f
美国
证券交易委员会
华盛顿特区20549
表格
（在以下选项中加上一个）
截至季度末
或者
委员会文件号
(根据其章程规定的注册人准确名称)
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注册地或其他司法管辖区 |
| （IRS雇主 |
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，（主要行政办公地址） |
| (邮政编码) |
注册人的电话号码，包括区号 (
根据证券法第12(b)条注册的证券：
每一类的名称 |
| 交易代码 |
| 在其上注册的交易所的名称 |
该 |
请在以下方框内打勾：(1) 在过去的12个月内(或者在注册公司需要提交此类报告的较短时期内)，公司已经提交了根据证券交易法1934年第13或15(d)条规定需要提交的所有报告；以及 (2) 在过去的90天内，公司一直受到了此类报告提交的要求。☒
请在以下方框内打勾：公司是否已电子提交了在过去的12个月内（或者在公司需要提交此类文件的较短时期内）根据规则405 of Regulation S-T(232.405章节)所要求提交的每一个互动数据文件。☒
请在交易所法规则120.2规定的“大型加速申报人”、“加速申报人”、“小型报告公司”和“新兴成长公司”的定义中选中相应选项。
大型加速归档人☐ |
| 加速报告人☐ |
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小型报告公司 | |||
新兴成长公司 |
如果是新兴成长型企业，请勾选是否选择不使用按照《证券交易法》第13(a)条规定的新或修订财务会计准则的过渡期。
请在选项前打勾，标示注册公司是否为空壳公司（按照《交易所法规》120亿.2中所定义）
截至2024年11月12日，该公司普通股股份的数量为
关于前瞻性声明的特别说明
本季度报告表格10-Q（“季度报告”）以及引文中包含的某些信息包含根据1933年证券法（经修订）（“证券法”）第27A节和1934年证券交易法（经修订）（“交易法”）的定义的前瞻性陈述。在本季度报告中，我们将Acurx制药公司及其子公司称为“公司”、“我们”、“我们的”或“我们”。这里面所有非历史事实的陈述，包括关于我们未来经营结果和财务状况、策略和计划，以及我们对未来运营的预期的陈述，均为前瞻性陈述。术语“相信”、“可能”、“将”、“估计”、“持续”、“预期”、“设计”、“打算”、“期望”或这些词的否定形式以及类似表述旨在识别前瞻性陈述。
我们已根据当前的预期和关于未来事件及趋势的预测做出这些前瞻性陈述，我们相信这些事件和趋势可能会影响我们的财务状况、经营成果、业务策略、短期和开多业务运营及目标以及财务需求。这些前瞻性陈述受多种风险、不确定性和假设的影响，包括在第二部分，项目1A“风险因素”中描述的风险。鉴于这些风险、不确定性和假设，此处包含的前瞻性事件和情况可能不会发生，实际结果可能与前瞻性陈述中预期或暗示的结果有实质性和不利的差异。鉴于这些不确定性，您不应过度依赖这些前瞻性陈述。前瞻性陈述包括但不限于关于：
| ● | 我们获取和维持ibezapolstat及/或其他产品候选人的监管批准的能力； |
| ● | 我们成功商业化和市场推广ibezapolstat及/或其他产品候选者（如果获得批准）的能力； |
| ● | 我们与第三方供应商、制造商和其他服务提供商签订合同的能力，以及他们的表现能力； |
| ● | ibezapolstat及/或其他产品候选者（如果获得批准）潜在的市场规模、机会和增长潜力； |
| ● | 我们建立自己的销售和市场营销能力，或寻求合作伙伴来商业化ibezapolstat及/或其他产品候选者（如果获得批准）的能力； |
| ● | 我们为运营获得资金的能力； |
| ● | 我们前临床研究和临床试验的启动、时机、进展和结果，以及我们的研发项目； |
| ● | 预计监管申请的时机； |
| ● | 临床试验数据可用的时机； |
| ● | 持续的COVID-19大流行的影响以及我们对此的回应; |
| ● | 我们关于费用、资本需求和额外融资需求的估计的准确性; |
| ● | 我们留住关键专业人员持续服务的能力，以及识别、招聘和留住其他合格专业人员的能力; |
| ● | 我们将临床前的候选产品推进，并成功完成临床试验的能力； |
| ● | 我们招募和登记适合患者参加临床试验的能力以及登记的时间； |
| ● | 各种科学、临床、监管和其他产品开发目标的实现时间或可能性； |
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| ● | 如果获批准，产品候选物的定价和报销； |
| ● | 产品候选者获得批准后，市场接受程度和速度。 |
| ● | 我们业务模式、业务、产品候选人和技术的实施以及战略计划; |
| ● | 涵盖产品候选物和技术的知识产权权利的保护范围，我们能够建立和维护的范围； |
| ● | 与我们的竞争对手和我们所在的行业有关的发展； |
| ● | 重大公共卫生问题的发展，包括新冠疫情爆发或全球出现的其他大流行病以及其对我们临床试验、业务运营和资金需求的未来影响； |
| ● | 近期美国和全球信贷和金融市场的动荡和波动的影响，以及俄罗斯与乌克兰之间的冲突以及以色列与哈马斯之间的中东冲突。 |
| ● | 我们普通股价格的波动性； |
| ● | 我们的财务表现；和 |
| ● | 其他风险和不确定性，包括在“风险因素”中列出的那些。 |
尽管我们认为前瞻性声明中反映的预期是合理的，但我们无法保证未来的结果、活动水平、绩效或成就。此外，我们和任何其他人都不对这些前瞻性声明的准确性和完整性承担责任。我们在本季度财报中做出的任何前瞻性声明仅代表做出声明的日期。我们不承担更新本季度财报日期之后对任何这些前瞻性声明的责任，以使这些声明符合实际结果或修订后的预期。
其他风险可能会不时在适用证券法下的备案中描述。新的风险不时出现。我们的管理层无法预测所有风险。本季度财报中所有前瞻性声明仅代表发表日期，并基于我们当前的信念和期望。我们不负责更新或修订任何前瞻性声明，无论是基于新信息、未来事件还是其他原因而导致。
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第一部分 - 财务信息
项目1. 精简的中期基本报表。
Acurx制药公司
简化中间资产负债表
9月30日 |
| 十二月31日， | ||||
| 2024 |
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(未经审计) | (附注2) | |||||
资产 |
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现金 | $ | | $ | | ||
其他应收款 | | | ||||
预付费用 |
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资产总计 | $ | | $ | | ||
负债及股东权益 |
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流动负债 |
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应付账款及应计费用 | $ | | $ | | ||
流动负债合计 |
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负债合计 |
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承诺和 contingencies |
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普通股；$ |
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累计赤字 |
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股东权益合计 |
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负债和股东权益总计 | $ | | $ | | ||
请参阅附带的简明中期基本报表附注。
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阿康诺斯制药股份有限公司
经营活动财务摘要
| 三个月截至 |
| 九个月结束 |
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9月30日 | 九月30日， | ||||||||||||
| 2024 |
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(未经审计) | (未经审计) | (未经审计) | (未经审计) | ||||||||||
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研究与开发 | $ | | $ | | $ | | $ | | |||||
总务及行政开支 |
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总营业费用 |
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净损失 | $ | ( | $ | ( | $ | ( | $ | ( | |||||
每股损失 |
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每股普通股基本和稀释净亏损 | $ | ( | $ | ( | $ | ( | $ | ( | |||||
普通股基本和稀释平均股数 |
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请参阅附带的简明中期基本报表附注。
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阿康诺斯制药股份有限公司
股东权益变动简明中期报表 （未经审计）
| 普通股 | |||||||||||||
额外 | 总计 | |||||||||||||
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股票 | 金额 | 注册资本 | 赤字 | 资产 | ||||||||||
2023年1月1日余额 |
| | $ | | $ | | $ | ( | $ | | ||||
股权奖励 |
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供应商的股份支付 |
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净损失 |
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2023年3月31日余额 |
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基于股份的报酬 |
| — | — | | — | | ||||||||
发行普通股份和实发权证作为注册直接发行的一部分，净额为 $ | | | | — | | |||||||||
预先资金支付的权证行权 | | | ( | — | | |||||||||
净损失 |
| — | — | — | ( | ( | ||||||||
2023年6月30日的余额 |
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股权奖励 | — | — | | — | | |||||||||
净亏损 | — | — | — | ( | ( | |||||||||
2023年9月30日余额 | | $ | | $ | | $ | ( | $ | | |||||
2024年1月1日的余额 | | $ | | $ | | $ | ( | $ | | |||||
基于股份的报酬 | — | — | | — | | |||||||||
供应商的股份支付 | | | | — | | |||||||||
根据市场销售协议发行普通股股票，净额为$ | | | | — | | |||||||||
认股权行权 | | | | — | | |||||||||
净损失 | — | — | — | ( | ( | |||||||||
截至2023年6月30日的前六个月 | | | | ( | | |||||||||
基于股份的报酬 | — | — | | — | | |||||||||
供应商的股份支付 | | | | — | | |||||||||
按市场价格销售协议发行普通股股票，净额$ | | | | — | | |||||||||
净损失 | — | — | — | ( | ( | |||||||||
2024年6月30日的余额 | | | | ( | | |||||||||
股权奖励 | — | — | | — | | |||||||||
向供应商支付的股份报酬 | | | | — | | |||||||||
根据市场价格销售协议发行普通股份，减去$净额 | | | | — | | |||||||||
净损失 | — | — | — | ( | ( | |||||||||
2024年9月30日的余额 | | $ | | $ | | $ | ( | $ | | |||||
请参阅附带的简明中期基本报表附注。
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阿康诺斯制药股份有限公司
简明中期现金流量表
九个月结束 | |||||||
九月30日， | |||||||
2024 | 2023 | ||||||
(未经审计) | (未审核) | ||||||
经营性现金流： |
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净亏损 | $ | ( | $ | ( | |||
调整以使净亏损与用于经营活动的净现金吻合： |
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基于股份的报酬 |
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供应商的股份支付 |
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资产和负债的变动： |
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其他应收款 | | — | |||||
预付费用 |
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应付账款及应计费用 | | | |||||
经营活动中的现金流量净额 | ( | ( | |||||
筹资活动现金流: |
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认股权行权 | | — | |||||
市场发行的收益，扣除发行成本 | | — | |||||
注册直接发行的收益，扣除发行成本 | — | | |||||
预先资金支付的权证行权 | — | | |||||
融资活动提供的净现金 | | | |||||
现金减少净额 |
| ( |
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期初现金余额 | | | |||||
期末现金余额 | $ | | $ | | |||
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非现金融资活动的补充披露 | |||||||
2023年注册直接融资成本（注4） | $ | — | $ | | |||
请参阅附带的简明中期基本报表附注。
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ACURX 制药有限公司
简明中期财务报表附注（未经审计）
注释 1 — 操作性质
商业
Acurx Pharmicals, Inc.，一家特拉华州公司，前身为Acurx Pharmicals, LLC（“公司”）是一家临床阶段的生物制药公司，成立于2017年7月，于2018年2月开始运营。该公司专注于开发一种治疗严重或危及生命的细菌感染的新型抗生素。
2020年3月，世界卫生组织宣布COVID-19爆发19，一种新型冠状病毒毒株，一种全球大流行病。随着病毒的持续传播，这次疫情对全球的企业和市场造成了重大干扰。此前，公司的临床试验业务受到 COVID-19 疫情的直接和间接的不利影响，并可能继续受到直接和间接的不利影响。对公司运营和财务业绩的影响程度将取决于未来的发展，包括疫情的持续时间、传播和强度，以及政府、监管和私营部门的应对措施，通货膨胀、供应链中断和劳动力短缺造成的直接和间接经济影响，所有这些都不确定且难以预测。尽管公司无法估计疫情的财务影响，但目前，如果疫情持续很长时间，可能会对公司的业务、经营业绩、财务状况和现金流产生重大不利影响。财务报表未反映因疫情而作出的任何调整。
2018 年 2 月，公司从 GlSynthesis, Inc. 购买了一种名为 GLS362E（更名为 ACX-362E，现已获准使用非专有名称 ibezapolstat）（“资产”）的活性药物成分、知识产权和其他权利。该公司支付了美元
公司自成立以来的主要活动除组织活动外，还包括开展与开发其两种抗生素候选药物相关的研发活动，以及通过股票发行筹集资金，包括2021年6月完成的首次公开募股（“IPO”）。该公司自成立以来没有产生任何收入。
自成立以来，公司一直经历净亏损和运营现金流负数，预计这种情况将在可预见的将来持续下去。该公司需要通过出售证券筹集资金来维持运营。2021 年 6 月 29 日，公司完成首次公开募股，发行了
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候选产品将获得食品和药物管理局（“FDA”）或其他全球监管机构的批准，或变得具备商业可行性。公司面临着生物制药行业公司常见的风险，包括但不限于对合作安排的依赖、公司或其竞争对手新技术创新的开发、对关键人员的依赖、对专有技术的保护，以及遵守FDA和其他政府规定及批准要求。
部分去年数额已经重新分类，以保证与本年度呈现的一致性。这种再分类不会对2023年9月30日的总资产和总负债或2024年3月31日、2023年和2022年六个月的现金流量和综合收益（损失）和股东权益变动产生影响。
报告范围
随附的未经审计的简明中期基本报表是根据美国通用会计原则（“GAAP”）以及美国证券交易委员会针对中期报告的规则和规定编制的。在管理层看来，这些未经审计的中期基本报表包括所有调整，仅包括正常、经常性的调整，这是公正陈述公司财务状况、运营结果和现金流所必需的。未经审计的中期运营结果不一定能够指示全年可能发生的结果。年末简明中期资产负债表数据源自审计的基本报表，但未包含GAAP要求的所有披露。管理层认为，在与2023年12月31日提交的Form 10-k审计财务报表及相关说明一起阅读时，此处提供的披露是充分的。
使用估计
根据GAAP编制财务报表要求管理层进行估计和假设，这些估计和假设会影响财务报表日期资产和负债的报告金额及或有资产和负债的披露，以及报告期间支出的报告金额。实际结果可能会与这些估计不同。
所得税
公司估计截至2024年12月31日的年度有效税率为
基于公司产生经营亏损的历史以及其对可预见未来经营亏损的预期，公司已确定这些净经营亏损的税收优惠不太可能实现，并已记录对所有递延税资产的全额评估准备金。如果公司的评估发生变化，与历史净经营亏损结转相关的税收优惠可能因未来所有权变动而受到限制。
在2024年第二季度，公司申请了合格小企业的工资税抵免，以增加研究活动，金额为$
信贷风险集中
公司将大部分现金余额保存在一家金融机构中。该余额在联邦存款保险公司（“FDIC”）允许的最大限额内投保。公司在这些账户中没有经历任何损失，并且不认为其面临任何重大现金损失风险。有时，现金余额可能会超过FDIC的最大投保限额。截至2024年9月30日，公司在美国银行账户中的现金约为$
研究与开发
公司在发生时会将研究和开发费用进行费用核算。有时，公司可能会为未来的研究和开发服务预付现金。这些金额会被递延，并在服务提供的期间进行费用核算。公司在研究和开发方面发生的费用为$
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对某些研究和开发活动的成本，比如为临床试验活动提供服务，是基于对特定任务完成进度的评估而估计的，可能使用数据，如受试者招募情况、临床研究中心的激活情况或公司向其供应商提供的实际成本相关信息。这些活动的支付基于个别安排的条款，可能不同于发生的成本模式，并在基本报表中反映为预付或应计的研究和开发费用。这些估计值将根据在基本报表发布时最佳信息进行调整。公司对服务执行的状况和时间的估计可能与实际执行的状况和时间有所不同。
基于股份的报酬
公司核算向员工、董事和顾问提供的服务的成本，以换取公司的普通股或股票期权，基于授予日奖励的公允价值。公司根据必要服务期间确认补偿费用。
与股票期权奖励相关的补偿费用将根据授予日的期权公允价值在必要服务期间内确认，这是基于Black-Scholes期权定价模型确定的。期权估值模型需要输入高度主观的假设，包括预期价格波动率。公司的员工股票期权具有与交易期权显著不同的特征，主观输入假设的变化可能会显著影响使用Black-Scholes期权定价模型进行的公允价值计算。由于公司的股票期权没有市场，而且对公司的股票的历史经验非常有限，类似的上市公司用于比较波动率和股息率。无风险利率是从具有可比到期日的美国国债中确定的。
供应商的股份支付
公司按照授予的普通股、股票期权或认股权的授予日公允价值或已确定的服务公允価值中较容易确定的那个作为成本核算服务供应商提供的服务。公司将在与公司为服务支付现金的方式和同一期间内确认费用。
主要供应商
公司有三家主要供应商负责约占研发支出的
截至2024年9月30日，有三家供应商负责约占
备注3 - 应付账款和应计费用
截至2024年9月30日和2023年12月31日的应付账款和应计费用如下：
| 2024年9月30日 |
| 2023年12月31日 | |||
已发生的研究和开发 | $ | | $ | | ||
应计补偿费用 |
| |
| | ||
应计专业费用 |
| |
| | ||
其他应付款及应计费用 |
| |
| | ||
总计 | $ | | $ | | ||
注4 - 股权发行
于2021年6月23日，Acurx Pharmaceuticals, LLC 被转为公司并更名为 Acurx Pharmaceuticals, Inc。 公司的公司章程授权
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2023年5月16日，公司与一家美国机构投资者签署了证券购买协议，该投资者名为（“2023投资者”），公司根据协议，通过向2023投资者直接遵照发行并售出注册直接提供的方式（“2023注册发行”），共发行并售出了
在一项同时进行的定向增发（“2023定向增发”及与2023注册发行合称“2023发行”）中，公司向投资者发行了C系列权证，总计可行权金额为
作为2023发行的一部分，公司还与2023投资者签订了权证修正协议。根据该协议，公司修改了现有的A系列权证，最多可购买总计
In January 2024, the Affiliate Investors exercised
The following table summarizes information with respect to outstanding warrants to purchase common stock of the Company as of September 30, 2024:
加权平均 | ||||||
| 认股权证数量 |
| 行权价 | |||
2023年12月31日的余额 | | $ | | |||
已发行 |
| — | — | |||
Exercised |
| ( | | |||
2024年9月30日的余额 |
| | $ | | ||
未行使认股权证的加权平均合同期限为
于2023年11月15日，公司签订了销售协议并设立了ATm计划，根据该计划，公司可以不时通过A.G.P./全球联盟合作伙伴作为销售代理，以总价高达$进行发行和销售其普通股股票
公司出售的
截至2024年9月30日，公司总共出售了
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截至2024年9月30日的未结算股票包含在随附的简明中期的 “其他应收账款” 余额中 资产负债表。未结算股票的应收账款已于2024年10月1日收取，
截至 2024 年 9 月 30 日，该公司拥有 $
附注5 — 基于股份的薪酬
2021 年 4 月，董事会批准了 2021 年股权激励计划（“计划”）的制定。该计划自公司转换完成之日起生效，根据该计划，每年有常青条款。该计划目前总共储备了
2021年6月，公司授予股票期权，总共购买了
2021年7月，公司授予股票期权，总共购买了
2022年1月，公司授予股票期权，总共购买了
2022年4月，公司授予股票期权，总共购买了
2023年2月，公司授予股票期权，总共购买了
2023年6月，公司授予股票期权，总共购买了
2024年2月，公司授予股票期权，总共购买了
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期权每月解禁
2024年6月，公司根据该计划向其五名独立董事会授予了购买总计股份的股票期权。
这些奖励的补偿费用根据授予日期权的公允价值在归属期间内确认，根据Black-Scholes模型确定。 期权估值模型需要输入高度主观的假设，包括预期价格波动率。 公司的员工股票期权具有与交易期权明显不同的特征，并且主观输入假设的变化可能会显着影响使用Black-Scholes期权定价模型计算的公允价值。 由于公司的股票期权没有公开市场，而且与公司的股票几乎没有历史经验，因此类似的上市公司被用于比较波动率和股利收益率。 无风险利率是通过具有可比到期期限的美国国债推导出的。
公司使用Black-Scholes期权定价模型确定期权奖励的公允价值，并使用以下加权平均假设：
九个月截至 | |||||||
九月三十日, | |||||||
2024 | 2023 | ||||||
预期期限 | 年 | 年 | |||||
波动性 | | % | | % | |||
股息率 | — | % | — | % | |||
无风险利率 | | % | | % | |||
加权平均授予日公正价值 | $ | | $ | | |||
公司股票期权活动概况如下：
加权 | |||||||||
平均 | |||||||||
加权 | 未行权期限平均 | 总计 | |||||||
数量 |
| 平均 | 期限 | 内在价值 | |||||
Options |
| 行权价格 | （年） | 价值 | |||||
杰出的，已授与并预计在2023年12月31日实现 | | $ | | $ | | ||||
授予 | | | — | ||||||
已行使 | — | — | — | — | |||||
被取消 | — | — | — | — | |||||
优秀，授予并预计将于2024年9月30日行使 | | $ | | $ | — | ||||
可行使的 | | $ | | $ | — | ||||
截至2024年9月30日，这些期权尚未确认的总非货币补偿费用为$
注6 - 分享基础支付给供应商
2022年第四季度，公司与供应商签订了多项协议，根据协议，公司发放了总共
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In the first quarter of 2023, the Company entered into an agreement with a consultant to provide investor relation services for a
2023年第四季度，公司与供应商签订了若干协议，根据这些协议，公司发放了总额为的普通股。
2024年第一季度，公司与两家顾问分别签订协议，提供投资者关系服务，期限为
2024年第二季度，公司与两名顾问分别签订协议，提供投资者关系服务，为期
2024年9月30日和2023年截至同日的九个月的普通股每股基本和摊薄净损失是通过将净损失除以期间内普通股加权平均流通股份数来确定的。公司的潜在稀释股份包括
期权，在所有期间的稀释净损失每股计算中未予考虑，因为结果会产生抗稀释效应。
附注8 - 承诺和或然事项
根据2018年2月的资产购买协议，公司需要根据ACX-362E的持续开发进行一定的重要阶段支付，总计 $
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项目2. 财务状况和经营业绩管理层讨论与分析
以下关于我们财务状况和运营结果的讨论与分析应与我们的未经审计的缩减基本报表一起阅读， 中期 基本报表及与之相关的附注见于本季度报告10-Q表格的其他部分，以及我们的经过审计的合并基本报表、相关附注和标题为“管理层关于财务状况和运营结果的讨论与分析”的部分，这些内容包含在截至2023年12月31日的财年年度报告10-K表格（“2023年度报告”）中，并于2024年3月15日向美国证券交易委员会（“SEC”）提交。本讨论，尤其是关于我们未来运营结果或财务状况、业务策略和计划以及管理层未来营运目标的信息，包括前瞻性陈述，这些陈述包含风险和不确定性，具体描述见于本季度报告10-Q表格标题为“关于前瞻性陈述的特别说明”。您应查看本季度报告10-Q表格标题为“风险因素”下的披露，以讨论可能导致我们的实际结果与这些前瞻性陈述所预期结果存在重大差异的重要因素。
概述
我们是一家后期生物制药公司，专注于开发新型小分子抗生素，以治疗难以治愈的细菌感染。我们的策略是开发具有格兰阳性特异性光谱（“GPSS®”）的抗生素候选药物，这些药物阻断格兰阳性特定细菌酶脱氧核糖核酸（“DNA”）聚合酶IIIC（"pol IIIC"）的活性位点，抑制DNA复制并导致格兰阳性细菌电芯死亡。我们的研究与开发（“R&D”）管道包括针对格兰阳性细菌的抗生素产品候选药物，包括 Clostridioides difficile耐甲氧西林金黄色葡萄球菌（“MRSA”）、耐万古霉素肠球菌（“VRE”）和耐药性肺炎链球菌（“DRSP”）。
