Item 1A. Risk Factors
You
should consider carefully the following information about the risks described below, together with the other information contained in
this Quarterly Report on Form 10-Q and in our other public filings, in evaluating our business. If any of the following risks actually
occurs, our business, financial condition, results of operations, and future growth prospects would likely be materially and adversely
affected. In these circumstances, the market price of our common stock would likely decline.
Risks Related to Our
Financial Condition
We have a
very limited operating history and have never generated any revenues.
We
are an early-stage biopharmaceutical company with a very limited operating history that may make it difficult to evaluate the success
of our business to date and to assess our future viability. Our operations, with respect to the entity that operationally survived the
Merger, have been limited to organizing and staffing the company, business planning, raising capital, developing our pipeline assets
(TARA-002 and IV Choline Chloride), identifying product candidates, and other research and development. Although our employees have made
regulatory submissions and conducted successful clinical trials in the past across many therapeutic areas while employed at other companies,
we have not yet demonstrated an ability to successfully complete any clinical trials and have never completed the development of any
product candidate, nor have we ever generated any revenue from product sales or otherwise. Consequently, we have no meaningful operations
upon which to evaluate our business, and predictions about our future success or viability may not be as accurate as they could be if
we had a longer operating history or a history of successfully developing and commercializing biopharmaceutical products.
We expect to incur significant
losses for the foreseeable future and may never achieve or maintain profitability.
Investment
in biopharmaceutical product development is highly speculative because it entails substantial upfront capital and significant risk that
a product candidate will fail to gain regulatory approval or become commercially viable. We have never generated any revenues, and cannot
estimate with precision the extent of our future losses. We expect to incur increasing levels of operating losses for the foreseeable
future as we execute on the plan to continue research and development activities, including the ongoing and planned clinical development
of our product candidates, potentially acquire new products and/or product candidates, seek regulatory approvals of and potentially commercialize
any approved product candidates, hire additional personnel, protect our intellectual property, and incur the additional costs of operating
as a public company. We expect to continue to incur significant and increasing operating losses and negative cash flows for the foreseeable
future. These losses have had and will continue to have an adverse effect on our financial position and working capital.
To
become and remain profitable, we must develop or acquire and eventually commercialize a product with significant market potential. This
will require us to be successful in a range of challenging activities, including completing preclinical studies and clinical trials,
obtaining marketing approval, manufacturing, marketing and selling any product candidate for which we obtain marketing approval, and
satisfying post-marketing requirements, if any. We may never succeed in these activities and, even if we succeed in obtaining approval
for and commercializing one or more products, we may never generate revenues that are significant enough to achieve profitability. In
addition, as a young business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown
challenges. Furthermore, because of the numerous risks and uncertainties associated with biopharmaceutical product development, we are
unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. If
we achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis and may continue to
incur substantial research and development and other expenditures to develop and market additional product candidates. Our failure to
become and remain profitable would decrease the value of us and could impair our ability to raise capital, maintain our research and
development efforts, expand the business or continue operations. A decline in the value of us could also cause you to lose all or part
of your investment.
The COVID-19
coronavirus could adversely impact our business, including our clinical development plans.
As the COVID-19 pandemic
and measures imposed to contain this pandemic continue in the United States and around the world, we may experience disruptions that could
severely impact our business, including:
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interruption
of key manufacturing, research and clinical development activities, due to limitations on work and travel imposed or recommended
by federal or state governments, employers and others;
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delays
or difficulties in clinical trial site operations, including difficulties in recruiting clinical site investigators and clinical
site staff and difficulties in enrolling patients;
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interruption
of key business activities, due to illness and/or quarantine of key individuals and delays associated with recruiting, hiring and
training new temporary or permanent replacements for such key individuals, both internally and at our third party service providers;
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delays
in research and clinical trial sites receiving the supplies and materials needed to conduct preclinical studies and clinical trials,
due to work stoppages, travel and shipping interruptions or restrictions or other reasons;
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delays
or difficulties conducting nonclinical studies due to limitations in employee resources or laboratory closures;
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difficulties
in raising additional capital needed to pursue the development of our programs due to the slowing of our economy and near term and/or
long term negative effects of the pandemic on the financial, banking and capital markets;
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changes
in local regulations as part of a response to the COVID-19 coronavirus outbreak which may require us to change the ways in which
research, including clinical development, is conducted, which may result in unexpected costs; and
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delays
in necessary interactions with regulators, ethics committees and other important agencies and contractors due to limitations in employee
resources, travel restrictions or forced furlough of government employees.
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The
global outbreak of COVID- continues to evolve. The extent to which the COVID-19 coronavirus may impact our business will depend on future
developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease,
the duration of the outbreak, travel restrictions and social distancing in the United States and other countries, business closures or
business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the virus.
The duration and extent of the impact from the COVID-19 pandemic depend on future developments that cannot be accurately predicted at
this time, such as the severity and transmission rate of the virus, the extent and effectiveness of containment actions and the impact
of these and other factors on our operations, employees, partners and vendors. If we are not able to respond to and manage the impact
of such events effectively, our business will be harmed.
In
addition, while the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, it has
significantly disrupted global financial markets, and may limit our ability to access additional capital, which could in the future negatively
affect our liquidity. A recession or market correction resulting from the spread of COVID-19 could materially affect our business and
the value of our common stock.
To
the extent the COVID-19 pandemic adversely affects our business and results of operations, it may also have the effect of heightening
many of the other risks and uncertainties described elsewhere in this “Risk Factors” section.
We will need
to raise additional financing in the future to fund our operations, which may not be available to us on favorable terms or at all.
We
will require substantial additional funds to conduct the costly and time-consuming clinical efficacy trials necessary to pursue regulatory
approval of each potential product candidate and to continue the development of TARA-002 and IV Choline Chloride in new indications or
uses. Our future capital requirements will depend upon a number of factors, including: the number and timing of future product candidates
in the pipeline; progress with and results from preclinical testing and clinical trials; the ability to manufacture sufficient drug supplies
to complete preclinical and clinical trials; the costs involved in preparing, filing, acquiring, prosecuting, maintaining and enforcing
patent and other intellectual property claims; and the time and costs involved in obtaining regulatory approvals and favorable reimbursement
or formulary acceptance. Raising additional capital may be costly or difficult to obtain and could significantly dilute stockholders’
ownership interests or inhibit our ability to achieve our business objectives. As a result of economic conditions, general global economic
uncertainty, political change, and other factors, including uncertainty associated with the COVID-19 pandemic, we do not know whether
additional capital will be available when needed, or that, if available, we will be able to obtain additional capital on reasonable terms.
Specifically, the COVID-19 pandemic has significantly disrupted global financial markets, and may limit our ability to access capital,
which could in the future negatively affect our liquidity.
If
we raise additional funds through public or private equity offerings, the terms of these securities may include liquidation or other
preferences that adversely affect the rights of our common stockholders. Further, to the extent that we raise additional capital through
the sale of common stock or securities convertible or exchangeable into common stock, the ownership interests of our common stockholders
will be diluted. In addition, any debt financing may subject us to fixed payment obligations and 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 capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements
with third parties, we may have to relinquish certain valuable intellectual property or other rights to our product candidates, technologies,
future revenue streams or research programs or grant licenses on terms that may not be favorable to us. Even if we were to obtain sufficient
funding, there can be no assurance that it will be available on terms acceptable to us or our stockholders.
Clinical
drug development is very expensive, time-consuming and uncertain.
Clinical
development for our product candidates is very expensive, time-consuming, difficult to design and implement, and the outcomes are
inherently uncertain. Most product candidates that commence clinical trials are never approved by regulatory authorities for
commercialization and of those that are approved many do not cover their costs of development. In addition, we, any partner with
which we may in the future collaborate, the FDA, an institutional review board, or IRB, or other regulatory authorities, including
state and local agencies and counterpart agencies in foreign countries, may suspend, delay, require modifications to or terminate
our clinical trials at any time.
Risks Related
to Drug/Biologics Development
Our business
depends on the successful clinical development, regulatory approval and commercialization of TARA-002 and IV Choline Chloride.
The
success of our business, including our ability to finance our self and generate revenue in the future, primarily depends on the successful
development, regulatory approval and commercialization of TARA-002 and IV Choline Chloride. The clinical and commercial success of TARA-002
and IV Choline Chloride depends on a number of factors, including the following:
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timely
and successful completion of required clinical trials not yet initiated, which may be significantly slower or costlier than we currently
anticipate and/or produce results that do not achieve the endpoints of the trials;
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whether
we are required by the FDA or similar foreign regulatory agencies to conduct additional studies beyond those planned to support the
approval and commercialization of TARA-002 and IV Choline Chloride;
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achieving
and maintaining, and, where applicable, ensuring that our third-party contractors achieve and maintain compliance with their contractual
obligations and with all regulatory requirements applicable to TARA-002 and IV Choline Chloride;
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ability to confirm the
comparability of TARA-002 and OK-432;
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ability
of third parties with whom we contract to manufacture adequate clinical trial and commercial supplies of TARA-002 and IV Choline
Chloride, to remain in good standing with regulatory agencies and to develop, validate and maintain commercially viable manufacturing
processes that are compliant with current good manufacturing practices, or cGMP;
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a
continued acceptable safety profile during clinical development and following approval of TARA-002 and IV Choline Chloride;
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ability
to obtain favorable labeling for TARA-002 and IV Choline Chloride through regulators that allows for successful commercialization,
given the drugs may be marketed only to the extent approved by these regulatory authorities (unlike with most other industries);
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ability
to successfully commercialize TARA-002 and IV Choline Chloride in the United States and internationally, if approved for marketing,
sale and distribution in such countries and territories, whether alone or in collaboration with others;
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acceptance
by physicians, insurers and payors, and patients of the quality, benefits, safety and efficacy of TARA-002 and IV Choline Chloride,
if either is approved, including relative to alternative and competing treatments;
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existence
of a regulatory environment conducive to the success of TARA-002 and IV Choline Chloride;
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ability
to price TARA-002 and IV Choline Chloride to recover our development costs and generate a satisfactory profit margin; and
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our
ability and our partners’ ability to establish and enforce intellectual property rights in and to TARA-002 and IV Choline Chloride.
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If
we do not achieve one or more of these factors, many of which are beyond our control, in a timely manner or at all, we could experience
significant delays or an inability to obtain regulatory approvals or commercialize TARA-002 and IV Choline Chloride. Even if regulatory
approvals are obtained, we may never be able to successfully commercialize TARA-002 and IV Choline Chloride. Accordingly, we cannot assure
you that we will be able to generate sufficient revenue through the sale of TARA-002 and IV Choline Chloride to continue our business.
The
COVID-19 pandemic is impacting our business and the business of the third-parties with which we contract for key services related to
our clinical development plans. If the crisis persists, it is likely to have a significant delay in our development timelines and result
in additional and unexpected costs. Presently, we anticipate that the stress of COVID-19 on healthcare systems around the globe will
negatively impact our ability to conduct clinical trials in the near term due primarily to the lack of resources at clinical trial sites
and the resulting inability to enroll patients in these trials. In addition, it is possible that the stress of the COVID-19 pandemic
on regulatory agencies may make it more difficult to collaborate with, and receive guidance from, such agencies, which could delay our
development timelines and negatively impact our business.
We have never
made an IND, BLA or NDA submission or conducted a clinical trial and may be unable to successfully do so for TARA-002 or IV Choline Chloride.
