The statements set forth under the captions
“Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
and “Risk Factors,” and other statements included elsewhere in this Annual Report on Form 10-K, which are not
historical, constitute “forward-looking statements” within the meanings of Section 27A of the Securities Act
of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), including statements regarding expectations, beliefs, intentions or strategies for the future.
These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance
or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking
statements. In some cases, you can identify forward-looking statements by terms including “anticipates,” “believes,”
“could,” “estimates,” “expects,” “intends,” “may,” “plans,”
“potential,” “predicts,” “projects,” “should,” “will,” “would,”
and similar expressions intended to identify forward-looking statements, but these are not the only ways these statements are
identified. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and
subject to risks and uncertainties.
Factors that could cause our actual results
to differ materially from those expressed or implied in such forward-looking statements include, but are not limited to:
On December 14, 2020, we entered
into an Agreement and Plan of Merger “(Merger Agreement”) with Chemomab Ltd. (“Chemomab”), an Israeli
limited company and a clinical-stage biotech company focusing on the discovery and development of innovative therapeutics for
fibrosis-related diseases with high unmet need, which included the proposed business combination (“Merger”) of CMB
Acquisition Ltd., a wholly owned subsidiary of ours, with Chemomab as the surviving company, subject to shareholder approval.
As a result, you should not place undue reliance on the plans discussed below relating to the pan-RAS and PDE10/ß-catenin
programs as they are subject to change.
The merger is described in detail in a
proxy statement / prospectus that we filed with the SEC on February 12, 2021 and that is available at this link: https://www.sec.gov/Archives/edgar/data/1534248/000110465921021553/tm211883-6_424b3.htm
Overview
We are a preclinical biotechnology company
committed to discovering and developing new cancer therapies designed to target the products of mutated genes that are drivers
of human malignancies. These therapies are called small molecule targeted therapies. Our company has obtained the option to license
small molecule technologies that we believe we can develop into product candidates that can deliver novel treatments for cancer
patients whose cancers are caused by mutated genes and for whom existing therapies are limited in effectiveness. The first of
these technologies comprises small molecules that potently inhibit the products of RAS oncogenes. RAS oncogenes are the most frequently
mutated family of genes in human cancer, responsible for almost a third of all human malignancies, and almost half of the three
most lethal cancers (i.e., lung cancer, colorectal cancer and pancreatic cancer). To date there are no approved therapies
that are effective in countering their tumorigenic effects. Our second technology consists of small molecules that interfere with
the Wnt/APC/β-catenin biochemical pathway through the inhibition of phosphodiesterase 10 (“PDE10”). Mutations
in this pathway are involved in most human colorectal cancers, the second leading cause of cancer deaths in the United States,
as well as in the hereditary cancer predisposition syndrome, familial adenomatous polyposis (“FAP”), which gives rise
to colorectal cancer. As is true for RAS-driven cancers, to date there are no approved therapies specifically for cancers that
carry mutations in the Wnt/APC/β-catenin pathway genes.
Previously we discovered and developed
a gene therapy, inodiftagene vixteplasmid (“inodiftagene”), designed to treat early stage bladder cancer. We developed
this gene therapy in six clinical trials in pancreatic cancer, ovarian cancer, and bladder cancer. Based on these preliminary
clinical studies, we planned and initiated a clinical trial designed as the basis for potential regulatory approval of inodiftagene.
This clinical trial, the Phase 2 Codex trial, was initiated in December 2018, enrolling patients through the following year.
We terminated the program in November 2019 based on our assessment that the observed preliminary efficacy of inodiftagene
in bladder cancer was insufficient to support regulatory approval.
In parallel to the now-terminated inodiftagene
program, our corporate goals for 2019 called for the expansion of our pipeline, and we determined to move toward small molecule
anti-cancer therapeutics. In September 2019, we entered into a collaboration and license agreement (the “Collaboration
Agreement”) with ADT Pharmaceuticals, LLC (“ADT”) pursuant to which we agreed to use commercially reasonable
efforts to conduct research and development activities with respect to the pan-RAS and PDE10/β-catenin programs under the
oversight of a jointly established steering committee. In addition, ADT granted us an exclusive option to license its small molecule
technologies. The Collaboration Agreement covers two proprietary classes of molecules: (1) inhibitors of RAS, and (2) inhibitors
of the Wnt/APC/β-catenin pathway via PDE10. Pursuant to the Collaboration Agreement, we have an exclusive option to license
the suite of intellectual property covering these molecules, with granted patents that extend to 2034.