这些细菌靶点被世界卫生组织（“WHO”）、美国疾病控制与预防中心（“CDC”）和美国食品药品监督管理局（“FDA”）列为优先病原体。优先病原体是指需要新抗生素来应对全球抗微生物耐药性（“AMR”）危机的病原体，这些病原体已被WHO、CDC和FDA确定。
我们的市场机会。
CDC估计，在美国，抗生素耐药性病原体每11秒就感染一人，每15分钟导致一人死亡。WHO最近表示，日益增长的抗微生物耐药性与最近的COVID-19大流行同样危险，威胁到一个世纪以来的医疗进步，并可能让我们在面对目前可以轻松治疗的感染时不堪一击。根据WHO，目前的临床开发管道对抗应对日益增加的抗微生物耐药性的挑战仍然不足。
我们认为我们正在开发的第一种DNA聚合酶IIIC抑制剂即将进入第三阶段临床试验，而我们的第二阶段临床试验为我们的主要聚合酶IIIC抗生素候选药物提供了积极的临床试验结果。
聚合酶IIIC是多种革兰氏阳性细菌细胞DNA复制的主要催化剂。我们的研发管道包括针对革兰氏阳性细菌的临床阶段和早期抗生素候选药物，用于口服和/或注射治疗引起的感染。 艰难梭菌 （“艰难梭状芽胞杆菌”）、肠球菌（包括耐万古霉素肠球菌）、葡萄球菌（包括耐甲氧西林金黄色葡萄球菌）和链球菌（包括耐抗生素菌株）。
Pol IIIC 在某些革兰阳性细菌物种的 DNA 复制中是必需的。通过阻断该酶，我们的抗生素候选药物被认为具有杀菌作用，并抑制几种常见革兰阳性细菌病原体的增殖，包括敏感菌和耐药菌。 艰难梭菌感染（CDI）。Ibezapolstat 是一种新颖的口服抗生素，正在研发为革兰氏阳性选择波谱（GPSS，耐甲氧西林金黄色葡萄球菌、耐万古霉素肠球菌、耐青霉素的肺炎链球菌（“PRSP”）和其他耐药细菌。
我们预计会与一家全面整合的药品公司合作进行晚期临床试验和商业化，或在这种合作之前进行第三阶段临床试验，并继续定期审查合作机会，直至 FDA 批准。
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我们的主导抗生素候选药物ibezapolstat（前称ACX-362E）具有独特的作用机制，针对pol IIIC酶，这是一个先前未开发的科学靶标。一项第2期临床试验，包括第2a阶段和20亿阶段，提供的数据表明我们的主导抗生素候选药物具有积极的临床试验结果，并验证了pol IIIC作为一个合适的细菌靶标。
我们的首席产品候选
目前可用的抗生素用于治疗 C。难辛普生菌 感染（“CDI”）采用其他作用机制。我们相信ibezapolstat是第一种处于晚期临床试验阶段，通过阻断DNA pol IIIC酶起作用的抗生素候选药物在 艰难梭菌感染（CDI）。Ibezapolstat 是一种新颖的口服抗生素，正在研发为革兰氏阳性选择波谱（GPSS。这种酶对某些革兰氏阳性细菌的DNA复制是必不可少的，如 C. difficle.
我们的其他候选人
我们还拥有早期阶段的抗生素产品候选，具有先前未开发的相同作用机制，在动物研究中已经证明了概念。这个产品线包括ACX-375C，一个潜在的口服和静脉治疗，针对革兰阳性细菌，包括MRSA、VRE和PRSP。
我们继续评估公司的战略交易，包括寻找合作伙伴进一步发展和潜在商业化我们的主导抗生素候选药物ibezapolstat，以及潜在的出售、合并、第三方许可安排或其他战略交易。目前，我们还没有得到潜在合作伙伴或其他方面提供资金的承诺。
近期发展
2024年9月26日，我们宣布了关于ibezapolstat在肠道微生物组中益处影响的新分析结果。数据显示，有益的梭菌门和受益的梭菌门（厚壁菌门）的数量增加，逆转菌群失衡，有助于ibezapolstat的CDI抗复发效果。 actinobacteriota的增加以及有益的厚壁菌门（梭菌门）的数量增加导致菌群失衡的逆转，有助于ibezapolstat的CDI抗复发效果。ACX-375 DNA pol IIIC类似物的某些微生物学测试，在包括佛罗里达大学在内的独立合格实验室中进行，展示了体外活性。 对包括炭疽杆菌在内的生物恐怖类别A病原体的最小抑菌浓度为0.5-2mcg/mL，包括对头孢氨嗪耐药炭疽杆菌的活性。这些结果是在2024年9月在斯洛文尼亚布莱德举办的首届国际Cdifficile 症状学术研讨会（“ICDS”）于2024年9月在斯洛文尼亚布莱德举行。
2024年9月24日，我们宣布了与莱顿大学医学中心合作进行的有关ibezapolstat的开创性研究结果。对DNA pol IIIC抑制剂的作用方式进行了详细的演示，对于ibezapolstat尤为重要，以支持我们的科学基础和我们的监管申报，因为我们正推进至ibezapolstat开发的晚期阶段。这些结果在2024年9月举办的ICDS上也相似地被呈现。 2024年9月举办的ICDS上也类似地被呈现.
Ibezapolstat第2阶段 临床结果
2023年11月2日，我们宣布了艾贝左普利塞特（ibezapolstat）对CDI患者进行的第2期临床试验概述性结果。在临床试验的第2期段，根据协议人群观察到的临床治愈率是：艾贝左普利塞特组中16名患者中有15名（94%），万古霉素组中14名患者中有14名（100%）。在评估艾贝左普利塞特治疗CDI患者的第2a期段临床试验中，根据协议人群观察到的临床治愈率是10名患者中有10名（100%）。根据试验终止时可用数据进行的事后分析显示，在CDI患者的第2a期和第2期段的临床试验中，艾贝左普利塞特的整体临床治愈率为96%（26名患者中有25名），其中根据协议人群，在第2a期段有10名患者（100%），第2期段有16名患者中的15名（94%）。我们相信，基于艾贝左普利塞特整体临床治愈率96%和约为81%的万古霉素历史治愈率（Vancocin®处方信息，2021年1月），按照适用的FDA行业指南（2022年10月）进行的第3期试验将能够证明艾贝左普利塞特与万古霉素的非劣效性，尽管不能保证这些早期第2期数据将能够预测第3期临床试验的结果。
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对20阶段次要终点和探索性终点的进一步分析显示了以下结果：
| ● | 在治疗结束时（“EOT”）获得临床治愈（“CC”）的 ibezapolstat 治疗患者中，有 15 名（100%）仍然没有 艰难梭菌 EoT 后一个月内感染（“CDI”）复发，持续临床治愈（“SCC”）率为 100%。在2a期患者中，在接受ibezapolstat治疗的10例患者中，有10例（100％）在EoT后的一个月内没有CDI复发，SCC率为100％； |
| ● | 在接受标准护理万古霉素治疗的14名患者中，有2名在EoT后一个月内反复感染，SCC为86％； |
为了延长临床治愈时间，数据还显示，在接受过ibezapolstat治疗的患者中，100％（5例中的5例）同意在EoT进行CC后观察长达三个月的患者没有出现感染复发；
| ● | 对20期患者的其他微生物学和微生物组分析数据显示，显示粪便已根除的ibezapolstat的表现优于万古霉素 艰难梭菌 在接受治疗的16名患者中，有15名（94％）在治疗的第3天，而万古霉素已根除 艰难梭菌 在14名接受治疗的患者中，有10例（71％）；以及 |
| ● | Ibezapolstat，但不是万古霉素，它持续保存并允许关键肠道细菌物种的再生，这些细菌被认为具有健康益处，包括防止CDI复发。 |
Ibezapolstat在2期临床试验中的耐受性良好。在20期患者中，有三名患者每人出现一种轻度不良事件，失明研究人员评估为与药物有关。这三起事件本质上都是胃肠道事件，未经治疗即可解决。在2a期患者中，有四名患者报告了七起不良事件，其中只有一起（恶心）可能与ibezapolstat有关。发生了一起严重的不良事件（偏头痛加重），但被认为与ibezapolstat无关。在2期临床试验的两个部分中，均未出现药物相关治疗中断或与药物相关的严重不良事件或其他令人担忧的安全性发现。
今年晚些时候，将对2期临床试验20期部分的其他探索性终点进行进一步分析。该公司预计将在2024年的一次或多次科学会议上公布2期临床试验的数据。
我们于2024年4月17日与美国食品药品管理局召开了第二阶段末会议，并于2024年5月15日宣布我们成功举行了会议，包括确认Ibezapolstat的第三阶段准备就绪用于治疗 艰难梭菌 感染。与美国食品药品管理局就推进我们的国际3期临床试验计划的关键要素达成协议。还与美国食品和药物管理局就提交新药申请（“NDA”）上市批准的完整非临床和临床开发计划达成协议。计划继续推动ibezapolstat进入国际3期临床试验，用于治疗以下疾病 艰难梭菌 感染（“CDI”）。我们现在还准备提交指导申请，以便在欧盟、英国、日本和加拿大启动临床试验，并准备在第三阶段注册之前与美国食品和药物管理局举行生产会议。
2024 年 7 月，我们宣布一项新专利已获得美国专利和商标局（“USPTO”）的批准。该专利涉及ibezapolstat及其用于治疗的用途 艰难梭菌 感染，同时减少感染的复发，并改善肠道微生物组的健康。这是我们为保护我们在抗微生物药物领域的专有技术而提交的一系列已授权专利和待处理专利申请中的最新一项。
2024年8月，我们成功地与美国食品药品管理局举行了第二阶段会议，确认了我们的3期临床试验准备就绪，此后，根据美国食品药品管理局的监管要求，我们于2024年8月向美国食品和药物管理局提交了开会申请，以审查我们的药物物质的制造工艺和规格以及我们的3期临床试验的最终项目和包装（通常称为化学、制造和控制（“CMC”））。我们预计美国食品和药物管理局将在第四季度批准一次会议。
2023 年市场发行
2023 年 11 月 15 日，我们签订了销售协议并制定了 “aTm 计划”，根据该计划，我们可以不时通过 A.G.P/Alliance Global Partners 作为销售代理发行和出售我们的普通股
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总发行价高达1700万美元。根据销售协议，销售代理有权获得3％的补偿根据销售协议，通过其出售的所有普通股的发行收益总额的0.0％。
截至2024年9月30日的期间，我们共出售了2692,190股股票 AtM计划下的普通股，加权平均价格为每股3.35美元，在扣除销售代理佣金和其他自动柜员机计划相关费用后，共筹集了900万美元的总收益和860万澳元的净收益。截至2024年11月11日，自2023年11月实施自动柜员机计划以来，其总销售额约为900万美元，而自动柜员机设施总额为1,700万美元。
根据aTm计划，未来仍有大约800万美元可用于出售普通股。
冠状病毒（COVID-19）对我们业务的影响
诸如流行病或类似疫情之类的公共卫生危机可能会对我们的业务产生不利影响。值得注意的是，COVID-19 疫情仍在继续演变。COVID-19 对我们或合作者、供应商、承包商、供应商、临床试验场所和其他重要业务关系和政府机构的业务的影响程度将取决于未来的发展，这些事态发展高度不确定，无法自信地预测，包括疫情的最终持续时间、将出现的有关病毒严重程度的新信息以及遏制或治疗其影响的行动等。尽管 COVID-19 疫情带来的潜在经济影响及其最终持续时间一直难以评估或预测，但COVID-19 的传播已经在全球范围内造成了广泛的影响。COVID-19 疫情可能在多大程度上影响我们的业务仍然非常不确定，无法自信地预测。
运营业绩的组成部分
收入
自成立以来，我们没有产生任何收入，预计在不久的将来不会通过产品销售产生任何收入（如果有的话）。
研究与开发费用
迄今为止，我们的研发费用主要与ibezapolstat的开发、临床前研究以及与我们的产品组合相关的其他临床前活动有关。研究与开发费用确认为已发生的支出，在收到用于研究和开发的商品或服务之前支付的款项在收到商品或服务之前记作资本化。
研发费用包括：
| ● | 根据与合同研究机构（“CRO”）和顾问签订的协议产生的外部研发费用，以进行我们的临床前、毒理学和其他临床前研究； |
| ● | 实验室用品； |
| ● | 与生产候选产品相关的成本，包括支付给第三方制造商和原材料供应商的费用； |
| ● | 许可费和研究经费；以及 |
| ● | 设施、折旧和其他分配费用，包括租金、设施维护、保险、设备和其他用品的直接和分配费用。 |
临床试验成本是研发开支的重要组成部分，包括与第三方承包商相关的成本。我们将很大一部分临床试验活动外包，利用外部实体，例如CRO、独立临床研究人员和其他第三方服务提供商来协助我们执行临床试验。
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我们计划在可预见的未来大幅增加研发支出，以继续开发我们的产品候选物，并寻求发现和开发新的产品候选物。由于临床前和临床开发具有固有的不可预测性，我们无法确定未来临床试验和临床前研究的启动时间、持续时间或成本。临床和临床前发展时间表、成功的概率和开发成本可能与预期显著不同。我们预计，我们将根据临床前研究和临床试验的持续和未来结果、监管发展和我们对每个产品候选物商业潜力的持续评估，对要推进的产品候选物和开发计划以及要向每个产品候选物或计划投入多少资金进行决策。此外，我们无法预测哪些产品候选物可能会成为未来合作伙伴，这些安排将在何时获得，如果有的话，以及这些安排将以何种程度影响我们的开发计划和资本需求。
我们未来临床开发成本可能会基于以下因素而显著变化:
| ● | 每患者试验成本; |
| ● | 获得监管批准所需试验次数; |
| ● | 试验中包含的网站数量; |
| ● | 进行试验的国家; |
| ● | 招募符合条件的患者所需的时间; |
| ● | 参加试验的患者数量; |
| ● | 患者接受的剂量数量； |
| ● | 患者退出或中止的比例; |
| ● | 监管机构要求进行的潜在额外安全监测; |
| ● | 患者参与试验和随访的持续时间； |
| ● | 产品候选品的开发阶段；和 |
| ● | 产品候选物的功效和安全个人履历。 |
一般和管理费用
一般管理费用主要包括高管、财务和其他行政职能人员的薪酬和与员工相关的费用，包括股权补偿，以及设施相关费用、知识产权和公司事务的法律费用、会计和咨询服务的专业费用以及保险费用。我们预计将增加一般管理费用，以支持持续的研发活动、在产品商业化前的准备阶段以及如果任何产品候选获得营销批准后的商业化活动。我们还预计将增加审计、法律、监管和与交易所及SEC要求合规相关的税务服务相关费用，以及董事和高管保险费用、作为上市公司运营的投资者关系费用。
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经营结果
2024年9月30日结束的三个月与2023年9月30日结束的三个月相比
下表总结了截至2024年9月30日的三个月与截至2023年9月30日的三个月之间的营业结果变化：
三个月截至 |
| ||||||||
九月30日， | 百分比 | ||||||||
| 2024 |
| 2023 |
| 改变 |
| |||
(以千为单位) |
| ||||||||
营业费用: |
|
|
|
|
|
| |||
研究与开发 | $ | 1,198 | $ | 1,349 |
| (11) | % | ||
总务及行政开支 |
| 1,623 |
| 1,766 |
| (8) | % | ||
总营业费用 |
| 2,821 |
| 3,115 |
| (9) | % | ||
净亏损 | $ | (2,821) | $ | (3,115) |
| (9) | % | ||
研发开支
研发费用在截至2024年9月30日的三个月内为120万元，而在截至2023年9月30日的三个月内为130万元，减少了10万元，主要是由于制造业-半导体相关成本增加10万元，咨询费用减少20万元。
一般和管理费用
一般和行政费用在截至2024年9月30日的三个月内为160万元，而在截至2023年9月30日的三个月内为180万元，减少了20万元。减少的主要原因是专业费用增加20万元，补偿相关成本增加10万元，抵消了基于分享的补偿相关成本减少50万元。
净损失
截至2024年9月30日的三个月内净损失为280万元，而截至2023年9月30日的三个月内为310万元，减少了30万元，原因如上所述。
2024年9月30日结束的九个月与2023年9月30日结束的九个月相比
下表总结了截至2024年9月30日的九个月与截至2023年9月30日的九个月的运营结果变化：
| 九个月截至 |
|
|
| |||||
2023年9月30日 | 百分比 | ||||||||
| 2024 |
| 2023 |
| 变动 |
| |||
(以千为单位) |
| ||||||||
营业费用： |
|
|
|
|
|
| |||
研发 | $ | 4,579 | $ | 4,101 |
| 12 | % | ||
一般及行政费用 |
| 6,743 |
| 5,362 |
| 26 | % | ||
总营业费用 |
| 11,322 |
| 9,463 |
| 20 | % | ||
净亏损 | $ | (11,322) | $ | (9,463) |
| 20 | % | ||
研发费用
截至2024年9月30日的九个月内，研发费用为460万，而截至2023年9月30日的九个月内，研发费用为410万，增加了50万，主要是由于制造业-半导体相关成本增加了90万，部分抵消了咨询费用减少了40万。
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General and Administrative Expenses
General and administrative expenses were $6.7 million for the nine months ended September 30, 2024 and $5.4 million for the nine months ended September 30, 2023, an increase of $1.3 million. The increase was primarily due to $1.1 million increase in professional fees and $0.2 million increase in legal costs.
Net Loss
Net loss was $11.3 million for the nine months ended September 30, 2024, and $9.5 million for the nine months ended September 30, 2023, an increase of $1.8 million, due to the reasons stated above.
Liquidity and Capital Resources
Overview
Since inception, we have generated no revenue from operations and we have incurred cumulative losses of approximately $64.5 million as of September 30, 2024. We have funded our operations primarily from equity issuances. We received net cash proceeds of approximately $12.9 million from equity financings closed between March 2018 and October 2020. On June 29, 2021, we completed our IPO resulting in net proceeds of approximately $14.8 million after deducting underwriter discounts of $1.4 million and offering costs of approximately $1.1 million. On July 27, 2022, we completed a registered direct offering and concurrent private placement resulting in net proceeds of approximately $3.7 million after deducting placement agents fees of $0.3 million and offering costs of $0.2 million. On May 18, 2023, we completed a registered direct offering and a concurrent private placement resulting in net proceeds of approximately $3.5 million after deducting placement agents fee of $0.2 million and offering costs of $0.2 million. On November 15, 2023, we entered into a Sales Agreement and established the ATM Program, pursuant to which we may offer and sell, from time to time, through A.G.P./Alliance Global Partners, as sales agent, shares of our common stock having an aggregate offering price of up to $17.0 million. Under the ATM Program, we raised net proceeds of approximately $8.6 million after deducting sales agent commissions and other related expenses of $0.4 million.
Based upon our lack of revenue expected for the foreseeable future, and because of numerous risks and uncertainties associated with the research, development and future commercialization of our product candidates, we are unable to estimate with certainty the amounts of increased capital outlays and operating expenditures associated with our anticipated clinical trials and development activities.
As of September 30, 2024, we had working capital of $2.7 million, consisting primarily of $5.8 million of cash, $0.2 million of other receivable and prepaid expenses, offset by approximately $3.3 million of accounts payable and accrued expenses.
The following table sets forth selected cash flow information for the periods indicated:
| Nine Months Ended | |||||
| September 30, | |||||
| 2024 |
| 2023 | |||
(in thousands) | ||||||
Net cash (used in)/provided by: |
|
|
|
| ||
Operating activities | $ | (8,133) | $ | (5,603) | ||
Financing activities |
| 6,421 |
| 3,544 | ||
Net increase/(decrease) in cash | $ | (1,712) | $ | (2,059) | ||
Net Cash Used in Operating Activities
Net cash used in operating activities was $8.1 million for the nine months ended September 30, 2024. The net loss was greater than the net cash used in operating activities by $3.2 million, primarily attributable to share-based compensation and share-based vendor payments of $2.9 million and increase in accounts payable and accrued expenses of $0.3 million.
Net cash used in operating activities was $5.6 million for the nine months ended September 30, 2023. The net loss was greater than the net cash used in operating activities by $3.8 million, primarily attributable to share-based compensation and share-
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based vendor payments of $2.5 million and an increase in accounts payable and accrued expenses of $1.2 million and decrease in prepaid expenses of $0.1 million.
Net Cash Provided by Financing Activities
Net cash provided from financing activities was $6.4 million for the nine months ended September 30, 2024, which was primarily attributable to the ATM Program.
Net cash provided from financing activities was $3.5 million for the nine months ended September 30, 2023, which was attributable to the net proceeds from the registered direct offering.
Critical Accounting Policies and Estimates
Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses and share-based compensation. We base our estimates on historical experience, known trends and events, and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are described in more detail in Note 2, “Summary of Significant Accounting Policies,” we believe the following accounting policies and estimates to be most critical to the preparation of our financial statements.
Research and Development
We expense research and development costs when incurred. At times, we may make cash advances for future research and development services. These amounts are deferred and expensed in the period the services are provided.
Costs for certain research and development activities, such as the provision of services for clinical trial activity, are estimated based on an evaluation of the progress to completion of specific tasks which may use data such as subject enrollment, clinical site activations or information provided to us by our vendors with respect to their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the financial statements as prepaid or accrued research and development expense, as applicable. The estimates are adjusted to reflect the best information available at the time of the financial statement issuance. Although we do not expect our estimates to be materially different from amounts actually incurred, our estimate of the status and timing of services performed relative to the actual status and timing of services performed may vary.
