotional conduct is changed or curtailed.
If
we or a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity
or frequency, problems with the facility where the product is manufactured, or we or our manufacturers fail to comply with applicable
regulatory requirements, we may be subject to the following administrative or judicial sanctions:
|
●
|
restrictions
on the marketing or manufacturing of the product;
|
|
●
|
withdrawal
of the product from the market;
|
|
●
|
voluntary
or mandatory product recalls;
|
|
●
|
restrictions
of the labeling of a product;
|
|
●
|
restrictions
on product distribution or use
|
|
●
|
requirements
to conduct post-marketing studies or clinical trials;
|
|
●
|
issuance
of warning letters or untitled letters;
|
|
●
|
injunctions
or the imposition of civil or criminal penalties or monetary fines, restitution, or disgorgement of profit or revenues;
|
|
●
|
suspension,
withdrawal, or revocation of regulatory approval;
|
|
●
|
suspension
or termination of any ongoing clinical trials;
|
|
●
|
refusal
to approve pending applications or supplements to approved applications filed by us;
|
|
●
|
suspension
or imposition of restrictions on operations, including costly new manufacturing requirements; or
|
|
●
|
product
seizure or detention or refusal to permit the import or export of product.
|
The
occurrence of any event or penalty described above may inhibit our ability to commercialize our product candidates and generate
revenue. Any government investigation of alleged violations of law could require us to expend significant time and resources in
response and could generate negative publicity. Adverse regulatory action, whether pre- or post-approval, can also potentially
lead to product liability claims and increase our product liability exposure.
Even
though we may obtain or apply for orphan drug designation for a product candidate, we may not be able to obtain orphan drug marketing
exclusivity.
We
have obtained orphan drug designation from the FDA for PRV-031 for the treatment of recent-onset T1D. Separately, some of the
subsets of lupus erythematosus, which we may target with PRV-3279, are orphan indications (e.g., lupus nephritis).
However,
there is no guarantee that the FDA, EMA or its foreign equivalents will grant any future application for orphan drug designation
for any of our other product candidates, including PRV-031 in the At-Risk indication, which would make us ineligible for the additional
exclusivity and other benefits of orphan drug designation.
Under
the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition, which
is generally a disease or condition that affects fewer than 200,000 individuals in the United States or for which there is no
reasonable expectation that the cost of developing and making a drug available in the United
States for this type of disease or condition
will be recovered from sales of the product. Orphan drug designation must be requested before submitting an NDA or a BLA. After
the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly
by the FDA. Orphan product designation does not convey any advantage in or shorten the duration of regulatory review and approval
process. In addition to the potential period of exclusivity, orphan designation makes a company eligible for grant funding of
up to $400,000 per year for four years to defray costs of clinical trial expenses, tax credits for clinical research expenses
and potential exemption from the FDA application user fee.
If
a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has
such designation, the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other applications
to market the same drug for the same indication for seven years, except in limited circumstances, such as (i) the drug’s
orphan designation is revoked; (ii) its marketing approval is withdrawn; (iii) the orphan exclusivity holder consents to the approval
of another applicant’s product; (iv) the orphan exclusivity holder is unable to assure the availability of a sufficient
quantity of drug; or (v) a showing of clinical superiority to the product with orphan exclusivity by a competitor product. If
a drug designated as an orphan product receives marketing approval for an indication broader than what is designated, it may not
be entitled to orphan drug exclusivity. There can be no assurance that we will receive orphan drug designation for any of our
product candidates in the indications for which we think they might qualify, if we elect to seek such applications.
As
a result, even if we obtain orphan drug exclusivity for PRV-031 for the treatment of recent-onset T1D in the United States, the
FDA can still approve other drugs that have a different active ingredient for use in treating the same indication. Furthermore,
the FDA can waive orphan drug exclusivity if we are unable to manufacture sufficient supply of PRV-031 or if the FDA finds that
a subsequent applicant for recent-onset T1D demonstrates clinical superiority to PRV-031. Accordingly, orphan drug exclusivity
for a product may not effectively protect the product from competition.
Although
we may pursue expedited regulatory approval pathways for a product candidate, it may not qualify for expedited development or,
if it does qualify for expedited development, it may not actually lead to a faster development or regulatory review or approval
process.
Although
we believe there may be an opportunity to accelerate the development of certain of our product candidates through one or more
of the FDA’s expedited programs, such as fast track, breakthrough therapy, accelerated approval or priority review, we cannot
be assured that any of our product candidates will qualify for such programs.
For
example, a drug may be eligible for designation as a breakthrough therapy if the drug is intended, alone or in combination with
one or more other drugs, to treat a serious or life-threatening condition and preliminary clinical evidence indicates that the
drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints. Although
breakthrough designation or access to any other expedited program may expedite the development or approval process, it does not
change the standards for approval. If we apply for breakthrough therapy designation or any other expedited program for our product
candidates, the FDA may determine that our proposed target indication or other aspects of our clinical development plans do not
qualify for such expedited program. Even if we are successful in obtaining a breakthrough therapy designation or access to any
other expedited program, we may not experience faster development timelines or achieve faster review or approval compared to conventional
FDA procedures. For example, the time required to identify and resolve issues relating to chemistry, manufacturing and controls,
the acquisition of a sufficient supply of our product for clinical trial purposes or the need to conduct additional preclinical
or clinical studies may delay approval by the FDA, even if the product candidate qualifies for a breakthrough therapy designation
or access to any other expedited program. Access to an expedited program may also be withdrawn by the FDA if it believes that
the designation is no longer supported by data from our clinical development program. Additionally, qualification for any expedited
review procedure does not ensure that we will ultimately obtain regulatory approval for such product candidate.
Obtaining
and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be successful in
obtaining regulatory approval of our product candidates in other jurisdictions.
Obtaining
and maintaining regulatory approval of our product candidates in one jurisdiction does not guarantee that we will be able to obtain
or maintain regulatory approval in any other jurisdiction, but a failure or delay in obtaining regulatory approval in one jurisdiction
may have a negative effect on the regulatory approval process in others. For example, even if the FDA grants marketing approval
of a product candidate, comparable regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing
and promotion of the product candidate in those countries. Approval procedures vary among jurisdictions and can involve requirements
and administrative review periods different from those in the United States, including additional preclinical studies or clinical
trials, as clinical trials conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions.
In many jurisdictions outside the United States, a product candidate must be approved for reimbursement before it can be approved
for sale in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval.
Obtaining
foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties
and costs for us and could delay or prevent the introduction of our products in certain countries. If we fail to comply with the
regulatory requirements in international markets and/ or to receive applicable marketing approvals, our target market will be
reduced and our ability to realize the full market potential of our product candidates will be harmed.
Current
and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product
candidates and affect the prices we may obtain.
In
the United States 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 marketing approval for our product candidates, restrict or
regulate post-approval activities and affect our ability to profitably sell our product candidates. Legislative and regulatory
proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical
products. We do not know 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 marketing approvals of our product candidates, if any, may be. In addition,
increased scrutiny by the U.S. Congress (“Congress”) of the FDA’s approval process may significantly
delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other
requirements.
In
the United States, the Medicare Modernization Act (“MMA”), changed the way Medicare covers and pays for pharmaceutical
products. The legislation expanded Medicare coverage for drug purchases by the elderly and introduced a new reimbursement methodology
based on average sales prices for drugs. In addition, this legislation authorized Medicare Part D prescription drug plans to use
formularies where they can limit the number of drugs that will be covered in any therapeutic class. As a result of this legislation
and the expansion of federal coverage of drug products, we expect that there will be additional pressure to contain and reduce
costs. These cost reduction initiatives and other provisions of this legislation could decrease the coverage and price that we
receive for our product candidates and could seriously harm our business. While the MMA applies only to drug benefits for Medicare
beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement
rates, and any reduction in reimbursement that results from the MMA may result in a similar reduction in payments from private
payors.
The
Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act of 2010
(collectively, the “Health Care Reform Law”), is a sweeping law intended to broaden access to health insurance, reduce
or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for
healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy
reforms. The Health Care Reform Law revised the definition of “average manufacturer price” for reporting purposes,
which could increase the amount of Medicaid drug rebates to states. Further, the law imposed a significant annual fee on companies
that manufacture or import branded prescription drug products.
The
Health Care Reform Law remains subject to legislative efforts to repeal, modify or delay the implementation of the law. However,
if the Health Care Reform Law is repealed or modified, or if implementation of certain aspects of the Health Care Reform Law are
delayed, such repeal, modification or delay may materially adversely impact our business, strategies, prospects, operating results
or financial condition. We are unable to predict the full impact of any repeal, modification or delay in the implementation of
the Health Care Reform Law on us at this time. Due to the substantial regulatory changes that will need to be implemented by CMS
and others, and the numerous processes required to implement these reforms, we cannot predict which healthcare initiatives will
be implemented at the federal or state level, the timing of any such reforms, or the effect such reforms or any other future legislation
or regulation will have on our business.
In
addition, other legislative changes have been proposed and adopted in the United States since the Health Care Reform Law was enacted.
We expect that additional federal healthcare reform measures will be adopted in the future, any of which could limit the amounts
that federal and state governments will pay for healthcare products and services, and in turn could significantly reduce the projected
value of certain development projects and reduce or eliminate our profitability.
The
FDA’s and other regulatory authorities’ policies may change, and additional government regulations may be enacted
that could prevent, limit or delay regulatory approval of our product candidates. We also cannot predict the likelihood, nature,
or extent of adverse government regulation that may arise from pending or future legislation or administrative action, either
in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements
or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained,
and we may not achieve or sustain profitability
If
we fail to successfully commercialize any of our product candidates, we may need to acquire additional product candidates and
our business will be adversely affected.
