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 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. 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. For example, the FDA and other agencies actively enforce the laws
and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may
be subject to significant liability. Although physicians may prescribe products for off-label uses as the FDA and other regulatory agencies
do not regulate a physician’s choice of drug treatment made in the physician’s independent medical judgment, they do restrict
promotional communications from companies or their sales force with respect to off-label uses of products for which marketing clearance
has not been issued. Companies may only share truthful and not misleading information that is otherwise consistent with a product’s
FDA approved labeling. 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. Further, coverage policies and third-party
reimbursement rates may change at any time. Therefore, even if favorable coverage and reimbursement status is attained, less favorable
coverage policies and reimbursement rates may be implemented in the future.
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 Internal
Revenue Code, which is commonly referred to as the “individual mandate,” was eliminated beginning in 2019. Additionally, on
June 17, 2021 the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the Affordable Care Act is unconstitutional
in its entirety because the “individual mandate” was repealed by Congress. Thus, the Affordable Care Act will remain in effect
in its current form. Further, prior to the U.S. Supreme Court ruling, on January 28, 2021, President Biden issued an executive order that
initiated 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 instructed 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 possible that the Affordable Care Act will be subject
to judicial or Congressional challenges in the future.
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, or MFN, 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. On January 13, 2021, in a separate
lawsuit brought by industry groups in the U.S. District of Maryland, the government defendants entered a joint motion to stay litigation
on the condition that the government would not appeal the preliminary injunction granted in the U.S. District Court for the Northern District
of California and that performance for any final regulation stemming from the MFN Model interim final rule shall not commence earlier
than sixty (60) days after publication of that regulation in the Federal Register. Based on a recent executive order, the Biden administration
expressed its intent to pursue certain policy initiatives to reduce drug prices 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, privacy, transparency, 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 federal Right-to-Try legislation; and similar state
laws of such federal laws, which may be broader in scope.
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 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 analytical profile indexes, or 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.
In addition, the United States is currently experiencing a decrease in
unemployment rates and an increasingly competitive labor market, which may result in difficulties in hiring or retaining sufficient qualified
personnel to maintain and grow our business. We are uncertain as to the employment environment in the future, or how that environment
will impact our workforce, including our ability to retain qualified management and other key personnel.
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 (collectively, “Process” or “Processing”) personal information and other information,
including information we collect about patients in connection with clinical trials, or, as 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. Further, the new California Privacy Rights Act, or CPRA, which was passed in November 2020, substantially
expands the CCPA’s requirements effective January 1, 2023.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. The enactment of the CCPA has prompted similar legislative developments
in other states, which could create the potential for a patchwork of overlapping but different state laws. The federal government is also
considering comprehensive privacy legislation.
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. On
July 15, 2020, the Court of Justice of the European Union, or CJEU, invalidated the primary compliance mechanism on which many companies
relied for such transfers, namely, the EU-US Privacy Shield, and raised questions about the viability of an alternative compliance mechanism
on which companies have relied, namely, the European Commission’s Standard Contractual Clauses. As a result, there is substantial
uncertainty about whether personal information can be transferred from Europe to the US in compliance with the cross-border data transfer
restrictions of the GDPR. We may be required to incur significant costs and increase our foreign data processing capabilities in an effort
to comply with these requirements, and there is no assurance they will be successful.
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.