Share-Based Compensation
We account for the cost of services performed by employees, directors and consultants received in exchange for an award of the Company’s common stock or stock options, based on the grant-date fair value of the award. We recognize compensation expense based on the requisite service period.
Compensation expense associated with stock option awards is recognized over the requisite service period based on the fair value of the option at the grant date determined based on the Black-Scholes option pricing model. Option valuation models require the input of highly subjective assumptions including the expected price volatility. Our employee stock options have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value computation using the Black-Scholes option pricing model. Because there is no public market for our stock options and very little historical experience with our stock, similar public companies were used for the comparison of volatility and the dividend yield. The risk-free rate of return was derived from U.S. Treasury notes with comparable maturities. We will continue to analyze the expected stock price volatility and will adjust our Black-Scholes option pricing assumptions as appropriate. Any changes in the foregoing Black-Scholes assumptions, or if we were to elect to utilize an alternative method for valuing stock options granted to employees, officers and directors, could potentially impact our stock-based compensation expense and our results of operations.
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Share-Based Payments to Vendors
We account for the cost of services performed by vendors in exchange for an award of our common stock or stock options, based on the grant-date fair value of the award or the fair value of the services rendered, whichever is more readily determinable. We also use Black-Scholes option pricing model for the purpose of estimating the fair value of options and warrants. Changes in our Black-Scholes assumptions, or if we were to utilize an alternative method for valuing options or warrants issued to our vendors, could impact our expense and our results of operations.
Other Company Information
Emerging Growth Company Status
We are an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, companies have extended transition periods available for complying with new or revised accounting standards. We have elected this exemption to delay adopting new or revised accounting standards until such time as those standards apply to private companies.
In addition, we intend to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, we are entitled to rely on certain exemptions as an emerging growth company; we are not required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b), (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis), and (iv) disclose certain executive compensation-related items. These exemptions will apply for a period of five years following the completion of our IPO or until we no longer meet the requirements of being an emerging growth company, whichever is earlier.
Recent Accounting Pronouncements not yet adopted
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands the disclosures required for income taxes. This ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The amendment should be applied on a prospective basis while retrospective application is permitted. The Company is currently evaluating the effect of this pronouncement on its disclosures.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to provide the information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As required by Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act, our management, including our principal executive officer and our principal financial officer, conducted an evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q of the effectiveness of the design and operation of our disclosure controls and procedures. In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period covered by this Quarterly Report on Form 10-Q.
Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
We can give no assurance that weaknesses in our internal control over financial reporting will not be identified in the future. Our failure to implement and maintain effective internal control over financial reporting could result in errors in our financial statements that could result in a restatement of our financial statements and cause us to fail to meet our reporting obligations.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations over Internal Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may become involved in litigation or other legal proceedings. We are not currently a party to any litigation or legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
ITEM 1A. RISK FACTORS
The following risk factors and other information included in this Quarterly Report on Form 10-Q should be carefully considered. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations. Please see page 3 of this Quarterly Report on Form 10-Q for a discussion of some of the forward-looking statements that are qualified by these risk factors. If any of the following risks occur, our business, financial condition, results of operations and future growth prospects could be materially and adversely affected.
Our business is subject to a number of risks of which you should be aware before making an investment decision. These risks include the following:
| ● | We are a clinical-stage company and have a limited operating history, which may make it difficult to evaluate our current business and predict our future performance. |
| ● | We have incurred significant net losses in each period since our inception and anticipate that we will continue to incur net losses for the foreseeable future and may never achieve or maintain profitability. |
| ● | Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability. |
| ● | We may need substantial additional funding. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts. |
| ● | Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates. |
| ● | We are reliant on the success of our lead product candidate, ibezapolstat, which we are developing for the treatment of CDI. If we are unable to commercialize ibezapolstat, or experience significant delays in doing so, our business will be materially harmed. |
| ● | If serious adverse or inappropriate side effects are identified during the development of ibezapolstat or any other product candidate, we may need to abandon or limit our development of that product candidate. |
| ● | Ibezapolstat or our other product candidates may never achieve sufficient market acceptance even if we obtain regulatory approval. |
| ● | We are exposed to product liability, and non-clinical and clinical liability risks which could place a substantial financial burden upon us, should lawsuits be filed against us. |
| ● | Our current and future operations substantially depend on our management team and our ability to hire other key personnel, the loss of any of whom could disrupt our business operations. |
| ● | Our failure to complete or meet key milestones relating to the development of our technologies and proposed products and formulations would significantly impair our financial condition. |
| ● | We will compete with larger and better capitalized companies, and competitors in the drug development or pharmaceutical industries may develop competing products which outperform or supplant our proposed products. |
| ● | A pandemic, epidemic, or outbreak of an infectious disease, such as the COVID-19 pandemic, could materially and adversely affect our business. |
| ● | Global market and economic conditions may negatively impact our business, financial condition and share price. |
| ● | Because results of preclinical studies and early clinical trials are not necessarily predictive of future results, any product candidate we advance may not have favorable results in later clinical trials or receive regulatory approval. Moreover, interim, “top-line,” and preliminary data from our clinical trials that we announce or publish may change, or the perceived product profile may be negatively impacted, as more patient data or additional endpoints (including efficacy and safety) are analyzed. |
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| ● | If clinical trials of our lead product candidate fail to demonstrate safety and efficacy to the satisfaction of the FDA, or the European Medicines Agency (“EMA”), or do not otherwise produce favorable results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete the development and commercialization of ibezapolstat or any other product candidate. |
| ● | If we experience any of a number of possible unforeseen events in connection with our clinical trials, potential marketing approval or commercialization of our product candidates could be delayed or prevented. |
| ● | We may be unable to obtain regulatory approval in the United States or foreign jurisdictions and, as a result, be unable to commercialize our product candidates and our ability to generate revenue will be materially impaired. |
| ● | Risks associated with operating in foreign countries could materially adversely affect our product development should we elect to extend development outside the U.S. |
| ● | Our results of operations may be adversely affected by current and potential future healthcare legislative and regulatory actions. |
| ● | If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our product candidates, we may not be successful in commercializing ibezapolstat or any other product candidate if and when such product candidates are approved. |
| ● | We contract with third parties for the manufacture of our product candidates for preclinical studies and our ongoing clinical trials, and expect to continue to do so for additional clinical trials and ultimately for commercialization. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or drugs or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts. |
| ● | If ultimate users of our product candidates are unable to obtain adequate reimbursement from third- party payers, or if new restrictive legislation is adopted, market acceptance of our proposed products may be limited and we may not achieve material revenues. |
| ● | We may be involved in lawsuits to protect or enforce our patents. |
| ● | Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities. |
| ● | Because we do not anticipate paying any cash dividends on our common stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain. |
| ● | The price of our stock may be volatile, and you could lose all or part of your investment. |
| ● | Our largest stockholders will exercise significant influence over our company for the foreseeable future, including the outcome of matters requiring stockholder approval. |
| ● | Cyber incidents or attacks directed at us could result in information theft, data corruption, operational disruption and/or financial loss. |
| ● | We may fail to comply with evolving privacy and data protection laws, which could adversely affect our business, results of operations and financial condition. |
| ● | There may be limitations on the effectiveness of our internal controls, and a failure of our control systems to prevent error or fraud may materially harm us. |
Risks Relating to Our Business
We are a clinical-stage company and have a limited operating history, which may make it difficult to evaluate our current business and predict our future performance.
We are a clinical-stage biopharmaceutical company that was formed in July 2017. We acquired the rights to our lead product candidate, ibezapolstat, in February 2018 and we have a limited operating history. Our operations to date have been limited to securing our initial product candidate, generating a second product candidate in-house, conducting clinical and regulatory development for our lead program and raising capital. We have no products approved for commercial sale and have not generated any revenue.
Investing in an early-stage company with limited history, financial or otherwise, includes a high degree of risk. As an early-stage company, our prospects must be considered in light of the uncertainties, risks, expenses, and difficulties frequently encountered by companies in their early stages of operations. We have generated losses since inception and we expect to continue to run at a loss for several years until our initial program, or one of our pipeline products, is approved by the FDA or another worldwide regulatory body. We expect to incur substantial operating expenses over the next several years as our product development activities and related
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costs increase. No assurance can be given that we will be able to successfully implement any or all of our business plan, or if implemented, that we will accomplish the desired objectives, including achieving profitability. Our short history as an operating company makes any assessment of our future success or viability subject to significant uncertainty. We will encounter risks and difficulties frequently experienced by early-stage companies in rapidly evolving fields. If we do not address these risks successfully, our business will suffer.
