The following information
sets forth risk factors that could cause our actual results to differ materially from those contained in forward-looking statements
we have made in this report and those we may make from time to time. You should carefully consider the risks described below, in
addition to the other information contained in this report, before making an investment decision. Our business, financial condition
or results of operations could be harmed by any of these risks. The risks and uncertainties described below are not the only ones
we face. Additional risks not presently known to us or other factors not perceived by us to present significant risks to our business
at this time also may impair our business operations.
Risks Related to Our Business and
Industry
We currently have no drug products
for sale, and only one drug product candidate, IV Tramadol. We are dependent on the success of IV Tramadol and cannot guarantee
that we will be able to complete the required studies or that this product candidate will receive regulatory approval or be successfully
commercialized.
Our business success depends on our ability
to obtain regulatory approval for and to successfully commercialize our only product candidate, IV Tramadol, and any significant
delays in obtaining approval for and commercializing IV Tramadol will have a substantial adverse impact on our business and financial
condition.
If approved, our ability to generate
revenues from IV Tramadol will depend on our ability to:
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hire, train, deploy and support our sales force;
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create market demand for IV Tramadol through our own
marketing and sales activities, and any other arrangements to promote this product candidate we may later establish;
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obtain sufficient quantities of IV Tramadol from our
third-party manufacturers as required to meet commercial demand at launch and thereafter;
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establish and maintain agreements with wholesalers,
distributors and group purchasing organizations on commercially reasonable terms;
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obtain and maintain government and private payer reimbursement
for our product; and
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maintain patent protection and regulatory exclusivity
for IV Tramadol.
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We may not receive regulatory approval
for IV Tramadol or future product candidates, or its or their approvals may be delayed, which would have a material adverse effect
on our business and financial condition.
IV Tramadol and
other future product candidates and the activities associated with their development and commercialization, including their
design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale and
distribution, are subject to comprehensive regulation by the FDA and other regulatory agencies in the United States and by
the European Medicines Agency, or the EMA, and similar regulatory authorities outside the United States. Failure to obtain
marketing approval for our product candidate IV Tramadol or any future product candidates will prevent us from
commercializing the product candidates. We have not received approval to market IV Tramadol from regulatory authorities in
any jurisdiction. We have only limited experience in conducting preclinical and clinical studies and filing and supporting
the applications necessary to gain marketing approvals and expect to rely on third party contract research organizations as
well as consultants and vendors to assist us in this process. Securing marketing approval requires the submission of
extensive preclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication
to establish the product candidate’s safety and efficacy. Securing marketing approval also requires the submission of
information about the product manufacturing process to, and inspection of manufacturing facilities by, the regulatory
authorities.
Our product candidate IV Tramadol or
any future product candidates may not be effective, may be only moderately effective or may prove to have undesirable or unintended
side effects, toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial
use.
If our product candidate or any future
product candidate receives marketing approval, the accompanying label may limit the approved use of our drug, which could limit
sales of the product. In addition, our third-party supplier may not pass an inspection by the FDA of its manufacturing facilities
and we may be forced to identify, qualify and implement additional suppliers.
The process of obtaining marketing approvals,
both in the United States and abroad, is expensive, may take many years if approval is granted at all, and can vary substantially
based upon a variety of factors, including the type, complexity and novelty of the product candidates involved. Changes in marketing
approval policies during the development period, changes in or the enactment of additional statutes or regulations, or changes
in regulatory review for each submitted product application, may cause delays in the approval or rejection of an application. Regulatory
authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that our
data is insufficient for approval and require additional preclinical studies or clinical trials. In addition, varying interpretations
of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of a product candidate.
Any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render
the approved product not commercially viable.
If we experience delays in obtaining
approval or if we fail to obtain approval of our product candidate or any future product candidates, the commercial prospects for
our product candidates may be harmed and our ability to generate revenue will be materially impaired.
In addition, even
if we were to obtain approval, regulatory authorities may, among other things, approve our product candidate or any future product
candidates for fewer or more limited indications than we request, may not approve the price we intend to charge for our product,
may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve a product candidate with
a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate.
Any of these scenarios could compromise the commercial prospects for our product candidate or any future product candidates.
If IV Tramadol is approved and
our contract manufacturer fails to produce the product in the volumes that we require on a timely basis, to produce the product
according to the applicable quality standards and requirements, or to comply with stringent regulations applicable to pharmaceutical
drug manufacturers, we may face delays in the commercialization of this product candidate, lose potential revenues or be unable
to meet market demand.
The manufacture of pharmaceutical products
requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process
controls, and the use of specialized processing equipment. We have entered into a development and supply agreement for the completion
of pre-commercialization manufacturing development activities and the manufacture of commercial supplies of IV Tramadol. Any termination
or disruption of this relationship may materially harm our business and financial condition, and frustrate any commercialization
efforts for this product candidate.
In order to meet anticipated demand for
IV Tramadol, if this product candidate is approved, we have one manufacturer to provide us clinical and commercial supply of IV
Tramadol in accordance with the Current Good Manufacturing Practice, or cGMP. We also plan to qualify a backup manufacturer.
All of our contract manufacturers must
comply with strictly enforced federal, state and foreign regulations, including cGMP requirements enforced by the FDA through its
facilities inspection program, as well as controlled substance handling and security requirements, and we have little control over
their compliance with these regulations. Any failure to comply with applicable regulations may result in fines and civil penalties,
suspension of production, suspension or delay in product approval, product seizure or recall, or withdrawal of product approval,
and would limit the availability of our product. Any manufacturing defect or error discovered after products have been produced
and distributed could result in even more significant consequences, including costly recall procedures, re-stocking costs, damage
to our reputation and potential for product liability claims.
If the commercial manufacturers upon
whom we rely to manufacture IV Tramadol, and any other product candidates we may in-license, fail to deliver the required commercial
quantities on a timely basis at commercially reasonable prices, we would likely be unable to meet demand for our products and we
would lose potential revenues.
If serious adverse or unacceptable
side effects are identif ied during the development of IV Tramadol or our future product candidates, we may need to abandon or
limit our development of some of our product candidates.
If our product candidate or future product
candidates are associated with undesirable side effects in clinical trials or have characteristics that are unexpected, we may
need to abandon their development or limit development to more narrow 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. In our industry, many
compounds that initially showed promise in early stage testing have later been found to cause side effects that prevented further
development of the compound. In the event that our preclinical or clinical trials reveal a high and unacceptable severity and prevalence
of side effects, our trials could be suspended or terminated and the FDA or comparable foreign regulatory authorities could order
us to cease further development or deny approval of our product candidate or future product candidates for any or all targeted
indications. The FDA could also issue a letter requesting additional data or information prior to making a final decision regarding
whether or not to approve a product candidate. The number of requests for additional data or information issued by the FDA in recent
years has increased, and resulted in substantial delays in the approval of several new drugs. Undesirable side effects caused by
our product candidate or future product candidates could also result in the inclusion of serious risk information in our product
labeling, application of burdensome post-market requirements, or denial of regulatory approval by the FDA or other regulatory authorities
for any or all targeted indications, and in turn prevent us from commercializing and generating revenues from the sale of our product
candidate. Drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete the trial
and could result in potential product liability claims.
For example, some of the adverse events
observed in the IV Tramadol clinical trials completed to date include nausea, dizziness, drowsiness, tiredness, sweating, vomiting,
dry mouth, somnolence and hypotension.
Additionally, if one or more of our current
or future product candidates receives marketing approval, and we or others later identify undesirable side effects caused by this
product, a number of potentially significant negative consequences could result, including:
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regulatory authorities may require the addition of
serious risk-related labeling statements, specific warnings, precautions, or contraindication;
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regulatory authorities may suspend or withdraw their
approval of the product, or require it to be removed from the market;
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regulatory authorities may require implementation
of burdensome post-market risk mitigation strategies and practices;
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we may be required to change the way the product is
administered, conduct additional clinical trials or change the labeling of the product; or
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our reputation may suffer.
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Any of these events could prevent us
from achieving or maintaining marketing approval and market acceptance of our product candidate or future product candidates or
could substantially increase our commercialization costs and expenses, which in turn could delay or prevent us from generating
significant revenues from its sale.
Even if IV Tramadol receives regulatory
approval, it and any other products we may market will remain subject to substantial regulatory scrutiny.
IV Tramadol and any other product candidates
we may license or acquire will also be subject to ongoing requirements and review of the FDA and other regulatory authorities.
These requirements include, among others, labeling, packaging, storage, advertising, promotion, record-keeping and submission of
safety and other post-market information and reports, registration and listing requirements, ongoing cGMP requirements relating
to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, requirements regarding
the distribution of samples to physicians and recordkeeping of the drug.
The FDA may also impose requirements
for costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of the product. The FDA
closely regulates the post-approval marketing and promotion of drugs to ensure drugs are marketed only for the approved indications
and in accordance with the approved labeling. The FDA imposes stringent restrictions on manufacturers’ communications regarding
off-label use and off-label information and if we do not market our products for only their approved indications and on-label information,
we may be subject to enforcement action for off-label marketing as well as false claims liability. Violations of the FDCA relating
to the promotion of prescription drugs may lead to investigations alleging violations of federal and state health care fraud and
abuse laws, as well as state consumer protection laws.
In addition, later
discovery of previously unknown adverse events or other problems with our products, manufacturers or manufacturing processes, or
failure to comply with regulatory requirements, may yield various results, including:
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restrictions on such products, operations, manufacturers
or manufacturing processes;
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restrictions on the labeling or marketing of a product;
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restrictions on product distribution or use;
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requirements to conduct post-marketing studies or
clinical trials;
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withdrawal of the products from the market;
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refusal to approve pending applications or supplements
to approved applications that we submit;
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fines, restitution or disgorgement of profits;
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suspension or withdrawal of marketing or regulatory
approvals;
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suspension of any ongoing clinical trials;
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refusal to permit the import or export of our products;
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injunctions or the imposition of civil or criminal
penalties.