We believe we will be able to develop these
molecules into product candidates to provide new therapies for patients with cancers whose pathogenesis depends on mutant RAS
oncogenes, or on mutations in the Wnt/APC/β-catenin pathway. Both of these genetic lesions cause enormous human suffering
by reason of the cancers they cause. These genes are primarily responsible for lung, colorectal, and pancreatic cancers, the most
common lethal cancers, among others. Mutations in one of the RAS genes are present in more than 30% of all human cancers, making
these the most frequent oncogenic mutations in cancer. The Wnt/APC/β-catenin pathway genes are mutated in approximately 90%
of colorectal cancers.
The impact of RAS and Wnt/APC/β-catenin
mutations can be best understood by considering cancer incidence and death rates in the United States. According to the American
Cancer Society, in 2020, it is expected that more than 1.8 million new cases of cancers will be diagnosed in the United States,
and approximately 606,520 people in the United States are expected to die of cancer. More than 30% of these cancers have RAS mutations.
The cancers with the highest estimated mortality rates in the United States for 2020 are lung cancer (approximately 136,000 deaths),
colorectal cancer (approximately 53,000 deaths), and pancreatic cancer (approximately 47,000 deaths), which together are estimated
to account for over 235,000 deaths in 2020 in the United States alone. These three cancer types are largely driven by mutant RAS.
Globally, the epidemiologic profile is similar. The Wnt/APC/β-catenin pathway is similarly implicated in a large number of
lethal cancers. Approximately 90% of colorectal cancers carry mutations in either the adenomatous polyposis coli (“APC”)
gene or in the CTNNB1 gene that encodes β-catenin. This translates into approximately 48,000 deaths due to colorectal cancer
carrying Wnt/APC/β-catenin pathway mutations in the United States alone. Additionally, the involvement of the Wnt/APC/β-catenin
pathway in the hereditary cancer syndrome FAP via mutations in the APC gene affects approximately 16,000 additional patients in
the United States.
The RAS oncogenes are heavily implicated
in the genesis of a broad spectrum of cancers as the most common oncogenic alterations known. There are three members of the RAS
family of genes: KRAS, HRAS, and NRAS. Of the most frequently lethal cancer types, lung cancers (non-small cell lung cancers,
“NSCLC”) have mutations in one of the RAS family of genes in approximately 35% of cases; colorectal cancers carry
RAS mutation in approximately 45% of cases; and pancreatic cancers carry RAS mutations in over 95% of cases. We estimate that
the total addressable population of patients with RAS-mutation driven solid tumors alone is more than 165,000 patients per year
in the US. This enormous toll of cancer morbidity and mortality suggests that therapies directed at tumors carrying mutated forms
of RAS are urgently needed.
Treating cancers that carry mutated oncogenes
by discovering and developing small molecule inhibitors of the mutated protein products of the oncogene is one of the most successful
cancer treatment paradigms that exists. Approved small molecule targeted drugs include inhibitors of the oncogenic breakpoint
cluster region-Abelson murine leukemia viral oncogene homolog 1 (“BCR-ABL”) including imatinib, dasatinib, and ponatinib
in leukemia; inhibitors of oncogenically mutated epidermal growth factor receptor (“EGFR”) in NSCLC including erlotinib
and osimertinib; inhibitors of mutated anaplastic leukemia kinase (“ALK”) in NSCLC such as crizotinib and brigatinib;
and many others. However, there are no approved inhibitors for mutated members of the RAS family of oncogenes. Until very recently,
the unique biochemistry and biology of the RAS family had resisted efforts of cancer biologists to discover and develop drugs
capable of inhibiting the activity of the mutated protein. However, in 2014 work by Shokat and others led to new approaches to
the discovery of small molecules capable of inhibiting a particular mutated form of RAS, known as KRAS G12C. This designates a
mutation in the KRAS member of the RAS family, in which an amino acid at position 12 is altered due to a mutation in the encoding
gene. In 2019, this work led to the first demonstration in the clinic of anti-tumor response associated with treatment with KRAS
G12C inhibitors under development by Amgen and Mirati Therapeutics. We believe the significance of these successes is field-altering,
as for the first time there is evidence that inhibition of mutated RAS isoforms may be undertaken in the same manner as other
successful small molecule targeted therapies had shown possible against other mutated oncogenes. In other words, RAS has become
a clinically validated target. However, KRAS is only one of three mutated isoforms of the RAS family, and only approximately 11%
of KRAS mutations are of the G12C type. This means that while these observations have proven that RAS-directed therapy using small
molecule inhibitors is possible with clinical effect, results so far are confined to a small subset of patients carrying a particular
mutation. That said, the values of the companies pursuing KRAS G12C inhibitors has grown by many billions of dollars during 2019.
