Item
1. Business.
General
Advaxis
is a clinical-stage biotechnology company focused on the development and commercialization of proprietary Listeria monocytogenes,
or Lm, Technology antigen delivery products based on a platform technology that utilizes live attenuated Lm bioengineered
to secrete antigen/adjuvant fusion proteins. These Lm-based strains are believed to be a significant advancement in immunotherapy
as they integrate multiple functions into a single immunotherapy and are designed to access and direct antigen presenting cells
to stimulate anti-tumor T cell immunity, activate the immune system with the equivalent of multiple adjuvants, and simultaneously
reduce tumor protection in the Tumor Microenvironment, or TME, to enable T cells to eliminate tumors. The Company believes that
Lm Technology immunotherapies can complement and address significant unmet needs in the current oncology treatment landscape.
Specifically, the Company’s product candidates have the potential to optimize the clinical impact of checkpoint inhibitors
while having a generally well-tolerated safety profile. The Company’s passion for the clinical potential of Lm Technology
is balanced by focus and fiscal discipline which is directed towards improving treatment options for cancer patients and increasing
shareholder value.
Advaxis
is focused on single antigen and multiple antigen delivery products and is in various stages of clinical development. All of the
Company’s products are anchored in the Company’s Lm TechnologyTM, a unique platform designed for
its ability to target various cancers in multiple ways. As an intracellular bacterium, Lm is an effective vector for the
presentation of antigens through both the Major Histocompatibility Complex, or MHC, I and II pathways, due to its active phagocytosis
by Antigen Presenting Cells, or APCs. Within the APCs, Lm produces virulence factors which allow survival in the host cytosol
and potently stimulate the immune system.
Through
a license from the University of Pennsylvania and through its own development efforts, Advaxis has exclusive access to a proprietary
formulation of attenuated Lm that we call Lm Technology. Lm Technology is designed to optimize this natural
system, and one of the keys to the enhanced immunogenicity of Lm Technology is the tLLO-fusion protein, which is
made up of tumor associated antigen, or TAA, fused to a highly immunogenic bacterial protein that triggers potent cellular immunity.
The tLLO-fusion protein is also designed to help reduce immune tolerance in the TME and to promote antigen spreading, thereby
improving activity in the TME. Multiple copies of the tLLO-fusion protein within each construct may increase antigen presentation
and TME impact.
As
the field of immunotherapy continues to evolve, the flexibility of the Lm Technology platform has allowed Advaxis to develop
highly innovative products. To date, Lm Technology has demonstrated preclinical synergy with multiple checkpoint inhibitors,
co-stimulatory agents and radiation therapy. The safety profile of all Lm Technology constructs seen to date across over
470 patients has been generally predictable and manageable, consisting mostly of mild to moderate flu-like symptoms that have
been transient and associated with infusion.
The
Advaxis Corporate Strategy
Our
strategy is to advance the Lm Technology platform and leverage its unique capabilities to design and develop an array of cancer
treatments. We are currently conducting or planning clinical studies of Lm Technology immunotherapies in non-small cell lung cancer
and other solid tumor types, prostate cancer and HPV-associated cancers. We are working with, or are in the process of identifying,
collaborators and potential licensees for these programs.
Advaxis
is currently mainly concentrating on its disease-focused, hotspot/“off-the-shelf” neoantigen-directed therapies called
ADXS-HOT. ADXS-HOT is a program that leverages the Company’s proprietary Lm technology to target hotspot mutations that
commonly occur in specific cancer types. ADXS-HOT drug candidates are designed to target acquired shared or “public”
mutations in tumor driver genes along with other cancer-associated antigens that also commonly occur in specific cancer types.
We
expect that we will continue to invest in our core clinical program areas and will also remain opportunistic in evaluating Investigator
Sponsored Trials, or ISTs, as well as licensing opportunities as we are actively looking for partners and/or licensees for these
programs. The Lm Technology platform is protected by a range of patents, covering both product and process, some of which
we believe can be maintained into 2039.
Lm
Technology and the Immunotherapy Landscape
The
challenge of cancer immunotherapy has been to find the best overall balance between efficacy and side effects when mobilizing
the body’s immune system to fight against cancer. The development of immune checkpoint inhibitors was a significant step
forward, particularly with anti-PD-1 therapies, and brought with it impressive clinical activity in many different types of cancers,
including melanoma, lung, head and neck and urothelial cancers. However, a literature review published in Science in 2018
noted that anti-PD-1 monotherapy response rates are only in the 15-25% range, and rise to ≥50% only in selected groups of patients
with desmoplastic melanoma, Merkel carcinoma or tumors with mismatch-repair deficiency. Development of secondary resistance with
disease progression is yet another common limitation of these therapies. Therefore, for most cancer patients, there is room for
improvement. Checkpoint inhibitors can expand existing cancer fighting cells that may already be present in low numbers and support
their activity against cancer cells, but if the right cancer-fighting cells are not present, checkpoint inhibitors may not provide
clinical benefit. Similarly, there are many mechanisms of immune tolerance that are distinct from the checkpoints which may also
be blocking the immune system from fighting cancer. Based on both pre-clinical and early clinical data, Advaxis believes that
checkpoint inhibitors, when combined with treatments such as Lm Technology, can have an amplified anti-tumor effect. Lm
Technology incorporates several complementary elements that include innate immune stimulation, potent generation of cancer-targeted
T cells, ability to boost immunity through multiple treatments, enhancing lymphocyte infiltration into tumors, reduction of non-checkpoint
mediated immune tolerance within the tumor microenvironment, and promotion of antigen spreading which may amplify the effects
of treatment. These results provide rationale for further testing of Lm Technology agents alone and in combination with
checkpoint inhibitors.
Traditional
cancer vaccines were another development within immunotherapy and have a history beginning over 30 years ago. Unfortunately, these
vaccines have largely been unsuccessful for a variety of potential reasons. These include poor selection of targets, imbalanced
antigen presentation by inclusion of certain immune enhancing agents (adjuvants), failure to consider the blocking actions of
immune tolerance, and choice of vaccine vectors. In some cases, patients may develop neutralizing antibodies, preventing further
treatments. In contrast to traditional cancer vaccines, Lm Technology takes advantage of a natural pathway in the immune
system that evolved to protect us against Listeria infections, that also happens to generate the same type of immunity
that is required when fighting cancer. The live but weakened (attenuated) bacteria stimulate a balanced concert of innate immune
triggers and present the tumor antigen target precisely where it needs to be able to generate potent cancer fighting cells from
within the immune system itself. The multitude of accompanying signals serves to broadly mobilize most of the immune system in
support of fighting what seems to be a Listeria infection, and is then “re-directed” against cancer cell targets.
Additionally, the unique intracellular lifecycle of Listeria avoids the creation of neutralizing antibodies, thereby allowing
for repeat administration as a chronic therapy with a sustained enhancing of tumor antigen-specific T cell immunity.
Looking
back on the last two decades, there have been promising technology advancements to harness and activate killer T cells against
cancers and every day more is learned about the interplay between immunity and cancer that can lead to improved treatments. However,
there are still significant unmet needs in the immunotherapy landscape that Advaxis feels Lm Technology may be able to
address and complement. Specifically, Lm Technology has the potential to optimize and expand checkpoint inhibitor activity
in combination. It also avoids many of the limitations of previous cancer vaccine attempts by tapping into the pathway reserved
for defense against Listeria infection while incorporating the best cancer targets science can identify, including neoantigens
that result from mutations in the cancer. To date, Lm Technology products have a manageable safety profile, do not generate
neutralizing antibodies lending themselves to retreatments, and most of the products are designed to be immediately available
for treatment without the complication and expense of modifying a patient’s own cells in a laboratory.
Lm
Technology: An optimized Listeria -based antigen delivery system
Advaxis’
Listeria -based immunotherapies are designed for antigen delivery through a process of insertion of multiple copies of
the proprietary tLLO-fusion protein into each extrachromosomal protein expression and secretion plasmid that makes and
secretes the target protein right inside the patient’s antigen presenting cells to initiate and/or boost their immune response.
The tLLO-fusion protein approach was developed at the University of Pennsylvania as an improvement over insertion of a
single copy of the target gene, as an ACT-A (or other Lm peptide) fusion, within the bacterial genome for four key reasons:
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1.
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Multiple
copies of the DNA in the plasmids per bacteria can result in larger amounts of tLLO -fusion protein being expressed
simultaneously, versus a single copy. This is designed to improve antigen presentation and immunologic priming and increases
the number of T cells generated for a particular treatment.
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2.
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tLLO
expressed on plasmids (with or without a tumor target protein attached) has been shown preclinically to reduce numbers
and immune suppressive function of Tregs and myeloid-derived suppressor cells, or MDSCs, in the tumor microenvironment. Presented
preclinical data demonstrates that Tregs are destroyed as soon as five days after the first Lm Technology treatment
and that suppressive M2 tumor-associated macrophages, or TAMs, are replaced by M1 macrophages which support antigen presentation
and adoptive immunity.
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3.
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The
extrachromosal DNA plasmids themselves also contain CpG sequence patterns that trigger TLR-9, which confers additional innate
immune stimulation beyond a listeria without the plasmids.
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4.
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The
multiple copies of bacterial DNA plasmids (up to 80-100 per bacteria) confers additional stimulation of the STING receptor
within APC’s which has been associated with enhancing anti-cancer immunity in patients.
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Clinical
Pipeline
Advaxis
is focused on the development and commercialization of proprietary Lm Technology antigen delivery products. The Company
and its collaborators are currently conducting or are in the planning process for conducting clinical studies of Lm Technology
immunotherapies in the following areas:
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Disease
focused hotspot/“off-the-shelf” neoantigen-directed therapies
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Human
Papilloma Virus (“HPV”)-associated cancers
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Prostate
cancer (ADXS-PSA)
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The
Company has completed the clinical study report for ADXS-NEO program—its Lm Technology personalized neoantigen-directed
therapies clinical study and plans to close the related IND for this study shortly. In addition, the Company is winding down its
AIM2CERV Phase 3 clinical trial with axalimogene filolisbac (AXAL) in high-risk locally advanced cervical cancer.
As
a clinical-stage biotechnology company with no commercial products, Advaxis is aware of the need for fiscal responsibility, and
is focusing its investments in areas that it anticipates will have the highest likelihood of clinical and commercial success.
Additionally, the company will continue to be opportunistic by exploring ISTs, licensing and other external opportunities.
Advaxis
Pipeline of Product Candidates
Disease-focused hotspot/‘off -the-shelf’ neoantigen therapies (ADXS-HOT)
Advaxis
is creating a new group of immunotherapy constructs for major solid tumor cancers that combines our optimized Lm Technology
vector with promising targets designed to generate potent anti-cancer immunity. The ADXS-HOT program is a series of novel cancer
immunotherapies that will target somatic mutations, or hotspots, cancer testis antigens, or CTAs, and oncofetal antigens, or OFAs.
These three types of targets form the basis of the ADXS-HOT program because they are designed to be more capable of generating
potent, tumor specific, and high strength killer T cells, versus more traditional over-expressed native sequence tumor associated
antigens. Most hotspot mutations and OFA/CTA proteins play critical roles in oncogenesis; targeting both at once could significantly
impair cancer proliferation. The ADXS-HOT products will combine many of the potential high avidity targets that are expressed
in all patients with the target disease into one “off-the-shelf”, ready to administer treatment. The ADXS-HOT technology
has a strong intellectual property, or IP, position, with potential protection into 2037, and an IP filing strategy providing
for broad coverage opportunities across multiple disease platforms and combination therapies.In July 2018, the Company announced
that the U.S. Food and Drug Administration, or FDA, allowed the Company’s investigational new drug, or IND, application
for its ADXS-HOT drug candidate (ADXS-503) for non-small cell lung cancer, or NSCLC. ADXS-503 is currently being evaluated in
a Phase 1/2 clinical trial, enrolling patients at five sites. The first two dose-levels with monotherapy in Part A, (1 X108
CFU and 5 X108 CFU) have been completed and Part B and Part C with ADXS-503 (1 X108 CFU) in combination with
a checkpoint inhibitor are currently open to enrollment.
The
Company presented updated clinical data from Part B of the ADXS-503 clinical study at ASCO Annual Meeting 2020, which demonstrated
durable clinical benefit in 2 out of 3 evaluable patients with immediate prior progression on KEYTRUDA® including
one durable response out to 34 weeks with 25% reduction in a target lesion and another sustained response out to 33 weeks with
a 60% reduction in site lesions. Clinical benefit was observed after immediate prior progression on KEYTRUDA® with
previous best responses of stable disease suggest ADXS-503 may re-sensitize or enhance response to KEYTRUDA®. Both
patients remain on treatment in Part B, the combination arm with KEYTRUDA®. The Company has initiated ADXS-503
Part B combination arm efficacy expansion which will enroll up to 15 additional patients to evaluate the potential of ADXS-503
in combination with KEYTRUDA® to restore and/or enhance responsiveness to checkpoint inhibitors in PD-1/L-1 refractory
NSCLC patients Advaxis also has initiated the ADXS-503 Part C combination arm to evaluate ADXS-503 in combination with KEYTRUDA®
as a first line treatment in patients with NSCLC with PD-L1 expression ≥ 1% or who are unsuitable for chemotherapy
The
Company expects to report updated clinical and immune response updated data from Part B combination therapy at upcoming scientific
meetings in 2021.
On
December 3, 2019, Advaxis announced that it submitted an IND to the FDA for the initiation of a Phase 1 clinical study of ADXS-504,
its ADXS-HOT drug candidate for prostate cancer. On September 10, 2020, Advaxis was notified that a new IND submitted to the FDA
for the initiation of an Investigator-Sponsored-Trial, a Phase 1 clinical study of ADXS-504 for biochemically recurrent prostate
cancer after radical prostatectomy or radical radiotherapy, was accepted by the agency. This study is expected to start at a leading
medical institution in 1Q2021.
HPV-Related
Cancers
The
Company conducted several studies evaluating axalimogene filolisbac, or AXAL, for HPV-related cancers. AXAL is an Lm-based
antigen delivery product directed against HPV and designed to target cells expressing HPV.
In
June 2019, the Company announced the closing of its AIM2CERV Phase 3 clinical trial with axalimogene filolisbac (AXAL) in high-risk
locally advanced cervical cancer. Company estimates showed that the remaining cost to complete the AIM2CERV trial ranged from
$80 million to $90 million, and initial efficacy data was not anticipated for at least three years. Therefore, results from the
clinical trial were not the basis for the decision to close the study, nor was safety as the trial recently underwent its third
Independent Data Monitoring Committee (IDMC) review with no safety issues noted. The Company has unblinded the AIM2CERV clinical
data generated to date and currently has no plans to present it at any medical conference as the data set is incomplete and inconclusive.
In
2014, Advaxis granted Global BioPharma, or GBP, an exclusive license for the development and commercialization of AXAL in Asia,
Africa, and the former USSR territory, exclusive of India and certain other countries. GBP is responsible for all development
and commercial costs and activities associated with the development in their territories.
Other
HPV Program Licensing Agreements
Biocon
Limited, or Biocon, our co-development and commercialization partner for AXAL in India and key emerging markets, filed a MAA for
licensure of this immunotherapy in India. The companies will evaluate next steps regarding potential registration in India.
Especificos
Stendhal SA de CV, or Stendhal, the Company’s co-development and commercialization partner for AXAL in Mexico, Brazil, Colombia
and other Latin American countries, agreed to pay $10 million in support payment towards the expense of AIM2CERV over the duration
of the trial, contingent upon Advaxis achieving annual project milestones, pursuant to a Co-Development and Commercialization
Agreement, or the Stendhal Agreement. The Company was in arbitration proceedings with Stendhal. For more information, see Note
9, “Commitments and Contingencies – Legal Proceedings” of the “Notes to the Financial Statements”
included in Item 8.
Knight
Therapeutics Inc., or Knight, holds an exclusive license to commercialize AXAL in Canada, as well as other product candidates.
Personalized
Neoantigen-directed Therapies (ADXS-NEO)
ADXS-NEO
is an individualized Lm Technology antigen delivery product developed using whole-exome sequencing of a patient’s
tumor to identify neoantigens. ADXS-NEO is designed to work by presenting a large payload of neoantigens directly into dendritic
cells within the patient’s immune system and stimulating a T cell response against cancerous cells. In October 2019, the
Company announced that it has dosed its last patient in Part A, in monotherapy, and does not intend to continue into Part B, in
combination with a checkpoint inhibitor. As a result, Advaxis is in the process of winding down this study. The Company has completed
the clinical study report from Part A of the ADXS-NEO study and plans to close its ADXS-NEO program IND as next step.
Prostate
Cancer (ADXS-PSA)
According
to the American Cancer Society, prostate cancer is the second most common type of cancer found in American men and is the second
leading cause of cancer death in men, behind only lung cancer. More than 160,000 men are estimated to be diagnosed with prostate
cancer in 2018, with approximately 30,000 deaths each year. Unfortunately, in about 10-20% of cases, men with prostate cancer
will go on to develop castration-resistant prostate cancer, or CRPC, which refers to prostate cancer that progresses despite androgen
deprivation therapy. Metastatic CRPC, or mCRPC, occurs when the cancer spreads to other parts of the body and there is a rising
prostate-specific antigen, PSA, level. This stage of prostate cancer has an average survival of 9-13 months, is associated with
deterioration in quality of life, and has few therapeutic options available.
Recent
data regarding checkpoint inhibitor monotherapy has shown some antitumor activity that provides disease control in a subset of
patients with bone predominant mCRPC previously treated with next generation hormonal agents and docetaxel. Data from the KEYNOTE-199
trial in bone predominant-mCRPC patients treated with KEYTRUDA®, or pembrolizumab, was updated at the ASCO GU meeting in 2019.
In this trial, the total stable disease/disease stabilization rate was 39% with no responses reported so far, and only one patient
with ≥50% decrease in the post-baseline PSA value. It is hypothesized that the limited activity in mCRPC may be due to 1) the
inability of the checkpoint inhibitor to infiltrate the tumor microenvironment and 2) the presence of an immunosuppressive tumor
micro-environment, or TME. The combination therapy with agents—like Lm constructs—that induce T cell infiltration
within the tumor and decrease negative regulators in the TME may improve performance of checkpoints in prostate cancer.
Lm
Technology constructs demonstrated the ability to induce anti-tumor T cell responses and T cell infiltration in the TME and
to reduce the number and suppressive function of Tregs and MDSCs in the TME. For example, destruction of Tregs in the TME has
been documented as soon as five days after dosing Lm constructs in models. This reduction of immune suppression in the
tumors has been attributed to our proprietary tLLO-fusion peptides expressed by multiple copies of the plasmids in each bacteria.
Because of all these effects, it is hypothesized that Lm constructs can turn “cold prostate tumors” into “hot
tumors” that better respond to checkpoint inhibitors. Advaxis believes that the combination of ADXS-PSA, its immunotherapy
designed to target the PSA antigen, with a checkpoint inhibitor may provide an alternative treatment option for patients with
mCRPC.
Advaxis
has entered into a clinical trial collaboration and supply agreement with Merck to evaluate the safety and efficacy of ADXS-PSA
as monotherapy and in combination with KEYTRUDA®, Merck’s anti PD-1 antibody, in a Phase 1/2, open-label,
multicenter, dose determination and expansion trial in patients with previously treated metastatic, castration-resistant prostate
cancer (KEYNOTE-046). ADXS-PSA was tested alone or in combination with KEYTRUDA in an advanced and heavily pretreated patient
population who had progressed on androgen deprivation therapy. A total of 13 and 37 patients were evaluated on monotherapy and
combination therapy, respectively. For the ADXS-PSA monotherapy dose escalation and determination portion of the trial, cohorts
were started at a dose of 1 x 109 cfu (n=7) and successfully escalated to higher dose levels of 5x109 cfu
(n=3) and 1x1010 cfu (n=3) without achieving a maximum tolerated dose. TEAEs noted at these higher dose levels were
generally consistent with those observed at the lower dose level (1 x 109 cfu) other than a higher occurrence rate
of Grade 2/3 hypotension. The Recommended Phase II Dose of ADXS-PSA monotherapy was determined to be 1x 109 cfu based
on a review of the totality of the clinical data. This dose was used in combination with 200mg of pembrolizumab in a cohort of
six patients to evaluate the safety of the combination before moving into an expanded cohort of patients. The safety of the combination
was confirmed and enrollment in the expansion cohort phase was initiated. Enrollment in the study was completed in January 2017.