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The FDA’s
policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval
of our product candidates. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements
or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained.
We will need to obtain FDA approval
of any proposed product brand names, and any failure or delay associated with such approval may adversely impact our business.
A pharmaceutical
product candidate cannot be marketed in the United States or many other countries until we have completed a rigorous and
extensive regulatory review processes, including obtaining the approval of a brand name. Any brand names we intend to use for
our product candidates will require approval from the FDA regardless of whether we have secured a formal trademark
registration from the U.S. Patent and Trademark Office, or USPTO. The FDA typically conducts a review of proposed product
brand names, including an evaluation of potential for confusion with other product names. The FDA may also object to a
product brand name if it believes the name inappropriately implies medical claims. If the FDA objects to any of our proposed
product brand names, we may be required to adopt an alternative brand name for our product candidates. If we adopt an
alternative brand name, we would lose the benefit of our existing trademark applications for such product candidate and may
be required to expend significant additional resources in an effort to identify a suitable product brand name that would
qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA. We
may be unable to build a successful brand identity for a new trademark in a timely manner or at all, which would limit our
ability to commercialize our product candidates.
Our current and future relationships
with customers and third-party payors in the United States and elsewhere may be subject, directly or indirectly, to applicable
anti-kickback, fraud and abuse, false claims, transparency, health information privacy and security and other healthcare laws and
regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm, administrative
burdens and diminished prof its and future earnings.
Healthcare providers, physicians and
third-party payors in the United States and elsewhere 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, distributors, retailers, marketers
and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations, including, without
limitation, the federal Anti-Kickback Statute, the federal False Claims Act, and similar state or foreign laws which may constrain
the business or financial arrangements and relationships through which we sell, market and distribute any product candidates for
which we obtain marketing approval. In addition, we may be subject to transparency laws and patient privacy regulation by U.S.
federal and state governments and by governments in foreign jurisdictions in which we conduct our business. The applicable federal,
state and foreign healthcare laws and regulations that may affect our ability to operate include, but are not necessarily limited
to:
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the federal Anti-Kickback Statute, which 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 federal and state healthcare programs, such
as Medicare and Medicaid;
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federal civil and criminal false claims laws and civil
monetary penalty laws, including the federal False Claims Act, which impose criminal and civil penalties, including civil whistleblower
or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government,
including the Medicare and Medicaid programs, claims for payment that are false or fraudulent, making a false statement to avoid,
decrease or conceal an obligation to pay money to the federal government, or the knowing retention of an overpayment from government
health care programs; the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes criminal
and civil liability for executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare
matters;
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HIPAA, as amended by the Health Information Technology
for Economic and Clinical Health Act of 2009, or HITECH, and their respective implementing regulations, which impose obligations
on covered healthcare providers, health plans, and healthcare clearinghouses, as well as their business associates that create,
receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity, with respect
to safeguarding the privacy, security and transmission of individually identifiable health information;
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the federal Open Payments program, which requires
manufacturers of certain drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid
or the Children’s Health Insurance Program, with specific exceptions, to report annually to the Centers for Medicare &
Medicaid Services, or CMS, information related to “payments or other transfers of value” made to physicians, which
is defined to include doctors, dentists, optometrists, podiatrists and chiropractors, and certain teaching hospitals and applicable
manufacturers to report annually to CMS ownership and investment interests held by the physicians and their immediate family members.
Data collection began on August 1, 2013 with requirements for manufacturers to submit reports to CMS by March 31, 2014 and 90
days after the end of each subsequent calendar year. Disclosure of such information was made by CMS on a publicly available website
beginning in September 2014; and
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analogous state and foreign laws and regulations,
such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare
items or services reimbursed by non-governmental third party payors, including private insurers; state and foreign laws that require
pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance
guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers; state
and foreign laws that require drug manufacturers to report information related to payments and other transfers of value to physicians
and other healthcare providers or marketing expenditures; and state and foreign laws governing the privacy and security of health
information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by
HIPAA, thus complicating compliance efforts.
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Efforts to ensure that our business arrangements
with third parties will comply with applicable healthcare laws and regulations may 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, including, without limitation, damages, fines, imprisonment, exclusion from participation
in government healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations, which
could have a material adverse effect on our business. If any of the physicians or other healthcare providers or entities with whom
we expect to do business, including our collaborators, is found not to be in compliance with applicable laws, it may be subject
to criminal, civil or administrative sanctions, including exclusions from participation in government healthcare programs, which
could also materially affect our business.
Regulatory approval for any approved
product is limited by the FDA to those specif ic indications and conditions for which clinical safety and eff icacy have been demonstrated.
Any regulatory approval is limited to
those specific diseases and indications for which a product is deemed to be safe and effective by the FDA. In addition to the FDA
approval required for new formulations, any new indication for an approved product also requires FDA approval. If we are not able
to obtain FDA approval for any desired future indications for our products, our ability to effectively market and sell our products
may be reduced and our business may be adversely affected.
While physicians may choose to prescribe
drugs for uses that are not described in the product’s approved labeling and for uses that differ from those tested in clinical
studies and approved by the regulatory authorities, our ability to promote the products is limited to those indications that are
specifically approved by the FDA. These “off-label” uses are common across medical specialties and may constitute an
appropriate treatment for some patients in varied circumstances. Regulatory authorities in the United States generally do not regulate
the behavior of physicians in their choice of treatments. Regulatory authorities do, however, restrict communications by pharmaceutical
companies on the subject of off-label use or off-label information. If our promotional activities fail to comply with these regulations
or guidelines, we may be subject to warnings from, or enforcement action by, these authorities. In addition, our failure to follow
FDA rules and guidelines relating to promotion and advertising may cause the FDA to suspend or withdraw an approved product from
the market, require a recall or corrective advertising, institute fines, or could result in disgorgement of money, operating restrictions,
injunctions or civil or criminal prosecution by the government, any of which could harm our reputation and business.
Current and future legislation
may increase the diff iculty and cost for us to obtain marketing approval of, and to commercialize, our product candidates and
may affect the prices we are able to obtain.
In the United States and some foreign
jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system
that could prevent or delay marketing approval of our product candidate, restrict or regulate post-approval activities, and affect
our ability to profitably sell any product candidates for which we obtain marketing approval.
In the United States, the Medicare Prescription
Drug, Improvement, and Modernization Act of 2003, or the MMA, changed the way Medicare covers and pays for pharmaceutical products.
The legislation expanded Medicare coverage for drug purchases by the elderly and certain disabled people and introduced a reimbursement
methodology based on average sales prices for physician-administered drugs. In addition, this law provided authority for limiting
the number of drugs that will be covered in any therapeutic class. Cost reduction initiatives and other provisions of this law
and future laws could decrease the coverage and price that we will receive for any approved products. While the MMA only applies
to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting
their own payment rates. Therefore, any limitations in reimbursement that results from the MMA may result in reductions in payments
from private payors.
In March 2010, the Patient Protection
and Affordable Care Act, or the ACA, became law. The ACA is a sweeping law intended to broaden access to health insurance, reduce
or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for
the healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy
reforms.
Among the provisions of the ACA of importance
to our potential product candidate are the following:
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an annual, nondeductible fee on any entity that manufactures
or imports specified branded prescription drugs and biologic products;
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an increase in the statutory minimum rebates a manufacturer
must pay under the Medicaid Drug Rebate Program;
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expansion of healthcare fraud and abuse laws, including
the False Claims Act and the Anti-Kickback Statute, new government investigative powers, and enhanced penalties for noncompliance;
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new Medicare Part D coverage gap discount program,
in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices;
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extension of manufacturers’ Medicaid rebate
liability;
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expansion of eligibility criteria for Medicaid programs;
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expansion of the entities eligible for discounts under
the Public Health Service Act’s pharmaceutical pricing program;
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new requirements to report financial arrangements
with physicians and teaching hospitals;
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a new requirement to annually report drug samples
that manufacturers and distributors provide to physicians; and
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a new Patient-Centered Outcomes Research Institute
to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.
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The Supreme Court upheld the
ACA in the main challenge to the constitutionality of the law in 2012. Specifically, the Supreme Court held that the individual
mandate and corresponding penalty was constitutional because it would be considered a tax by the federal government. The Supreme
Court also upheld federal subsidies for purchasers of insurance through federally facilitated exchanges in a decision released
in June 2015. Any remaining legal challenges to the ACA are viewed generally as not significantly impacting the implementation
of the law if the plaintiffs prevail.
President Trump ran for office
on a platform that supported the repeal of the ACA, and one of his first actions after his inauguration was to sign an Executive
Order instructing federal agencies to waive or delay requirements of the ACA that impose economic or regulatory burdens on states,
families, the health-care industry and others. Modifications to or repeal of all or certain provisions of the ACA have been attempted
in Congress as a result of the outcome of the recent presidential and congressional elections, consistent with statements made
by the incoming administration and members of Congress during the presidential and congressional campaigns and following the election.