We have incurred significant net losses in each period since our inception and anticipate that we will continue to incur net losses in for the foreseeable future and may never achieve or maintain profitability.
We are not profitable and have incurred significant losses in each period since our inception, including net losses of $11.3 million for the nine months ended September 30, 2024 and $14.6 million for the year ended December 31, 2023. We have not commercialized any products and have never generated any revenue from product sales. We expect these losses to increase as we continue to incur significant research and development and other expenses related to our ongoing operations, seek regulatory approvals for our product candidates, scale-up manufacturing capabilities and hire additional personnel to support the development of our product candidates and to enhance our operational, financial and information management systems.
A critical aspect of our strategy is to invest significantly in our clinical and regulatory development for our lead program. To become and remain profitable, we must develop and eventually commercialize products with significant market potential, which we may never achieve. Even if we succeed in commercializing one or more of these product candidates, we will continue to incur losses for the foreseeable future relating to our substantial research and development expenditures to develop our product candidates. 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 revenue. Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders’ equity and working capital. Further, the net losses we incur may fluctuate significantly from quarter-to-quarter and year-to-year, such that a period-to-period comparison of our results of operations may not be a good indication of our future performance. If we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of the company and could impair our ability to raise capital, maintain our discovery and preclinical development efforts, expand our business or continue our operations and may require us to raise additional capital that may dilute your ownership interest. A decline in the value of our company could also cause you to lose all or part of your investment.
Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.
Our independent registered public accounting firm noted in its report accompanying our financial statements for the fiscal year ended December 31, 2023, that we had suffered significant accumulated deficit and had negative operating cash flows and that the development and commercialization of our product candidates are expected to require substantial expenditures. We have not yet generated any material revenues from our operations to fund our activities, and are therefore dependent upon external sources for financing our operations. There can be no assurance that we will succeed in obtaining the necessary financing to continue our operations. As a result, our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. If we cannot successfully continue as a going concern, our stockholders may lose their entire investment in our common stock.
We may need substantial additional funding. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.
We expect our expenses to increase in connection with our ongoing activities, particularly as we continue research and development and initiate additional clinical trials of our product candidates and seek regulatory approval for these and potentially other product candidates. In addition, if we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. In particular, the costs that may be required for the manufacture of any product candidate that receives marketing approval may be substantial. Accordingly, we may need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or any future commercialization efforts.
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As of September 30, 2024, we had approximately $5.8 million in cash. In June 2021, we completed the IPO for net cash proceeds of $14.8 million after deducting underwriting discounts and commissions and offering expenses. In July 2022, we completed a registered direct offering and concurrent private placement for net cash proceeds of $3.7 million after deducting placement agent fees and offering expenses. In May 2023, we completed a registered direct offering and concurrent private placement for net cash proceeds of $3.5 million after deducting placement agent fees and offering expenses. In November 2023, we entered into a Sales Agreement and established an ATM Program, pursuant to which we may offer and sell, from time to time through A.G.P./Alliance Global Partners, as sales agent, shares of our common stock having an aggregate offering price of up to $17.0 million. As of the period ended September 30, 2024, we sold a total of 2,692,190 shares of our common stock under the ATM Program, at a weighted-average price of $3.35 per share, raising $9.0 million of gross proceeds and net proceeds of $8.6 million after deducting commissions to the sales agent and other ATM Program related expenses. There remains approximately $8.0 million available for future sales of shares of common stock under the Sales Agreement. We believe that, based upon our current operating plan, our existing capital resources will not be sufficient to fund our anticipated operations for at least 12 months from the issuance of our condensed interim financial statements for the period ended September 30, 2024. Our future capital requirements and the period for which we expect our existing resources to support our operations may vary significantly from what we expect. Our monthly spending levels vary based on new and ongoing research and development and other corporate activities. Because the length of time and activities associated with successful research and development of our product candidates is highly uncertain, we are unable to estimate the actual funds we will require for development and any approved marketing and commercialization activities.
Our future capital requirements will depend on many factors, including:
| ● | the timing, progress, and results of our ongoing and planned clinical trials of our product candidates; |
| ● | our ability to manufacture sufficient clinical supply of our products candidates and the costs thereof; |
| ● | discussions with regulatory agencies regarding the design and conduct of our clinical trials and the costs, timing and outcome of regulatory review of our product candidates; |
| ● | the cost and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive marketing approval; |
| ● | the costs of any other product candidates or technologies we pursue; |
| ● | our ability to establish and maintain strategic partnerships, licensing or other arrangements and the financial terms of such agreements; |
| ● | the revenue, if any, received from commercial sales of any product candidates for which we receive marketing approval; and |
| ● | the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims. |
We cannot be certain that additional funding will be available on acceptable terms, or at all. Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates. Our ability to raise additional funding will depend on financial, economic and market conditions and other factors, over which we may have no or limited control, including the conflict between Russia and Ukraine and the conflict in the Middle East between Israel and Hamas. In addition, our ability to obtain future funding when needed through equity financings, debt financings or strategic collaborations may be particularly challenging in light of the uncertainties and circumstances regarding the COVID-19 pandemic. We have no committed source of additional capital and 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 our product candidates or other research and development initiatives. We could be required to seek collaborators for our product candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available or relinquish or license on unfavorable terms our rights to our product candidates in markets where we otherwise would seek to pursue development or commercialization ourselves.
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Any of the above events could significantly harm our business, prospects, financial condition and results of operations and cause the price of our common stock to decline.
Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.
Until such time as we can generate substantial revenue from product sales, if ever, we expect to finance our cash needs through a combination of public and private equity offerings, debt financings, strategic partnerships, and alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. The incurrence of indebtedness would result in increased fixed payment obligations and could involve restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. If we raise additional funds through strategic partnerships and alliances and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or product candidates, or grant licenses on terms unfavorable to us. If we are unable to raise additional capital through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise develop and market ourselves.
We are reliant on the success of our lead product candidate, ibezapolstat, which we are developing for the treatment of CDI. If we are unable to commercialize ibezapolstat, or experience significant delays in doing so, our business will be materially harmed.
Our ability to generate product revenues, which may not occur for several years, if ever, currently depends heavily on the successful development and commercialization of ibezapolstat. The success of ibezapolstat will depend on a number of factors, including the following:
| ● | successful completion of clinical development; |
| ● | receipt of marketing approvals from applicable regulatory authorities; |
| ● | establishing commercial manufacturing arrangements with third-party manufacturers; |
| ● | obtaining and maintaining patent and trade secret protection and regulatory exclusivity; |
| ● | protecting our rights in our intellectual property portfolio; |
| ● | establishing sales, marketing and distribution capabilities; |
| ● | launching commercial sales of ibezapolstat, if and when approved, whether alone or in collaboration with others; |
| ● | acceptance of ibezapolstat, if and when approved, by patients, the medical community and third-party payors; |
| ● | effectively competing with other CDI therapies; and |
| ● | maintaining a continued acceptable safety profile of ibezapolstat following approval. |
If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize ibezapolstat, which would materially harm our business.
If serious adverse or inappropriate side effects are identified during the development of ibezapolstat or any other product candidate, we may need to abandon or limit our development of that product candidate.
Our product candidates are in clinical development and its risk of failure is high. It is impossible to predict when our product candidates will prove effective or safe in humans or will receive marketing approval. If our product candidates are associated with undesirable side effects or have characteristics that are unexpected, we may need to abandon their development or limit development
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to certain uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective.
Many compounds that initially show promise in clinical or earlier stage testing have later been found to cause side effects or other safety issues that prevented further development. If we elect or are forced to suspend or terminate any clinical trial of our product candidates, the commercial prospects of such product candidate will be harmed and our ability to generate product revenues from such product candidate will be delayed or eliminated. Any of these occurrences could materially harm our business.
Ibezapolstat or our other product candidates may never achieve sufficient market acceptance even if we obtain regulatory approval.
If ibezapolstat or any of our other future product candidates receive marketing approval, such products may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community. If these products do not achieve an adequate level of acceptance, we may not generate significant product revenues or revenue from collaboration agreements or any profits from operations. The degree of market acceptance of our product candidates, if approved for commercial sale, will depend on a number of factors, including:
| ● | the efficacy and potential advantages compared to alternative treatments or competitive products; |
| ● | the prevalence and severity of any side effects; |
| ● | the ability to offer our product candidates for sale at competitive prices; |
| ● | convenience and ease of administration compared to alternative treatments; |
| ● | the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies; |
| ● | obtaining regulatory clearance of marketing claims for the uses that we are developing; |
| ● | our ability to timely and effectively manufacture, market and distribute our products, either on our own or through third parties; |
| ● | pricing and reimbursement policies of government and third-party payers such as insurance companies, health maintenance organizations and other health plan administrators; |
| ● | the timing of any such marketing approval in relation to other product approvals; |
| ● | support from patient advocacy groups; |
| ● | our ability to attract corporate partners, including pharmaceutical companies, to assist in commercializing our proposed formulations or products; and |
| ● | any restrictions on concomitant use of other medications. |
If our products do not achieve an adequate level of acceptance by the relevant constituencies, or adequate pricing, we may not generate significant product revenue and may not become profitable.
We are exposed to product liability, and non-clinical and clinical liability risks which could place a substantial financial burden upon us, should lawsuits be filed against us.
Our business exposes us to potential product liability and other liability risks that are inherent in the testing, manufacturing and marketing of pharmaceutical formulations and products. We expect that such claims are likely to be asserted against us at some point, although we do carry product liability and clinical trial insurance to mitigate this risk. In addition, the use in our clinical trials of pharmaceutical formulations and products and the subsequent sale of these formulations or products by us or our potential
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collaborators may cause us to bear a portion of or all product liability risks. A successful liability claim or series of claims brought against us could have a material adverse effect on our business, financial condition and results of operations.
Our current and future operations substantially depend on our management team and our ability to hire other key personnel, the loss of any of whom could disrupt our business operations.
Our business does and will depend in substantial part on the continued services of David P. Luci, Robert J. DeLuccia and Robert G. Shawah. The loss of the services of any of these individuals would significantly impede implementation and execution of our business strategy and result in the failure to reach our goals. We do not carry key person life insurance on any member of our management, which would leave us uncompensated for the loss of any member of our management.
Our future financial condition and ability to achieve profitability will also depend on our ability to attract, retain and motivate highly qualified personnel in the diverse areas required for continuing our operations. There is a risk that we will be unable to attract, retain and motivate qualified personnel, both near term or in the future, and our failure to do so may severely damage our prospects.
Our failure to complete or meet key milestones relating to the development of our technologies and proposed products and formulations would significantly impair our financial condition.
In order to be commercially viable, we must research, develop and obtain regulatory approval to manufacture, introduce, market and distribute formulations or products incorporating our technologies. For each drug that we formulate, we must meet a number of critical developmental milestones, including:
| ● | demonstration of the benefit of each specific drug through our drug delivery technologies; |
| ● | demonstration, through non-clinical and clinical trials, that our drug delivery technologies are safe and effective; and |
| ● | establishment of a viable current good manufacturing process (“cGMP”) capable of potential scale-up. |
The estimated required capital and time frames necessary to achieve these developmental milestones is subject to inherent risks, many of which are beyond our control. As such, we may not be able to achieve these or similar milestones for any of our proposed product candidates or other product candidates in the future. Our failure to meet these or other critical milestones would adversely affect our financial condition.
Conducting and completing the clinical trials necessary for FDA approval is costly and subject to intense regulatory scrutiny as well as the risk of failing to meet the primary endpoint of such trials. We will not be able to commercialize and sell our proposed products and formulations without completing such trials.
In order to conduct clinical trials that are necessary to obtain approval by the FDA to market a formulation or product, it is necessary to receive clearance from the FDA to conduct such clinical trials. The FDA can halt clinical trials at any time for safety reasons or because we or our clinical investigators did not follow the FDA’s requirements for conducting clinical trials. If we are unable to receive clearance to conduct clinical trials or the trials are permanently halted by the FDA, we would not be able to achieve any revenue from such product as it is illegal to sell any drug or medical device for human consumption or use without FDA approval. Moreover, there is a risk that our clinical trials will fail to meet their primary endpoints, which would make them unacceptable in having the subject product approved by the FDA. If this were to occur, such event would materially and adversely affect our business, results of operations and financial condition.
We will compete with larger and better capitalized companies, and competitors in the drug development or pharmaceutical industries may develop competing products which outperform or supplant our proposed products.
Drug companies and/or other technology companies have developed (and are currently marketing in competition with us), have sought to develop and may in the future seek to develop and market similar product candidates and drug delivery technologies which may become more accepted by the marketplace or which may supplant our technology entirely. In addition, many of our current competitors are, and future competitors may be, significantly larger and better financed than we are, thus giving them a significant advantage over us. Our competitors may also have significantly greater expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. These
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competitors also compete with us in recruiting and retaining qualified scientific advisors and consultants as well as management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Other small or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. We may be unable to respond to competitive forces presently in the marketplace which would severely impact our business.
We may not be able to effectively manage our growth and expansion or implement our business strategies, in which case our business and results of operations may be materially and adversely affected.
The expected growth of our business, if it occurs, will place increased demands on our management, operational and administrative resources. These increased demands and operating complexities could cause us to operate our business less effectively which, in turn, could cause a deterioration in our financial performance and negatively impact our growth. Any planned growth will also require that we continually monitor and upgrade our management information and other systems, as well as our infrastructure.
There can be no assurance that we will be able to grow our business and achieve our goals. Even if we succeed in establishing new strategic partnerships, we cannot assure that we will achieve planned revenue or profitability levels in the time periods estimated by us, or at all. If any of these initiatives fails to achieve or is unable to sustain acceptable revenue and profitability levels, we may incur significant costs.
A pandemic, epidemic, or outbreak of an infectious disease, such as the COVID-19 pandemic, could materially and adversely affect our business.
Public health crises such as pandemics or similar outbreaks could adversely impact our business. Notably, the COVID-19 pandemic continues to evolve. The extent to which COVID-19 impacts our operations or those of our collaborators, contractors, suppliers, CROs, clinical sites, contract manufacturing organizations (“CMOs”) and other material business relations and governmental agencies will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration and severity of the outbreak, new information that will emerge concerning the severity of the virus and the actions to contain it or treat its impact, among others. Previously, our clinical trial operations were directly and indirectly adversely impacted, and could continue to be directly and indirectly adversely impacted, by the COVID-19 pandemic.
The spread of COVID-19 could also have adverse economic impacts to us. While the potential economic impact brought by, and the duration of, the COVID-19 pandemic, have been, and continue to be, difficult to assess or predict, the spread of COVID-19 has caused a broad impact globally.
Global, market and economic conditions may negatively impact our business, financial condition and share price.
The results of our operations could be adversely affected by general conditions in the global economy, the global financial markets and the global political conditions. The U.S. and global economies are facing growing inflation, higher interest rates and a potential recession. Furthermore, a severe or prolonged economic downturn, including a recession or depression resulting from the ongoing COVID-19 pandemic or political disruption such as the war between Ukraine and Russia and the conflict involving Israel and Hamas could result in a variety of risks to our business, including weakened demand for our programs and development candidates, if approved, relationships with any vendors or business partners located in affected geographies and our ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy or political disruption, including any international trade disputes, could also strain our manufacturers or suppliers, possibly resulting in supply disruption, or cause our customers to delay making payments for our potential products. Any of the foregoing could seriously harm our business, and we cannot anticipate all of the ways in which the political or economic climate and financial market conditions could seriously harm our business.
Increases in inflation could raise our costs for commodities, labor, materials and services and other costs required to grow and operate our business, and failure to secure these on reasonable terms may adversely impact our financial condition. Additionally, increases in inflation, along with the uncertainties surrounding geopolitical developments and global supply chain disruptions, have caused, and may in the future cause, global economic uncertainty and uncertainty about the interest rate environment. A failure to adequately respond to these risks could have a material adverse impact on our financial condition, results of operations or cash flows. In response to high levels of inflation and recession fears, the U.S. Federal Reserve, the European Central Bank, and the Bank of
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England have raised, and may continue to raise, interest rates and implement fiscal policy interventions. Even if these interventions lower inflation, they may also reduce economic growth rates, create a recession, and have other similar effects.
The U.S. debt ceiling and budget deficit concerns have increased the possibility of credit-rating downgrades and economic slowdowns, or a recession in the U.S. Although U.S. lawmakers have previously passed legislation to raise the federal debt ceiling on multiple occasions, there is a history of ratings agencies lowering or threatening to lower the long-term sovereign credit rating on the United States given such uncertainty. On August 1, 2023, Fitch Ratings downgraded the U.S.’s long-term foreign currency issuer default rating to AA+ from AAA as a result of these repeated debt ceiling and budget deficit concerns. The impact of this or any further downgrades to the U.S. government’s sovereign credit rating or its perceived creditworthiness could adversely affect the U.S. and global financial markets and economic conditions.
If the equity and credit markets deteriorate, it may make any necessary equity or debt financing more difficult to secure, more costly or more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could harm our growth strategy, financial performance and stock price and could require us to delay or abandon plans with respect to our business, including clinical development plans. Further, recent developments in the banking industry could adversely affect our business. If the financial institutions with which we do business enter receivership or become insolvent in the future, there is no guarantee that the Department of the Treasury, the Federal Reserve and the Federal Deposit Insurance Corporation, or FDIC, will intercede to provide us and other depositors with access to balances in excess of the $250,000 FDIC insurance limit, that we would be able to access our existing cash, cash equivalents and investments, that we would be able to maintain any required letters of credit or other credit support arrangements, or that we would be able to adequately fund our business for a prolonged period of time or at all, any of which could have a material adverse effect on our business, financial condition and results of operations. We cannot predict the impact that the high market volatility and instability of the banking sector more broadly could have on economic activity and our business in particular. In addition, there is a risk that one or more of our current service providers, manufacturers or other third parties with which we conduct business may not survive difficult economic times, including the current global situation resulting from the COVID-19 pandemic, the ongoing conflict between Russia and Ukraine, the war between Israel and Hamas, the instability of the banking sector, and the uncertainty associated with current worldwide economic conditions, which could directly affect our ability to attain our operating goals on schedule and on budget.