We
have never developed and obtained approval for any product candidates or commercialized any product candidates. We have limited
product candidates and do not have any other compounds in pre-clinical testing, lead optimization or lead identification stages
beyond our product candidates. We cannot be certain that any of our product candidates will prove to be sufficiently effective
and safe to meet applicable regulatory standards for any indication. If we fail to successfully obtain regulatory approval or
commercialize any of our product candidates for their targeted indications, whether as stand-alone therapies or in combination
with other therapeutic agents, and if we are unable to acquire additional product candidates in the future, our business will
be adversely affected.
Even
if we receive regulatory approval for any of our product candidates, we may not be able to successfully commercialize the product
and the revenue that we generate from its sales, if any, may be limited.
If
approved for marketing, the commercial success of our product candidates will depend upon each product’s acceptance by the
medical community, including physicians, patients and health care payors. The degree of market acceptance for any of our product
candidates will depend on a number of factors, including:
|
●
|
demonstration
of clinical safety and efficacy;
|
|
●
|
relative
convenience, dosing burden and ease of administration;
|
|
●
|
the
prevalence and severity of any adverse events and the overall safety profile;
|
|
●
|
the
clinical indications for which our products are approved;
|
|
●
|
the
acceptance of physicians to include T1D screening in routine patient medical care;
|
|
●
|
the
willingness of physicians to prescribe our product candidates, and the target patient population to try new therapies;
|
|
●
|
efficacy
of our product candidates compared to competing products or therapies;
|
|
●
|
the
introduction of any new products that may in the future become available targeting indications for which our product candidates
may be approved;
|
|
●
|
new
procedures or therapies that may reduce the incidences of any of the indications in which our product candidates may show
utility;
|
|
●
|
pricing
and cost-effectiveness;
|
|
●
|
the
inclusion or omission of our product candidates in applicable therapeutic and vaccine guidelines;
|
|
●
|
the
effectiveness of our own or any future collaborators’ sales and marketing strategies;
|
|
●
|
limitations
or warnings contained in approved labeling from regulatory authorities, including any interactions of our products with other
medicines patients are taking;
|
|
●
|
our
ability to obtain and maintain sufficient third-party coverage or reimbursement from government health care programs, including
Medicare and Medicaid, private health insurers and other third-party payors or to receive the necessary pricing approvals
from government bodies regulating the pricing and usage of therapeutics; and
|
|
●
|
the
willingness of patients to pay out-of-pocket in the absence of third-party coverage or reimbursement or government pricing
approvals.
|
If
any of our product candidates are approved, but do not achieve an adequate level of acceptance by physicians, health care payors,
and patients, we may not generate sufficient revenue and we may not be able to achieve or sustain profitability. Our efforts to
educate the medical community and third-party payors on the benefits of our product candidates may require significant resources
and may never be successful.
In
addition, even if we obtain regulatory approvals, the timing or scope of any approvals may prohibit or reduce our ability to commercialize
our product candidates successfully. For example, if the approval process takes too long, we may miss market opportunities and
give other companies the ability to develop competing products or establish market dominance. Any regulatory approval we ultimately
obtain may be limited or subject to restrictions or post-approval commitments that render our product candidates not commercially
viable. For example, regulatory authorities may approve any of our product candidates for fewer or more limited indications than
we request, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve any of our
product candidates with a label that does not include the labeling claims necessary or desirable for the successful commercialization
for that indication. Further, the FDA or comparable foreign regulatory authorities may place conditions on approvals or require
risk management plans or a REMS, to assure the safe use of the drug. Any of these limitations on approval or marketing could restrict
the commercial promotion, distribution, prescription or dispensing of our product candidates. Moreover, product approvals may
be withdrawn for non-compliance with regulatory standards or if problems occur following the initial marketing of the product.
Any of the foregoing scenarios could materially harm the commercial success of our product candidates.
We
currently have a limited commercial organization. If we are unable to establish satisfactory sales capabilities or secure a sales
partner, we may not successfully commercialize any of our product candidates.
We
have just recently begun to build out our commercial infrastructure and at present, we have only limited sales personnel. In order
to commercialize products that are approved for commercial sales, we must either develop our own sales infrastructure or collaborate
with third parties that have such commercial infrastructure. If we are not successful entering into appropriate collaboration
arrangements or recruiting sales personnel or in building a sales infrastructure, we will have difficulty successfully commercializing
our product candidates, which would adversely affect our business, operating results and financial condition.
If
we are unable to establish a satisfactory sales infrastructure, we may not realize a positive return on this investment. In addition,
we will have to compete with established and well-funded pharmaceutical and biotechnology companies to recruit, hire, train and
retain sales personnel. Factors that may inhibit our efforts to commercialize our product candidates without strategic partners
or licensees include:
|
●
|
our
inability to recruit and retain adequate numbers of effective sales personnel;
|
|
●
|
the
inability of sales personnel to obtain access to or persuade adequate numbers of physicians to prescribe any of our product
candidates;
|
|
●
|
the
lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to
companies with more extensive product lines; and
|
|
●
|
unforeseen
costs and expenses associated with creating an independent sales organization.
|
We
may enter into collaborations with third parties for the research, development, and commercialization of certain of the product
candidates we may develop. If any such collaborations are not successful, we may not be able to capitalize on the market potential
of those product candidates.
We
may seek additional third-party collaborators for the research, development, and commercialization of certain of the product candidates
we may develop. If we enter into any such arrangements with any third parties, we will likely have limited control over the amount
and timing of resources that our collaborators dedicate to the development or commercialization of any product candidates we may
seek to develop with them. Our ability to generate revenues from these arrangements will depend on our collaborators’ abilities
to successfully perform the functions assigned to them in these arrangements. We cannot predict the success of any collaboration
that we enter into.
Collaborations
pose numerous risks to us, including the following:
|
●
|
collaborators
have significant discretion in determining the efforts and resources that they will apply to these collaborations;
|
|
●
|
collaborators
may not pursue development and commercialization of any product candidates we may develop or may elect not to continue or
renew development or commercialization programs based on clinical trial results, changes in the collaborator’s strategic
focus or available funding or external factors such as an acquisition that diverts resources or creates competing priorities;
|
|
●
|
collaborators
may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product
candidate, repeat or conduct new clinical trials, or require a new formulation of a product candidate for clinical testing;
|
|
●
|
collaborators
could independently develop, or develop with third parties, products that compete directly or indirectly with our medicines
or product candidates we may develop if the collaborators believe that competitive products are more likely to be successfully
developed or can be commercialized under terms that are more economically attractive than ours;
|
|
●
|
collaborators
with marketing and distribution rights to one or more products may not commit sufficient resources to the marketing and distribution
of such product or products;
|
|
●
|
collaborators
may not properly obtain, maintain, enforce, or defend our intellectual property or proprietary rights or may use our proprietary
information in such a way as to invite litigation that could jeopardize or invalidate our proprietary information or expose
us to potential litigation;
|
|
●
|
disputes
may arise between the collaborators and us that result in the delay or termination of the research, development, or commercialization
of our products or product candidates or that result in costly litigation or arbitration that diverts management attention
and resources;
|
|
●
|
we
may lose certain valuable rights under circumstances identified in our collaborations, including if we undergo a change of
control;
|
|
●
|
collaborations
may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization
of the applicable product candidates we may develop; and
|
|
●
|
collaboration
agreements may not lead to development or commercialization of product candidates in the most efficient manner or at all.
If a present or future collaborator of ours were to be involved in a business combination, the continued pursuit and emphasis
on our product development or commercialization program under such collaboration could be delayed, diminished, or terminated.
|
If
our collaborations do not result in the successful development and commercialization of product candidates, or if one of our collaborators
terminates its agreement with us, we may not receive any future research funding or milestone or royalty payments under the collaboration.
If we do not receive the funding we expect under these agreements, our development of product candidates could be delayed, and
we may need additional resources to develop product candidates. In addition, if one of our collaborators terminates its agreement
with us, we may find it more difficult to find a suitable replacement collaborator or attract new collaborators, and our development
programs may be delayed or the perception of us in the business and financial communities could be adversely affected. All of
the risks relating to product development, regulatory approval, and commercialization described in this Quarterly Report on Form
10-Q apply to the activities of our collaborators.
These
relationships, or those like them, may require us to incur non-recurring and other charges, increase our near- and long-term expenditures,
issue securities that dilute our existing stockholders, or disrupt our management and business. In addition, we could face significant
competition in seeking appropriate collaborators, and the negotiation process is time-consuming and complex. Our ability to reach
a definitive collaboration agreement will depend, among other things, upon our assessment of the collaborator’s resources
and expertise, the terms and conditions of the proposed collaboration, and the proposed collaborator’s evaluation of several
factors. If we license rights to any product candidates, we may not be able to realize the benefit of such transactions if we
are unable to successfully integrate them with our existing operations and company culture.
Amgen
has the right to assume control over the activities of our anti-IL-15 mAb product candidate.
Pursuant to the Amgen
Agreement, Amgen reserves the right, at any time until 120 days after the delivery of the final data package relating to the Phase
2b PROACTIVE study which we initiated in August 2020, to assume control over all activities with respect to our anti-IL-15 monoclonal
antibody (“mAb”), product candidate, including pricing and marketing decisions, after the payment of a $150.0
million milestone. There can be no assurance that Amgen’s strategic direction will be in line with ours should it assume
control of activities, or that their decisions will have a positive impact on our results of operations. Moreover, we may not
realize the full economic benefit of this agreement.