The
conduct of a clinical trials is a long, expensive, complicated and highly regulated process. Although our employees have made
regulatory submissions and conducted successful clinical trials in the past across many therapeutic areas while employed at other
companies, we, as a company, have not submitted an investigational new drug application, or IND, conducted any clinical trials, or
submitted a biological license application, or BLA, or new drug application, or NDA, and as a result may require more time and incur
greater costs than we anticipate. Failure to commence or complete, or delays in, our planned regulatory submissions or clinical
trials would prevent us from, or delay us, in obtaining regulatory approval of and commercializing TARA-002 and IV Choline Chloride,
which would adversely impact our financial performance, as well as subject us to significant contract liabilities.
TARA-002
is an immunopotentiator, and one indication for which we plan to pursue is the treatment of lymphatic malformations. There are no FDA-approved
therapies for the treatment of lymphatic malformations. It is difficult to predict the timing and costs of clinical development for TARA-002
with respect to lymphatic malformations.
To
date, there are no FDA-approved therapies for the treatment of lymphatic malformations. The regulatory approval process for novel
product candidates such as TARA-002 can be more expensive and take longer than for other, better known or extensively studied
therapeutic approaches. We may be delayed in reaching agreement with FDA on the design of a
pediatric LMs trial to support approval of TARA-002. Delay or failure to obtain, or unexpected costs in obtaining, the regulatory
approval necessary to bring TARA-002 to market could decrease our ability to generate sufficient revenue to maintain our
business.
Our product
candidates may cause undesirable side effects or have other unexpected properties that could delay or prevent their regulatory approval,
limit the commercial profile of an approved label, or result in post-approval regulatory action.
Unforeseen
side effects from TARA-002 or IV Choline Chloride could arise either during clinical development or, if approved, after it has been marketed.
Undesirable side effects could cause us, any partners with which we may collaborate, or regulatory authorities to interrupt, extend,
modify, delay or halt clinical trials and could result in a more restrictive or narrower label or the delay or denial of regulatory approval
by the FDA or comparable foreign authorities.
Results
of clinical trials could reveal a high and unacceptable severity and prevalence of side effects. In such an event, trials could be suspended
or terminated, and the FDA or comparable foreign regulatory authorities could order us to cease further development of or deny approval
of a product candidate for any or all targeted indications. The drug-related side effects could affect patient recruitment or the ability
of enrolled patients to complete the trial or result in product liability claims. Any of these occurrences may harm our business, financial
condition, operating results and prospects.
Additionally,
if we or others identify undesirable side effects, or other previously unknown problems, caused by a product after obtaining U.S. or
foreign regulatory approval, a number of potentially negative consequences could result, which could prevent us or our potential partners
from achieving or maintaining market acceptance of the product and could substantially increase the costs of commercializing such product.
A fast track
designation by the FDA may not actually lead to a faster development or regulatory review or approval process for IV Choline Chloride
for the treatment of IFALD.
The
FDA has granted fast track designation to IV Choline Chloride for the treatment of IFALD. If a drug is intended for the treatment of
a serious or life-threatening condition and the drug demonstrates the potential to address unmet medical needs for this condition, the
drug sponsor may apply for fast track designation. Even though we have received fast track designation for IV Choline Chloride for the
treatment of IFALD, we may not experience a faster development process, review or approval. The FDA may withdraw fast track designation
if it believes that the designation is no longer supported by data from our clinical development program.
Although
the FDA has granted Rare Pediatric Disease Designation for TARA-002 for the treatment of LMs, a BLA for TARA-002, if approved,
may not meet the eligibility criteria for a priority review voucher.
Rare
Pediatric Disease Designation has been granted for TARA-002 for the treatment of LMs. In 2012, Congress authorized the FDA to award priority
review vouchers to sponsors of certain rare pediatric disease product applications. This provision is designed to encourage development
of new drug and biological products for prevention and treatment of certain rare pediatric diseases. Specifically, under this program,
a sponsor who receives an approval for a drug or biologic for a “rare pediatric disease” may qualify for a voucher that can
be redeemed to receive a priority review of a subsequent marketing application for a different product. The sponsor of a rare pediatric
disease drug product receiving a priority review voucher may transfer (including by sale) the voucher to another sponsor. The voucher
may be further transferred any number of times before the voucher is used, as long as the sponsor making the transfer has not yet submitted
the application. The FDA may also revoke any priority review voucher if the rare pediatric disease drug for which the voucher was awarded
is not marketed in the U.S. within one year following the date of approval.
For
the purposes of this program, a “rare pediatric disease” is a (a) serious or life-threatening disease in which the serious
or life-threatening manifestations primarily affect individuals aged from birth to 18 years, including age groups often called neonates,
infants, children, and adolescents; and (b) rare disease or conditions within the meaning of the Orphan Drug Act. Congress has only
authorized the Rare Pediatric Disease Priority Review Voucher program until September 30, 2024. However, if a drug candidate received
Rare Pediatric Disease Designation before September 30, 2024, it is eligible to receive a voucher if it is approved before September
30, 2026.
However,
TARA-002 for the treatment of LMs may not be approved by that date, or at all, and, therefore, we may not be in a position to obtain
a priority review voucher prior to expiration of the program, unless Congress further reauthorizes the program. Additionally, designation
of a drug for a rare pediatric disease does not guarantee that a BLA will meet the eligibility criteria for a rare pediatric
disease priority review voucher at the time the application is approved. Finally, a Rare Pediatric Disease Designation does not
lead to faster development or regulatory review of the product, or increase the likelihood that it will receive marketing approval. We
may or may not realize any benefit from receiving a voucher.
Even if a product candidate
obtains regulatory approval, it may fail to achieve the broad degree of physician and patient adoption and use necessary for commercial
success.
The
commercial success of both TARA-002 and IV Choline Chloride, if approved, will depend significantly on the broad adoption and use of
them by physicians and patients for approved indications, and neither may be commercially successful even though the product is shown
to be safe and effective. The degree and rate of physician and patient adoption of a product, if approved, will depend on a number of
factors, including but not limited to:
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patient demand
for approved products that treat the indication for which a product is approved;
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the effectiveness
of the product compared to other available therapies;
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the availability
of coverage and adequate reimbursement from managed care plans and other healthcare payors;
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the cost of
treatment in relation to alternative treatments and willingness to pay on the part of patients;
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in
the case of TARA-002, overcoming physician or patient biases toward surgery for the treatment of lymphatic malformations;
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insurers’
willingness to see the applicable indication as a disease worth treating;
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patient satisfaction
with the results, administration and overall treatment experience;
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limitations
or contraindications, warnings, precautions or approved indications for use different than those sought by us that are contained
in the final FDA-approved labeling for the applicable product;
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any FDA requirement
to undertake a risk evaluation and mitigation strategy;
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the
effectiveness of our sales, marketing, pricing, reimbursement and access, government affairs, and distribution efforts;
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adverse publicity
about a product or favorable publicity about competitive products;
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new
government regulations and programs, including price controls and/or limits or prohibitions on ways to commercialize drugs, such
as increased scrutiny on direct-to-consumer advertising of pharmaceuticals; and
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potential
product liability claims or other product-related litigation.
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If
either TARA-002 or IV Choline Chloride is approved for use but fails to achieve the broad degree of physician and patient adoption necessary
for commercial success, our operating results and financial condition will be adversely affected, which may delay, prevent or limit our
ability to generate revenue and continue our business.
Any adverse
developments that occur in patients undergoing treatment with OK-432 / Picibanil or in patients participating in clinical trials conducted
by third parties may affect our ability to obtain regulatory approval or commercialize TARA-002.
Chugai
Pharmaceutical Co., Ltd., over which we have no control, has the rights to commercialize TARA-002 and it is currently marketed in Japan
and Taiwan, under the name Picibanil, for various indications. In addition, clinical trials using Picibanil are currently ongoing in
various countries around the world. If serious adverse events occur with patients using Picibanil or during any clinical trials of Picibanil
conducted by third parties, the FDA may delay, limit or deny approval of TARA-002 or require us to conduct additional clinical trials
as a condition to marketing approval, which would increase our costs. If we receive FDA approval for TARA-002 and a new and serious safety
issue is identified in connection with use of Picibanil or in clinical trials of Picibanil conducted by third parties, the FDA may withdraw
the approval of the product or otherwise restrict our ability to market and sell TARA-002. In addition, treating physicians may be less
willing to administer TARA-002 due to concerns over such adverse events, which would limit our ability to commercialize TARA-002.
We may in
the future conduct clinical trials for our product candidates outside the United States, and the FDA and applicable foreign regulatory
authorities may not accept data from such trials.
We
may in the future choose to conduct one or more of our clinical trials outside of the United States. Although the FDA or applicable foreign
regulatory authority may accept data from clinical trials conducted outside the United States or the applicable jurisdiction, acceptance
of such study data by the FDA or applicable foreign regulatory authority may be subject to certain conditions or exclusion. Where data
from foreign clinical trials are intended to serve as the basis for marketing approval in the United States, the FDA will not approve
the application on the basis of foreign data alone unless such data are applicable to the U.S. population and U.S. medical practice;
the studies were performed by clinical investigators of recognized competence; and the data are considered valid without the need for
an on-site inspection by the FDA or, if the FDA considers such an inspection to be necessary, the FDA is able to validate the data through
an on-site inspection or other appropriate means. Many foreign regulatory bodies have similar requirements. In addition, such foreign
studies would be subject to the applicable local laws of the foreign jurisdictions where the studies are conducted. There can be no assurance
the FDA or applicable foreign regulatory authority will accept data from trials conducted outside of the United States or the applicable
home country. If the FDA or applicable foreign regulatory authority does not accept such data, it would likely result in the need for
additional trials, which would be costly and time-consuming and delay aspects of our business plan.
We may choose
not to continue developing or commercializing any of our product candidates at any time during development or after approval, which would
reduce or eliminate the potential return on investment for those product candidates.
At
any time, we may decide to discontinue the development of any of our product candidates for a variety of reasons, including the appearance
of new technologies that make our product obsolete, competition from a competing product or changes in or failure to comply with applicable
regulatory requirements. For example, we are reviewing the research and preclinical and clinical data of vonapanitase and have not yet
determined whether to pursue further development of this product candidate in the future.
If
we terminate a program in which we have invested significant resources, we will not receive any return on our investment and we will
have missed the opportunity to have allocated those resources to potentially more productive uses.
Our
or our third party’s clinical trials may fail to demonstrate the safety and efficacy of our product candidates, or serious adverse
or unacceptable side effects may be identified during their development, which could prevent or delay marketing approval and commercialization,
increase our costs or necessitate the abandonment or limitation of the development of the product candidate.
Before
obtaining marketing approvals for the commercial sale of any product candidate, we must demonstrate through lengthy, complex and expensive
preclinical testing and clinical trials that such product candidate is both safe and effective for use in the applicable indication,
and failures can occur at any stage of testing. Clinical trials often fail to demonstrate safety and are associated with side effects
or have characteristics that are unexpected. Based on the safety profile seen in clinical testing, we may need to abandon development
or limit development to more narrow uses in which the side effects or other characteristics are less prevalent, less severe or more tolerable
from a risk-benefit perspective. The FDA or an IRB may also require that we suspend, discontinue, or limit clinical trials based on safety
information. Such findings could further result in regulatory authorities failing to provide marketing authorization for the product
candidate. Many pharmaceutical candidates that initially showed promise in early stage testing and which were efficacious have later
been found to cause side effects that prevented further development of the drug candidate and, in extreme cases, the side effects were
not seen until after the drug was marketed, causing regulators to remove the drug from the market post-approval.
Our
regulatory strategy for TARA-002 requires that we demonstrate that TARA-002 is the same biologic substance as OK-432, which is
currently manufactured in Japan and marketed in Japan and Taiwan by Chugai. The FDA has agreed that we have successfully
demonstrated initial manufacturing comparability between TARA-002 and OK-432; we are currently conducting three large-scale batch
runs to confirm comparability. Good Manufacturing Practice, or GMP, scale up is currently in process and we have initiated GMP
comparability runs. There can be no assurances that our contract manufacturer will be able to produce a sufficiently comparable
product or that the FDA will find such substances comparable for use in our planned pediatric LMs trial or permit us to use any of
the data from prior clinical trials as part of a future BLA submission for TARA-002.