In January 2017, Congress voted to adopt a budget resolution for fiscal year 2017, or the Budget Resolution, that authorizes
the implementation of legislation that would repeal portions of the ACA. The Budget Resolution is not a law. However, it is widely
viewed as the first step toward the passage of legislation that would repeal certain aspects of the ACA. In March 2017, following
the passage of the budget resolution for fiscal year 2017, the U.S. House of Representatives passed legislation known as the American
Health Care Act of 2017, which, if enacted, would amend or repeal significant portions of the ACA. Attempts in the Senate to pass
ACA repeal legislation, including the Better Care Reconciliation Act of 2017, so far have been unsuccessful. At the end of 2017,
Congress passed the Tax Cuts and Jobs Act, which repealed the penalty for individuals who fail to maintain minimum essential health
coverage as required by the ACA. Following this legislation, Texas and 19 other states filed a lawsuit alleging that the ACA is
unconstitutional as the individual mandate was repealed, undermining the legal basis for the Supreme Court’s prior decision.
This lawsuit is ongoing and the outcome may have a significant impact on our business.
Most recently, the Bipartisan Budget Act of 2018, the “BBA,”
which set government spending levels for Fiscal Years 2018 and 2019, revised certain provisions of the ACA. Specifically, beginning
in 2019, the BBA increased manufacturer point-of-sale discounts off negotiated prices of applicable brand drugs in the Medicare
Part D coverage gap from 50% to 70%, ultimately increasing the liability for brand drug manufacturers. Further, this mandatory
manufacturer discount applies to biosimilars beginning in 2019.
The Trump Administration has also taken several regulatory
steps to redirect ACA implementation. The Department of Health and Human Services finalized a payment reduction for drugs acquired
through the 340B Drug Pricing Program and has taken steps to increase the availability of cheaper health insurance options, typically
with fewer benefits. The Administration has also signaled its intention to address drug prices and to increase competition, including
by increasing the availability of biosimilars. As these are regulatory actions, a new administration could undo or modify these
efforts.
There have been, and likely will continue to be, legislative
and regulatory proposals at the federal and state levels directed at broadening the availability of healthcare and containing or
lowering the cost of healthcare products and services. We cannot predict the initiatives that may be adopted in the future. The
continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to
contain or reduce costs of healthcare may adversely affect:
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the
demand for any products for which we may obtain regulatory approval;
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our
ability to set a price that we believe is fair for our products;
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our
ability to generate revenues and achieve or maintain profitability;
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the
level of taxes that we are required to pay; and
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the
availability of capital.
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In addition, governments may impose price controls, which may
adversely affect our future profitability.
We expect that
the ACA, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous
coverage criteria and in additional downward pressure on the price that we receive for any approved drug. Any reduction
in reimbursement from Medicare or other government healthcare programs may result in a similar reduction in payments from
private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to
generate revenue, attain profitability, or commercialize our drugs.
Legislative and regulatory proposals
have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products.
We cannot be sure whether additional legislative changes will be enacted, or whether FDA regulations, guidance or interpretations
will be changed, or what the impact of such changes on the marketing approvals, if any, of our product candidates, may be. In addition,
increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval,
as well as subject us to more stringent product labeling and post-marketing conditions and other requirements.
Public concern regarding the safety
of opioid drug products such as IV Tramadol could delay or limit our ability to obtain regulatory approval, result in the inclusion
of serious risk information in our labeling, negatively impact market performance, or require us to undertake other activities
that may entail additional costs.
In light of widely publicized events
concerning the safety risk of certain drug products, the FDA, members of Congress, the Government Accountability Office, medical
professionals and the general public have raised concerns about potential controlled substance drug safety issues. These events
have resulted in the withdrawal of drug products, revisions to drug labeling that further limit use of the drug products and the
establishment of risk management programs. The Food and Drug Administration Amendments Act of 2007, or FDAAA, grants significant
expanded authority to the FDA much of which is aimed at improving the safety of drug products before and after approval. In particular,
the new law authorizes the FDA to, among other things, require post-approval studies and clinical trials, mandate changes to drug
labeling to reflect new safety information and require risk evaluation and mitigation strategies for certain drugs, including certain
currently approved drugs. It also significantly expands the federal government’s clinical trial registry and results databank,
which we expect will result in significantly increased government oversight of clinical trials. Under the FDAAA, companies that
violate these and other provisions of the new law are subject to substantial civil monetary penalties, among other regulatory,
civil and criminal penalties. The increased attention to drug safety issues may result in a more cautious approach by the FDA in
its review of data from our clinical trials. Data from clinical trials may receive greater scrutiny, particularly with respect
to safety, which may make the FDA or other regulatory authorities more likely to require additional preclinical studies or clinical
trials. If the FDA requires us to conduct additional preclinical studies or clinical trials prior to approving IV Tramadol, our
ability to obtain approval of this product candidate will be delayed. If the FDA requires us to provide additional clinical or
preclinical data following the approval of IV Tramadol, the indications for which this product candidate is approved may be limited
or there may be specific warnings or limitations on production dosing, and our efforts to commercialize IV Tramadol may be otherwise
adversely impacted.
Rising public, medical, Congressional,
and agency concern around the prescription of controlled substance drug products to patients and a growing movement to reduce the
use of opioid drug products, to develop abuse-deterrent products, and to prevent dependence also could negatively impact our ability
to commercialize and generate revenue from IV Tramadol if it is approved for marketing in the United States.
If the DEA decides to reschedule
IV Tramadol from a Schedule IV controlled substance to a more restrictive Schedule, IV Tramadol could lose its competitive advantage,
and our related clinical development and regulatory approval could be delayed or prevented.
In July 2014, the U.S. Drug Enforcement
Administration, or DEA, classified IV Tramadol as a Schedule IV controlled substance. In comparison, other opioids, which have
a high potential for abuse, are mostly classified as Schedule I and II controlled substances. If approved, IV Tramadol will be
the only Schedule IV intravenous opioid on the market. However, in the current environment where the opioid epidemic is a recognized
problem in the United States, there is a possibility that the DEA might reschedule IV Tramadol as a Schedule I, II or III controlled
substance. Such a rescheduling would severely impair IV Tramadol’s current competitive advantage over traditional opioids
and may affect our ability to market IV Tramadol as a safe alternative pain management product.
If we experience delays or diff
iculties in the enrollment of patients in clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.
We may not be able to initiate or continue
clinical trials for our product candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate
in these trials as required by the FDA or similar regulatory authorities outside the United States. Some of our competitors have
ongoing clinical trials for product candidates that treat the same indications as 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.
Available therapies for the indications we are pursuing can also affect enrollment in our clinical trials. Patient enrollment is
affected by other factors including, but not necessarily limited to:
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the severity of the disease under investigation;
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the eligibility criteria for the study in question;
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the perceived risks and benefits of the product candidate
under study;
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the efforts to facilitate timely enrollment in clinical
trials;
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the patient referral practices of physicians;
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the ability to monitor patients adequately during
and after treatment; and
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the proximity and availability of clinical trial sites
for prospective patients.
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Our inability to enroll a sufficient
number of patients for our clinical trials would result in significant delays and could require us to abandon one or more clinical
trials altogether. Enrollment delays in our clinical trials may result in increased development costs for our product candidate
or future product candidates, which would cause the value of our company to decline and limit our ability to obtain additional
financing.
We expect intense competition for
IV Tramadol, and new products may emerge that provide different or better therapeutic alternatives for our targeted indications.
The biotechnology and pharmaceutical
industries are subject to rapid and intense technological change. We face, and will continue to face, competition in the development
and marketing of IV Tramadol from academic institutions, government agencies, research institutions and biotechnology and pharmaceutical
companies. There can be no assurance that developments by others will not render IV Tramadol obsolete or noncompetitive. Furthermore,
new developments, including the development of other drug technologies and methods of preventing the incidence of disease, occur
in the pharmaceutical industry at a rapid pace. These developments may render IV Tramadol obsolete or noncompetitive.
IV Tramadol will compete with well-established
products with similar indications. Competing products available for the management of pain include Ofirmev (IV acetaminophen) and
IV formulations of NSAIDs such as Dyloject (diclofenac), Toradol (ketorolac), and Caldolor (ibuprofen). In addition, we also expect
to compete with agents such as Exparel, a liposome injection of bupivacaine indicated for administration into the surgical site
to produce postsurgical analgesia. In addition to approved products, there are a number of product candidates in development for
the management of acute pain. The late-stage pain development pipeline is replete with reformulations and fixed-dose combination
products of already available therapies. Among specific drug classes, opioid analgesics and NSAIDs represent the greatest number
of agents in development. Most investigational opioids that have reached the later stages of clinical development are new formulations
of already marketed opioids. Likewise, investigational NSAIDs — mostly lower dose injectable reformulations of already approved
compounds — are another significant area of late-stage drug development in the postoperative pain space. There are also several
agents with novel mechanisms in clinical development, such as CR845 (Cara Therapeutics, Inc.) and TRV130 (Trevena, Inc.).
Competitors may seek to develop alternative
formulations of IV centrally acting synthetic opioid analgesics for our targeted indications that do not directly infringe on our
in-licensed patent rights. The commercial opportunity for IV Tramadol could be significantly harmed if competitors are able to
develop alternative formulations outside the scope of our in-licensed patents. Compared to us, many of our potential competitors
have substantially greater:
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development resources, including personnel and technology;
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clinical trial experience;
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expertise in prosecution of intellectual property
rights; and
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manufacturing, distribution and sales and marketing
experience.
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As a result of these factors, our competitors
may obtain regulatory approval of their products more rapidly than we are able to or may obtain patent protection or other intellectual
property rights that limit our ability to develop or commercialize IV Tramadol. Our competitors may also develop drugs that are
more effective, safe, useful and less costly than ours and may be more successful than us in manufacturing and marketing their
products.
If IV Tramadol does not achieve
broad market acceptance, the revenues that we generate from its sales will be limited.