Climate change or legal, regulatory or market measures to address climate change may negatively affect our business, results of operations, cash flows and prospects.
We believe that climate change has the potential to negatively affect our business and results of operations, cash flows and prospects. We are exposed to physical risks (such as extreme weather conditions or rising sea levels), risks in transitioning to a low-carbon economy (such as additional legal or regulatory requirements, changes in technology, market risk and reputational risk) and social and human effects (such as population dislocations and harm to health and well-being) associated with climate change. These risks can be either acute (short-term) or chronic (long-term).
The adverse impacts of climate change include increased frequency and severity of natural disasters and extreme weather events such as hurricanes, tornados, wildfires (exacerbated by drought), flooding, and extreme heat. Extreme weather and sea-level rise pose physical risks to our facilities as well as those of our suppliers. Such risks include losses incurred as a result of physical damage to facilities, loss or spoilage of inventory, and business interruption caused by such natural disasters and extreme weather events. Other potential physical impacts due to climate change include reduced access to high-quality water in certain regions and the loss of biodiversity, which could impact future product development. These risks could disrupt our operations and supply chains, which may result in increased costs.
New legal or regulatory requirements may be enacted to prevent, mitigate, or adapt to the implications of a changing climate and its effects on the environment. These regulations, which may differ across jurisdictions, could result in us being subject to new or expanded carbon pricing or taxes, increased compliance costs, restrictions on greenhouse gas emissions, investment in new technologies, increased carbon disclosure and transparency, upgrade of facilities to meet new building codes, and the redesign of
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utility systems, which could increase our operating costs, including the cost of electricity and energy used by us. Our supply chain would likely be subject to these same transitional risks and would likely pass along any increased costs to us.
The insurance coverage and reimbursement status of newly approved products is uncertain. Failure to obtain or maintain adequate coverage and reimbursement for new or current products could limit our ability to market those products and decrease our ability to generate revenue.
The availability and extent of reimbursement by governmental and private payors is essential for most patients to be able to afford expensive treatments. Sales of our product candidates will depend substantially, both domestically and abroad, on the extent to which the costs of our product candidates will be paid 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. If reimbursement is not available, or is available only to limited levels, we may not be able to successfully commercialize our product candidates. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to realize a sufficient return on our investment.
There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. Moreover, increasing efforts by governmental and third-party payors, in the U.S. and abroad, to cap or reduce healthcare costs may cause such organizations to limit both coverage and level of reimbursement for new products approved and, as a result, they may not cover or provide adequate payment for our product candidates. We expect to experience pricing pressures in connection with the sale of any of our product candidates, due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes. The downward pressure on healthcare costs in general has become very intense. As a result, increasingly high barriers are being erected to the entry of new products.
Because results of preclinical studies and early clinical trials are not necessarily predictive of future results, any product candidate we advance may not have favorable results in later clinical trials or receive regulatory approval. Moreover, interim, “top-line,” and preliminary data from our clinical trials that we announce or publish may change, or the perceived product profile may be negatively impacted, as more patient data or additional endpoints (including efficacy and safety) are analyzed.
Pharmaceutical development has inherent risks. The outcome of preclinical development testing and early clinical trials may not be predictive of the outcome of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their product candidates. Once a product candidate has displayed sufficient preclinical data to warrant clinical investigation, we will be required to demonstrate through adequate and well-controlled clinical trials that our product candidates are effective with a favorable benefit-risk profile for use in populations for their target indications before we can seek regulatory approvals for their commercial sale. Many drug candidates fail in the early stages of clinical development for safety and tolerability issues or for insufficient clinical activity, despite promising pre-clinical results. Accordingly, no assurance can be made that a safe and efficacious dose can be found for these compounds or that they will ever enter into advanced clinical trials alone or in combination with other product candidates. Moreover, success in early clinical trials does not mean that later clinical trials will be successful because product candidates in later-stage clinical trials may fail to demonstrate sufficient safety or efficacy despite having progressed through initial clinical testing. Companies frequently experience significant setbacks in advanced clinical trials, even after earlier clinical trials have shown promising results. There is an extremely high rate of failure of pharmaceutical candidates proceeding through clinical trials.
Individually reported outcomes of patients treated in clinical trials may not be representative of the entire population of treated patients in such studies. In addition, larger scale Phase 3 studies, which are often conducted internationally, are inherently subject to increased operational risks compared to earlier stage studies, including the risk that the results could vary on a region to region or country to country basis, which could materially adversely affect the outcome of the study or the opinion of the validity of the study results by applicable regulatory agencies.
From time to time, we may publicly disclose top-line or preliminary data from our clinical trials, which is based on a preliminary analysis of then available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of such data, and we may not have received or had the opportunity to fully and carefully evaluate all data from the particular study or trial, including all endpoints and safety data. As a result, top-line or preliminary results that we
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report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Top-line or preliminary data also remain subject to audit and verification procedures that may result in the final data being materially different from the topline, interim, or preliminary data we previously published. When providing top-line results, we may disclose the primary endpoint of a study before all secondary endpoints have been fully analyzed. A positive primary endpoint does not translate to all, or any, secondary endpoints being met. As a result, top-line and preliminary data should be viewed with caution until the final data are available, including data from the full safety analysis and the final analysis of all endpoints.
Further, from time to time, we may also disclose interim data from our preclinical studies and clinical trials. Interim data from clinical trials that we may complete 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. For example, time-to-event based endpoints such as duration of response and progression free survival have the potential to change, sometimes drastically, with longer follow-up. In addition, as patients continue on therapy, there can be no assurance given that the final safety data from studies, once fully analyzed, will be consistent with prior safety data presented, will be differentiated from other similar agents in the same class, will support continued development, or will be favorable enough to support regulatory approvals for the indications studied. Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and our company in general. The information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and regulators or others may not agree with what we determine is material or otherwise appropriate information to include in our disclosure. If the interim, top-line or preliminary data that we report differ from final results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, or successfully commercialize, our product candidates may be harmed, which could harm our business, operating results, prospects or financial condition.
Risks Related to Regulatory Approval
If clinical trials of our lead product candidate fail to demonstrate safety and efficacy to the satisfaction of the FDA, or the EMA, or do not otherwise produce favorable results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete the development and commercialization of ibezapolstat or any other product candidate.
In connection with obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. A failure of one or more clinical trials can occur at any stage of testing. The outcome of preclinical testing and early clinical trials, particularly with a small number of patients, may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. The design of a clinical trial can determine whether its results will support approval of a product, and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced or completed. We have limited experience in designing clinical trials and may be unable to design and execute a clinical trial to support marketing approval.
Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that believe their product candidates performed satisfactorily in preclinical studies and clinical trials have failed to obtain marketing approval of their products.
If we experience any of a number of possible unforeseen events in connection with our clinical trials, potential marketing approval or commercialization of our product candidates could be delayed or prevented.
We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our product candidates, including:
| ● | clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon product development programs; |
| ● | the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of these clinical trials at a higher rate than we anticipate; |
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| ● | we may be unable to enroll a sufficient number of patients in our clinical trials to ensure adequate statistical power to detect any statistically significant treatment effects; |
| ● | our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; |
| ● | regulators, institutional review boards or independent ethics committees may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site; |
| ● | we may have delays in reaching or fail to reach agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites; |
| ● | we may have to suspend or terminate clinical trials of our product candidates for various reasons, including a finding that the participants are being exposed to unacceptable health risks; |
| ● | regulators, institutional review boards or independent ethics committees may require that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks; |
| ● | clinical trials are costly and the cost of clinical trials of our product candidates may be greater than we anticipate; |
| ● | the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate; and |
| ● | our product candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators, institutional review boards or independent ethics committees to suspend or terminate the clinical trials. |
Our product development costs will increase if we experience delays in testing or marketing approvals. We do not know whether any preclinical tests or clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant preclinical or clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do and impair our ability to successfully commercialize our product candidates and may harm our business and results of operations.
If we experience delays or difficulties in the enrollment of patients in our clinical trials, our receipt of necessary marketing approvals could be delayed or prevented.
We may not be able to initiate or continue clinical trials for our product candidates, including our planned clinical trials of ibezapolstat, if we are unable to locate and enroll a sufficient number of eligible patients to participate in these clinical trials. CDI is an acute infection that requires rapid diagnosis. For our clinical trials of ibezapolstat, we need to identify potential patients, test them for CDI and enroll them in the clinical trial within a 24-hour period. In addition, our competitors have ongoing clinical trials for product candidates that could be competitive with our product candidates, and patients who would otherwise be eligible for our clinical trials may instead enroll in clinical trials of our competitors’ product candidates. For our clinical trials of ibezapolstat, we need to identify potential patients and enroll them in the clinical trial based on a history of diarrhea within 24 hours of a positive stool test for C. difficile toxin.
Enrollment delays in our clinical trials may result in increased development costs for our product candidates, which would cause the value of our common stock to decline and limit our ability to obtain additional financing. Our inability to enroll a sufficient number of patients in our planned clinical trials of ibezapolstat would result in significant delays or may require us to abandon one or more clinical trials altogether.
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We may be unable to obtain regulatory approval in the United States or foreign jurisdictions and, as a result, be unable to commercialize our product candidates and our ability to generate revenue will be materially impaired.
Our product candidates are subject to extensive governmental regulations relating to, among other things, research, testing, development, manufacturing, quality, safety, efficacy, approval, recordkeeping, reporting, labeling, storage, packaging, advertising and promotion, pricing, marketing and distribution of drugs. Rigorous preclinical studies and clinical trials, and an extensive regulatory approval process are required to be successfully completed in the United States and in many foreign jurisdictions before a new drug can be marketed. Satisfaction of these and other regulatory requirements is costly, time consuming, uncertain, and subject to a continuously evolving regulatory environment and unanticipated delays. It is possible that none of the product candidates we may develop will obtain the regulatory approvals necessary for us or our collaborators to begin selling them.
The time required to obtain FDA and other approvals is unpredictable but typically takes many years following the commencement of clinical trials, depending upon the type, complexity and novelty of the product candidate. The standards that the FDA and its foreign counterparts use when regulating companies such as ours are not always applied predictably or uniformly and can change. Any analysis we perform of data from chemistry, manufacturing and controls, preclinical and clinical activities is subject to confirmation and interpretation by regulatory authorities, which could delay, limit or prevent regulatory approval. We may also encounter unexpected delays or increased costs due to new government regulations, for example, from future legislation or administrative action, or from changes in FDA policy during the period of product development, clinical trials and FDA regulatory review. It is impossible to predict whether legislative changes will be enacted, or whether FDA or foreign regulations, guidance or interpretations will be changed, or what the impact of such changes, if any, may be.
Any delay or failure in obtaining required approvals could adversely affect our ability to generate revenues from the particular product candidate for which we are seeking approval. Furthermore, any regulatory approval to market a product may be subject to limitations on the approved uses for which we may market the product or the labeling or other restrictions. In addition, the FDA has the authority to require a risk evaluation and mitigation strategy (“REMS”) as a condition of approval, which may impose further requirements or restrictions on the distribution or safe use of an approved drug, such as limiting prescribing rights to certain physicians or medical centers that have undergone specialized training, limiting treatment to patients as specially defined by the indication statement or who meet certain safe-use criteria, and requiring treated patients to enroll in a registry, among other requirements. These limitations and restrictions may limit the size of the market for the product and affect reimbursement by third-party payors.
We are also subject to numerous foreign regulatory requirements governing, among other things, the conduct of clinical trials, manufacturing and marketing authorization, pricing and payment. The foreign regulatory approval process varies among countries and may include all of the risks associated with FDA approval described above, as well as risks attributable to the satisfaction of local regulations in foreign jurisdictions. Approval by the FDA does not ensure approval by comparable regulatory authorities outside of the United States and vice versa.
Even if we obtain regulatory approvals, our marketed drugs will be subject to ongoing regulatory oversight. If we or our collaborators or contractors fail to comply with continuing U.S. and foreign requirements, our approvals, if obtained, could be limited or withdrawn, we could be subject to other penalties, and our business would be seriously harmed.
Following any initial regulatory approval of any drugs we may develop, we will also be subject to continuing regulatory oversight, including the review of adverse drug experiences and safety data that are reported after our drug products are made commercially available. This would include results from any post-marketing studies or surveillance to monitor the safety and efficacy of the drug product required as a condition of approval or agreed to by us. Any regulatory approvals that we receive for our product candidates may also be subject to limitations on the approved uses for which the product may be marketed. Other ongoing regulatory requirements include, among other things, submissions of safety and other post-marketing information and reports, registration and listing, as well as continued maintenance of our marketing application, compliance with cGMP requirements and quality oversight, compliance with post-marketing commitments, and compliance with good clinical practice (“GCP”) for any clinical trials that we conduct post-approval. Failure to comply with these requirements could result in warning or untitled letters, criminal or civil penalties, recalls, or product withdrawals. In addition, we are conducting our clinical trials and we intend to seek approval to market our product candidates in jurisdictions outside of the United States, and therefore will be subject to, and must comply with, regulatory requirements in those jurisdictions.
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The FDA has significant post-market authority, including, for example, the authority to require labeling changes based on new safety information and to require post-market studies or clinical trials for a variety of reasons. The FDA also has the authority to require a REMS plan after approval, which may impose further requirements or restrictions on the distribution or use of an approved drug.
We, our CMOs, and the manufacturing facilities we use to make our product candidates will also be subject to ongoing assessment of product quality, compliance with cGMP, and periodic inspection by the FDA and potentially other regulatory agencies. We or our CMOs may not be able to comply with applicable cGMP regulations or similar regulatory requirements outside of the United States. Our failure, or the failure of our CMOs, to comply with applicable regulations could result in regulatory actions, such as the issuance of FDA Form 483 notices of observations, warning letters or sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or drugs, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our products. We may not have the ability or capacity to manufacture material at a broader commercial scale in the future. We and our CMOs currently manufacture a limited supply of clinical trial materials. Reliance on CMOs entails risks to which we would not be subject if we manufactured all of our material ourselves, including reliance on the CMO for regulatory compliance. Our product promotion and advertising will also be subject to regulatory requirements and continuing regulatory review.
If we or our collaborators, manufacturers or service providers fail to comply with applicable continuing regulatory requirements in the United States or foreign jurisdictions in which we may seek to market our products, we or they may be subject to, among other things, fines, warning letters, holds on clinical trials, refusal by the FDA or comparable foreign regulatory authorities to approve pending applications or supplements to approved applications, suspension or withdrawal of regulatory approval, product recalls and seizures, refusal to permit the import or export of products, operating restrictions, injunction, consent decree, civil penalties and criminal prosecution.
Our product candidates for which we obtain approval may face competition sooner than anticipated.
Even if we are successful in achieving regulatory approval to commercialize a product candidate ahead of our competitors, our future pharmaceutical products may face direct competition from generic and other follow-on drug products. Any of our product candidates that may achieve regulatory approval in the future may face competition from generic products earlier or more aggressively than anticipated, depending upon how well such approved products perform in the U.S. prescription drug market. Our ability to compete may also be affected in many cases by insurers or other third-party payors seeking to encourage the use of generic products.
The Hatch-Waxman Amendments to the federal Food, Drug, and Cosmetic Act (“FDCA”) authorized the FDA to approve generic drugs that are the same as drugs previously approved for marketing under the NDA provisions of the statute pursuant to abbreviated new drug applications (“ANDAs”), and also created the Section 505(b)(2) NDA pathway. An ANDA relies on the preclinical and clinical testing conducted for a previously approved reference listed drug and must demonstrate to the FDA that the generic drug product is identical to the reference listed drug (“RLD”) with respect to the active ingredients, the route of administration, the dosage form, and the strength of the drug and also that it is “bioequivalent” to the reference listed drug. In contrast, Section 505(b)(2) enables the applicant to rely, in part, on the FDA’s prior findings of safety and efficacy data for an existing product, or published literature, in support of its application. Section 505(b)(2) provides an alternate path to FDA approval for new or improved formulations or new uses of previously approved products; for example, a follow-on applicant may be seeking approval to market a previously approved drug for new indications or for a new patient population that would require new clinical data to demonstrate safety or effectiveness. Such products, if approved and depending upon the scope of the changes made to the reference drug, may also compete with any product candidates for which we receive approval.
The FDA is prohibited by statute from approving an ANDA or 505(b)(2) NDA when certain marketing or data exclusivity protections apply to the reference listed drug. However, if any competitor or third party is able to demonstrate bioequivalence without infringing our patents, then such competitor or third party may then be able to gain approval of an ANDA and introduce a competing generic product onto the market.
Furthermore, the CREATES Act established a private cause of action that permits a generic product developer to sue the brand manufacturer to compel it to furnish necessary samples of an RLD on “commercially reasonable, market-based terms.” If generic developers request samples of any product candidates for which we receive marketing approval in order to conduct comparative testing to support one or more ANDAs for a generic version of our products, and we refuse any such request, we may be subject to litigation under the CREATES Act. Although lawsuits have been filed under the CREATES Act since its enactment, those
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lawsuits have settled privately; therefore, to date, no federal court has reviewed or opined on the statutory language and there continues to be uncertainty regarding the scope and application of the law.