Other
Risks Related to Our Business
Our
product candidates, if approved, will face significant competition and their failure to compete effectively may prevent them from achieving
significant market penetration.
The
pharmaceutical industry is characterized by rapidly advancing technologies, intense competition, less effective patent terms, and a strong
emphasis on developing newer, fast-to-market proprietary therapeutics. Numerous companies are engaged in the development, patenting,
manufacturing and marketing of healthcare products competitive with those that we are developing, including TARA-002 and IV Choline Chloride.
We will face competition from a number of sources, such as pharmaceutical companies, generic drug companies, biotechnology companies
and academic and research institutions, many of which have greater financial resources, marketing capabilities, sales forces, manufacturing
capabilities, research and development capabilities, regulatory expertise, clinical trial expertise, intellectual property portfolios,
more international reach, experience in obtaining patents and regulatory approvals for product candidates and other resources than we
have. Some of the companies that offer competing products also have a broad range of other product offerings, large direct sales forces
and long-term customer relationships with our target physicians, which could inhibit our market penetration efforts.
With
respect to our lead product candidate, TARA-002, for the treatment of LMs and NMIBC, the active ingredient in TARA-002 is a genetically
distinct strain of Streptococcus pyogenes (group A, type 3) Su strain. TARA-002 is produced through a proprietary manufacturing
process. We anticipate that, if approved by the FDA, TARA-002 will be protected by 12 years of biologic exclusivity. In addition, TARA-002
is likely to have seven years of concurrent Orphan Drug Designation exclusivity for the treatment of LMs if deemed comparable to OK-432
by the FDA based on the prevalence of the disease. There are no approved pharmacotherapies currently available for the treatment of LMs
and the current standard of care is a high-risk surgical procedure. There are a number of drug development companies and academic researchers
exploring oral formulations of various agents including macrolides, phosphodiesterase inhibitors, and calcineurin/ mTOR inhibitors. These
are in early development. TARA-002, if approved for the treatment of NMIBC, would be subject to competition from existing treatment methods
of surgery, chemotherapy and immunomodulatory therapy.
There
are no treatments currently available for IFALD. With respect to IV Choline Chloride for the treatment of IFALD, IV Choline Chloride
is the only sterile injectable form of choline chloride that can be combined with parenteral nutrition. Further, if approved, IV Choline
Chloride will be protected by Orphan Drug Designation exclusivity for seven years.
TARA-002
and any future product candidates for which we intend to seek approval as biologic products may face competition sooner than anticipated.
The Patient Protection and Affordable
Care Act of 2010, as amended by the Health Care Reconciliation Act of 2010, or collectively, the Affordable Care Act, signed into law
on March 23, 2010, includes a subtitle called the Biologics Price Competition and Innovation Act of 2009, or BPCIA, which created an abbreviated
approval pathway for biological products that are biosimilar to or interchangeable with an FDA-licensed reference biological product.
Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the
reference product was first licensed by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA
until 12 years from the date on which the reference product was first licensed. During this 12-year period of exclusivity, another company
may still market a competing version of the reference product if the FDA approves a full BLA for the competing product containing the
sponsor’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and
potency of their product. The law is complex and is still being interpreted and implemented by the FDA. As a result, its ultimate impact,
implementation and meaning are subject to uncertainty. While it is uncertain when such processes are intended to implement BPCIA may be
fully adopted by the FDA, any such processes could have a material adverse effect on the future commercial prospects for our biological
products.
We
believe that any of our product candidates approved as a biological product under a BLA should qualify for the 12-year period of exclusivity.
However, there is a risk that this exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not
consider our product candidates to be reference products for competing products, potentially creating the opportunity for biosimilar
competition sooner than anticipated. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also
been the subject of recent litigation. Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of
our reference products in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and
will depend on a number of marketplace and regulatory factors that are still developing.
We rely and expect to continue to
rely on third-party CROs and other third parties to conduct and oversee our clinical trials. If these third parties do not meet our requirements
or otherwise conduct the trials as required, we may not be able to satisfy our contractual obligations or obtain regulatory approval
for, or commercialize, our product candidates.
We
rely and expect to continue to rely on third-party contract research organizations, or CROs, to conduct and oversee our TARA-002 and
IV Choline Chloride clinical trials and other aspects of product development. We also rely on various medical institutions, clinical
investigators and contract laboratories to conduct our trials in accordance with our clinical protocols and all applicable
regulatory requirements, including the FDA’s regulations and good clinical practice, or GCP, requirements, which are an
international standard meant to protect the rights and health of patients and to define the roles of clinical trial sponsors,
administrators and monitors, and state regulations governing the handling, storage, security and recordkeeping for drug and biologic
products. These CROs and other third parties will play a significant role in the conduct of these trials and the subsequent
collection and analysis of data from the clinical trials. We will rely heavily on these parties for the execution of our clinical
trials and preclinical studies and will control only certain aspects of their activities. We and our CROs and other third-party
contractors will be required to comply with GCP and good laboratory practice, or GLP, requirements, which are regulations and
guidelines enforced by the FDA and comparable foreign regulatory authorities. Regulatory authorities enforce these GCP and GLP
requirements through periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of these third
parties fail to comply with applicable GCP and GLP requirements, or reveal noncompliance from an audit or inspection, the clinical
data generated in our clinical trials may be deemed unreliable and the FDA or other regulatory authorities may require us to perform
additional clinical trials before approving our or our partners’ marketing applications. We cannot assure that upon inspection
by a given regulatory authority, such regulatory authority will determine that any of our clinical or preclinical trials comply with
applicable GCP and GLP requirements. In addition, our clinical trials generally must be conducted with product produced under cGMP
regulations. Our failure to comply with these regulations and policies may require us to repeat clinical trials, which would delay
the regulatory approval process.
If
any of our CROs or clinical trial sites terminate their involvement in one of our clinical trials for any reason, we may not be able
to enter into arrangements with alternative CROs or clinical trial sites or do so on commercially reasonable terms. In addition, if our
relationship with clinical trial sites is terminated, we may experience the loss of follow-up information on patients enrolled in our
clinical trials unless we are able to transfer the care of those patients to another qualified clinical trial site. In addition, principal
investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and could receive cash
or equity compensation in connection with such services. If these relationships and any related compensation result in perceived or actual
conflicts of interest, the integrity of the data generated at the applicable clinical trial site may be questioned by the FDA.
We
currently have limited marketing capabilities and no sales organization. If we are unable to grow our sales and marketing capabilities
on our own or through third parties, we will be unable to successfully commercialize our product candidates, if approved, or generate
product revenue.
We
currently have limited marketing capabilities and no sales organization. To commercialize our product candidates, if approved, in the
United States, Canada, the European Union, Latin America and other jurisdictions we seek to enter, we must build our 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. Although our employees have experience in the marketing, sale and distribution of pharmaceutical
products, and business development activities involving external alliances, from prior employment at other companies, we, as a company,
have no prior experience in the marketing, sale and distribution of pharmaceutical products, and there are significant risks involved
in building and managing a sales organization, including our ability to hire, retain and incentivize qualified individuals, generate
sufficient sales leads, provide adequate training to sales and marketing personnel, and effectively manage a geographically dispersed
sales and marketing team. Any failure or delay in the development of our internal sales, marketing, distribution and pricing/reimbursement/access
capabilities would impact adversely the commercialization of these products.
We
have only received the exclusive rights to the materials required to commercialize TARA-002 in territories other than Japan and Taiwan
until June 17, 2030, or an earlier date if Chugai terminates the agreement with us for any number of reasons, following which such rights
become nonexclusive.
Pursuant
to an agreement with Chugai Pharmaceutical Co., Ltd. dated June 17, 2019, as amended on July 14, 2020 (effective June 30, 2020), Chugai
agreed to provide us with exclusive access to the starting material necessary to manufacture TARA-002 as well as technical support necessary
for us to develop and commercialize TARA-002 anywhere in the world other than Japan and Taiwan. However, this agreement does not prevent
Chugai from providing such materials and support to any third party for medical, compassionate use and/or non-commercial research purposes
and this agreement is exclusive through June 17, 2030 or following any termination of the agreement by either party. Once our rights
to the materials and technology necessary to manufacture, develop and commercialize TARA-002 are not exclusive, third parties, including
those with greater expertise and greater resources, could obtain such materials and technology and develop a competing therapy, which
would adversely affect our ability to generate revenue and achieve or maintain profitability.
We
currently have no products approved for sale, and we may never obtain regulatory approval to commercialize any of our product candidates.
The
research, testing, manufacturing, safety surveillance, efficacy, quality control, recordkeeping, labeling, packaging, storage, approval,
sale, marketing, distribution, import, export and reporting of safety and other post-market information related to our biopharmaceutical
products are subject to extensive regulation by the FDA and other regulatory authorities in the United States and in foreign countries,
and such regulations differ from country to country and frequently are revised.
Even
after we achieve U.S. regulatory approval for a product candidate, if any, we will be subject to continued regulatory review and compliance
obligations. For example, with respect to our product candidates, the FDA may impose significant restrictions on the approved indicated
uses for which the product may be marketed or on the conditions of approval. A product candidate’s approval may contain requirements
for potentially costly post-approval studies and surveillance, including Phase 4 clinical trials, to monitor the safety and efficacy
of the product. We also will be subject to ongoing FDA obligations and continued regulatory review with respect to, among other things,
the manufacturing, processing, labeling, packaging, distribution, pharmacovigilance and adverse event reporting, storage, advertising,
promotion and recordkeeping for our product candidates.
These
requirements include submissions of safety and other post-marketing information and reports, registration, continued compliance with
cGMP requirements and with the FDA’s GCP requirements and GLP requirements, which are regulations and guidelines enforced by the
FDA for all of our product candidates in clinical and preclinical development, and for any clinical trials that it conducts post-approval,
as well as continued compliance with the FDA’s laws governing commercialization of the approved product, including but not limited
to the FDA’s Office of Prescription Drug Promotion, regulation of promotional activities, fraud and abuse, product sampling,
scientific speaker engagements and activities, formulary interactions as well as interactions with healthcare practitioners. To the extent
that a product candidate is approved for sale in other countries, we may be subject to similar or more onerous (i.e., prohibition on
direct-to-consumer advertising that does not exist in the United States) restrictions and requirements imposed by laws and government
regulators in those countries.
In
addition, manufacturers of drug and biologic products and their facilities are subject to continual review and periodic inspections by
the FDA and other regulatory authorities for compliance with cGMP regulations. If we or a regulatory agency discovers previously unknown
problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the manufacturing, processing,
distribution or storage facility where, or processes by which, the product is made, a regulatory agency may impose restrictions on that
product or us, including requesting that we initiate a product recall, or requiring notice to physicians or the public, withdrawal of
the product from the market, or suspension of manufacturing.
