These forward-looking statements include, but are not limited to, statements
about:
We undertake no obligation to update or revise
any of the forward-looking statements contained in this Annual Report on Form 10-K after the date of this report, except as required by
law or the rules and regulations of the U.S. Securities and Exchange Commission, or SEC. We caution readers not to place undue reliance
on forward-looking statements. Our actual results could differ materially from those discussed in this Annual Report on Form 10-K. The
forward-looking statements contained in this Annual Report on Form 10-K, and other written and oral forward-looking statements made by
us from time to time, are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated
in the forward-looking statements, including the risks, uncertainties and assumptions identified under the heading “Risk Factors”
in this Annual Report on Form 10-K.
Item 1. Business.
Overview
We are a New York City based
clinical-stage biopharmaceutical company committed to identifying and advancing transformative therapies for the treatment of cancer and
rare diseases. We were founded on the principle of applying modern scientific, regulatory or manufacturing advancements to established
mechanisms in order to create new development opportunities. We prioritize creativity, diverse perspectives, integrity and tenacity to
expedite our goal of bringing life-changing therapies to people with limited treatment options.
Our portfolio includes two
development programs utilizing TARA-002, an investigational cell therapy based on the broad immunopotentiator, OK-432, which was originally
granted marketing approval by the Japanese Ministry of Health and Welfare as an immunopotentiating cancer therapeutic agent. This cell
therapy is currently approved in Japan and Taiwan for LMs, and multiple oncologic indications. We have secured worldwide rights to the
asset excluding Japan and Taiwan and have begun to explore its use in oncology and rare disease indications. TARA-002 was developed from
the same master cell bank of genetically distinct group A Streptococcus pyogenes as OK-432 (marketed as Picibanil® in Japan
and Taiwan by Chugai Pharmaceutical Co., Ltd., or Chugai Pharmaceutical). We are currently developing TARA-002 in non-muscle invasive
bladder cancer, or NMIBC, and in LMs.
Our lead oncology program
is TARA-002 in NMIBC, which is cancer found in the tissue that lines the inner surface of the bladder that has not spread into the bladder
muscle. Bladder cancer is the sixth most common cancer in the United States, with NMIBC representing approximately 80% of bladder cancer
diagnoses. Approximately 65,000 patients are diagnosed with NMIBC in the United States each year. Very few new therapeutics have been
approved for NMIBC since the 1990s and the current standard of care for NMIBC includes intravesical Bacillus Calmette–Guérin,
or BCG. The mechanism of TARA- 002 is similar to BCG. TARA-002 and BCG are intravesically administered and elicit both a Th1 type immune
response and locally activated generally similar array of cytokines and immune cells.
In October 2021, we announced
that the Office of Tissues and Advanced Therapies Division, or the OTAT Division, of the FDA’s Center for Biologics Evaluation and
Research, or CBER, cleared our Investigational New Drug, or IND, application for TARA-002 in NMIBC. We have commenced a Phase 1 dose-finding,
open-label clinical trial to evaluate TARA-002 in treatment-naïve and treatment-experienced NMIBC patients with high-grade carcinoma
in situ and high-grade papillary tumors (Ta). In the initial dose escalation phase of the trial, patients will receive six weekly intravesical
doses of TARA-002. The primary objective of the trial is to evaluate the safety, tolerability and preliminary signs of anti-tumor activity
of TARA-002, with the goal of establishing a recommended dose for a future Phase 2 clinical trial.
We are also pursuing TARA-002
in LMs, which are rare, non-malignant cysts of the lymphatic vascular system that primarily form in the head and neck region of children
before the age of two. In July 2020, the FDA granted Rare Pediatric Disease designation for TARA-002 for the treatment of LMs. OK-432,
the originator therapy to TARA-002, has been the standard of care in LMs in Japan for over 20 years. In addition to the clinical experience
in Japan, we have secured the rights to a dataset from one of the largest ever conducted Phase 2 trials in LMs, in which OK-432 was administered
via a compassionate use program led by the University of Iowa to over 500 pediatric and adult patients. We have an IND for TARA-002 for
LMs with the Vaccines and Related Products Division of the FDA, or Vaccines Division, and in October 2021 we submitted the completed confirmatory,
current Good Manufacturing Practices (cGMP) comparability data for TARA-002 in relation to OK-432 as part of the IND. We are engaged with
the FDA to align on a development plan for TARA-002 in LMs.
The third development program in our portfolio is intravenous, or IV,
Choline Chloride, an investigational phospholipid substrate replacement therapy initially in development for patients receiving parenteral
nutrition, or PN, who have intestinal failure associated liver disease, or IFALD. IV Choline Chloride has been granted Orphan Drug Designation
by the FDA for this indication and has also been granted Fast Track Designation for the treatment of IFALD. Following a positive end of
Phase 2 meeting with the FDA, we received feedback on a potential design of the studies necessary to complete a registration package for
IV Choline Chloride for the treatment of IFALD, including a Phase 1 pharmacokinetic, or PK, trial and a Phase 3 clinical trial. Prior
to initiating these clinical trials, we are conducting a prevalence study to enhance understanding of the PN patient population and we
plan to use this information to determine the next steps for the development program. In September 2021, we reported results of the retrospective
part of the prevalence study, which supported the significant unmet medical need in patients dependent on PN who have IFALD. We are currently
conducting the prospective part of the study, which is a multi-center, cross-sectional observational study that will assess the prevalence
of choline deficiency, as well as cholestasis and steatosis, in patients dependent on PN.
We had been pursuing an additional program, Vonapanitase, a recombinant
human elastase. Following a review of the research, preclinical, and clinical data of Vonapanitase, we have determined to cease further
development of this product candidate at this time.
We have devoted substantial
efforts to the development of these programs and do not have any approved products and have not generated any revenue from product sales.
TARA-002 has not yet been approved for use for treatment of NMIBC, LMs or any other indications. We do not expect to generate revenues
in the near-term, if ever. To finance our current strategic plans, including the conduct of ongoing and future clinical trials and further
research and development costs, we will need to raise additional capital.
Our Product Candidate Pipeline
The following chart summarizes
the current status of our product candidate pipeline:
| * | TARA-002 Granted Rare Pediatric
Disease Designation for the treatment of LMs. OK-432 Granted Orphan Drug Designation by the U.S. FDA for the treatment of LMs, which
we believe is applicable under established comparability. |
** |
Granted Orphan Drug and Fast Track Designations by the U.S. FDA |
† |
Phase 1 PK study to be conducted in addition to Phase 3 |
Our Corporate Strategy:
We are an oncology and rare
disease company focused on identifying and acquiring or licensing de-risked assets and optimizing and/or accelerating their development.
Leveraging the drug development and commercialization experience of our management team, our goal is to build a leading biopharmaceutical
company focused on bringing life-saving therapies to patients with significant unmet needs.
1. Pursue development of TARA-002 for the
treatment of NMIBC and Advance Phase 1 clinical trial.
We have recently commenced a Phase 1 clinical trial to assess the safety
and tolerability of TARA-002 in patients with high-grade NMIBC, involving a dose escalation phase in which we are evaluating the safety,
tolerability and preliminary signs of anti-tumor activity of TARA-002 to determine dosage for a future Phase 2 clinical trial. We then
intend to further assess safety and preliminary signs of anti-tumor activity of TARA-002 in an expanded cohort of our Phase 1 clinical
trial.
2. Align with the FDA on a development plan
and regulatory pathway for TARA-002 in LMs.
Based on the robust dataset for the originator product OK-432 in LMs
and the full Clinical Study Report, or CSR of the randomized Phase 2 clinical trial of OK-432 in LMs led by the University of Iowa, we
are encouraged by the potential for TARA-002 to treat patients with LMs. We are engaged with the FDA to align on a development plan for
TARA-002 in LMs.
3. Complete prospective prevalence study
of patients receiving PN and who have IFALD to refine a development pathway for IV Choline Chloride.
We are currently conducting
a prospective prevalence study to enhance understanding of the PN patient population and plan to use this information to inform the next
steps for the development program. We received FDA feedback on a potential design of the studies necessary to complete a registration
package for IV Choline Chloride for the treatment of IFALD, including a Phase 1 pharmacokinetic study and a Phase 3 trial.
4. Explore opportunities to expand our pipeline
while maintaining a disciplined approach to investment.
We intend to explore the
use of TARA-002 in combination with other therapies and identify additional opportunities to develop TARA-002 in indications beyond NMIBC
and LMs. We plan to conduct non-clinical experiments and modeling to better characterize the potential benefits of combination therapy
with TARA-002, particularly in NMIBC. In addition, our leadership team has a strong track record of licensing, acquiring and optimizing
product candidates and we intend to leverage this skill set to identify opportunities for potential combination opportunities for TARA-002,
in NMIBC and other oncology indications. The immunological activity of TARA-002’s originator product, OK-432, has been effectively
interrogated in patients in a long list of indications. We plan to continue to carefully evaluate the case reports and the literature
and perform non-clinical characterization studies to better understand the mechanism of action of TARA-002 and its potential activity
in indications beyond NMIBC and LM in which there is unmet need.
Our Pipeline
TARA-002 / OK-432
TARA-002, our lead program,
is an investigational cell therapy developed from the master cell line of the same genetically distinct Streptococcus pyogenes
(group A, type 3) Su strain as OK-432, a broad immunopotentiator marketed as Picibanil® in Japan and Taiwan by Chugai Pharmaceutical.
We are using the same regulatory starting materials as OK-432 and manufacture TARA-002 using an updated version of the same proprietary
processes used to manufacture OK-432. We have designated this product candidate as TARA-002 in order to differentiate the regulatory path
in the United States and other geographies from that of OK-432 in Japan.
We entered into an agreement with Chugai Pharmaceutical in June 2019,
as amended in July 2020, to support our development of TARA-002. The agreement provides us with exclusive access to certain materials
and documents relating to OK-432 including the master cell bank of Streptococcus pyogenes used in the manufacturing of OK-432.
Additionally, the agreement provides technical support during a certain period. We have utilized the materials, proprietary manufacturing
process and technical support provided by Chugai Pharmaceutical to produce TARA-002 at a cGMP-compliant facility in the United States.
Under the agreement with Chugai Pharmaceutical, we have sole responsibility for the development and commercialization of TARA-002 worldwide,
excluding Japan and Taiwan. This agreement is exclusive through June 17, 2030 or following any termination of the agreement by either
party.
In Japan, OK-432 is indicated
for: the treatment of lymphangiomas (lymphatic malformations); the prolongation of survival time in patients with gastric cancer (postoperative
cases) or primary lung cancer in combination with chemotherapy; and the reduction of cancerous pleural effusion or ascites in patients
with lung cancer or gastrointestinal cancer respectively, head and neck cancer (maxillary cancer, laryngeal cancer, pharyngeal cancer,
and tongue cancer) and thyroid cancer that are resistant to other drugs.
We plan to pursue development of TARA-002 for the treatment of NMIBC
and LMs initially in the United States, and plan to also seek approval in Europe and other regions in the future and may also explore
additional indications where its utility as an immunostimulant has been hypothesized to be of therapeutic benefit.
TARA-002 in NMIBC
Disease Overview
Bladder cancer is the sixth
most common cancer in the United States, with NMIBC representing approximately 80% of bladder cancer diagnoses. NMIBC is cancer found
in the tissue that lines the inner surface of the bladder that has not spread into the bladder muscle. There are three subtypes of NMIBC:
Ta (non-invasive papillary carcinoma), Tis (carcinoma in situ or CIS), and T1 (carcinoma invading the lamina propria). Among the types
of NMIBC, Ta accounts for most NMIBC cases (70%), whereas T1 and CIS account for 20% and 10%, respectively.
Based on currently available treatment data, we believe that there
are approximately 30,000 incident cases of High-Grade NMIBC per year that would be appropriate for treatment with TARA-002 in the United
States. There are 65,000 incident cases of NMIBC in the United States every year, of these, approximately 45% (approximately 30,000) are
made up of High-Grade tumor types that are considered higher risk, and therefore candidates for immunotherapies, such as TARA-002. In
addition, NMIBC has one of the highest rates of recurrence with three-year rate estimated at up to 80%.
Treatment:
Treatment for NMIBC is typically targeted to reduce unresectable persistence,
recurrence after resection and to prevent disease progression to muscle-invasive bladder cancer. The initial treatment for NMIBC includes
cystoscopy and complete transurethral resection of the bladder tumor (TURBT) for papillary Ta or T1, or biopsy for CIS. A single postoperative
instillation of intravesical chemotherapy is recommended in patients with low risk of progression, and for patients with intermediate
and high-risk disease, a longer course of intravesical therapy is administered. The most efficacious intravesical agent to date has been
BCG, a live attenuated form of Mycobacterium bovis. BCG has been the subject of multiple supply shortages in the past decade due
to the inability to meet demand to treat the large population of patients with NMIBC, resulting in strategies to conserve the use of the
therapy. There has been a significant increase in bladder cancer recurrence and progression with an escalated number of patients who require
cystectomy. As such, with the current BCG shortage and limited effective alternate therapies or dosing strategies, there continues to
be a significant unmet need for treatment options for patients with NMIBC.
Manufacturing:
We plan to manufacture TARA-002
using an equivalent, but modernized, proprietary manufacturing process as is used to produce OK-432 by Chugai Pharmaceutical, starting
with a master cell line propagated by us but utilizing the same genetically distinct strain of Streptococcus pyogenes (A group,
type 3) Su strain as OK-432. We have contracted a contract development and manufacturing organization, or CDMO, to manufacture TARA-002.
TARA-002 for the Treatment of Lymphatic
Malformations
Disease Overview:
We are working to align with
the FDA on a regulatory pathway and development plan for TARA-002 for the treatment of LMs. LMs are rare, non-malignant cystic masses
that primarily form in the head and neck region of children before the age of two. The International Society for the Study of Vascular
Anomalies classifies LMs as either macrocystic, microcystic, or mixed cystic. Macrocystic and microcystic LMs are differentiated by the
size of the fluid-containing portion of the malformation. Macrocystic LMs are characteristically large, fluid-filled cysts with a thin
endothelial lining. Macrocystic LMs are composed of cysts greater than 2 cubic centimeters in size and present as a soft, fluid-filled
swelling beneath normal or slightly discolored skin. Macrocystic LMs are usually located in the antero-lateral cervical region of the
neck; however, it is possible for this type of LM to originate in other areas of the body. In contrast, microcystic LMs have very limited
internal space with a thick irregular endothelial lining. Microcystic LMs are comprised of cysts less than 2 cubic centimeters in size
and are often composed of micro-lymphatic channels that integrate and infiltrate normal soft tissue. Microcystic LMs can involve both
superficial and deep aspects including muscle and bone. Microcystic LMs can thicken or swell causing enlargement of surrounding soft tissue
and bones and can be found on any area of the skin or mucous membrane. Mixed cystic LMs are comprised of varying degrees of both macrocystic
and microcystic LMs.