Our lead focus is our pan-RAS program,
which we believe is poised to take advantage both of the fact that RAS inhibition has been shown to be clinically valid, and initial
successes by existing therapies have been confined to a fraction of tumors that carry RAS mutations. A broadly-acting pan-RAS
inhibitor with the potential to treat RAS-driven cancers regardless of RAS isoform or mutation would be clinically useful. We
believe our RAS-inhibitor molecules have potential for RAS inhibition in a broad variety of clinical settings.
The characteristics one would need in such
inhibitors include: selectivity for activated RAS; potency against cells harboring mutant RAS; consistency of biochemical data
with RAS inhibition (as opposed to other pathway points of inhibition); evidence for binding RAS directly; in vivo anti-tumor
activity; and immunological stimulation in vivo consistent with other clinical RAS inhibitors.
Our small molecule inhibitors have been
demonstrated to have these characteristics. Our lead RAS-inhibitor molecules are novel structures that share an indene core. These
molecules potently inhibit growth of tumor cells harboring mutant RAS, while having greater than 100-fold selectivity over cells
with normal RAS activity. Inhibitory activity has been observed with low nanomolar potency in KRAS-, HRAS-, and NRAS-driven tumor
cell models with a variety of mutations across a variety of tumor types. This activity is observable in both monolayer cultures,
and in 3-D spheroid cultures, which may have higher predictive value for anti-tumor activity. These compounds inhibit downstream
signaling through RAF and PI3K pathways, which is consistent with their acting directly on RAS, as opposed to another pathway
molecule. They initiate cell-cycle arrest and induce apoptosis, consistent with cell killing. Importantly, the inhibitors demonstrate
blockade of GTP loading of RAS in the nucleotide-free state in cell-free biochemical assays, suggesting that their mechanism of
action is through interference of GTP-mediated signaling. They have exhibited in vivo activity in RAS-mutant tumor models.
Finally, an emerging characteristic of RAS inhibition is the stimulation of anti-tumor immunity. This has been shown with AMG
510, a KRAS G12C inhibitor presently in the clinic, and it suggests that effective RAS inhibition stimulates several anti-tumor
immune mechanisms. Our inhibitors have been shown to similarly stimulate anti-tumor T-cell-mediated immune mechanisms, suggesting
that their mechanism is indeed effected through RAS.
We have identified lead compounds with
the desired biologic and biochemical characteristics with regard to effecting pan-RAS inhibition. We are undertaking additional
structural studies and medicinal chemistry to identify a clinical lead compound. We anticipate that we will identify a clinical
development lead compound in the next 12 to18 months, followed by 12 months of Investigational New Drug (“IND”) application-enabling
studies. We believe this will allow us to initiate our first in human trial in 2022. Initial clinical studies will enroll patients
with RAS mutations and advanced solid tumors. The clinical development of other targeted therapies in tumors with genetically
defined driver mutations, including the development plans for the KRAS G12C inhibitors presently under investigation, suggests
that there is a path to accelerated approval based on a single well-designed multi-center single-arm study. We would then pursue
the expansion of indications to additional tumor types, earlier lines of therapy, and combination studies, with additional trials.
Our focus initially will be on the pan-RAS-inhibitor
program. Our second program, the PDE10/β-catenin program, will proceed in collaboration with ADT. This program’s suite
of small molecules selectively and potently inhibit PDE10 and suppress Wnt/APC/β-catenin signaling in preclinical models.
PDE10 inhibition has been shown to downregulate β-catenin expression and inhibits polyp and tumor growth. We have identified
molecules that are orally bioavailable, and, in our preliminary mouse models, have been shown to inhibit the development of intestinal
polyposis and colon cancer, and the growth of pulmonary metastases. Initial plans for continued preclinical development of the
PDE10/β-catenin program will be funded by ADT using Small Business Innovation Research (“SBIR”) grants to ADT.We
believe we are positioned for the successful development of small molecule inhibitors. We believe that our pan-RAS and PDE10/β-catenin
programs have substantial promise to lead to new development candidates with the potential to treat lethal tumors harboring RAS
and Wnt/APC/β-catenin pathway mutations in the United States and globally.