If
we, our product candidates or the manufacturing facilities for our product candidates fail to comply with applicable regulatory requirements,
a regulatory agency may:
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impose
restrictions on the sale, marketing or manufacturing of the product, amend, suspend or withdraw
product approvals or revoke necessary licenses;
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mandate modifications
to promotional and other product-specific materials or require us to provide corrective information to healthcare practitioners or
in our advertising;
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require us or our partners
to enter into a consent decree, which can include imposition of various fines, reimbursements for inspection costs, required due
dates for specific actions, penalties for noncompliance and, in extreme cases, require an independent compliance monitor to oversee
our activities;
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issue warning letters,
bring enforcement actions, initiate surprise inspections, issue show cause notices or untitled letters describing alleged violations,
which may be publicly available;
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commence criminal investigations
and prosecutions;
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impose injunctions, suspensions
or revocations of necessary approvals or other licenses;
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impose other civil or
criminal penalties;
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suspend any ongoing clinical
trials;
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place restrictions on
the kind of promotional activities that can be done;
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delay or refuse to approve
pending applications or supplements to approved applications filed by us or our potential partners;
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refuse to permit drugs
or precursor chemicals to be imported or exported to or from the United States;
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suspend or impose restrictions
on operations, including costly new manufacturing requirements; or
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seize or detain products
or require us or our partners to initiate a product recall.
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The
regulations, policies or guidance of the FDA and other applicable government agencies may change, and new or additional statutes or government
regulations may be enacted, including at the state and local levels, which can differ by geography and could prevent or delay regulatory
approval of our product candidates or further restrict or regulate post-approval activities. We cannot predict the likelihood, nature
or extent of adverse government regulations that may arise from future legislation or administrative action, either in the United States
or abroad. If we are not able to achieve and maintain regulatory compliance, we may not be permitted to commercialize our product candidates,
which would adversely affect our ability to generate revenue and achieve or maintain profitability.
We
may face product liability exposure, and if successful claims are brought against us, we may incur substantial liability if our insurance
coverage for those claims is inadequate.
We
face an inherent risk of product liability or similar causes of action as a result of the clinical testing of our product candidates
and will face an even greater risk if we commercialize any products. This risk exists even if a product is approved for commercial sale
by the FDA and manufactured in facilities licensed and regulated by the FDA or an applicable foreign regulatory authority and notwithstanding
that we comply with applicable laws on promotional activity. Our products and product candidates are designed to affect important bodily
functions and processes. Any side effects, manufacturing defects, misuse or abuse associated with our product candidates could result
in injury to a patient or potentially even death. We cannot offer any assurance that we will not face product liability suits in the
future, nor can we assure you that our insurance coverage will be sufficient to cover our liability under any such cases.
In
addition, a liability claim may be brought against us even if our product candidates merely appear to have caused an injury. Product
liability claims may be brought against us by consumers, healthcare providers, pharmaceutical companies or others selling or otherwise
coming into contact with our product candidates, among others, and under some circumstances even government agencies. If we cannot successfully
defend our self against product liability or similar claims, we will incur substantial liabilities, reputational harm and possibly injunctions
and punitive actions. In addition, regardless of merit or eventual outcome, product liability claims may result in:
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withdrawal or delay of
recruitment or decreased enrollment rates of clinical trial participants;
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termination or increased
government regulation of clinical trial sites or entire trial programs;
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the inability to commercialize
our product candidates;
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decreased demand for our
product candidates;
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impairment of our business
reputation;
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product recall or withdrawal
from the market or labeling, marketing or promotional restrictions;
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substantial costs of any
related litigation or similar disputes;
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distraction of management’s
attention and other resources from our primary business;
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significant delay in product
launch;
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substantial monetary awards
to patients or other claimants against us that may not be covered by insurance;
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withdrawal of reimbursement
or formulary inclusion; or
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We
intend to obtain product liability insurance coverage for our clinical trials. Large judgments have been awarded in class action or individual
lawsuits based on drugs that had unanticipated side effects. Our insurance coverage may not be sufficient to cover all of our product
liability-related expenses or losses and may not cover us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming
increasingly expensive, restrictive and narrow, and, in the future, we may not be able to maintain adequate insurance coverage at a reasonable
cost, in sufficient amounts or upon adequate terms to protect us against losses due to product liability or other similar legal actions.
We will need to increase our product liability coverage if any of our product candidates receive regulatory approval, which will be costly,
and we may be unable to obtain this increased product liability insurance on commercially reasonable terms or at all and for all geographies
in which we wish to launch. A successful product liability claim or series of claims brought against us, if judgments exceed our insurance
coverage, could decrease our cash and harm our business, financial condition, operating results and future prospects.
Our
employees, independent contractors, principal investigators, other clinical trial staff, consultants, vendors, CROs and any partners
with whom we may collaborate may engage in misconduct or other improper activities, including noncompliance with regulatory standards
and requirements.
We
are exposed to the risk that our employees, independent contractors, principal investigators, other clinical trial staff, consultants,
vendors, CROs and any partners with which we may collaborate may engage in fraudulent or other illegal activity. Misconduct by these
persons could include intentional, reckless, gross or negligent misconduct or unauthorized activity that violates: laws or regulations,
including those laws requiring the reporting of true, complete and accurate information to the FDA or foreign regulatory authorities;
manufacturing standards; federal, state and foreign healthcare fraud and abuse laws and data privacy; anticorruption laws, anti-kickback
and Medicare/Medicaid rules, or laws that require the true, complete and accurate reporting of financial information or data, books and
records. If any such or similar actions are instituted against us and we are not successful in defending our self or asserting our rights,
those actions could have a significant impact on our business, including the imposition of significant civil, criminal and administrative
and punitive penalties, damages, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare
programs, debarments, contractual damages, imprisonment, reputational harm, diminished profits and future earnings, injunctions, and
curtailment or cessation of our operations, any of which could adversely affect our ability to operate our business and our operating
results.
We
may be subject to risks related to off-label use of our product candidates.
The
FDA strictly regulates the advertising and promotion of drug products, and drug products may only be marketed or promoted for their FDA
approved uses, consistent with the product’s approved labeling. Advertising and promotion of any product candidate that obtains
approval in the United States will be heavily scrutinized by the FDA, the Department of Justice, the Office of Inspector General of the
Department of Health and Human Services, state attorneys general, members of Congress and the public. Violations, including promotion
of our products for unapproved or off-label uses, are subject to enforcement letters, inquiries and investigations, and civil, criminal
and/or administrative sanctions by the FDA. Additionally, advertising and promotion of any product candidate that obtains approval outside
of the United States will be heavily scrutinized by relevant foreign regulatory authorities.
Even
if we obtain regulatory approval for our product candidates, the FDA or comparable foreign regulatory authorities may require labeling
changes or impose significant restrictions on a product’s indicated uses or marketing or impose ongoing requirements for potentially
costly post-approval studies or post-market surveillance.
In
the United States, engaging in impermissible promotion of our product candidates for off-label uses can also subject us to false claims
litigation under federal and state statutes, which can lead to significant civil, criminal and/or administrative penalties and fines
and agreements, such as a corporate integrity agreement, that materially restrict the manner in which we promote or distribute our product
candidates. If we do not lawfully promote our products once they have received regulatory approval, we may become subject to such litigation
and, if we are not successful in defending against such actions, those actions could have a material adverse effect on our business,
financial condition and operating results and even result in having an independent compliance monitor assigned to audit our ongoing operations
for a lengthy period of time.
If
we or any partners with which we may collaborate are unable to achieve and maintain coverage and adequate levels of reimbursement for
TARA-002 or IV Choline Chloride following regulatory approval, their commercial success may be hindered severely.
If
TARA-002 and IV Choline Chloride only becomes available by prescription, successful sales by us or by any partners with which we may
collaborate depend on the availability of coverage and adequate reimbursement from third-party payors. Patients who are prescribed medicine
for the treatment of their conditions generally rely on third-party payors to reimburse most or part of the costs associated with their
prescription drugs. The availability of coverage and adequate reimbursement from governmental healthcare programs, such as Medicare and
Medicaid in the United States, and private third-party payors is often critical to new product acceptance. Coverage decisions may depend
on clinical and economic standards that disfavor new drug products when more established or lower-cost therapeutic alternatives are already
available or subsequently become available, or may be affected by the budgets and demands on the various entities responsible for providing
health insurance to patients who will use TARA-002 and IV Choline Chloride. Even if we obtain coverage for our products, the resulting
reimbursement payment rates might not be adequate or may require co-payments that patients find unacceptably high. Patients are unlikely
to use a product unless coverage is provided, and reimbursement is adequate to cover a significant portion of the cost.
In
addition, the market for our products will depend significantly on access to third-party payors’ drug formularies or lists of medications
for which third-party payors provide coverage and reimbursement. The industry competition to be included in such formularies often leads
to downward pricing pressures on pharmaceutical companies and there may be time limitations on when a new drug may even apply for formulary
inclusion. Also, third-party payors may refuse to include products in their formularies or otherwise restrict patient access to such
products when a less costly generic equivalent or other treatment alternative is available in the discretion of the formulary.
Third-party
payors, whether foreign or domestic, or governmental or commercial, are developing increasingly sophisticated methods of controlling
healthcare costs. In addition, in the United States, although private third-party payors tend to follow Medicare practices, no uniform
or consistent policy of coverage and reimbursement for drug products exists among third-party payors. Therefore, coverage and reimbursement
for drug products can differ significantly from payor to payor as well as state to state. Consequently, the coverage determination process
is often a time-consuming and costly process that must be played out across many jurisdictions and different entities and which will
require us to provide scientific, clinical and health economics support for the use of our products compared to current alternatives
and do so to each payor separately, with no assurance that coverage and adequate reimbursement will be obtained and in what time frame.
Further,
we believe that future coverage and reimbursement likely will be subject to increased restrictions both in the United States and in international
markets. Third-party coverage and reimbursement for our products may not be available or adequate in either the United States or international
markets, which could harm our business, financial condition, operating results and prospects.
Healthcare
reform measures could hinder or prevent the commercial success of our product candidates.
Existing
regulatory policies may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory
approval of any future product candidates we may develop. For example, the Trump administration and certain members of the U.S.
Congress sought to repeal all or part of the Affordable Care Act and implement a replacement program. For example, the so-called
“individual mandate” was repealed as part of tax reform legislation adopted in December 2017, informally titled the Tax
Cuts and Jobs Act, or Tax Act, such that the shared responsibility payment for individuals who fail to maintain minimum essential
coverage under section 5000A of the Code was eliminated beginning in 2019. In addition, litigation may result in the repeal or
replacement of prevent some or all of the Affordable Care Act legislation from taking effect. For example, on December 14, 2018, the
U.S. District Court for the Northern District of Texas held that the individual mandate is a critical and inseverable feature of the
Affordable Care Act, and therefore, because it was repealed as part of the Tax Act, the remaining provisions of the Affordable Care
Act are invalid as well. On December 18, 2019, the U.S. Court of Appeals for the Fifth Circuit upheld the District Court ruling that
the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining
provisions of the Affordable Care Act are invalid as well. The United States Supreme Court is currently reviewing this case,
although it is unclear when a decision will be made. On February 10, 2021, the Biden administration withdrew the federal
government’s support for overturning the Affordable Care Act. Although the United States Supreme Court has yet ruled on the
constitutionality of the Affordable Care Act on January 28, 2021, President Biden issued an executive order to initiate a special
enrollment period for purposes of obtaining health insurance coverage through the
Affordable Care Act marketplace, which began on February 15, 2021 and will remain open through August
15, 2021. The executive order also instructs certain governmental agencies to review and reconsider their
existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and
waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health
insurance coverage through Medicaid or the Affordable Care Act. It is unclear how the Supreme Court ruling, other such litigation
and the healthcare reform efforts of the Biden administration will impact the Affordable Care Act and our business.