While the exact prevalence
of LMs is not known, in the United States, the condition is thought to be present in approximately one in every 4,000 live births and
we believe there are approximately 1,400-1,800 LM cases per year.
Treatment:
Outside of Japan and Taiwan,
the standard of care is surgical excision, which is associated with high rates of recurrence and complications. There are no approved
pharmacotherapies for LMs, except in Japan and Taiwan where OK-432 is approved. In these countries, OK-432 has been the standard of care
for LMs for over 25 years.
Treatment of LMs varies depending
on the symptoms and complications that present themselves. The standard of care outside Japan and Taiwan for the treatment of LMs is either
a partial or complete surgical excision of the cysts. While surgery is the standard approach to the treatment of LMs in the head and neck,
the region is a difficult area to operate on because of the large number of important anatomical structures in the area. Major venous
and arterial trunks travel through the neck, as do important nerves. Surgery on such malformations frequently results in high rates of
recurrence and complications including life-long chronic conditions, such as damage to nerves and other important structures of the head
and neck.
Clinical Development
When OK-432 is administered locally for LMs, it is hypothesized that
innate immune cells within the cyst are activated and produce a strong immune cascade. Neutrophils and monocytes infiltrate the cyst and
various cytokines, including interleukins IL-6, IL-8, IL-12, interferon, or IFN, -gamma, tumor necrosis factor, or TNF-alpha, and vascular
endothelial growth factor (VEGF) are secreted by immune cells within the cyst in response to the presence of OK-432. In concert, these
immune activities induce a strong local inflammatory reaction in the cyst wall, resulting in fluid drainage, shrinkage and fibrotic adhesion
of the cyst.
A randomized, phase 2 clinical
trial led by the University of Iowa studied the use of OK-432 in patients with LM from 1998 to 2005. Most eligible subjects were between
6 months and 18 years of age with macrocystic or mixed cystic LMs (with ≥ 50% macrocytic disease) of the head and/or neck. There were
three treatment groups: immediate treatment (ITG), delayed treatment (DTG), and open label treatment group. The immediate treatment group
received treatment with OK-432 upon diagnosis. The delayed treatment group received OK-432 treatment following a six-month observation
period; the cross-over design was intended to investigate spontaneous resolution. The open-label treatment group included infants younger
than six months of age, adults older than 18 years of age, patients with LMs involving sites other than the head and neck (such as the
axilla, thorax, and extremities), and patients treated on an emergent basis. The open label treatment group were treated immediately with
OK-432. Response to therapy was measured by quantitating change in lesion size. Clinical success was defined as a complete (90% to 100%)
or substantial (60% to 89%) response to treatment based on radiographically confirmed shrinkage in lesions.
Results presented in this
report were based on a retrospective analysis of source verified data that included the full dataset of subjects enrolled in the Phase
2 randomized clinical trial between January 1998 and August 2005, including data in the published study (Smith et al. 2009) that included
subjects enrolled between January 1998 and November 2004.
Overall, 310 subjects were
enrolled with intent to treat: 246 subjects were randomized to the immediate (ITG, N=171) and delayed (DTG, N=75) treatment groups; 64
subjects were nonrandomized and assigned to the open-label group. Analysis of the primary efficacy endpoint (N=150) demonstrated clinical
success (complete and/or substantial response) in 69% of patients in the ITG 6 months after enrollment, while 7.5% of patients in the
DTG experienced spontaneous regression of a LM during this time interval (p < 0.0001)). When the results were analyzed by lesion type
across all treatment groups, a successful outcome was observed in 84% and 60% of patients with macrocystic and mixed cystic LM, respectively.
None of the patients with microcystic LM demonstrated clinical success with OK-432 therapy. The results of the retrospective analysis
were consistent with the results observed in the original analysis (Smith et al. 2009).
Figure 1: the primary endpoint was met with 69%
of patients in the immediate treatment group had a complete or substantial response to OK-432 while 7.5% of patients in the delayed treatment
group had a complete or substantial response after six months of observation and before treatment.
| ǂ | Clinical Success was defined as complete or substantial response. |
| * | Reflects data prior to dosing with OK-432. After dosing, the
clinical success rate was 66%, which was not statistically different from the ITG. |
Figure 2: patients with radiographically confirmed
macrocystic lesions had the greatest likelihood of clinical success and in those patients with mixed lesions, clinical success was also
present.
| ǂ | Clinical Success was defined as complete or substantial response. |
| * | Reflects data prior to dosing with OK-432. After dosing, the
clinical success rate was 66%, which was not statistically different from the ITG. |
| ** | Results were analyzed by lesion type across all treatment groups. |
Safety Profile
The most common adverse events with treatment were local injection
site reactions, fever, fatigue, and decreased appetite, with resolution within two weeks. Treatment emergent serious adverse events or
SAEs, (treatment emergent SAEs are defined as any SAE occurring or worsening on or after the first dose of study drug and within 35 days
after the last dose of study drug) associated with OK-432 treatment were reported in 4.1% of patients, with the most severe events being
airway obstruction and facial paralysis due to massive swelling post-injection that required tracheostomy and hospitalization. Both of
these events were reported as resolved.
The safety findings from the sponsor-conducted retrospective analysis
are consistent with the original analysis reported in Smith et al. 2009, and with safety data in published studies in approximately 865
patients with LMs after treatment with OK-432.
Preclinical Development:
A comprehensive preclinical development program for OK-432, including
in vitro and in vivo pharmacology and toxicology studies, was conducted by Chugai Pharmaceutical to support the filing of
a NDA with the Japan Pharmaceuticals and Medical Devices Agency. We believe these studies may help inform the design of a development
plan for TARA-002 in LMs.
Regulatory Interactions:
In July 2020, the FDA granted Rare Pediatric Disease designation for
TARA-002 for the treatment of LMs. The FDA grants Rare Pediatric Disease designation for serious diseases that primarily affect children
ages 18 years or younger and fewer than 200,000 persons in the United States. Under the FDA’s Rare Pediatric Disease Priority Review Voucher
program, a sponsor who receives an approval of a NDA or BLA for a product for the prevention or treatment of a rare pediatric disease
may be eligible for a voucher, which can be redeemed to obtain priority review for any subsequent marketing application or may be sold
or transferred.
We are encouraged by the robust dataset for OK-432 in LMs, which will
inform our development of TARA-002 and which we believe could help support the potential filing of a BLA for TARA-002 in LMs. At the FDA’s
request, we submitted the full CSR of the randomized Phase 2 clinical trial of OK-432 in LMs led by the University of Iowa to our open
IND. We are engaged with the FDA to align on a development plan for TARA-002 in LMs and subsequently initiate a clinical trial in LM patients.
Manufacturing Plans:
TARA-002
will be manufactured using an equivalent, but modernized, proprietary manufacturing process as is used to produce OK-432 by Chugai Pharmaceutical.
Starting with a master cell line propagated by us but utilizing the same genetically distinct strain of Streptococcus pyogenes
(A group, type 3) Su strain as OK-432. We have contracted a CDMO, to manufacture TARA-002.
IV Choline Chloride
for the treatment of Intestinal Failure Associated Liver Disease
Background:
IV
Choline Chloride is an IV substrate replacement therapy initially in development for patients receiving PN who have IFALD.
Choline
is a known important substrate for phospholipids that are critical for healthy liver function. Because patients receiving PN cannot sufficiently
absorb adequate levels of choline and no available PN components contain sufficient amounts of choline to correct this deficit, they often
experience a prolonged progression to hepatic failure and death, with the only known intervention being a dual small bowel / liver transplant.
If approved, IV Choline Chloride would be the first approved therapy for IFALD. It has been granted ODD by the FDA for the treatment of
IFALD and the prevention of choline deficiency in PN patients. We are currently undertaking a multinational prevalence study to enhance
understanding of the PN patient population.
We have entered into a license agreement with Dr. Alan Buchman for
exclusive rights to the IND, ODD and other regulatory assets related to IV Choline Chloride, as well as exclusive rights to the data from
previously conducted Phase 1 and Phase 2 clinical trials led by Dr. Buchman.
The
results of a randomized, controlled, Phase 2 clinical trial demonstrated that treatment with IV Choline Chloride resulted in normalization
of plasma-free choline concentrations, improvement of hepatic steatosis, and statistically significant improvement in cholestasis in patients
dependent on PN.
We had an end of Phase 2 meeting with the FDA in November 2018 and
received the FDA’s feedback on the design of studies necessary to complete the registration package for IV Choline Chloride for
the treatment of IFALD, including a Phase 1 pharmacokinetic study and Phase 3 trial.
Disease Overview:
IFALD
is a rare hepatic/metabolic disease. IFALD, which occurs in patients dependent upon PN, is characterized by choline deficiency, hepatic
steatosis, cholestasis, and rapid progression of liver disease through to hepatic failure and death, in the absence of intestine-liver
transplant. IFALD carries a relatively poor prognosis, with a 15-34% death rate within one to four years. When IFALD presents in children,
mortality is even higher, with studies reporting death rates of 23-40% within 18 months. A patient is considered to have IFALD if she/he:
|
● |
is dependent on PN for more than six months (e.g., has chronic intestinal failure); |
|
● |
has evidence of steatosis, determined by imaging techniques or histologic assessments; |
|
● |
has evidence of cholestasis (e.g., elevated alkaline phosphatase, or ALP, elevated bilirubin and/or histology); and |
|
● |
may have evidence of ongoing, progressive liver injury on the basis of multiple abnormal liver function tests, in conjunction with findings of fibrosis, cirrhosis, and/or end-stage liver disease. |
Many patients receiving PN
are entirely dependent on PN for their nutritional needs. PN delivers nearly all the macro and micro-nutrients necessary for survival
in their patients, with the notable exception of choline. Consequently, patients dependent on PN support have been shown to be choline
deficient. Patients dependent upon PN are unable to synthesize sufficient levels of choline and malabsorption limits the bioavailability
of choline chloride from the PN diet. The American Society for Parenteral and Enteral Nutrition and the Academy of Nutrition and Dietetics’
Dietitians in Nutrition Support both recommend that choline be developed and routinely included in PN products; however, there are currently
no FDA-approved choline chloride PN products.
Dependence on PN and resulting choline deficiency often leads to IFALD,
which is the most common adverse outcome in chronic PN adult patients that is associated with death. Low free choline plasma concentrations
are associated with alanine aminotransferase, or ALT, aspartate aminotransferase, or AST, and ALP elevations as well as steatosis (fatty
liver) and cholestasis (when bile from the liver stops or slows), all indicators of ongoing liver damage.
Clinical History:
In a Phase 2 randomized,
double-blind, controlled 24-week clinical trial, patients (n=15) receiving nightly PN for > 85% of their nutritional needs (for at
least 12 weeks prior to entry) were randomized to receive via IV infusion (10-12 hours) their usual PN with placebo (n = 8), or PN to
which 2g IV Choline Chloride was added (n = 7).
In the IV Choline Chloride
group, mean choline levels were within or greater than the estimated normal range (i.e., 6.7 to 26.9 nmol/mL) throughout the 24-week trial
and quickly returned to baseline levels when treatment was discontinued.
Steatosis:
Upon conversion of the quantification of computed tomography, or CT,
values to magnetic resonance imaging proton density fat fraction, or MRI-PDFF, significant differences in the least square, or LS, mean
change from baseline in estimated MRI-PDFF were observed in the IV Choline Chloride group in comparison to placebo group at Week 4 through
Week 24, demonstrating a clinically meaningful and statistically significant reduction in steatosis. When LS mean percent changes from
baseline in MRI-PDFF were compared between treatment groups, significant differences in LS mean changes (range, 31.7% to 53.6%) were observed
from Weeks 4 to 24 with p-values of 0.0009 to 0.0297 favoring the IV Choline Chloride group.
Figure 3. Liver CT Images: Before and After Treatment with IV Choline
Chloride
Alkaline Phosphatase:
At baseline, LS mean ALP concentration was 239.3 ± 118.93 in
the IV Choline Chloride group and 148.1 ± 100.2 in the placebo group. The mixed model for repeated measures, or MMRM, analyses
demonstrated statistically significant decreases in ALP concentrations at Week 12 (p = 0.008), Week 16 (p = 0.005), Week 20 (p = 0.007),
and Week 24 (p = 0.005) for the IV Choline Chloride group, demonstrating a reduction in cholestasis. A trend towards significance was
observed at Week 4 (p = 0.076) and Week 6 (p = 0.056). At Week 34, 10 weeks after discontinuation of IV Choline Chloride treatment, LS
mean change from baseline in ALP concentrations still demonstrated statistically significant decreases (p = 0.002), demonstrating a significant
improvement in cholestasis with treatment with IV Choline Chloride (Figure 4).
In the subgroup of subjects with ALP concentration
> 1.5x upper limit of normal (ULN) at baseline, (n=7), mean values at baseline were comparable between the IV Choline Chloride and
placebo groups (294.20 ± 87.947 versus 277.00 ± 128.693, respectively). In the sub-group analysis, improvement in ALP was
consistent and substantial, with 20-30% improvement over 12-24 weeks of treatment. Statistical significance was observed at 12, 16, and
20 weeks.
In the description of the trials above and
elsewhere in this Annual Report on Form 10-K, n represents the number of patients in a particular group and p or p-values represent
the probability that random chance caused the result (e.g., a p-value of 0.001 means that there is a 0.1% probability
that the difference between the placebo group and the treatment group is purely due to random chance). A p-value of less
than or equal to 0.05 is a commonly used criterion for statistical significance, and may be supportive of a finding of efficacy by
regulatory authorities.