The commercial success of IV Tramadol,
if approved, will depend upon its acceptance by the medical community, our ability to ensure that the drug is included in hospital
formularies, and coverage and reimbursement for IV Tramadol by third party payors, including government payors. The degree of market
acceptance of IV Tramadol or any other product candidate we may license or acquire will depend on a number of factors, including,
but not necessarily limited to:
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the efficacy and safety as demonstrated in clinical
trials;
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the timing of market introduction of such product
candidate as well as competitive products;
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the clinical indications for which the drug is approved;
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acceptance by physicians, major operators of cancer
clinics and patients of the drug as a safe and effective treatment;
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the safety of such product candidate seen in a broader
patient group, including its use outside the approved indications;
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the availability, cost and potential advantages of
alternative treatments, including less expensive generic drugs;
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the availability of adequate reimbursement and pricing
by third party payors and government authorities;
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the relative convenience and ease of administration
of the product candidate for clinical practices;
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the product labeling or product insert required by
the FDA or regulatory authority in other countries, including any contradictions, warnings, drug interactions, or other precautions;
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the approval, availability, market acceptance and
reimbursement for a companion diagnostic, if any;
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the prevalence and severity of adverse side effects;
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the effectiveness of our sales and marketing efforts;
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changes in the standard of care for the targeted indications
for our product candidate or future product candidates, which could reduce the marketing impact of any superiority claims that
we could make following FDA approval; and
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potential advantages over, and availability of, alternative
treatments.
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If any product candidate that we develop
does not provide a treatment regimen that is as beneficial as, or is not perceived as being as beneficial as, the current standard
of care or otherwise does not provide patient benefit, that product candidate, if approved for commercial sale by the FDA or other
regulatory authorities, likely will not achieve market acceptance. Our ability to effectively promote and sell IV Tramadol and
any other product candidates we may license or acquire in the hospital marketplace will also depend on pricing and cost effectiveness,
including our ability to produce a product at a competitive price and achieve acceptance of the product onto hospital formularies,
as well as our ability to obtain sufficient third-party coverage or reimbursement. Since many hospitals are members of group purchasing
organizations, which leverage the purchasing power of a group of entities to obtain discounts based on the collective buying power
of the group, our ability to attract customers in the hospital marketplace will also depend on our ability to effectively promote
our product candidates to group purchasing organizations. We will also need to demonstrate acceptable evidence of safety and efficacy,
as well as relative convenience and ease of administration. Market acceptance could be further limited depending on the prevalence
and severity of any expected or unexpected adverse side effects associated with our product candidates. If our product candidates
are approved but do not achieve an adequate level of acceptance by physicians, health care payors and patients, we may not generate
sufficient revenue from these products, and we may not become or remain profitable. In addition, our efforts to educate the medical
community and third-party payors on the benefits of our product candidates may require significant resources and may never be successful.
If the government or third-party
payors fail to provide adequate coverage and payment rates for IV Tramadol or any future products we may license or acquire in
the future, if any, or if hospitals choose to use therapies that are less expensive, our revenue and prospects for prof itability
will be limited.
In both domestic and foreign markets,
our sales of any future products will depend in part upon the availability of coverage and reimbursement from third party payors.
Such third-party payors include government health programs such as Medicare, managed care providers, private health insurers and
other organizations. In particular, many U.S. hospitals receive a fixed reimbursement amount per procedure for certain surgeries
and other treatment therapies they perform. Because this amount may not be based on the actual expenses the hospital incurs, hospitals
may choose to use therapies which are less expensive when compared to our product candidate or future product candidates. Accordingly,
IV Tramadol or any other product candidates that we may in-license or acquire, if approved, will face competition from other therapies
and drugs for these limited hospital financial resources. We may need to conduct post-marketing studies in order to demonstrate
the cost-effectiveness of any future products to the satisfaction of hospitals, other target customers and their third-party payors.
Such studies might require us to commit a significant amount of management time and financial and other resources. Our future products
might not ultimately be considered cost-effective. Adequate third-party coverage and reimbursement might not be available to enable
us to maintain price levels sufficient to realize an appropriate return on investment in product development.
If we are unable to establish sales,
marketing and distribution capabilities or to enter into agreements with third parties to market and sell our product candidates,
we may not be successful in commercializing our product candidates if and when they are approved.
We currently do not have a marketing
or sales organization for the marketing, sales and distribution of pharmaceutical products. In order to commercialize any product
candidate that receives marketing approval, we would need to build marketing, sales, distribution, managerial and other non-technical
capabilities or make arrangements with third parties to perform these services, and we may not be successful in doing so. In the
event of successful development and regulatory approval of IV Tramadol or another product candidate, we expect to build a targeted
specialist sales force to market or co-promote the product. There are risks involved with establishing our own sales, marketing
and distribution capabilities. 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 future products, if any, on our own include, but are not necessarily limited to:
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our inability to recruit, train and retain adequate
numbers of effective sales and marketing personnel;
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the inability of sales personnel to obtain access
to physicians or persuade adequate numbers of physicians to prescribe any future products;
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the lack of complementary or other products to be
offered by sales personnel, which may put us at a competitive disadvantage from the perspective of sales efficiency relative to
companies with more extensive product lines; and
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unforeseen costs and expenses associated with creating
an independent sales and marketing organization.
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As an alternative to establishing our
own sales force, we may choose to partner with third parties that have well-established direct sales forces to sell, market and
distribute our products. There are risks involved with partnering with third party sales forces, including ensuring adequate training
on the product, regulatory, and compliance requirements associated with promotion of the product.
We rely, and expect to continue
to rely, on third parties to conduct our preclinical studies and clinical trials, and those third parties may not perform satisfactorily,
including failing to meet deadlines for the completion of
such trials or complying with applicable
regulatory requirements.
We rely on third party contract research
organizations and clinical research organizations to conduct some of our preclinical studies and all of our clinical trials for
IV Tramadol and for any future product candidates. We expect to continue to rely on third parties, such as contract research organizations,
clinical research organizations, clinical data management organizations, medical institutions and clinical investigators, to conduct
some of our preclinical studies and all of our clinical trials. The agreements with these third parties might terminate for a variety
of reasons, including a failure to perform by the third parties. If we need to enter into alternative arrangements, that could
delay our product development activities.
Our reliance on these third parties for
research and development activities will reduce our control over these activities but will not relieve us of our legal and regulatory
product development responsibilities. For example, we will remain responsible for ensuring that each of our preclinical studies
and clinical trials are conducted in accordance with the general investigational plan and protocols for the trial and for ensuring
that our preclinical studies are conducted in accordance with good laboratory practice, or GLP, as appropriate. Moreover, the FDA
requires us to comply with standards, commonly referred to as good clinical practices, or GCPs, for conducting, recording and reporting
the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity
and confidentiality of trial participants are protected. Regulatory authorities enforce these requirements through periodic inspections
of trial sponsors, clinical investigators and trial sites. If we or any of our clinical research organizations fail to comply with
applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign
regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot
assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical
trials complies with GCP regulations. In addition, our clinical trials must be conducted with product produced under cGMP regulations.
Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval
process. We also are required to register ongoing clinical trials and post the results of completed clinical trials on a government-sponsored
database, ClinicalTrials.gov, within specified timeframes. Failure to do so can result in fines, adverse publicity and civil and
criminal sanctions.
The third parties with whom we have contracted
to help perform our preclinical studies or clinical trials may also have relationships with other entities, some of which may be
our competitors. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct
our preclinical studies or clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able
to obtain, or may be delayed in obtaining, marketing approvals for our product candidates and will not be able to, or may be delayed
in our efforts to, successfully commercialize our product candidates.
If any of our relationships with these
third-party contract research organizations or clinical research organizations terminates, we may not be able to enter into arrangements
with alternative contract research organizations or clinical research organizations or to do so on commercially reasonable terms.
Switching or adding additional contract research organizations or clinical research organizations involves additional cost and
requires extensive training and management time and focus. In addition, there is a natural transition period when a new contract
research organization or clinical research organization commences work. As a result, delays could occur, which could compromise
our ability to meet our desired development timelines. Though we carefully manage our relationships with our contract research
organizations or clinical research organizations, there can be no assurance that we will not encounter challenges or delays in
the future.
We contract with third parties
for the manufacture of our product candidates for preclinical and clinical testing and expect to continue to do so for commercialization.
This reliance on third parties increases the risk that we will not have suff icient quantities of our product candidates or products
or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.
We do not have any manufacturing facilities
or personnel. We rely, and expect to continue to rely, on third parties for the manufacture of our product candidates for preclinical
and clinical testing, as well as for commercial manufacture if any of our product candidates receive marketing approval. This reliance
on third parties increases the risk that we will not have sufficient quantities of our product candidates or products or such quantities
at an acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts.
We also expect to rely on third party
manufacturers or third-party collaborators for the manufacture of commercial supply of any product candidates for which our collaborators
or we obtain marketing approval. We may be unable to establish any 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, but not necessarily limited to:
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reliance on the third party for regulatory compliance
and quality assurance;
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raw material or active ingredient shortages from suppliers
the third party has qualified for our product;
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the possible breach of the manufacturing agreement
by the third party;
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manufacturing delays if our third-party manufacturers
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 agreement between us;
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the possible misappropriation of our proprietary information,
including our trade secrets and know-how; and
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the possible termination or nonrenewal of the agreement
by the third party at a time that is costly or inconvenient for us.