We cannot predict the interest of potential follow-on competitors or how quickly others may seek to come to market with competing products, whether approved as a direct ANDA competitor or as a Section 505(b)(2) NDA referencing one of our future product candidates. If the FDA approves generic versions of any of our products in the future, should they be approved for commercial marketing, such competitive products may be able to immediately compete with us in each indication for which our product has received approval, which could negatively impact our future revenue, profitability and cash flows and substantially limit our ability to obtain a return on our investments.
Risks associated with operating in foreign countries could materially adversely affect our product development should we elect to extend development outside the U.S.
Should we elect to extend development outside the U.S., we may be subject to risks related to operating in foreign countries. Risks associated with conducting operations in foreign countries include:
• | differing regulatory requirements for drug approvals and regulation of approved drugs in foreign countries; more stringent privacy requirements for data to be supplied to our operations in the United States, e.g., GDPR in the EU; |
• | unexpected changes in tariffs, trade barriers and regulatory requirements; economic weakness, including inflation, or political instability in particular foreign economies and markets; compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; foreign taxes, including withholding of payroll taxes; |
• | differing payor reimbursement regimes, governmental payors or patient self-pay systems and price controls; |
• | foreign currency fluctuations, which could result in increased operating expenses or reduced revenues, and other obligations incident to doing business or operating in another country; |
• | workforce uncertainty in countries where labor unrest is more common than in the United States; |
• | continued uncertainties related to the withdrawal of the UK from the EU (known as “Brexit”) and its financial, trade, regulatory and legal implications, which could lead to legal uncertainty and potentially divergent national laws and regulations as the UK determines which EU laws to replace or replicate, and which may further create global economic uncertainty, which could materially adversely affect our business, business opportunities, results of operations, financial condition, and cash flows; |
• | production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad, including those that may result from the recent coronavirus outbreak; and |
• | business interruptions resulting from geopolitical actions, including war and terrorism. |
Our results of operations may be adversely affected by current and potential future healthcare legislative and regulatory actions.
Legislative and regulatory actions affecting government prescription drug procurement and reimbursement programs occur relatively frequently. In the U.S., the Patient Protection and Affordable Care Act (the “ACA”) was enacted in 2010 to expand healthcare coverage. Since then, numerous efforts have been made to repeal, amend or administratively limit the ACA in whole or in part. With regard to biopharmaceutical products, 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 on manufacturers of certain branded prescription drugs, and created a new Medicare Part D coverage gap discount program. We expect that future changes or additions to the ACA, the Medicare and Medicaid programs, and changes stemming from other healthcare reform measures, especially with regard to healthcare access, financing or other legislation in individual states, could have a material adverse effect on the healthcare industry in the United States. Complying with any new legislation or reversing changes implemented under the ACA could be time-intensive and expensive, resulting in a material adverse effect on our business. If we are slow or unable to adapt to changes in
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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 otherwise may have obtained and we may not achieve or sustain profitability, which would adversely affect our business, prospects, financial condition and results of operations.
Additionally, on December 20, 2019, the Further Consolidated Appropriations Act for 2020 was signed into law (P.L. 116-94) and includes a piece of bipartisan legislation called the Creating and Restoring Equal Access to Equivalent Samples Act of 2019 (the “CREATES Act”). The CREATES Act aims to address the concern articulated by both the FDA and others in the industry that some brand manufacturers have improperly restricted the distribution of their products, including by invoking the existence of a REMS for certain products, to deny generic product developers access to samples of brand products. Because generic product developers need samples of a reference listed drug, to conduct certain comparative testing required by the FDA, some have attributed the inability to timely obtain samples as a cause of delay in the entry of generic products. To remedy this concern, the CREATES Act establishes a private cause of action that permits a generic product developer to sue the brand manufacturer to compel it to furnish the necessary samples on “commercially reasonable, market-based terms.” Whether and how generic product developments will use this new pathway, as well as the likely outcome of any legal challenges to provisions of the CREATES Act, remain highly uncertain and its potential effects on any of our future commercial products are unknown.
For a drug product to receive federal reimbursement under the Medicaid or Medicare Part B programs or to be sold directly to U.S. government agencies, the manufacturer must extend discounts to entities eligible to participate in the 340B Drug Pricing Program. The maximum amount that a manufacturer may charge a 340B covered entity for a given product is the average manufacturer price (“AMP”), reduced by the rebate amount paid by the manufacturer to Medicaid for each unit of that product. As of 2010, the ACA expanded the types of entities eligible to receive discounted 340B pricing, although, under the current state of the law, with the exception of children’s hospitals, these newly eligible entities will not be eligible to receive discounted 340B pricing on orphan drugs. In addition, as 340B drug pricing is determined based on AMP and Medicaid rebate data, the revisions to the Medicaid rebate formula and AMP definition described above could cause the required 340B discount to increase.
Moreover, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. For example, the 2021 Consolidated Appropriations Act signed into law on December 27, 2020 incorporated extensive healthcare provisions and amendments to existing laws, including a requirement that all manufacturers of drug products covered under Medicare Part B report the product’s average sales price to the Centers for Medicare and Medicaid Services (“CMS”) beginning on January 1, 2022, subject to enforcement via civil money penalties. The U.S. Department of Health and Human Services (“DHHS”) has also solicited feedback on various measures intended to lower drug prices and reduce the out-of-pocket costs of drugs and has implemented others under its existing authority.
In August 2022, President Biden signed into the law the Inflation Reduction Act of 2022 (the “IRA”). The IRA has multiple provisions that may impact the prices of drug products that are both sold into the Medicare program and throughout the United States. Starting in 2023, a manufacturer of a drug or biological product covered by Medicare Parts B or D must pay a rebate to the federal government if the drug product’s price increases faster than the rate of inflation. This calculation is made on a drug product by drug product basis and the amount of the rebate owed to the federal government is directly dependent on the volume of a drug product that is paid for by Medicare Parts B or D. Additionally, starting in payment year 2026, CMS will negotiate drug prices annually for a select number of single source Part D drugs without generic or biosimilar competition. CMS will also negotiate drug prices for a select number of Part B drugs starting for payment year 2028. If a drug product is selected by CMS for negotiation, it is expected that the revenue generated from such drug will decrease. CMS has begun to implement these new authorities and entered into the first set of agreements with pharmaceutical manufacturers to conduct price negotiations in October 2023. However, the IRA’s impact on the pharmaceutical industry in the United States remains uncertain, in part because multiple large pharmaceutical companies and other stakeholders (e.g., the U.S. Chamber of Commerce) have initiated federal lawsuits against CMS arguing the program is unconstitutional for a variety of reasons, among other complaints. Those lawsuits are currently ongoing.
In addition, many states have proposed or enacted legislation that seeks to indirectly or directly regulate pharmaceutical drug pricing, such as by requiring biopharmaceutical manufacturers to publicly report proprietary pricing information or to place a maximum price ceiling on pharmaceutical products purchased by state agencies. For example, in recent years, several states have formed prescription drug affordability boards (“PDABs”). Much like the IRA’s drug price negotiation program, these PDABs have attempted to implement upper payment limits (“UPLs”) on drugs sold in their respective states in both public and commercial health
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plans. In August 2023, Colorado’s PDAB announced a list of five prescription drugs that would undergo an affordability review. The effects of these efforts remain uncertain pending the outcomes of several federal lawsuits challenging state authority to regulate prescription drug payment limits. In December 2020, the U.S. Supreme Court held unanimously that federal law does not preempt the states’ ability to regulate pharmaceutical benefit managers (“PBMs”) and other members of the healthcare and pharmaceutical supply chain, an important decision that may lead to further and more aggressive efforts by states in this area. The Federal Trade Commission (“FTC”) in mid-2022 also launched sweeping investigations into the practices of the PBM industry that could lead to additional federal and state legislative or regulatory proposals targeting such entities’ operations, pharmacy networks, or financial arrangements. Significant efforts to change the PBM industry as it currently exists in the U.S. may affect the entire pharmaceutical supply chain and the business of other stakeholders, including pharmaceutical product developers like us.
Changes to the Medicaid program at the federal or state level could also have a material adverse effect on our business. Proposals that could impact coverage and reimbursement of our products, including giving states more flexibility to manage drugs covered under the Medicaid program and permitting the re-importation of prescription medications from Canada or other countries, could have a material adverse effect by limiting our products’ use and coverage. Furthermore, state Medicaid programs could request additional supplemental rebates on our products as a result of an increase in the federal base Medicaid rebate. To the extent that private insurers or managed care programs follow Medicaid coverage and payment developments, they could use the enactment of these increased rebates to exert pricing pressure on our products, and the adverse effects may be magnified by their adoption of lower payment schedules.
Other proposed regulatory actions affecting manufacturers could have a material adverse effect on our business. It is difficult to predict the impact, if any, of any such proposed legislative and regulatory actions or resulting state actions on the use and reimbursement of our products in the U.S., but our results of operations may be adversely affected.
Risks Related to Our Dependence on Third Parties
If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our product candidates, we may not be successful in commercializing ibezapolstat or any other product candidate if and when such product candidates are approved.
We do not have a sales or marketing infrastructure and have no experience in the sale or marketing of pharmaceutical products. To achieve commercial success for any approved product, we must either develop a sales and marketing organization or outsource these functions to third parties. If ibezapolstat receives marketing approval, we intend to commercialize it in the U.S. with our own focused, specialized sales force. We plan to evaluate the potential for utilizing additional collaboration, distribution and marketing arrangements with third parties to commercialize ibezapolstat in other jurisdictions where we retain commercialization rights. There are risks involved with establishing our own sales and marketing capabilities and entering into arrangements with third parties to perform these services. For example, recruiting and training a sales force is expensive and time-consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.
Factors that may inhibit our efforts to commercialize our products on our own include:
| ● | our inability to recruit, train and retain adequate numbers of effective sales and marketing personnel; |
| ● | the inability of sales personnel to obtain access to or persuade adequate numbers of physicians to prescribe any future products; |
| ● | the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to competitors with more extensive product lines; and |
| ● | unforeseen costs and expenses associated with creating an independent sales and marketing organization. |
If we enter into arrangements with third parties to perform sales and marketing services, our product revenues or the profitability of these product revenues will likely be lower than if we were to market and sell any products that we develop ourselves. In addition, we may not be successful in entering into arrangements with third parties to sell and market our product candidates or may
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be unable to do so on terms that are acceptable to us. We likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively. If we do not establish sales and marketing capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our product candidates.
We contract with third parties for the manufacture of our product candidates for preclinical studies and our ongoing clinical trials, and expect to continue to do so for additional clinical trials and ultimately for commercialization. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or drugs or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.
We do not currently have the infrastructure or internal capability to manufacture supplies of our product candidates for use in development and commercialization. We rely, and expect to continue to rely, on third-party manufacturers for the production of our product candidates for preclinical studies and clinical trials under the guidance of members of our organization. We do not have long-term supply agreements. Furthermore, the raw materials for our product candidates are sourced, in some cases, from a single-source supplier although other sources are available. For example, drug substance and drug product are sourced from our principal supplier, Piramal Pharma Solutions, in Ennore, India and Ahmedabad, India, respectively. Chemical raw materials used for drug substance manufacture are sourced locally in India and are generally available. Accordingly, we do not anticipate difficulties sourcing drug substance for our clinical trials or, if FDA approved, for our marketing period, but we have not yet sourced a backup supplier because we currently have sufficient supply to complete our Phase 2b clinical trial. We are considering U.S. sources of drug substance for the commercial period if ibezapolstat is FDA approved and we anticipate several manufacturing options will be available. If we were to experience an unexpected loss of supply of any of our product candidates or any of our future product candidates for any reason, whether as a result of manufacturing, supply or storage issues or otherwise, we could experience delays, disruptions, suspensions or terminations of, or be required to restart or repeat, any pending or ongoing clinical trials.
We expect to continue to rely on third-party manufacturers for the commercial supply of any of our product candidates for which we obtain marketing approval. We may be unable to maintain or establish required agreements with third-party manufacturers or to do so on acceptable terms. Even if we are able to establish agreements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including:
| ● | the failure of the third party to manufacture our product candidates according to our schedule, or at all, including if our third-party contractors give greater priority to the supply of other products over our product candidates or otherwise do not satisfactorily perform according to the terms of the agreements between us and them; |
| ● | the reduction or termination of production or deliveries by suppliers, or the raising of prices or renegotiation of terms; |
| ● | the termination or nonrenewal of arrangements or agreements by our third-party contractors at a time that is costly or inconvenient for us; |
| ● | the breach by the third-party contractors of our agreements with them; |
| ● | the failure of third-party contractors to comply with applicable regulatory requirements; |
| ● | the failure of the third party to manufacture our product candidates according to our specifications; |
| ● | the mislabeling of clinical supplies, potentially resulting in the wrong dose amounts being supplied or active drug or placebo not being properly identified; |
| ● | clinical supplies not being delivered to clinical sites on time, leading to clinical trial interruptions, or of drug supplies not being distributed to commercial vendors in a timely manner, resulting in lost sales; and |
| ● | the misappropriation of our proprietary information, including our trade secrets and know-how. |
We do not have complete control over all aspects of the manufacturing process of, and are dependent on, our contract manufacturing partners for compliance with cGMP regulations for manufacturing both active drug substances and finished drug
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products. Third-party manufacturers may not be able to comply with cGMP regulations or similar regulatory requirements outside of the U.S. If our contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA, EMA or others, they will not be able to secure and/or maintain marketing approval for their manufacturing facilities. In addition, we do not have control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA, EMA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our product candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain marketing approval for or market our product candidates, if approved. Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could subject us and our third-party manufacturers to warning letters or other enforcement-related letters, holds on clinical trials or could result in further sanctions being imposed on us or our third-party manufacturers, including fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or drugs, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our product candidates or drugs and harm our business and results of operations. Our current and anticipated future dependence upon others for the manufacture of our product candidates or drugs may adversely affect our future profit margins and our ability to commercialize any product candidates that receive marketing approval on a timely and competitive basis.
We rely on third party clinical investigators, contract research organizations (“CROs”), clinical data management organizations and consultants to design, conduct, supervise and monitor preclinical studies and clinical trials of our product candidates. Because we rely on third parties and do not have the ability to conduct preclinical studies or clinical trials independently, we have less control over the timing, quality and other aspects of preclinical studies and clinical trials than we would if we conducted them on our own. These investigators, CROs and consultants are not our employees and we have limited control over the amount of time and resources that they dedicate to our programs. These third parties may have contractual relationships with other entities, some of which may be our competitors, which may draw time and resources from our programs. Further, these third parties may not be diligent, careful or timely in conducting our preclinical studies or clinical trials, resulting in the preclinical studies or clinical trials being delayed or unsuccessful.
If we cannot contract with acceptable third parties on commercially reasonable terms, or at all, or if these third parties do not carry out their contractual duties, satisfy legal and regulatory requirements for the conduct of preclinical studies or clinical trials or meet expected deadlines, our preclinical and clinical development programs could be delayed and otherwise adversely affected. In all events, we are responsible for ensuring that each of our preclinical studies and clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. The FDA and other health authorities require preclinical studies to be conducted in accordance with GLP and clinical trials to be conducted in accordance with GCP, including conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of clinical trial participants are protected. If we or our CROs fail to comply with these requirements, the data generated in our clinical trials may be deemed unreliable or uninterpretable and the FDA may require us to perform additional preclinical studies or clinical trials. Our reliance on third parties that we do not control does not relieve us of these responsibilities and requirements. Any such event could adversely affect our business, financial condition, results of operations and prospects.
If ultimate users of our product candidates are unable to obtain adequate reimbursement from third- party payers, or if new restrictive legislation is adopted, market acceptance of our proposed products may be limited and we may not achieve material revenues.
The continuing efforts of government and insurance companies, health maintenance organizations and other payers of healthcare costs to contain or reduce costs of healthcare may affect our future revenues and profitability, and the future revenues and profitability of our potential customers, suppliers and collaborative partners and the availability of capital. For example, in the U.S., given recent federal and state government initiatives directed at lowering the total cost of healthcare, the U.S. Congress and state legislatures will likely continue to focus on healthcare reform, the cost of prescription pharmaceuticals and on the reform of the Medicare and Medicaid systems. While we cannot predict whether any such legislative or regulatory proposals will be adopted, the announcement or adoption of such proposals and related laws, rules and regulations could materially harm our business, financial condition, results of operations or stock price. Moreover, the passage of the ACA in 2010, and efforts to amend or repeal such law, has created significant uncertainty relating to the scope of government regulation of healthcare and related legal and regulatory requirements, which could have an adverse impact on sales of our products.
Moreover, our ability to commercialize our product candidates will depend in part on the extent to which appropriate reimbursement levels for the cost of such products and related treatments are obtained by governmental authorities, private health
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insurers and other organizations, such as HMOs. Consumers and third-party payers are increasingly challenging the prices charged for medical drugs and services. Also, the trend toward managed healthcare in the U.S. and the concurrent growth of organizations such as HMOs, which could control or significantly influence the purchase of healthcare services and drugs, as well as legislative proposals to reform healthcare or reduce government insurance programs, may all result in lower prices for or rejection of our proposed products.