Figure 4. Improvement in Cholestasis1: All Patients
| 1 | Protara Therapeutics re-analysis of patient CRF’s, data
on file. |
| * | MMRM method used for imputation. |
| ǂ | A placebo subject was excluded from all analyses due to likely
IV contrast-induced imaging abnormalities, confirmed by independent radiologist in subsequent re-analysis. |
Preclinical Development:
Table 1. Preclinical Studies Conducted by us for
IV Choline Chloride
Study Type | |
Brief Description |
In vitro protein binding | |
Evaluation of Protein Binding by Choline Chloride in Plasma Using Rapid Equilibrium Dialysis |
In vitro cardiac ion channel study | |
In Vitro Assessment of the Effect of Choline on Currents Mediated by hERG, Cav1.2, and Peak and Late Nav1.5 Channels Expressed in Human Embryonic Kidney (HEK) Cells |
In vitro drug-drug interaction | |
Evaluation of Transporter Inhibition by Choline Chloride in Transporter-Transfected HEK293 Cells |
| |
Evaluation of OCT2, MATE1 and MATE2-K Inhibition by Choline Chloride in Transporter-Transfected HEK293 Cells |
| |
Evaluation of Transporter Inhibition by Choline Chloride in Caco-2 Cells |
| |
Evaluation of Time Dependent Cytochrome P450 Inhibition (IC50 Shift) by Choline Chloride in Human Liver Microsomes |
| |
Evaluation of Direct Cytochrome P450 Inhibition by Choline Chloride in Human Liver Microsomes |
| |
Evaluation of Cytochrome P450 Induction by Choline Chloride in Human Hepatocytes |
| |
Evaluation of Transporter Inhibition by Choline Chloride in Caco-2 Cells |
| |
Evaluating of Cytochrome P450 2C8, 2C9, and 2C19 mRNA Induction by Choline Chloride in Human Hepatocytes |
In vitro BSEP inhibition | |
Assessment of Choline as an Inhibitor of Human BSEP Mediated Transport |
| |
Assessment of Choline as a Substrate of Human BSEP Mediated Transport |
Nonclinical pharmacology studies | |
Non-GLP Pilot Single Dose, Escalating Dose Tolerance Study of Choline by Intravenous Infusion in Male Beagle Dogs |
| |
GLP Single-dose IV Cardiovascular Study in Surgically Instrumented Male Dogs Monitored by Telemetry |
| |
GLP Combined Single-dose IV Neurobehavioral and Respiratory Study |
Clinical Development Plan:
We have received feedback from the FDA on a number of key aspects of
the overall clinical program necessary for registration, including a Phase 1 pharmacokinetic study and a Phase 3 clinical trial. We completed
a retrospective, observational study of patients dependent on PN for 6 or more months. The objective of the study was to understand the
incidence of cholestasis, a hallmark pathology of IFALD in this patient population by measuring serum alkaline phosphatase (ALP) levels
greater than 1.5 times the upper limit of normal ULN as a key marker of cholestasis. Results of the study showed: 31% of all patients,
irrespective of baseline levels, presented with ALP levels greater than 1.5 times the ULN at any given time during 6 to 36 months. In
addition, approximately 28% of all patients had persistent ALP elevations greater than 1.5 times the ULN at 36 months. At baseline, approximately
23% of patients presented with ALP levels greater than 1.5 times the ULN with approximately 76% presenting with greater than 1.5 times
the ULN at any given time during 6 to 36 months and approximately 59% with persistent ALP elevations greater than 1.5 times the ULN at
36 months. While medical management demonstrated some improvement in ALP levels, it was not sufficient for managing ALP levels over the
long term in patients on PN. Results support further exploration in patient population to determine rates of choline deficiency and steatosis.
We have initiated a prospective observational study to further characterize the prevalence of choline deficiency, as well as cholestasis
and steatosis. We plan to use information from this prospective study to determine the appropriate next steps for the development program.
Manufacturing Plans:
We have manufactured sufficient
amounts of cGMP drug substance and drug product to initiate the planned clinical trials. Scale up for commercial demand is ready and will
commence when appropriate. Our end-to-end manufacturing of IV Choline Chloride is conducted in the United States by a cGMP-compliant CDMO.
Vonapanitase
As a result of the Merger (as defined below), we acquired the product
candidate, Vonapanitase, a recombinant human elastase that we previously developed for the improvement of vascular access outcomes in
patients with chronic kidney disease, undergoing or preparing for hemodialysis, and as a treatment for patients with symptomatic peripheral
artery disease. We have reviewed the research, preclinical and clinical data of Vonapanitase and have determined to cease further development
of this product candidate at this time.
Collaborations and License Agreements
Chugai Agreement
On June 17, 2019, we entered into an agreement, or the Chugai Agreement
with Chugai Pharmaceutical, a company organized and existing under the laws of Japan. Chugai Pharmaceutical has developed and commercialized
a therapeutic product, OK-432 (Existing Product), in Japan and Taiwan, or the Chugai Territory and owns and controls certain materials
and documents related to the Existing Product (the “Chugai Materials”). Pursuant to the Chugai Agreement, Chugai Pharmaceutical
has provided us with certain materials and documents relating to the Existing Product and has provided certain technical services to us
for our development and commercialization in territories other than the Chugai Territory, or the Protara Territory of a new therapeutic
product, or the New Product or TARA-002 comparable to the Existing Product beginning on the effective date of the Chugai Agreement and
ending on June 30, 2020, or any other date to be agreed to by the parties, or the Chugai Service Period, Chugai Pharmaceutical will exclusively
provide the Existing Product and Chugai Materials to us and will not provide the Existing Product or Chugai Materials to any third parties
during the Chugai Service Period, other than for medical, compassionate use and/or non-commercial research purposes. Additionally, beginning
on the effective date of the Chugai Agreement and ending on the fifth anniversary of such date or upon the termination of the Chugai Agreement,
whichever comes earlier, Chugai Pharmaceutical shall not provide Chugai Materials or technical support to any third-party for the purpose
of development and commercialization in the Protara Territory of a therapeutic product comparable to the Existing Product. We are responsible,
at our sole cost and expense, for the development and commercialization of the New Product in the Protara Territory.
On July 14, 2020, we entered into an amended agreement with Chugai
Pharmaceutical, or the Amended Chugai Agreement, with an effective date as of June 30, 2020. The Chugai Amendment extended the date through
which Chugai will exclusively provide the Existing Product and materials to us from June 30, 2020 to June 30, 2021, extended the date
through which Chugai will not provide materials or technical support to any third-party for the purpose of development and commercialization
in a given area from the fifth anniversary to the eleventh anniversary of the original effective date (extended to June 17, 2030) and
provides that, in addition to the designated fee provided upon the initial indication approval in the Chugai Pharmaceutical Agreement,
we will pay Chugai a designated fee for each additional indication approval.
As consideration for Chugai
Pharmaceutical’s performance under the Chugai Agreement, we agreed to pay Chugai Pharmaceutical a payment in the low, single-digit
millions, which payments shall be made in two installments with an initial payment in July 2020, and the remaining majority of the payment
payable upon FDA approval of the New Product.
We granted Chugai Pharmaceutical
a right of first refusal on terms to be negotiated between the parties for a license related to the New Product-relevant information,
data and documentation and inventions to develop and commercialize the New Product in the Chugai Territory. We will be responsible for
manufacturing and supplying or causing our CDMO to manufacture and supply the New Product to Chugai Pharmaceutical.
The Chugai Agreement shall
remain in full force and effect until the first anniversary of the date of FDA approval of the New Product, unless terminated sooner,
or the Chugai Term. Following the Chugai Service Period and during the Chugai Term, Chugai Pharmaceutical may terminate the Chugai Agreement,
in whole or in part, without cause, by providing us 90 days prior written notice. Following such termination, we would maintain exclusive
access to Chugai Materials, subject to the termination clauses outlined below. We may terminate the Chugai Agreement, in whole only, by
providing Chugai Pharmaceutical 90 days prior written notice if (i) we decide to discontinue the New Product development; (ii) we decide
that the FDA’s requirements for the New Product are not likely to be met; or (iii) the FDA identifies a safety issue regarding the
New Product.
In addition, either party
may terminate the Chugai Agreement, in whole or in part, in the event that the other party materially breaches the Chugai Agreement and
fails to cure the breach within 30 days of written notice. Either party may terminate the Chugai Agreement in its entirety immediately
upon notice to the other party if such other party: (i) is dissolved or liquidated or takes any corporate action for such purpose; (ii)
becomes insolvent or is generally unable to pay, or fails to pay, its debts as they become due; (iii) files or has filed against it a
petition for voluntary or involuntary bankruptcy or otherwise becomes subject to any proceeding under any domestic or foreign bankruptcy
or insolvency laws; (iv) makes or seeks to make a general assignment for the benefit of creditors; or (v) applies for or has a receiver,
trustee, custodian or similar agent appointed by order of any court to take charge of or sell any material portion of its property or
business.
In the event that we undergo
a change of control, Chugai Pharmaceutical may terminate the Chugai Agreement upon 90 days written notice to us, absent a written pledge
by the new controlling party of its agreement to fulfill and undertake all obligations of ours and to be bound by the Chugai Agreement.
Sponsored Research and License Agreement
On November 28, 2018, we
entered into a sponsored research and license agreement, or the Research Agreement with The University of Iowa, or the University, pursuant
to which the University will provide access to certain program data related to Chugai Pharmaceutical’s OK-432 and will assist us
in conducting certain clinical studies. As consideration for the University’s performance under the Research Agreement, we will
pay the University $30,000 per year in funding for the project, taking into consideration the time spent by University employees required
for the Project. The parties also agree to discuss in good faith potential additional funding required for completion of the project pursuant
to the Research Agreement as applicable and necessary. In addition, within 45 days of approval of the TARA-002 BLA by the FDA, we will
pay a one-time approval milestone to the University, the amount of which depends on the usefulness of the program data in TARA-002’s
BLA filing, and the milestone amount will range from $0 to $1 million. We will also be responsible for certain tiered royalties on annual
net sales of products for the indication, which royalty rates are in the low single digit percentages. These royalty rates are also subject
to a reduction in the event that regulatory authorities determine that the program data is not sufficient for regulatory approval on its
own and additional pediatric efficacy and safety clinical studies are required. In the event that the annual net sales surpass certain
dollar amount thresholds, we will need to make certain additional milestone payments following the close of the calendar quarter in which
each milestone is reached, with the payments ranging from $62,500 to $125,000.
We may terminate the Research
Agreement upon 30 days prior written notice to the University. Either party may terminate the project under the Research Agreement and
all commitments and obligations with respect thereto upon 30 days prior written notice to the other party. In the event of any termination
of the project under the Research Agreement by the University, (a) the University agrees to complete certain phases of the project and
(b) we will continue to provide annual funding until the completion of the second phase of the project. Upon termination of the project
by us, the Agreement will terminate and we will reassign to the University the IND.
Choline License Agreement
On September 27, 2017, we entered into a choline license agreement,
or the Choline Agreement, with Alan L. Buchman, M.D., pursuant to which Dr. Buchman granted us an exclusive, worldwide, non-transferable
license in and to certain licensed orphan designations, a certain licensed IND, certain existing study data and to certain licensed know-how
to develop, make, use, sell, offer for sale and import the licensed product during the term of the Choline Agreement. We are solely responsible
for all fees and expenses related to the undertaking of the Choline Agreement, including all due diligence obligations, regulatory authority
fees, attorney fees and consulting fees. During the term of the Choline Agreement, Dr. Buchman may not work with any third parties on
any product competing with the licensed product. In consideration for the rights and licenses granted under the Agreement, we made an
initial upfront payment of $50,000 payable to Dr. Buchman.
Certain milestone and royalty
payments may also be payable to Dr. Buchman. Pursuant to the Choline Agreement, we paid Dr. Buchman $50,000 in October 2019 because we
had not received at least $5 million in working capital from any source or in any manner as of October 15, 2019. Also, we paid Dr. Buchman
an additional $550,000 milestone upon the closing of the Private Placements (as defined herein) following the consummation of the Merger
(as defined herein) following our receipt of at least $5 million in working capital.
Regardless of whether development
or commercialization is undertaken by us under the Choline Agreement, commencing on November 21, 2022 and during the term of the Choline
Agreement, we shall pay Dr. Buchman a minimum annual royalty that ranges between $25,000 and $75,000.
We owe Dr. Buchman sales
royalties based on aggregate net sales of IV Choline Chloride in each calendar quarter, with the royalty rates ranging from 5.0% to 10.5%
based on the amount of net sales. In the event of development or commercialization activity by any sublicensees, we also agreed to pay
Dr. Buchman a royalty in the mid-single digit percentage of (i) net cash receipts after payment of taxes received by us from sublicensees
for their sales of licensed products and (ii) any other consideration received by us from such sublicensees; in each case, including a
fair monetary value for any transaction that is not a bona fide arms-length transaction or that is for consideration other than monetary.
Further, in the event of a sale or transfer of a priority review voucher regarding the license product, regardless of whether any development
or commercialization activity is undertaken by us or our sublicensees, we agreed to pay Dr. Buchman a milestone payment representing the
mid-single digit percentage of (i) net cash receipts after payment of taxes and (ii) any other consideration; in each case, received by
us, our affiliates, or our sublicensees, including a fair monetary value for any transaction that is not a bona fide arms-length transaction
or that is for consideration other than monetary.
We shall also pay Dr. Buchman
up to an aggregate of up to $775,000 in additional milestone payments upon the achievement of various regulatory approval milestones.
The Choline Agreement will
remain in full force and effect until the last sale of the licensed product under the Choline Agreement. After we received the FDA’s
written minutes regarding its initial FDA meeting concerning the development of the first licensed product for one or more of the licensed
indications, we paid an additional payment of $100,000 to Dr. Buchman and elected not terminate the Choline Agreement. The Choline Agreement
may be terminated by Dr. Buchman if, following regulatory approval of a licensed product, we have not made our first sale of a licensed
product within such country within a specified time period. We may terminate the Choline Agreement for convenience upon 90 days’
prior written notice to Dr. Buchman. Dr. Buchman may terminate the Choline Agreement for non-payment of any payment due that has not been
cured. Either party may terminate the Choline Agreement if the other party is in material breach and has not cured such breach within
60 days’ notice. In addition, Dr. Buchman may terminate the Choline Agreement upon 60 days’ prior written notice if (a) we
cease or threaten to cease to carry on our business; (b) a petition or resolution for the making of an administration order or for the
bankruptcy, winding-up or dissolution of us is presented or passed; (c) we file a voluntary petition in bankruptcy or insolvency; (d)
a receiver or administrator takes possession of our assets or (e) any similar procedure is commenced against us in the United States.