In January 2020, our board of directors
approved management’s recommendation to close our office and laboratories located in Israel. Following the closure of the
Israeli facilities at the end of May 2020, our sole remaining office was located in Cambridge, Massachusetts. Under circumstances
related our restructuring this office has not been in use for a large part of the year and our lease for this office in Cambridge,
Massachusetts terminated on February 28, 2021. We are allowed, however, to continue using this address to receive mail.
On July 2, 2020, our Chief Executive
Officer, Dr. Frank Haluska, sent a letter to the Chairman of our board of directors outlining Dr. Haluska’s belief
that events had occurred that were sufficient to trigger his ability to resign for “Good Reason” under his employment
agreement. Our board of directors informed Dr. Haluska that it disagreed with the letter’s assertions regarding “Good
Reason” and treated the letter as a constructive resignation effective as of July 2, 2020. On July 12, 2020, Dr. Frank
Haluska tendered his written resignation from our board of directors, effective immediately. Dr. Haluska referenced the matters
articulated in his letter of July 2, 2020, and the Company’s response and actions following receipt of the letter as
the basis for his resignation from the Board. It is our position, based on advice from our legal counsel, that Dr. Haluska
resigned without Good Reason, is not entitled to severance, and we will contest any and all claims for severance. Prior to the
appointment of Mr. Neil Cohen as interim Chief Executive Officer in October 2020 (see below), our board of directors
handled all matters related to CEO duties.
On October 20, 2020, we appointed
Mr. Neil Cohen as interim Chief Executive Officer of Anchiano, effective immediately. Mr. Cohen continues to serve as
a member of our board of directors. The Company also appointed Andrew Fine to serve as our Chief Financial Officer, effective
immediately. Mr. Fine previously served as our Interim Chief Financial Officer pursuant to a subcontracting agreement.
In light of business circumstances, and
in order to conserve cash and preserve optionality while alternatives are being identified and assessed, we made a decision during
July 2020 to undertake reductions in headcount and other cost saving measures. These included plans to temporarily reduce
our internal and external research and development work on the Company’s pan-RAS-inhibitor program until there is greater
clarity regarding Anchiano’s ability to fund the program. We continue to undertake actions for the promotion of the program
and its assets and towards strengthening the protection of all related intellectual property.
On December 14, 2020 we entered into
an Agreement and Plan of Merger with Chemomab, an Israeli limited company and a clinical-stage biotech company focusing on the
discovery and development of innovative therapeutics for fibrosis-related diseases with high unmet need, which included the proposed
Merger of CMB Acquisition Ltd., a wholly owned subsidiary of ours, with Chemomab as the surviving company, subject to shareholder
approval. A shareholder meeting has been scheduled for March 15, 2021 to approve the Merger and related proposals. For more
information regarding Chemomab and the proposed Merger, see the proxy statement/prospectus we filed with the SEC on February 12,
2021 and that can be found at this link: https://www.sec.gov/Archives/edgar/data/1534248/000110465921021553/tm211883-6_424b3.htm
Our Product Pipeline
Our preclinical programs are summarized
below and consist of two preclinical programs. We have a partnership with ADT related to two small molecule development programs
targeting oncogenic pathways, focused on RAS and PDE10/β-catenin, respectively.
Our Therapeutics Pipeline
Pan-RAS
Program: Our highest priority program targets oncogenic mutations in the RAS family of genes (i.e., KRAS,
HRAS, and NRAS gene families), which are present in more than 30% of cancers. RAS plays a pivotal role in signal transduction
pathways leading to tumor cell proliferation and survival. Our pan-RAS program has identified novel indene-based small molecules
that exhibit potent and selective inhibition of activated RAS signaling regardless of isoform or mutation, or pan-RAS inhibition.
PDE10/ß-catenin
Program: Genetic alterations in components that make up the Wnt signaling pathway, which includes APC and β-catenin,
are prevalent in a number of cancer types, occurring in more than 80% of colorectal cancers. Our PDE10/ß-catenin program
has identified small molecules that selectively and potently inhibit PDE10 and suppress Wnt/APC/β-catenin signaling in preclinical
models. PDE10 inhibition has been shown to down regulate β-catenin expression and inhibits polyp and tumor growth. We believe
it has potential for application in the treatment of cancer as well as spontaneous and familial polyposis syndromes.