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The facilities used by our contract manufacturers
to manufacture our product candidates must be approved by the FDA pursuant to inspections that will be conducted after we submit
an NDA to the FDA. We do not control the manufacturing process of, and are completely dependent on, our contract manufacturers
for compliance with cGMP regulations for manufacture of our product candidates. Third party manufacturers may not be able to comply
with the cGMP regulations or similar regulatory requirements outside the United States. Our failure, or the failure of our third-party
manufacturers, to comply with applicable regulations could result in 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 products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect
supplies of our products.
IV Tramadol and any products that we
may develop may compete with other product candidates and products for access to manufacturing facilities. There are a limited
number of manufacturers that operate under cGMP regulations and that might be capable of manufacturing for us. Any performance
failure on the part of our existing or future manufacturers could delay clinical development or marketing approval. We do not currently
have arrangements in place for redundant supply or a second source for bulk drug substance. If our current contract manufacturers
cannot perform as agreed, we may be required to replace such manufacturers. We may incur added costs and delays in identifying
and qualifying any replacement manufacturers.
The U.S. Drug Enforcement Administration,
or the DEA, restricts the importation of a controlled substance finished drug product when the same substance is commercially available
in the United States, which could reduce the number of potential alternative manufacturers for IV Tramadol.
Our current and anticipated future dependence
upon others for the manufacture of our product candidates or products may adversely affect our future profit margins and our ability
to commercialize any products that receive marketing approval on a timely and competitive basis.
We also expect to rely on other third
parties to store and distribute drug supplies for our clinical trials. Any performance failure on the part of our distributors
could delay clinical development or marketing approval of our product candidates or commercialization of our products, producing
additional losses and depriving us of potential product revenue.
We rely on clinical data and results
obtained by third parties that could ultimately prove to be inaccurate or unreliable.
As part of our strategy to mitigate development
risk, we seek to develop product candidates with validated mechanisms of action and we utilize biomarkers to assess potential clinical
efficacy early in the development process. This strategy necessarily relies upon clinical data and other results obtained by third
parties that may ultimately prove to be inaccurate or unreliable. Further, such clinical data and results may be based on products
or product candidates that are significantly different from our product candidate or future product candidates. If the third-party
data and results we rely upon prove to be inaccurate, unreliable or not applicable to our product candidate or future product candidate,
we could make inaccurate assumptions and conclusions about our product candidates and our research and development efforts could
be compromised and called into question during the review or any marketing applications we submit.
If we breach the agreement under
which we license rights to IV Tramadol, we could lose the ability to continue to develop and commercialize this product candidate.
In February 2015, Fortress obtained an
exclusive license to IV Tramadol for the U.S. market from Revogenex Ireland Ltd., or Revogenex, pursuant to the License Agreement;
Fortress subsequently transferred the License Agreement to us. Because we have in-licensed the rights to this product candidate
from a third party, if there is any dispute between us and our licensor regarding our rights under the License Agreement, our ability
to develop and commercialize this product candidate may be adversely affected. Any uncured, material breach under the License Agreement
could result in our loss of exclusive rights to our product candidate and may lead to a complete termination of our related product
development efforts.
We may not be able to manage our
business effectively if we are unable to attract and retain key personnel.
We may not be able to attract or retain
qualified management and commercial, scientific and clinical personnel in the future due to the intense competition for qualified
personnel among biotechnology, pharmaceutical and other businesses. If we are not able to attract and retain necessary personnel
to accomplish our business objectives, we may experience constraints that will significantly impede the achievement of our development
objectives, our ability to raise additional capital and our ability to implement our business strategy.
Our employees, consultants, or
third-party partners may engage in misconduct or other improper activities, including those that result in noncompliance with certain
regulatory standards and requirements, which could have a material adverse effect on our business.
We are exposed to the risk of employee
fraud or other misconduct. Misconduct by employees, consultants, or third-party partners could include intentional failures to
comply with FDA regulations, provide accurate information to the FDA, comply with manufacturing standards we have established,
comply with federal and state healthcare fraud and abuse laws and regulations, report financial information or data accurately
or 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, kickbacks, self-dealing and other abusive practices. 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. Employee, consultant, or third-party misconduct could also involve
the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious
harm to our reputation. The precautions we take to detect and prevent this activity may not be effective in controlling unknown
or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a
failure to be in compliance with such laws or regulations. 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 and results of operations,
including the imposition of significant fines or other sanctions.
We face potential product liability
exposure, and if successful claims are brought against us, we may incur substantial liability for IV Tramadol or other product
candidates we may license or acquire and may have to limit their commercialization.
The use of IV Tramadol and any other
product candidates we may license or acquire in clinical trials and the sale of any products for which we obtain marketing approval
expose us to the risk of product liability claims. For example, we may be sued if any product we develop allegedly causes injury
or is found to be otherwise unsuitable during clinical testing, manufacturing, marketing or sale. Any such product liability claims
may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence,
strict liability or a breach of warranties. Product liability claims might be brought against us by consumers, health care providers
or others using, administering or selling our products. If we cannot successfully defend ourselves against these claims, we will
incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:
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withdrawal of clinical trial participants;
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termination of clinical trial sites or entire trial
programs;
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decreased demand for any product candidates or products
that we may develop;
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initiation of investigations by regulators;
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impairment of our business reputation;
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costs of related litigation;
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substantial monetary awards to patients or other claimants;
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reduced resources of our management to pursue our
business strategy; and
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the inability to commercialize our product candidate
or future product candidates.
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We have limited product liability insurance
coverage for our clinical trials. However, our insurance coverage may not reimburse us or may not be sufficient to reimburse us
for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive, and, in the future,
we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due
to liability. When needed, we intend to expand our insurance coverage to include the sale of commercial products if we obtain marketing
approval for our product candidate in development, but we may be unable to obtain commercially reasonable product liability insurance
for any products approved for marketing. On occasion, large judgments have been awarded in class action lawsuits based on drugs
that had unanticipated side effects. A successful product liability claim or series of claims brought against us could cause our
stock price to fall and, if judgments exceed our insurance coverage, could decrease our cash and adversely affect our business.
Our future growth depends on our
ability to identify and acquire or in-license products and if we do not successfully identify and acquire or in-license related
product candidates or integrate them into our operations, we may have limited growth opportunities.
An important part of our business strategy
is to continue to develop a pipeline of product candidates by acquiring or in-licensing products, businesses or technologies that
we believe are a strategic fit with our focus on the hospital marketplace. Future in-licenses or acquisitions, however, may entail
numerous operational and financial risks, including:
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exposure to unknown liabilities;
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disruption of our business and diversion of our management’s
time and attention to develop acquired products or technologies;
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difficulty or inability to secure financing to fund
development activities for such acquired or in-licensed technologies in the current economic environment;
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incurrence of substantial debt or dilutive issuances
of securities to pay for acquisitions;
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higher than expected acquisition and integration costs;
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increased amortization expenses;
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difficulty and cost in combining the operations and
personnel of any acquired businesses with our operations and personnel;
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impairment of relationships with key suppliers or
customers of any acquired businesses due to changes in management and ownership; and
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inability to retain key employees of any acquired
businesses.
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We have limited resources to identify
and execute the acquisition or in-licensing of third party products, businesses and technologies and integrate them into our current
infrastructure. In particular, we may compete with larger pharmaceutical companies and other competitors in our efforts to establish
new collaborations and in-licensing opportunities. These competitors likely will have access to greater financial resources than
us and may have greater expertise in identifying and evaluating new opportunities. Moreover, we may devote resources to potential
acquisitions or in-licensing opportunities that are never completed, or we may fail to realize the anticipated benefits of such
efforts.
We may expend our limited resources
to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be
more prof itable or for which there is a greater likelihood of success.
Because we have limited financial and
managerial resources, we focus on research programs and product candidates that we identify for specific indications. As a result,
we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have
greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products
or profitable market opportunities. Our spending on current and future research and development programs and product candidates
for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential
or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration,
licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development
and commercialization rights to such product candidate.
If we fail to comply with environmental,
health and safety laws and regulations, we could become subject to f ines 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. Our operations involve the use of hazardous and flammable materials, including
chemicals and biological materials. Our operations also produce hazardous waste products. We generally contract with third parties
for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. Although
we believe that the safety procedures for handling and disposing of these materials comply with the standards prescribed by these
laws and regulations, we cannot eliminate the risk of accidental contamination or injury from these materials. In the event of
contamination or injury resulting from our use of 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.
Although 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, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental
liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous
or radioactive materials.
In addition, we may incur substantial
costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future
laws and regulations may impair our research, development or production efforts. Our failure to comply with these laws and regulations
also may result in substantial fines, penalties or other sanctions.
Our business and operations would
suffer in the event of system failures.
Despite the implementation of security
measures, our internal computer systems are vulnerable to damage from computer viruses, unauthorized access, natural disasters,
terrorism, war and telecommunication and electrical failures. Any system failure, accident or security breach that causes interruptions
in our operations could result in a material disruption of our drug development programs. For example, the loss of clinical trial
data from completed clinical trials for IV Tramadol could result in delays in our regulatory approval efforts and significantly
increase our costs to recover or reproduce the data. To the extent that any disruption or security breach results in a loss or
damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we may incur liability
and the further development of our product candidate may be delayed.
Risks Related to Intellectual Property
If we are unable to obtain and
maintain patent protection for our technology and products or if the scope of the patent protection obtained is not suff iciently
broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to
successfully commercialize our technology and products may be impaired.
Our commercial success will depend in
part on obtaining and maintaining patent protection and trade secret protection in the United States with respect to IV Tramadol
or any other product candidates that we may license or acquire and the methods we use to manufacture them, as well as successfully
defending these patents and trade secrets against third party challenges. We seek to protect our proprietary position by filing
patent applications in the United States and abroad related to our product candidates. We will only be able to protect our technologies
from unauthorized use by third parties to the extent that valid and enforceable patents or trade secrets cover them.