License Agreement
On December 22, 2017, we entered into a license agreement, or the License
Agreement with The Feinstein Institute for Medical Research, a not-for-profit corporation organized and existing under the laws of New
York, or the Institute. The Institute owns, by assignment, a U.S. patent related to the treatment of fatty liver disease in humans. Pursuant
to the License Agreement, the Institute granted us an exclusive, worldwide license, with the right to grant sublicenses to non-affiliate
third parties, to develop, make, have made, use, sell, offer for sale and import certain products for use in the field of fatty liver
disease in humans receiving total parenteral nutrition, by administering, as monotherapy, a pharmaceutical composition comprising intravenous
choline, wherein the fatty liver disease is selected from IFALD, non-alcoholic fatty liver, non-alcoholic steatohepatitis, or NASH, NASH-associated
liver fibrosis, or non-alcoholic cirrhosis. Notwithstanding the exclusive rights granted to us, the Institute shall retain the right to
make, use and practice such patents in its own laboratories solely for non-commercial scientific purposes and for continued non-commercial
research.
As consideration for the
license grant, we agreed to pay the Institute tiered royalties of between 1.0% and 1.5% of all net sales. In addition, we agreed to pay
the Institute a low double digit percentage of net proceeds resulting from agreements entered into within two years from the effective
date of the License Agreement and a mid-single digit percentage of net proceeds resulting from agreements entered into thereafter. We
also agreed to make certain license maintenance payments of $15,000 beginning on the second anniversary of the effective date of the License
Agreement and continuing upon every anniversary thereafter until the first commercial sale of a licensed product. Beginning on the first
anniversary of the effective date of the License Agreement after the first commercial sale of a licensed product and every anniversary
of the effective date of the License Agreement thereafter, we shall pay the Institute $30,000 as a license maintenance fee. Such license
maintenance fees are non-refundable but are creditable against future royalty payments due to the Institute during the 12-month period
following each such anniversary.
We agreed to make certain
one-time milestone payments in the aggregate amount of $375,000 upon the achievement of certain regulatory approval milestones, of which
$100,000 was paid on January 28, 2020 upon us having consummated the Private Placements.
Unless terminated earlier,
the License Agreement will expire upon the expiration of the last to expire patent under the License Agreement. We may terminate the License
Agreement by giving the Institute 60 days prior notice. Either party may terminate the License Agreement in the event of a default or
breach by the other party that has not been cured within 60 days of such notice. If we (i) make an assignment for the benefit of creditors
or if proceedings for a voluntary bankruptcy are instituted on behalf of us; (ii) is declared bankrupt or insolvent or (iii) is convicted
of a felony relating to the manufacture, use or sale of the licensed products or a felony relating to moral turpitude, the Institute may
terminate the License Agreement.
Intellectual Property
Our intellectual property
is critical to our business and we strive to protect it, including by obtaining and maintaining patent protection in the U.S. and internationally
for our product candidates, novel biological discoveries, epitopes, new therapeutic approaches and potential indications, and other inventions
that are important to our business. Throughout the development of our product candidates, we will seek to identify additional means of
obtaining patent protection that would potentially enhance commercial success. We also rely upon
trade secrets, know-how, continuing technological innovation and in-licensing opportunities to develop and maintain our proprietary position.
The patent positions of biotechnology
companies like us are generally uncertain and involve complex legal, scientific and factual questions. We recognize that the ability to
obtain patent protection and the degree of such protection depends on a number of factors, including the extent of the prior art, the
novelty and non-obviousness of the invention, and the ability to satisfy the enablement requirement of the patent laws. In addition, the
coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be reinterpreted
after issuance. Consequently, we may not obtain or maintain adequate patent protection for any of our product candidates. Any patents
that we hold may be challenged, circumvented or invalidated by third parties.
Our commercial success will also depend in part on not infringing the
proprietary rights of third parties. In addition, we have licensed rights under proprietary technologies of third parties to develop,
manufacture and commercialize specific aspects of our products and services. It is uncertain whether the issuance of any third-party patent
would require us to alter our development or commercial strategies, alter our processes, obtain licenses or cease certain activities.
The expiration of patents or patent applications licensed from third parties or our breach of any license agreements or failure to obtain
a license to proprietary rights that it may require to develop or commercialize our future technology may have a material adverse impact
on it. If third parties prepare and file patent applications in the United States that also claim technology to which we have rights,
we may have to participate in interference proceedings in the United States Patent and Trademark Office, or the USPTO, to determine priority
of invention. For a more comprehensive discussion of the risks related to our intellectual property, please see “Risk Factors—Risks
Related to Our Intellectual Property.”
TARA-002:
TARA-002 is a genetically
distinct Su strain of Streptococcus pyogenes (group A, type 3). TARA-002 is produced through a proprietary manufacturing process.
We believe a significant barrier to entry exists, as we believe only Chugai Pharmaceutical and we have the specific strain and possess
the know-how to manufacture the product. We anticipate that, if approved by the FDA, TARA-002 will be protected by 12 years of biologic
exclusivity.
IV Choline Chloride:
With respect to IV Choline
Chloride, we have acquired an exclusive, worldwide license to U.S. Patent 8,865,641 B2 from the Feinstein Institute for Medical Research
providing protection in the United States until 2035. The patent applies to a method of treating a fatty liver disease in a subject. In
particular, the method comprises administering to the subject an effective amount of a cholinergic pathway stimulating agent, wherein
the fatty liver disease is selected from non-alcoholic fatty liver, alcoholic fatty liver, NASH, alcoholic steatohepatitis, or ASH, NASH-associated
liver fibrosis, ASH-associated liver fibrosis, non-alcoholic cirrhosis and alcoholic cirrhosis.
The term of individual patents
depends upon the legal term of the patents in the countries in which they are obtained. In most countries in which we may file, the patent
term is 20 years from the earliest date of filing a non-provisional patent application related to the patent. A U.S. patent also may be
accorded a patent term adjustment under certain circumstances to compensate for delays in obtaining the patent from the USPTO. In some
instances, such a patent term adjustment may result in a U.S. patent term extending beyond 20 years from the earliest date of filing a
non-provisional patent application related to the U.S. patent. In addition, in the United States, the term of a U.S. patent that covers
an FDA-approved drug may also be eligible for patent term extension, which permits patent term restoration as compensation for the patent
term lost during the FDA regulatory review process. The Hatch-Waxman Act permits a patent term extension of up to five years beyond the
expiration of the patent. The length of the patent term extension is related to the length of time the drug is under regulatory review.
Patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval and only
one patent applicable to an approved drug may be extended. Similar provisions are available in Europe and other foreign jurisdictions
to extend the term of a patent that covers an approved drug. In the future, if and when our products receive FDA approval, we expect to
apply for patent term extensions on patents covering certain of those products, when applicable.
We also rely on trade secrets
relating to product candidates and seek to protect and maintain the confidentiality of proprietary information to protect aspects of our
business that are not amenable to, or that we do not consider appropriate for, patent protection. Although we take steps to protect our
proprietary information and trade secrets, including through contractual means with our employees and consultants, third parties may independently
develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets, including through
breaches of such agreements with our employees and consultants. Thus, we may not be able to meaningfully protect our trade secrets. It
is our policy to require our employees, consultants, outside scientific partners, sponsored researchers and other advisors to execute
confidentiality agreements upon the commencement of employment or consulting relationships with us. These agreements provide that all
confidential information concerning our business or financial affairs developed or made known to the individual during the course of the
individual’s relationship with us is to be kept confidential and not disclosed to third parties except in specific circumstances.
Our agreements with employees also provide that all inventions conceived by the employee in the course of employment with us or from the
employee’s use of our confidential information are our exclusive property.
Manufacturing
We rely on CDMOs to produce
our drug candidates in accordance with cGMP as well as regulations for use in clinical trials and for commercial product. The manufacture
of pharmaceuticals is subject to extensive cGMP regulations, which impose various procedural and documentation requirements and govern
all areas of record keeping, production processes and controls, personnel and quality control.
The CDMOs that we partner
with have the capability to produce clinical supply required for clinical trials, as well as support commercial scale up activities for
both products.
We plan to manufacture TARA-002
using an equivalent, but modernized, proprietary manufacturing process as is used to produce OK-432 by Chugai Pharmaceutical, starting
with a master cell line propagated by us but utilizing the same genetically distinct strain of Streptococcus pyogenes (A group,
type 3) Su strain as OK-432. We have contracted a CDMO to manufacture TARA-002.
We expect that both TARA-002 and IV Choline Chloride will be manufactured
in the United States. The starting materials for TARA-002 were provided to us pursuant to an agreement with Chugai Pharmaceutical. The
regulatory starting materials for IV Choline Chloride are available commercially.
Sales and Marketing
We plan to become a fully-integrated
biopharmaceutical company pursuing our mission of supporting and improving the lives of patients suffering from cancer and rare diseases.
If approved by the FDA, we plan to commercialize both of our current
product candidates in the United States first and then in other geographies. As we advance TARA-002 and IV Choline Chloride through our
respective clinical development programs, we plan to grow our commercial organization in support of anticipated product launches.
Competition
The process for commercialization
of new drugs is very competitive, and we could potentially face worldwide competition from other pharmaceutical companies, biotechnology
companies and ultimately generic or biosimilar products. Our potential competitors may develop or market therapies that are more clinically
effective, safer or less expensive than any therapeutic products we develop. Numerous companies are engaged in the development, patenting,
manufacturing and marketing of healthcare products competitive with those that we are developing.
With respect to our lead
product candidate, TARA-002, for the treatment of NMIBC and LMs, 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, based on the prevalence of
the disease, 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 Vaccines Division.
There are no approved pharmacotherapies
currently available for the treatment of LMs and the current treatment options include a high-risk surgical procedure and off-label use
of sclerosants, including doxycycline, bleomycin, ethanol and sodium tetradecyl sulfate. There are a number of drug development companies
and academic researchers exploring oral formulations of various agents for the treatment of LMs 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. For example, the current standard of care for NMIBC includes intravesical BCG. Other products approved for the treatment of NMIBC
include Merck & Co., Inc.’s Keytruda and Endo International plc’s Valstar. Additional product candidates in development
include Japanese BCG Laboratory’s BCG Tokyo, Pfizer Inc.’s sasanlimab in combination with BCG, ImmunityBio, Inc.’s anktiva
in combination with BCG, CG Oncology Inc.’s CG0070, FerGene’s instiladrin, Sesen Bio, Inc.’s vicineum, and enGene Inc.’s,
EG-70. Additional pharmaceutical and biotechnology companies with product candidates in development for the treatment of NMIBC include
AstraZeneca PLC, Bristol-Myers Squibb Company, Roche Group and Seagen Inc.
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.
Government Regulation and Product Approval
The FDA and other regulatory
authorities at federal, state, and local levels, as well as in foreign countries, extensively regulate, among other things, the research,
development, testing, manufacture, quality control, import, export, safety, effectiveness, labeling, packaging, storage, distribution,
record keeping, approval, advertising, promotion, marketing, post-approval monitoring, and post-approval reporting of drugs and biologics
such as those we are developing. We, along with third-party contractors, will be required to navigate the various preclinical, clinical
and commercial approval requirements of the governing regulatory agencies of the countries in which we wish to conduct studies or seek
approval or licensure of our product candidates.
In the United States, the FDA regulates drugs under the Federal Food,
Drug and Cosmetic Act, or FDCA and biologics additionally under the Public Health Services Act, or PHSA, as well as their respective implementing
regulations. The process required by the FDA before biopharmaceutical product candidates may be marketed in the United States generally
involves the following:
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completion of preclinical laboratory tests and animal studies performed in accordance with the FDA’s current Good Laboratory Practices, or cGLP regulations; |
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submission to the FDA of an IND, which must become effective before clinical trials may begin and must be updated annually or when significant changes are made; |
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approval by an independent Institutional Review Board, or IRB, or ethics
committee at each clinical site before the trial is commenced; |
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performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of a product candidate and the safety, purity and potency of the proposed biologic product candidate for its intended purpose; |
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preparation of and submission to the FDA of an NDA or BLA after completion of all pivotal clinical trials that includes substantial evidence of safety, purity and potency or efficacy from results of nonclinical testing and clinical trials; |
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a determination by the FDA within 60 days of its receipt of an NDA or BLA to accept the application for review; |
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satisfactory completion of an FDA Advisory Committee review, if applicable; |
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satisfactory completion of an FDA pre-approval inspection of the manufacturing
facility or facilities at which the proposed product is produced to assess compliance with cGMP, and of selected clinical investigation
sites to assess compliance with current Good Clinical Practices, or cGCP; and |
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FDA review and approval, or licensure, of the NDA or BLA to permit commercial marketing of the product for particular indications for use in the United States. |
Preclinical and Clinical Development
Prior to beginning the first
clinical trial with a product candidate, we must submit an IND to the FDA. An IND is a request for authorization from the FDA to administer
an investigational new drug product to humans. The central focus of an IND submission is on the general investigational plan and the protocol(s)
for clinical trials. The IND also includes results of animal and in vitro studies assessing the toxicology, pharmacokinetics, pharmacology,
and pharmacodynamic characteristics of the product candidate; chemistry, manufacturing, and controls information; and any available human
data or literature to support the use of the investigational product. An IND must become effective before human clinical trials may begin.
The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises safety
concerns or questions about the proposed clinical trial. In such a case, the IND may be placed on clinical hold and the IND sponsor and
the FDA must resolve any outstanding concerns or questions before the clinical trial can begin. Submission of an IND therefore may or
may not result in FDA authorization to begin a clinical trial.
Clinical trials involve the
administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with GCPs,
which include the requirement that all research subjects provide their informed consent for their participation in any clinical trial.
Clinical trials are conducted under protocols detailing, among other things, the objectives of the trial, the parameters to be used in
monitoring safety and the effectiveness criteria to be evaluated. A separate submission to the existing IND must be made for each successive
clinical trial conducted during product development and for any subsequent protocol amendments. Furthermore, an independent IRB for each
site proposing to conduct the clinical trial must review and approve the plan for any clinical trial and its informed consent form before
the clinical trial begins at that site, and must monitor the trial until completed. Regulatory authorities, the IRB or the sponsor may
suspend a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health
risk or that the trial is unlikely to meet its stated objectives. Some studies also include oversight by an independent group of qualified
experts organized by the clinical trial sponsor, known as a data safety monitoring board, which provides authorization for whether or
not a trial may move forward at designated check points based on access to certain data from the trial and may halt the clinical trial
if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy. There
are also requirements governing the reporting of ongoing clinical trials and clinical trial results to public registries.
Human clinical trials are
typically conducted in three sequential phases that may overlap.