Additionally,
there has been increasing legislative and enforcement interest in the United States with respect to drug pricing practices. For example,
the Trump administration used several means to propose or implement drug pricing reform, including through federal budget proposals,
executive orders and policy initiatives. For example, on July 24, 2020 and September 13, 2020, the Trump administration announced several
executive orders related to prescription drug pricing that attempt to implement several of the administration’s proposals. The
FDA also released a final rule, effective November 30, 2020, implementing a portion of the importation executive order providing guidance
for states to build and submit importation plans for drugs from Canada. Further, on November 20, 2020, the Department of Health and Human
Services finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors
under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The implementation
of the rule has been delayed by the Biden administration from January 1, 2022 to January 1, 2023 in response to ongoing litigation. The
rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a new safe harbor for certain fixed
fee arrangements between pharmacy benefit managers and manufacturers, the implementation of which have also been delayed until January
1, 2023. On November 20, 2020, the Centers for Medicare & Medicaid Services issued an interim final rule implementing President Trump’s
Most Favored Nation executive order, which would tie Medicare Part B payments for certain physician-administered drugs to the lowest
price paid in other economically advanced countries, effective January 1, 2021. On December 28, 2020, the United States District Court
in Northern California issued a nationwide preliminary injunction against implementation of the interim final rule. However, it is unclear
whether the Biden administration will work to reverse these measures or pursue similar policy initiatives. We expect that additional
state and federal healthcare reform measures will be adopted in the future, particularly in light of the new Presidential administration,
any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result
in reduced demand for our product candidates if approved or additional pricing pressures.
There
are also calls to place additional restrictions on or to ban all direct-to-consumer advertising of pharmaceuticals, which would limit
our ability to market our product candidates. The United States is in a minority of jurisdictions that allow this kind of advertising
and its removal could limit the potential reach of a marketing campaign. Further, it is possible that additional government action is
taken in response to the COVID-19 pandemic.
We
may also be subject to stricter healthcare laws, regulation and enforcement, and our failure to comply with those laws could adversely
affect our business, operations and financial condition.
Certain
federal and state healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are and will be applicable
to our business. We are subject to regulation by both the federal government and the states in which we or our partners conduct business.
The healthcare laws and regulations that may affect our ability to operate include but are not limited to: the federal Anti-Kickback
Statute; federal civil and criminal false claims laws and civil monetary penalty laws; the federal Health Insurance Portability and Accountability
Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act; the Prescription Drug Marketing Act
(for sampling of drug product among other things); the federal physician sunshine requirements under the Affordable Care Act; the Foreign
Corrupt Practices Act as it applies to activities outside of the United States; the new federal Right-to-Try legislation; and state law
equivalents of many of the above federal laws.
Because
of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our
business activities could be subject to challenge under one or more of such laws. In addition, recent healthcare reform legislation has
strengthened these laws. For example, the recently enacted Affordable Care Act, among other things, amended the intent requirement of
the federal Anti-Kickback Statute and certain criminal healthcare fraud statutes. A person or entity no longer needs to have actual knowledge
of the statute or specific intent to violate it. In addition, the Affordable Care Act provided that the government may assert that a
claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim
for purposes of the federal civil False Claims Act.
Achieving
and sustaining compliance with these laws may prove costly. In addition, any action against us for violation of these laws, even if we
successfully defend against it, could cause us to incur significant legal expenses and divert management’s attention from the operation
of our business and result in reputational damage. If our operations are found to be in violation of any of the laws described above
or any other governmental laws or regulations that apply to us, we may be subject to significant penalties, including administrative,
civil and criminal penalties, damages, including punitive damages, fines, disgorgement, the exclusion from participation in federal and
state healthcare programs, imprisonment, additional oversight and reporting obligations, or the curtailment or restructuring of our operations,
and injunctions, any of which could adversely affect our ability to operate our business and financial results.
We
intend to in-license and acquire product candidates and may engage in other strategic transactions, which could impact our liquidity,
increase our expenses and present significant distractions to our management.
Our
strategy is to in-license and acquire product candidates and we may engage in other strategic transactions. Additional potential transactions
that we may consider include a variety of different business arrangements, including spin-offs, strategic partnerships, joint ventures,
restructurings, divestitures, business combinations and investments. Any such transaction may require us to incur non-recurring or other
charges, may increase our near- and long-term expenditures and may pose significant integration challenges or disrupt our management
or business, which could adversely affect our operations and financial results. Accordingly, there can be no assurance that we will undertake
or successfully complete any transactions of the nature described above, and any transaction that we do complete could harm our business,
financial condition, operating results and prospects. We have no current plan, commitment or obligation to enter into any transaction
described above, and we are not engaged in discussions related to additional partnerships.
Our
failure to successfully in-license, acquire, develop and market additional product candidates or approved products would impair our ability
to grow our business.
We
intend to in-license, acquire, develop and market additional products and product candidates. Because our internal research and development
capabilities are limited, we may be dependent on pharmaceutical companies, academic or government scientists and other researchers to
sell or license products or technology to us. The success of this strategy depends partly on our ability to identify and select promising
pharmaceutical product candidates and products, negotiate licensing or acquisition agreements with their current owners, and finance
these arrangements.
The
process of proposing, negotiating and implementing a license or acquisition of a product candidate or approved product is lengthy and
complex. Other companies, including some with substantially greater financial, marketing, sales and other resources, may compete with
us for the license or acquisition of product candidates and approved products. 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.
Moreover, we may devote resources to potential acquisitions or licensing opportunities that are never completed, or we may fail to realize
the anticipated benefits of such efforts. We may not be able to acquire the rights to additional product candidates on terms that we
find acceptable or at all.
Further,
any product candidate that we acquire may require additional development efforts prior to commercial sale, including preclinical or clinical
testing and approval by the FDA and applicable foreign regulatory authorities. All product candidates are prone to risks of failure typical
of pharmaceutical product development, including the possibility that a product candidate will not be shown to be sufficiently safe and
effective for approval by regulatory authorities. In addition, we cannot provide assurance that any approved products that we acquire
will be manufactured or sold profitably or achieve market acceptance.
We
expect to rely on collaborations with third parties for the successful development and commercialization of our product candidates.
We
expect to rely upon the efforts of third parties for the successful development and commercialization of our current and future product
candidates. The clinical and commercial success of our product candidates may depend upon maintaining successful relationships with third-party
partners which are subject to a number of significant risks, including the following:
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our partners’ ability
to execute their responsibilities in a timely, cost-efficient and compliant manner;
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reduced control over delivery
and manufacturing schedules;
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price increases and product
reliability;
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manufacturing deviations
from internal or regulatory specifications;
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the failure of partners
to perform their obligations for technical, market or other reasons;
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misappropriation of our
current or future product candidates; and
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other risks in potentially
meeting our current and future product commercialization schedule or satisfying the requirements of our end-users.
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We
cannot assure you that we will be able to establish or maintain third-party relationships in order to successfully develop and commercialize
our product candidates.
We
rely completely on third-party contractors to supply, manufacture and distribute clinical drug supplies for our product candidates, which
may include sole-source suppliers and manufacturers; we intend to rely on third parties for commercial supply, manufacturing and distribution
if any of our product candidates receive regulatory approval; and we expect to rely on third parties for supply, manufacturing and distribution
of preclinical, clinical and commercial supplies of any future product candidates.
We
do not currently have, nor do we plan to acquire, the infrastructure or capability to supply, store, manufacture or distribute preclinical,
clinical or commercial quantities of drug substances or products. Additionally, we have not entered into a long-term commercial supply
agreement to provide us with such drug substances or products. As a result, our ability to develop our product candidates is dependent,
and our ability to supply our products commercially will depend, in part, on our ability to obtain the APIs and other substances and
materials used in our product candidates successfully from third parties and to have finished products manufactured by third parties
in accordance with regulatory requirements and in sufficient quantities for preclinical and clinical testing and commercialization. If
we fail to develop and maintain supply and other technical relationships with these third parties, we may be unable to continue to develop
or commercialize our products and product candidates.
We
do not have direct control over whether our contract suppliers and manufacturers will maintain current pricing terms, be willing to continue
supplying us with API and finished products or maintain adequate capacity and capabilities to serve our needs, including quality control,
quality assurance and qualified personnel. We are dependent on our contract suppliers and manufacturers for day-to-day compliance with
applicable laws and cGMPs for production of both APIs and finished products. If the safety or quality of any product or product candidate
or component is compromised due to a failure to adhere to applicable laws or for other reasons, we may not be able to commercialize or
obtain regulatory approval for the affected product or product candidate successfully, and we may be held liable for injuries sustained
as a result.
In
order to conduct larger or late-stage clinical trials for our product candidates and supply sufficient commercial quantities of the resulting
drug product and its components, if that product candidate is approved for sale, our contract manufacturers and suppliers will need to
produce our drug substances and product candidates in larger quantities, more cost-effectively and, in certain cases, at higher yields
than they currently achieve. If our third-party contractors are unable to scale up the manufacture of any of our product candidates successfully
in sufficient quality and quantity and at commercially reasonable prices, or are shut down or put on clinical hold by government regulators,
and we are unable to find one or more replacement suppliers or manufacturers capable of production at a substantially equivalent cost
in substantially equivalent volumes and quality, and we are unable to transfer the processes successfully on a timely basis, the development
of that product candidate and regulatory approval or commercial launch for any resulting products may be delayed, or there may be a shortage
in supply, either of which could significantly harm our business, financial condition, operating results and prospects.
We
expect to continue to depend on third-party contract suppliers and manufacturers for the foreseeable future. Our supply and manufacturing
agreements, if any, do not guarantee that a contract supplier or manufacturer will provide services adequate for our needs. Additionally,
any damage to or destruction of our third-party manufacturer’s or suppliers’ facilities or equipment, even by force majeure,
may significantly impair our ability to have our products and product candidates manufactured on a timely basis. Our reliance on contract
manufacturers and suppliers further exposes us to the possibility that they, or third parties with access to their facilities, will have
access to and may misappropriate our trade secrets or other proprietary information. In addition, the manufacturing facilities of certain
of our suppliers may be located outside of the United States. This may give rise to difficulties in importing our products or product
candidates or their components into the United States or other countries.
In
addition, we cannot be certain that any prolonged, intensified or worsened effect from the COVID-19 pandemic would not impact our supply
chain.
The
manufacture of biologics is complex and our third-party manufacturers may encounter difficulties in production. If our CDMO encounters
such difficulties, the ability to provide supply of TARA-002 for clinical trials, our ability to obtain marketing approval, or our ability
to obtain commercial supply of TARA-002, if approved, could be delayed or stopped.
We
have no experience in biologic manufacturing and do not own or operate, and we do not expect to own or operate, facilities for product
manufacturing, storage and distribution, or testing. We are completely dependent on CDMOs to fulfill our clinical and commercial supply
of TARA-002. The process of manufacturing biologics is complex, highly regulated and subject to multiple risks. Manufacturing biologics
is highly susceptible to product loss due to contamination, equipment failure, improper installation or operation of equipment, vendor
or operator error, inconsistency in yields, variability in product characteristics and difficulties in scaling the production process.
Even minor deviations from normal manufacturing processes could result in reduced production yields, product defects and other supply
disruptions and higher costs. If microbial, viral or other contaminations are discovered at the facilities of our manufacturer, such
facilities may need to be closed for an extended period of time to investigate and remedy the contamination, which could delay clinical
trials, result in higher costs of drug product and adversely harm our business. Moreover, if the FDA determines that our manufacturer
is not in compliance with FDA laws and regulations, including those governing cGMPs, the FDA may deny BLA approval until the deficiencies
are corrected or we replace the manufacturer in our BLA with a manufacturer that is in compliance.
In
addition, there are risks associated with large scale manufacturing for clinical trials or commercial scale including, among others,
cost overruns, potential problems with process scale-up, process reproducibility, stability issues, compliance with cGMPs, lot consistency
and timely availability of raw materials. Even if we obtain regulatory approval for TARA-002 or any future product candidates, there
is no assurance that our manufacturers will be able to manufacture the approved product to specifications acceptable to the FDA or other
regulatory authorities, to produce it in sufficient quantities to meet the requirements for the potential launch of the product or to
meet potential future demand. If our manufacturers are unable to produce sufficient quantities for clinical trials or for commercialization,
commercialization efforts would be impaired, which would have an adverse effect on our business, financial condition, results of operations
and growth prospects. Scaling up a biologic manufacturing process is a difficult and uncertain task, and any CDMO we contract may not
have the necessary capabilities to complete the implementation and development process of further scaling up production, transferring
production to other sites, or managing its production capacity to timely meet product demand.