At
the final data cutoff of September 16, 2019, median overall survival for 37 patients in the combination arm was 33.6 months (95%
CI, range 15.4-33.6 months). This updated median overall survival is an increase from the previous data presented at the American
Association for Cancer Research Annual Meeting in April 2019, where median overall survival was 21.1 months in the combination
arm. The combination of ADXS-PSA with KEYTRUDA®, might be associated with prolonged OS in this population, particularly
in patients with unmet medical needs like visceral metastasis (16.4 months, range 4.0 - not reached) and those with prior docetaxel
(16 months, range 6.4-34.6). The majority of TEAEs consisted of transient and reversible Grade 1-2 chills/rigors, fever, hypotension,
nausea and fatigue. The combination of ADXS-PSA and KEYTRUDA® has appeared to be well-tolerated to date, with no additive
toxicity observed. The Company presented these new data at the ASCO Genitourinary Cancers Symposium in San Francisco, CA. on February
2020. The Company is currently seeking potential partners regarding opportunities to expand or advance this mCRPC program.
Other
Lm Technology Products
HER2
Expressing Solid Tumors
HER2
is overexpressed in a percentage of solid tumors including osteosarcoma. According to published literature, up to 60% of osteosarcomas
are HER2 positive, and this overexpression is associated with poor outcomes for patients. ADXS-HER2 is an Lm Technology
antigen delivery product candidate designed to target HER2 expressing solid tumors including human and canine osteosarcoma. ADXS-HER2
has received FDA and EMA orphan drug designation for osteosarcoma and has received Fast Track designation from the FDA for patients
with newly-diagnosed, non-metastatic, surgically-resectable osteosarcoma.
In
September 2018, the Company announced that it had granted a license to OS Therapies, LLC, or OS Therapies, for the use of ADXS31-164,
also known as ADXS-HER2, for evaluation in the treatment of osteosarcoma in humans. Under the terms of the license agreement,
OS Therapies, in collaboration with the Children’s Oncology Group, will be responsible for the conduct and funding of a
clinical study evaluating ADXS-HER2 in recurrent, completely resected osteosarcoma. In December 2020 and January 2021, we received
an aggregate of $1,345,000 from OS Therapies upon achievement of the $1,550,000 funding milestone set forth in the license agreement.
For more information, see Note 15, “Subsequent Events” of the “Notes to the Financial Statements”
included in Item 8.
Canine
Osteosarcoma
On
March 19, 2014, we entered into a definitive Exclusive License Agreement, or Aratana Agreement, with Aratana Therapeutics, Inc.,
or Aratana, where we granted Aratana an exclusive, worldwide, royalty-bearing license, with the right to sublicense, certain of
our proprietary technology that enables Aratana to develop and commercialize animal health products that will be targeted for
treatment of osteosarcoma and other cancer indications in animals. A product license request was filed by Aratana for ADXS-HER2
(also known as AT-014 by Aratana) for the treatment of canine osteosarcoma with the United States Department of Agriculture, or
USDA. Aratana received communication in December 2017 that the USDA granted Aratana conditional licensure for AT-014 for the treatment
of dogs diagnosed with osteosarcoma, one year of age or older. Initially, Aratana plans to make the therapeutic available for
purchase at approximately two dozen veterinary oncology practice groups across the United States who participate in the study.
Aratana received communication in December 2017 that the USDA granted Aratana conditional licensure for AT-014 for the treatment
of dogs diagnosed with osteosarcoma, one year of age or older. Aratana is currently conducting an extended field study which is
a requirement for full USDA licensure. Initially, Aratana plans to make the therapeutic available for purchase at approximately
two dozen veterinary oncology practice groups across the United States who participate in the study.
Under
the terms of the Aratana Agreement, Aratana paid an upfront payment to Advaxis in the amount of $1,000,000 upon signing of the
Aratana Agreement. Aratana will also pay Advaxis: (a) up to $36.5 million based on the achievement of milestone relating to the
advancement of products through the approval process with the USDA in the United States and the relevant regulatory authorities
in the European Union, or E.U., in all four therapeutic areas and up to an additional $15 million in cumulative sales milestones
based on achievement of gross sales revenue targets for sales of any and all products for use in non-human animal health applications,
or the Aratana Field, (regardless of therapeutic area), and (b) tiered royalties starting at 5% and going up to 10%, which will
be paid based on net sales of any and all products (regardless of therapeutic area) in the Aratana Field in the United States.
Royalties for sales of products outside of the United States will be paid at a rate equal to half of the royalty rate payable
by Aratana on net sales of products in the United States (starting at 2.5% and going up to 5%). Royalties will be payable on a
product-by-product and country-by-country basis from first commercial sale of a product in a country until the later of (a) the
10th anniversary of first commercial sale of such product by Aratana, its affiliates or sub licensees in such country or (b) the
expiration of the last-to-expire valid claim of our patents or joint patents claiming or covering the composition of matter, formulation
or method of use of such product in such country. Aratana will also pay us 50% of all sublicense royalties received by Aratana
and its affiliates. In fiscal year 2019, the Company received approximately $8,000 in royalty revenue from Aratana. Additionally,
in July 2019, Aratana announced that their shareholders approved a merger agreement with Elanco Animal Health, or Elanco, whereby
Elanco is now the majority shareholder of Aratana. On October 6, 2020, the Company received a notice from Aratana, dated September
17, 2020, indicating that Aratana was terminating the Exclusive License Agreement effective December 21, 2020. The Company did
not incur any early termination penalties as a result of the termination. Aratana was required to make all payments to the Company
that were otherwise payable under the Exclusive License Agreement through the effective date of termination.
Corporate
Information
We
were originally incorporated in the State of Colorado on June 5, 1987 under the name Great Expectations, Inc. We were a publicly-traded
“shell” company without any business until November 12, 2004 when we acquired Advaxis, Inc., a Delaware corporation,
through a Share Exchange and Reorganization Agreement, dated as of August 25, 2004, which we refer to as the Share Exchange, by
and among Advaxis, the stockholders of Advaxis and us. As a result of the Share Exchange, Advaxis became our wholly-owned subsidiary
and our sole operating company. On December 23, 2004, we amended and restated our articles of incorporation and changed our name
to Advaxis, Inc. On June 6, 2006, our stockholders approved the reincorporation of our company from Colorado to Delaware by merging
the Colorado entity into our wholly-owned Delaware subsidiary. Our date of inception, for financial statement purposes, is March
1, 2002 and the Company was uplisted to Nasdaq in 2014.
Our
principal executive offices and manufacturing facility is located at 305 College Road East, Princeton, New Jersey 08540 and our
telephone number is (609) 452-9813. We maintain a corporate website at www.advaxis.com which contains descriptions of our technology,
our product candidates and the development status of each drug. We make available free of charge through our Internet website
our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments to these reports,
as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the SEC. We are
not including the information on our website as a part of, nor incorporating it by reference into, this report. The SEC maintains
a website that contains annual, quarterly, and current reports, proxy statements, and other information that issuers (including
us) file electronically with the SEC. The SEC’s website address is http://www.sec.gov.
Intellectual
Property
Protection
of our intellectual property is important to our business. We have a robust patent portfolio that protects our product candidates
and Lm -based immunotherapy technology. Currently, we own or have rights to several hundred patents and applications, which
are owned, licensed from, or co-owned with University of Pennsylvania, or Penn, Merck, National Institute of Health, or NIH, and/or
Augusta University. We aggressively prosecute and defend our patents and proprietary technology. Our patents and applications
are directed to the compositions of matter, use, and methods thereof, of our Lm-LLO immunotherapies for our product candidates,
including AXAL, ADXS-PSA, ADXS-HOT, ADXS-HER2. We have and may continue to abandon prosecuting certain patents that are not strategically
aligned with the direction of the Company.
Our
approach to the intellectual property portfolio is to create, maintain, protect, enforce and defend our proprietary rights for
the products we develop from our immunotherapy technology platform. We endeavor to maintain a coherent and aggressive strategic
approach to building our patent portfolio with an emphasis in the field of cancer vaccines. Issued patents which are directed
to AXAL, ADXS-PSA, and ADXS-HER2 in the United States, will expire between 2020 and 2032. Issued patents directed to our product
candidates AXAL, ADXS-PSA, and ADXS-HER2 outside of the United States, will expire in 2032. Issued patents directed to our Lm
-based immunotherapy platform in the United States, will expire between 2020 and 2031. Issued patents directed to our Lm-based
immunotherapy platform outside of the United States, will expire between 2020 and 2033.
We
have pending patent applications directed to our product candidates AXAL, ADXS-PSA, ADXS-HER2, and ADXS-HOT that, if issued would
expire in the United States and in countries outside of the United States between 2020 and 2037. We have pending patent applications
directed to methods of using of our product candidates AXAL, ADXS-PSA, ADXS-HOT, ADXS-HER2 directed to the following indications
and others: prostate cancer and her2/neu-expressing cancer, that, if issued would expire in the United States and in countries
outside of the United States between 2020 and 2037, depending on the specific indications.
We
will be able to protect our technology from unauthorized use by third parties only to the extent it is covered by valid and enforceable
patents or is effectively maintained as trade secrets. Patents and other proprietary rights are an essential element of our business.
Our
success will depend in part on our ability to obtain and maintain proprietary protection for our product candidates, technology,
and know-how, to operate without infringing on the proprietary rights of others, and to prevent others from infringing our proprietary
rights. Our policy is to seek to protect our proprietary position by, among other methods, filing U.S. and foreign patent applications
related to our proprietary technology, inventions, and improvements that are important to the development of our business. We
also rely on trade secrets, know-how, continuing technological innovation, and in-licensing opportunities to develop and maintain
our proprietary position.
Any
patent applications which we have filed or will file or to which we have or will have license rights may not issue, and patents
that do issue may not contain commercially valuable claims. In addition, any patents issued to us or our licensors may not afford
meaningful protection for our products or technology, or may be subsequently circumvented, invalidated, narrowed, or found unenforceable.
Our processes and potential products may also conflict with patents which have been or may be granted to competitors, academic
institutions or others. As the pharmaceutical industry expands and more patents are issued, the risk increases that our processes
and potential products may give rise to interferences filed by others in the U.S. Patent and Trademark Office, or to claims of
patent infringement by other companies, institutions or individuals. These entities or persons could bring legal actions against
us claiming damages and seeking to enjoin clinical testing, manufacturing and marketing of the related product or process. In
recent years, several companies have been extremely aggressive in challenging patents covering pharmaceutical products, and the
challenges have often been successful. If any of these actions are successful, in addition to any potential liability for damages,
we could be required to cease the infringing activity or obtain a license in order to continue to manufacture or market the relevant
product or process. We may not prevail in any such action and any license required under any such patent may not be made available
on acceptable terms, if at all. Our failure to successfully defend a patent challenge or to obtain a license to any technology
that we may require to commercialize our technologies or potential products could have a materially adverse effect on our business.
In addition, changes in either patent laws or in interpretations of patent laws in the United States and other countries may materially
diminish the value of our intellectual property or narrow the scope of our patent protection.
We
also rely upon unpatented proprietary technology, and in the future may determine in some cases that our interests would be better
served by reliance on trade secrets or confidentiality agreements rather than patents or licenses. We may not be able to protect
our rights to such unpatented proprietary technology and others may independently develop substantially equivalent technologies.
If we are unable to obtain strong proprietary rights to our processes or products after obtaining regulatory clearance, competitors
may be able to market competing processes and products.
Others
may obtain patents having claims which cover aspects of our products or processes which are necessary for, or useful to, the development,
use or manufacture of our services or products. Should any other group obtain patent protection with respect to our discoveries,
our commercialization of potential therapeutic products and methods could be limited or prohibited.
The
Drug Development Process
The
product candidates in our pipeline are at various stages of clinical development. The path to regulatory approval includes multiple
phases of clinical trials in which we collect data that will ultimately support an application to regulatory authorities to allow
us to market a product for the treatment, of a specific type of cancer. There are many difficulties and uncertainties inherent
in research and development of new products, resulting in high costs and variable success rates. Bringing a drug from discovery
to regulatory approval, and ultimately to market, takes many years and significant costs.
The
process required by the FDA before product candidates may be marketed in the United States generally involves the following:
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completion
of preclinical laboratory tests, animal studies, and formulation studies in compliance with the FDA’s Good Laboratory
Practice, or GLP, regulations;
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submission
to the FDA of an Investigational New Drug Application, or IND, which must become effective before human clinical trials may
begin at United States clinical trial sites;
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approval
by an Institutional Review Board, or IRB for each clinical site, or centrally, before each trial may be initiated;
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adequate
and well-controlled human clinical trials to establish the product candidate’s safety, purity, and potency for its intended
use, performed in accordance with Good Clinical Practices, or GCPs;
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development
of manufacturing processes to ensure the product candidate’s identity, strength, quality, purity, and potency;
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submission
to the FDA of a Biologics License Application, or BLA;
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satisfactory
completion of an FDA advisory committee review, if applicable;
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satisfactory
completion of an FDA inspection of the manufacturing facility or facilities at which the products are produced to assess compliance
with current Good Manufacturing Practices, or cGMPs, and to assure that the facilities, methods, and controls are adequate
to preserve the therapeutics’ identity, strength, quality, purity, and potency as well as satisfactory completion of
an FDA inspection of selected clinical sites and selected clinical investigators to determine GCP compliance; and
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FDA
review and approval of the BLA to permit commercial marketing for particular indications for use.
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Preclinical
studies include laboratory evaluation of chemistry, pharmacology, toxicity, and product formulation, as well as animal studies
to assess potential safety and efficacy. Such studies must generally be conducted in accordance with the FDA’s GLPs. Prior
to commencing the first clinical trial at a United States investigational site with a product candidate, an IND sponsor must submit
the results of the preclinical tests and preclinical literature, together with manufacturing information, analytical data, any
available clinical data or literature, and proposed clinical study protocols among other things, to the FDA as part of an IND.
An IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA notifies the applicant of safety concerns
or questions related to one or more proposed clinical trials and places the trial on a clinical hold. In such a case, the IND
sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. Clinical holds also may be imposed
by the FDA at any time before or during trials due to safety concerns or non-compliance. A separate submission to an existing
IND must also be made for each successive clinical trial conducted during product development.
Clinical
testing, known as clinical trials or clinical studies, is either conducted internally by pharmaceutical or biotechnology companies
or managed on behalf of these companies by Clinical Research Organizations, or CROs. The process of conducting clinical studies
is highly regulated by the FDA, as well as by other governmental and professional bodies. In a clinical trial, participants receive
specific interventions according to the research plan or protocol created by the study sponsor and implemented by study investigators.
Clinical trials must be conducted in accordance with federal regulations and GCP requirements, which include the requirements
that all research subjects provide their informed consent in writing for their participation in any clinical trial, as well as
review and approval of the study by an IRB. Additionally, some clinical trials are overseen by an independent data safety monitoring
board, which reviews data and advises the study sponsor on study continuation. A protocol for each clinical trial, and any subsequent
protocol amendments, must be submitted to the FDA as part of the IND.
Clinical
trials may compare a new medical approach to a standard one that is already available or to a placebo that contains no active
ingredients or to no intervention. Some clinical trials compare interventions that are already available to each other. When a
new product or approach is being studied, it is not usually known whether it will be helpful, harmful, or no different than available
alternatives. The investigators try to determine the safety and efficacy of the intervention by measuring certain clinical outcomes
in the participants.
Phase
1. Phase 1 clinical trials begin when regulatory agencies allow initiation of clinical investigation of a new drug or product
candidate. They typically involve testing an investigational new drug on a limited number of patients. Phase 1 studies determine
a drug’s basic safety, maximum tolerated dose, mechanism of action and how the drug is absorbed by, and eliminated from,
the body. Typically, cancer therapies are initially tested on late-stage cancer patients.
Phase
2. Phase 2 clinical trials involve larger numbers of patients that have been diagnosed with the targeted disease or condition.
Phase 2 clinical trials gather preliminary data on effectiveness (where the drug works in people who have a certain disease or
condition) and to determine the common short-term side effects and risks associated with the drug. If Phase 2 clinical trials
show that an investigational new drug has an acceptable range of safety risks and probable effectiveness, a company will continue
to evaluate the investigational new drug in Phase 3 studies.
Phase
3. Phase 3 clinical trials are typically controlled multi-center trials that involve a larger number of patients to ensure
the study results are statistically significant. The purpose is to confirm effectiveness and safety on a large scale and to provide
an adequate basis for physician labeling. These trials are generally global in nature and are designed to generate clinical data
necessary to submit an application for marketing approval to regulatory agencies. Typically, two Phase 3 trials are required for
product approval. Under limited circumstances, however, approval may be based upon a single adequate and well-controlled clinical
trial plus confirmatory evidence or a single large multicenter trial without confirmatory evidence.
FDA
may also consider additional kinds of data in support of a BLA, such as patient experience data and real world evidence. For genetically
targeted populations and variant protein targeted products intended to address an unmet medical need in one or more patient subgroups
with a serious or life threatening rare disease or condition, the FDA may allow a sponsor to rely upon data and information previously
developed by the sponsor or for which the sponsor has a right of reference, that was submitted previously to support an approved
application for a product that incorporates or utilizes the same or similar genetically targeted technology or a product that
is the same or utilizes the same variant protein targeted drug as the product that is the subject of the application.
Reports
regarding clinical study progress must be submitted to the FDA and IRB on an annual basis. Additional reports are required if
serious adverse events or other significant safety information is found. Certain reports may also be required to be submitted
to the IBC. Investigational biologics must additionally be manufactured in accordance with cGMPs, imported in accordance with
FDA requirements, and exported in accordance with the requirements of the receiving country as well as FDA.
Additionally,
under the Pediatric Research Equity Act, or PREA, BLAs or BLA supplements for a new active ingredient, dosage form, dosage regimen,
or route of administration, unless subject to the below requirement for molecularly targeted cancer products, must contain data
to assess the safety and effectiveness of the product in all relevant pediatric subpopulations. The FDA may, however, grant deferrals
or full or partial waivers of this requirement. PREA does not apply to orphan designated products approved solely for the orphan
indication.
If
a product is intended for the treatment of adult cancer and is directed at molecular targets that the FDA determines to be substantially
relevant to the growth or progression of pediatric cancer, even if the product has orphan designation, the application sponsors
must submit, reports from molecularly targeted pediatric cancer investigations designed to yield clinically meaningful pediatric
study data, gathered using appropriate formulations for each applicable age group, to inform potential pediatric labeling. Like
PREA, FDA may grant deferrals or waivers of some or all of this data requirement.
Certain
gene therapy studies are also subject to the National Institutes of Health’s Guidelines for Research Involving Recombinant
DNA Molecules, or NIH Guidelines. The NIH Guidelines include the review of the study by a local institutional committee called
an institutional biosafety committee, or IBC. The IBC assesses the compliance of the research with the NIH Guidelines, assesses
the safety of the research and identifies any potential risk to public health or the environment.
In
addition to the regulations discussed above, there are a number of additional standards that apply to clinical trials involving
the use of gene therapy. The FDA has issued various guidance documents regarding gene therapies, which outline additional factors
that the FDA will consider during product development. These include guidance regarding preclinical studies; chemistry, manufacturing,
and controls; the measurement of product potency; how FDA will determine whether a gene therapy product is the same as another
product for the purpose of the agency’s orphan drug regulations; and long term patient and clinical study subject follow
up and regulatory reporting.
Biologic
License Application (BLA). During clinical trials, companies usually also complete additional preclinical studies. Companies
further develop additional information about the product candidate’s physical characteristics and finalize the cGMP manufacturing
process. The results of the clinical trials using biologics are submitted to the FDA as part of a BLA. Following the completion
of Phase 3 studies, if the sponsor of a potential product in the United States believes it has sufficient information to support
the safety and effectiveness of the investigational biologic, the sponsor submits a BLA to the FDA requesting marketing approval.
The application is a comprehensive filing that includes the results of all preclinical and clinical studies, information about
the product’s composition, and the sponsor’s plans for manufacturing, packaging, labeling and testing the investigational
new product
Subject
to certain exceptions, the BLA must be accompanied by a substantial user fee at the time of the first submission. FDA has 60 days
from its receipt of a BLA to determine whether the application is sufficiently complete for filing and for a substantive review.