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Phase 1—The investigational product is initially introduced into healthy human subjects or patients with the target disease or condition. These trials are designed to test the safety, dosage tolerance, absorption, metabolism, distribution and elimination of the investigational product in humans, the side effects associated with increasing doses, and, if possible, to gain early evidence on effectiveness. |
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Phase 2—The investigational product is administered to a limited patient population with a specified disease or condition to evaluate the preliminary efficacy, optimal dosages and dosing schedule and to identify possible adverse side effects and safety risks. Multiple Phase 2 clinical trials may be conducted to obtain information prior to beginning larger and more expensive Phase 3 clinical trials. |
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Phase 3—The investigational product is administered to an expanded patient population to further evaluate dosage, to provide statistically significant evidence of clinical efficacy and to further test for safety, generally at multiple geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk/benefit ratio of the investigational product and to provide an adequate basis for product approval. |
In some cases, the FDA may
require, or companies may voluntarily pursue, additional clinical trials after a product is approved to gain more information about the
product. These so- called Phase 4 trials may be made a condition to approval of the NDA or BLA. Concurrent with clinical trials, companies
may complete additional animal studies and develop additional information about the biological characteristics of the product candidate,
and must finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing
process must be capable of consistently producing quality batches of the product candidate and, among other things, must develop methods
for testing the identity, strength, quality and purity of the final product, or for biologics, the safety, purity and potency. Additionally,
appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the product candidate does
not undergo unacceptable deterioration over its shelf life.
Application Submission, Review and Approval
Assuming successful completion
of all required testing in accordance with all applicable regulatory requirements, the results of product development, nonclinical studies
and clinical trials are submitted to the FDA as part of an NDA or BLA requesting approval to market the product for one or more indications.
The NDA or BLA must include all relevant data available from pertinent preclinical and clinical trials, including negative or ambiguous
results as well as positive findings, together with detailed information relating to the product’s chemistry, manufacturing, controls,
and proposed labeling, among other things. The submission of an NDA or BLA requires payment of a substantial application user fee to FDA,
unless a waiver or exemption applies.
Once an NDA or BLA has been
submitted, the FDA’s goal is to review standard applications within ten months after it accepts the application for filing, or,
if the application qualifies for priority review, six months after the FDA accepts the application for filing. In both standard and priority
reviews, the review process is often significantly extended by FDA requests for additional information or clarification. The FDA reviews
the application to determine, among other things, whether a product is safe, pure and potent and the facility in which it is manufactured,
processed, packed, or held meets standards designed to assure the product’s continued safety, purity and potency. The FDA may convene
an advisory committee to provide clinical insight on application review questions. Before approving an NDA or BLA, the FDA will typically
inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that
the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the
product within required specifications. Additionally, before approving an NDA or BLA, the FDA will typically inspect one or more clinical
sites to assure compliance with GCP. If the FDA determines that the application, manufacturing process or manufacturing facilities are
not acceptable, it will outline the deficiencies in the submission and often will request additional testing or information. Notwithstanding
the submission of any requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory
criteria for approval.
The FDA may issue an approval
letter or a Complete Response letter. An approval letter authorizes commercial marketing of the product with specific prescribing information
for specific indications. A Complete Response letter will describe all of the deficiencies that the FDA has identified in the NDA or BLA.
In issuing the Complete Response letter, the FDA may recommend actions that the applicant might take to place the application in condition
for approval, including requests for additional information or clarification. The FDA may delay or refuse approval of an application if
applicable regulatory criteria are not satisfied, require additional testing or information and/or require post-marketing testing and
surveillance to monitor safety or efficacy of a product.
If regulatory approval of a product is granted, such approval will
be granted for particular indications and may entail limitations on the indicated uses for which such product may be marketed. For example,
the FDA may impose a Risk Evaluation and Mitigation Strategy, or REMS, to ensure the benefits of the product outweigh its risks. A REMS
is a safety strategy to manage a known or potential serious risk associated with a product and to enable patients to have continued access
to such medicines by managing their safe use, and could include medication guides, physician communication plans, or elements to assure
safe use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDA also may condition approval
on, among other things, changes to proposed labeling or the development of adequate controls and specifications. Once approved, the FDA
may withdraw the product approval if compliance with pre- and post-marketing requirements is not maintained or if problems occur after
the product reaches the marketplace. The FDA may require one or more Phase 4 post-market trials and surveillance to further assess and
monitor the product’s safety and effectiveness after commercialization, and may limit further marketing of the product based on
the results of these post-marketing trials.
Orphan Drug Designation
Under the Orphan Drug Act,
the FDA may grant orphan designation to a drug or biologic intended to treat a rare disease or condition, which is a disease or condition
that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States for which there
is no reasonable expectation that the cost of developing and making available in the United States a drug or biologic for this type of
disease or condition will be recovered from sales in the United States for that drug or biologic. Orphan designation must be requested
before submitting an NDA or BLA. After the FDA grants orphan designation, the generic identity of the therapeutic agent and its potential
orphan use are disclosed publicly by the FDA. The orphan drug designation does not convey any advantage in, or shorten the duration of,
the regulatory review or approval process.
If a product that has orphan
designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to
orphan exclusivity, which means that the FDA may not approve any other applications, including a full NDA or BLA, to market the same product
for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with
orphan drug exclusivity. Orphan exclusivity does not prevent FDA from approving a different drug or biologic for the same disease or condition,
or the same drug or biologic for a different disease or condition. Among the other benefits of orphan drug designation are tax credits
for certain research and a waiver of the BLA application fee.
A designated orphan product
may not receive orphan exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation.
In addition, exclusive marketing rights in the United States may be lost if the FDA later determines that the request for designation
was materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients
with the rare disease or condition.
The FDA incentivizes the
development of drugs and biologics that meet the definition of a “rare pediatric disease” defined to mean a serious or life-threatening
disease in which the serious of life-threatening manifestations primarily affect individuals aged from birth to 18 years and the disease
affects fewer than 200,000 individuals in the United States or affects 200,000 or more in the United States and for which there is no
reasonable expectation that the cost of developing and making in the United States a drug for such disease or condition will be received
from sales in the United States of such drug. The sponsor of a product candidate for a rare pediatric disease may be eligible for a voucher
that can be used to obtain a priority review for a subsequent human drug or biologic application after the date of approval of the rare
pediatric disease drug product, referred to as a priority review voucher, or PRV. A rare pediatric disease designation does not guarantee
that a sponsor will receive a PRV upon approval of its NDA or BLA. If a PRV is received, it may be sold or transferred an unlimited number
of times. Congress has extended the PRV program until September 30, 2024, with the potential for PRVs to be granted until September
30, 2026.
Post-Approval Requirements
Any products manufactured
or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things,
requirements relating to quality control and quality assurance, record-keeping, reporting of adverse experiences, periodic reporting,
product sampling and distribution, and advertising and promotion of the product. After approval, most changes to the approved product,
such as adding new indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing user
fee requirements, under which FDA assesses an annual program fee for each product identified in an approved NDA or BLA. Biopharmaceutical
manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies, and are
subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP, which impose certain procedural
and documentation requirements upon sponsors and their third-party manufacturers. Changes to the manufacturing process are strictly regulated,
and, depending on the significance of the change, may require prior FDA approval before being implemented. FDA regulations also require
investigation and correction of any deviations from cGMP and impose reporting requirements upon sponsor and third-party manufacturers.
Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance
with cGMP and other aspects of regulatory compliance.
The FDA may withdraw approval
if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market.
Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with
manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new
safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution restrictions
or other restrictions under a REMS program. Other potential consequences include, among other things:
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restrictions on the marketing or manufacturing of a product, mandated modification of promotional materials or issuance of corrective information, issuance by FDA or other regulatory authorities of safety alerts, Dear Healthcare Provider letters, press releases or other communications containing warnings or other safety information about the product, or complete withdrawal of the product from the market or product recalls; |
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fines, warning or untitled letters or holds on post-approval clinical trials; |
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refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of existing product approvals; |
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product seizure or detention, or refusal of the FDA to permit the import or export of products; or |
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injunctions, consent decrees or the imposition of civil or criminal penalties. |
The FDA closely regulates
the marketing, labeling, advertising and promotion of biopharmaceuticals. A company can make only those claims relating to safety and
efficacy, purity and potency of a biopharmaceutical that are approved by the FDA and in accordance with the provisions of the approved
label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. Failure to comply
with these requirements can result in, among other things, adverse publicity, warning letters, corrective advertising and potential civil
and criminal penalties. Physicians may prescribe legally available products for uses that are not described in the product’s labeling
and that differ from those approved by the FDA. Such off-label uses are common across medical specialties. Physicians may believe that
such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians
in their choice of treatments. The FDA does, however, restrict manufacturer’s communications on the subject of off-label use of
their products.
Biosimilars and Reference Product Exclusivity
The Patient Protection and Affordable Care Act, as amended by the Health
Care and Education Reconciliation Act, or ACA, signed into law in 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-approved reference biological product. To date, a number of biosimilars have been licensed under the BPCIA, and numerous biosimilars
have been approved in Europe. The FDA has issued several guidance documents outlining its approach to the review and approval of biosimilars.
Biosimilarity, which requires
that there be no clinically meaningful differences between the biological product and the reference product in terms of safety, purity,
and potency, can be shown through analytical studies, animal studies, and a clinical trial or trials. Interchangeability requires that
a product is biosimilar to the reference product and the product must demonstrate that it can be expected to produce the same clinical
results as the reference product in any given patient and, for products that are administered multiple times to an individual, the biologic
and the reference biologic may be alternated or switched after one has been previously administered without increasing safety risks or
risks of diminished efficacy relative to exclusive use of the reference biologic. Complexities associated with the larger, and often more
complex, structures of biological products, as well as the processes by which such products are manufactured, pose significant hurdles
to implementation of the abbreviated approval pathway that are still being worked out by the FDA.
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 that applicant’s own preclinical data
and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of its product. The BPCIA also
created certain exclusivity periods for biosimilars approved as interchangeable products. At this juncture, it is unclear whether products
deemed “interchangeable” by the FDA will, in fact, be readily substituted by pharmacies, which are governed by state pharmacy
law.
The BPCIA is complex and
continues to be interpreted and implemented by the FDA. In addition, recent government proposals have sought to reduce the 12-year reference
product exclusivity period. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the
subject of recent litigation. As a result, the ultimate impact, implementation, and impact of the BPCIA is subject to significant uncertainty.
Other U.S. Healthcare Laws and Compliance
Requirements
In the United States, our current and future operations are subject
to regulation by various federal, state and local authorities in addition to the FDA, including but not limited to, the Centers for Medicare
& Medicaid Services, or CMS, other divisions of the U.S. Department of Health and Human Services, or HHS, (such as the Office of Inspector
General, Office for Civil Rights and the Health Resources and Service Administration), the U.S. Department of Justice, or DOJ and individual
U.S. Attorney offices within the DOJ, and state and local governments. For example, our clinical research, sales, marketing and scientific/educational
grant programs will need to comply with the anti-fraud and abuse provisions of the Social Security Act, the false claims laws, the privacy
and security provisions of the Health Insurance Portability and Accountability Act, or HIPAA, and similar state laws, each as amended,
as applicable.
The federal Anti-Kickback
Statute prohibits, among other things, any person or entity, from knowingly and willfully offering, paying, soliciting or receiving any
remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for purchasing, leasing, ordering
or arranging for the purchase, lease or order of any item or service reimbursable, in whole or in part, under Medicare, Medicaid or other
federal healthcare programs. The term remuneration has been interpreted broadly to include anything of value. The Anti-Kickback Statute
has been interpreted to apply to arrangements between therapeutic product manufacturers on one hand and prescribers, purchasers, and formulary
managers on the other. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution.
The exceptions and safe harbors are drawn narrowly and practices that involve remuneration that may be alleged to be intended to induce
prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify for an exception or safe harbor. Failure to
meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se
illegal under the Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a
cumulative review of all of its facts and circumstances. Our practices may not in all cases meet all of the criteria for protection under
a statutory exception or regulatory safe harbor.
Additionally, the intent standard under the Anti-Kickback Statute was
amended by the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or
the Affordable Care Act, to a stricter standard such that a person or entity no longer needs to have actual knowledge of the statute or
specific intent to violate it in order to have committed a violation. In addition, the Affordable Care Act codified case law 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 False Claims Act, or the FCA (discussed below).
The federal false claims,
including the FCA, and civil monetary penalty laws, which imposes significant penalties and can be enforced by private citizens through
civil qui tam actions, prohibit any person or entity from, among other things, knowingly presenting, or causing to be presented, a false
or fraudulent claim for payment to, or approval by, the federal government, including federal healthcare programs, such as Medicare and
Medicaid, knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim to
the federal government, or knowingly making a false statement to improperly avoid, decrease or conceal an obligation to pay money to the
federal government. A claim includes “any request or demand” for money or property presented to the U.S. government. For instance,
historically, pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly providing free product
to customers with the expectation that the customers would bill federal programs for the product. Other companies have been prosecuted
for causing false claims to be submitted because of the companies’ marketing of the product for unapproved, off-label, and thus
generally non-reimbursable, uses.
HIPAA created additional
federal criminal statutes that prohibit, among other things, knowingly and willfully executing, or attempting to execute, a scheme to
defraud or to obtain, by means of false or fraudulent pretenses, representations or promises, any money or property owned by, or under
the control or custody of, any healthcare benefit program, including private third-party payors, willfully obstructing a criminal investigation
of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up by trick, scheme or device, a material fact
or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits,
items or services. Like the Anti-Kickback Statute, the Affordable Care Act amended the intent standard for certain healthcare fraud statutes
under HIPAA such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order
to have committed a violation.
Also, many states have similar,
and typically more prohibitive, fraud and abuse statutes or regulations that apply to items and services reimbursed under Medicaid and
other state programs, or, in several states, apply regardless of the payor.
We may be subject to data privacy and security regulations by both
the federal government and the states in which it conducts business. HIPAA, as amended by the Health Information Technology for Economic
and Clinical Health Act, or HITECH, and its implementing regulations, imposes requirements on “covered entities,” including
certain healthcare providers, health plans, and healthcare clearinghouses, as well as their respective “business associates”
that create, receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity as well as
their covered subcontractors relating to the privacy, security and transmission of individually identifiable health information. Among
other things, HITECH makes HIPAA’s privacy and security standards directly applicable to business associates, independent contractors,
or agents of covered entities that receive or obtain protected health information in connection with providing a service on behalf of
a covered entity. HITECH also created four new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly
applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in
federal courts to enforce HIPAA and seek attorneys’ fees and costs associated with pursuing federal civil actions. In addition,
many state laws govern the privacy and security of health information in specified circumstances, many of which differ from each other
in significant ways, are often not pre-empted by HIPAA, and may have a more prohibitive effect than HIPAA, thus complicating compliance
efforts.