We
face competition from other biotechnology and pharmaceutical companies and our operating results will suffer if we fail to compete
effectively.
The
biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant technological change.
We have existing competitors and will have potential new competitors in a number of jurisdictions, many of which have or will
have substantially greater name recognition, commercial infrastructures and financial, technical and personnel resources than
we have. Established competitors may invest heavily to quickly discover and develop novel compounds that could make any of our
product candidates obsolete or uneconomical. Any new product that competes with an approved product may need to demonstrate compelling
advantages in efficacy, cost, convenience, tolerability and safety to be commercially successful. Other competitive factors, including
generic competition, could force us to lower prices or could result in reduced sales. In addition, new products developed by others
could emerge as competitors to our product candidates. If we are not able to compete effectively against our current and future
competitors, our business will not grow, and our financial condition and operations will suffer.
Our
potential competitors both in the United States and throughout the world include companies developing and/or marketing drugs and
therapeutic solutions for immune-mediated diseases, including oncological, autoimmune and inflammatory diseases, as well as companies
working in our specific fields, including T1D, enteroviral and emerging viral diseases, lupus, and inflammatory bowel diseases,
such as CD.
There
can be no assurance that our product candidates will be more effective or achieve greater market acceptance than competitive products,
or that our competitors will not succeed in developing products and technologies that are more effective than those being developed
by us or that would render our products and technologies less competitive or obsolete. Additionally, there can be no assurance
that the development by others of new or improved products will not make our product candidates superfluous or obsolete.
Our
product candidates may face competition sooner than expected.
We
intend to seek data exclusivity or market exclusivity for our monoclonal antibodies PRV-031 and PRV-015, our DART molecule PRV-3279
and our PRV-101 CVB vaccine product candidates provided under the Federal Food, Drug and Cosmetic Act (“FDCA”),
and similar laws in other countries. We believe that these product candidates will qualify for 12 years of data exclusivity
under the Biologics Price Competition and Innovation Act of 2009 (“BPCIA”), which was enacted as part
of the Health Care Reform Law. Under the BPCIA, an application for a biosimilar product or BLA cannot be submitted to the FDA
until four years, or if approved by the FDA, until 12 years, after the original brand product identified as the reference product
is approved under a BLA. The BPCIA provides an abbreviated pathway for the approval of biosimilar and interchangeable biological
products. The abbreviated regulatory pathway establishes legal authority for the FDA to review and approve biosimilar biologics,
including the possible designation of a biosimilar as “interchangeable” based on its similarity to an existing brand
product. The law is complex and the processes the FDA establishes to implement the law could have a material adverse effect on
the future commercial prospects for our biological product candidates. There is also a risk that Congress could repeal or amend
the BPCIA to shorten this exclusivity period, potentially creating the opportunity for biosimilar competition sooner than anticipated
after the expiration of our patent protection. Moreover, the extent to which a biosimilar, once approved, will be substituted
for any reference product in a way that is similar to traditional generic substitution for non-biological products is not yet
clear, and will depend on a number of marketplace and regulatory factors that are still developing.
Our
product candidates that are not, or are not considered, biologics that would qualify for exclusivity under the BPCIA may be eligible
for market exclusivity as drugs under the FDCA. The FDCA provides a five-year period of non-patent marketing exclusivity within
the U.S. to the first applicant to gain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA
has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for
the action of the drug substance. During the exclusivity period, the FDA may not accept for review an abbreviated new drug application
(“ANDA”), or a 505(b)(2) NDA, submitted by another company for another version of such drug where the applicant
does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted
after four years if it contains a certification of patent invalidity or non-infringement. The FDCA also provides three years of
marketing exclusivity for an NDA, 505(b)(2) NDA or supplement to an existing NDA if new clinical investigations, other than bioavailability
studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application,
for example, for new indications, dosages, or strengths of an existing drug. This three-year exclusivity covers only the conditions
associated with the new clinical investigations and does not prohibit the FDA from approving ANDAs for drugs containing the original
active agent.
Even
if, as we expect, our product candidates are considered to be reference products eligible for 12 years of exclusivity under the
BPCIA or five years of exclusivity under the FDCA, another company could market competing products if the FDA approves a full
BLA or full NDA for such product containing the sponsor’s own preclinical data and data from adequate and well-controlled
clinical trials to demonstrate the safety, purity and potency of the products. Moreover, an amendment or repeal of the BPCIA could
result in a shorter exclusivity period for our product candidates, which would have a material adverse effect on our business.
Our
future growth depends, in part, on our ability to penetrate international markets, where we would be subject to additional regulatory
burdens and other risks and uncertainties.
Our
future profitability will depend, in part, on our ability to commercialize our product candidates in international markets for
which we intend to rely on collaborations with third parties. If we commercialize any of our product candidates in international
markets, we would be subject to additional risks and uncertainties, including:
|
●
|
our
customers’ ability to obtain reimbursement for our product candidates in international markets;
|
|
●
|
our
inability to directly control commercial activities because we are relying on third parties;
|
|
●
|
the
burden of complying with complex and changing international regulatory, tax, accounting and legal requirements;
|
|
●
|
different
medical practices and customs in foreign countries affecting acceptance in the marketplace;
|
|
●
|
import
or export licensing requirements;
|
|
●
|
longer
accounts receivable collection times;
|
|
●
|
longer
lead times for shipping;
|
|
●
|
language
barriers for technical training;
|
|
●
|
reduced
protection of intellectual property rights in some foreign countries;
|
|
●
|
foreign
currency exchange rate fluctuations; and
|
|
●
|
the
interpretation of contractual provisions governed by foreign laws in the event of a contract dispute.
|
International
sales of our product candidates could also be adversely affected by the imposition of governmental controls, political and economic
instability, trade restrictions and changes in tariffs, any of which may adversely affect our results of operations.
If
we market any of our product candidates in a manner that violates healthcare fraud and abuse laws, or if we violate government
price reporting laws, we may be subject to civil or criminal penalties.
The
FDA enforces laws and regulations which require that the promotion of pharmaceutical products be consistent with the approved
prescribing information. While physicians may prescribe an approved product for a so-called “off label” use, it is
unlawful for a pharmaceutical company to promote its products in a manner that is inconsistent with its approved label and any
company which engages in such conduct can subject that company to significant liability. The federal government has levied large
civil and criminal fines and/or other penalties against companies for alleged improper promotion and has investigated and/or prosecuted
several companies in relation to off-label promotion. The FDA has also requested that certain companies enter consent decrees
or permanent injunctions under which specified promotional conduct is changed, curtailed or prohibited. Similarly, industry codes
in the EU and other foreign jurisdictions prohibit companies from engaging in off-label promotion and regulatory agencies in various
countries enforce violations of the code with civil penalties. While we intend to ensure that our promotional materials are consistent
with our label, regulatory agencies may disagree with our assessment and may issue untitled letters, warning letters or may institute
other civil or criminal enforcement proceedings. In addition to FDA restrictions on marketing of pharmaceutical products, several
other types of state and federal healthcare fraud and abuse laws have been applied in recent years to restrict certain marketing
practices in the pharmaceutical industry. These laws include the U.S. Anti-Kickback Statute, U.S. False Claims Act and similar
state laws. Because of the breadth of these laws and the narrowness of the safe harbors, it is possible that some of our business
activities could be subject to challenge under one or more of these laws.
The
U.S. Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration,
directly or indirectly, in cash or in kind, to induce, or in return for, purchasing, leasing, ordering or arranging for the purchase,
lease or order of any healthcare item or service reimbursable under federal and state healthcare programs such as Medicare, Medicaid
or other federally financed healthcare programs. This statute has been interpreted broadly to apply to arrangements between pharmaceutical
manufacturers on the one hand and prescribers, purchasers and formulary managers on the other. Although there are several statutory
exemptions and regulatory safe harbors protecting certain common activities from prosecution, the exemptions and safe harbors
are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchasing or recommending may be
subject to scrutiny if they do not qualify for an exemption or safe harbor. Our practices may not, in all cases, meet all of the
criteria for safe harbor protection from anti-kickback liability. Moreover, recent health care reform legislation has strengthened
these laws. For example, the Health Care Reform Law, among other things, amends the intent requirement of the U.S. Anti-Kickback
Statute and criminal health care fraud statutes; a person or entity no longer needs to have actual knowledge of this statute or
specific intent to violate it. In addition, the Health Care Reform Law provides that the government may assert that a claim including
items or services resulting from a violation of the U.S. Anti-Kickback Statute constitutes a false or fraudulent claim for purposes
of the U.S. False Claims Act. Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented,
a false claim for payment to the federal government or knowingly making, or causing to be made, a false statement to get a false
claim paid. Several other countries, including the United Kingdom, have enacted similar anti-kickback, fraud and abuse, and healthcare
laws and regulations.
Over
the past few years, several pharmaceutical and other healthcare companies have been prosecuted under these laws for a variety
of alleged promotional and marketing activities, such as: allegedly providing free trips, free goods, sham consulting fees and
grants and other monetary benefits to prescribers; reporting to pricing services inflated average wholesale prices that were then
used by federal programs to set reimbursement rates; engaging in off-label promotion that caused claims to be submitted to Medicare
or Medicaid for non-covered, off-label uses; and submitting inflated best price information to the Medicaid Rebate Program to
reduce liability for Medicaid rebates. Most states also have statutes or regulations similar to the U.S. Anti-Kickback Statute
and the U.S. False Claims Act, which apply to items and services reimbursed under Medicaid and other state programs, or, in several
states, apply regardless of the payor. Sanctions under these federal and state laws may include substantial civil monetary penalties,
exclusion of a manufacturer’s products from reimbursement under government programs, substantial criminal fines and imprisonment.