If the FDA determines that the NDA is incomplete, the FDA may refuse to file the application, in which case the applicant must
address the FDA identified deficiencies before refiling. After the BLA is accepted for filing, the FDA reviews the application
to determine whether the product meets FDA’s approval standards. The FDA aims to complete its review within ten months of
the 60-day filing date. For products that present significant improvements in the safety or effectiveness of the treatment, diagnosis,
or prevention of serious conditions FDA aims to complete its review within 6 months of the 60-day filing date. The FDA, however,
does not always meet its review goal. The review goal date may also be extended if FDA requests or the sponsor provides additional
information regarding the application. As part of the approval process, FDA will typically inspect one or more clinical sites,
as well as the facility or the facilities at which the product is manufactured to ensure GCP and cGMP compliance.
FDA
may also refer an application for review by an independent advisory committee. Specifically, for a product candidate for which
no active ingredient (including any ester or salt of active ingredients) has previously been approved by the FDA, the FDA must
either refer that product candidate to an advisory committee or provide in an action letter, a summary of the reasons why the
FDA did not refer the product candidate to an advisory committee. While FDA is not bound by the recommendation of an advisory
committee, it does carefully consider the committee’s recommendations.
After
evaluating the application, FDA may issue an approval letter, authorizing product marketing, or a Complete Response Letter, or
CRL, indicating that the application is not ready for approval. The CRL describes the application’s deficiencies and conditions
that must be met for product approval. If a CRL is issued, the applicant may resubmit the application, addressing the deficiencies,
withdraw the application, or request a hearing. Even with submission of additional information, the FDA ultimately may decide
that the application is not approvable.
If
approval is granted, the FDA may limit the indications for use, including the indicated population, require contraindications,
warnings or precautions be included in the product labeling, including black box warnings, or may not approve label statements
necessary for successful commercialization. FDA may also require, or companies may conduct, additional clinical trials following
approval, called Phase 4 studies, which can confirm or refute the effectiveness of a product candidate, and can provide important
safety information. FDA may also require the implementation of a risk evaluation and mitigation strategy, or REMS, which may include
requirements for a medication guide or patient package insert, a communication plan on product risks, or other elements to assure
safe use.
After
approval, some types of changes to the approved product, such as adding new indications or label claims, which may themselves
require further clinical testing, or changing the manufacturing process are subject to further FDA review and approval. FDA can
also require the implementation REMS or the conduct of phase 4 studies after product approval.
Government
Regulations
General
Government
authorities in the United States and other countries extensively regulate, among other things, the preclinical and clinical testing,
manufacturing, labeling, storage, record-keeping, advertising, promotion, import, export, marketing and distribution of biopharmaceutical
and drug products. In the United States, the FDA subjects drugs to rigorous review under the Federal Food, Drug and Cosmetic Act,
or FDCA, the Public Health Service Act, or PHSA, and implementing regulations.
Orphan
Drug Designation
Under
the Orphan Drug Act, or ODA, the FDA may grant Orphan Drug Designation, or ODD, to a drug or biological product intended to treat
a rare disease or condition, which means a disease or condition that affects fewer than 200,000 individuals in the United States,
or more than 200,000 individuals in the United States, but for which there is no reasonable expectation that the cost of developing
and making a drug or biological product available in the United States will be recovered from domestic sales of the product. Additionally,
sponsors must present a plausible hypothesis for clinical superiority to obtain ODD if there is a product already approved by
the FDA that that is considered by the FDA to be the same as the already approved product and is intended for the same indication.
This hypothesis must be demonstrated to obtain orphan exclusivity.
The
benefits of ODD can be substantial, including research and development tax credits, grants and exemption from user fees. The tax
advantages, however, were limited in the 2017 Tax Cuts and Jobs Act. Moreover, if there is no other product that the FDA considers
to be the same product that is approve for the orphan indication, the orphan designated product is eligible for 7 years
of orphan market exclusivity once the product is approved. During that period, the FDA generally may not approve any other application
for the same product for the same indication, although there are exceptions, most notably when the later product is shown to be
clinically superior to the product with exclusivity. Other applicants, however, may receive approval of different products for
the orphan indication or the same product for a different indication during the orphan exclusivity period. In order to qualify
for these incentives, a company must apply for designation of its product as an “Orphan Drug” and obtain approval
from the FDA. Orphan product designation does not convey any advantage in or shorten the duration of the regulatory review and
approval process.
We
currently have ODD with the FDA for AXAL for treatment of anal cancer (granted August 2013), HPV-associated head and neck cancer
(granted November 2013); and treatment of Stage II-IV invasive cervical cancer (granted May 2014). We also have ODD with the FDA
for ADXS-HER2 for the treatment of osteosarcoma (granted May 2014).
In
Europe, the Committee for Orphan Medicinal Products, COMP, has issued a positive opinion on the application for ODD of AXAL for
the treatment of anal cancer (December 2015) and on the application for ODD of ADXS-HER2 for osteosarcoma (November 2015).
Expedited
Review and Approval Programs for Serious Conditions
Four
core FDA programs are intended to facilitate and expedite development and review of new biologics to address unmet medical need
in the treatment of serious or life-threatening conditions: fast track designation, breakthrough therapy designation, accelerated
approval, and priority review. We intend to avail ourselves of any and all of these programs as applicable to our products.
FDA
is required to facilitate the development, and expedite the review, of products that are intended for the treatment of a serious
or life-threatening disease or condition, and which demonstrate the potential to address unmet medical needs for the condition.
Under the fast track program, the sponsor of a new biologic product candidate may request that FDA designate the drug candidate
for a specific indication as a fast track drug concurrent with, or after, the filing of the IND for the product candidate. FDA
must determine if the product candidate qualifies for Fast Track Designation within 60 days of receipt of the sponsor’s
request. If Fast Track Designation is obtained, sponsors may be eligible for more frequent development meetings and correspondence
with the FDA. FDA may also initiate review of sections of a fast track product’s BLA before the application is complete.
This rolling review is available if the applicant provides, and FDA approves, a schedule for the submission of the remaining information
and the applicant pays applicable user fees. However, FDA’s time period goal for reviewing an application does not begin
until the last section of the BLA is submitted.
Under
FDA’s accelerated approval programs, FDA may approve a product for a serious or life-threatening illness that provides meaningful
therapeutic benefit to patients over existing treatments based upon a surrogate endpoint that is reasonably likely to predict
clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably
likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity,
rarity or prevalence of the condition and the availability or lack of alternative treatments.
In
clinical trials, a surrogate endpoint is a measurement of laboratory or clinical signs of a disease or condition that substitutes
for a direct measurement of how a patient feels, functions or survives. Surrogate endpoints can often be measured more easily
or more rapidly than clinical endpoints. A product candidate approved on this basis is subject to rigorous post-marketing compliance
requirements, including the completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint.
Failure to conduct required post-approval studies, or confirm a clinical benefit during post-marketing studies, will allow FDA
to withdraw the product from the market on an expedited basis. All promotional materials for product candidates approved under
accelerated regulations are subject to prior review by FDA.
Under
the provisions of the Food and Drug Administration Safety and Innovation Act, or FDASIA, enacted in 2012, a sponsor can request
designation of a product candidate as a “breakthrough therapy.” A breakthrough therapy is defined as a product that
is intended, alone or in combination with one or more other products, to treat a serious or life-threatening disease or condition,
and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on
one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. Products
designated as breakthrough therapies are eligible for intensive guidance on an efficient development program beginning as early
as Phase 1 trials, a commitment from the FDA to involve senior managers and experienced review staff in a proactive collaborative
and cross-disciplinary review, rolling review, and the facilitation of cross-disciplinary review.
Another
expedited pathway is the Regenerative Medicine Advanced Therapy, or RMAT, designation. Qualifying products must be a cell therapy,
therapeutic tissue engineering product, human cell and tissue product, or a combination of such products, and not a product solely
regulated as a human cell and tissue product. The product must be intended to treat, modify, reverse, or cure a serious or life-threatening
disease or condition, and preliminary clinical evidence must indicate that the product has the potential to address an unmet need
for such disease or condition. Advantages of the RMAT designation include all the benefits of the Fast Track and breakthrough
therapy designation programs, including early interactions with the FDA. These early interactions may be used to discuss potential
surrogate or intermediate endpoints to support accelerated approval.
Even
if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions
for qualification or decide that the time period for FDA review or approval will not be shortened.
Disclosure
of Clinical Trial Information
Sponsors
of clinical trials of FDA regulated products, including biologics, are required to register and submit certain clinical trial
information within specific timeframes to the National Institutes of Health, or NIH, for public dissemination on their clinicaltrials.gov
website. Information related to the product, patient population, phase of investigation, Trial sites and investigators and other
aspects of the clinical trial is then made public as part of the registration. Sponsors are also obligated to discuss the results
of their clinical trials after completion. Disclosure of the results of these trials can be delayed in certain circumstances for
up to two years, depending on the circumstances, after the date of completion of the trial. Competitors may use this publicly
available information to gain knowledge regarding the progress of development programs.
Coverage,
Pricing and Reimbursement
Successful
commercialization of new drug products depends in part on the extent to which reimbursement for those drug products will be available
from government health administration authorities, private health insurers and other organizations. Government authorities and
third-party payors, such as private health insurers and health maintenance organizations, decide which drug products they will
pay for and establish reimbursement levels. The availability and extent of reimbursement by governmental and private payors is
essential for most patients to be able to afford a drug product. Sales of drug products depend substantially, both domestically
and abroad, on the extent to which the costs of drugs products are paid for by health maintenance, managed care, pharmacy benefit
and similar healthcare management organizations, or reimbursed by government health administration authorities, private health
coverage insurers and other third-party payors.
A
primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and other third-party
payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular drug products. In many
countries, the prices of drug products are subject to varying price control mechanisms as part of national health systems. In
general, the prices of drug products under such systems are substantially lower than in the United States. Other countries allow
companies to fix their own prices for drug products, but monitor and control company profits. Accordingly, in markets outside
the United States, the reimbursement for drug products may be reduced compared with the United States. In the United States, the
principal decisions about reimbursement for new drug products are typically made by the Centers for Medicare & Medicaid Services,
or CMS, an agency within the Department of Health and Human Services, or HHS. CMS decides whether and to what extent a new drug
product will be covered and reimbursed under certain federal governmental healthcare programs, such as Medicare, and private payors
tend to follow CMS to a substantial degree. However, no uniform policy of coverage and reimbursement for drug products exists
among third-party payors and coverage and reimbursement levels for drug products can differ significantly from payor to payor.
In the United States, the process for determining whether a third-party payor will provide coverage for a biological product typically
is separate from the process for setting the price of such product or for establishing the reimbursement rate that the payor will
pay for the product once coverage is approved. With respect to biologics, third-party payors may limit coverage to specific products
on an approved list, also known as a formulary, which might not include all of the FDA-approved products for a particular indication,
or place products at certain formulary levels that result in lower reimbursement levels and higher cost sharing obligation imposed
on patients. A decision by a third-party payor not to cover our product candidates could reduce physician utilization of a product.
Moreover, a third-party payor’s decision to provide coverage for a product does not imply that an adequate reimbursement
rate will be approved. Adequate third-party reimbursement may not be available to enable a manufacturer to maintain price levels
sufficient to realize an appropriate return on its investment in product development. Additionally, coverage and reimbursement
for products can differ significantly from payor to payor. One third-party payor’s decision to cover a particular medical
product does not ensure that other payors will also provide coverage for the medical product, or will provide coverage at an adequate
reimbursement rate. As a result, the coverage determination process usually requires manufacturers to provide scientific and clinical
support for the use of their products to each payor separately and is a time-consuming process.
Coverage
policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained
for one or more products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may
be implemented in the future. Third-party payors are increasingly challenging the prices charged for medical products and services,
examining the medical necessity and reviewing the cost-effectiveness of pharmaceutical products, in addition to questioning safety
and efficacy. If third-party payors do not consider a product to be cost-effective compared to other available therapies, they
may not cover that product after FDA approval or, if they do, the level of payment may not be sufficient to allow a manufacturer
to sell its product at a profit.
In
addition, in many foreign countries, the proposed pricing for a drug must be approved before it may be lawfully marketed. The
requirements governing drug pricing and reimbursement vary widely from country to country. In the European Union, governments
influence the price of products through their pricing and reimbursement rules and control of national healthcare systems that
fund a large part of the cost of those products to consumers. Some jurisdictions operate positive and negative list systems under
which products may only be marketed once a reimbursement price has been agreed to by the government. To obtain reimbursement or
pricing approval, some of these countries may require the completion of clinical trials that compare the cost effectiveness of
a particular product to currently available therapies. Other member states allow companies to fix their own prices for medicines,
but monitor and control company profits. There can be no assurance that any country that has price controls or reimbursement limitations
for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products. The downward
pressure on healthcare costs in general, particularly prescription products, has become very intense. As a result, increasingly
high barriers are being erected to the entry of new products. In addition, in some countries, cross border imports from low-priced
markets exert a commercial pressure on pricing within a country (particularly in the EEA where it is illegal to impede such imports
from elsewhere within the EEA).
Other
Healthcare Laws
Manufacturing,
sales, promotion and other activities following product approval are also subject to regulation by numerous regulatory authorities
in the United States in addition to the FDA, including CMS, the HHS Office of Inspector General and HHS Office for Civil Rights,
other divisions of the HHS and the Department of Justice.
Healthcare
providers, physicians, and third-party payors will play a primary role in the recommendation and prescription of any products
for which we obtain marketing approval. Our current and future arrangements with third-party payors, healthcare providers and
physicians may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the
business or financial arrangements and relationships through which we market, sell and distribute any drugs for which we obtain
marketing approval. In the United States, these laws include, without limitation, state and federal anti-kickback, false claims,
physician transparency, and patient data privacy and security laws and regulations, including but not limited to those described
below.
The
U.S. federal Anti-Kickback Statute, or AKS, prohibits, among other things, any person or entity from knowingly and willfully offering,
paying, soliciting, receiving or providing any remuneration, directly or indirectly, overtly or covertly, to induce or in return
for purchasing, leasing, ordering or arranging for or recommending the purchase, lease or order of any good, facility, item or
service reimbursable, in whole or in part, under Medicare, Medicaid or other federal healthcare programs. The term “remuneration”
has been broadly interpreted to include anything of value. The AKS has been interpreted to apply to arrangements between pharmaceutical
and medical device manufacturers on the one hand and prescribers, purchasers, formulary managers and beneficiaries on the other
hand. Although there are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution,
the exceptions and safe harbors are drawn narrowly. Failure to meet all of the requirements of a particular applicable statutory
exception or regulatory safe harbor does not make the conduct per se illegal under the AKS. Instead, the legality of the arrangement
will be evaluated on a case-by-case basis based on a cumulative review of all its facts and circumstances. Several courts have
interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is
to induce referrals of federal healthcare covered business, the statute has been violated. In addition, a person or entity does
not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. Moreover,
a claim including items or services resulting from a violation of the AKS constitutes a false or fraudulent claim for purposes
of the federal civil False Claims Act.
Although
we would not submit claims directly to payors, drug manufacturers can be held liable under the federal False Claims Act, which
imposes civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities (including
manufacturers) for, among other things, knowingly presenting, or causing to be presented to federal programs (including Medicare
and Medicaid) claims for items or services, including drugs, that are false or fraudulent, claims for items or services not provided
as claimed, or claims for medically unnecessary items or services. The government may deem manufacturers to have “caused”
the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information to customers
or promoting a product off-label. Several biopharmaceutical, medical device and other healthcare companies have been prosecuted
under federal false claims and civil monetary penalty laws for, among other things, allegedly providing free product to customers
with the expectation that the customers would bill federal programs for the product. Other companies have been prosecuted for
causing false claims to be submitted because of the companies’ marketing of products for unapproved (e.g., or off-label),
and thus non-covered, uses. In addition, the civil monetary penalties statute imposes penalties against any person who is determined
to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an
item or service that was not provided as claimed or is false or fraudulent. Claims which include items or services resulting from
a violation of the federal AKS are false or fraudulent claims for purposes of the False Claims Act.
Our
future marketing and activities relating to the reporting of wholesaler or estimated retail prices for our products, if approved,
the reporting of prices used to calculate Medicaid rebate information and other information affecting federal, state and third-party
reimbursement for our products, and the sale and marketing of our product candidates, are subject to scrutiny under these laws.
The federal Health Insurance
Portability and Accountability Act of 1996, or HIPAA, created additional federal criminal statutes that prohibit, among other
actions, knowingly and wilfully executing, or attempting to execute, a scheme to defraud or to obtain, by means of false
or fraudulent pretences, representations or promises, any money or property owned by, or under the control or custody of,
any healthcare benefit program, including private third-party payors, knowingly and wilfully embezzling or stealing from
a healthcare benefit program, wilfully obstructing a criminal investigation of a healthcare offense and knowingly and wilfully
falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in
connection with the delivery of or payment for healthcare benefits, items or services. Similar to the U.S. federal Anti-Kickback
Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to
have committed a violation.
In
addition, there has been a recent trend of increased federal and state regulation of payments made to physicians and certain other
healthcare providers. The Affordable Care Act, or the ACA, imposed, among other things, new annual reporting requirements through
the Physician Payments Sunshine Act for covered manufacturers for certain payments and “transfers of value” provided
to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family
members. Failure to submit timely, accurately and completely the required information for all payments, transfers of value and
ownership or investment interests may result in civil monetary penalties. Covered manufacturers must submit reports by the 90th
day of each subsequent calendar year and the reported information is publicly made available on a searchable website.
We
may also be subject to data privacy and security regulation by both the federal government and the states in which we conduct
our business. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their
respective implementing regulations, including the Final HIPAA Omnibus Rule published on January 25, 2013, impose specified requirements
relating to the privacy, security and transmission of individually identifiable health information held by covered entities and
their business associates. Among other things, HITECH made HIPAAs security standards directly applicable to “business associates,”
defined as independent contractors or agents of covered entities that create, receive, maintain or transmit protected health information
in connection with providing a service for or on behalf of a covered entity, although it is unclear that we would be considered
a “business associate” in the normal course of our business. HITECH also increased the civil and criminal penalties
that may be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general
new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’s
fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security of health
information in certain circumstances, many of which differ from each other in significant ways and may not have the same requirements,
thus complicating compliance efforts.
Similar
state and foreign fraud and abuse laws and regulations, such as state anti-kickback and false claims laws, may apply to sales
or marketing arrangements and claims involving healthcare items or services. Such laws are generally broad and are enforced by
various state agencies and private actions. Also, many states have similar fraud and abuse statutes or regulations that may be
broader in scope and may apply regardless of payor, in addition to items and services reimbursed under Medicaid and other state
programs. Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance
guidelines and the relevant federal government compliance guidance, and require drug manufacturers to report information related
to payments and other transfers of value to physicians and other healthcare providers, marketing expenditures or drug pricing.
In
order to distribute products commercially, we must comply with state laws that require the registration of manufacturers and wholesale
distributors of drug and biological products in a state, including, in certain states, manufacturers and distributors who ship
products into the state even if such manufacturers or distributors have no place of business within the state. Some states also
impose requirements on manufacturers and distributors to establish the pedigree of product in the chain of distribution, including
some states that require manufacturers and others to adopt new technology capable of tracking and tracing product as it moves
through the distribution chain. Several states have enacted legislation requiring pharmaceutical and biotechnology companies to
establish marketing compliance programs, file periodic reports with the state, make periodic public disclosures on sales, marketing,
pricing, clinical trials and other activities, and/or register their sales representatives, as well as to prohibit pharmacies
and other healthcare entities from providing certain physician prescribing data to pharmaceutical and biotechnology companies
for use in sales and marketing, and to prohibit certain other sales and marketing practices. All of our activities are potentially
subject to federal and state consumer protection and unfair competition laws.