We may develop products that,
once approved, may be administered by a physician. Under currently applicable U.S. law, certain products not usually self-administered
(including injectable drugs) may be eligible for coverage under Medicare through Medicare Part B. Medicare Part B is part of original
Medicare, the federal health care program that provides health care benefits to the aged and disabled, and covers outpatient services
and supplies, including certain biopharmaceutical products, that are medically necessary to treat a beneficiary’s health condition.
As a condition of receiving Medicare Part B reimbursement for a manufacturer’s eligible drugs, the manufacturer is required to participate
in other government healthcare programs, including the Medicaid Drug Rebate Program and the 340B Drug Pricing Program. The Medicaid Drug
Rebate Program requires pharmaceutical manufacturers to enter into and have in effect a national rebate agreement with the Secretary of
HHS as a condition for states to receive federal matching funds for the manufacturer’s outpatient drugs furnished to Medicaid patients.
Under the 340B Drug Pricing Program, the manufacturer must extend discounts to entities that participate in the program.
In addition, many pharmaceutical manufacturers must calculate and report
certain price reporting metrics to the government, such as average sales price, or ASP, and best price. Penalties may apply in some cases
when such metrics are not submitted accurately and timely. Further, these prices for drugs may be reduced by mandatory discounts or rebates
required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs
from countries where they may be sold at lower prices than in the United States. It is difficult to predict how Medicare coverage and
reimbursement policies will be applied to our products in the future and coverage and reimbursement under different federal healthcare
programs are not always consistent. Medicare reimbursement rates may also reflect budgetary constraints placed on the Medicare program.
Additionally, the federal
Physician Payments Sunshine Act, or the Sunshine Act, within the Affordable Care Act, and its implementing regulations, require that certain
manufacturers of drugs, devices, biological and medical supplies for which payment is available under Medicare, Medicaid or the Children’s
Health Insurance Program (with certain exceptions) report annually to CMS information related to certain payments or other transfers of
value made or distributed to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), other healthcare
professionals (such as physicians assistants and nurse practitioners) and teaching hospitals, or to entities or individuals at the request
of, or designated on behalf of, the physicians and teaching hospitals and to report annually certain ownership and investment interests
held by physicians and their immediate family members. Failure to report accurately could result in penalties. In addition, many states
also govern the reporting of payments or other transfers of value, many of which differ from each other in significant ways, are often
not pre-empted, and may have a more prohibitive effect than the Sunshine Act, thus further complicating compliance efforts.
In order to distribute products
commercially, we must comply with state laws that require the registration of manufacturers and wholesale distributors of drug and biological
products in a state, including, in certain states, manufacturers and distributors who ship products into the state even if such manufacturers
or distributors have no place of business within the state. Some states also impose requirements on manufacturers and distributors to
establish the pedigree of product in the chain of distribution, including some states that require manufacturers and others to adopt new
technology capable of tracking and tracing product as it moves through the distribution chain. Several states and/or localities have enacted
legislation requiring pharmaceutical and biotechnology companies to establish marketing compliance programs, file periodic reports with
the state, make periodic public disclosures on sales, marketing, pricing, clinical trials and other activities, and/or register their
sales representatives, as well as to prohibit pharmacies and other healthcare entities from providing certain physician prescribing data
to pharmaceutical and biotechnology companies for use in sales and marketing, and to prohibit certain other sales and marketing practices.
All of our activities are potentially subject to federal and state consumer protection and unfair competition laws.
Ensuring business arrangements
with third parties comply with applicable healthcare laws and regulations is a costly endeavor. If our operations are found to be in violation
of any of the federal and state healthcare laws described above or any other current or future governmental regulations that apply to
it, it may be subject to penalties, including without limitation, significant civil, criminal and/or administrative penalties, damages,
fines, disgorgement, imprisonment, exclusion from participation in government programs, such as Medicare and Medicaid, injunctions, private
“qui tam” actions brought by individual whistleblowers in the name of the government, or refusal to allow it to enter into
government contracts, contractual damages, reputational harm, administrative burdens, diminished profits and future earnings, additional
reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations
of non-compliance with these laws, and the curtailment or restructuring of its operations, any of which could adversely affect our ability
to operate our business and our results of operations.
Coverage, Pricing and Reimbursement
Significant uncertainty exists
as to the coverage and reimbursement status of any product candidates for which we may obtain regulatory approval. In the United States
and in foreign markets, sales of any products for which we receive regulatory approval for commercial sale will depend, in part, on the
extent to which third-party payors provide coverage and establish adequate reimbursement levels for such products. In the United States,
third-party payors include federal and state healthcare programs, private managed care providers, health insurers and other organizations.
Adequate coverage and reimbursement from governmental healthcare programs, such as Medicare and Medicaid in the United States, and commercial
payors are critical to new product acceptance.
Our ability to commercialize
any products successfully also will depend in part on the extent to which coverage and reimbursement for these products and related treatments
will be available from government health administration authorities, private health insurers and other organizations. Government authorities
and other third-party payors, such as private health insurers and health maintenance organizations, decide which therapeutics they will
pay for and establish reimbursement levels. Coverage and reimbursement by a third-party payor may depend upon a number of factors, including
the third-party payor’s determination that use of a therapeutic is:
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a covered benefit under its health plan; |
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safe, effective and medically necessary; |
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appropriate for the specific patient; |
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neither experimental nor investigational. |
We cannot be sure that reimbursement
will be available for any product that it commercializes and, if coverage and reimbursement are available, what the level of reimbursement
will be. Coverage may also be more limited than the purposes for which the product is approved by the FDA or comparable foreign regulatory
authorities. Reimbursement may impact the demand for, or the price of, any product for which we obtain regulatory approval.
Third-party payors are increasingly
challenging the price, examining the medical necessity, and reviewing the cost-effectiveness of medical products, therapies and services,
in addition to questioning their safety and efficacy. Obtaining reimbursement for our products may be particularly difficult because of
the higher prices often associated with branded drugs and drugs administered under the supervision of a physician. We may need to conduct
expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of our products, in addition to
the costs required to obtain FDA approvals. Our product candidates may not be considered medically necessary or cost-effective. Obtaining
coverage and reimbursement approval of a product from a government or other third-party payor is a time-consuming and costly process that
could require us to provide to each payor supporting scientific, clinical and cost-effectiveness data for the use of our product on a
payor-by-payor basis, with no assurance that coverage and adequate reimbursement will be obtained. A payor’s decision to provide
coverage for a product does not imply that an adequate reimbursement rate will be approved. Further, one payor’s determination to
provide coverage for a product does not assure that other payors will also provide coverage for the product. Adequate third-party reimbursement
may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development.
If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize any product
candidate that it successfully develops.
Different pricing and reimbursement
schemes exist in other countries. In the European Union, governments influence the price of biopharmaceutical products through their pricing
and reimbursement rules and control of national health care systems that fund a large part of the cost of those products to consumers.
Some jurisdictions operate positive and negative list systems under which products may only be marketed once a reimbursement price has
been agreed. To obtain reimbursement or pricing approval, some of these countries may require the completion of clinical trials that compare
the cost effectiveness of a particular product candidate to currently available therapies. Other member states allow companies to fix
their own prices for medicines but monitor and control company profits. The downward pressure on health care costs has become intense.
As a result, increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross-border imports
from low-priced markets exert a commercial pressure on pricing within a country.
The marketability of any
product candidates for which we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail
to provide adequate coverage and reimbursement. In addition, emphasis on managed care, the increasing influence of health maintenance
organizations, and additional legislative changes in the United States has increased, and we expect will continue to increase, the pressure
on healthcare pricing. The downward pressure on the rise in healthcare costs in general, particularly prescription medicines, medical
devices and surgical procedures and other treatments, has become very intense. Coverage policies and third-party reimbursement rates may
change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory
approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
Healthcare Reform
In the United States and
some foreign jurisdictions, there have been, and continue to be, several legislative and regulatory changes and proposed changes regarding
the healthcare system that could prevent or delay marketing approval of product candidates, restrict or regulate post-approval activities,
and affect the ability to profitably sell product candidates for which marketing approval is obtained. Among policy makers and payors
in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of
containing healthcare costs, improving quality and/or expanding access. In the United States, the pharmaceutical industry has been a particular
focus of these efforts and has been significantly affected by major legislative initiatives.
For example, the Affordable
Care Act has substantially changed healthcare financing and delivery by both governmental and private insurers. Among the Affordable Care
Act provisions of importance to the pharmaceutical and biotechnology industries, in addition to those otherwise described above, are the
following:
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an annual, nondeductible fee on any entity that manufactures or imports certain specified branded prescription drugs and biologic agents apportioned among these entities according to their market share in some government healthcare programs; |
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an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13% of the average manufacturer price for most branded and generic drugs, respectively, and capped the total rebate amount for innovator drugs at 100% of the Average Manufacturer Price, or the AMP; |
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a new Medicare Part D coverage gap discount program, in which manufacturers must now agree to offer 70% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturers’ outpatient drugs to be covered under Medicare Part D; |
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an extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations; |
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an expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for individuals with income at or below 133% of the federal poverty level, thereby potentially increasing manufacturers’ Medicaid rebate liability; |
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an expansion of the entities eligible for discounts under the 340B Drug Discount Program; |
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a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; |
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an expansion of healthcare fraud and abuse laws, including the FCA and the Anti-Kickback Statute, new government investigative powers, and enhanced penalties for noncompliance; |
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a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted, or injected; |
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a requirement to report certain financial arrangements with physicians and teaching hospitals; |
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a requirement to annually report certain information regarding drug samples that manufacturers and distributors provide to physicians; |
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the establishment of a Center for Medicare and Medicaid Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending; and |
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a licensure framework for follow on biologic products. |
There remain legal and political
challenges to certain aspects of the Affordable Care Act. Since January 2017, the Trump administration signed several executive orders
and other directives designed to delay, circumvent, or loosen certain requirements mandated by the Affordable Care Act. In December 2017,
Congress repealed the tax penalty for an individual’s failure to maintain Affordable Care Act-mandated health insurance as part
of a tax reform bill. Further, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the Affordable Care
Act-mandated “Cadillac” tax on high-cost employer-sponsored health coverage and medical device tax and, effective January
1, 2021, also eliminated the health insurer tax 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 to initiate a special enrollment period for purposes of obtaining health insurance coverage
through the Affordable Care Act marketplace. The executive order also instructs certain governmental agencies to review and reconsider
their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects
and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance
coverage through Medicaid or the Affordable Care Act. It is possible that the Affordable Care Act will be subject to judicial or Congressional
challenges in the future. It is unclear how such challenges and the healthcare reform measures of the Biden administration will impact
the Affordable Care Act and our business.
We anticipate that the Affordable
Care Act, if substantially maintained in its current form, will continue to result in additional downward pressure on coverage and the
price that we receive for any approved product, and could seriously harm our business. Any reduction in reimbursement from Medicare and
other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures
or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our products. Such
reforms could have an adverse effect on anticipated revenue from product candidates that we may successfully develop and for which we
may obtain regulatory approval and may affect our overall financial condition and ability to develop product candidates.
Further legislation or regulation
could be passed that could harm our business, financial condition and results of operations. Other legislative changes have been proposed
and adopted since the Affordable Care Act was enacted. For example, in August 2011, President Obama signed into law the Budget Control
Act of 2011, which, among other things, created the Joint Select Committee on Deficit Reduction to recommend to Congress proposals in
spending reductions. The Joint Select Committee on Deficit Reduction did not achieve a targeted deficit reduction of at least $1.2 trillion
for fiscal years 2012 through 2021, triggering the legislation’s automatic reduction to several government programs. This includes
aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, which went into effect beginning on April 1, 2013
and will stay in effect through 2031 unless additional Congressional action is taken. However, COVID-19 pandemic relief legislation suspended
the 2% Medicare sequester from May 1, 2020 through March 31, 2021. Under current legislation, the actual reduction in Medicare payments
will vary from 1% in 2022 to up to 3% in the final fiscal year of this sequester. Additionally, on March 11, 2021, President Biden signed
the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s
average manufacturer price, for single source and innovator multiple source drugs, beginning January 1, 2024. In January 2013, the American
Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers,
including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government
to recover overpayments to providers from three to five years.
Additionally, there has been
increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices. Specifically, there
have been several recent U.S. Congressional inquiries and proposed federal legislation designed to, among other things, bring more transparency
to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient
programs, and reform government program reimbursement methodologies for drugs. 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 and guidance
implementing a portion of the importation executive order providing pathways for states to build and submit importation plans for drugs
from Canada. Further, on November 20, 2020, the Department of Health and Human Services, or HHS, 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, CMS issued an interim final
rule implementing former 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.
As a result of litigation challenging the MFN model, on August 10, 2021, CMS published a proposed rule that rescinded the MFN model interim
final rule. As a result of litigation challenging the MFN model, on December 27, 2021, CMS published a final rule that rescinded the Most
Favored Nation model interim final rule. In July 2021, the Biden administration released an executive order, “Promoting Competition
in the American Economy,” with multiple provisions aimed at prescription drugs. In response to Biden’s executive order, on
September 9, 2021, HHS released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform
and sets out a variety of potential legislative policies that Congress could pursue to advance these principles. No legislation or administrative
actions have been finalized to implement these principles. In addition, Congress is considering drug pricing as part of other reform initiatives.
Individual states in the United States have also become increasingly active in passing legislation and implementing regulations designed
to control biopharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain
product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other
countries and bulk purchasing. Further, it is possible that additional government action is taken in response to the COVID-19 pandemic.
The Foreign Corrupt Practices Act
The Foreign Corrupt Practices
Act, or the FCPA, prohibits any U.S. individual or business from paying, offering, or authorizing payment or offering of anything of value,
directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the
foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose
securities are listed in the United States to comply with accounting provisions requiring us to maintain books and records that accurately
and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system
of internal accounting controls for international operations.
Additional Regulation
In addition to the foregoing,
state and federal laws regarding environmental protection and hazardous substances, including the Occupational Safety and Health Act,
the Resource Conservancy and Recovery Act and the Toxic Substances Control Act, affect our business. These and other laws govern our use,
handling and disposal of various biological, chemical and radioactive substances used in, and wastes generated by, our operations. If
our operations result in contamination of the environment or expose individuals to hazardous substances, we could be liable for damages
and governmental fines. We believe that we are in material compliance with applicable environmental laws and that continued compliance
therewith will not have a material adverse effect on our business. We cannot predict, however, how changes in these laws may affect our
future operations.