Inodiftagene
vixteplasmid: Previously we discovered and developed a gene therapy, inodiftagene, designed to treat non-muscle
invasive bladder cancer (“NMIBC”). We had developed this gene therapy in six clinical trials in pancreatic cancer,
ovarian cancer, and bladder cancer. Based on these preliminary clinical studies, we determined to test this product candidate
in a clinical trial designed as the basis for potential regulatory approval. This clinical trial, the Codex trial, was initiated
in December 2018, enrolling patients through the following year. In November 2019, we discontinued the pivotal Phase
2 Codex study. After a thorough analysis of the data, we determined that there was a low probability of surpassing the pre-defined
futility threshold at the planned interim analysis, which required 10 complete responses in 35 patients. As of November 14,
2019, 16 patients were evaluable after the first disease assessment on treatment; of these, three, or 19%, had experienced a complete
response. The data also indicated a low probability of achieving an efficacy profile that in our estimation would be necessary
to support regulatory approval. The safety data on the investigational product were consistent with those observed in prior preliminary
clinical trials. In April 2020 we notified Yissum Technology Transfer Company of the Hebrew University Ltd. (“Yissum”)
that as a result of our decision to discontinue clinical development of inodiftagene, we will cease payments to maintain intellectual
property (“IP”) we licensed from Yissum that supported the development and as related to a licensing and development
agreement between the parties (“License Agreement”). In August 2020 we agreed with Yissum on termination of the
License Agreement and return of the IP.
Pan-RAS Program
Background
According to the National Cancer Institute,
mutations in the RAS family of genes (i.e., KRAS, HRAS, and NRAS) are the most frequent oncogenic mutations in cancer,
present in over 30% of all cancers. These mutations are involved in more than 181,000 cancer deaths per year (more than 30% of
606,000 deaths) in the United States alone. The three most lethal cancers, lung cancer, colorectal cancer and pancreatic cancer,
are driven largely by mutant RAS. Of these cancer types, non-small cell lung cancers (“NSCLC”) have mutations in the
RAS family of genes in approximately 35% of cases; colorectal cancers carry RAS mutation in approximately 45% of cases; and pancreatic
cancers carry RAS mutations in over 95% of cases. Taken together, in these three cancer types, RAS mutations account for more
than 100,000 lethal cases of cancer per year in the United States. The World Health Organization estimates that in 2018, the most
common causes of cancer death are lung cancer (1.76 million deaths) and colorectal cancer (862,000 deaths). According to the National
Cancer Institute Surveillance, Epidemiology, and End Results (SEER) Program, five-year survival outcomes in advanced NSCLC, colorectal
cancer and pancreatic cancer are particularly dismal - 5%, 14% and 3%, respectively.
We estimate that the total addressable
population of patients with RAS-mutation driven solid tumors alone totals more than 165,000 patients per year in the United States.
These morbidity and mortality rates suggest that therapies directed at tumors carrying mutated forms of RAS are urgently needed.
Taken together, these statistics suggest
that the patient population that could benefit from effective therapy targeting RAS mutations is large. The U.S. annual incidence
of NSCLC, colorectal cancer, and pancreatic cancer combined is approximately 395,000 patients, of which approximately 295,00 are
advanced cases. We estimate that this translates into approximately 130,000 addressable patients annually with RAS-mutated advanced
solid tumors in the United States in these three indications. We estimate that other solid tumors will add approximately 35,000
additional addressable patients for a total annual addressable patient population of 165,000 in the United States. RAS mutations
are similarly frequent globally. Despite success in development of therapies targeting other genetic drivers in cancer, there
have been no approved RAS inhibitors to date. The frequency of RAS mutations in cancer, the high mortality associated with the
disease, and the lack of any approved targeted therapies creates a significant clinical need.
RAS plays a pivotal role in cell signal
transduction pathways leading to tumor cell proliferation and survival. RAS, a membrane bound protein, resides in an inactive,
or GDP-bound, state. Following stimulation, RAS releases guanosine triphosphate (“GDP”) and forms a transient nucleotide-free
state, subsequently binding with guanosine triphosphate (“GTP”). Active, or GTP-bound, RAS engages specific RAS effector
proteins (e.g., RAF, PI3K), resulting in activation of pathways leading to cell proliferation and survival. Oncogenic activation
of RAS occurs mainly via mutations in codons 12, 13 and 61—with a shift to the GTP-bound state and constitutive activation
of RAS effector pathways.