The patent prosecution process is expensive
and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable
cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development
output before it is too late to obtain patent protection. If our licensors or we fail to obtain or maintain patent protection or
trade secret protection for IV Tramadol or any other product candidate we may license or acquire, third parties could use our proprietary
information, which could impair our ability to compete in the market and adversely affect our ability to generate revenues and
achieve profitability. Moreover, should we enter into other collaborations we may be required to consult with or cede control to
collaborators regarding the prosecution, maintenance and enforcement of our patents. Therefore, these patents and applications
may not be prosecuted and enforced in a manner consistent with the best interests of our business.
The patent position of biotechnology
and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years
been the subject of much litigation. In addition, no consistent policy regarding the breadth of claims allowed in pharmaceutical
or biotechnology patents has emerged to date in the United States. The patent situation outside the United States is even more
uncertain. The laws of foreign countries may not protect our rights to the same extent as the laws of the United States. For example,
European patent law restricts the patentability of methods of treatment of the human body more than United States law does. Publications
of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States
and other jurisdictions are typically not published until 18 months after a first filing, or in some cases at all. Therefore, we
cannot know with certainty whether we or our licensors were the first to make the inventions claimed in our owned or licensed patents
or pending patent applications, or that we were the first to file for patent protection of such inventions. In the event that a
third party has also filed a U.S. patent application relating to our product candidates or a similar invention, we may have to
participate in interference proceedings declared by the USPTO to determine priority of invention in the United States. The costs
of these proceedings could be substantial and it is possible that our efforts would be unsuccessful, resulting in a material adverse
effect on our U.S. patent position. As a result, the issuance, scope, validity, enforceability and commercial value of our patent
rights are highly uncertain. Our pending and future patent applications may not result in patents being issued which protect our
technology or products, in whole or in part, or which effectively prevent others from commercializing competitive technologies
and products. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may
diminish the value of our patents or narrow the scope of our patent protection. For example, the federal courts of the United States
have taken an increasingly dim view of the patent eligibility of certain subject matter, such as naturally occurring nucleic acid
sequences, amino acid sequences and certain methods of utilizing same, which include their detection in a biological sample and
diagnostic conclusions arising from their detection. Such subject matter, which had long been a staple of the biotechnology and
biopharmaceutical industry to protect their discoveries, is now considered, with few exceptions, ineligible in the first place
for protection under the patent laws of the United States. Accordingly, we cannot predict the breadth of claims that may be allowed
or enforced in our patents (if any) or in those licensed from third parties.
Recent patent reform legislation could
increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our
issued patents. On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith
Act includes a number of significant changes to United States patent law. These include provisions that affect the way patent applications
are prosecuted and may also affect patent litigation. The USPTO recently developed new regulations and procedures to govern administration
of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular,
the first to file provisions, only became effective on March 16, 2013. Accordingly, it is not clear what, if any, impact the Leahy-Smith
Act will have on the operation of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties
and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which
could have a material adverse effect on our business and financial condition.
Moreover, we may be subject to a third
party preissuance submission of prior art to the USPTO, or become involved in opposition, derivation, reexamination, inter parties
review, post-grant review or interference proceedings challenging our patent rights or the patent rights of others. An adverse
determination in any such submission, patent office trial, proceeding or litigation could reduce the scope of, render unenforceable,
or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with us,
without payment to us, or result in our inability to manufacture or commercialize products without infringing third party patent
rights. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it
could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.
Even if our patent applications issue
as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors from competing
with us or otherwise provide us with any competitive advantage. Our competitors may be able to circumvent our owned or licensed
patents by developing similar or alternative technologies or products in a non-infringing manner.
The issuance of a patent does not foreclose
challenges to its inventorship, scope, validity or enforceability. Therefore, our owned and licensed patents may be challenged
in the courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or freedom to
operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability
to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent
protection of our technology and products. Given the amount of time required for the development, testing and regulatory review
of new product candidates, patents protecting such product candidates might expire before or shortly after such product candidates
are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others
from commercializing products similar or identical to ours.
The patent rights that we have
in-licensed covering the infusion time and pharmacokinetics, or PK, prof ile for IV Tramadol are limited to a specif ic IV formulation
of centrally acting synthetic opioid analgesic, and our market opportunity for this product candidate may be limited by the lack
of patent protection for the active ingredient itself and other formulations that may be developed by competitors.
The active ingredients in IV Tramadol
have been generic in the United States for a number of years. While we believe that the patent estate covering IV Tramadol (including
but not limited to U.S. Patent Nos. 8,895,622; 9,561,195, 9,566,253 and 9,693,949) provides strong protection, our market opportunity
would be limited if a generic manufacturer could obtain regulatory approval for another IV formulation of tramadol and commercialize
it without infringing on our patent.
Because it is diff icult and costly
to protect our proprietary rights, we may not be able to ensure their protection.
The degree of future protection for our
proprietary rights is uncertain, because legal means afford only limited protection and may not adequately protect our rights or
permit us to gain or keep our competitive advantage. For example:
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our licensors might not have been the first to make
the inventions covered by each of our pending patent applications and issued patents;
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our licensors might not have been the first to file
patent applications for these inventions;
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others may independently develop similar or alternative
technologies or duplicate our product candidate or any future product candidates technologies;
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it is possible that none of the pending patent applications
licensed to us will result in issued patents;
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the issued patents covering our product candidate
or any future product candidates may not provide a basis for market exclusivity for active products, may not provide us with any
competitive advantages, or may be challenged by third parties;
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we may not develop additional proprietary technologies
that are patentable; or
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patents of others may have an adverse effect on our
business.
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We may become involved in lawsuits
to protect or enforce our patents or other intellectual property, which could be expensive, time consuming and unsuccessful.
Competitors may infringe our issued patents
or other intellectual property. To counter infringement or unauthorized use, we may be required to file infringement claims, which
can be expensive and time consuming. Any claims we assert against perceived infringers could provoke these parties to assert counterclaims
against us alleging that we infringe their patents. In addition, in a patent infringement proceeding, a court may decide that a
patent of ours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or 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 proceeding could put one or more of our patents at risk of being invalidated, rendered unenforceable,
or interpreted narrowly.
If we are sued for infringing intellectual
property rights of third parties, it will be costly and time consuming, and an unfavorable outcome in any litigation would harm
our business.
Our ability to develop, manufacture,
market and sell IV Tramadol or any other product candidates that we may license or acquire depends upon our ability to avoid infringing
the proprietary rights of third parties. Numerous U.S. and foreign issued patents and pending patent applications, which are owned
by third parties, exist in the general fields of pain treatment and cover the use of numerous compounds and formulations in our
targeted markets. Because of the uncertainty inherent in any patent or other litigation involving proprietary rights, we and our
licensors may not be successful in defending intellectual property claims by third parties, which could have a material adverse
effect on our results of operations. Regardless of the outcome of any litigation, defending the litigation may be expensive, time-consuming
and distracting to management. In addition, because patent applications can take many years to issue, there may be currently pending
applications, unknown to us, which may later result in issued patents that IV Tramadol may infringe. There could also be existing
patents of which we are not aware that IV Tramadol may inadvertently infringe.
There is a substantial amount of litigation
involving patent and other intellectual property rights in the biotechnology and biopharmaceutical industries generally. If a third-party
claims that we infringe on their patents or misappropriated their technology, we could face a number of issues, including:
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infringement and other intellectual property claims
which, with or without merit, can be expensive and time consuming to litigate and can divert management’s attention from
our core business;
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substantial damages for past infringement which we
may have to pay if a court decides that our product infringes on a competitor’s patent;
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a court prohibiting us from selling or licensing our
product unless the patent holder licenses the patent to us, which it would not be required to do;
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if a license is available from a patent holder, we
may have to pay substantial royalties or grant cross licenses to our patents; and
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redesigning our processes so they do not infringe,
which may not be possible or could require substantial funds and time.
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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 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 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 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 are important or necessary to the development and 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.
If we fail to comply with our obligations
in our intellectual property licenses and funding arrangements with third parties, we could lose rights that are important to our
business.
We are currently party to a license agreement
for IV Tramadol. In the future, we may become party to licenses that are important for product development and commercialization.
If we fail to comply with our obligations under current or future license and funding agreements, our counterparties may have the
right to terminate these agreements, in which event we might not be able to develop, manufacture or market any product or utilize
any technology that is covered by these agreements or may face other penalties under the agreements. Such an occurrence could materially
and adversely affect the value of a product candidate being developed under any such agreement or could restrict our drug discovery
activities. Termination of these agreements or reduction or elimination of our rights under these agreements may result in our
having to negotiate new or reinstated agreements with less favorable terms, or cause us to lose our rights under these agreements,
including our rights to important intellectual property or technology.
We may be subject to claims that
our employees have wrongfully used or disclosed alleged trade secrets of their former employers.
As is common in the biotechnology and
pharmaceutical industry, we employ individuals who were previously employed at other biotechnology or pharmaceutical companies,
including our competitors or potential competitors. Although no claims against us are currently pending, we may be subject to claims
that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of
their former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against
these claims, litigation could result in substantial costs and be a distraction to management.
If we are unable to protect the
conf identiality of our trade secrets, our business and competitive position would be harmed.