We
are completely dependent on third parties to manufacture our product candidates, and our commercialization of our product candidates
could be halted, delayed or made less profitable if those third parties fail to obtain manufacturing approval from the FDA or
comparable foreign regulatory authorities, fail to provide us with sufficient quantities of our product candidates or fail to
do so at acceptable quality levels or prices.
We
do not currently have, nor do we plan to acquire, the capability or infrastructure to manufacture the bulk drug substance or the
active pharmaceutical ingredient (“API”), in our product candidates for use in our clinical trials or for commercial
products, if any. As a result, we are obligated to rely on contract manufacturers for clinical supplies of our product candidates
and will be obligated, if and when any of our product candidates are approved for commercialization, to rely on contract manufacturers
for commercial supply. We have not entered into an agreement with any contract manufacturers for commercial supply and may not
be able to engage a contract manufacturer for commercial supply of any of our product candidates on acceptable terms to us, or
at all.
The
facilities used by our contract manufacturers to manufacture our product candidates must be approved by the FDA, EMA or comparable
foreign regulatory authorities pursuant to inspections that will be conducted after we submit an NDA or BLA to the FDA or equivalent
applications to other relevant regulatory authorities. We will be completely dependent on, our contract manufacturers for compliance
with cGMPs for manufacture of both active drug substances and finished drug products. These cGMP regulations cover all aspects
of the manufacturing, testing, quality control and record keeping relating to our product candidates. If our contract manufacturers
do not successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA,
EMA or other regulatory authorities, they will not be able to secure and/or maintain regulatory approval for their manufacturing
facilities. If the FDA, EMA or a comparable foreign regulatory authority does not approve these facilities for the manufacture
of our product candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities,
which would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved.
Our
contract manufacturers are subject to ongoing periodic unannounced inspections by the FDA and corresponding state and foreign
agencies for compliance with cGMPs and similar regulatory requirements. Although we are responsible for oversight of manufacturing
of our product candidates, we do not have control over our contract manufacturers’ compliance with these regulations and
standards. Failure by any of our contract manufacturers to comply with applicable regulations could result in sanctions being
imposed on us, including fines, injunctions, civil penalties, failure to grant approval to market any of our product candidates,
delays, suspensions or withdrawals of approvals, operating restrictions and criminal prosecutions, any of which could significantly
and adversely affect our business. In addition, we do not have control over the ability of our contract manufacturers to maintain
adequate quality control, quality assurance and qualified personnel. Failure by our contract manufacturers to comply with or maintain
any of these standards could adversely affect our ability to develop, obtain regulatory approval for or market any of our product
candidates.
If,
for any reason, these third parties are unable or unwilling to perform, we may not be able to terminate our agreements with them,
to the extent applicable, and we may not be able to locate alternative manufacturers or formulators or enter into favorable agreements
with them and we cannot be certain that any such third parties will have the manufacturing capacity to meet future requirements.
If these manufacturers or any alternate manufacturer of finished drug product experiences any significant difficulties in its
respective manufacturing processes for our API or finished products or should cease doing business with us, we could experience
significant interruptions in the supply of any of our product candidates or may not be able to create a supply of our product
candidates at all. Were we to encounter manufacturing issues, our ability to produce a sufficient supply of any of our product
candidates might be negatively affected. Our inability to coordinate the efforts of our third-party manufacturers, or the lack
of capacity available at our third-party manufacturers, could impair our ability to supply any of our product candidates at required
levels. Because of the significant regulatory requirements that we would need to satisfy in order to qualify a new bulk or finished
product manufacturer, if we face these or other difficulties with our current manufacturers, we could experience significant interruptions
in the supply of any of our product candidates if we decided to transfer the manufacture of any of our product candidates to one
or more alternative manufacturers in an effort to deal with the difficulties.
Any
manufacturing problem or the loss of a contract manufacturer could be disruptive to our operations and result in lost sales. Additionally,
we rely on third parties to supply the raw materials needed to manufacture our potential products. Any reliance on suppliers may
involve several risks, including a potential inability to obtain critical materials and reduced control over production costs,
delivery schedules, reliability and quality. Any unanticipated disruption to a contract manufacturer caused by problems at suppliers
could delay shipment of any of our product candidates, increase our cost of goods sold and result in lost sales.
We
cannot guarantee that our future manufacturers and suppliers will be able to reduce the costs of commercial scale manufacturing
of any of our product candidates over time. If the commercial-scale manufacturing costs of any of our product candidates are higher
than expected, these costs may significantly impact our operating results. In order to reduce costs, we may need to develop and
implement process improvements. However, in order to do so, we will need, from time to time, to notify or make submissions with
regulatory authorities, and the improvements may be subject to approval by such regulatory authorities. We cannot be sure that
we will receive these necessary approvals or that these approvals will be granted in a timely fashion. We also cannot guarantee
that we will be able to enhance and optimize output in our commercial manufacturing process. If we cannot enhance and optimize
output, we may not be able to reduce our costs over time.
Our
experience manufacturing PRV-031 is limited. As a result, if we encounter manufacturing issues, we may experience delays in commercialization,
if approved, or in our ongoing and planned clinical trials, including the PROTECT study.
We
have limited experience manufacturing PRV-031. We currently rely on a single third-party manufacturer to supply us with PRV-031
drug substance. In order to obtain regulatory approval for PRV-031, this third-party manufacturer will be required to consistently
produce the active pharmaceutical ingredient used in PRV-031 in commercial quantities and of specified quality on a repeated basis
and document its ability to do so. This is referred to as process validation. In addition, in November 2019 the
FDA confirmed that it would require the demonstration of comparability between the PRV-031study drug previously manufactured by
MacroGenics and Eli Lilly and the to-be-commercialized PRV-031 drug substance and drug product scheduled for production by Provention
and its contract manufacturing partners. If we and our third-party manufacturer are unable to satisfy this requirement,
our business will be materially and adversely affected.
The
PROTECT study will need to include data from a sufficient number of subjects dosed with this new drug supply in this clinical
trial to demonstrate safety and efficacy in order to obtain regulatory approval. If our third-party manufacturer is unable to
produce a comparable new drug supply to that used in the At-Risk TN10 study in order to complete the PROTECT study in a timely
manner, delays in FDA acceptance or review of our BLA submission may occur. Such delays would in turn delay the potential marketing
and commercialization of PRV-031, which would materially and adversely affect our business.
The
manufacturing processes for PRV-031 has only recently been tested at commercial scale, and the process validation requirement
has not yet been satisfied. These manufacturing processes, their validation and our third-party manufacturers’ facilities
will be subject to inspection by the FDA. Approval from the FDA will be required before we can introduce PRV-031 into commerce.
If our third-party manufacturers are unable to pass such inspection and otherwise satisfactorily complete the FDA approval requirements,
our business will be materially and adversely affected.
Also,
as we or any manufacturer we engage scales up manufacturing of any approved product, we may encounter unexpected issues relating
to the manufacturing process or the quality, purity and stability of the product, and we may be required to refine or alter our
manufacturing processes to address these issues. Resolving these issues could result in significant delays and may result in significantly
increased costs. If we experience significant delays or other obstacles in producing any approved product for commercial scale,
our ability to market and sell any approved products may be adversely affected and our business could suffer.
Changes
in product candidate manufacturing or formulation may result in additional costs or delay.
As
product candidates are developed through preclinical studies to late-stage clinical trials towards approval and commercialization,
it is common that various aspects of the development program, such as manufacturing methods and formulation, are altered along
the way in an effort to optimize processes and results. During the course of a development program, sponsors may also change the
contract manufacturers used to produce the product candidates. Such changes carry the risk that they will not achieve these intended
objectives. Any of these changes could cause our product candidates to perform differently and affect the results of clinical
trials. Such changes may also require additional testing, notification or approval by the FDA, EMA or other regulatory authorities.
This could delay completion of clinical trials; require the conduct of bridging clinical trials or studies, or the repetition
of one or more clinical trials; increase clinical trial costs; delay approval of our product candidates and jeopardize our ability
to commence product sales and generate revenue.
We
expect to rely on third parties to conduct clinical trials for our product candidates. If these third parties do not successfully
carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize
any of our product candidates and our business would be substantially harmed.
We
rely on third-party CROs and vendors to conduct and manage our clinical programs including contracting with clinical sites to
perform our clinical trials. We plan to rely heavily on these parties for execution of clinical trials for our product candidates
and will control only certain aspects of their activities. Nevertheless, we will be 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 CROs and clinical sites will not relieve us of our regulatory responsibilities. We and our CROs are required to comply with
cGCPs, which are regulations and guidelines enforced by the FDA, the Competent Authorities of the Member States of the European
Economic Area and comparable foreign regulatory authorities for any products in clinical development. The FDA and its foreign
equivalents enforce these cGCP regulations through periodic inspections of trial sponsors, principal investigators and trial sites.
If we or our CROs fail to comply with applicable cGCPs, the clinical data generated in our clinical trials may be deemed unreliable
and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving
our marketing applications. We cannot assure you that, upon inspection, the FDA or other regulatory authorities will determine
that any of our clinical trials comply with cGCPs. In addition, our clinical trials must be conducted with products produced under
cGMP regulations and will require a large number of test subjects. Our failure or the failure of our CROs or clinical sites to
comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process and
could also subject us to enforcement action up to and including civil and criminal penalties.