The
scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare
reform, especially in light of the lack of applicable precedent and regulations. Federal and state enforcement bodies have recently
increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations,
prosecutions, convictions and settlements in the healthcare industry. It is possible that governmental authorities will conclude
that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud
and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any
other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties,
damages, fines, disgorgement, contractual damages, reputational harm, diminished profits and future earnings, imprisonment, exclusion
of drugs from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our
operations, as well as additional reporting obligations and oversight if we become subject to a corporate integrity agreement
or other agreement to resolve allegations of non-compliance with these laws, any of which could adversely affect our ability to
operate our business and our financial results. If any of the physicians or other healthcare providers or entities with whom we
expect to do business is found to be not in compliance with applicable laws, they may be subject to significant criminal, civil
or administrative sanctions, including exclusions from government funded healthcare programs. Ensuring business arrangements comply
with applicable healthcare laws, as well as responding to possible investigations by government authorities, can be time- and
resource-consuming and can divert a company’s attention from the business.
Current
and Future Legislation
In
the United States and 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 of our product candidates, restrict or regulate
post-approval activities and affect our ability to profitably sell any product candidates for which we obtain marketing approval.
We expect that current laws, as well as other healthcare reform measures that may be adopted in the future, may result in more
rigorous coverage criteria and additional downward pressure on the price that we, or any collaborators, may receive for any approved
products.
The
ACA, for example, contains provisions that subject biological products to potential competition by lower-cost biosimilars and
may reduce the profitability of drug products through increased rebates for drugs reimbursed by Medicaid programs, extend Medicaid
rebates to Medicaid managed care plans, provide for mandatory discounts for certain Medicare Part D beneficiaries and annual fees
based on pharmaceutical companies’ share of sales to federal healthcare programs. With the President Trump administration
and current Congress, there will likely be additional administrative or legislative changes, including modification, repeal or
replacement of all, or certain provisions of the ACA, which may impact reimbursement for drugs and biologics. On January 20, 2017,
President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under the ACA to waive,
defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory
burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices.
On October 13, 2017, President Trump signed an Executive Order terminating the cost-sharing subsidies that reimburse insurers
under the ACA. Several state Attorneys General filed suit to stop the administration from terminating the subsidies, but their
lawsuit was dismissed by a federal judge in California on July 18, 2018. In addition, CMS has recently finalized regulations that
would give states greater flexibility in setting benchmarks for insurers in the individual and small group marketplaces, which
may have the effect of relaxing the essential health benefits required under the ACA for plans sold through such marketplaces.
Further, each chamber of Congress has put forth multiple bills, and may do so again in the future, designed to repeal or repeal
and replace portions of the ACA.
While
Congress has not passed repeal legislation, the Tax Reform Act includes a provision that repealed, effective January 1, 2019,
the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage
for all or part of a year that is commonly referred to as the “individual mandate.” Further, the Bipartisan Budget
Act of 2018, or the BBA, among other things, amended the ACA, effective January 1, 2019, to increase from 50 percent to 70 percent
the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D and to close the coverage
gap in most Medicare drug plans, commonly referred to as the “donut hole.” Congress may consider other legislation
to repeal and replace elements of the ACA. On December 14, 2018, a U.S. District Court judge in the Northern District of Texas
ruled that the individual mandate portion of the ACA is an essential and inseverable feature of the ACA, and therefore because
the mandate was repealed as part of the Tax Cuts and Jobs Act, the remaining provisions of the ACA are invalid as well. The Trump
administration and CMS have both stated that the ruling will have no immediate effect, and on December 30, 2018 the same judge
issued an order staying the judgment pending appeal. A Fifth Circuit U.S. Court of Appeals hearing to determine whether certain
states and the House of Representatives have standing to appeal the lower court decision was held on July 9, 2019, but it is unclear
when a Court will render its decision on this hearing, and what effect it will have on the status of the ACA. Litigation and legislation
over the ACA are likely to continue, with unpredictable and uncertain results.
Additionally,
other federal health reform measures have been proposed and adopted in the United States since the ACA was enacted:
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The
Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee
on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through
2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government
programs. These changes included aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, which
went into effect in April 2013 and, due to subsequent legislative amendments to the statute, including the BBA, will remain
in effect through 2027, unless additional Congressional action is taken.
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The
American Taxpayer Relief Act of 2012, among other things, reduced Medicare payments to several providers, and increased the
statute of limitations period for the government to recover overpayments to providers from three to five years.
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The
Middle Class Tax Relief and Job Creation Act of 2012 required that CMS reduce the Medicare clinical laboratory fee schedule
by 2% in 2013, which served as a base for 2014 and subsequent years. In addition, effective January 1, 2014, CMS also began
bundling the Medicare payments for certain laboratory tests ordered while a patient received services in a hospital outpatient
setting.
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Further,
there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products,
which have resulted in several recent Congressional inquiries and proposed and enacted bills designed to, among other things,
bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform
government program reimbursement methodologies for products. In addition, the U.S. government, state legislatures, and foreign
governments have shown significant interest in implementing cost containment programs, including price-controls, restrictions
on reimbursement and requirements for substitution of generic products for branded prescription drugs to limit the growth of government
paid healthcare costs. For example, the U.S. government has passed legislation requiring pharmaceutical manufacturers to provide
rebates and discounts to certain entities and governmental payors to participate in federal healthcare programs. Further, Congress
and the current administration have each indicated that it will continue to seek new legislative and/or administrative measures
to control drug costs, and the current administration recently released a “Blueprint”, or plan, to reduce the cost
of drugs. The Blueprint contains certain measures that the U.S. Department of Health and Human Services is already working to
implement. For example, in May 2019, CMS issued a final rule to allow Medicare Advantage Plans the option of using step therapy
for Part B drugs beginning January 1, 2020. This final rule codified CMS’s policy change that was effective January 1, 2019.
Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative
measures to control drug costs. Individual states in the United States have also been 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.
Non-U.S.
Regulation
Before
our products can be marketed outside the United States, they are subject to regulatory approval of the respective authorities
in the country in which the product should be marketed. The requirements governing the conduct of clinical trials, product licensing,
pricing and reimbursement vary widely from country to country. No action can be taken to market any product in a country until
an appropriate application has been approved by the regulatory authorities in that country. The time spent in gaining approval
varies from that required for FDA approval, and in certain countries, the sales price of a product must also be approved. The
pricing review period often begins after market approval is granted. Even if a product is approved by a regulatory authority,
satisfactory prices might not be approved for such product.
Collaborations,
Partnerships and Agreements
Collaborations,
partnerships and agreements are a key component of Advaxis’ corporate strategy. As a clinical stage biotechnology company
without sales revenue, partnerships are an essential part of the ongoing strategy. Additionally, the evolution of the field of
immunotherapy has resulted in combination treatments becoming ubiquitous; ongoing clinical studies and agreements with many of
the leading, large oncology pharmaceutical companies helps validate that Lm Technology may play a key role in the cancer
treatment protocols of the future.
Our
collaborators and partners include Merck, Aratana, OS Therapies, Biocon, Global BioPharma, Knight, and others. For more information,
see Note 8, “Collaboration and Licensing Agreements” of the “Notes to the Financial Statements” included
in Item 8.
We
entered into an exclusive worldwide license agreement with Penn, on July 1, 2002 with respect to the innovative work of Yvonne
Paterson, Ph.D., Associate Dean for Research at the School of Nursing at Penn, and former Professor of Microbiology at Penn, in
the area of innate immunity, or the immune response attributed to immune cells, including dendritic cells, macrophages and natural
killer cells, that respond to pathogens non-specifically (subject to certain U.S. government rights). This agreement was amended
and restated as of February 13, 2007, and, thereafter, has been amended from time to time.
This
license, unless sooner terminated in accordance with its terms, terminates upon the latter of (a) the expiration of the last to
expire of the Penn patent rights; or (b) twenty years after the effective date of the license. Penn may terminate the license
agreement early upon the occurrence of certain defaults by us, including, but not limited to, a material breach by us of the Penn
license agreement that is not cured within 60 days after notice of the breach is provided to us.
The
license provides us with the exclusive commercial rights to the patent portfolio developed by Penn as of the effective date of
the license, in connection with Dr. Paterson and requires us to pay various milestone, legal, filing and licensing payments to
commercialize the technology. In exchange for the license, Penn received shares of our Common Stock. In addition, Penn is entitled
to receive a non-refundable initial license fee, royalty payments and milestone payments based on net sales and percentages of
sublicense fees and certain commercial milestones. Under the amended licensing agreement, Penn is entitled to receive 2.5% of
net sales in the territory. Should annual net sales exceed $250 million, the royalty rate will increase to 2.75%, but only with
respect to those annual net sales in excess of $250 million. Additionally, Penn will receive tiered sales milestone payments upon
the achievement of cumulative global sales ranging between $250 million and $2 billion, with the maximum aggregate amounts payable
to Penn in the event that maximum sales milestones are achieved is $40 million. Notwithstanding these royalty rates, upon first
in-human commercial sale (U.S. & E.U.), we have agreed to pay Penn a total of $775,000 over a four-year period as an advance
minimum royalty, which shall serve as an advance royalty in conjunction with the above terms. In addition, under the license,
we are obligated to pay an annual maintenance fee of $100,000 commencing on December 31, 2010, and each December 31st thereafter
for the remainder of the term of the agreement until the first commercial sale of a Penn licensed product. We are responsible
for filing new patents and maintaining and defending the existing patents licensed to us and we are obligated to reimburse Penn
for all attorney’s fees, expenses, official fees and other charges incurred in the preparation, prosecution and maintenance
of the patents licensed from Penn.
Upon
first regulatory approval in humans (US or EU), Penn will be entitled to a milestone payment of $600,000. Furthermore, upon the
achievement of the first sale of a product in certain fields, Penn will be entitled to certain milestone payments, as follows:
$2.5 million will be due upon the first in-human commercial sale (US or EU) of the first product in the cancer field and $1.0
million will be due upon the date of first in-human commercial sale (US or EU) of a product in each of the secondary strategic
fields sold.
Manufacturing
cGMPs,
are the standards identified to conform to requirements by governmental agencies that control authorization and licensure for
manufacture and distribution of biologic products for either clinical investigations or commercial sale. GMPs identify the requirements
for procurement, manufacturing, testing, storage, distribution and the supporting quality systems to ensure that a drug product
is safe for its intended application. cGMPs are enforced in the United States by the FDA, under the authorities of the Federal
Food, Drug and Cosmetic Act and its implementing regulations and use the phrase “current good manufacturing practices”
to describe these standards.
Each
of Advaxis’ wholly owned product candidates is manufactured using a platform process, with uniform methods and testing procedures.
This allows for an expedited pathway from construct discovery to clinical product delivery, while helping to keep cost of goods
low.
Advaxis
has entered into agreements with multiple third-party organizations, or CMOs, to handle the manufacturing, testing, and distribution
of product candidates. These organizations have extensive experience within the biologics space and with the production of clinical
and commercial GMP supplies.
Advaxis
has constructed a state-of-the-art manufacturing facility and laboratory to develop and manufacture clinical-grade products, supporting
the clinical trials and future potential commercialization of the Company’s therapeutics. Increased manufacturing capability
and capacity allows Advaxis to manufacture its own material and reduce reliance on CMOs, and improve supply flexibility, scalability,
lead times, and costs of goods. The Company’s long-term manufacturing strategy is to leverage both their partners’
capabilities and their internal capabilities in order to build a supply chain that is reliable, flexible, and cost competitive.
Competition
The
biotechnology and biopharmaceutical industries are characterized by rapid technological developments and a high degree of competition.
As a result, our actual or proposed immunotherapies could become obsolete before we recoup any portion of our related research
and development expenses. While we believe that our product candidates, technology, knowledge and experience provide us with competitive
advantages, we face competition from established and emerging pharmaceutical and biotechnology companies, among others. The biotechnology
and biopharmaceutical industries are highly competitive, and this competition comes from both biotechnology firms and from major
pharmaceutical companies, including: BioNtech, Moderna, Gritstone, BMS, AstraZeneca, Merck, Neon Therapeutics, et al., each of
which is pursuing cancer vaccines and/or immunotherapies.
Many
of these companies have substantially greater financial, marketing, and human resources than we do (including, in some cases,
substantially greater experience in clinical testing, manufacturing, and marketing of pharmaceutical products). We also experience
competition in the development of our immunotherapies from universities and other research institutions and compete with others
in acquiring technology from such universities and institutions. In addition, certain of our immunotherapies may be subject to
competition from investigational new drugs and/or products developed using other technologies, some of which have completed numerous
clinical trials.
Our
competition will be determined in part by the potential indications for which drugs are developed and ultimately approved by regulatory
authorities. Additionally, the timing of market introduction of some of our potential immunotherapies or of competitors’
products may be an important competitive factor. Accordingly, the speed with which we can develop immunotherapies, complete preclinical
testing, clinical trials and approval processes and supply commercial quantities to market are expected to be important competitive
factors. We expect that competition among products approved for sale will be based on various factors, including product efficacy,
safety, administration, reliability, acceptance, availability, price and patent position.
Experience
and Expertise
Our
management team has extensive experience in oncology development, including contract research, development, manufacturing and
commercialization across a board range of science, technologies, and process operations. We have built internal capabilities supporting
research, clinical, medical, manufacturing and compliance operations and have extended our expertise with collaborations.
Employees
As
of October 31, 2020, we had 18 employees, 17 of which were full time employees. Of our full-time employees, 1 holds a Ph.D. degree.
None of our employees are represented by a labor union, and we consider our relationship with our employees to be good.
We
will continue to rent necessary offices and laboratories to support our business.
Item
1A. Risk Factors.
Summary
of Risk Factors
Below
is a summary of the principal factors that make an investment in our common stock speculative or risky. This summary does not
address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks
that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with
other information in this Form 10-K and our other filings with the SEC, before making an investment decision regarding our common
stock.
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We
have incurred significant losses since our inception and anticipate that we will continue to incur losses for the foreseeable
future.
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We
will require additional capital to fund our operations and if we fail to obtain necessary financing we will not be able to
complete the development and commercialization of our product candidates.
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We
are significantly dependent on the success of our Lm Technology platform and our product candidates based on this platform.
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If
we are unable to establish, manage or maintain strategic collaborations in the future, our revenue and drug development may
be limited.
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We
are subject to certain U.S. and foreign anti-corruption, anti-money laundering, export control, sanctions and other trade
laws and regulations. We can face serious consequences for violations.
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We
need to attract and retain highly skilled personnel; we may be unable to effectively manage growth with our limited resources.
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We
depend upon our senior management and key consultants and their loss or unavailability could put us at a competitive disadvantage.
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The
biotechnology and immunotherapy industries are characterized by rapid technological developments and a high degree of competition.
We may be unable to compete with more substantial enterprises.
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As
a matter of course, we are reviewing strategic transactions for our company. We may not be successful in identifying or completing
any strategic transaction and any such strategic transaction completed may not yield additional value for stockholders.
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We
can provide no assurance that our clinical product candidates will obtain regulatory approval or that the results of clinical
studies will be favorable.
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Drug
discovery and development is a complex, time-consuming and expensive process that is fraught with risk and a high rate of
failure.
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We
may face legal claims; legal disputes are expensive and we may not be able to afford the costs.
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We
can provide no assurance of the successful and timely development of new products.
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Our
employees, independent contractors, consultants, commercial partners, principal investigators, or CROs may engage in misconduct
or other improper activities, including noncompliance with regulatory standards and requirements, which could have a material
adverse effect on our business.
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We
must comply with significant government regulations.
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Ongoing
healthcare legislative and regulatory reform measures may have a material adverse effect on our business and results of operations.
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We
rely upon patents to protect our technology. We may be unable to protect our intellectual property rights and we may be liable
for infringing the intellectual property rights of others.
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The
price of our common stock and warrants may be volatile.
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The
market prices for our common stock may be adversely impacted by future events.
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A
limited public trading market may cause volatility in the price of our common stock.
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We
are not currently in compliance with the continued listing requirements for Nasdaq. If the price of our common stock continues
to trade below $1.00 per share for a sustained period or we do not meet other continued listing requirements, our common stock
may be delisted from the Nasdaq Capital Market, which could affect the market price and liquidity for our common stock and
reduce our ability to raise additional capital.
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We
may be at an increased risk of securities litigation, which is expensive and could divert management attention.
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Our
certificate of incorporation, bylaws and Delaware law have anti-takeover provisions that could discourage, delay or prevent
a change in control, which may cause our stock price to decline.
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Risk
Factors
You
should carefully consider the risks described below as well as other information provided to you in this annual report, including
information in the section of this document entitled “Forward-Looking Statements.” The risks and uncertainties described
below are not the only ones facing us. Additional risks and uncertainties not presently known to us or that we currently believe
are immaterial may also impair our business operations. If any of the following risks actually occur, our business, financial
condition or results of operations could be materially adversely affected, the value of our common stock could decline, and you
may lose all or part of your investment.
Risks
Related to Our Financial Position and Capital Needs
We
have incurred significant losses since our inception and anticipate that we will continue to incur losses for the foreseeable
future.
We
are a clinical-stage biotechnology company. Investment in biotechnology product development is highly speculative because it entails
substantial upfront capital expenditures and significant risk that a product candidate will fail to gain regulatory approval or
become commercially viable. We have not generated any revenue from product sales to date, and we continue to incur significant
development and other expenses related to our ongoing operations. As a result, we are not profitable and have incurred losses
in each period since our inception.
We
expect to continue to incur losses for the foreseeable future, and we expect these losses to increase as we continue our development
of, and seek regulatory approvals for, our product candidates, and begin to commercialize any approved products. We may encounter
unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The
size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenues.
If any of our product candidates fails in clinical studies or do not gain regulatory approval, or if approved, fails to achieve
market acceptance, we may never become profitable. Even if we achieve profitability in the future, we may not be able to sustain
profitability in subsequent periods. Our prior losses and expected future losses have had and will continue to have an adverse
effect on our stockholders’ (deficit) equity and working capital.
We
will require additional capital to fund our operations and if we fail to obtain necessary financing we will not be able to complete
the development and commercialization of our product candidates.
The
research and development of our products has consumed substantial amounts of cash since inception. We expect to continue to invest
in advancing the clinical development of our product candidates and to commercialize any product candidates for which we receive
regulatory approval. As of October 31, 2020, we had cash and cash equivalents of about $25.178 million. We will require additional
capital for the further development of our product candidates. We are pursuing various ways to support our development efforts
including debt and/or equity financing as well as targeting potential collaborators of our products.
We
cannot be certain that additional funding will be available on acceptable terms, or at all. If we are unable to raise additional
capital in sufficient amounts or on terms acceptable to us we may have to significantly delay, scale back or discontinue the development
or commercialization of one or more of our products or product candidates or one or more of our other research and development
initiatives. Our forecast of the period of time through which our financial resources will be adequate to 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.
Our future funding requirements, both near and long-term, will depend on many factors, including, but not limited to:
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The
progress, timing, costs and results of the clinical studies underway;
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future
clinical development plans we establish for our product candidates;
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the
number and characteristics of product candidates that we develop or may in-license;
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the
outcome, timing and cost of meeting regulatory requirements established by the FDA and comparable foreign regulatory authorities,
including the potential for the FDA or comparable foreign regulatory authorities to require that we perform more studies than
those that we currently expect;
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the
cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights;
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the
cost of defending intellectual property disputes, including patent infringement actions brought by third parties against us
or our product candidates;
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the
effect of competing technological and market developments;
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the
cost and timing of completion of commercial-scale outsourced manufacturing activities; and
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the
cost of establishing sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory
approval in regions where we choose to commercialize our products on our own.
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Risks
Related to Our Business, Industry and Strategy
We
are a clinical stage company.
We
are a clinical stage biotechnology company with a history of losses and can provide no assurance as to future operating results.
As a result of losses that will continue throughout our clinical stage, we may exhaust our financial resources and be unable to
complete the development of our products. We anticipate that we will continue to incur significant operational costs as we execute
on our clinical development strategy. Our deficit will continue to grow during our drug development period.
We
have sustained losses from operations in each fiscal year since our inception, and we expect losses to continue for the foreseeable
future due to our substantial investment in research and development. As of October 31, 2020, we had an accumulated deficit of
approximately $410.7 million and stockholders’ equity of approximately $30.18 million. We expect to spend substantial additional
sums on the continued administration and research and development of proprietary products and technologies with no certainty that
our immunotherapies will become commercially viable or profitable as a result of these expenditures. If we fail to raise a significant
amount of capital, we may need to significantly curtail operations or cease operations in the near future. If any of our product
candidates fail in clinical trials or does not gain regulatory approval, we may never become profitable. Even if we achieve profitability
in the future, we may not be able to sustain profitability in subsequent periods.