In addition to seeking patent protection
for our product candidate or future product candidates, we also rely on trade secrets, including unpatented know-how, technology
and other proprietary information, to maintain our competitive position, particularly where we do not believe patent protection
is appropriate or obtainable. However, trade secrets are difficult to protect. We limit disclosure of such trade secrets where
possible but we also seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements
with parties who do have access to them, such as our employees, our licensors, corporate collaborators, outside scientific collaborators,
contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention or patent
assignment agreements with our employees and consultants. Despite these efforts, any of these parties may breach the agreements
and may unintentionally or willfully disclose our proprietary 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 courts inside and outside the United
States are less willing or unwilling to protect trade secrets. Moreover, 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 were to be disclosed to or independently developed
by a competitor, our competitive position would be harmed.
Risks Related to Our Finances and
Capital Requirements
We have incurred signif icant losses
since our inception. We expect to incur losses for the foreseeable future, and may never achieve or maintain prof itability.
We are an emerging growth company with
a limited operating history. We have focused primarily on in-licensing and developing IV Tramadol, with the goal of supporting
regulatory approval for this product candidate. We have incurred losses since our inception in February 2015.
These losses, among other things, have
had and will continue to have an adverse effect on our stockholders’ equity and working capital. We expect to continue to
incur significant operating losses for the foreseeable future. We also do not anticipate that we will achieve profitability for
a period of time after generating material revenues, if ever. If we are unable to generate revenues, we will not become profitable
and may be unable to continue operations without continued funding. Because of the numerous risks and uncertainties associated
with developing pharmaceutical products, we are unable to predict the timing or amount of increased expenses or when or if, we
will be able to achieve profitability. Our net losses may fluctuate significantly from quarter to quarter and year to year. We
anticipate that our expenses will increase substantially if:
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IV Tramadol or other future product candidates are
approved for commercial sale, due to the necessity in establishing adequate commercial infrastructure to launch such candidate
or candidates without substantial delays, including hiring, sales and marketing personnel, and contracting with third parties
for warehousing, distribution, cash collection and related commercial activities;
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we are required by the FDA, or foreign regulatory
authorities, to perform studies in addition to those currently expected;
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there are any delays in completing our clinical trials
or the development of any of our product candidates;
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we execute other collaborative, licensing or similar
arrangements and the timing of payments we may make or receive under these arrangements;
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there are variations in the level of expenses related
to our future development programs;
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there are any product liability or intellectual property
infringement lawsuits in which we may become involved; and
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there are any regulatory developments affecting IV
Tramadol or the product candidates of our competitors.
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Our ability to become profitable depends
upon our ability to generate revenue. To date, we have not generated any revenue from our development stage product, and we do
not know when, or if, we will generate any revenue. Our ability to generate revenue depends on a number of factors, including,
but not limited to, our ability to:
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obtain regulatory approval for IV Tramadol, or any
other product candidates that we may license or acquire;
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manufacture commercial quantities of IV Tramadol or
other product candidates, if approved, at acceptable cost levels; and
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develop a commercial organization and the supporting
infrastructure required to successfully market and sell IV Tramadol or other product candidates, if approved.
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Even 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 depress our value and could impair our ability to raise capital, expand our business, maintain our research and development
efforts, diversify our product offerings or even continue our operations. A decline in our value could also cause you to lose all
or part of your investment.
Our short operating history makes
it difficult to evaluate our business and prospects.
We were incorporated on February 9, 2015,
and have only been conducting operations with respect to IV Tramadol since February 17, 2015. We have not yet demonstrated an ability
to successfully complete clinical trials, obtain regulatory approvals, manufacture a commercial scale product, or arrange for a
third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization.
Consequently, any predictions about our future performance may not be as accurate as they could be if we had a history of successfully
developing and commercializing pharmaceutical products.
In addition, as a young business, we
may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. We will need to expand
our capabilities to support commercial activities. We may not be successful in adding such capabilities.
We expect our financial condition and
operating results to continue to fluctuate significantly from quarter to quarter and year to year due to a variety of factors,
many of which are beyond our control. Accordingly, you should not rely upon the results of any past quarterly period as an indication
of future operating performance.
We do not have any products that
are approved for commercial sale and therefore do not expect to generate any revenues from product sales in the foreseeable future,
if ever.
We have not generated any product related
revenues to date, and do not expect to generate any such revenues for at least the next several years, if at all. To obtain revenues
from sales of our product candidates, we must succeed, either alone or with third parties, in developing, obtaining regulatory
approval for, manufacturing and marketing products with commercial potential. We may never succeed in these activities, and we
may not generate sufficient revenues to continue our business operations or achieve profitability.
We will require substantial additional
funding, which may not be available to us on acceptable terms, or at all. If we fail to raise the necessary additional capital,
we may be unable to raise capital when needed, which would force us to delay, reduce or eliminate our product development programs
or commercialization efforts.
Our operations have consumed substantial
amounts of cash since inception. We expect to significantly increase our spending to advance the clinical development of IV Tramadol
and launch and commercialize any additional product candidates for which we receive regulatory approval, including building our
own commercial organizations to address certain markets. We will require additional capital for the further development and commercialization
of our product candidates, as well as to fund our other operating expenses and capital expenditures, and cannot provide any assurance
that we will be able to raise funds to complete the development of our product.
We cannot be certain that additional
funding will be available on acceptable terms, or at all. If we are unable to raise additional capital in sufficient amounts or
on terms acceptable to us we may have to significantly delay, scale back or discontinue the development or commercialization of
one or more of our product candidates. We may also seek collaborators for product candidates at an earlier stage than otherwise
would be desirable or on terms that are less favorable than might otherwise be available. Any of these events could significantly
harm our business, financial condition and prospects.
Our future funding requirements will
depend on many factors, including, but not limited to:
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the timing, design and conduct of, and results from,
preclinical and clinical trials for our product candidates;
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the potential for delays in our efforts to seek regulatory
approval for our product candidates, and any costs associated with such delays;
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the costs of establishing a commercial organization
to sell, market and distribute our product candidates;
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the rate of progress and costs of our efforts to prepare
for the submission of an NDA for any product candidates that we may in-license or acquire in the future, and the potential that
we may need to conduct additional clinical trials to support applications for regulatory approval;
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the costs of filing, prosecuting, defending and enforcing
any patent claims and other intellectual property rights associated with our product candidates, including any such costs we may
be required to expend if our licensors are unwilling or unable to do so;
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the cost and timing of securing sufficient supplies
of our product candidates from our contract manufacturers for clinical trials and in preparation for commercialization;
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the effect of competing technological and market developments;
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the terms and timing of any collaborative, licensing,
co-promotion or other arrangements that we may establish;
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if one or more of our product candidates are approved,
the potential that we may be required to file a lawsuit to defend our patent rights or regulatory exclusivities from challenges
by companies seeking to market generic versions of one or more of our product candidates; and
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the success of the commercialization of one or more
of our product candidates.
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Future capital requirements will also
depend on the extent to which we acquire or invest in additional complementary businesses, products and technologies.
In order to carry out our business plan
and implement our strategy, we anticipate that we will need to obtain additional financing from time to time and may choose to
raise additional funds through strategic collaborations, licensing arrangements, public or private equity or debt financing, bank
lines of credit, asset sales, government grants, or other arrangements. We cannot be sure that any additional funding, if needed,
will be available on terms favorable to us or at all. Furthermore, any additional equity or equity-related financing may be dilutive
to our stockholders, and debt or equity financing, if available, may subject us to restrictive covenants and significant interest
costs. If we obtain funding through a strategic collaboration or licensing arrangement, we may be required to relinquish our rights
to certain of our product candidates or marketing territories.
Our inability to raise capital when needed
would harm our business, financial condition and results of operations, and could cause our stock value to decline or require that
we wind down our operations altogether.
Raising additional capital may
cause dilution to our existing stockholders, restrict our operations or require us to relinquish proprietary rights.
Until such time, if ever, as we can generate
substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings, grants
and license and development agreements in connection with any collaborations. To the extent that we raise additional capital through
the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may
include liquidation or other preferences that adversely affect your rights as a stockholder. Debt financing and preferred equity
financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions,
such as incurring additional debt, making capital expenditures or declaring dividends.
If we raise additional
funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we
may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or
grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds 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 prefer to develop and market ourselves.
We will continue to incur signif
icant increased costs as a result of operating as a public company, and our management will be required to devote substantial time
to new compliance initiatives.
We are a listed and traded public company.
As a public company, we incur significant legal, accounting and other expenses under the Sarbanes-Oxley Act of 2002, as well as
rules subsequently implemented by the Securities and Exchange Commission, or SEC, and the rules of any stock exchange on which
we may become listed. These rules impose various requirements on public companies, including requiring establishment and maintenance
of effective disclosure and financial controls and appropriate corporate governance practices. Our management and other personnel
have devoted and will continue to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and
regulations increase our legal and financial compliance costs and make some activities more time-consuming and costly. For example,
these rules and regulations make it more difficult and more expensive for us to obtain director and officer liability insurance,
and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar
coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our Board of Directors,
our Board committees or as executive officers.
The Sarbanes-Oxley Act of 2002 requires,
among other things, that we maintain effective internal controls for financial reporting and disclosure controls and procedures.
As a result, we are required to periodically perform an evaluation of our internal controls over financial reporting to allow management
to report on the effectiveness of those controls, as required by Section 404 of the Sarbanes-Oxley Act. Additionally, our independent
auditors are required to perform a similar evaluation and report on the effectiveness of our internal controls over financial reporting.
These efforts to comply with Section 404 and related regulations have required, and continue to require, the commitment of significant
financial and managerial resources. While we anticipate maintaining the integrity of our internal controls over financial reporting
and all other aspects of Section 404, we cannot be certain that a material weakness will not be identified when we test the effectiveness
of our control systems in the future. If a material weakness is identified, we could be subject to sanctions or investigations
by the SEC or other regulatory authorities, which would require additional financial and management resources, costly litigation
or a loss of public confidence in our internal controls, which could have an adverse effect on the market price of our stock.