Although
we design the clinical trials for our product candidates in consultation with CROs, we expect that the CROs will manage all of
the clinical trials conducted at contracted clinical sites. As a result, many important aspects of our drug development programs
would be outside of our direct control. In addition, the CROs and clinical sites may not perform all of their obligations under
arrangements with us or in compliance with regulatory requirements. If the CROs or clinical sites do not perform clinical trials
in a satisfactory manner, breach their obligations to us or fail to comply with regulatory requirements, the development and commercialization
of any of our product candidates for the subject indication may be delayed or our development program materially and irreversibly
harmed. We cannot control the amount and timing of resources these CROs and clinical sites will devote to our program or any of
our product candidates. If we are unable to rely on clinical data collected by our CROs, we could be required to repeat, extend
the duration of, or increase the size of our clinical trials, which could significantly delay commercialization and require significantly
greater expenditures.
If
any of our relationships with these third-party CROs or clinical sites terminate, we may not be able to enter into arrangements
with alternative CROs or clinical sites. If CROs do not successfully carry out their contractual duties or obligations or meet
expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised
due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, any such clinical trials
may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for or successfully commercialize
our product candidates. As a result, our financial results and the commercial prospects for any of our product candidates would
be harmed, our costs could increase and our ability to generate revenue could be delayed.
The
outcome of pre-clinical testing and early clinical trials may not be predictive of the success of later clinical trials, and the
results of our clinical trials may not satisfy the requirements of the FDA or comparable foreign regulatory authorities.
We
currently have no products approved for sale and we cannot guarantee that we will ever have marketable products. Clinical failure
can occur at any stage of clinical development. Clinical trials may produce negative or inconclusive results, and we or any future
collaborators may decide, or regulators may require us, to conduct additional clinical trials or pre-clinical studies. We will
be required to demonstrate with substantial evidence through well-controlled clinical trials that our product candidates are safe
and effective for use in a diverse population before we can seek marketing approvals for their commercial sale. Success in pre-clinical
studies and early-stage clinical trials does not mean that future larger registration clinical trials will be successful. This
is because product candidates in later-stage clinical trials may fail to demonstrate sufficient safety and efficacy to the satisfaction
of the FDA and comparable foreign regulatory authorities despite having progressed through pre-clinical studies and early-stage
clinical trials.
From
time to time, we may publish or report interim or preliminary data from our clinical trials. Interim or preliminary data from
clinical trials that we may conduct may not be indicative of the final results of the trial and are subject to the risk that one
or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available.
Interim or preliminary data also remain subject to audit and verification procedures that may result in the final data being materially
different from the interim or preliminary data. As a result, interim or preliminary data should be viewed with caution until the
final data are available.
In
some instances, there can be significant variability in safety and efficacy results between different clinical trials of the same
product candidate due to numerous factors, including changes in trial protocols, differences in size and type of the patient populations,
differences in and adherence to the dosing regimen and other trial protocols and the rate of dropout among clinical trial participants.
We do not know whether any clinical trials we may conduct will demonstrate consistent or adequate efficacy and safety sufficient
to obtain marketing approval to market our product candidates.
Third-party
coverage and reimbursement and health care cost containment initiatives and treatment guidelines may constrain our future revenues.
Our
ability to successfully market our product candidates will depend in part on the level of reimbursement that government health
administration authorities, private health coverage insurers and other organizations provide for the cost of our products and
related treatments. Countries in which any of our product candidates are sold through reimbursement schemes under national health
insurance programs frequently require that manufacturers and sellers of pharmaceutical products obtain governmental approval of
initial prices and any subsequent price changes. In certain countries, including the United States, government-funded and private
medical care plans can exert significant indirect pressure on prices. We may not be able to sell our product candidates profitably
if adequate prices are not approved or coverage and reimbursement is unavailable or limited in scope. Increasingly, third-party
payors attempt to contain health care costs in ways that are likely to impact our development of products including:
|
●
|
failing
to approve or challenging the prices charged for health care products;
|
|
●
|
introducing
reimportation schemes from lower priced jurisdictions;
|
|
●
|
limiting
both coverage and the amount of reimbursement for new therapeutic products;
|
|
●
|
denying
or limiting coverage for products that are approved by the regulatory agencies but are considered to be experimental or investigational
by third-party payors; and
|
|
●
|
refusing
to provide coverage when an approved product is used in a way that has not received regulatory marketing approval.
|
Moreover,
recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their
commercial products. There have been several recent Congressional inquiries and proposed and enacted federal and state
legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing
and manufacturer patient programs, reduce the cost of drugs under Medicare, and reform government program reimbursement
methodologies for drugs. While any proposed measures will require authorization through additional legislation 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. At the state level, legislatures are increasingly passing legislation and
implementing 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.
Risks
Relating to Our Intellectual Property Rights
We
depend on rights to certain pharmaceutical compounds that are licensed to us. We do not control these pharmaceutical compounds
and any loss of our rights to them could prevent us from selling our products.
We
are dependent on licenses from third parties for all but one of our pharmaceutical compounds. We do not own the patents that underlie
these licenses. Our rights to use the pharmaceutical compounds we license are subject to the continuation of and compliance with
the terms of those licenses. Thus, the patents and patent applications applicable to our product candidates were not written by
us or our attorneys, and we did not have control over the drafting and prosecution. The former patent owners and our licensors
might not have given the same attention to the drafting and prosecution of these patents and applications as we would have if
we had been the owners of the patents and applications and had control over the drafting. Moreover, under certain of our licenses,
patent prosecution activities remain under the control of the licensor. We cannot be certain that drafting of the licensed patents
and patent applications, or patent prosecution, by the licensors have been or will be conducted in compliance with applicable
laws and regulations or will result in valid and enforceable patents and other intellectual property rights.
Our
rights to develop and commercialize the product candidates we license are subject to the validity of the owner’s intellectual
property rights. Enforcement of our licensed patents or defense or any claims asserting the invalidity of these patents is often
subject to the control or cooperation of our licensors. Legal action could be initiated against the owners of the intellectual
property that we license and an adverse outcome in such legal action could harm our business because it might prevent such companies
or institutions from continuing to license intellectual property that we may need to operate our business. In addition, such licensors
may resolve such litigation in a way that benefits them but adversely affects our ability to develop and commercialize our product
candidates.
In
addition, our rights to practice the inventions claimed in the licensed patents and patent applications are subject to our licensors
abiding by the terms of those licenses and not terminating them. Our licenses may be terminated by the licensor if we are in material
breach of certain terms or conditions of the license agreement or in certain other circumstances. Certain of our licenses contained
in our agreements with Janssen and Vactech contain provisions that allow the licensor to terminate the license if (i) we breach
any payment obligation or other material provision under the agreement and fail to cure the breach within a fixed time following
written notice of termination, (ii) we or any of our affiliates, licensees or sublicensees directly or indirectly challenge the
validity, enforceability, or extension of any of the licensed patents, (iii) we declare bankruptcy or dissolve, (iv) we fail to
maintain a licensed product in active development or fail to use commercially reasonable efforts to develop or commercialize a
licensed product. Our rights under the licenses are subject to our continued compliance with the terms of the license, including
the payment of royalties due under the license. Termination of these licenses could prevent us from marketing some or all of our
products. Because of the complexity of our products and the patents we have licensed, determining the scope of the license and
related royalty obligations can be difficult and can lead to disputes between us and the licensor. An unfavorable resolution of
such a dispute could lead to an increase in the royalties payable pursuant to the license. If a licensor believed we were not
paying the royalties due under the license or were otherwise not in compliance with the terms of the license, the licensor might
attempt to revoke the license. If such an attempt were successful, we might be barred from producing and selling some or all of
our products.
It
is difficult and costly to protect our intellectual property rights, and we cannot ensure the protection of these rights.
Our
commercial success will depend, in part, on obtaining and maintaining patent protection for our technologies, products and processes,
successfully defending these patents against third-party challenges and successfully enforcing these patents against third party
competitors. The patent positions of pharmaceutical companies can be highly uncertain and involve complex legal, scientific and
factual questions for which important legal principles remain unresolved. Changes in either the patent laws or in interpretations
of patent laws may diminish the value of our intellectual property. Accordingly, we cannot predict the breadth of claims that
may be allowable or enforceable in our patents. We currently own 24 issued patents and 6 pending patent applications, and license
290 issued patents and 57 pending patent applications related to our product candidates, in which the pending applications may
never be approved by United States or foreign patent offices. The existing patents and patent applications relating to our product
candidates and related technologies may be challenged, invalidated or circumvented by third parties and might not protect us against
competitors with similar products or technologies.
The
degree of future protection for our proprietary rights is uncertain, because legal means afford only limited protection and may
not adequately protect our rights, permit us to gain or keep our competitive advantage, or provide us with any competitive advantage
at all. For example, others have filed, and in the future are likely to file, patent applications covering products and technologies
that are similar, identical or competitive to any of our product candidates, or important to our business. We cannot be certain
that any patent application owned by a third party will not have priority over patent applications filed by us, or that we will
not be involved in interference, opposition or invalidity proceedings before United States or foreign patent offices. Additionally,
the composition of matter patents for PRV-031 have expired, and although we have filed method of use patents for PRV-031, these
may not provide adequate protection from competitors.
In
the future we may rely on know-how and trade secrets to protect technology, especially in cases when we believe patent protection
is not appropriate or obtainable. However, know-how and trade secrets are difficult to protect. While we intend to require employees,
academic collaborators, consultants and other contractors to enter into confidentiality agreements, we may not be able to adequately
protect our trade secrets or other proprietary or licensed information. Typically, research collaborators and scientific advisors
have rights to publish data and information in which we may have rights. If we cannot maintain the confidentiality of our proprietary
technology and other confidential information, our ability to receive patent protection and our ability to protect valuable information
owned by us may be imperiled. Enforcing a claim that a third-party entity illegally obtained and is using any of our trade secrets
is expensive and time consuming, and the outcome is unpredictable. In addition, courts are sometimes less willing to protect trade
secrets than patents. Moreover, our competitors may independently develop equivalent knowledge, methods and know-how.