We
are significantly dependent on the success of our Lm Technology platform and our product candidates based on this platform.
We
have invested, and we expect to continue to invest, significant efforts and financial resources in the development of product
candidates based on our Lm Technology. Our ability to generate meaningful revenue, which may not occur for the foreseeable
future, if ever, will depend heavily on the successful development, regulatory approval and commercialization of one or more of
these product candidates, and such regulatory approval and commercialization may never occur.
The
successful development of immunotherapies is highly uncertain.
Successful
development of immunotherapies is highly uncertain and is dependent on numerous factors, many of which are beyond our control.
Immunotherapies that appear promising in the early phases of development may fail to reach, or be delayed in reaching, the market
for several reasons including:
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preclinical
study results that may show the immunotherapy to be less effective than desired (e.g., the study failed to meet its primary
objectives) or to have harmful or problematic side effects;
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clinical
study results that may show the immunotherapy to be less effective than expected (e.g., the study failed to meet its primary
endpoint) or to have unacceptable side effects;
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failure
to receive the necessary regulatory approvals or a delay in receiving such approvals. Among other things, such delays may
be caused by slow enrollment in clinical studies, length of time to achieve study endpoints, delays in receiving the necessary
products or supplies for the conduct of clinical or pre-clinical trials, additional time requirements for data analysis, or
Biologics License Application preparation, discussions with the FDA, an FDA request for additional preclinical or clinical
data, FDA delays in inspecting manufacturing establishments, failure to receive FDA approval for manufacturing processes or
facilities, or unexpected safety or manufacturing issues;
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manufacturing
costs, formulation issues, pricing or reimbursement issues, or other factors that make the immunotherapy uneconomical; and
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the
proprietary rights of others and their competing products and technologies that may prevent the immunotherapy from being commercialized.
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Success
in preclinical and early clinical studies does not ensure that large-scale clinical studies will be successful. Clinical results
are frequently susceptible to varying interpretations that may delay, limit or prevent regulatory approvals. The length of time
necessary to complete clinical studies and to submit an application for marketing approval for a final decision by a regulatory
authority varies significantly from one immunotherapy to the next and may be difficult to predict.
Even
if our product candidates are approved, they may be subject to limitations on the indicated uses and populations for which they
may be marketed. They may also be subject to other conditions of approval, may contain significant safety warnings, including
boxed warnings, contraindications, and precautions, may not be approved with label statements necessary or desirable for successful
commercialization, or may contain requirements for costly post-market testing and surveillance, or other requirements, including
the submission of a REMS, to monitor the safety or efficacy of the products. If we do not receive FDA approval for, and successfully
commercialize our product candidates, we will not be able to generate revenue from these product candidates in the United States
in the foreseeable future, or at all. Any significant delays in obtaining approval for and commercializing our product candidates
will have a material adverse impact on our business and financial condition.
We
are limited in our manufacturing capabilities and we must rely upon third parties for such services.
We
currently have agreements with third party manufacturing facilities for production of many of our immunotherapies for research
and development and testing purposes. While we have built our own manufacturing facility onsite in Princeton, New Jersey to manufacture
clinical materials for some of our products, we depend on third-party manufacturers to supply most of our clinical materials.
Third-party manufacturers must be able to meet our deadlines as well as adhere to quality standards and specifications. Our predominant
reliance on third parties for the manufacture of our drug substance, investigational new drugs and, in the future, any approved
products, creates a dependency that could severely disrupt our research and development, our clinical testing, and ultimately
our sales and marketing efforts if the source of such supply proves to be unreliable or unavailable. For instance, manufacturers
may experience unforeseen problems, such as material or personnel shortages, temporary or permanent facility closures, or scale
up challenges. If our own manufacturing operation or any contracted manufacturing operation is unreliable or unavailable, we may
not be able to manufacture clinical drug supplies of our immunotherapies, and our preclinical and clinical testing programs may
not be able to move forward and our entire business plan could fail. If we are able to commercialize our products in the future,
there is no assurance that our own manufacturing operation or any third-party manufacturers will be able to meet commercialized
scale production requirements in a timely manner.
There
is also no guarantee that our third party manufacturers will be able to manufacture our product candidates in accordance with
applicable standards or cGMPs. Poor control of production processes can lead to the introduction of adventitious agents or other
contaminants, or to inadvertent changes in the properties or stability of a product candidate that may not be detectable in final
product testing. If these third party manufacturers are not able to comply with cGMPs, we may not be able to conduct clinical
trials, may need to conduct additional studies, and may not, eventually, receive and maintain FDA approval of our manufacturing
processes and facilities. Deviations from manufacturing requirements may also require remedial measures that may be costly and/or
time-consuming for us or a third party to implement and that may include the temporary or permanent suspension of a clinical trial
or commercial sales or the temporary or permanent closure of a facility. Any such remedial measures imposed upon or by us or third
parties with whom we contract could materially harm our business. A failure to comply with the applicable regulatory requirements
may also result in regulatory enforcement actions against our manufacturers or us.
While
we are ultimately responsible for the manufacture of our product candidates, other than through our contractual arrangements,
we have little control over our manufacturers’ compliance with these regulations and standards. If we or our manufacturers
encounter manufacturing difficulties, including cGMP compliance, we may need to find alternative manufacturing facilities, which
we may not be able to on favorable terms or at all, and which would significantly impact our ability to develop, obtain and maintain
regulatory approval for or market our product candidates, if approved. Any new manufacturers would need to either obtain or develop
the necessary manufacturing know-how, and obtain the necessary equipment and materials, which may take substantial time and investment.
We must also receive FDA approval for the use of any new manufacturers for commercial supply.
If
we are unable to establish, manage or maintain strategic collaborations in the future, our revenue and drug development may be
limited.
Our
strategy includes eventual substantial reliance upon strategic collaborations for marketing and commercialization of our clinical
product candidates, and we may rely even more on strategic collaborations for research, development, marketing and commercialization
for some of our immunotherapies. To date, we have been heavily reliant upon third party outsourcing for our clinical trials execution
and production of drug supplies for use in clinical trials. Establishing strategic collaborations is difficult and time-consuming.
Our discussions with potential collaborators may not lead to the establishment of collaborations on favorable terms, if at all.
For example, potential collaborators may reject collaborations based upon their assessment of our financial, clinical, regulatory
or intellectual property position. Our current collaborations, as well as any future new collaborations, may never result in the
successful development or commercialization of our immunotherapies or the generation of sales revenue. To the extent that we have
entered or will enter into co-promotion or other collaborative arrangements, our product revenues are likely to be lower than
if we directly marketed and sold any products that we may develop.
Management
of our relationships with our collaborators will require:
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significant
time and effort from our management team;
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financial
funding to support said collaboration;
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coordination
of our research and development programs with the research and development priorities of our collaborators; and
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effective
allocation of our resources to multiple projects.
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If
we continue to enter into research and development collaborations at the early phases of drug development, our success will in
part depend on the performance of our corporate collaborators. We will not directly control the amount or timing of resources
devoted by our corporate collaborators to activities related to our immunotherapies and our collaborations may terminate at any
time. Our corporate collaborators may not commit sufficient resources to our research and development programs or the commercialization,
marketing or distribution of our immunotherapies. If any corporate collaborator fails to commit sufficient resources or terminate
their collaborations with us, our preclinical or clinical development programs related to this collaboration could be delayed
or terminated.
Further,
our collaborators may pursue existing or other development-stage products or alternative technologies in preference to those being
developed in collaboration with us. Collaborators may also fail to comply with the applicable regulatory requirements, which may
subject them or us to regulatory enforcement actions. Finally, if we fail to make required milestone or royalty payments to our
collaborators or to observe other obligations in our agreements with them, our collaborators may have the right to terminate those
agreements.
Changes
in product candidate manufacturing or formulation may result in additional costs or delay.
In
an effort to optimize processes and results, it is common that various aspects of the development program, such as manufacturing
methods, manufacturing sites, and formulation, are altered as product candidates are developed from preclinical studies to late-stage
clinical trials toward approval and commercialization. Any of these changes could cause our product candidates to perform differently
and affect the results of planned clinical trials or other future clinical trials conducted with the altered materials. Such changes
may also require additional testing, regulatory disclosure, or prior approval from the FDA. For instance, the FDA may require
that we conduct a comparability study that evaluates the potential differences in the product candidate resulting from the change.
Delays in designing and completing such a study to the satisfaction of the FDA could delay or preclude our development and commercialization
plans, and the regulatory approval of our product candidates. It may also require 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. Any of the foregoing could limit our future revenues and growth. Any changes would also require that we devote
time and resources to manufacturing development, including with third-party manufacturers, and would also likely require additional
testing and regulatory actions on our part, which may delay the development of our product candidates.
We
may incur significant costs complying with environmental laws and regulations.
We
and our contracted third parties use hazardous materials, including chemicals and biological agents and compounds that could be
dangerous to human health and safety or the environment. As appropriate, we store these materials and wastes resulting from their
use at our or our outsourced laboratory facility pending their ultimate use or disposal. We contract with a third party to properly
dispose of these materials and wastes. We are subject to a variety of federal, state and local laws and regulations governing
the use, generation, manufacture, storage, handling and disposal of these materials and wastes. Compliance with such laws and
regulations may be costly.
Additional
laws and regulations governing international operations could negatively impact or restrict our operations.
If
we further expand our operations outside of the United States, we must dedicate additional resources to comply with numerous laws
and regulations in each jurisdiction in which we plan to operate. The U.S. Foreign Corrupt Practices Act, or FCPA, prohibits any
U.S. individual or business from paying, offering, authorizing payment or offering anything of value, directly or indirectly,
to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity
in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities
are listed in the United States to comply with certain accounting provisions requiring the company to maintain books and records
that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and
maintain an adequate system of internal accounting controls for international operations.
Compliance
with the FCPA is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition,
the FCPA presents particular challenges in the pharmaceutical industry, because, in many countries, hospitals are operated by
the government, and doctors and other hospital employees are considered foreign officials. Certain payments to hospitals in connection
with clinical trials and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement
actions.
Various
laws, regulations and executive orders also restrict the use and dissemination outside of the United States, or the sharing with
certain non-U.S. nationals, of information classified for national security purposes, as well as certain products and technical
data relating to those products. If we expand our presence outside of the United States, it will require us to dedicate additional
resources to comply with these laws, and these laws may preclude us from developing, manufacturing or selling certain products
and product candidates outside of the United States, which could limit our growth potential and increase our development costs.
The
failure to comply with laws governing international business practices may result in substantial civil and criminal penalties
and suspension or debarment from government contracting. The SEC also may suspend or bar issuers from trading securities on U.S.
exchanges for violations of the FCPA’s accounting provisions.
We
are subject to certain U.S. and foreign anti-corruption, anti-money laundering, export control, sanctions and other trade laws
and regulations. We can face serious consequences for violations.
Among
other matters, U.S. and foreign anti-corruption, anti-money laundering, export control, sanctions and other trade laws and regulations,
which are collectively referred to as Trade Laws, prohibit companies and their employees, agents, clinical research organizations,
legal counsel, accountants, consultants, contractors and other partners from authorizing, promising, offering, providing, soliciting
or receiving, directly or indirectly, corrupt or improper payments or anything else of value to or from recipients in the public
or private sector. Violations of Trade Laws can result in substantial criminal fines and civil penalties, imprisonment, the loss
of trade privileges, debarment, tax reassessments, breach of contract and fraud litigation, exclusion from public tenders, reputational
harm and other consequences. We have direct or indirect interactions with officials and employees of government agencies or government-affiliated
hospitals, universities and other organizations. We plan to engage third parties for clinical trials and/or to obtain necessary
permits, licenses, patent registrations and other regulatory approvals and we can be held liable for the corrupt or other illegal
activities of our personnel, agents or partners, even if we do not explicitly authorize or have prior knowledge of such activities.
If
we use biological materials in a manner that causes injury, we may be liable for damages.
Our
research and development activities involve the use of biological and hazardous materials. Although we believe our safety procedures
for handling and disposing of these materials complies with federal, state and local laws and regulations, we cannot entirely
eliminate the risk of accidental injury or contamination from the use, storage, handling or disposal of these materials. We do
not carry specific biological waste or pollution liability or remediation insurance coverage, nor do our workers’ compensation,
general liability, and property and casualty insurance policies provide coverage for damages and fines/penalties arising from
biological exposure or contamination. Accordingly, in the event of contamination or injury, we could be held liable for damages
or penalized with fines in an amount exceeding our resources, and our clinical trials or regulatory approvals could be suspended
or terminated.
We
need to attract and retain highly skilled personnel; we may be unable to effectively manage growth with our limited resources.
As
of October 31, 2020, we had 18 employees, 17 of which were full time employees. Our ability to attract and retain highly skilled
personnel is critical to our operations and expansion. We face competition for these types of personnel from other technology
companies and more established organizations, many of which have significantly larger operations and greater financial, technical,
human and other resources than we have. We may not be successful in attracting and retaining qualified personnel on a timely basis,
on competitive terms, or at all. If we are not successful in attracting and retaining these personnel, or integrating them into
our operations, our business, prospects, financial condition and results of operations will be materially adversely affected.
In such circumstances we may be unable to conduct certain research and development programs, unable to adequately manage our clinical
trials and other products, unable to commercialize any products, and unable to adequately address our management needs.
We
depend upon our senior management and key consultants and their loss or unavailability could put us at a competitive disadvantage.
We
depend upon the efforts and abilities of our senior executives, as well as the services of several key consultants. The loss or
unavailability of the services of any of these individuals for any significant period of time could have a material adverse effect
on our business, prospects, financial condition and results of operations. We have not obtained, do not own, nor are we the beneficiary
of, key-person life insurance.
The
biotechnology and immunotherapy industries are characterized by rapid technological developments and a high degree of competition.
We may be unable to compete with more substantial enterprises.
The
biotechnology and biopharmaceutical industries are characterized by rapid technological developments and a high degree of competition.
As a result, our actual or proposed immunotherapies could become obsolete before we recoup any portion of our related research
and development and commercialization expenses. Competition in the biopharmaceutical industry is based significantly on scientific
and technological factors. These factors include the availability of patent and other protection for technology and products,
the ability to commercialize technological developments and the ability to obtain governmental approval for testing, manufacturing
and marketing. We compete with specialized biopharmaceutical firms in the United States, Europe and elsewhere, as well as a growing
number of large pharmaceutical companies that are applying biotechnology to their operations. Many biopharmaceutical companies
have focused their development efforts in the human therapeutics area, including cancer. Many major pharmaceutical companies have
developed or acquired internal biotechnology capabilities or made commercial arrangements with other biopharmaceutical companies.
These companies, as well as academic institutions and governmental agencies and private research organizations, also compete with
us in recruiting and retaining highly qualified scientific personnel and consultants. Our ability to compete successfully with
other companies in the pharmaceutical field will also depend to a considerable degree on the continuing availability of capital
to us.
We
are aware of certain investigational new products under development or approved products by competitors that are used for the
prevention, diagnosis, or treatment of certain diseases we have targeted for product development. Various companies are developing
biopharmaceutical products that have the potential to directly compete with our immunotherapies even though their approach may
be different. The biotechnology and biopharmaceutical industries are highly competitive, and this competition comes from both
biotechnology firms and major pharmaceutical companies, including companies like: Gritstone, Moderna, BMS, Merck and Neon Therapeutics,
among others, each of which is pursuing cancer vaccines and/or immunotherapies. Many of these companies have substantially greater
financial, marketing, and human resources than we do (including, in some cases, substantially greater experience in clinical testing,
manufacturing, and marketing of pharmaceutical products). We also experience competition in the development of our immunotherapies
from universities and other research institutions and compete with others in acquiring technology from such universities and institutions.
In
addition, certain of our immunotherapies may be subject to competition from investigational new drugs and/or products developed
using other technologies, some of which have completed numerous clinical trials.
As
a matter of course, we are reviewing strategic transactions for our company. We may not be successful in identifying or completing
any strategic transaction and any such strategic transaction completed may not yield additional value for stockholders.
As
a matter of course, we are reviewing strategic transactions and alternatives and there can be no assurance that we will be successful
in identifying or completing any strategic transactions, that any such strategic transaction will result in additional value for
our stockholders or that the process will not have an adverse impact on our business. These transactions could include, but are
not limited to, collaboration agreements, co-development agreements, strategic mergers, reverse mergers, the issuance or buyback
of public shares, or the purchase, in-license or out-license or sale of specific assets, in addition to other potential actions
aimed at increasing stockholder value. There can be no assurance that the review of strategic transactions will result in the
identification or consummation of any transaction. Our Board of Directors may also determine that our most effective strategy
is to continue to effectuate our current business plan. The process of reviewing strategic transactions may be time consuming
and disruptive to our business operations and, if we are unable to effectively manage the process, our business, financial condition
and results of operations could be adversely affected. We could incur substantial expenses associated with identifying and evaluating
potential strategic alternatives. No decision has been made with respect to any transaction and we cannot assure you that we will
be able to identify and undertake any transaction that allows our shareholders to realize an increase in the value of their common
stock or provide any guidance on the timing of such action, if any.
We
also cannot assure you that any potential strategic transaction or other alternative transaction, if identified, evaluated and
consummated, will provide greater value to our stockholders than that reflected in the current price of our common stock. Any
potential transaction would be dependent upon a number of factors that may be beyond our control, including, but not limited to,
market conditions, industry trends, the interest of third parties in our business and the availability of financing to potential
buyers on reasonable terms. We do not intend to comment regarding the evaluation of strategic alternatives until such time as
our Board of Directors has determined the outcome of the process or otherwise has deemed that disclosure is appropriate or required
by applicable law. As a consequence, perceived uncertainties related to our future may result in the loss of potential business
opportunities and volatility in the market price of our common stock and may make it more difficult for us to attract and retain
qualified personnel and business partners.
A
global health crisis such as a pandemic, epidemic or outbreak of an infectious disease, such as COVID-19, may materially and adversely
affect our business and operations.
The
COVID-19 pandemic is affecting the United States and global economies and has affected, and may continue to affect, our operations
and those of third parties on which we rely, including by causing disruptions in our raw material supply and the manufacturing
of our product candidates. In addition, the COVID-19 pandemic has affected the operations of the U.S. Food and Drug Administration
and other health authorities, which can result in delays of reviews and approvals, including with respect to our product candidates.
The evolving COVID-19 pandemic has, and may continue to, directly or indirectly affect the pace of enrollment in our clinical
trials as patients may avoid or may not be able to travel to healthcare facilities and physicians’ offices unless due to
a health emergency and clinical trial staff can no longer get to the clinic. Additionally, such facilities and offices have been
and may continue to be required to focus limited resources on non-clinical trial matters, including treatment of COVID-19 patients,
thereby decreasing availability, in whole or in part, for clinical trial services. In addition, employee disruptions and remote
working environments related to the COVID-19 pandemic and the federal, state and local responses to such virus, could materially
affect the efficiency and pace with which we work and develop our product candidates and the manufacturing of our product candidates.
In addition, COVID-19 infection of our workforce could result in a temporary disruption in our business activities, including
manufacturing and other functions. Further, while the potential economic impact brought by, and the duration of, the COVID-19
pandemic is difficult to assess or predict, the impact of the COVID-19 pandemic on the global financial markets may reduce our
ability to access capital, which could negatively affect our short-term and long-term liquidity. Additionally, the stock market
has been unusually volatile during the COVID-19 outbreak and such volatility may continue. The ultimate impact of the COVID-19
pandemic is highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our business,
financing or clinical trial activities, or on healthcare systems or the global economy as a whole. However, these effects could
have a material impact on our liquidity, capital resources, operations and business and those of the third parties on which we
rely.
Risks
Related to the Development and Regulatory Approval of Our Product Candidates
We
can provide no assurance that our clinical product candidates will obtain regulatory approval or that the results of clinical
studies will be favorable.
We
are currently evaluating the safety and efficacy of our product candidates in clinical trials. However, even though the initiation
and conduct of the clinical trials is in accordance with the governing regulatory authorities in each country, as with any investigational
new drug (under an IND in the United States, or the equivalent in countries outside of the United States), we are at risk of a
clinical hold at any time based on the evaluation of the data and information submitted to the governing regulatory authorities.