We
expect our stock price to be highly volatile.
The
market price of our shares could be subject to significant fluctuations. Market prices for securities of biotechnology and other life
sciences companies historically have been particularly volatile subject even to large daily price swings. Some of the factors that may
cause the market price of our shares to fluctuate include, but are not limited to:
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our ability
to obtain timely regulatory approvals for TARA-002, IV Choline Chloride or future product candidates, and delays or failures to obtain
such approvals;
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failure
of TARA-002 or IV Choline Chloride, if approved, to achieve commercial success;
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issues
in manufacturing TARA-002, IV Choline Chloride or future product candidates;
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the results
of current and any future clinical trials of TARA-002 or IV Choline Chloride;
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failure
of other of our product candidates, if approved, to achieve commercial success;
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the entry
into, or termination of, or breach by partners of key agreements, including key commercial partner agreements;
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the initiation
of, material developments in, or conclusion of any litigation to enforce or defend any intellectual property rights or defend against
the intellectual property rights of others;
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announcements
of any dilutive equity financings;
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announcements
by commercial partners or competitors of new commercial products, clinical progress or the lack thereof, significant contracts, commercial
relationships or capital commitments;
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failure
to elicit meaningful stock analyst coverage and downgrades of our stock by analysts; and
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the loss of key employees.
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Moreover,
the stock markets in general have experienced substantial volatility in our industry that has often been unrelated to the operating performance
of individual companies or a certain industry segment. These broad market fluctuations may also adversely affect the trading price of
our shares.
In
the past, following periods of volatility in the market price of a company’s securities, shareholders have often instituted class
action securities litigation against those companies. Such litigation, if instituted, could result in substantial costs and diversion
of management attention and resources, which could significantly harm our profitability and reputation. In addition, such securities
litigation often has ensued after a reverse merger or other merger and acquisition activity. Such litigation if brought could impact
negatively our business.
We
incur costs and demands upon management as a result of complying with the laws and regulations affecting public companies.
As
a public company, we have incurred, and will continue to incur, significant legal, accounting and other expenses, including costs associated
with public company reporting and other SEC requirements. We have also incurred, and will continue to incur, costs associated with corporate
governance requirements, including requirements under the Sarbanes-Oxley Act, as well as rules implemented by the SEC and Nasdaq.
We
expect the rules and regulations applicable to public companies will continue to substantially increase our legal and financial compliance
costs and to make some activities more time-consuming and costly. Our executive officers and other personnel will need to continue to
devote substantial time to gaining expertise regarding operations as a public company and compliance with applicable laws and regulations.
These rules and regulations may also make it expensive for us to operate our business.
We
are able to take advantage of reduced disclosure and governance requirements applicable to smaller reporting companies, which could result
in our common stock being less attractive to investors.
We
have a public float of less than $250 million and therefore qualify as a smaller reporting company under the rules of the SEC. As a smaller
reporting company, we are able to take advantage of reduced disclosure requirements, such as simplified executive compensation disclosures
and reduced financial statement disclosure requirements in our SEC filings. Decreased disclosures in our SEC filings due to our status
as a smaller reporting company may make it harder for our investors to analyze our results of operations and financial prospects. We
cannot predict if investors will find our common stock less attractive due to our reliance on these exemptions. If some investors find
our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may
be more volatile. We may take advantage of the reporting exemptions applicable to a smaller reporting company until we are no longer
a smaller reporting company, which status would end once we have a public float greater than $250 million. In that event, we could still
be a smaller reporting company if our annual revenues were below $100 million and we have a public float of less than $700 million.
If
we fail to attract and retain management and other key personnel, we may be unable to continue to successfully develop or commercialize
our product candidates or otherwise implement our business plan.
Our
ability to compete in the highly competitive pharmaceuticals industry depends on our ability to attract and retain highly qualified managerial,
scientific, medical, legal, sales and marketing and other personnel. We are highly dependent on our management and scientific personnel.
The loss of the services of any of these individuals could impede, delay or prevent the successful development of our product pipeline,
completion of our planned clinical trials, commercialization of our product candidates or in-licensing or acquisition of new assets and
could impact negatively our ability to implement successfully our business plan. If we lose the services of any of these individuals,
we might not be able to find suitable replacements on a timely basis or at all, and our business could be harmed as a result. We might
not be able to attract or retain qualified management and other key personnel in the future due to the intense competition for qualified
personnel among biotechnology, pharmaceutical and other businesses.
Our
ability to use our net operating loss carryforwards and certain other tax attributes to offset future taxable income or taxes may be
limited.
Under
the Tax Act, as modified by the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, federal net operating
losses incurred in tax years beginning after December 31, 2017, may be carried forward indefinitely, but the deductibility of such federal
net operating losses in tax years beginning after December 31, 2020, is limited to 80% of taxable income. It is uncertain if and to what
extent various states and localities will conform to the Tax Act or the CARES Act. In addition, under Sections 382 and 383 of the Internal
Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,”
which is generally defined as a greater than 50% change in its equity ownership value over a three-year period, the corporation’s
ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income or
taxes may be limited. We have experienced an ownership change in the past and we may also experience additional ownership changes in
the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control. If an ownership change
occurs and our ability to use our net operating loss carryforwards is materially limited, it would harm our future operating results
by effectively increasing our future tax obligations. In addition, at the state level, there may be periods during which the use of net
operating loss carryforwards is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed. As a
result, if we earn net taxable income, we may be unable to use all or a material portion of our net operating loss carryforwards and
other tax attributes, which could potentially result in increased future tax liability to us and adversely affect our future cash flows.
We
may be adversely affected by natural disasters, pandemics and other catastrophic events and by man-made problems such as terrorism that
could disrupt our business operations, and our business continuity and disaster recovery plans may not adequately protect us from a serious
disaster.
Our
corporate office is located in New York, New York. If a disaster, power outage, computer hacking, or other event occurred that prevented
us from using all or a significant portion of an office, that damaged critical infrastructure, such as enterprise financial systems,
IT systems, manufacturing resource planning or enterprise quality systems, or that otherwise disrupted operations, it may be difficult
or, in certain cases, impossible for us to continue our business for a substantial period of time. As an example, New York City has been
significantly impacted by the COVID-19 pandemic and, due to safety considerations for our employees and government restrictions, we have
been unable to use our facilities located there for an extended period of time. Our contract manufacturer’s and suppliers’
facilities are located in multiple locations where there have been similar working restrictions in place for the COVID-19 pandemic and
where other natural disasters or similar events, such as tornadoes, fires, explosions or large-scale accidents or power outages, or IT
threats, pandemic, acts of terrorism and other geo-political unrest, could severely disrupt our operations and have a material adverse
effect on our business, financial condition, operating results and prospects. All of the aforementioned risks may be further increased
if we do not implement a disaster recovery plan or our partners’ or manufacturers’ disaster recovery plans prove to be inadequate.
To the extent that any of the above should result in delays in the regulatory approval, manufacture, distribution or commercialization
of TARA-002 or IV Choline Chloride, our business, financial condition, operating results and prospects would suffer.
Anti-takeover
provisions in our charter documents and under Delaware law could make an acquisition of us more difficult and may prevent attempts by
our stockholders to replace or remove management.
Provisions
in our certificate of incorporation and bylaws may delay or prevent an acquisition or a change in management. In addition, because we
are incorporated in Delaware, we are governed by the provisions of Section 203 of the DGCL, which prohibits stockholders owning in excess
of 15% of the outstanding voting stock from merging or combining with us. These provisions may frustrate or prevent any attempts by our
stockholders to replace or remove then current management by making it more difficult for stockholders to replace members of the board
of directors, which is responsible for appointing the members of management.
Our
certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for substantially
all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum
for disputes with us or our directors, officers or other employees.
Our
certificate of incorporation provides that the Court of Chancery of the State of Delaware is the sole and exclusive forum for
any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty owed by any of our directors,
officers or other employees to us or our stockholders, any action asserting a claim against us arising pursuant to any provisions of
the DGCL, our certificate of incorporation or our bylaws, or any action asserting a claim against us that is governed by the internal
affairs doctrine. The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it
finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and
our directors, officers and other employees. If a court were to find the choice of forum provision contained in the certificate of incorporation
to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions.
Certain
stockholders have the ability to control or significantly influence certain matters submitted to our stockholders for approval.
Certain
stockholders have consent rights over certain significant matters of our business. These include decisions to effect a merger or other
similar transaction, changes to our principal business, and the sale or other transfer of TARA-002 or other assets with an aggregate
value of more than $2,500,000. As a result, these stockholders, have significant influence over certain matters that require approval
by our stockholders.
If
we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could
be impaired.
We
are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of Nasdaq. The Sarbanes-Oxley
Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting.
We must perform system and process evaluation and testing of our internal control over financial reporting to allow management to report
on the effectiveness of our internal controls over financial reporting in our Annual Report on Form 10-K filing for that year, as required
by Section 404 of the Sarbanes-Oxley Act. This will require that we incur substantial professional fees and internal costs to expand
our accounting and finance functions and that we expend significant management efforts. We may experience difficulty in meeting these
reporting requirements in a timely manner.
We
may discover weaknesses in our system of internal financial and accounting controls and procedures that could result in a material misstatement
of our financial statements. Our internal control over financial reporting will not prevent or detect all errors and all fraud. A control
system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s
objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance
that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.
If
we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act, or if we are unable to maintain proper and
effective internal controls, we may not be able to produce timely and accurate financial statements. If that were to happen, the market
price of our common stock could decline and we could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory
authorities.
We are subject to stringent and changing
privacy laws, regulations and standards as well as policies, contracts and other obligations related to data privacy and security. Our
actual or perceived failure to comply with such obligations could lead to government enforcement actions (that could include fines or
penalties), a disruption of our clinical trials or commercialization of our products, private litigation, harm to our reputation, or other
adverse effects on our business or prospects.
We collect, receive, store,
process, use, generate, transfer, disclose, make accessible, protect and share personal information and other information, including information
we collect about patients in connection with clinical trials, or “Process” or “Processing”, necessary to operate
our business, for legal and marketing purposes, and for other business-related purposes.
Accordingly, we are, or may
become, subject to numerous federal, state, local and international data privacy and security laws, regulations, guidance and industry
standards as well as external and internal privacy and security policies, contracts and other obligations that apply to the Processing
of personal data by us and on our behalf, or collectively, Data Protection Requirements. The number and scope of Data Protection Requirements
are changing, subject to differing applications and interpretations, and may be inconsistent between jurisdictions or in conflict with
each other. If we fail, or are perceived to have failed, to address or comply with Data Protection Requirements, this could result in
government enforcement actions against us that could include investigations, fines, penalties, audits and inspections, additional reporting
requirements and/or oversight, temporary or permanent bans on all or some Processing of personal data, orders to destroy or not use personal
data, and imprisonment of company officials. Further, individuals or other relevant stakeholders could bring a variety of claims against
us for our actual or perceived failure to comply with the Data Protection Requirements. Any of these events could have a material adverse
effect on our reputation, business, or financial condition, and could lead to a loss of actual or prospective customers, collaborators
or partners; interrupt or stop clinical trials; result in an inability to Process personal data or to operate in certain jurisdictions;
limit our ability to develop or commercialize our products; or require us to revise or restructure our operations, or each, a Material
Adverse Impact.