RAS Signaling Pathway
Abbreviations:
EGFR
=
|
epidermal
growth factor receptor,
|
ERK
=
|
extracellular
signal-regulated kinase
|
GRB2 =
|
growth factor receptor-bound
protein 2
|
MEK =
|
mitogen activated
protein kinase
|
P =
|
phosphorylated
|
PI3K =
|
phosphatidylinositol
3-kinase
|
PIP2 =
|
phosphatidylinositol
(4,5)-bisphosphate
|
PIP3 =
|
phosphatidylinositol
(3,4,5)-trisphosphate
|
SOS =
|
son of sevenless
|
|
|
The understanding of the oncogenic properties
of RAS has driven the search for anti-RAS therapeutics for several decades. However, mutant RAS has long been viewed as “undruggable”
directly due to its minute structural differences from wild-type RAS, its smooth surface and lack of deep pockets for binding
of small molecule inhibitors. Initial attempts to inhibit mutant RAS focused on inhibition of farnesyltransferase, responsible
for posttranslational modifications associated with correct localization of the protein. However, this line of investigation has
been unsuccessful to date in clinical trials. More recently, a previously unrecognized pocket of RAS—the Switch II Pocket
(“SII-P”)—was discovered in the inactive GDP-bound form. Compounds have been identified that selectively target
the cysteine mutation at codon 12 (also known as the KRAS G12C mutation) and bind covalently to RAS G12C, targeting SII-P and
preventing loading of GTP and engagement of effectors. A number of KRAS G12C mutation inhibitors are currently in Phase 1 clinical
trials (e.g., Amgen Inc.’s AMG-510 and Mirati Therapeutics, Inc.’s MRTX849), with early clinical data
reporting evidence of activity in KRAS G12C mutation-positive cancers, particularly NSCLC. These drugs have generated enormous
excitement, with the most advanced drug, AMG-510, showing an overall response rate (“ORR”) of 48% in 23 evaluable
NSCLC patients with eight out of 11 responders remaining in response and on treatment. Similarly, MRTX849 has shown a 50% ORR
in six patients with NSCLC in its initially presented Phase 1 data set.
We believe the significance of these successes
is field-altering, as for the first time there is evidence that inhibition of mutated RAS isoforms may be undertaken in the same
manner as other successful small molecule targeted therapies had shown possible against other mutated oncogenes. In other words,
RAS has become a clinically validated target. However, these current investigational drugs are mutation specific—with G12C
representing approximately 9% of RAS mutations in cancer. As shown below, KRAS represents the most commonly mutated isoform of
RAS, and there is a spectrum of activating mutations that have been observed with this isoform. This means that only approximately
11% of the KRAS mutations can be addressed with G12C inhibitors. A variety of activating mutations have also been observed with
the HRAS and NRAS isoforms, which remain unaddressed. While these observations have proven that RAS-directed therapy using small
molecule inhibitors is possible with clinical effect, results so far are confined to a small subset of patients carrying a particular
mutation. That said, the market capitalization of the companies pursuing KRAS G12C inhibitors has grown by many billions of dollars
during 2019.
Frequency of RAS Mutations by Tumor Type (cancers with
>5% RAS mutation frequency)
Adapted from: Cox et al., Nat Rev Drug Discov, 2014
Frequency of Specific KRAS mutations in KRAS-Mutated Lung,
Colorectal, Pancreatic and Biliary Tract Cancers
Adapted from: Vasan et al., Clinical cancer research,
2014
We believe that our pan-RAS program is
poised to take advantage both of the fact that RAS inhibition has been shown to be clinically valid, and that initial successes
have been confined to a fraction of tumors that carry RAS mutations. A broadly acting RAS inhibitor with the potential to treat
RAS-driven cancers regardless of RAS isoform or mutation (i.e., a pan-RAS inhibitor) would be clinically useful. It is
also not yet well understood what resistance mechanisms to KRAS G12C mutation inhibitors will develop in the clinic. A pan-RAS
inhibitor may be clinically preferable in KRAS G12C mutation-positive patients if resistance to KRAS G12C mutation inhibitors
leads to mutations in other RAS isoforms or other KRAS mutations, and may also have utility in such patients who have been treated
previously with a KRAS G12C mutation inhibitor. There is a clear need to continue to develop new and more effective direct inhibitors
of RAS, preferably with broad activity against the multiple RAS isoforms and various mutations. Given the frequency of RAS mutations
overall, a pan-RAS inhibitor would have potential to address a substantial proportion of cancer patients—significantly more
than any other genetic target for which drugs have been developed to date (and, we estimate, approximately 11 times more patients
than are addressable by the KRAS G12C mutation inhibitors). Therefore, our pan-RAS program is our highest priority.