There
can be delays in obtaining FDA and/or other necessary regulatory approvals in the United States and in countries outside the United
States for any investigational new drug and failure to receive such approvals would have an adverse effect on the investigational
new drug’s potential commercial success and on our business, prospects, financial condition and results of operations. The
time required to obtain approval by the FDA and non-U.S. regulatory authorities is unpredictable but typically takes many years
following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory
authorities. For example, the FDA or non-U.S. regulatory authorities may disagree with the design or implementation of our clinical
trials or study endpoints; or we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh
its safety risks. In addition, the FDA or non-U.S. regulatory authorities may disagree with our interpretation of data from preclinical
studies or clinical trials or the data collected from clinical trials of our product candidates may not be sufficient to support
the submission of a BLA or New Drug Application, or NDA or other submission or to obtain regulatory approval in the United States
or elsewhere. The FDA or non-U.S. regulatory authorities may fail to approve the manufacturing processes or facilities of third-party
manufacturers with which we contract for clinical and commercial supplies; and the approval policies or regulations of the FDA
or non-U.S. regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.
In
addition to the foregoing, approval policies, regulations, or the type and amount of clinical data necessary to gain approval
may change during the course of a product candidate’s clinical development and may vary among jurisdictions. We have not
submitted for nor obtained regulatory approval for any product candidate in-humans (US & EU) and it is possible that none
of our existing product candidates or any product candidates we may seek to develop in the future will ever obtain regulatory
approval.
Drug
discovery and development is a complex, time-consuming and expensive process that is fraught with risk and a high rate of failure.
Product
candidates are subject to extensive pre-clinical testing and clinical trials to demonstrate their safety and efficacy in humans.
Conducting pre-clinical testing and clinical trials is a lengthy, time-consuming and expensive process that takes many years.
We cannot be sure that pre-clinical testing or clinical trials of any of our product candidates will demonstrate the safety, efficacy
and benefit-to-risk profile necessary to obtain marketing approvals. In addition, product candidates that experience success in
pre-clinical testing and early-stage clinical trials will not necessarily experience the same success in larger or late-stage
clinical trials, which are required for marketing approval.
Even
if we are successful in advancing a product candidate into the clinical development stage, before obtaining regulatory and marketing
approvals, we must demonstrate through extensive human clinical trials that the product candidate is safe and effective for its
intended use. Human clinical trials must be carried out under protocols that are acceptable to regulatory authorities and to the
independent committees responsible for the ethical review of clinical studies. There may be delays in preparing protocols or receiving
approval for them that may delay the start or completion of the clinical trials. In addition, clinical practices vary globally,
and there is a lack of harmonization among the guidance provided by various regulatory bodies of different regions and countries
with respect to the data that is required to receive marketing approval, which makes designing global trials increasingly complex.
There are a number of additional factors that may cause our clinical trials to be delayed, prematurely terminated or deemed inadequate
to support regulatory approval, such as:
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safety
issues up to and including patient death (whether arising with respect to trials by third parties for compounds in a similar
class as tour product or product candidate), inadequate efficacy, or an unacceptable risk-benefit profile observed at any
point during or after completion of the trials;
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slower
than expected rates of patient enrollment, which could be due to any number of factors, including failure of our third-party
vendors, including our CROs, to effectively perform their obligations to us, a lack of patients who meet the enrollment criteria
or competition from clinical trials in similar product classes or patient populations, or onerous treatment administration
requirements;
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subjects
may drop out of our clinical trials, be lost to follow-up at a higher rate than we anticipate, or not comply with the required
clinical trial procedures;
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we
may experience delays in reaching, or fail to reach, agreement on acceptable clinical trial contracts or clinical trial protocols
with prospective trial sites and our CROs;
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the
cost of clinical trials may be greater than we anticipate or we may have insufficient funds for a clinical trial or to pay the
substantial FDA user fees;
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the
FDA or comparable foreign regulatory authorities may disagree with our study design, including endpoints, our intended indications,
or our interpretation of data;
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the
risk of failure of our clinical investigational sites and related facilities, including our suppliers and CROs, to maintain
compliance with the FDA’s cGMP and GCP regulations or similar regulations in countries outside of the U.S., including
the risk that these sites fail to pass inspections by the appropriate governmental authority, which could invalidate the data
collected at that site or place the entire clinical trial at risk;
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any
inability to reach agreement or lengthy discussions with the FDA, equivalent regulatory authorities, or ethical review committees
on trial design that we are able to execute or we may be required to modify our trial design such that studies are impracticable;
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regulators
may require us to perform additional or unanticipated clinical trials to obtain approval or we may be subject to additional
post-marketing testing, surveillance, or REMS requirements to maintain regulatory approval;
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FDA
refusal to accept the data from foreign clinical trial sites, to the extent we use such sites;
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changes
in laws, regulations, regulatory policy or clinical practices, especially if they occur during ongoing clinical trials or
shortly after completion of such trials; and
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clinical
trial record keeping or data quality and accuracy issues.
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Any
deficiency in the design, implementation or oversight of our development programs could cause us to incur significant additional
costs, conduct additional trials, experience significant delays, prevent us from obtaining marketing approval for any product
candidate or abandon development of certain product candidates, any of which could harm our business and cause our stock price
to decline.
We
may face legal claims; legal disputes are expensive and we may not be able to afford the costs.
We
may face legal claims involving stockholders, consumers, clinical trial subjects, competitors, regulators and other parties. As
described in “Legal Proceedings” in Part I Item 3 of this Form 10-K, we are engaged in legal proceedings. Litigation
and other legal proceedings are inherently uncertain, and adverse rulings could occur, including monetary damages, or an injunction
stopping us from engaging in business practices, or requiring other remedies, including, but not limited to, compulsory licensing
of patents.
The
costs of litigation or any proceeding, including, but not limited to, those relating to our intellectual property or contractual
rights, could be substantial, even if resolved in our favor. Some of our competitors or financial funding sources have far greater
resources than we do and may be better able to afford the costs of complex litigation. Also, a lawsuit, even if frivolous, will
require considerable time commitments on the part of management, our attorneys and consultants. Defending these types of proceedings
or legal actions involve considerable expense and could negatively affect our financial results. Legal claims may also adversely
impact us in other ways, such as the withdrawal or slower enrollment in or from our clinical trials, regulatory enforcement actions,
and negative media attention, any of which could materially and negatively harm us and our operations.
We
can provide no assurance of the successful and timely development of new products.
Our
immunotherapies are at various stages of development. Further development and extensive testing will be required to determine
their technical feasibility and commercial viability. We will need to complete significant additional clinical trials demonstrating
that our product candidates are safe and effective to the satisfaction of the FDA and other non-U.S. regulatory authorities. The
drug approval process is time-consuming, involves substantial expenditures of resources, and depends upon a number of factors,
including the severity of the illness in question, the availability of alternative treatments, and the risks and benefits demonstrated
in the clinical trials. Our success will depend on our ability to achieve scientific and technological advances and to translate
such advances into licensable, FDA-approvable, commercially competitive products on a timely basis. Failure can occur at any stage
of the process. If such programs are not successful, we may invest substantial amounts of time and money without developing revenue-producing
products. As we enter a more extensive clinical program for our product candidates, the data generated in these studies may not
be as compelling as the earlier results.
The
proposed development schedules for our immunotherapies may be affected by a variety of factors, including technological difficulties,
clinical trial failures, regulatory hurdles, clinical holds, competitive products, intellectual property challenges and/or changes
in governmental regulation, many of which will not be within our control. Any delay in the development, introduction or marketing
of our products could result either in such products being marketed at a time when their cost and performance characteristics
would not be competitive in the marketplace or in the shortening of their commercial lives. In light of the long-term nature of
our projects, the unproven technology involved and the other factors described elsewhere in this section, there can be no assurance
that we will be able to successfully complete the development or marketing of any new products which could materially harm our
business, results of operations and prospects.
Our
research and development expenses are subject to uncertainty.
Factors
affecting our research and development expenses include, but are not limited to:
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competition
from companies that have substantially greater assets and financial resources than we have;
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need
for market acceptance of our immunotherapies if we receive regulatory approval;
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ability
to anticipate and adapt to a competitive market and rapid technological developments;
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ability
to raise sufficient capital to fund our research and development activities;
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amount
and timing of operating costs and capital expenditures relating to expansion of our business, operations and infrastructure;
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need
to rely on multiple levels of outside funding due to the length of drug development cycles and governmental approved protocols
associated with the pharmaceutical industry; and
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dependence
upon key personnel including key independent consultants and advisors.
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There
can be no guarantee that our research and development expenses will be consistent from period to period. We may be required to
accelerate or delay incurring certain expenses depending on the results of our studies and the availability of adequate funding.
We
may be required to suspend or discontinue clinical trials for a number of reasons, which could preclude approval of any of our
product candidates.
Our
clinical trials may be suspended at any time for a number of reasons. A clinical trial may be suspended or terminated by us, an
IRB, the FDA or other regulatory authorities due to a failure to conduct the clinical trial in accordance with regulatory requirements
or our clinical protocols, presentation or identification of unforeseen safety signals or issues, failure to demonstrate a benefit
from using the investigational drug, changes in governmental regulations or administrative actions, lack of adequate funding to
continue the clinical trial, or for other business-related reasons. For example, in June 2019, we announced that we were closing
our AIM2CERV Phase 3 clinical trial with AXAL in cervical cancer due to the delays we incurred as a result of the recent FDA partial
clinical hold on the trial, as well as the estimated cost and time to completion of the trial. Furthermore, the Company has completed
the clinical study report from Part A of the ADXS-NEO study and plans to close its ADXS-NEO program IND as next step. In addition,
clinical trials for our product candidates could be suspended due to adverse side effects. Drug-related side effects could affect
patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims.
We may also voluntarily suspend or terminate our clinical trials if at any time we believe that they present an unacceptable risk
to patients or do not demonstrate clinical benefit. If we elect or are forced to suspend or terminate any clinical trial of any
product candidates that we develop, the commercial prospects of such product candidates will be harmed and our ability to generate
product revenues from any of these product candidates will be delayed or eliminated. Any of these occurrences may significantly
harm our business, financial condition, results of operations and prospects.
Preliminary
or interim results of a clinical trial are not necessarily predictive of future or final results.
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. Even if our clinical trials are completed as planned, we cannot be certain
that their results will support our proposed indications.
We
are subject to numerous risks inherent in conducting clinical trials.
We
outsource the management of our clinical trials to third parties. Agreements with CROs, clinical investigators and medical institutions
for clinical testing and data management services, place substantial responsibilities on these parties that, if unmet, could result
in delays in, or termination of, our clinical trials. For example, if any of our clinical trial sites or CROs fail to comply with
FDA-approved good clinical practices, we may be unable to use the data gathered at those sites. If these clinical investigators,
medical institutions or other third parties do not carry out their contractual duties or regulatory obligations or fail to meet
expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to their failure to adhere
to our clinical protocols or for other reasons, our clinical trials may be extended, delayed or terminated, and we may be unable
to obtain regulatory approval for, or successfully commercialize, our agents. We are not certain that we will successfully recruit
enough patients to complete our clinical trials nor that we will reach our primary endpoints. Delays in recruitment, lack of clinical
benefit or unacceptable side effects would delay or prevent the initiation of future development of our agents.
While
we have agreements governing the activities of such third parties and are responsible for our third party service provider’s
activities and regulatory compliance, we have limited influence and control over their actual performance and activities and cannot
control whether or not they devote sufficient time and resources to our ongoing clinical, non-clinical, and preclinical programs
and cannot control whether they maintain regulatory compliance. Our third-party service providers may also have relationships
with other entities, some of which may be our competitors, for whom they may also be conducting trials or other therapeutic development
activities that could harm our competitive position.
Agreements
with third parties conducting or otherwise assisting with our clinical or preclinical studies might terminate for a variety of
reasons, including a failure to perform by the third parties. If any of our relationships with these third parties terminate,
we may not be able to enter into arrangements with alternative providers or to do so on commercially reasonable terms. Switching
or adding additional third parties involves additional cost and requires management time and focus. In addition, there is a natural
transition period when a new third party commences work. As a result, if we need to enter into alternative arrangements, it could
delay our product development activities and adversely affect our business. Though we carefully manage our relationships with
our third parties, there can be no assurance that we will not encounter challenges or delays in the future or that these delays
or challenges will not have a material adverse impact on our business, financial condition and prospects, and results of operations.
We
or our regulators may suspend or terminate our clinical trials for a number of reasons. We may voluntarily suspend or terminate
our clinical trials if at any time we believe they present an unacceptable risk to the patients enrolled in our clinical trials
or do not demonstrate clinical benefit. In addition, regulatory agencies may order the temporary or permanent discontinuation
of our clinical trials, or place our products on temporary or permanent hold, at any time if they believe that the clinical trials
are not being conducted in accordance with applicable regulatory requirements or that they present an unacceptable safety risk
to the patients enrolled in our clinical trials.
Our
clinical trial operations are subject to regulatory inspections at any time. If regulatory inspectors conclude that we or our
clinical trial sites are not in compliance with applicable regulatory requirements for conducting clinical trials, we may receive
reports of observations or warning letters detailing deficiencies, and we will be required to implement corrective actions. If
regulatory agencies deem our responses to be inadequate or are dissatisfied with the corrective actions we or our clinical trial
sites have implemented, our clinical trials may be temporarily or permanently discontinued, we may be fined, we or our investigators
may be precluded from conducting any ongoing or any future clinical trials, the government may refuse to approve our marketing
applications or allow us to manufacture or market our products, and we may be criminally prosecuted.
The
lengthy approval process as well as the unpredictability of future clinical trial results may result in our failing to obtain
regulatory approval for our product candidates, which would materially harm our business, results of operations and prospects.
Our
employees, independent contractors, consultants, commercial partners, principal investigators, or CROs may engage in misconduct
or other improper activities, including noncompliance with regulatory standards and requirements, which could have a material
adverse effect on our business.
We
are exposed to the risk of employee and third party fraud or other misconduct. Misconduct by employees, independent contractors,
consultants, commercial partners, manufacturers, investigators, or CROs could include intentional, reckless, negligent, or unintentional
failures to comply with FDA regulations, comply with applicable fraud and abuse laws, provide accurate information to the FDA,
properly calculate pricing information required by federal programs, comply with federal procurement rules or contract terms,
report financial information or data accurately or disclose unauthorized activities to us. This misconduct could also involve
the improper use or misrepresentation of information obtained in the course of clinical trials, which could result in regulatory
sanctions and serious harm to our reputation. It is not always possible to identify and deter this type of misconduct, and the
precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses
or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance
with such laws or regulations. Moreover, it is possible for a whistleblower to pursue a False Claims Act case against us even
if the government considers the claim unmeritorious and declines to intervene, which could require us to incur costs defending
against such a claim. Further, due to the risk that a judgment in an FCA case could result in exclusion from federal health programs
or debarment from government contracts, whistleblower cases often result in large settlements. If any such actions are instituted
against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact
on our business, financial condition, and results of operations, including the imposition of significant fines or other sanctions.
We
must comply with significant government regulations.
The
research and development, manufacturing and marketing of human therapeutic and diagnostic products are subject to regulation,
primarily by the FDA in the United States and by comparable authorities in other countries. These national agencies and other
federal, state, local and foreign entities regulate, among other things, research and development activities (including testing
in animals and in humans) and the testing, manufacturing, handling, labeling, storage, record keeping, approval, distribution,
advertising and promotion of the products that we are developing. If we obtain approval for any of our product candidates, our
operations will be directly or indirectly through our customers, subject to various federal and state fraud and abuse laws, including,
without limitation, the federal Anti-Kickback Statue and the federal False Claims Act, and privacy laws. We, our product candidates,
and our products, if we receive marketing approval are and will continue to be subject to extensive governmental regulation and
regulatory authorities do and will continue to closely monitor our and our contractor’s compliance through, among other
methods, inspections. Noncompliance with applicable laws and requirements can result in various adverse consequences and regulatory
enforcement actions, including delay in approving or refusal to approve product licenses or other applications, suspension or
termination of clinical investigations, revocation of approvals previously granted, fines, criminal prosecution, civil and criminal
penalties, restitution or disgorgement of profits, recall or seizure of products, exclusion from having our products reimbursed
by federal health care programs, the curtailment or restructuring of our operations, corporate integrity agreements or consent
decrees, refusal ot permit product import or export, modifications to labeling or promotional materials, issuance of corrective
information, regulatory authority public statements, warning, untitled, or cyber letters, requirements for post-market studies
or REMS, injunctions against shipping products and total or partial suspension of production and/or refusal to allow a company
to enter into governmental supply contracts. Any of these events could prevent us from achieving or maintaining product approval
and market acceptance of the particular product candidate, if approved, or could substantially increase the costs and expenses
of developing and commercializing such product, which in turn could delay or prevent us from generating significant revenues from
its sale. Any of these events could further have other material and adverse effects on our operations and business and could adversely
impact our stock price and could significantly harm our business, financial condition, results of operations, and prospects.
The
process of obtaining requisite FDA approval has historically been costly and time-consuming. Current FDA requirements for a new
human biological product to be marketed in the United States include: (1) the successful conclusion of preclinical laboratory
and animal tests, if appropriate, to gain preliminary information on the product’s safety; (2) filing with the FDA of an
IND to conduct human clinical trials for drugs or biologics; (3) the successful completion of adequate and well-controlled human
clinical trials to establish the safety and efficacy of the investigational new drug for its recommended use; and (4) filing by
a company and acceptance and approval by the FDA of a BLA for marketing approval of a biologic, to allow commercial distribution
of a biologic product. The FDA also requires that any drug or formulation to be tested in humans be manufactured in accordance
with its cGMP regulations. This has been extended to include any drug that will be tested for safety in animals in support of
human testing. The cGMPs set certain minimum requirements for procedures, record-keeping and the physical characteristics of the
laboratories used in the production of these drugs. A delay in one or more of the procedural steps outlined above could be harmful
to us in terms of getting our immunotherapies through clinical testing and to market.
We
may not obtain or maintain the benefits associated with orphan drug designation, including market exclusivity.
Although
we have been granted FDA orphan drug designation for AXAL for use in the treatment of anal cancer, HPV-associated head and neck
cancer, Stage II-IV invasive cervical cancer and for ADXS-HER2 for the treatment of osteosarcoma in the United States, as well
as EMA orphan drug designation for AXAL for the treatment of anal cancer and for ADXS-HER2 for the treatment of osteosarcoma in
the EU, we may not receive the benefits associated with orphan drug designation. This may result from a failure to maintain orphan
drug status or result from a competing product reaching the market that has an orphan designation for the same disease indication.
Moreover, while orphan drug designation does provide us with certain advantages, it neither shortens the development time or regulatory
review time of a product candidate nor gives the product candidate any advantage in the regulatory review or approval process.
Under
U.S. rules for orphan drugs, if such a competing product reaches the market before ours does, if such product is considered by
FDA to be the same as ours, and if such product is intended for the same orphan indication, the competing product could potentially
obtain a scope of market exclusivity that limits or precludes our product from being sold in the United States for seven years
unless we can demonstrate that our product is clinically superior. Even if we obtain exclusivity, the FDA could subsequently approve
the same drug for the same condition if the FDA concludes that the later drug is clinically superior to ours in that it is shown
to be safer, more effective or makes a major contribution to patient care. A competitor also may receive approval of different
products for the same indication for which our orphan product has exclusivity or obtain approval for the same product but for
a different indication for which the orphan product has exclusivity. Moreover, we may not be able to maintain our orphan drug
designation or exclusivity and our product candidates would not be eligible for exclusivity if the approved indication is broader
than the orphan drug designation.
In
addition, if and when we request orphan drug designation in Europe, the European exclusivity period is ten years but can be reduced
to six years if the drug no longer meets the criteria for orphan drug designation or if the drug is sufficiently profitable so
that market exclusivity is no longer justified. Orphan drug exclusivity may be lost if the FDA or EMEA determines that the request
for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the
needs of patients with the rare disease or condition.
We
may incur substantial liabilities from any product liability claims if our insurance coverage for those claims is inadequate.