If
we fail to obtain or maintain patent protection or trade secret protection for our product candidates or our technologies, third
parties could use our proprietary information, which could impair our ability to compete in the market and adversely affect our
ability to generate revenues and attain profitability.
We
may also rely on the trademarks we may develop to distinguish our products from the products of our competitors. We cannot guarantee
that any trademark applications filed by us or our licensors will be approved. Third parties may also oppose such trademark applications,
or otherwise challenge our use of the trademarks. In the event that the trademarks we use are successfully challenged, we could
be forced to rebrand our products, which could result in loss of brand recognition, and could require us to devote resources to
advertising and marketing new brands. Further, we cannot provide assurance that competitors will not infringe the trademarks we
use, or that we will have adequate resources to enforce these trademarks.
Our
product candidates may infringe the intellectual property rights of others, which could increase our costs and delay or prevent
our development and commercialization efforts.
Our
success depends in part on avoiding infringement of the proprietary technologies of others. The pharmaceutical industry has been
characterized by frequent litigation regarding patent and other intellectual property rights. Identification of third-party patent
rights that may be relevant to our proprietary technology is difficult because patent searching is imperfect due to differences
in terminology among patents, incomplete databases and the difficulty in assessing the meaning of patent claims. Additionally,
because patent applications are maintained in secrecy until the application is published, we may be unaware of third-party patents
that may be infringed by commercialization of any of our product candidates or any future product candidate. There may be certain
issued patents and patent applications claiming subject matter that we may be required to license in order to research, develop
or commercialize any of our product candidates, and we do not know if such patents and patent applications would be available
to license on commercially reasonable terms, or at all. Any claims of patent infringement asserted by third parties would be time-consuming
and may:
|
●
|
result
in costly litigation;
|
|
●
|
divert
the time and attention of our technical personnel and management;
|
|
●
|
prevent
us from commercializing a product until the asserted patent expires or is held finally invalid or not infringed in a court
of law;
|
|
●
|
require
us to cease or modify our use of the technology and/or develop non-infringing technology; or
|
|
●
|
require
us to enter into royalty or licensing agreements.
|
Third
parties may hold proprietary rights that could prevent any of our product candidates from being marketed. Any patent-related legal
action against us claiming damages and seeking to enjoin commercial activities relating to any of our product candidates or our
processes could subject us to potential liability for damages and require us to obtain a license to continue to manufacture or
market any of our product candidates or any future product candidates. We cannot predict whether we would prevail in any such
actions or that any license required under any of these patents would be made available on commercially acceptable terms, if at
all. In addition, we cannot be sure that we could redesign our product candidates or any future product candidates or processes
to avoid infringement, if necessary. Accordingly, an adverse determination in a judicial or administrative proceeding, or the
failure to obtain necessary licenses, could prevent us from developing and commercializing any of our product candidates or a
future product candidate, which could harm our business, financial condition and operating results.
A
number of companies, including several major pharmaceutical companies, have conducted, or are conducting, research in immune-mediated
diseases within the therapeutic fields in which we intend to operate, which has resulted, or may result, in the filing of many
patent applications related to this research. If we were to challenge the validity of these or any issued United States patent
in court, we would need to overcome a statutory presumption of validity that attaches to every issued United States patent. This
means that, in order to prevail, we would have to present clear and convincing evidence as to the invalidity of the patent’s
claims. If we were to challenge the validity of these or any issued United States patent in an administrative trial before the
Patent Trial and Appeal Board in the United States Patent and Trademark Office, we would have to prove that the claims are unpatentable
by a preponderance of the evidence. There is no assurance that a jury and/or court would find in our favor on questions of infringement,
validity or enforceability.
We
may be subject to claims that we have wrongfully hired an employee from a competitor or that we or our employees have wrongfully
used or disclosed alleged confidential information or trade secrets of their former employers.
As
is commonplace in our industry, we will employ individuals who were previously employed at other pharmaceutical companies, including
our competitors or potential competitors. We may be subject in the future to claims that our employees or prospective employees
are subject to a continuing obligation to their former employers (such as non-competition or non-solicitation obligations) and
that such obligations has been breached or claims that our employees or we have inadvertently or otherwise used or disclosed trade
secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims.
Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction
to management.
General
Company-Related Risks
We
will need to grow the size of our organization, and we may experience difficulties in managing this growth.
As
our development and commercialization plans and strategies continue to develop, we intend to expand the size of our employee and
consultant/contractor base. Future growth would impose significant added responsibilities on members of management, including
the need to identify, recruit, maintain, motivate and integrate additional employees. In addition, our management may have to
divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time
to managing these growth activities. Our future financial performance and our ability to develop and commercialize our product
candidates and any other future product candidates and our ability to compete effectively will depend, in part, on our ability
to effectively manage our future growth.
If
we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our
business strategy. In addition, the loss of the services of our co-founders would adversely impact our business prospects.
Our
management team has expertise in many different aspects of drug development and commercialization. However, our ability to compete
in the highly competitive pharmaceuticals industry depends in large part upon our ability to attract and retain highly qualified
managerial, scientific and medical personnel. We will need to hire additional personnel as we further develop our product candidates.
Competition for skilled personnel in our market is intense and competition for experienced scientists may limit our ability to
hire and retain highly qualified personnel on acceptable terms. Despite our efforts to retain valuable employees, members of our
management, scientific and medical teams may terminate their employment with us on short notice. We have entered into employment
agreements with certain of our executive officers. However, these employment arrangements will provide for at-will employment,
which means that any of our employees could leave our employment at any time, with or without notice. Moreover, there can be no
assurance that anyone we expect to employ in a key management position will be available to join our team when we expect them
to, if at all. The loss of the services of any of our executive officers or other key employees, or our inability to hire targeted
executives, could potentially harm our business, operating results or financial condition. In particular, we believe that the
loss of the services of our co-founders would have a material adverse effect on our business. Our success also depends on our
ability to continue to attract, retain and motivate highly skilled junior, mid-level, and senior managers as well as junior, mid-level,
and senior scientific and medical personnel.
Other
pharmaceutical companies with which we compete for qualified personnel have greater financial and other resources, different risk
profiles, and a longer history in the industry than we do. They also may provide more diverse opportunities and better chances
for career advancement. Some of these characteristics may be more appealing to high-quality candidates than what we have to offer.
If we are unable to continue to attract and retain high-quality personnel, the rate and success at which we can develop and commercialize
product candidates would be limited.
If
product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization
of our product candidates.
We
face a potential risk of product liability as a result of the clinical testing of our product candidates and will face an even
greater risk if we commercialize any of our product candidates or any other future product. For example, we may be sued if any
product we develop, including any of our product candidates, or any materials that we use in our products allegedly causes injury
or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims
may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product,
negligence, strict liability and a breach of warranties. In the US, claims could also be asserted under state consumer protection
acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be
required to limit commercialization of our product candidates. Even successful defense would require significant financial and
management resources. Regardless of the merits or eventual outcome, liability claims may result in:
|
●
|
decreased
demand for any of our product candidates or any future products that we may develop;
|
|
●
|
injury
to our reputation;
|
|
●
|
withdrawal
of clinical trial participants;
|
|
●
|
costs
to defend the related litigation;
|
|
●
|
a
diversion of management’s time and our resources;
|
|
●
|
substantial
monetary awards to trial participants or patients;
|
|
●
|
product
recalls, withdrawals or labeling, marketing or promotional restrictions;
|
|
●
|
the
inability to commercialize some or all of our product candidates; and
|
|
●
|
a
decline in the value of our stock.
|
Our
inability to obtain and retain sufficient product liability insurance at an acceptable cost to protect against potential product
liability claims could prevent or inhibit the commercialization of products we develop. We maintain product liability insurance
covering our clinical trials. Although we will maintain such insurance, any claim that may be brought against us could result
in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess
of the limits of our insurance coverage. Our insurance policies also have various exclusions, and we may be subject to a product
liability claim for which we have no coverage. We may have to pay any amounts awarded by a court or negotiated in a settlement
that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient
capital to pay such amounts.
We
may acquire businesses or products, or form strategic alliances, in the future, and we may not realize the benefits of such acquisitions.
We
may acquire additional businesses or products, form strategic alliances or create joint ventures with third parties that we believe
will complement or augment our existing business. If we acquire businesses with promising markets or technologies, we may not
be able to realize the benefit of acquiring such businesses if we are unable to successfully integrate them with our existing
operations and company culture. We may encounter numerous difficulties in developing, manufacturing and marketing any new products
resulting from a strategic alliance or acquisition that delay or prevent us from realizing their expected benefits or enhancing
our business. We cannot assure you that, following any such acquisition, we will achieve the expected synergies to justify the
transaction.
We
are generally a virtual company and may be unable to adequately protect our information technology systems from cyber-attacks,
which could result in the disclosure of confidential information, damage our reputation, and subject us to significant financial
and legal exposure.
We
are a virtual company and may be unable to adequately protect our information technology systems from cyber-attacks, which could
result in the disclosure of confidential information, damage our reputation, and subject us to significant financial and legal
exposure.