Our Approach
Our lead RAS inhibitor molecules are novel
indene derivatives of sulindac, a well-studied and clinically utilized anti-inflammatory agent with activity against cells carrying
mutated RAS. Our RAS inhibitor molecules have been engineered to eliminate cyclooxygenase-2 (“COX-2”) inhibitory activity,
present in sulindac, to lessen the potential cardiovascular side effects observed with sulindac and other related drugs.
We believe our RAS inhibitor molecules
have potential for RAS inhibition in a broad variety of clinical settings, because they exhibit the characteristics we believe
are necessary in a pan-RAS inhibitor. Our RAS inhibitor molecules potently, selectively, and reversibly inhibit growth of tumor
cells harboring mutant RAS, while having greater than 100-fold selectivity over cells with normal RAS activity. Inhibitory activity
has been observed with low nanomolar potency (<10 nM) in KRAS-, HRAS-, and NRAS-driven models with a variety of mutations (e.g.
KRAS G12C, G13D, G12V, G12S; HRAS G12D; and NRAS Q61K) across a variety of tumor types, which suggests that these molecules could
have utility across the broad spectrum of RAS mutations and tumor types in which these mutations have been observed to drive cancer.
This potent activity is observable in both monolayer cultures, and in 3-D spheroid cultures, which may have higher predictive
value for anti-tumor activity. These compounds inhibit downstream signaling through RAF and PI3K pathways, which is consistent
with their acting directly on RAS, as opposed to another pathway molecule. They initiate cell-cycle arrest and induce apoptosis,
consistent with cell killing. Importantly, the inhibitors demonstrate blockade of GTP loading of RAS in the nucleotide-free state
in cell-free biochemical assays, suggesting that their mechanism of action is through interference of GTP-mediated signaling.
They have exhibited in vivo activity in RAS mutant tumor models. Finally, an emerging characteristic of RAS inhibition
is the stimulation of anti-tumor immunity. This has been shown with AMG 510, a KRAS G12C inhibitor presently in the clinic, and
it suggests that effective RAS inhibition stimulates several anti-tumor immune mechanisms. Our inhibitors have been shown to similarly
stimulate anti-tumor T-cell-mediated immune mechanisms. These multiple lines of evidence are all consistent with the characteristics
one would expect to observe with a drug that is killing cells by direct inhibition of RAS.
We believe these molecules have potential
for RAS inhibition in a broad variety of clinical settings. Over the next 12-18 months our main goals are to understand the specific
mechanism of action and physical basis of binding of the compounds to RAS, and to optimize the initially identified series of
compounds to identify a lead development candidate.
One of our lead compounds in the pan-RAS
program, ANC 007 (also referred to as MCI-062), has been observed to have less than 10 nanomolar cellular potency in monolayer
cultures of tumor cells harboring mutant RAS. Similar potency was observed in 3D spheroid cultures, which are cell cultures that
are permitted to grow in all three dimensions and are considered by some to be more predictive of in vivo activity than
monolayer culture. Cell lines with wild-type (“WT”) RAS and concurrent upstream mutations (e.g. EGFR) that signal
through RAS display similar inhibition to cell lines with mutated RAS. Cell lines with WT RAS in the absence of upstream activation
are less sensitive (>100-fold selectivity), regardless of downstream activating mutations. Sensitivity to ANC 007 can be conferred
by transduction of HT-29 cells (WT RAS) with mutant RAS. This means that mutated (or activated) RAS is required for the activity
of the drug. These observations are consistent with the inhibition of RAS regardless of isoform, and regardless of the mutations
tested. In addition, they suggest that the activation of RAS (by mutation or upstream signaling) is a key feature of selectivity.
If this key finding of pan-RAS inhibition with this series of compound can be translated into a drug candidate exhibiting similar
broad activity in vivo, we believe the clinical potential is substantial.
Potent and Selective Pan-RAS Inhibition with ANC 007
Source:
Keeton et al., AACR 2019; Mattox et al. AACR 2019; McConnell et al. AACR 2017; Data on File. ANC 007 has previously been
referred to as MCI-062.
Potent and Selective RAS Inhibition of Monolayer and
Spheroid Culture with ANC 007
Panels:
|
·
|
A,
B, C, D: Growth inhibitory activity of ANC 007 (MCI-062) was tested using
the CellTiter-Glo luminescence assay.
|
|
·
|
E:
Inhibition of colony formation was tested on a five different cell lines
using ANC 007. BcPC-3 is a pancreatic cell line with non-mutated, or wild type, RAS.