Our relationships with future customers 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 will play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our future arrangements with third-party payors and customers 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 would market, sell and distribute our products. As a pharmaceutical company, even though we do not and may not control referrals of healthcare services or bill directly to Medicare, Medicaid or other third-party payors, federal and state healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are and will be applicable to our business. These regulations include:
| ● | the Federal Healthcare Anti-Kickback Statute that prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid, and which will constrain our marketing practices and the marketing practices of our licensees, educational programs, pricing policies, and relationships with healthcare providers or other entities; |
| ● | the federal physician self-referral prohibition, commonly known as the Stark Law, which prohibits physicians from referring Medicare or Medicaid patients to providers of “designated health services” with whom the physician or a member of the physician’s immediate family has an ownership interest or compensation arrangement, unless a statutory or regulatory exception applies; |
| ● | federal false claims laws that prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other government reimbursement programs that are false or fraudulent, and which may expose entities that provide coding and billing advice to customers to potential criminal and civil penalties, including through civil whistleblower or qui tam actions, and including as a result of claims presented in violation of the Federal Healthcare Anti-Kickback Statute, the Stark Law or other healthcare-related laws, including laws enforced by the FDA; |
| ● | the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program and also created federal criminal laws that prohibit knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statements in connection with the delivery of or payment for healthcare benefits, items or services that, as amended by the Health Information Technology for Economic and Clinical Health Act, also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; |
| ● | federal physician sunshine requirements under the ACA which requires manufacturers of approved drugs, devices, biologics and medical supplies to report annually to the HHS, information related to payments and other transfers of value to physicians, other healthcare providers, and teaching hospitals, and ownership and investment interests held by physicians and other healthcare providers and their immediate family members and applicable group purchasing organizations; |
| ● | the Federal Food, Drug, and Cosmetic Act, which, among other things, strictly regulates drug product marketing, prohibits manufacturers from marketing drug products for off-label use and regulates the distribution of drug samples; and |
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| ● | state and foreign law equivalents of each of the above federal laws, such as 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, state laws requiring pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government and which may require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures, and state and foreign laws governing the privacy and security of health information in specified circumstances, many of which differ from each other in significant ways and often are not preempted by federal laws such as HIPAA, thus complicating compliance efforts. |
Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. 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, imprisonment, exclusion from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. If any physicians or other healthcare providers or entities with whom we expect to do business are found to not be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.
Risks Related to Intellectual Property
We may be involved in lawsuits to protect or enforce our patents.
Competitors may infringe our patents. To counter infringement or unauthorized use, we or our collaborators may be required to file infringement lawsuits that can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that one of our patents is not valid, is unenforceable and/or is not infringed, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put any pending applications at risk of being interpreted narrowly and of not issuing.
Interference proceedings or derivation proceedings may be filed to determine the priority of inventions with respect to our patents or patent applications or those of our licensors (if any). An unfavorable outcome could require us to cease using the related technology or to attempt to license rights from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. We may not be able to prevent, alone or with our licensors (if any), misappropriation of our intellectual property rights, both in the U.S. and in countries where the laws may not protect those rights as fully as in the U.S. Other proceedings, such as proceedings before the U.S. Patent and Trademark Office Patent Trial and Appeal Board, filed by a third party may result in the invalidation of one or more of our patents.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our common stock.
Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims, regardless of their merit, would cause us to incur significant expenses, and could distract our technical and management personnel from their normal responsibilities. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, in addition to paying royalties, redesign infringing products or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure. A court may also issue an injunction against us preventing us from manufacturing and bringing our products to market. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Such
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litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could compromise our ability to compete in the marketplace.
We may need to license certain intellectual property from third parties, and such licenses may not be available or may not be available on commercially reasonable terms.
A third party may hold intellectual property, including patent rights, that is important or necessary to the development or commercialization of our products. It may be necessary for us to use the patented or proprietary technology of third parties to commercialize our products, in which case we would be required to obtain a license from these third parties on commercially reasonable terms, or our business could be harmed, possibly materially. Such licenses may not be available which could prevent us from commercializing our products. Further, if we are alleged to infringe third party intellectual property rights, we could face costly litigation, the outcome of which could negatively affect or prevent us from commercializing or developing our products. In the event of an adverse decision against us in a litigation, we could be required to: pay substantial damages and license fees, or even be prevented from using or commercializing our technologies and methods; and also be prevented from further research and development efforts. In such case, we may be unable to develop alternative non-infringing products or methods and unable to obtain one or more licenses from third parties.
If we are unable to adequately protect or enforce our rights to intellectual property or secure rights to third-party patents, we may lose valuable rights, experience reduced market share, assuming any, or incur costly litigation to enforce, maintain or protect such rights.
Our ability to license, obtain, enforce and maintain patents, maintain trade secret protection and operate without infringing the proprietary rights of others is important to the commercialization of any formulations or products under development. The patent positions of biotechnology and pharmaceutical companies, including ours, are frequently uncertain and involve complex legal and factual questions. In addition, the coverage claimed in a patent application can be significantly reduced before the patent is issued. Consequently, our patents, patent applications and other intellectual property rights may not provide protection against competitive technologies or products or may be held invalid if challenged or could be circumvented. Our competitors may also independently develop products similar to ours or design around or otherwise circumvent patents issued to, or licensed by, us. In addition, the laws of some foreign countries may not protect our proprietary rights to the same extent as U.S. law. Any of these occurrences would have a material adverse effect on our business.
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses, and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development, sales, marketing or distribution activities. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Accordingly, costs and lost management time, as well as uncertainties resulting from the initiation and continuation of patent litigation or other proceedings, could have a material adverse effect on our ability to compete in the marketplace.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
In addition to seeking patents for some of our technology and products, we will also rely on trade secrets, including unpatented know-how, technology and other proprietary and confidential information, to maintain our competitive position. We will seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties. However, we cannot guarantee that we will have executed these agreements with each party that may have or have had access to our trade secrets or that the agreements we do execute will provide adequate protection. Any party with whom we have executed such an agreement could breach that agreement and disclose our proprietary or confidential information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some
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courts inside and outside the U.S. are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us. If any of our trade secrets, particularly unpatented know-how, were to be obtained or independently developed by a competitor, our competitive position would be harmed.
Risks Related to Our Common Stock
Because we do not anticipate paying any cash dividends on our common stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.
We have never paid or declared any cash dividends on our common stock. We currently intend to retain earnings, if any, to finance the growth and development of our business and we do not anticipate paying any cash dividends in the foreseeable future. As a result, only appreciation of the price of our common stock will provide a return to our members.
Provisions in our corporate charter documents and under Delaware law could make an acquisition of our company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.
These provisions might discourage, delay or prevent a change in control of our company or a change in our management. The existence of these provisions could adversely affect the voting power of holders of common stock and limit the price that investors might be willing to pay in the future for shares of our common stock. Furthermore, we have the authority to issue shares of our preferred stock without further stockholder approval, the rights of which will be determined at the discretion of the board of directors and that, if issued, could operate as a “poison pill” to dilute the stock ownership of a potential hostile acquirer to prevent an acquisition that our board of directors does not approve. In addition, our certificate of incorporation and bylaws contain provisions that may make the acquisition of our company more difficult, including the following:
| ● | our authorized but unissued and unreserved common stock and preferred stock could make more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise; |
| ● | our board of directors is classified into three classes of directors with staggered three-year terms and directors are only able to be removed from office for cause; |
| ● | our stockholders will only be able to take action at a meeting of stockholders and will not be able to take action by written consent for any matter, except in certain circumstances; |
| ● | a special meeting of our stockholders may only be called by the chairperson of our board of directors or a majority of our board of directors; |
| ● | advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders; and |
| ● | certain amendments to our certificate of incorporation and any amendments to our bylaws by our stockholders will require the approval of at least two-thirds of our then-outstanding voting power entitled to vote generally in an election of directors, voting together as a single class. |
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We are an “emerging growth company,” and a “smaller reporting company” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies and smaller reporting companies will make our common stock less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we intend to take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including:
| ● | being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim condensed financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure in this Form 10-Q; |
| ● | not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act; |
| ● | reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and |
| ● | exemptions from the requirements of holding nonbinding advisory stockholder votes on executive compensation and stockholder approval of any golden parachute payments not previously approved. |
We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our initial public offering, (b) in which we have total annual gross revenue of at least $1.07 billion (as adjusted for inflation pursuant to SEC rules from time to time), or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We intend to take advantage of the extended transition period for adopting new or revised accounting standards under the JOBS Act as an emerging growth company. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.
We are also a smaller reporting company, and we will remain a smaller reporting company until the fiscal year following the determination that our voting and non-voting shares of common stock held by non-affiliates is more than $250 million measured on the last business day of our second fiscal quarter, or our annual revenues are less than $100 million during the most recently completed fiscal year and our voting and non-voting shares of common stock held by non-affiliates is more than $700 million measured on the last business day of our second fiscal quarter.
Similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations, such as an exemption from providing selected financial data and an ability to provide simplified executive compensation information and only two years of audited financial statements.
The price of our stock may be volatile, and you could lose all or part of your investment.
The market price of shares of our common stock could be subject to wide fluctuations in response to many risk factors listed in this section and many others beyond our control. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this Quarterly Report and our 2023 Annual Report, these factors include:
| ● | the commencement, enrollment, completion or results of our current Phase 2b clinical trial of ibezapolstat; |
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| ● | any delay in our regulatory filings for ibezapolstat or our future product candidates and any adverse development or perceived adverse development with respect to the applicable regulatory authority’s review of such filings, including without limitation the FDA’s issuance of a “refusal to file” letter or a request for additional information; |
| ● | adverse results or delays, suspensions or terminations in future preclinical studies or clinical trials; |
| ● | our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial; |
| ● | adverse regulatory decisions, including failure to receive regulatory approval of ibezapolstat or any other product candidate or the failure of a regulatory authority to accept data from preclinical studies or clinical trials conducted in other countries; |
| ● | changes in laws or regulations applicable to ibezapolstat or any other product candidate, including but not limited to clinical trial requirements for approvals; |
| ● | adverse developments concerning our manufacturers; |
| ● | our inability to obtain adequate product supply for any approved product or inability to do so at acceptable prices; |
| ● | our inability to establish collaborations, if needed; |
| ● | our failure to commercialize our product candidates, if approved; |
| ● | additions or departures of key scientific or management personnel; |
| ● | unanticipated serious safety concerns related to the use of ibezapolstat or any other product candidate; |
| ● | introduction of new products or services offered by us or our competitors; |
| ● | announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors; |
| ● | our ability to effectively manage our growth; |
| ● | actual or anticipated variations in quarterly operating results; |
| ● | our cash position; |
| ● | our failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public; |
| ● | publication of research reports about us or our industry, or product candidates in particular, or positive or negative recommendations or withdrawal of research coverage by securities analysts; |
| ● | changes in the market valuations of similar companies; |
| ● | changes in the structure of the healthcare payment systems; |
| ● | overall performance of the equity markets; |
| ● | sales of our common stock by us or our stockholders in the future; |
| ● | trading volume of our common stock; |
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| ● | changes in accounting practices; |
| ● | ineffectiveness of our internal controls; |
| ● | disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies; |
| ● | significant lawsuits, including patent or stockholder litigation; |
| ● | general political, economic and market conditions, many of which are beyond our control, such as military conflict between Russia and Ukraine as well as the conflict in the Middle East between Israel and Hamas; and |
| ● | other events or factors, many of which are beyond our control. |
In addition, the stock market has experienced significant volatility, particularly with respect to pharmaceutical, biotechnology and other life sciences company stocks. The volatility of pharmaceutical, biotechnology and other life sciences company stocks often does not relate to the operating performance of the companies represented by the stock. If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially. Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our stock to fluctuate substantially. We believe that quarterly comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance.
In the past, securities class action litigation has often been initiated against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management’s attention and resources, and could also require us to make substantial payments to satisfy judgments or to settle litigation.
Our largest stockholders will exercise significant influence over our company for the foreseeable future, including the outcome of matters requiring stockholder approval.
Our officers, directors and their affiliates currently collectively own 5,105,432 shares of our common stock (on an as-converted basis) or approximately 26% of our outstanding shares of common stock (on an as-converted basis) as of September 30, 2024. Accordingly, if these stockholders were to choose to act together, they could have a significant influence over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as a merger or other sale of our company or all or a significant percentage of our assets. This concentration of ownership could limit your ability to influence corporate matters and may have the effect of delaying or preventing a third party from acquiring control over us.
We cannot assure you that the interests of our officers, directors and affiliated persons will coincide with the interests of the investors. So long as our officers, directors and affiliated persons collectively controls a significant portion of our common stock, these individuals and/or entities controlled by them, will continue to collectively be able to strongly influence or effectively control our decisions. Therefore, you should not invest in reliance on your ability to have any control over our company.
Nasdaq may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.
Should we fail to satisfy the Nasdaq’s continued listing requirements, such as the corporate governance requirements or the minimum closing bid price requirement, Nasdaq may take steps to delist our common stock. Such a delisting would likely have a negative effect on the price of our common stock, and would impair your ability to sell or purchase our common stock when you wish to do so. In the event of a delisting, we would take actions to restore our compliance with Nasdaq’s listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below Nasdaq’s minimum bid price requirement or prevent future non-compliance with the Nasdaq’s listing requirements.
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If Nasdaq does not maintain the listing of our securities for trading on its exchange, we could face significant material adverse consequences, including:
| ● | a limited availability of market quotations for our common stock; |
| ● | reduced liquidity for our common stock; |
| ● | a determination that our common stock is a “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; |
| ● | a limited amount of news and analyst coverage; and |
| ● | a decreased ability to issue additional common stock or obtain additional financing in the future. |
General Risk Factors
The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.
As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act, the listing requirements of Nasdaq and other applicable securities rules and regulations. Compliance with these rules and regulations has increased, and will likely continue to increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly, and place significant strain on our personnel, systems and resources. In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time. This could result in continuing uncertainty regarding compliance matters, higher administrative expenses and a diversion of management’s time and attention. Further, if our compliance efforts differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed. Being a public company that is subject to these rules and regulations also make it more expensive for us to obtain and retain director and officer liability insurance and we may in the future be required to accept reduced coverage or incur substantially higher costs to obtain or retain adequate coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors and qualified executive officers.
Cyber incidents or attacks directed at us could result in information theft, data corruption, operational disruption and/or financial loss.
We depend on digital technologies, including information systems, infrastructure and cloud applications and services, including those of third parties with which we may deal. Sophisticated and deliberate attacks on, or security breaches in, our systems or infrastructure, or the systems or infrastructure of third parties or the cloud, could lead to corruption or misappropriation of our assets, proprietary information and sensitive or confidential data. As an early-stage company without significant investments in data security protection, we may not be sufficiently protected against such occurrences. We may not have sufficient resources to adequately protect against, or to investigate and remediate any vulnerability to, cyber incidents. It is possible that any of these occurrences, or a combination of them, could have adverse consequences on our business and lead to financial loss.
The costs related to significant security breaches or disruptions could be material and could exceed the limits of the cybersecurity insurance we maintain, if any, against such risks. If the information technology systems of our third-party vendors and other contractors and consultants become subject to disruptions or security breaches, we may have insufficient recourse against such third parties and may have to expend significant resources to mitigate the impact of such an event, and to develop and implement protections to prevent future events of this nature from occurring.
We cannot assure you that our data protection efforts will prevent significant breakdowns, data leakages, breaches in our systems, or those of our third-party vendors and other contractors and consultants, or other cyber incidents that could have a material adverse effect upon our reputation, business, operations, or financial condition. For example, if such an event were to occur and cause
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如果我们的业务、第三方供应商以及其他承包商和顾问的运营受到中断，可能会导致我们的项目实施出现重大紊乱，服务和技术开发可能会延迟。此外，我们的内部信息技术系统或第三方供应商、其他承包商和顾问的重大中断，或安全漏洞可能会导致机密信息（包括商业秘密或其他知识产权、专有业务信息和个人信息）的丢失、挪用和／或未经授权的访问、使用或披露，或对机密信息的访问被阻止，这可能会给我们带来财务、法律、业务和声誉上的伤害。例如，任何导致个人信息未经授权访问、使用或披露的事件，包括关于我们客户或员工的个人信息，可能会直接损害我们的声誉，迫使我们遵守联邦和／或州的数据泄露通知法律和外国等效法律，使我们受到强制性的整改行动约束，以及在保护个人信息的法律和法规下追究法律责任，这可能会造成重大的法律和财务风险和声誉损失，从而可能对我们的业务产生不利影响。
尽管我们采取措施保护敏感数据免受未经授权的访问、使用或披露，但我们的信息技术和基础设施可能容易受到黑客或病毒攻击，或因人员错误、不法行为或其他恶意或无意中断而遭到侵犯。任何这类侵入或中断都可能危及我们的网络，存储在那里的信息可能被未经授权的人访问、操纵、公开披露、丢失或被盗。
这些访问、泄露或其他信息丢失可能导致法律诉讼或诉讼程序，根据国内或国外的隐私、数据保护和数据安全法律（如HIPAA和健康信息技术经济和临床卫生法案（HITECH）），以及可能造成的罚款。特定安全漏洞的通知必须向受影响的个人、卫生部长和对于重大泄漏，可能需要向媒体或州检察长进行通知。这样的通知可能会损害我们的声誉和竞争能力。尽管我们已实施安全措施，但这些数据目前可以通过多个渠道访问，我们无法保证能保护数据免受侵犯。未经授权的访问、丢失或传播也可能损害我们的声誉或干扰我们的运营，包括我们进行分析、进行研发活动、收集、处理和准备公司财务信息，以及管理业务的行政方面的能力。
违反这些法律的处罚各不相同。 例如，违反HIPAA和HITECH的规定可能导致严重的民事罚款，特定情况下可能面临高达每次违规25万美元的民事罚款和/或监禁。 有意获取或披露违反HIPAA的个人可识别健康信息的人可能面临最高5万美元罚款和最长一年监禁的刑事处罚。 如果不当行为涉及虚假借口或意图出售、转让或利用可识别健康信息以获取商业利益、个人收益或恶意危害，刑事处罚将增加。
此外，加州和麻省等各州已实施类似的隐私法律和法规，如加州医疗信息保密法，规定限制性要求，监管对健康信息和其他个人可识别信息的使用和披露。 这些法律和法规未必会被HIPAA取代，特别是如果某个州给予个人的保护超过了HIPAA。 在州法律更为保护时，我们必须遵守更为严格的规定。 除了对违规者施加罚款和处罚外，一些州法律还为认为个人信息被滥用的个人提供了诉讼权利。 例如，加州的患者隐私法规定可处以高达25万美元罚款，并允许受害人起诉请求赔偿。 类似地，CCPA允许消费者在某些个人信息因企业未实施和维护合理安全程序而遭到未经授权访问和外泄、盗窃或披露时，提起私人诉讼。 联邦和州法律之间的相互作用可能会受到各法庭和政府机构不同的解释，为我们以及我们接收、使用和共享的数据带来复杂的合规问题，可能使我们面临额外支出、负面宣传和责任。 此外，随着监管对隐私问题的关注持续增加，有关保护个人信息的法律和法规日益扩大并变得更加复杂，我们业务面临的这些潜在风险可能会加剧。 与增强某些类型敏感数据保护有关的法律或法规的变化，以及对遗传数据处理的要求，再加上用户对增强数据安全基础设施的需求不断增加，可能会大大增加我们提供产品的成本，降低对我们产品的需求，减少我们的收入，并/或使我们承担额外责任。
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We may fail to comply with evolving privacy and data protection laws, which could adversely affect our business, results of operations and financial condition.