We are an “emerging growth
company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make
our securities less attractive to investors.
We are an “emerging growth company,”
as defined in the JOBS Act. We will remain an “emerging growth company” and may take advantage of these provisions
until the earlier of (i) December 31, 2022; (ii) the last day of the fiscal year in which we have total annual gross revenue of
at least $1.07 billion; (iii) the date on which we are deemed to be a large accelerated filer, which means the market value of
our equity securities that is held by non-affiliates is $700 million or more as of the last business day of our most recently completed
second fiscal quarter, and (iv) the date on which we have issued more than $1.0 billion of non-convertible debt in any three-year
period. These exemptions include 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 being exempt
from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute
payments not previously approved. Additionally, as an emerging growth company, we have elected to delay the adoption of new or
revised accounting standards that have different effective dates for public and private companies until those standards apply to
private companies. As such, our financial statements may not be comparable to companies that comply with public company effective
dates. We cannot predict if investors will find our shares less attractive because we may rely on these provisions. If some investors
find our shares less attractive as a result, there may be a less active trading market for our shares and our share price may be
more volatile.
Our results of operations and liquidity
needs could be materially negatively affected by market fluctuations and economic downturn.
Our results of operations could be materially
negatively affected by economic conditions generally, both in the United States and elsewhere around the world. Continuing concerns
over inflation, energy costs, geopolitical issues, the availability and cost of credit, the U.S. mortgage market and residential
real estate market in the United States have contributed to increased volatility and diminished expectations for the economy and
the markets going forward. These factors, combined with volatile oil prices, declining business and consumer confidence and increased
unemployment, have precipitated an economic recession and fears of a possible depression. Domestic and international equity markets
continue to experience heightened volatility and turmoil. These events and the continuing market upheavals may have an adverse
effect on us. In the event of a continuing market downturn, our results of operations could be adversely affected by those factors
in many ways, including making it more difficult for us to raise funds if necessary, and our stock price may further decline.
Risks Relating to Securities Markets
and Investment in Our Stock
Our stock may be subject to substantial
price and volume fluctuations due to a number of factors, many of which are beyond our control and may prevent our stockholders
from reselling our common stock at a prof it.
The market prices for securities of biotechnology
and pharmaceutical companies have historically been highly volatile, and the market has from time to time experienced significant
price and volume fluctuations that are unrelated to the operating performance of particular companies.
The market price of our common stock
is likely to be highly volatile and may fluctuate substantially due to many factors, including:
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announcements concerning the progress of our efforts
to obtain regulatory approval for and commercialize IV Tramadol or future product candidates, including any requests we receive
from the FDA for additional studies or data that result in delays in obtaining regulatory approval or launching this product candidate,
if approved;
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market conditions in the pharmaceutical and biotechnology
sectors or the economy as a whole;
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price and volume fluctuations in the overall stock
market;
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the failure of IV Tramadol or future product candidates,
if approved, to achieve commercial success;
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announcements of the introduction of new products
by us or our competitors;
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developments concerning product development results
or intellectual property rights of others;
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litigation or public concern about the safety of our
potential products;
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actual fluctuations in our quarterly operating results,
and concerns by investors that such fluctuations may occur in the future;
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deviations in our operating results from the estimates
of securities analysts or other analyst comments;
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additions or departures of key personnel;
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health care reform legislation, including measures
directed at controlling the pricing of pharmaceutical products, and third party coverage and reimbursement policies;
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developments concerning current or future strategic
collaborations; and
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discussion of us or our stock price by the financial
and scientific press and in online investor communities.
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Fortress controls a voting majority
of our common stock.
Pursuant to the terms of the Class A
Preferred Stock held by Fortress, Fortress will be entitled to cast, for each share of Class A Preferred Stock held by Fortress,
the number of votes that is equal to 1.1 times a fraction, the numerator of which is the sum of (A) the aggregate number of shares
of outstanding common stock and (B) the whole shares of common stock into which the shares of outstanding the Class A Preferred
Stock are convertible and the denominator of which is the aggregate number of shares of outstanding Class A Preferred Stock, or
the Class A Preferred Stock Ratio. Thus, Fortress will at all times have voting control of us. Further, for a period of ten years
from the date of the first issuance of shares of Class A Preferred Stock, the holders of record of the shares of Class A Preferred
Stock (or other capital stock or securities issued upon conversion of or in exchange for the Class A Preferred Stock), exclusively
and as a separate class, shall be entitled to appoint or elect the majority of our directors. This concentration of voting power
may delay, prevent or deter a change in control, even when such a change may be in the best interests of all stockholders, could
deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of us or our assets, and
might affect the prevailing market price of our common stock.
Fortress has the right to receive
a signif icant grant of shares of our common stock annually, which will result in the dilution of your holdings of common stock
upon each grant, which could reduce their value.
Under the terms of the Amended and Restated
Founders Agreement, which became effective September 13, 2016, Fortress will receive a grant of shares of our common stock equal
to 2.5% of the gross amount of any equity or debt financing. Additionally, the holders of Class A Preferred Stock, as a class,
will receive an annual dividend, payable in shares of common stock in an amount equal to 2.5% of our fully-diluted outstanding
capital stock as of the business day immediately prior to the date such dividend is payable. Fortress currently owns all outstanding
shares of Class A Preferred Stock. At our Annual Meeting of the Stockholder’s held on June 13, 2018, the Company’s
shareholders approved an amendment to the Company’s Third Amended and Restated Certificate of Incorporation, amending the
Class A Preferred dividend payment date from February 17 to January 1 of each year. These share issuances to Fortress and any other
holder of Class A Preferred Stock will dilute your holdings in our common stock and, if our value has not grown proportionately
over the prior year, would result in a reduction in the value of your shares. The Amended and Restated Founders Agreement has a
term of 15 years and renews automatically for subsequent one-year periods unless terminated by Fortress or upon a Change in Control
(as defined in the Amended and Restated Founders Agreement).
We are a “controlled company”
within the meaning of NASDAQ listing standards and, as a result, qualify for, and rely on, exemptions from certain corporate governance
requirements. You will not have the same protections afforded to stockholders of companies that are subject to such requirements.
We are a “controlled company”
within the meaning of NASDAQ listing standards. Under these rules, a company of which more than 50% of the voting power is held
by an individual, a group or another company is a “controlled company” and may elect not to comply with certain corporate
governance requirements of NASDAQ, including (i) the requirement that a majority of the Board of Directors consist of independent
directors, (ii) the requirement that we have a nominating and corporate governance committee that is composed entirely of independent
directors with a written charter addressing the committee’s purpose and responsibilities and (iii) the requirement that we
have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s
purpose and responsibilities. We intend to rely on some or all of these exemptions.
Accordingly, you will not have the same
protections afforded to stockholders of companies subject to all of the corporate governance requirements of NASDAQ.
We might have received better terms
from unaff iliated third parties than the terms we receive in our agreements with Fortress.
The agreements we entered into with Fortress
in connection with the separation include the Management Services Agreement, or the MSA, and the Founders Agreement. While we believe
the terms of these agreements are reasonable, they might not reflect terms that would have resulted from arm’s-length negotiations
between unaffiliated third parties. The terms of the agreements relate to, among other things, payment of a royalty on product
sales and the provision of employment and transition services. We might have received better terms from third parties because,
among other things, third parties might have competed with each other to win our business.
The ownership by our executive
off icers and some of our directors of equity securities of Fortress and/or rights to acquire equity securities of Fortress might
create, or appear to create, conflicts of interest.
Because of their current or former positions
with Fortress, some of our executive officers and directors own shares of Fortress common stock and/or options to purchase shares
of Fortress common stock. Their individual holdings of common stock and/or options to purchase common stock of Fortress may be
significant compared to their total assets. Ownership by our directors and officers, after our separation, of common stock and/or
options to purchase common stock of Fortress create might appear to create conflicts of interest when these directors and officers
are faced with decisions that could have different implications for Fortress than for us. For instance, and by way of example,
if there were to be a dispute between Fortress and us regarding the calculation of the royalty fee due to Fortress under the terms
of the Founders Agreement, then certain of our senior employees may have and will appear to have a conflict of interest with regard
to the outcome of such dispute.
Certain of our officers and directors serve in similar
roles with our parent company, affiliates, related parties and other parties with whom we transact business; ongoing and future
relationships and transactions between these parties could result in conflicts of interest.
We share directors and/or officers with certain of our parent
company, affiliates, related parties or other companies with which we transact business, and such arrangements could create conflicts
of interest in the future, including with respect to the allocation of corporate opportunities. While we believe that we have
put in place policies and procedures to identify such conflicts and that any existing agreements that may give rise to such conflicts
and any such policies or procedures were negotiated at arm’s length in conformity with fiduciary duties, such conflicts
of interest may nonetheless arise. The existence and consequences of such potential conflicts could expose us to lost profits,
claims by our investors and creditors, and harm to our results of operations.
We may become involved in securities
class action litigation that could divert management’s attention and harm our business.
The stock markets have from time to time
experienced significant price and volume fluctuations that have affected the market prices for the common stock of biotechnology
and pharmaceutical companies. These broad market fluctuations may cause the market price of our stock to decline. In the past,
securities class action litigation has often been brought against a company following a decline in the market price of its securities.
This risk is especially relevant for us because biotechnology and biopharmaceutical companies have experienced significant stock
price volatility in recent years. We may become involved in this type of litigation in the future. Litigation often is expensive
and diverts management’s attention and resources, which could adversely affect our business.