Other Regulations
We are also subject to numerous
federal, state and local laws relating to such matters as safe working conditions, manufacturing practices, environmental protection,
fire hazard control, and disposal of hazardous or potentially hazardous substances. We may incur significant costs to comply with such
laws and regulations now or in the future.
Employees
As of December 31, 2021,
we had 32 employees, 31 of whom were full-time employees and one of whom was a contract employee. As of December 31, 2021, 14 of our employees
were engaged in research and development activities and 18 of our employees were engaged in business development, finance, market development,
information systems, facilities, human resources or administrative support. As of December 31, 2021, all of our employees were located
in the U.S. None of our United States employees are represented by any collective bargaining agreements. We believe that we maintain good
relations with our employees.
COVID-19
The ultimate impact of the
current COVID-19 pandemic is highly uncertain and subject to change. We have experienced delays and may experience additional future delays
that impact our business, our research and development activities, the healthcare systems in which we operate and the global economy as
a whole. We will continue to monitor the COVID-19 public health crisis closely including whether the effects would have a material impact
on our operations, liquidity and capital resources.
In response to the initial
outbreak of COVID-19 and the prevalence of new variants and additional waves of infections throughout the pandemic, we have from time
to time implemented work-from-home policies for our employees and at times have temporarily modified our operations to comply with applicable
safety recommendations. Similar health and safety measures have affected or may affect third parties with whom we do business, including
the third parties that we have contracted with to conduct studies for TARA-002, our study sites or other clinical partners, laboratories
through which we conduct non-clinical studies, our third-party manufacturers, and other parties
with whom we conduct business and regulatory agencies. The effects of these measures and our related adjustments to our business are likely
to negatively impact productivity, disrupt our business and delay our timelines, the magnitude of which will depend, in part, on the length
and severity of the pandemic and associated health and safety measures and other limitations on our ability to conduct our business in
the ordinary course.
Severe and/or long-term disruptions
in our operations as a result of COVID-19, including in response to the prevalence of new variants of the virus, additional waves of infections
and the associated health and safety measures, will negatively impact our business, operating results and financial condition. Specifically,
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 primarily due to the lack of resources at clinical trial sites and the resulting inability to timely enroll patients
in the trials. We also anticipate that the global impact of COVID-19 will negatively impact our ability to conduct non-clinical studies
due primarily to laboratory closures and limited availability of personnel. In addition, the potential economic impact brought by, and
the duration of, COVID-19 may be difficult to assess or predict, and it may limit our ability to access capital, which could in the future
negatively affect our liquidity. A recession or market correction resulting from the COVID-19 pandemic and related effects on the economy
such as supply chain disruptions and inflation risk could materially affect our business and the value of our common stock. See “—Risks
Related to Our Financial Condition” below.
Corporate Information
On January 9, 2020, Protara
Therapeutics, Inc. (formerly ArTara Therapeutics, Inc., formerly Proteon Therapeutics, Inc., or the Company or Protara), and privately-held
ArTara Subsidiary, Inc., or Private ArTara, completed the merger and reorganization, or the Merger, in accordance with the terms of the
Agreement and Plan of Merger and Reorganization, dated September 23, 2019, or the Merger Agreement, by and among the Company, Private
ArTara and REM 1 Acquisition, Inc., a wholly owned subsidiary of the Company, or Merger Sub, whereby Merger Sub merged with and into Private
ArTara, with Private ArTara surviving as a wholly owned subsidiary of the Company. The Merger was structured as a reverse merger and Private
ArTara was determined to be the accounting acquirer based on the terms of the Merger and other factors.
Refer to Note 3, Reverse
Merger with Protara and Recapitalization, to our financial statements appearing elsewhere in this Annual Report on Form 10-K
for additional information.
We were originally incorporated
in Delaware in March 2006, and at that time, acquired Proteon Therapeutics, LLC, the predecessor of Protara, which was formed in June
2001.
Our principal executive offices
are located at 345 Park Avenue South, 3rd Floor, New York, New York 10010, our telephone number is (646) 844-0337 and our website
address is www.protaratx.com. The contents of our website are not incorporated into this Annual Report on Form 10-K and our reference
to the URL for our website is intended to be an inactive textual reference only. The information contained on, or that can be accessed
through, our website is not a part of this document.
Unless the context requires
otherwise, references in this Annual Report on Form 10-K to “Protara”, “TARA”, “we”, “us”,
the “Company” and “our” refer to Protara Therapeutics, Inc. (formerly ArTara Therapeutics, Inc., formerly Proteon
Therapeutics, Inc.) and our subsidiaries.
Available Information
Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the
Securities Exchange Act of 1934, as amended, or the Exchange Act, will be made available free of charge on our website as soon as reasonably
practicable after we electronically file such material with, or furnish it to, the SEC.
Item
1A. Risk Factors.
You
should consider carefully the following information about the risks described below, together with the other information contained in
this Annual Report on Form 10-K 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 limited operating history and have never generated any revenues.
We
are an early-stage biopharmaceutical company with a 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 pandemic could materially and adversely impact our business, including our clinical development plans and non-clinical research.
As
the COVID-19 pandemic and associated health and safety 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:
| ● | interruption
of key manufacturing, research and clinical development and other activities, due to limitations
on work and travel imposed or recommended by federal or state governments, employers and
others (for example, following the emergence of the omicron variant of COVID-19 in late 2021,
we reinstituted a temporary work-from-home policy and scaled back in-person meetings and
business travel to industry conferences); |
| ● | delays
or difficulties in the enrollment, scheduling and retention of patients in our clinical trials; |
| ● | delays
or difficulties in clinical trial site operations, including in recruiting clinical site
investigators and clinical site staff and in key clinical trial activities such as clinical
trial site monitoring and inspections (for example, we have experienced delays in clinical
trial site activations as potential sites faced reduced staffing and resources following
the emergence of the omicron variant of COVID-19 in late 2021); |
| ● | redeployment
of healthcare resources, including clinical site investigators and clinical site staff supporting
the conduct of our clinical trial to assist in the treatment of COVID-19 patients; |
| ● | 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; |
| ● | 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; |
| ● | delays
or difficulties conducting and completing non-clinical studies due to limitations in employee
resources or laboratory closures or limited availability of laboratory personnel; |
| ● | difficulties
in raising additional capital needed to pursue the development of our programs due near-term
and/or long-term negative effects of the pandemic on the financial, banking and capital markets; |
| ● | changes
in federal, state and local regulations or guidance as part of a response to the COVID-19
pandemic which may require us to change the ways in which research, including clinical development,
is conducted, which may result in unexpected costs; and |
| ● | delays
in necessary interactions with regulators, institutional review boards, ethics committees
and other important agencies and contractors due to limitations in employee resources, travel
restrictions or forced furlough of government employees. |
The
COVID-19 pandemic continues to evolve, as new variants emerge and additional waves of infections occur. The extent to which the COVID-19
pandemic 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 pandemic, travel restrictions and social distancing and other
health and safety measures and mandates 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 emergence of new variants of the virus, the extent and effectiveness of preventative measures, containment actions
and treatments 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, the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, 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 global COVID-19 pandemic and related effects on the economy such as supply chain disruptions and inflation risk 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, because the COVID-19 pandemic has at times significantly disrupted financial markets, it 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 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 and Commercialization
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 operations 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:
| ● | the
alignment with the FDA on a development plan for TARA-002 in LMs; |
| ● | the
timely and successful completion of planned and ongoing preclinical studies and clinical
trials, including our Phase 1 clinical trial of TARA-002 in NMIBC, which may be significantly
slower or costlier than we currently anticipate and/or produce results that do not achieve
the endpoints of the trials; |
| ● | the
results of our prevalence study and our enhanced understanding of the PN patient population
as part of our IV Choline Chloride program; |
| ● | 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; |
| ● | 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; |
| ● | the
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; |
| ● | a
continued acceptable safety profile during clinical development and following approval of
TARA-002 and IV Choline Chloride; |
| ● | the
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); |
| ● | the
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; |
| ● | the
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; |
| ● | the
existence of a regulatory environment conducive to the successful development and commercialization
of TARA-002 and IV Choline Chloride; |
| ● | the
ability to price TARA-002 and IV Choline Chloride to recover our development costs and achieve
commercial success; and |
| ● | our
ability and our partners’ ability to establish and enforce intellectual property rights
in and to TARA-002 and IV Choline Chloride. |
If
any one of these factors is not present, many of which are beyond our control, we could experience significant delays or an inability
to obtain regulatory approval of, or commercialize, TARA-002 or IV Choline Chloride. Even if regulatory approvals are obtained, we may
never be able to successfully commercialize TARA-002 or IV Choline Chloride, or 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. Accordingly, we cannot assure you that we will be able to generate
sufficient revenue through the sale of TARA-002 or 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 pandemic 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 the COVID-19 pandemic 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 a 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 conducted
any clinical trials, or submitted a BLA 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 or IV Choline Chloride, which would adversely impact our financial performance.
TARA-002
is an immunopotentiator, and one indication that we plan to pursue is the treatment of LMs. There are no FDA-approved therapies for the
treatment of LMs. It is difficult to predict the timing and costs of clinical development for TARA-002 for LMs.
To date, there are no FDA-approved
therapies for the treatment of LMs. 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. In addition, our regulatory strategy for the
TARA-002 program has involved demonstrating comparability to the OK-432 originator therapy, which is not a product approved by the FDA
and, for the LMs indication, potentially relying in part on existing data from OK-432 including the data set generated in the University
of Iowa-led study. There is no example to date of which we are aware of a biologic product that was approved using this regulatory approach
and it may take considerable time to reach alignment with the FDA on the development plan of a trial in LMs 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. Any 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, in connection with 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:
| ● | patient
demand for approved products that treat the indication for which a product is approved; |
| ● | the
effectiveness of the product compared to other available therapies; |
| ● | the
availability of coverage and adequate reimbursement from managed care plans and other healthcare
payors; |
| ● | the
cost of treatment in relation to alternative treatments and willingness to pay on the part
of patients; |
| ● | in
the case of TARA-002 for LMs, overcoming physician or patient biases toward alternative treatments
for LMs; |
| ● | insurers’
willingness to see the applicable indication as a disease worth treating; |
| ● | patient
satisfaction with the results, administration and overall treatment experience; |
| ● | 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; |
| ● | any
FDA requirement to undertake a Risk Evaluation and Mitigation Strategy; |
| ● | the
effectiveness of our sales, marketing, pricing, reimbursement and access, government affairs,
and distribution efforts; |
| ● | adverse
publicity about a product or favorable publicity about competitive products; |
| ● | 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 |
| ● | potential
product liability claims or other product-related litigation. |
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., or Chugai, over which we have no control, has the rights to commercialize TARA-002 and the originator therapy
to TARA-002, OK-432, 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 SAEs 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, following our review of the research and preclinical and clinical data of Vonapanitase, we have determined to cease further
development of this product candidate at this time.
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.
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, uncertain and complex 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, biotechnology companies, generic
drug companies, consumer products 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, 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 NMIBC and LMs, 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, based
on the prevalence of the disease 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 Vaccines Division. There are no approved pharmacotherapies currently available for the treatment
of LMs and the current treatment options include a high-risk surgical procedure and off-label use of sclerosants, including doxycycline,
bleomycin, ethanol and sodium tetradecyl sulfate. 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. For example, the current standard of care for NMIBC includes intravesical BCG.
Other products approved for the treatment of NMIBC include Merck & Co., Inc.’s Keytruda and Endo International plc’s
Valstar. Additional product candidates in development include Japanese BCG Laboratory’s BCG Tokyo, Pfizer Inc.’s sasanlimab
in combination with BCG, ImmunityBio, Inc.’s anktiva in combination with BCG, CG Oncology Inc.’s CG0070, FerGene’s
instiladrin, Sesen Bio, Inc.’s vicineum, and enGene Inc.’s, EG-70. Additional pharmaceutical and biotechnology companies
with product candidates in development for the treatment of NMIBC include AstraZeneca PLC, Bristol-Myers Squibb Company, Roche Group
and Seagen Inc.
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
Biologics Price Competition and Innovation Act of 2009, or BPCIA, 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 cGCP, 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 record-keeping 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 cGCP and cGLP, requirements, which
are regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities. Regulatory authorities enforce these
cGCP and cGLP 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 cGCP and cGLP requirements, or reveal non-compliance from an audit or inspection, including
due to COVID-19 and related health and safety measures and business closures and disruptions, or
if the same prevents the FDA or comparable foreign regulatory authorities from conducting
inspections or other regulatory activities, 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 cGCP and cGLP 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 fail to comply with their contractual commitments or terminate their involvement in one of our
clinical trials for any reason, including due to COVID-19 and related health and safety measures
and business closures and disruptions, 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.
Interim,
topline and preliminary data from our clinical trials may change as more patient data become available, and are subject to audit and
verification procedures that could result in material changes in the final data.
From
time to time, we may publicly disclose preliminary, interim or topline data from our preclinical studies and clinical trials, which is
based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change as
patient enrollment and treatment continues and more patient data become available. Adverse differences between previous preliminary or
interim data and future interim or final data could significantly harm our business prospects. We may also announce topline data following
the completion of a preclinical study or clinical trial, which may be subject to change following a more comprehensive review of the
data related to the particular study or trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses
of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the interim, topline
or preliminary results that we report may differ from future results of the same studies, or different conclusions or considerations
may qualify such results, once additional data have been received and fully evaluated. Preliminary, interim, or topline data also remain
subject to audit and verification procedures that may result in the final data being materially different from the data we previously
published. As a result, preliminary, interim, and topline data should be viewed with caution until the final data are available.
Further,
others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses
or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability
or commercialization of the particular product candidate or product and our company in general. In addition, the information we choose
to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others
may not agree with what we determine to be material or otherwise appropriate information to include in our disclosure.
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 non-exclusive.
Pursuant
to an agreement with Chugai Pharmaceutical dated June 17, 2019, as amended on July 14, 2020 (effective as of 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 only through June 17, 2030 or, if earlier, 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
product candidates 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 cGCP requirements and cGLP 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 restrictions and requirements
imposed by laws and government regulators in those countries (for example, a prohibition on direct-to-consumer advertising that does
not exist in the United States).