We
face an inherent risk of product liability exposure related to the testing of our immunotherapies in human clinical trials and
will face an even greater risk if the approved products are sold commercially. An individual may bring a liability claim against
us if one of the immunotherapies causes, or merely appears to have caused, an injury. If we cannot successfully defend ourselves
against the product liability claim, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability
claims may result in:
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decreased
demand for our immunotherapies;
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damage
to our reputation;
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withdrawal
of clinical trial participants;
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costs
of related litigation;
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substantial
monetary awards to patients or other claimants;
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loss
of revenues;
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the
inability to commercialize immunotherapies; and
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increased
difficulty in raising required additional funds in the private and public capital markets.
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We
have Product Liability and Clinical Trial Liability insurance coverage for each clinical trial. We do not have product liability
insurance for sold commercial products because we do not have products on the market. We plan to expand such coverage to include
the sale of commercial products if marketing approval is obtained for any of our immunotherapies. However, insurance coverage
is increasingly expensive and we may not be able to maintain insurance coverage at a reasonable cost. Further, we may not be able
to obtain insurance coverage that will be adequate to satisfy any liability that may arise.
We
may not receive Fast Track Designation, Breakthrough Therapy Designation or any other designation that we may apply for from the
FDA and, if granted, such designations may not actually lead to a faster development or regulatory review or approval process.
The
FDA has granted Fast Track Designation for AXAL for adjuvant therapy for high-risk locally advanced cervical cancer patients,
and has granted Fast Track Designation for ADXS-HER2 for patients with newly-diagnosed, non-metastatic, surgically-resectable
osteosarcoma. We may seek Breakthrough Therapy Designation for our product candidates or Fast Track Designation for certain of
our other product candidates. There is no guarantee, however, that we will be able to obtain or maintain such designations.
The
FDA has broad discretion whether or not to grant any special designation, so even if we believe one of our product candidates
is eligible for this designation, we cannot assure you that the FDA would decide to grant it. Additionally, even if we do receive
a special designation, we may not experience a faster development process, review or approval compared to conventional FDA procedures.
The FDA may also withdraw the designation if it believes that the designation is no longer supported by data from our clinical
development program.
The
results of clinical trials conducted at clinical trial sites outside the United States might not be accepted by the FDA, and data
developed outside of a foreign jurisdiction similarly might not be accepted by such foreign regulatory authority.
Some
of the clinical trials for our product candidates that are being or will be conducted through our partnerships and collaborations
may be conducted outside the United States, and we intend in the future to conduct additional clinical trials outside the United
States. Although the FDA, European Medicines Agency (“EMA”) or comparable foreign regulatory authorities may accept
data from clinical trials conducted outside the relevant jurisdiction, acceptance of these data is subject to certain conditions.
For example, the FDA requires that the clinical trial must be well designed and conducted and performed by qualified investigators
in accordance with ethical principles such as IRB or ethics committee approval and informed consent, the trial population must
adequately represent the U.S. population, and the data must be applicable to the U.S. population and U.S. medical practice in
ways that the FDA deems clinically meaningful. In addition, while these clinical trials are subject to the applicable local laws,
acceptance of the data by the FDA will be dependent upon its determination that the trials were conducted consistent with all
applicable U.S. laws and regulations. There can be no assurance that the FDA will accept data from trials conducted outside of
the United States as adequate support of a marketing application. Similarly, we must also ensure that any data submitted to foreign
regulatory authorities adheres to their standards and requirements for clinical trials and there can be no assurance a comparable
foreign regulatory authority would accept data from trials conducted outside of its jurisdiction.
Our
relationships with healthcare providers and physicians and third-party payors will be subject to applicable anti-kickback, fraud
and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual
damages, reputational harm and diminished profits and future earnings.
Healthcare
providers, physicians and third-party payors in the United States and elsewhere play a primary role in the recommendation and
prescription of pharmaceutical products. Arrangements with third-party payors and customers can expose pharmaceutical manufacturers
to broadly applicable fraud and abuse and other healthcare laws and regulations, including, without limitation, the federal Anti-Kickback
Statute and the federal False Claims Act, or FCA, which may constrain the business or financial arrangements and relationships
through which such companies sell, market and distribute pharmaceutical products. In particular, the research of our product candidates,
as well as the promotion, sales and marketing of healthcare items and services, as well as certain business arrangements in the
healthcare industry, are subject to extensive laws designed to prevent fraud, kickbacks, self-dealing and other abusive practices.
These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, structuring
and commission(s), certain customer incentive programs and other business arrangements generally. Activities subject to these
laws also involve the improper use of information obtained in the course of patient recruitment for clinical trials. The applicable
federal, state and foreign healthcare laws and regulations that may affect our ability to operate include, but are not limited
to:
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the
federal Anti-Kickback Statute, which prohibits, among other things, knowingly and willfully soliciting, receiving, offering
or paying any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash
or in kind, to induce, or in return for, either the referral of an individual, or the purchase, lease, order or recommendation
of any good, facility, item or service for which payment may be made, in whole or in part, under a federal healthcare program,
such as the Medicare and Medicaid programs. A person or entity can be found guilty of violating the statute without actual
knowledge of the statute or specific intent to violate it. In addition, a claim including items or services resulting from
a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the FCA. The Anti-Kickback
Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers,
purchasers, and formulary managers on the other. There are a number of statutory exceptions and regulatory safe harbors protecting
some common activities from prosecution;
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the
federal civil and criminal false claims laws and civil monetary penalty laws, including the FCA, which prohibit, among other
things, individuals or entities from knowingly presenting, or causing to be presented, false or fraudulent claims for payment
to, or approval by Medicare, Medicaid or other federal healthcare programs, knowingly making, using or causing to be made
or used a false record or statement material to a false or fraudulent claim or an obligation to pay or transmit money to the
federal government, or knowingly concealing or knowingly and improperly avoiding or decreasing or concealing an obligation
to pay money to the federal government. Manufacturers can be held liable under the FCA even when they do not submit claims
directly to government payors if they are deemed to “cause” the submission of false or fraudulent claims. The
government may deem manufacturers to have “caused” the submission of false or fraudulent claims by, for example,
providing inaccurate billing or coding information to customers or promoting a product off-label. The FCA also permits a private
individual acting as a “whistleblower” to bring actions on behalf of the federal government alleging violations
of the FCA and to share in any monetary recovery;
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the
federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created additional federal criminal statutes
that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program
or obtain, by means of false or fraudulent pretenses, representations or promises, any of the money or property owned by,
or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and
knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially
false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare
matters. Similar to the federal Anti-Kickback Statute, a person or entity can be found guilty of violating HIPAA without actual
knowledge of the statute or specific intent to violate it;
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HIPAA,
as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and their respective
implementing regulations, which impose, among other things, requirements on certain healthcare providers, health plans and
healthcare clearinghouses, known as covered entities, as well as their respective business associates, independent contractors
that perform services for covered entities that involve the use, or disclosure of, individually identifiable health information,
relating to the privacy, security and transmission of individually identifiable health information. HITECH also created new
tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates,
and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce
the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions;
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the
federal Physician Payments Sunshine Act, created under the Patient Protection and Affordable Care Act, as amended, or ACA,
and its implementing regulations, which require some manufacturers of drugs, devices, biologicals and medical supplies for
which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions)
to report annually to the Centers for Medicare & Medicaid Services, or CMS, of the U.S. Department of Health and Human
Services, or HHS, information related to payments or other transfers of value made to physicians (defined to include doctors,
dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment interests
held by physicians and their immediate family members; and
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analogous
state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing
arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including
private insurers, and may be broader in scope than their federal equivalents; state and foreign laws that require pharmaceutical
companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance
promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers; state and foreign
laws that require drug manufacturers to report information related to payments and other transfers of value to physicians
and other healthcare providers, marketing expenditures or drug pricing; state and local laws that require the registration
of pharmaceutical sales representatives; and state and foreign laws governing the privacy and security of health information
in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus
complicating compliance efforts.
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The
distribution of pharmaceutical products is subject to additional requirements and regulations, including extensive record-keeping,
licensing, storage and security requirements intended to prevent the unauthorized sale of pharmaceutical products. Pharmaceutical
companies may also be subject to federal consumer protection and unfair competition laws, which broadly regulate marketplace activities
and activities that potentially harm consumers.
The
scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare
reform, especially in light of the lack of applicable precedent and regulations. Federal and state enforcement bodies continue
to closely scrutinize interactions between healthcare companies and healthcare providers, which has led to a number of investigations,
prosecutions, convictions and settlements in the healthcare industry. Ensuring business arrangements comply with applicable healthcare
laws, as well as responding to possible investigations by government authorities, can be time and resource-consuming and can divert
a company’s attention from the business.
It
is possible that governmental and enforcement authorities will conclude that our business practices may not comply with current
or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws and regulations.
If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those
actions could have a significant impact on our business, including the imposition of civil, criminal and administrative penalties,
damages, fines, disgorgement, imprisonment, exclusion from participation in federal and state funded healthcare programs, contractual
damages and the curtailment or restricting of our operations, as well as additional reporting obligations and oversight if we
become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws.
Further, if any of the physicians or other healthcare providers or entities with whom we expect to do business is found to be
not in compliance with applicable laws, they may be subject to significant criminal, civil or administrative sanctions, including
exclusions from government funded healthcare programs. Any action for violation of these laws, even if successfully defended,
could cause a biopharmaceutical manufacturer to incur significant legal expenses and divert management’s attention from
the operation of the business. Prohibitions or restrictions on sales or withdrawal of future marketed products could materially
affect business in an adverse way.
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, while 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, the EMA or comparable foreign regulatory authorities 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, and greater than, 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.
We
may also submit marketing applications in other countries. Regulatory authorities in jurisdictions outside of the United States
have requirements for approval of product candidates with which we must comply prior to marketing in those jurisdictions. 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 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.
Even
if we receive regulatory approval of any product candidates, we will be subject to ongoing regulatory obligations and continued
regulatory review, which may result in significant additional expense and we may be subject to penalties if we fail to comply
with regulatory requirements or experience unanticipated problems with our product candidates.
If
any of our product candidates are approved, they will be subject to ongoing regulatory requirements for manufacturing, labeling,
packaging, storage, advertising, promotion, distribution, sampling, record-keeping, conduct of post-marketing studies and submission
of safety, efficacy and other post-market information, including both federal and state requirements in the United States and
requirements of comparable foreign regulatory authorities. In addition, we will be subject to continued compliance with cGMP and
GCP requirements for any clinical trials that we conduct post-approval.
Manufacturers
and manufacturers’ facilities are required to comply with extensive FDA, EMA and comparable foreign regulatory authority
requirements, including ensuring that quality control and manufacturing procedures conform to cGMP regulations. As such, we and
our contract manufacturers will be subject to continual review and inspections to assess compliance with cGMP and adherence to
commitments made in any BLA, other marketing application and previous responses to inspection observations. Accordingly, we and
others with whom we work must continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing,
production and quality control.
Any
regulatory approvals that we receive for our product candidates may be subject to limitations on the approved indicated uses for
which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing
testing, including Phase 4 clinical trials and surveillance to monitor the safety and efficacy of the product candidate. Certain
endpoint data we hope to include in any approved product labeling also may not make it into such labeling, including exploratory
or secondary endpoint data such as patient-reported outcome measures. The FDA may also require a risk evaluation and mitigation
strategies, or REMS, program as a condition of approval of our product candidates, which could entail requirements for long-term
patient follow-up, a medication guide, physician communication plans or additional elements to ensure safe use, such as restricted
distribution methods, patient registries and other risk minimization tools. In addition, if the FDA, EMA or a comparable foreign
regulatory authority approves our product candidates, we will have to comply with requirements including submissions of safety
and other post-marketing information and reports and registration.
The
FDA may impose consent decrees or withdraw approval if compliance with regulatory requirements and standards is not maintained
or if problems occur after the product reaches the market. Later discovery of previously unknown problems with our product candidates,
including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes,
or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information,
imposition of post-market studies or clinical trials to assess new safety risks or imposition of distribution restrictions or
other restrictions under a REMS program. Other potential consequences include, among other things:
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restrictions
on the marketing or manufacturing of our products, withdrawal of the product from the market or voluntary or mandatory product
recalls;
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fines,
warning letters or holds on clinical trials;
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refusal
by the FDA to approve pending applications or supplements to approved applications filed by us or suspension or revocation
of license approvals;
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product
seizure or detention or refusal to permit the import or export of our product candidates; and
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injunctions
or the imposition of civil or criminal penalties.
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The
FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Products may
be promoted only for the approved indications and in accordance with the provisions of the approved label. The policies of the
FDA, EMA and comparable foreign regulatory authorities may change and additional government regulations may be enacted that could
prevent, limit or delay regulatory approval of our product candidates. We cannot predict the likelihood, nature or extent of government
regulation that may arise from 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.
Coverage
and reimbursement may be limited or unavailable in certain market segments for our product candidates, if approved, which could
make it difficult for us to sell any product candidates profitably.
The
success of our product candidates, if approved, depends on the availability of coverage and adequate reimbursement from third-party
payors. We cannot be sure that coverage and reimbursement will be available for, or accurately estimate the potential revenue
from, our product candidates or assure that coverage and reimbursement will be available for any product that we may develop.
Patients
who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of the costs
associated with their treatment. Coverage and adequate reimbursement from governmental healthcare programs, such as Medicare and
Medicaid, and commercial payors is critical to new product acceptance.
Government
authorities and other third-party payors, such as private health insurers and health maintenance organizations, decide which drugs
and treatments they will cover and the amount of reimbursement. Coverage and reimbursement by a third-party payor may depend upon
a number of factors, including the third-party payor’s determination that use of a product is:
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a
covered benefit under its health plan;
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safe,
effective and medically necessary;
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appropriate
for the specific patient;
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cost-effective;
and
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neither
experimental nor investigational.
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In
the United States, no uniform policy of coverage and reimbursement for products exists among third-party payors. As a result,
obtaining coverage and reimbursement approval of a product from a government or other third-party payor is a time-consuming and
costly process that could require us to provide to each payor supporting scientific, clinical and cost-effectiveness data for
the use of our products on a payor-by-payor basis, with no assurance that coverage and adequate reimbursement will be obtained.
Even if we obtain coverage for a given product, the resulting reimbursement payment rates might not be adequate for us to achieve
or sustain profitability or may require co-payments that patients find unacceptably high. Additionally, third-party payors may
not cover, or provide adequate reimbursement for, long-term follow-up evaluations required following the use of product candidates,
once approved. Patients are unlikely to use our product candidates, once approved, unless coverage is provided and reimbursement
is adequate
Ongoing
healthcare legislative and regulatory reform measures may have a material adverse effect on our business and results of operations.
Changes
in regulations, statutes or the interpretation of existing regulations could impact our business in the future by requiring, for
example: (i) changes to our manufacturing arrangements; (ii) additions or modifications to product labeling; (iii) the recall
or discontinuation of our products; or (iv) additional record-keeping requirements. If any such changes were to be imposed, they
could adversely affect the operation of our business.
In
the United States, there have been and continue to be a number of legislative initiatives to contain healthcare costs. For example,
in March 2010, the ACA was passed, which substantially changed the way healthcare is financed by both governmental and private
insurers, and significantly impacted the U.S. biopharmaceutical industry. The ACA, among other things, addressed a new methodology
by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused,
instilled, implanted or injected, increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate
Program and extended the rebate program to individuals enrolled in Medicaid managed care organizations, established annual fees
and taxes on manufacturers of certain branded prescription drugs and created a new Medicare Part D coverage gap discount program,
in which manufacturers must agree to offer 70% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible
beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under
Medicare Part D.
Some
of the provisions of the ACA have yet to be fully implemented, while certain provisions have been subject to judicial and Congressional
challenges, as well as efforts by the Trump administration to repeal or replace certain aspects of the ACA. For example, Congress
has considered legislation that would repeal or repeal and replace all or part of the ACA. While Congress has not passed repeal
legislation, the Tax Reform Act includes a provision that repealed, effective January 1, 2019, the tax-based shared responsibility
payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that
is commonly referred to as the “individual mandate.” As a result of the individual mandate repeal, subsequent litigation
challenged the validity of the ACA. On December 14, 2018, a U.S. District Court judge in the Northern District of Texas ruled
that the individual mandate portion of the ACA is an essential and inseverable feature of the ACA, and therefore because the mandate
was repealed as part of the Tax Cuts and Jobs Act, or TCJA, the remaining provisions of the ACA are invalid as well. The Trump
administration and CMS have both stated that the ruling will have no immediate effect, and on December 30, 2018 the same judge
issued an order staying the judgment pending appeal. A Fifth Circuit U.S. Court of Appeals hearing to determine whether certain
states and the House of Representatives have standing to appeal the lower court decision was held on July 9, 2019, but it is unclear
when the court will render its decision on this hearing, and what effect it will have on the status of the ACA. Litigation and
legislation over the ACA are likely to continue, with unpredictable and uncertain results. We will continue to evaluate the effect
that the ACA and its possible repeal and replacement has on our business.
Since
January 2017, President Trump has signed two Executive Orders designed to delay the implementation of certain provisions of the
ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA. Further, the Trump administration
has concluded that cost-sharing reduction, or CSR, payments to insurance companies required under the ACA have not received necessary
appropriations from Congress and announced that it will discontinue these payments immediately until those appropriations are
made. The loss of the CSR payments is expected to increase premiums on certain policies issued by qualified health plans under
the ACA. Bipartisan bills to appropriate funds for CSR payments were proposed in 2017 and 2018, but the proposals have not been
enacted into law. Multiple state Attorneys General filed suit to stop the administration from terminating the subsidies, but their
case was dismissed by a federal judge in California on July 18, 2018. Furthermore, on June 14, 2018, the U.S. Court of Appeals
for the Federal Circuit ruled that the federal government was not required to pay more than $12 billion in ACA risk corridor payments
to third-party payors who argued were owed to them. The effects of this gap in reimbursement on third-party payors, the viability
of the ACA marketplace and providers, and the potential effect on our business, are not yet known.
Inadequate
funding for the FDA and other government agencies could hinder their ability to hire and retain key leadership and other personnel,
prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies
from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.
The
ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and
funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy
changes. Average review times at the agency have fluctuated in recent years as a result.
Disruptions
at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government
agencies, which would adversely affect our business. For example, over the last several years, the U.S. government has shut down
several times and certain regulatory agencies, such as the FDA, have had to furlough critical employees and stop critical activities.
If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our
regulatory submissions, which could have a material adverse effect on our business. Further, upon completion of this offering
and in our operations as a public company, future government shutdowns could impact our ability to access the public markets and
obtain necessary capital in order to properly capitalize and continue our operations.
Approval
of our product candidates does not ensure successful commercialization and reimbursement.
We
are not currently marketing our product candidates, nor can we until they are approved; however, we are seeking partnering and
commercial opportunities for our products. We cannot assure you that we will be able to commercialize any of our product candidates
ourselves or find a commercialization partner or that we will be able to agree to acceptable terms with any partner to launch
and commercialize our products.
The
commercial success of our product candidates is subject to risks in both the United States and European countries. In addition,
in European countries, pricing and payment of prescription pharmaceuticals is subject to more extensive governmental control than
in the United States. Pricing negotiations with European governmental authorities can take six to 12 months or longer after the
receipt of regulatory approval and product launch. If reimbursement is unavailable in any country in which reimbursement is sought,
limited in scope or amount, or if pricing is set at or reduced to unsatisfactory levels, our ability or any potential partner’s
ability to successfully commercialize in such a country would be impacted negatively. Furthermore, if these measures prevent us
or any potential partner from selling on a profitable basis in a particular country, they could prevent the commercial launch
or continued sale in that country and could adversely impact the commercialization market opportunity in other countries.
Moreover,
as a condition of approval, the regulatory authorities may require that we conduct post-approval studies. Those studies may reveal
new safety or efficacy findings regarding our drug that could adversely impact the continued commercialization or future market
opportunity in other countries.
In
addition, we predominantly rely on a network of suppliers and vendors to manufacture our products. Should a regulatory authority
make any significant findings on an inspection of our own operations or the operations of those companies, the ability for us
to continue producing our products could be adversely impacted and further production could cease. Regulatory GMP requirements
are extensive and can present a risk of injury or recall, among other risks, if not manufactured or labeled properly under GMPs.