For example, in the United
States, there are a broad variety of data protection laws and regulations that may apply to our activities such as state data breach notification
laws, state personal data privacy laws (for example, the California Consumer Privacy Act of 2018, or CCPA), state health information privacy
laws, and federal and state consumer protection laws. A range of enforcement agencies exist at both the state and federal levels that
can enforce these laws and regulations. For example, the CCPA requires covered businesses that process personal information of California
residents to disclose their data collection, use and sharing practices. Further, the CCPA provides California residents with new data
privacy rights (including the ability to opt out of certain disclosures of personal data), imposes new operational requirements for covered
businesses, provides for civil penalties for violations as well as a private right of action for data breaches and statutory damages (that
is expected to increase data breach class action litigation and result in significant exposure to costly legal judgements and settlements).
Aspects of the CCPA and its interpretation and enforcement remain uncertain. In addition, it is anticipated that the CCPA will be expanded
on January 1, 2023, when the California Privacy Rights Act of 2020, or CPRA, becomes operative. The CPRA will, among other things, give
California residents the ability to limit use of certain sensitive personal information, establish restrictions on the retention of personal
information, expand the types of data breaches subject to the CCPA’s private right of action, and establish a new California Privacy
Protection Agency to implement and enforce the new law. Although there are limited exemptions for clinical trial data under the CCPA,
the CCPA and other similar laws could impact our business activities depending on how it is interpreted.
There are also an increasing
number of laws, regulations and industry standards concerning privacy, data protection and information security in various international
jurisdictions. For example, in May 2018 the European Union’s, or EU, General Data Protection Regulation (EU) 2016/679, or GDPR,
came into effect across the European Economic Area, or EEA. Also, notwithstanding the United Kingdom’s, or UK withdrawal from the
EU, by operation of the so-called “UK GDPR,” the GDPR continues to apply in substantially equivalent form in the context of
the UK, UK establishments and UK-focused Processing operations. European data protection laws provide robust regulatory enforcement and
greater penalties for noncompliance than previous data protection laws, including, for example, under the GDPR, fines of up to €20 million
or 4% of global annual revenue of any noncompliant organization for the preceding financial year, whichever is higher.
Collectively, European data
protection laws (including the GDPR) are wide-ranging in scope and impose numerous, significant and complex compliance burdens in relation
to the Processing of personal data, such as: limiting permitted Processing of personal data to only that which is necessary for specified,
explicit and legitimate purposes; requiring the establishment of a legal basis for Processing personal data; broadening the definition
of personal data to possibly include ‘pseudonymized’ or key-coded data; creating obligations for controllers and processors
to appoint data protection officers in certain circumstances; increasing transparency obligations to data subjects; introducing the obligation
to carry out data protection impact assessments in certain circumstances; establishing limitations on the collection and retention of
personal data through ‘data minimization’ and ‘storage limitation’ principles; introducing obligations to honor
increased rights for data subjects; formalizing a heightened and codified standard of data subject consent; establishing obligations to
implement certain technical and organizational safeguards to protect the security and confidentiality of personal data; introducing the
obligation to provide notice of certain significant personal data breaches to the relevant supervisory authority(ies) and affected individuals;
and mandating the appointment of representatives in the UK and/or EU in certain circumstances. In particular, the Processing of “special
category personal data” (such as personal data related to health and genetic information), which could be relevant to our operations
in the context of our conduct of clinical trials, imposes heightened compliance burdens under European data protection laws and is a topic
of active interest among relevant regulators. The GDPR also includes restrictions on cross-border data transfers. Recent developments
in Europe have created uncertainty regarding how to lawfully transfer data from Europe to the United States and, as a result, we could
have difficulty transferring personal data, including patient data, internationally.
These laws exemplify the vulnerability
of our business to the evolving regulatory environment related to personal data and may require us to modify our Processing practices
at substantial costs and expenses in an effort to comply. Given the breadth and evolving nature of Data Protection Requirements, preparing
for and complying with these requirements is rigorous, time-intensive and requires significant resources and a review of our technologies,
systems and practices, as well as those of any third-party collaborators, service providers, contractors or consultants that Process personal
data on our behalf.
We may publish privacy policies
and other documentation regarding our Processing of personal data and/or other confidential, proprietary or sensitive information. Although
we endeavor to comply with our published policies and other documentation, we may at times fail to do so or may be perceived to have
failed to do so. Moreover, despite our efforts, we may not be successful in achieving compliance if our employees, third-party collaborators,
service providers, contractors or consultants fail to comply with our policies and documentation. Such failures can subject us to potential
foreign, local, state and federal action if they are found to be deceptive, unfair, or misrepresentative of our actual practices. Moreover,
subjects about whom we or our partners obtain information, as well as the providers who share this information with us, may contractually
limit our ability to use and disclose the information. Claims that we have violated individuals’ privacy rights or failed to comply
with data protection laws or applicable privacy notices even if we are not found liable, could be expensive and time-consuming to defend
and could result in adverse publicity that could harm our business or have other Material Adverse Impacts.
Risks
Related to Intellectual Property Rights
We
may not be able to obtain, maintain or enforce global patent rights or other intellectual property rights that cover our product candidates
and technologies that are of sufficient breadth to prevent third parties from competing against us.
Our
success with respect to our product candidates will depend, in part, on our ability to obtain and maintain patent protection in both
the United States and other countries, to preserve our trade secrets and to prevent third parties from infringing on our proprietary
rights. Our ability to protect our product candidates from unauthorized or infringing use by third parties depends in substantial part
on our ability to obtain and maintain valid and enforceable patents around the world.
The
patent application process, also known as patent prosecution, is expensive and time-consuming, and we and our current or future licensors
and licensees may not be able to prepare, file and prosecute all necessary or desirable patent applications at a reasonable cost or in
a timely manner in all the countries that are desirable. It is also possible that we or our current licensors, or any future licensors
or licensees, will fail to identify patentable aspects of inventions made in the course of development and commercialization activities
before it is too late to obtain patent protection on them. Therefore, these and any of our patents and applications may not be prosecuted
and enforced in a manner consistent with the best interests of our business. Moreover, our competitors independently may develop equivalent
knowledge, methods and know-how or discover workarounds to our patents that would not constitute infringement. Any of these outcomes
could impair our ability to enforce the exclusivity of our patents effectively, which may have an adverse impact on our business, financial
condition and operating results.
Due
to legal standards relating to patentability, validity, enforceability and claim scope of patents covering pharmaceutical inventions,
our ability to obtain, maintain and enforce patents is uncertain and involves complex legal and factual questions especially across countries.
Accordingly, rights under any existing patents or any patents we might obtain or license may not cover our product candidates or may
not provide us with sufficient protection for our product candidates to afford a sustainable commercial advantage against competitive
products or processes, including those from branded, generic and over-the-counter pharmaceutical companies. In addition, we cannot guarantee
that any patents or other intellectual property rights will issue from any pending or future patent or other similar applications owned
by or licensed to us. Even if patents or other intellectual property rights have issued or will issue, we cannot guarantee that the claims
of these patents and other rights are or will be held valid or enforceable by the courts, through injunction or otherwise, or will provide
us with any significant protection against competitive products or otherwise be commercially valuable to us in every country of commercial
significance that we may target.
Competitors
in the field of immunology and oncology therapeutics have created a substantial amount of prior art, including scientific publications,
posters, presentations, patents and patent applications and other public disclosures including on the Internet. Our ability to obtain
and maintain valid and enforceable patents depends on whether the differences between our technology and the prior art allow our technology
to be patentable over the prior art. We do not have outstanding issued patents covering all of the recent developments in our technology
and are unsure of the patent protection that we will be successful in obtaining, if any. Even if the patents do successfully issue, third
parties may design around or challenge the validity, enforceability or scope of such issued patents or any other issued patents we own
or license, which may result in such patents being narrowed, invalidated or held unenforceable. If the breadth or strength of protection
provided by the patents we hold or pursue with respect to our product candidates is challenged, it could dissuade companies from collaborating
with us to develop or threaten our ability to commercialize or finance our product candidates.
The
laws of some foreign jurisdictions do not provide intellectual property rights to the same extent or duration as in the United States,
and many companies have encountered significant difficulties in acquiring, maintaining, protecting, defending and especially enforcing
such rights in foreign jurisdictions. If we encounter such difficulties in protecting, or are otherwise precluded from effectively protecting,
our intellectual property in foreign jurisdictions, our business prospects could be substantially harmed, especially internationally.
Proprietary
trade secrets and unpatented know-how are also very important to our business. Although we have taken steps to protect our trade secrets
and unpatented know-how by entering into confidentiality agreements with third parties, and intellectual property protection agreements
with officers, directors, employees, and certain consultants and advisors, there can be no assurance that binding agreements will not
be breached or enforced by courts, that we would have adequate remedies for any breach, including injunctive and other equitable relief,
or that our trade secrets and unpatented know-how will not otherwise become known, inadvertently disclosed by us or our agents and representatives,
or be independently discovered by our competitors. If trade secrets are independently discovered, we would not be able to prevent their
use and if we and our agents or representatives inadvertently disclose trade secrets and/or unpatented know-how, we may not be allowed
to retrieve this and maintain the exclusivity we previously enjoyed.
We
may not be able to protect our intellectual property rights throughout the world.
Filing,
prosecuting and defending patents on our product candidates does not guarantee exclusivity. The requirements for patentability differ
in certain countries, particularly developing countries. In addition, the laws of some foreign countries do not protect intellectual
property rights to the same extent as laws in the United States, especially when it comes to granting use and other kinds of patents
and what kind of enforcement rights will be allowed, especially injunctive relief in a civil infringement proceeding. Consequently, we
may not be able to prevent third parties from practicing our inventions in all countries outside the United States and even in launching
an identical version of our product notwithstanding we have a valid patent in that country. Competitors may use our technologies in jurisdictions
where we have not obtained patent protection to develop their own products, or produce copy products, and, further, may export otherwise
infringing products to territories where we have patent protection but enforcement on infringing activities is inadequate or where we
have no patents. These products may compete with our products, and our patents or other intellectual property rights may not be effective
or sufficient to prevent them from competing.
Many
companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The
legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual
property protection, particularly those relating to pharmaceuticals, and the judicial and government systems are often corrupt, which
could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary
rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our
efforts and attention from other aspects of our business, could put our global patents at risk of being invalidated or interpreted narrowly
and our global patent applications at risk of not issuing, and could provoke third parties to assert claims against us. We may not prevail
in any lawsuits that we initiate or infringement actions brought against us, and the damages or other remedies awarded, if any, may not
be commercially meaningful when we are the plaintiff. When we are the defendant we may be required to post large bonds to stay in the
market while we defend ourselves from an infringement action.
In
addition, certain countries in Europe and certain developing countries have compulsory licensing laws under which a patent owner may
be compelled to grant licenses to third parties, especially if the patent owner does not enforce or use its patents over a protracted
period of time. In some cases, the courts will force compulsory licenses on the patent holder even when finding the patent holder’s
patents are valid if the court believes it is in the best interests of the country to have widespread access to an essential product
covered by the patent. In these situations, the royalty the court requires to be paid by the license holder receiving the compulsory
license is not calculated at fair market value and can be inconsequential, thereby disaffecting the patent holder’s business. In
these countries, we may have limited remedies if our patents are infringed or if we are compelled to grant a license to our patents to
a third party, which could also materially diminish the value of those patents. This would limit our potential revenue opportunities.
Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial
advantage from the intellectual property that we own or license, especially in comparison to what we enjoy from enforcing our intellectual
property rights in the Unites States. Finally, our ability to protect and enforce our intellectual property rights may be adversely affected
by unforeseen changes in both U.S. and foreign intellectual property laws, or changes to the policies in various government agencies
in these countries, including but not limited to the patent office issuing patents and the health agency issuing pharmaceutical product
approvals For example, in Brazil, pharmaceutical patents require initial approval of the Brazilian health agency (ANVISA). Finally, many
countries have large backlogs in patent prosecution, and in some countries in Latin America it can take years, even decades, just to
get a pharmaceutical patent application reviewed notwithstanding the merits of the application.
Obtaining
and maintaining patent protection depends on compliance with various procedural, document submission, fee payment, and other requirements
imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
Periodic
maintenance and annuity fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over
the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural,
documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can, in many
cases, be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance
can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the
relevant jurisdiction just for failure to know about and/or timely pay a prosecution fee. Non-compliance events that could result in
abandonment or lapse of a patent or patent application include failure to respond to official actions within prescribed time limits,
non-payment of fees in prescribed time periods, and failure to properly legalize and submit formal documents in the format and style
the country requires. If we or our licensors fail to maintain the patents and patent applications covering our product candidates for
any reason, our competitors might be able to enter the market, which would have an adverse effect on our business.
If
we fail to comply with our obligations under our intellectual property license agreements, we could lose license rights that are important
to our business. Additionally, these agreements may be subject to disagreement over contract interpretation, which could narrow the scope
of our rights to the relevant intellectual property or technology or increase our financial or other obligations to our licensors.
We
have entered into in-license arrangements with respect to certain of our product candidates. These license agreements impose various
diligence, milestone, royalty, insurance and other obligations on us. If we fail to comply with these obligations, the respective licensors
may have the right to terminate the license, in which event we may not be able to develop or market the affected product candidate. The
loss of such rights could materially adversely affect our business, financial condition, operating results and prospects.
If
we are sued for infringing intellectual property rights of third parties, such litigation could be costly and time consuming and could
prevent or delay us from developing or commercializing our product candidates.
Our
commercial success depends on our ability to develop, manufacture, market and sell our product candidates and use our proprietary technologies
without infringing the proprietary rights of third parties. We cannot assure that marketing and selling such candidates and using such
technologies will not infringe existing or future patents. Numerous U.S.- and foreign-issued patents and pending patent applications
owned by third parties exist in the fields relating to our product candidates. As the biotechnology and pharmaceutical industries expand
and more patents are issued, the risk increases that others may assert that our product candidates, technologies or methods of delivery
or use infringe their patent rights. Moreover, it is not always clear to industry participants, including us, which patents and other
intellectual property rights cover various drugs, biologics, drug delivery systems or their methods of use, and which of these patents
may be valid and enforceable. Thus, because of the large number of patents issued and patent applications filed in our fields across
many countries, there may be a risk that third parties may allege they have patent rights encompassing our product candidates, technologies
or methods.
In
addition, there may be issued patents of third parties that are infringed or are alleged to be infringed by our product candidates or
proprietary technologies notwithstanding patents we may possess. Because some patent applications in the United States may be maintained
in secrecy until the patents are issued, because patent applications in the United States and many foreign jurisdictions are typically
not published until 18 months after filing and because publications in the scientific literature often lag behind actual discoveries,
we cannot be certain that others have not filed patent applications for technology covered by our own and in-licensed issued patents
or our pending applications. Our competitors may have filed, and may in the future file, patent applications covering our product candidates
or technology similar to our technology. Any such patent application may have priority over our own and in-licensed patent applications
or patents, which could further require us to obtain rights to issued patents covering such technologies, which may mean paying significant
licensing fees or the like. If another party has filed a U.S. patent application on inventions similar to those owned or in-licensed
to us, or, in the case of in-licensed technology, the licensor may have to participate, in the United States, in an interference proceeding
to determine priority of invention.
We
may be exposed to, or threatened with, future litigation by third parties having patent or other intellectual property rights alleging
that our product candidates or proprietary technologies infringe such third parties’ intellectual property rights, including litigation
resulting from filing under Paragraph IV of the Hatch-Waxman Act or other countries’ laws similar to the Hatch-Waxman Act. These
lawsuits could claim that there are existing patent rights for such drug, and this type of litigation can be costly and could adversely
affect our operating results and divert the attention of managerial and technical personnel, even if we do not infringe such patents
or the patents asserted against us is ultimately established as invalid. There is a risk that a court would decide that we are infringing
the third party’s patents and would order us to stop the activities covered by the patents. In addition, there is a risk that a
court will order us to pay the other party significant damages for having violated the other party’s patents.
Because
we rely on certain third-party licensors and partners and will continue to do so in the future, if one of our licensors or partners is
sued for infringing a third party’s intellectual property rights, our business, financial condition, operating results and prospects
could suffer in the same manner as if we were sued directly. In addition to facing litigation risks, we have agreed to indemnify certain
third-party licensors and partners against claims of infringement caused by our proprietary technologies, and we have entered or may
enter into cost-sharing agreements with some our licensors and partners that could require us to pay some of the costs of patent litigation
brought against those third parties whether or not the alleged infringement is caused by our proprietary technologies. In certain instances,
these cost-sharing agreements could also require us to assume greater responsibility for infringement damages than would be assumed just
on the basis of our technology.
The
occurrence of any of the foregoing could adversely affect our business, financial condition or operating results.
We
may be subject to claims that our officers, directors, employees, consultants or independent contractors have wrongfully used or disclosed
to us alleged trade secrets of their former employers or their former or current customers.
As
is common in the biotechnology and pharmaceutical industries, certain of our employees were formerly employed by other biotechnology
or pharmaceutical companies, including our competitors or potential competitors. Moreover, we engage the services of consultants to assist
us in the development of our products and product candidates, many of whom were previously employed at, or may have previously been or
are currently providing consulting services to, other biotechnology or pharmaceutical companies, including our competitors or potential
competitors. We may be subject to claims that these employees and consultants or we have inadvertently or otherwise used or disclosed
trade secrets or other proprietary information of their former employers or their former or current customers. Although we have no knowledge
of any such claims being alleged to date, if such claims were to arise, litigation may be necessary to defend against any such claims.
Even if we are successful in defending against any such claims, any such litigation could be protracted, expensive, a distraction to
our management team, not viewed favorably by investors and other third parties, and may potentially result in an unfavorable outcome.
General
Risk Factors
We
do not anticipate paying any dividends in the foreseeable future.
The
current expectation is that we will retain our future earnings to fund the development and growth of our business. As a result, capital
appreciation, if any, of your shares of us will be your sole source of gain, if any, for the foreseeable future.
If our security measures, or those maintained
on our behalf, are compromised now, or in the future, or the security, confidentiality, integrity or availability of our information technology,
software, services, networks, communications or data is compromised, limited or fails, this could result in a Material Adverse Impact.
In the ordinary course of
our business, we may Process (as defined above) proprietary, confidential and sensitive information, including personal data (including,
key-coded data, health information and other special categories of personal data), intellectual property, trade secrets, and proprietary
business information owned or controlled by ourselves or other parties, or collectively, Sensitive Information.
We may use third-party
service providers and subprocessors to help us operate our business and engage in Processing on our behalf. We may also share
Sensitive Information with our partners or other third parties in conjunction with our business. If we, our service providers,
partners or other relevant third parties have experienced, or in the future experience, any security incident(s) that result in, any
data loss; deletion or destruction; unauthorized access to; loss, unauthorized acquisition, disclosure, or exposure of, Sensitive
Information, or compromise related to the security, confidentiality, integrity or availability of our (or their) information
technology, software, services, communications or data, or any, a Security Breach, it may result in a Material Adverse Impact (as
defined above), including the diversion of funds to address the breach, and interruptions, delays, or outages in our operations and
development programs. In the first quarter of 2020, our
email server was compromised in a cyber-attack. We quickly isolated the incident and have, since, implemented additional risk
prevention measures.
Cyberattacks, malicious
internet-based activity and online and offline fraud are prevalent and continue to increase. In addition to traditional computer “hackers”;
threat actors; software bugs; malicious code (such as viruses and worms); employee error, theft or misuse; denial-of-service attacks
(such as credential stuffing); advanced persistent threat intrusions; natural disasters; terrorism; war; telecommunication and electrical
failures; and ransomware attacks, sophisticated nation-state and nation-state supported actors are threats to our information technology
assets and data. For example, the loss of access to (e.g., via a denial of service attack) or loss of clinical trial data (e.g., via
a ransomware attack) that we may have collected from completed or ongoing or planned clinical
trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data.
We may also be the subject of server malfunction, software or hardware failures, supply-chain cyber attacks, loss of data or other computer
assets, and other similar issues. Due to the COVID-19 pandemic, a significant portion of our workforce works remotely that has increased
the risk to our information technology assets and data.
We may be required to expend
additional, significant resources, fundamentally change our business activities and practices, or modify our operations, including our
clinical trial activities, or information technology in an effort to protect against Security Breaches and to mitigate, detect, and remediate
actual and potential vulnerabilities. Applicable Data Protection Requirements (as defined above) may require us to implement specific
security measures or use industry-standard or reasonable measures to protect against Security Breaches. Even if we were to take and
have taken security measures designed to protect against Security Breaches, there can be no assurance that such security measures or those
of our service providers, partners and other third parties will be effective in protecting against all Security Breaches and Material
Adverse Impacts that may arise from such Security Breaches.
Actual or perceived Security
Breaches or vulnerabilities, and concerns regarding data privacy, security or Processing may cause some of our actual or prospective customers,
collaborators, partners and/or clinical trial participants to stop using our products or services or working with us. This discontinuance,
or failure to meet the expectations of such third parties, could result in material harm to our operations, financial performance or reputation
and affect our ability to grow and operate our business.
Failures or significant downtime
of our information technology or telecommunication systems or those used by our third-party service providers could cause significant
interruptions in our operations and adversely impact the confidentiality, integrity and availability of Sensitive Information, including
preventing us from conducting clinical trials, tests or research and development activities and preventing us from managing the administrative
aspects of our business.
Applicable Data Protection
Requirements may require us to notify relevant stakeholders of Security Breaches, including affected individuals, partners, collaborators,
customers, regulators, law enforcement agencies, credit reporting agencies and others. Such disclosures are costly, and the disclosures
or the failure to comply with such requirements could lead to Material Adverse Impacts. There can be no assurance that any limitations
or exclusions of liability in our contracts would be enforceable or adequate or would otherwise protect us from liabilities or damages
if we fail to comply with Data Protection Requirements related to information security or Security Breaches.
We cannot be sure that our
insurance coverage, if any, will be adequate or otherwise protect us from or adequately mitigate liabilities or damages with respect to
claims, costs, expenses, litigation, fines, penalties, business loss, data loss, regulatory actions or Material Adverse Impacts arising
out of our Processing operations, privacy and security practices, or Security Breaches we may experience. The successful assertion of
one or more large claims against us that exceeds our available insurance coverage, or results in changes to our insurance policies (including
premium increases or the imposition of large excess or deductible or co-insurance requirements), could have a Material Adverse Impact.
If
equity research analysts do not publish research or reports, or publish unfavorable research or reports, about us, our business or our
market, our stock price and trading volume could decline.
The
trading market for our common stock is influenced by the research and reports that equity research analysts publish about us and our
business. Equity research analysts may elect not to provide research coverage of our common stock, and such lack of research coverage
may adversely affect the market price of our common stock. In the event we do have equity research analyst coverage, we will not have
any control over the analysts or the content and opinions included in their reports. The price of our common stock could decline if one
or more equity research analysts downgrade our stock or issue other unfavorable commentary or research. If one or more equity research
analysts ceases coverage of us or fails to publish reports on us regularly, demand for our common stock could decrease, which in turn
could cause our stock price or trading volume to decline.