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:
| ● | impose
restrictions on the sale, marketing or manufacturing of the product, amend, suspend or withdraw
product approvals or revoke necessary licenses; |
| ● | mandate
modifications to promotional and other product-specific materials or require us to provide
corrective information to healthcare practitioners or in our advertising; |
| ● | 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 non-compliance and, in extreme cases, require an independent compliance monitor to oversee
our activities; |
| ● | issue
warning letters, bring enforcement actions, initiate surprise inspections, issue show cause
notices or untitled letters describing alleged violations, which may be publicly available; |
| ● | commence
criminal investigations and prosecutions; |
| ● | impose
injunctions, suspensions or revocations of necessary approvals or other licenses; |
| ● | impose
other civil or criminal penalties; |
| ● | suspend
any ongoing clinical trials; |
| ● | place
restrictions on the kind of promotional activities that can be done; |
| ● | delay
or refuse to approve pending applications or supplements to approved applications filed by
us or our potential partners; |
| ● | refuse
to permit drugs or precursor chemicals to be imported or exported to or from the United States; |
| ● | suspend
or impose restrictions on operations, including costly new manufacturing requirements; or |
| ● | seize
or detain products or require us or our partners to initiate a product recall. |
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 ourself 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:
| ● | withdrawal
or delay of recruitment or decreased enrollment rates of clinical trial participants; |
| ● | termination
or increased government regulation of clinical trial sites or entire trial programs; |
| ● | the
inability to commercialize our product candidates; |
| ● | decreased
demand for our product candidates; |
| ● | impairment
of our business reputation; |
| ● | product
recall or withdrawal from the market or labeling, marketing or promotional restrictions; |
| ● | substantial
costs of any related litigation or similar disputes; |
| ● | distraction
of management’s attention and other resources from our primary business; |
| ● | significant
delay in product launch; |
| ● | substantial
monetary awards to patients or other claimants against us that may not be covered by insurance; |
| ● | withdrawal
of reimbursement or formulary inclusion; or |
We
have obtained 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 non-compliance 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 ourself 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, if approved.
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.
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 biosimilar or 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 from 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 that 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. In another 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 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. 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 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. It is unclear how such challenges and the healthcare reform measures of the Biden administration will impact
the Affordable Care Act and our business.
Additionally, there has been
increasing legislative and enforcement interest in the United States with respect to drug pricing practices. For example, the Trump administration
used several means to propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy
initiatives. For example, on July 24, 2020 and September 13, 2020, the Trump administration announced several executive orders related
to prescription drug pricing that attempted to implement several of the administration’s proposals. The FDA also released a final
rule and guidance implementing a portion of the importation executive order providing pathways for states to build and submit importation
plans for drugs from Canada. Further, on November 20, 2020, the Department of Health and Human Services, or HHS, 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, CMS
issued an interim final rule implementing former President Trump’s 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.
As a result of litigation challenging the MFN model, on August 10, 2021, CMS published a proposed rule that rescinded the MFN model interim
final rule. Further, in July 2021, the Biden administration released an executive order that included multiple provisions aimed at prescription
drugs. In response to Biden’s executive order, on September 9, 2021, HHS released a Comprehensive Plan for Addressing High Drug
Prices that outlines principles for drug pricing reform. The plan sets out a variety of potential legislative policies that Congress could
pursue as well as potential administrative actions HHS could take to advance these principles. No legislation or administrative actions
have been finalized to implement these principles. In addition, Congress is considering drug pricing as part of other reform initiatives.
We expect that additional state and federal healthcare reform measures will be adopted in the future, 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 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 strict 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 may 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.
Part of 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.
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 may 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 and biotechnology 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
and biologic 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:
| ● | our partners’ ability to execute their responsibilities in a timely, cost-efficient and compliant manner; |
| ● | reduced control over delivery and manufacturing schedules; |
| ● | price increases and product reliability; |
| ● | manufacturing deviations from internal or regulatory specifications; |
| ● | the failure of partners to perform their obligations for technical, market or other reasons; |
| ● | misappropriation of our current or future product candidates; and |
| ● | other risks in potentially meeting our current and future product anticipated commercialization schedule or satisfying the requirements
of our end-users. |
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 active pharmaceutical ingredient, or API, 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 cGMP for production of both API 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 any of our products, if approved,
our contract manufacturers and suppliers will need to produce our API and other substances and materials used in our 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 manufacturers’ 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 of 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. For example, the closing price of our
common stock from the period January 1, 2021 to December 31, 2021 has ranged from a low of $6.15 to a high of $23.86. Some of the factors
that may cause the market price of our shares to fluctuate include, but are not limited to:
| ● | the results of current and any future clinical trials of TARA-002 or IV Choline Chloride and any clinical
trial failure, including any failure resulting from difficulties or delays in identifying patients, enrolling patients, meeting specific
trial endpoints or completing and timely reporting the results of any trial; |
| ● | our ability to obtain regulatory approvals for TARA-002, IV Choline Chloride or future product candidates,
and delays or failures to obtain such approvals; |
| ● | the failure of TARA-002 or IV Choline Chloride or future product candidates, if approved, to achieve commercial success; |
| ● | the effects of the COVID-19 pandemic and associated health and safety measures; |
| ● | potential side effects associated with TARA-002 or IV Choline Chloride or future product candidates; |
| ● | issues in manufacturing, or the inability to obtain adequate supply of, TARA-002, IV Choline Chloride or future product candidates; |
| ● | the entry into, or termination of, or breach by partners of key agreements, including key commercial partner agreements; |
| ● | 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; |
| ● | announcements of any dilutive equity financings; |
| ● | inability to obtain additional funding; |
| ● | announcements by commercial partners or competitors of new commercial products, clinical progress or
the lack thereof, significant contracts, commercial relationships or capital commitments; |
| ● | failure to elicit meaningful stock analyst coverage and downgrades of our stock by analysts; |
| ● | the loss of key employees; |
| ● | changes in laws or regulations application to TARA-002 or IV Choline Chloride or future product candidates; and |
| ● | sales of our common stock by us, our insiders or our other stockholders. |
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, stockholders 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 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.
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.
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 current
law, 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 federal tax laws. 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 ownership changes 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 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 health and safety considerations for our employees and various government restrictions, from time to time we have instituted
work-from-home policies and as a result have not used our facilities there for extended periods of time. Our contract manufacturers and
suppliers’ facilities and our clinical trial sites are located in 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, wars and other geopolitical 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 research, development, 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 Delaware General Corporation Law, or 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 certain 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 certain 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 the SEC or other regulatory authorities or by Nasdaq.
We are subject to stringent and changing obligations related
to data privacy and security. Our actual or perceived failure to comply with such obligations could lead to regulatory investigations
or actions; litigation; fines and penalties; a disruption of our business operations, including our clinical trials; harm to our reputation;
and other adverse effects on our business or prospects.
In the ordinary course of
business, we collect, receive, store, process, use, generate, transfer, disclose, make accessible, protect, secure, dispose of, transmit,
and share, or collectively, Process or Processing of, personal data and other sensitive and confidential information, including information
we collect about patients in connection with clinical trials, sensitive third-party data 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, 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, we could face significant
consequences. These consequences may include, but are not limited to, 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 (for example, under HIPAA).
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.
We are, or
may become, subject to U.S. privacy laws. 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.
The CCPA requires covered
businesses that process personal data 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 the sale of personal data),
imposes new operational requirements for covered businesses, provides for civil penalties for violations (up to $7,500 per
violation), as well as a private right of action for certain data breaches (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, 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 data, establish restrictions on the retention of personal data, 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 and the CPRA, the CCPA and the
CPRA may increase compliance costs and potential liability with respect to other personal data we maintain about California
residents. Other states have enacted data privacy laws. For example, Virginia passed its Consumer Data Protection Act, and Colorado
passed the Colorado Privacy Act, both of which differ from the CPRA and become effective in 2023. The federal government is also
considering comprehensive privacy legislation.
Outside
the United States, an increasing number of laws, regulations, and industry standards apply to data privacy and security. For example,
the European Union’s General Data Protection Regulation, or EU GDPR, the United Kingdom’s GDPR, or UK GDPR, and Brazil’s
General Data Protection Law (Lei Geral de Proteção de Dados Pessoais, or LGPD) (Law No. 13,709/2018) impose strict requirements
for processing personal data. For example, under the EU GDPR, government regulators may impose temporary or definitive bans on data processing,
as well as fines of up to 20 million euros or 4% of annual global revenue, whichever is greater. Further, individuals may initiate litigation
related to processing of their personal data.
European
data protection laws (including the EU GDPR and UK GDRP) 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; 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
standard to obtain 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 categor[ies] [of] personal data” (such as personal
data related to health and genetic information), which could be relevant to our operations in the context of our clinical trials, imposes
heightened compliance burdens under European data protection laws and is a topic of active interest among relevant regulators.
Certain jurisdictions
have enacted data localization laws and cross-border personal data transfer laws, which could make it more difficult to transfer information
across jurisdictions (such as transferring or receiving personal data that originates in the EU or in other foreign jurisdictions). Existing
mechanisms that facilitate cross-border personal data transfers may change or be invalidated. For example, absent appropriate safeguards
or other circumstances, the EU GDPR generally restricts the transfer of personal data to countries outside of the European Economic Area,
or EEA, that the European Commission does not consider to provide an adequate level of data privacy and security, such as the United States.
The European Commission released a set of “Standard Contractual Clauses,” or SCCs, that are designed to be a valid mechanism
to facilitate personal data transfers out of the EEA to these jurisdictions. Currently, these SCCs are a valid mechanism to transfer personal
data outside of the EEA, but there exists some uncertainty regarding whether the SCCs will remain a valid mechanism. Additionally, the
SCCs impose additional compliance burdens, such as conducting transfer impact assessments to determine whether additional security measures
are necessary to protect the at-issue personal data.
In addition, Switzerland
and the UK similarly restrict personal data transfers outside of those jurisdictions to countries that they do not consider to provide
an adequate level of personal data protection, such as the United States, and certain countries outside Europe (e.g. Brazil) have also
passed or are considering laws requiring local data residency or otherwise impeding the transfer of personal data across borders, any
of which could increase the cost and complexity of doing business.
If we cannot implement a valid compliance mechanism for cross-border
data transfers, we may face increased exposure to regulatory actions, substantial fines, and injunctions against processing or transferring
personal data from Europe or other foreign jurisdictions. Inability to import personal data to the United States may significantly and
negatively impact our business operations, including by limiting our ability to conduct clinical trial activities in Europe and elsewhere;
limiting our ability to collaborate with parties subject to European and other data protection laws or requiring us to increase our personal
data processing capabilities in Europe and/or elsewhere at significant expense.
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 regulatory 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 will be 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, 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 adversely affecting 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 non-compliance 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 could materially adversely affect our business, financial condition, operating results and prospects.
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 are 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 would 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
If our information technology systems or
data, or those of third parties upon which we rely, are or were compromised, we could experience adverse consequences resulting from such
compromise, including, but not limited to, regulatory investigations or actions; litigation; fines and penalties; disruptions of our business
operations; loss of revenue or profits; interruptions to our operations such as our clinical trials; harm to our reputation; loss of customers
or sales; and other adverse consequences.
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 critical business systems to Process Sensitive Information on our behalf in a variety of contexts, including without limitation,
encryption and authentication technology, employee email, and other functions. Our ability to monitor these third parties’ information
security practices is limited, and these third parties may not have adequate information security measures in place. We may share or receive
Sensitive Information with or from third parties.
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 collectively, a Security
Incident, it may materially adversely affect our business, financial condition, operating results and prospects, 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. These threats are becoming increasingly
difficult to detect. These threats come from a variety of sources, including traditional computer “hackers”, threat actors,
employee error, theft or misuse, sophisticated nation-states, and nation-state supported actors. We and the third parties upon which we
rely may be subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through phishing
attacks); software bugs; malicious code (such as viruses and worms); denial-of-service attacks (such as credential stuffing); malware
(including as a result of advanced persistent threat intrusions); supply-chain attacks, server malfunctions, software and hardware failures;
loss of data or other information technology assets; adware; natural disasters; terrorism; war; telecommunication and electrical failures;
ransomware attacks; and other similar threats.
Ransomware
attacks, including those from organized criminal threat actors, nation-states and nation-state supported actors, are becoming increasingly
prevalent and severe and can lead to significant interruptions, delays, or outages in our operations, loss of data, loss of income, significant
extra expenses to restore data or systems, reputational loss and the diversion of funds. To alleviate the financial, operational and reputational
impact of a ransomware attack, it may be preferable to make extortion payments, but we may be unwilling or unable to do so (including,
for example, if applicable laws or regulations prohibit such payments).
Similarly, supply chain attacks have increased in frequency and severity,
and we cannot guarantee that third parties and infrastructure in our supply chain have not been compromised or that they do not contain
exploitable defects or bugs that could result in a breach of or disruption to our systems and networks or the systems and networks of
third parties that support us and our services. We may also be the subject of server malfunction, software or hardware failures, loss
of data or other computer assets, and other similar issues. Due to the COVID-19 pandemic, a significant portion of our workforce and third-party
partners have worked remotely from time to time, and reliance on remote working technologies and the prevalent use of mobile devices that
access confidential and personal data information increase the risk of Security Incidents, which could lead to the loss confidential information,
personal data, trade secrets or other intellectual property.
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 Incidents and
to mitigate, detect, and remediate actual and potential vulnerabilities. Certain data privacy and security obligations may require us
to implement specific security measures or use industry-standard or reasonable measures to protect our information technology systems
and Sensitive Information. Even if we were to take and have taken security measures designed to protect against Security Incidents, 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 Incidents and material adverse impacts that may arise from such Security Incidents. We may be unable
in the future to detect vulnerabilities in our information technology systems because such threats and techniques change frequently,
are often sophisticated in nature, and may not be detected until after a security incident has occurred. Despite our efforts to identify
and remediate vulnerabilities, if any, in our information technology systems, our efforts may not be successful. Further, we may experience
delays in developing and deploying remedial measures designed to address any such identified vulnerabilities.
If we (or a third-party upon whom we rely) experience a Security Incident
or are perceived to have experienced a Security Incident, we may experience adverse consequences. These consequences may include: government
enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or
oversight; restrictions on processing sensitive information (including personal data); litigation (including class claims); indemnification
obligations; negative publicity; reputational harm; monetary fund diversions; interruptions in our operations (including availability
of data); financial loss; and other similar harms. In addition, our actual or prospective customers, collaborators, partners and/or clinical
trial participants may stop using our product candidates 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 prevent us from managing the administrative aspects of our business.
Applicable Data Protection Requirements may require us to notify relevant
stakeholders of Security Incidents, 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 materially adversely affect our business, financial condition, operating results and prospects.
Our
contracts may not contain limitations of liability, and even where they do, 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 Incidents.
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 Incidents 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 materially adversely affect our business, financial condition, operating
results and prospects.
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.