Cyber-attacks
are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect. Cyber-attacks
could include wrongful conduct by hostile foreign governments, industrial espionage, deployment of harmful malware, denial-of-service,
and other means to threaten data confidentiality, integrity and availability. A successful cyber-attack could cause serious negative
consequences for our company, including the disruption of operations, the misappropriation of confidential business information
and trade secrets, and the disclosure of corporate strategic plans. To date, we have not experienced threats to our data and information
technology systems. However, although we devote resources to protect our information technology systems, we realize that cyber-attacks
are a threat, and there can be no assurance that our efforts will prevent information security breaches that would result in business,
legal or reputational harm to us, or would have a material adverse effect on our operating results and financial condition.
We
rely on the proper function, availability and security of our information technology systems to operate our business and a cyber-attack
or other breach or disruption of these systems could have a material adverse effect on our business and results of operations.
We
rely on information technology systems to process, transmit and store electronic information in our day-to-day operations. The
form and function of such systems may change over time as our business needs change. The nature of our business involves the receipt
and storage of personal and financial information regarding our customers. We use our information technology systems to manage
or support a variety of business processes and activities, including sales, procurement and supply chain, manufacturing and accounts
payable. In addition, we use enterprise information technology systems to record, process, and summarize transactions and other
financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting,
legal, and tax requirements. Our information technology systems may be susceptible to damage, disruptions or shutdowns due to
computer viruses, attacks by computer hackers, failures during the process of upgrading or replacing software, databases or components
thereof, power outages, hardware failures, telecommunication failures, user errors or catastrophic events. Any failure by us to
maintain or protect our information technology systems and data integrity, including from cyber-attacks, intrusions, disruptions
or shutdowns, could result in the unauthorized access to personally identifiable information, theft of intellectual property or
other misappropriation of assets or the loss of key data and information, or otherwise compromise our confidential or proprietary
information and disrupt our operations. If our information technology systems are breached or suffer severe damage, disruption
or shutdown and we are unable to effectively resolve the issues in a timely manner, our business and operating results may be
materially and adversely affected.
If
our efforts to maintain the privacy and security of our patient, employee, supplier or Company information are not successful,
we could incur substantial additional costs and become subject to litigation, enforcement actions and reputational damage.
Our
business, like that of most biopharmaceutical companies, involves the receipt, storage and transmission of patient information,
as well as confidential information about our employees, our suppliers and our Company. Our information systems are vulnerable
to an increasing threat of continually evolving cybersecurity risks. Unauthorized parties may attempt to gain access to our systems
or information through fraud or other means of deceiving our employees or third-party service providers. Hardware, software or
applications we develop or obtain from third parties may contain defects in design or manufacture or other problems that could
unexpectedly compromise information and device security. The methods used to obtain unauthorized access, disable or degrade service
or sabotage systems are also constantly changing and evolving, and may be difficult to anticipate or detect for long periods of
time. The ever-evolving threats mean we must continually evaluate and adapt our systems and processes, and our efforts may not
be adequate to safeguard against all data security breaches, misuse of data or sabotage of our systems. Any future significant
compromise or breach of our data security, whether external or internal, or misuse of patient, employee, supplier or Company data,
could result in additional significant costs, lost sales, fines, lawsuits and damage to our reputation. In addition, as the regulatory
environment related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and
constantly changing requirements applicable to our business, compliance with those requirements could also result in additional
costs.
We
are subject to stringent privacy laws, information security laws, regulations, policies and contractual obligations related to
data privacy and security and changes in such laws, regulations, policies and contractual obligations could adversely affect our
business.
We
are subject to data privacy and protection laws and regulations that apply to the collection, transmission, storage and use of
personally-identifying information, which among other things, impose certain requirements relating to the privacy, security and
transmission of personal information, including comprehensive regulatory systems in the U.S. and EU. The legislative and regulatory
landscape for privacy and data protection continues to evolve in jurisdictions worldwide, and there has been an increasing focus
on privacy and data protection issues with the potential to affect our business. Failure to comply with any of these laws and
regulations could result in enforcement action against us, including fines, imprisonment of company officials and public censure,
claims for damages by affected individuals, damage to our reputation and loss of goodwill, any of which could have a material
adverse effect on our business, financial condition, results of operations or prospects.
There
are numerous U.S. federal and state laws and regulations related to the privacy and security of personal information. In particular,
regulations promulgated pursuant to HIPAA establish privacy and security standards that limit the use and disclosure of individually
identifiable health information, or protected health information, and require the implementation of administrative, physical and
technological safeguards to protect the privacy of protected health information and ensure the confidentiality, integrity and
availability of electronic protected health information. Determining whether protected health information has been handled in
compliance with applicable privacy standards and our contractual obligations can be complex and may be subject to changing interpretation.
If
we are unable to properly protect the privacy and security of protected health information, we could be found to have breached
our contracts. Further, if we fail to comply with applicable privacy laws, we could face civil and criminal penalties. The U.S.
Department of Health and Human Services, of HHS, has the discretion to impose penalties without attempting to resolve violations
through informal means. HHS enforcement activity can result in financial liability and reputational harm, and responses to such
enforcement activity can consume significant internal resources. In addition, state attorneys general are authorized to bring
civil actions seeking either injunctions or damages in response to violations that threaten the privacy of state residents. We
cannot be sure how these regulations will be interpreted, enforced or applied to our operations. In addition to the risks associated
with enforcement activities and potential contractual liabilities, our ongoing efforts to comply with evolving laws and regulations
at the federal and state level may be costly and require ongoing modifications to our policies, procedures and systems.
In
the EU, we are subject to the General Data Protection Regulation (“GDPR”), which went into effect in May
2018 and which imposes new obligations on companies that operate in our industry with respect to the processing of personal data
and the cross-border transfer of such data. The GDPR imposes onerous accountability obligations requiring data controllers and
processors to maintain a record of their data processing and policies. If our or our partners’ or service providers’
privacy or data security measures fail to comply with the GDPR requirements, we may be subject to litigation, regulatory investigations,
enforcement notices requiring us to change the way we use personal data and/or fines of up to 20 million Euros or up to 4% of
the total worldwide annual turnover of the preceding financial year, whichever is higher, as well as compensation claims by affected
individuals, negative publicity, reputational harm and a potential loss of business and goodwill. The GDPR places restrictions
on the cross-border transfer of personal data from the EU to countries that have not been found by the European Commission to
offer adequate data protection legislation, such as the United States. In July 2020, the Court of Justice of the European Union
(“CJEU”) invalidated the EU-U.S. Privacy Shield framework (“Privacy Shield”), one of the mechanisms used
to legitimize the transfer of personal data from the EU to the U.S. The CJEU decision also drew into question the long-term viability
of an alternative means of data transfer, the standard contractual clauses, for transfers of personal data from the EU to the
U.S. While we were not self-certified under the Privacy Shield, this CJEU decision may lead to increased scrutiny on data transfers
from the EU to the U.S. generally and increase our costs of compliance with data privacy legislation.
In
2018, California passed into law the California Consumer Privacy Act (“CCPA”), which took effect on January
1, 2020 and imposed many requirements on businesses that process the personal information of California residents. Many of the
CCPA’s requirements are similar to those found in the GDPR, including requiring businesses to provide notice to data subjects
regarding the information collected about them and how such information is used and shared, and providing data subjects the right
to request access to such
Risks
Related to Ownership of our Common Stock
The
price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for stockholders.
The
market price of our common stock has been volatile and can be subject to wide fluctuations in response to various factors, some
of which are beyond our control, including, the reporting of results of our clinical trials or partner-sponsored clinical trials
involving our programs. These factors include those discussed in this “Risk Factors” section of this Quarterly Report
on Form 10-Q and others such as:
|
●
|
our
commercialization, marketing and manufacturing prospects;
|
|
●
|
our
intentions and our ability to establish collaborations and/or partnerships;
|
|
●
|
the
timing or likelihood of regulatory filings and approvals;
|
|
●
|
our
development, commercialization, marketing and manufacturing capabilities;
|
|
●
|
our
expectations regarding the potential market size and the size of the patient populations for our product candidates;
|
|
●
|
the
implementation of our business model and strategic plans for our business and technology;
|
|
●
|
the
scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates,
along with any product modifications and improvements;
|
|
●
|
estimates
of our expenses, future revenue, capital requirements, our needs for additional financing and our ability to obtain additional
capital;
|
|
●
|
our
financial performance; and
|
|
●
|
developments
and projections relating to our competitors and our industry, including competing therapies and procedures.
|
In
addition, the stock markets in general, and the markets for biopharmaceutical and biotechnology stocks in particular, have experienced
extreme volatility that may have been unrelated to the operating performance of the issuer. These broad market fluctuations may
adversely affect the market price or liquidity of our common stock. In the past, when the market price of a stock has been volatile,
holders of that stock have sometimes instituted securities class action litigation against the issuer. If any of our stockholders
were to bring such a lawsuit against us, we could incur substantial costs defending the lawsuit and the attention of our management
would be diverted from the operation of our business.
An
active, liquid and orderly market for our common stock may not develop, which could result in substantial losses for stockholders.
Prior
to our IPO, there was no public market for shares of our common stock. Although our common stock is listed on The Nasdaq Global
Select Market (“Nasdaq”), the market for our shares has demonstrated varying levels of trading activity and
an active public market for our shares may not be sustained. The lack of an active market may impair the ability to sell shares
at the time a shareholder wish to sell them or at a price that a shareholder may consider reasonable. An inactive market may also
impair our ability to raise capital by selling shares and may impair our ability to acquire other businesses, applications, or
technologies using our shares as consideration.
If
securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading
opinion regarding our stock, our stock price and trading volume could decline.