Our
potential revenues from the commercialization of our product candidates are subject to these and other factors, and therefore
we may never reach or maintain profitability.
Even
if we are successful in obtaining market approval, commercial success of any of our product candidates will also depend in large
part on the availability of coverage and adequate reimbursement from third-party payers, including government payers such as the
Medicare and Medicaid programs and managed care organizations, which may be affected by existing and future health care reform
measures designed to reduce the cost of health care. Third-party payers could require us to conduct additional studies, including
post-marketing studies related to the cost effectiveness of a product, to qualify for reimbursement, which could be costly and
divert our resources. If government and other health care payers were not to provide adequate coverage and reimbursement levels
for one any of our products once approved, market acceptance and commercial success would be reduced.
In
addition, if one of our products is approved for marketing, we will be subject to significant regulatory obligations regarding
product promotion, the submission of safety and other post-marketing information and reports and registration, and will need to
continue to comply (or ensure that our third party providers comply) with cGMPs, and Good Clinical Practices, or GCPs, for any
clinical trials that we conduct post-approval. In addition, there is always the risk that we or a regulatory authority might identify
previously unknown problems with a product post-approval, such as adverse events of unanticipated severity or frequency. Compliance
with these requirements is costly, and any failure to comply or other issues with our product candidates’ post-market approval
could have a material adverse effect on our business, financial condition and results of operations.
Risks
Related to our Intellectual Property
We
rely upon patents to protect our technology. We may be unable to protect our intellectual property rights and we may be liable
for infringing the intellectual property rights of others.
Our
ability to compete effectively will depend on our ability to maintain the proprietary nature of our technologies, including the
Lm-LLO based immunotherapy platform technology, and the proprietary technology of others with whom we have entered into
collaboration and licensing agreements.
Currently,
we own or have rights to several hundred patents and applications, which are owned, licensed from, or co-owned with Penn and Merck.
We have obtained the rights to all future patent applications in this field originating in the laboratories of Dr. Yvonne Paterson
and Dr. Fred Frankel, at the University of Pennsylvania.
We
own or hold licenses to a number of issued patents and U.S. pending patent applications, as well as foreign patents and foreign
counterparts. Our success depends in part on our ability to obtain patent protection both in the United States and in other countries
for our product candidates, as well as the methods for treating patients in the product indications using these product candidates.
Such patent protection is costly to obtain and maintain, and we cannot guarantee that sufficient funds will be available. Our
ability to protect our product candidates from unauthorized or infringing use by third parties depends in substantial part on
our ability to obtain and maintain valid and enforceable patents. Due to evolving legal standards relating to the patentability,
validity and enforceability of patents covering pharmaceutical inventions and the scope of claims made under these patents, our
ability to obtain, maintain and enforce patents is uncertain and involves complex legal and factual questions. Even if our product
candidates, as well as methods for treating patients for prescribed indications using these product candidates are covered by
valid and enforceable patents and have claims with sufficient scope, disclosure and support in the specification, the patents
will provide protection only for a limited amount of time. Accordingly, rights under any issued patents may not provide us with
sufficient protection for our product candidates or provide sufficient protection to afford us a commercial advantage against
competitive products or processes.
In
addition, we cannot guarantee that any patents will issue from any pending or future patent applications owned by or licensed
to us. Even if patents have issued or will issue, we cannot guarantee that the claims of these patents are or will be valid or
enforceable or will provide us with any significant protection against competitive products or otherwise be commercially valuable
to us. The laws of some foreign jurisdictions do not protect intellectual property rights to the same extent as in the United
States and many companies have encountered significant difficulties in protecting and defending such rights in foreign jurisdictions.
Furthermore, different countries have different procedures for obtaining patents, and patents issued in different countries offer
different degrees of protection against use of the patented invention by others. If we encounter such difficulties in protecting
or are otherwise precluded from effectively protecting our intellectual property rights in foreign jurisdictions, our business
prospects could be substantially harmed.
The
patent positions of biotechnology and pharmaceutical companies, including our patent position, involve complex legal and factual
questions, and, therefore, validity and enforceability cannot be predicted with certainty. Patents may be challenged, deemed unenforceable,
invalidated, or circumvented as a result of laws, rules and guidelines that are changed due to legislative, judicial or administrative
actions, or review, which render our patents unenforceable or invalid. Our patents can be challenged by our competitors who can
argue that our patents are invalid, unenforceable, lack utility, sufficient written description or enablement, or that the claims
of the issued patents should be limited or narrowly construed. Patents also will not protect our product candidates if competitors
devise ways of making or using these product candidates without infringing our patents.
We
will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our technologies,
methods of treatment, product candidates, and any future products are covered by valid and enforceable patents or are effectively
maintained as trade secrets and we have the funds to enforce our rights, if necessary.
The
expiration of our owned or licensed patents before completing the research and development of our product candidates and receiving
all required approvals in order to sell and distribute the products on a commercial scale can adversely affect our business and
results of operations.
Litigation
regarding patents, patent applications and other proprietary rights may be expensive and time consuming. If we are involved in
such litigation, it could cause delays in bringing product candidates to market and harm our ability to operate.
Our
success will depend in part on our ability to operate without infringing the proprietary rights of third parties. The pharmaceutical
industry is characterized by extensive litigation regarding patents and other intellectual property rights. Other parties may
obtain patents in the future and allege that the products or use of our technologies infringe these patent claims or that we are
employing their proprietary technology without authorization.
In
addition, third parties may challenge or infringe upon our existing or future patents. Proceedings involving our patents or patent
applications or those of others could result in adverse decisions regarding:
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the
patentability of our inventions relating to our product candidates; and/or
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the
enforceability, validity or scope of protection offered by our patents relating to our product candidates.
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Even
if we are successful in these proceedings, we may incur substantial costs and divert management time and attention in pursuing
these proceedings, which could have a material adverse effect on us. If we are unable to avoid infringing the patent rights of
others, we may be required to seek a license, defend an infringement action or challenge the validity of the patents in court.
Patent litigation is costly and time consuming. We may not have sufficient resources to bring these actions to a successful conclusion.
In addition, if we do not obtain a license, develop or obtain non-infringing technology, fail to defend an infringement action
successfully or have infringed patents declared valid, we may:
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incur
substantial monetary damages;
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encounter
significant delays in bringing our product candidates to market; and/or
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be
precluded from participating in the manufacture, use or sale of our product candidates or methods of treatment requiring licenses.
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We
may be unable to adequately prevent disclosure of trade secrets and other proprietary information.
We
also rely on trade secrets to protect our proprietary technologies, especially where we do not believe patent protection is appropriate
or obtainable. However, trade secrets are difficult to protect. We rely in part on confidentiality agreements with our employees,
consultants, outside scientific collaborators, sponsored researchers, and other advisors to protect our trade secrets and other
proprietary information. These agreements may not effectively prevent disclosure of confidential information and may not provide
an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently
discover our trade secrets and proprietary information. Costly and time-consuming litigation could be necessary to enforce and
determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect
our competitive business position.
Some
of our products are dependent upon our license agreement with Penn; if we breach the license agreement and/or fail to make payments
due and owing to Penn under our license agreement, our business may be materially and adversely affected.
Pursuant
to the terms of our license agreement with Penn, which has been amended from time to time, we have acquired exclusive worldwide
licenses for patents and patent applications related to our proprietary Listeria vaccine technology. The license provides us with
the exclusive commercial rights to the patent portfolio developed at Penn as of the effective date of the license, in connection
with Dr. Paterson and requires us to pay various milestone, legal, filing and licensing payments to commercialize the technology.
As of October 31, 2019, we did not have outstanding payables to Penn. We can provide no assurance that we will be able to make
all future payments due and owing thereunder, that such licenses will not be terminated or expire during critical periods, that
we will be able to obtain licenses from Penn for other rights that may be important to us, or, if obtained, that such licenses
will be obtained on commercially reasonable terms. The loss of any current or future licenses from Penn or the exclusivity rights
provided therein could materially harm our business, financial condition and operating results.
If
we are unable to obtain licenses needed for the development of our product candidates, or if we breach any of the agreements under
which we license rights to patents or other intellectual property from third parties, we could lose license rights that are important
to our business.
If
we are unable to maintain and/or obtain licenses needed for the development of our product candidates in the future, we may have
to develop alternatives to avoid infringing on the patents of others, potentially causing increased costs and delays in drug development
and introduction or precluding the development, manufacture, or sale of planned products. Some of our licenses provide for limited
periods of exclusivity that require minimum license fees and payments and/or may be extended only with the consent of the licensor.
We can provide no assurance that we will be able to meet these minimum license fees in the future or that these third parties
will grant extensions on any or all such licenses. This same restriction may be contained in licenses obtained in the future.
Additionally,
we can provide no assurance that the patents underlying any licenses will be valid and enforceable. To the extent any products
developed by us are based on licensed technology, royalty payments on the licenses will reduce our gross profit from such product
sales and may render the sales of such products uneconomical. In addition, the loss of any current or future licenses or the exclusivity
rights provided therein could materially harm our business, financial condition and our operations.
Risks
Related to Ownership of our Securities
Sales
of additional equity securities may adversely affect the market price of our common stock and your rights may be reduced.
We
expect to continue to incur drug development and selling, general and administrative costs, and to satisfy our funding requirements,
we will need to sell additional equity securities, which may be subject to registration rights and warrants with anti-dilutive
protective provisions. The sale or the proposed sale of substantial amounts of our common stock or other equity securities in
the public markets may adversely affect the market price of our common stock and our stock price may decline substantially. Our
shareholders may experience substantial dilution and a reduction in the price that they are able to obtain upon sale of their
shares. Also, new equity securities issued may have greater rights, preferences or privileges than our existing common stock.
The
price of our common stock and warrants may be volatile.
The
trading price of our common stock and warrants may fluctuate substantially. The price of our common stock and warrants that will
prevail in the market may be higher or lower than the price you have paid, depending on many factors, some of which are beyond
our control and may not be related to our operating performance. These fluctuations could cause you to lose part or all of your
investment in our common stock and warrants. Those factors that could cause fluctuations include, but are not limited to, the
following:
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price
and volume fluctuations in the overall stock market from time to time;
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fluctuations
in stock market prices and trading volumes of similar companies;
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actual
or anticipated changes in our net loss or fluctuations in our operating results or in the expectations of securities analysts;
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the
issuance of new equity securities pursuant to a future offering, including issuances of preferred stock;
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general
economic conditions and trends;
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positive
and negative events relating to healthcare and the overall pharmaceutical and biotech sector;
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major
catastrophic events;
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sales
of large blocks of our stock;
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significant
dilution caused by the anti-dilutive clauses in our financial agreements;
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departures
of key personnel;
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changes
in the regulatory status of our immunotherapies, including results of our clinical trials;
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events
affecting Penn or any current or future collaborators;
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announcements
of new products or technologies, commercial relationships or other events by us or our competitors;
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regulatory
developments in the United States and other countries;
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failure
of our common stock or warrants to be listed or quoted on The Nasdaq Stock Market, NYSE Amex Equities or other national market
system;
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changes
in accounting principles; and
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discussion
of us or our stock price by the financial and scientific press and in online investor communities.
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In
the past, following periods of volatility in the market price of a company’s securities, securities class action litigation
has often been brought against that company. Due to the potential volatility of our stock price, we may therefore be the target
of securities litigation in the future. Securities litigation could result in substantial costs and divert management’s
attention and resources from our business.
A
limited public trading market may cause volatility in the price of our common stock.
The
quotation of our common stock on the Nasdaq does not assure that a meaningful, consistent and liquid trading market currently
exists, and in recent years such market has experienced extreme price and volume fluctuations that have particularly affected
the market prices of many smaller companies like us. Our common stock is thus subject to this volatility. Sales of substantial
amounts of common stock, or the perception that such sales might occur, could adversely affect prevailing market prices of our
common stock and our stock price may decline substantially in a short time and our shareholders could suffer losses or be unable
to liquidate their holdings.
The
market prices for our common stock may be adversely impacted by future events.
Our
common stock began trading on the over-the-counter-markets on July 28, 2005 and is currently quoted on the Nasdaq Capital Market
under the symbol ADXS. Market prices for our common stock and warrants will be influenced by a number of factors, including:
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the
issuance of new equity securities pursuant to a future offering, including issuances of preferred stock;
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changes
in interest rates;
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significant
dilution caused by the anti-dilutive clauses in our financial agreements;
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competitive
developments, including announcements by competitors of new products or services or significant contracts, acquisitions, strategic
partnerships, joint ventures or capital commitments;
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variations
in quarterly operating results;
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change
in financial estimates by securities analysts;
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the
depth and liquidity of the market for our common stock and warrants;
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investor
perceptions of our company and the pharmaceutical and biotech industries generally; and
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general
economic and other national conditions.
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We
are not currently in compliance with the continued listing requirements for Nasdaq. If the price of our common stock continues
to trade below $1.00 per share for a sustained period or we do not meet other continued listing requirements, our common stock
may be delisted from the Nasdaq Capital Market, which could affect the market price and liquidity for our common stock and reduce
our ability to raise additional capital.
In
order to maintain listing on the Nasdaq Capital Market, we must satisfy minimum financial and other requirements including, without
limitation, a requirement that our closing bid price be at least $1.00 per share. On April 8, 2020, the Company received written
notice from Nasdaq indicating that the Company was not in compliance with this minimum bid price requirement because the Company’s
common stock had closed below $1.00 per share for the previous 30 consecutive business days. On April 17, 2020, the Company received
an additional notice from Nasdaq indicating that, due to extraordinary market conditions, Nasdaq had tolled the compliance period
for the bid-price requirement through June 30, 2020 (the “tolling period”) and that on April 16, 2020, Nasdaq filed
an immediately effective rule change with the SEC to implement the tolling period. In accordance with the April 17, 2020 notice
from Nasdaq, the Company had until December 21, 2020 to regain compliance with the minimum bid price requirement.
As
of December 21, 2020, the Company was yet to be in compliance with the minimum bid requirement as discussed above. On December
22, 2020, the Company received notification from the Nasdaq that the Company’s application to transfer the listing of its
common stock from the Nasdaq Global Select Market to the Nasdaq Capital Market had been approved. The Company’s securities
were transferred to the Nasdaq Capital Market at the opening of business on December 24, 2020 and the Company will have an additional
180 days, or until June 21, 2021, to regain compliance with the minimum bid price per share requirement.
If
compliance cannot be demonstrated by June 21, 2021 or the Company does not comply with the terms of this extension, Nasdaq will
provide written notification that the Company’s securities will be delisted which could adversely affect the market price
and liquidity of our common stock and reduce our ability to raise additional capital.
Unless
our common stock continues to be listed on a national securities exchange it will become subject to the so-called “penny
stock” rules that impose restrictive sales practice requirements.
If
we are unable to maintain the listing of our common stock on The Nasdaq Capital Market or another national securities exchange,
our common stock could become subject to the so-called “penny stock” rules if the shares have a market value of less
than $5.00 per share. The SEC has adopted regulations that define a penny stock to include any stock that has a market price of
less than $5.00 per share, subject to certain exceptions, including an exception for stock traded on a national securities exchange.
The SEC regulations impose restrictive sales practice requirements on broker-dealers who sell penny stocks to persons other than
established customers and accredited investors. An accredited investor generally is a person whose individual annual income exceeded
$200,000, or whose joint annual income with a spouse exceeded $300,000 during the past two years and who expects their annual
income to exceed the applicable level during the current year, or a person with net worth in excess of $1.0 million, not including
the value of the investor’s principal residence and excluding mortgage debt secured by the investor’s principal residence
up to the estimated fair market value of the home, except that any mortgage debt incurred by the investor within 60 days prior
to the date of the transaction shall not be excluded from the determination of the investor’s net worth unless the mortgage
debt was incurred to acquire the residence. For transactions covered by this rule, the broker-dealer must make a special suitability
determination for the purchaser and must have received the purchaser’s written consent to the transaction prior to sale.
This means that if we are unable maintain the listing of our common stock on a national securities exchange, the ability of stockholders
to sell their common stock in the secondary market could be adversely affected.
If
a transaction involving a penny stock is not exempt from the SEC’s rule, a broker-dealer must deliver a disclosure schedule
relating to the penny stock market to each investor prior to a transaction. The broker-dealer also must disclose the commissions
payable to both the broker-dealer and its registered representative, current quotations for the penny stock, and, if the broker-dealer
is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market.
Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the customer’s
account and information on the limited market in penny stocks.
If
we fail to remain current with our listing requirements, we could be removed from the Nasdaq Capital Market, which would limit
the ability of broker-dealers to sell our securities and the ability of shareholders to sell their securities in the secondary
market.
Companies
trading on the Nasdaq Marketplace, such as our Company, must be reporting issuers under Section 12 of the Exchange Act, as amended,
and must meet the listing requirements in order to maintain the listing of our common stock on the Nasdaq Capital Market. If we
do not meet these requirements, the market liquidity for our securities could be severely adversely affected by limiting the ability
of broker-dealers to sell our securities and the ability of shareholders to sell their securities in the secondary market.
We
may be at an increased risk of securities litigation, which is expensive and could divert management attention.
The
market price of our common stock may be volatile, and in the past companies that have experienced volatility in the market price
of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the
future. Securities litigation against us could result in substantial costs and divert our management’s attention from other
business concerns, which could seriously harm our business.
We
do not intend to pay cash dividends.
We
have not declared or paid any cash dividends on our common stock, and we do not anticipate declaring or paying cash dividends
for the foreseeable future. Any future determination as to the payment of cash dividends on our common stock will be at our Board
of Directors’ discretion and will depend on our financial condition, operating results, capital requirements and other factors
that our Board of Directors considers to be relevant.
Our
certificate of incorporation, bylaws and Delaware law have anti-takeover provisions that could discourage, delay or prevent a
change in control, which may cause our stock price to decline.
Our
certificate of incorporation, Bylaws and Delaware law contain provisions which could make it more difficult for a third party
to acquire us, even if closing such a transaction would be beneficial to our shareholders. To date, we have not issued shares
of preferred stock, however, we are authorized to issue up to 5,000,000 shares of preferred stock. This preferred stock may be
issued in one or more series, the terms of which may be determined at the time of issuance by our Board of Directors without further
action by shareholders. The terms of any series of preferred stock may include voting rights (including the right to vote as a
series on particular matters), preferences as to dividend, liquidation, conversion and redemption rights and sinking fund provisions.
The issuance of any preferred stock could materially adversely affect the rights of the holders of our common stock, and therefore,
reduce the value of our common stock. In particular, specific rights granted to future holders of preferred stock could be used
to restrict our ability to merge with, or sell our assets to, a third party and thereby preserve control by the present management.
Provisions
of our certificate of incorporation, Bylaws and Delaware law also could have the effect of discouraging potential acquisition
proposals or making a tender offer or delaying or preventing a change in control, including changes a shareholder might consider
favorable. Such provisions may also prevent or frustrate attempts by our shareholders to replace or remove our management. In
particular, the certificate of incorporation, Bylaws and Delaware law, as applicable, among other things; provide the Board of
Directors with the ability to alter the Bylaws without shareholder approval and provide that vacancies on the Board of Directors
may be filled by a majority of directors in office, and less than a quorum.
In
addition, our Board of Directors recently adopted a short-term stockholder rights agreement with an expiration date of September
28, 2021 and an ownership trigger threshold of 10%. This stockholder rights agreement could render more difficult, or discourage
a merger, tender offer, or assumption of control of the Company that is not approved by our Board of Directors. The rights agreement,
however, should not interfere with any merger, tender or exchange offer or other business combination approved by our Board of
Directors. In addition, the rights agreement does not prevent our Board of Directors from considering any offer that it considers
to be in the best interest of the Company’s stockholders.
We
are also subject to Section 203 of the Delaware General Corporation Law, which, subject to certain exceptions, prohibits “business
combinations” between a publicly-held Delaware corporation and an “interested shareholder,” which is generally
defined as a shareholder who becomes a beneficial owner of 15% or more of a Delaware corporation’s voting stock for a three-year
period following the date that such shareholder became an interested shareholder.
These
provisions are expected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage
persons seeking to acquire control of our company to first negotiate with its board. These provisions may delay or prevent someone
from acquiring or merging with us, which may cause the market price of our common stock to decline.