New privacy and data security laws have been proposed in more than half of the states in the U.S. and in the U.S. Congress, reflecting a trend toward more stringent privacy legislation in the U.S., which trend may accelerate with increasing concerns about individual privacy. The existence of comprehensive privacy laws in different states in the U.S. may make our compliance obligations more complex and costly, may require us to modify our data processing practices and policies, and may require us to incur substantial costs and potential liability in an effort to comply.
In California, the California Consumer Privacy Act (“CCPA”), which became effective in 2020, broadly defines personal information, gives California residents expanded individual privacy rights and protections, provides for civil penalties for violations and gives California residents a private right of action for data breaches in certain cases. Further, the California Privacy Rights Act (“CPRA”), which became effective in 2023 and amends the CCPA, imposes additional obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data. It also created a new California Privacy Protection Agency authorized to issue substantive regulations and is expected to result in increased privacy and information security enforcement. The CPRA also extends the provisions of both the CCPA and the CPRA to the personal information of California-based employees. While there is an exception for certain health information, including protected health information that is subject to HIPAA, and clinical trial data, the CCPA may impact our business activities if we become a “Business” regulated by the CCPA. Further, there continues to be some uncertainly about how certain provisions of the CCPA will be interpreted and how some areas of the law will be enforced. We will continue to monitor developments related to the CCPA and anticipate additional costs and expenses associated with compliance.
In addition to the CCPA, broad consumer privacy laws recently went into effect in Virginia on January 1, 2023, in Colorado and Connecticut on July 1, 2023, and in Utah on December 31, 2023. New privacy laws will also become effective in Florida, Montana, Oregon and Texas in 2024, in Delaware, Iowa, New Hampshire, New Jersey, and Tennessee in 2025, and in Indiana in 2026. In addition, numerous other states are considering new comprehensive privacy laws.
Other U.S. states, such as New York and Massachusetts have enacted stringent data security laws and numerous other states have proposed similar laws. Additionally, various states, such as California and Massachusetts, have implemented similar privacy laws and regulations, such as the California Confidentiality of Medical Information Act, that impose restrictive requirements regulating the use and disclosure of health information and other personally identifiable information. These laws and regulations are not necessarily preempted by HIPAA, particularly if a state affords greater protection to individuals than HIPAA. Where state laws are more protective, we have to comply with the stricter provisions. In addition to fines and penalties imposed upon violators, some of these state laws also afford private rights of action to individuals who believe their personal information has been misused. California’s patient privacy laws, for example, provide for penalties of up to $250,000 and permit injured parties to sue for damages. Similarly, as discussed above, the CCPA allows consumers a private right of action when certain personal information is subject to unauthorized access and exfiltration, theft or disclosure due to a business’ failure to implement and maintain reasonable security procedures.
Furthermore, over the past few years, the number of privacy-related enforcement actions in the U.S., and in many cases the fines, have steadily increased. Failure to comply with these current and future laws, policies, industry standards, or legal obligations. or any data breach involving personal information, may result in government enforcement actions, litigation, fines, and penalties, private litigation, or adverse publicity, and could cause our customers, business partners, and investors to lose trust in us which could have a material adverse impact on our business, results of our operations, and our financial condition. We continue to face uncertainty as to the exact interpretation of the new requirements on our clinical trials and we may be unsuccessful in implementing all measures required by data protection authorities or courts in interpretation of the new law.
The interplay of federal and state laws may be subject to varying interpretations by courts and government agencies, creating complex compliance issues for us and data we receive, use and share, potentially exposing us to additional expense, adverse publicity and liability. Further, as regulatory focus on privacy issues continues to increase and laws and regulations concerning the protection of personal information expand and become more complex, these potential risks to our business could intensify. Changes in laws or regulations associated with the enhanced protection of certain types of sensitive data, for the treatment of genetic data, along with increased customer demands for enhanced data security infrastructure, could greatly increase our cost of providing our products, decrease demand for our products, reduce our revenues and/or subject us to additional liabilities.
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In the European Union (“EU”) and the United Kingdom (“UK”), we may face particular privacy, data security, and data protection risks in connection with requirements of EU’s General Data Protection Regulation (“GDPR”), the GDPR as it existed on December 31, 2020 but subject to certain UK specific amendments incorporated into UK law on January 1, 2021 under the UK GDPR and other data protection requirements. The regulatory framework for collecting, using, safeguarding, sharing, transferring and other processing of information worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. The withdrawal of the UK from the EU and the subsequent separation of the data protection regimes of these territories means we are required to comply with separate data protection laws in the EU and the UK, which may lead to additional compliance costs and could increase our overall risk. Similar laws and regulations govern our processing of personal data, including the collection, access, use, analysis, modification, storage, transfer, security breach notification, destruction and disposal of personal data. For example, the collection, use, disclosure, transfer, or other processing of personal data regarding individuals in the EU, including personal health data, is subject to the GDPR, which took effect across all Member States of the European Economic Area (“EEA”) on May 25, 2018, and as still in effect in the UK as the “UK GDPR”. On June 28, 2021, the EU Commission adopted decisions on the UK’s adequacy under the EU GDPR, and the UK continues to operate under this adequacy decision. The GDPR applies to any company established in the EU as well as to those outside the EU that process personal data in connection with the offering of goods or services to individuals in the EU or the monitoring of their behavior. The GDPR imposes a broad range of data protection obligations on controllers and/or processors, as applicable, that must be complied with when processing personal data subject to the GDPR, including, for example, providing expanded disclosures about how their personal data will be used; higher standards for organizations to demonstrate that they have obtained valid consent or have another legal basis in place to justify their data processing activities; the obligation to appoint data protection officers in certain circumstances; new rights for individuals to be “forgotten” and rights to data portability, as well as enhanced current rights (e.g., access requests); the principal of accountability and demonstrating compliance through policies, procedures, training and audit; limitations on retention of information; mandatory data breach notification requirements; safeguards to protect the security and confidentiality of personal data; restrictions on transfers of personal data outside of the EU to third countries deemed to lack adequate privacy protections (such as the U.S.), and onerous new obligations and liabilities on services providers or data processors. In particular, medical or health data, genetic data and biometric data are all classified as “special category” data under the GDPR and afford greater protection and require additional compliance obligations. Further, the UK and EU member states have a broad right to impose additional conditions—including restrictions—on these data categories. This is because the GDPR allows EU member states to derogate from the requirements of the GDPR mainly in regard to specific processing situations (including special category data and processing for scientific or statistical purposes). Non-compliance with the GDPR may result in monetary penalties of up to €20 million or 4% of worldwide revenue, whichever is greater. Moreover, data subjects can claim damages resulting from infringement of the GDPR. The GDPR further grants non-profit organizations and consumer organizations the right to bring claims on behalf of data subjects. The GDPR and other changes in laws or regulations associated with the enhanced protection of certain types of personal data, such as healthcare data or other sensitive information, could greatly increase our cost of providing our products and services or even prevent us from offering certain services in jurisdictions that we may operate in. The GDPR may increase our responsibility and liability in relation to personal data that we process where such processing is subject to the GDPR, and we may be required to put in place additional mechanisms to ensure compliance with the GDPR, including as implemented by individual EU Member States. Compliance with the GDPR is a rigorous and time-intensive process that may increase our cost of doing business or require us to change our business practices, and despite those efforts, there is a risk that we may be subject to fines and penalties, litigation, and reputational harm in connection with any activities in the EU.
Further, as referenced above, following the UK’s withdrawal from the EU (i.e., Brexit), and the expiry of the Brexit transition period, which ended on December 31, 2020, the EU GDPR has been implemented in the UK (as the UK GDPR). The UK GDPR sits alongside the UK Data Protection Act 2018 which implements certain derogations in the EU GDPR into UK law. Under the UK GDPR, companies not established in the UK but who process personal data in relation to the offering of goods or services to individuals in the UK, or to monitor their behavior will be subject to the UK GDPR – the requirements of which are (at this time) largely aligned with those under the EU GDPR and as such, may lead to similar compliance and operational costs. Non-compliance with the UK GDPR may result in monetary penalties of up to £17.5 million or 4% of worldwide revenue, whichever is higher.
In addition, we may be unable to transfer personal data from the EU, UK, and other jurisdictions to U.S. or other countries due to limitations on cross-border data flows. In particular, the EEA and the UK have significantly regulated the transfer of personal data to the U.S. and other countries whose privacy laws it believes are inadequate. Other jurisdictions may adopt similarly stringent interpretations of their data localization and cross-border data transfer laws. Although there are currently various mechanisms that may be used to transfer personal data from the EEA and the UK to the U.S. in compliance with law, such as the EEA and UK’s standard contractual clauses and the newly-adopted Data Privacy Framework, these mechanisms are subject to legal challenges, and there is no assurance that we can satisfy or rely on these measures to lawfully transfer personal data to the U.S. If there is no lawful manner for us to transfer personal data from the EEA, the UK or other jurisdictions to the U.S., or if the requirements for a legally-compliant transfer
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are too onerous, we could face significant adverse consequences, including the interruption or degradation of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, and injunctions against our processing or transferring of personal data necessary to operate our business. Additionally, companies that transfer personal data out of the EEA and the UK to other jurisdictions, particularly to the U.S., are subject to increased scrutiny from regulators, individual litigants, and activist groups.
If we are investigated by an EEA or UK data protection authority, we may face fines and other penalties, which could have a negative effect on our existing business and on our ability to attract and retain new clients or pharmaceutical partners. We may also experience hesitancy, reluctance, or refusal by EEA, UK, or multi-national clients or pharmaceutical partners to continue to use our products due to the potential risk exposure because of the current (and future) data protection obligations imposed on them by certain data protection authorities in interpretation of current law, including the GDPR and UK GDPR. Such clients or pharmaceutical partners may also view any alternative approaches to compliance as being too costly, too burdensome, too legally uncertain, or otherwise objectionable and therefore decide not to do business with us. Any of the foregoing could materially harm our business, prospects, financial condition, and results of operations.
In addition, many jurisdictions outside of the EEA and the UK are also considering and/or enacting comprehensive data protection legislation. For example, as of August 2020, the Brazilian General Data Protection Law imposes stringent requirements similar to GDPR with respect to personal information collected from individuals in Brazil.
We also continue to see jurisdictions imposing data localization laws. These regulations may interfere with our intended business activities, inhibit our ability to expand into those markets or prohibit us from continuing to offer services in those markets without significant additional costs.
Because the interpretation and application of many domestic and international privacy and data protection laws, commercial frameworks, and standards are uncertain, it is possible that these laws, frameworks, and standards may be interpreted and applied in a manner that is inconsistent with our existing data management practices and policies. It is also possible that by complying with one law, we may be violating another. In addition to the possibility of fines, lawsuits, breach of contract claims, and other claims and penalties, we could be required to fundamentally change our business activities and practices or modify our solutions, which could have an adverse effect on our business. Failure to comply with current and future privacy and data protection laws and regulations could result in government enforcement actions (including the imposition of significant penalties), criminal and civil liability for us and our officers and directors, private litigation and/or adverse publicity that negatively affects our business. Any inability to adequately respond to privacy and security concerns, even if unfounded, or to comply with applicable privacy and data protection laws, regulations, and policies, could result in additional cost and liability to us, damage our reputation, inhibit our ability to conduct trials, and adversely affect our business.
Our issuance of additional capital stock in connection with potential future financings, acquisitions, investments, our stock incentive plans or otherwise will dilute all other stockholders.
We expect to issue additional capital stock in the future that will result in dilution to all other stockholders. We expect to grant equity awards to employees, directors and consultants under our stock incentive plans. We may also raise capital through equity financings in the future. As part of our business strategy, we may acquire or make investments in complementary companies, products or technologies and issue equity securities to pay for any such acquisition or investment. Any such issuances of additional capital stock may cause stockholders to experience significant dilution of their ownership interests and the per share value of our common stock to decline.
Our employees, principal investigators, consultants and commercial partners may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading.
We are exposed to the risk of fraud or other misconduct by our employees, principal investigators, consultants and collaborators. Misconduct by these parties could include intentional failures to comply with the regulations of the FDA and non-U.S. regulators, to provide accurate information to the FDA and non-U.S. regulators, to comply with healthcare fraud and abuse laws and regulations in the U.S. and abroad, to report financial information or data accurately or to disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices.
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These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Such misconduct could also involve the improper use of information obtained during clinical studies that could result in regulatory sanctions and cause serious harm to our reputation. It is not always possible to identify and deter employee 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 comply with these laws or regulations. If any such actions are instituted against us and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.
There may be limitations on the effectiveness of our internal controls, and a failure of our control systems to prevent error or fraud may materially harm us.
Proper systems of internal control over financial accounting and disclosure are critical to the operation of a public company. We may be unable to effectively establish such systems, especially in light of the fact that we expect to operate as a publicly reporting company. This would leave us without the ability to reliably assimilate and compile financial information about us and significantly impair our ability to prevent error and detect fraud, all of which would have a negative impact on us from many perspectives.
Moreover, we do not expect that disclosure controls or internal control over financial reporting, even if established, will prevent all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Failure of our control systems to prevent error or fraud could materially adversely impact us.
The estimates and judgments we make, or the assumptions on which we rely, in preparing our financial statements could prove inaccurate.
Our financial statements have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of our assets, liabilities, revenues and expenses, the amounts of charges accrued by us and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. We cannot assure, however, that our estimates, or the assumptions underlying them, will not change over time or otherwise prove inaccurate. Any potential litigation related to the estimates and judgments we make, or the assumptions on which we rely, in preparing our financial statements could have a material adverse effect on our financial results, harm our business, and cause our share price to decline.
Failure to comply with the United States Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences.
As a Delaware corporation, we are subject to the United States Foreign Corrupt Practices Act, which generally prohibits U.S. companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Some foreign companies, including some that may compete with us, may not be subject to these prohibitions. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices may occur from time-to-time in countries in which we conduct our business. However, our employees or other agents may engage in conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations.
Litigation may adversely affect our business, financial condition and results of operations.
From time to time in the normal course of our business operations, we may become subject to litigation that may result in liability material to our financial statements as a whole or may negatively affect our operating results if changes to our business operation are required. The cost to defend such litigation may be significant and may require a diversion of our resources. There also may be adverse publicity associated with litigation that could negatively affect customer perception of our business, regardless of whether the allegations are valid or whether we are ultimately found liable. As a result, litigation may adversely affect our business, financial condition and results of operations.
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If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business.
We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. From time to time and in the future, our operations may involve the use of hazardous and flammable materials, including chemicals and biological materials, and may also produce hazardous waste products. Even if we contract with third parties for the disposal of these materials and waste products, we cannot completely eliminate the risk of contamination or injury resulting from these materials. In the event of contamination or injury resulting from the use or disposal of our hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.
We maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, but this insurance may not provide adequate coverage against potential liabilities. However, we do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us.
In addition, we may incur substantial costs to comply with current or future environmental, health and safety laws and regulations. Current or future environmental laws and regulations may impair our research, development or production efforts that could adversely affect our business, financial condition, results of operations or prospects. In addition, failure to comply with these laws and regulations may result in substantial fines, penalties or other sanctions.
If securities or industry analysts do not publish research or reports about our business, or they publish negative reports about our business, our share price and trading volume could decline.
The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business, our market and our competitors. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade our shares or change their opinion of our shares, our share price would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.
Delaware law contains anti-takeover provisions that could deter takeover attempts that could be beneficial to our stockholders.
Provisions of Delaware law could make it more difficult for a third party to acquire us, even if doing so would be beneficial to our stockholders. Section 203 of the Delaware General Corporation Law may make the acquisition of our company and the removal of incumbent officers and directors more difficult by prohibiting stockholders holding 15% or more of our outstanding voting stock from acquiring us, without the consent of our board of directors, for at least three years from the date they first hold 15% or more of the voting stock.
Our certificate of incorporation and our bylaws provide that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our certificate of incorporation and our bylaws provide that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our certificate of incorporation or our bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine. Notwithstanding the foregoing, the exclusive forum provision does not apply to suits brought to enforce any liability or duty created by the Exchange Act, the Securities Act or any other claim for which the federal courts have exclusive jurisdiction. Unless we consent in writing to the selection of an alternative forum, the federal district courts of the U.S. of America shall, to the fullest extent permitted by applicable law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. Alternatively, if a court were to find the choice of forum provision contained in our certificate of incorporation and our bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially and adversely affect our business, financial condition, and results of operation.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Note 6 to the condensed interim financial statements included in Item 1 of this Quarterly Report is incorporated by reference herein.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
ITEM 5. OTHER INFORMATION
None of our directors or officers have
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ITEM 6. EXHIBITS
The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as part of this Quarterly Report.
Exhibit |
| Description of Exhibit |
3.1 | ||
31.1* | ||
31.2* | ||
32.1* | ||
32.2* | ||
101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | Inline XBRL Taxonomy Extension Labels Linkbase Document | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit) |
* | These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act, nor shall they be deemed incorporated by reference in any filing under the Securities Act, except as shall be expressly set forth by specific reference in such filing. |
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