The
trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish
about us or our business. We only recently obtained research coverage by securities and industry analysts. If there are insufficient
securities or industry analysts covering us, the market price for our stock would be negatively impacted. If any of the analysts
who cover us issue an adverse or misleading opinion regarding us, our business model, our intellectual property or our stock performance,
or if our clinical trials and operating results fail to meet the expectations of analysts, our stock price would likely decline.
If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in
the financial markets, which in turn could cause our stock price or trading volume to decline.
Commencing
January 1, 2021, we will no longer be an “emerging growth company,” and the reduced disclosure requirements applicable
to emerging growth companies will no longer apply to us.
We
are currently an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS
Act”). We will no longer qualify for such status commencing January 1, 2021. As a large-accelerated filer, we will be subject
to certain disclosure requirements that are applicable to other public companies that have not been applicable to us as an emerging
growth company. These requirements include:
|
●
|
compliance
with the auditor attestation requirements in the assessment of our internal control over
financial reporting;
|
|
●
|
compliance
with any requirement that may be adopted by the Public Company Accounting Oversight Board
regarding mandatory audit firm rotation or a supplement to the auditor’s report
providing additional information about the audit and the financial statements;
|
|
●
|
full
disclosure obligations regarding executive compensation; and
|
|
●
|
compliance
with the requirements of holding a nonbinding advisory vote on executive compensation
and shareholder approval of any golden parachute payments not previously approved.
|
We
have incurred increased costs as a result of operating as a public company, and our management is now required to devote substantial
time to additional compliance initiatives and corporate governance practices.
As
a public company, and particularly commencing January 1, 2021 when we will no longer be an “emerging growth company”
or a “smaller reporting company,” we do and will continue to incur significant legal, accounting and other expenses
that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection
Act, the listing requirements of Nasdaq and other applicable securities rules and regulations
impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial
controls and corporate governance practices. Our management and other personnel devote a substantial amount of time to these compliance
initiatives. Moreover, these rules and regulations have increased our legal and financial compliance costs and will make some
activities more time-consuming and costly.
Pursuant
to Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”), commencing January 1, 2021,
because we will no longer be an emerging growth company, we will be required to include with our annual report an attestation
report on internal control over financial reporting issued by our independent registered public accounting firm, which is
both costly and challenging. In this regard, we will need to continue to dedicate internal resources, engage outside
consultants and potentially increase our efforts to assess and document the adequacy of our systems of internal control over
financial reporting. Despite our efforts, there is a risk that neither we nor our independent registered public accounting
firm will be able to conclude, within the prescribed timeframe or at all, that our internal controls over financial reporting
is effective as required by Section 404. If we identify one or more material weaknesses, it could result in an adverse
reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. We could also
become subject to stockholder or other third-party litigation as well as investigations by the stock exchange on which our
securities are listed, the SEC or other regulatory authorities, which could require additional financial and management
resources and could result in fines, trading suspensions or other remedies.
Future
capital raises may dilute our existing stockholders’ ownership and/or have other adverse effects on our operations.
If
we raise additional capital by issuing equity securities, our existing stockholders’ percentage ownership will be reduced,
and these stockholders may experience substantial dilution. We may also issue equity securities that provide for rights, preferences
and privileges senior to those of our common stock. If we raise additional funds by issuing debt securities, these debt securities
would have rights senior to those of our common stock and the terms of the debt securities issued could impose significant restrictions
on our operations, including liens on our assets. If we raise additional funds through collaborations and licensing arrangements,
we may be required to relinquish some rights to our technologies or product candidates, or to grant licenses on terms that are
not favorable to us.
Our
principal stockholders and management own a significant percentage of our stock and will be able to exert significant control
over matters subject to stockholder approval.
Our
executive officers, directors, holders of 5% or more of our capital stock and their respective affiliates beneficially owned approximately
17.4% of our voting stock as of September 30, 2020. Therefore, these stockholders will have the ability to influence us through
this ownership position. These stockholders may be able to determine all matters requiring stockholder approval. For example,
these stockholders may be able to control elections of directors, amendments of our organizational documents, or approval of any
merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals
or offers for our common stock that you may feel are in your best interest as one of our stockholders.
Sales
of a substantial number of shares of our common stock in the public market could cause our stock price to decline.
Sales
of a substantial number of shares of our common stock in the public market could cause the market price of our common stock to
decline. If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public
market, the market price of our common stock could decline.
In
addition, as of September 30, 2020, approximately 11,348,000 shares of common stock were subject to outstanding options, reserved
for future issuance under our equity incentive plans or subject to outstanding warrants. If these additional shares of common
stock are sold, or if it is perceived that they will be sold, in the public market, the market price of our common stock could
decline.
If
we are unable to maintain effective internal control over financial reporting, investors may lose confidence in the accuracy and
completeness of our financial reports and the market price of our securities may decrease.
Section
404 of the Sarbanes-Oxley Act requires that we evaluate and determine the effectiveness of our internal control over financial
reporting and provide a management report on our internal control over financial reporting and, for the year ended December 31,
2020, requires attestation by our independent registered public accounting firm.
If
we are unable to comply with the requirements of Section 404 in a timely manner, if we are unable to assert that our internal
control over financial reporting is effective or if we are unable to provide an attestation report from our independent registered
public accounting firm, investors may lose confidence in the accuracy and completeness of our financial reports and the market
price of our common stock could decrease.
Provisions
in our organizational documents and provisions under Delaware law could discourage a takeover that stockholders may consider favorable
and may lead to entrenchment of management.
Our
amended and restated certificate of incorporation and bylaws contains provisions that could delay or prevent changes in control
or changes in our management without the consent of our board of directors. These provisions include the following:
|
●
|
no
cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;
|
|
●
|
the
exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors
or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board
of directors;
|
|
●
|
the
ability of our board of directors to authorize the issuance of shares of preferred stock and to determine the price and other
terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly
dilute the ownership of a hostile acquirer;
|
|
●
|
the
ability of our board of directors to amend our bylaws without obtaining stockholder approval;
|
|
●
|
the
required approval of at least 66 2/3% of the shares entitled to vote at an election of directors to adopt, amend or repeal
our bylaws or repeal the provisions of our amended and restated certificate of incorporation regarding the election and removal
of directors;
|
|
●
|
the
requirement that a special meeting of stockholders may be called only by the chairman of the board of directors, the chief
executive officer, the president or the board of directors, which may delay the ability of our stockholders to force consideration
of a proposal or to take action, including the removal of directors; and
|
|
●
|
advance
notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose
matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting
a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of
us.
|
In
addition, these provisions would apply even if we were to receive an offer that some stockholders may consider beneficial.
We
are also subject to the anti-takeover provisions contained in Section 203 of the Delaware General Corporation Law. Under Section
203, a corporation may not, in general, engage in a business combination with any holder of 15% or more of its capital stock unless
the holder has held the stock for three years or, among other exceptions, the board of directors has approved the transaction.
Claims
for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against
us and may reduce the amount of money available to us.
Our
amended and restated certificate of incorporation and bylaws provide that we will indemnify our directors and officers, in each
case to the fullest extent permitted by Delaware law.
In
addition, as permitted by Section 145 of the Delaware General Corporation Law, our bylaws became effective immediately prior to
the completion of the IPO and our indemnification agreements that we have entered into with our directors and officers provide
that:
|
●
|
we
will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at
our request, to the fullest extent permitted by Delaware law. Delaware law provides that a corporation may indemnify such
person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best
interests of the registrant and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s
conduct was unlawful;
|
|
●
|
we
may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable
law;
|
|
●
|
we
are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except
that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is
not entitled to indemnification;
|
|
●
|
we
will not be obligated pursuant to our bylaws to indemnify a person with respect to proceedings initiated by that person against
us or our other indemnitees, except with respect to proceedings authorized by our board of directors or brought to enforce
a right to indemnification;
|
|
●
|
the
rights conferred in our bylaws are not exclusive, and we are authorized to enter into indemnification agreements with our
directors, officers, employees and agents and to obtain insurance to indemnify such persons; and
|
|
●
|
we
may not retroactively amend our bylaw provisions to reduce our indemnification obligations to directors, officers, employees
and agents.
|
Our
certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially
all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial
forum for disputes with us or our directors, officers or employees.
Our
certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative
action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against
us arising pursuant to the Delaware General Corporation Law, our certificate of incorporation or our bylaws, any action to interpret,
apply, enforce, or determine the validity of our certificate of incorporation or bylaws, or any action asserting a claim against
us that is governed by the internal affairs doctrine. Section 27 of the Exchange Act creates exclusive federal jurisdiction over
all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result,
the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or
any other claim for which the federal courts have exclusive jurisdiction. In addition, Section 22 of the Securities Act creates
concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities
Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce
any duty or liability created by the Securities Act or any other claim for which the federal and state courts have concurrent
jurisdiction.
The
choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable
for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors,
officers and other employees. Alternatively, if a court were to find the choice of forum provision contained in our certificate
of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such
action in other jurisdictions, which could adversely affect our business and financial condition.
We
do not intend to pay dividends on our common stock, and, consequently, the ability to achieve a return on investment will depend
on appreciation in the price of our common stock.
We
do not intend to pay any cash dividends on our common stock for the foreseeable future. We intend to invest our future earnings,
if any, to fund our growth. Therefore, shareholders are not likely to receive any dividends on their common stock for the foreseeable
future. Since we do not intend to pay dividends, the ability to receive a return on investment will depend on any future appreciation
in the market value of our common stock. There is no guarantee that our common stock will appreciate or even maintain the price
at which our holders have purchased it.