Other four cell lines carry RAS mutations.
|
|
·
|
F:
Replication incompetent retrovirus encoding HRAS-G12V mutant or empty
vector was prepared by transfection of A293T cells with packaging and envelope plasmids.
Crude supernatant collected and used to tranduce HT29 colon cancer cells. Stable pools
of each were expanded and expression of HRAS was characterized by western blot.
|
Source:
Keeton et al., AACR 2019; Mattox et al. AACR 2019; Data on File.
ANC 007 has been shown to inhibit signaling
through RAF and PI3K pathways (i.e., nodes in the signal transduction cascade that are downstream (distal) to RAS), which
suggests that the node of inhibition is RAS itself, rather than one of the effectors further downstream. As shown below, treatment
of MIA-PaCa-2 pancreatic cancer cells with KRAS G12C results in inhibition of signaling of the MAPK pathway as evidenced by inhibition
of phosphorylation of CRAF, MEK, and ERK. AKT phosphorylation is also inhibited. The observation that both sides of the signaling
pathways downstream from RAS (RAF/MEK/ERK and AKT) are inhibited suggests that the node of inhibition is RAS itself, rather than
one of the effectors further downstream. MAPK signaling in KRAS G13D mutant HCT-116 colon cancer cells is inhibited in vivo
as well.
Inhibition of Downstream Signaling Through RAF and PI3K
Pathways with ANC 007
Panels:
|
·
|
A,
ANC 007 (MCI-062) reduced RAS-GTP levels and inhibits activation of downstream
RAS signaling in MIA-PaCa-2 pancreatic cancer cells Cells were treated with vehicle or
ANC 007 for 24 hours in serum-free media and subsequently stimulated with 30 ng/mL EGF
for 10 minutes. RAS- GTP levels after treatment were determined by the active RAS pull-down
using GST-RAF1- RBD/glutathione agarose and detection by Western blotting. Detection
of phospho-protein levels was performed by Western blot.
|
|
·
|
B,
ANC 007 inhibits activation of downstream RAS signaling and activates
anti-tumor immunity in murine RAS mutant colon cancer model. Mice were implanted in the
right flank with 10 million HCT- 116 tumor cells per mouse. ANC 007-treated mice received
5 mg/kg MCI-062 twice daily by peritumoral administration. Vehicle-treated mice received
5% DMSO/5% cremophor EL/90% water once daily by peritumoral administration. RAS-GTP levels
in tumor lysates were determined by the active RAS pull-down and detection by Western
blotting. Levels of MAPK proteins and immune markers were determined by Western blotting
with the whole tumor lysate. Each lane corresponds to an individual animal.
|
Source:
Keeton et al., AACR 2019; Mattox et al. AACR 2019.
To initially characterize
the molecular mechanism of action of ANC 007, it has been tested in cell-free biochemical assays utilizing recombinant KRAS in
order to evaluate the potential for direct binding of the drug to the RAS protein. Incubation of ANC 007 with nucleotide-free
KRAS followed by addition of GTP led to a concentration dependent reduction of RAS-GTP levels in an RBD pull-down experiment.
This effect was not observed when ANC 007 was incubated with GTP-loaded RAS. The RBD assay utilizes the Ras-binding domain (RBD)
of the RAS effector kinase Raf1 which been shown to bind specifically to the GTP-bound form of RAS proteins, making it an ideal
tool for affinity purification of GTP-Ras. This experiment suggests ANC 007 directly inhibits GTP binding to RAS when RAS is in
the nucleotide-free state but not in the GTP-bound state. Similarly, in a guanine nucleotide exchange assay, which uses a fluorescently-labeled
guanine nucleotide analogue (MANT-GTP) to evaluate nucleotide binding to RAS, addition of ANC 007 to nucleotide-free KRAS inhibits
MANT-GTP binding. We believe the results of these cell-free experiments indicate that the mechanism of ANC 007 involves direct
binding to RAS to exert its effect. Further work, including such structural biology methodologies as x-ray crystallography, are
planned to more specifically elucidate the mechanism of action and binding contacts of these compounds.
Inhibition of GTP Binding to Recombinant KRAS in Cell-Free
Biochemical Assays Under Nucleotide-Free (nf) Conditions with ANC 007
Panels:
|
·
|
A,
ANC 007 (MCI-062) inhibits GTP binding to recombinant nucleotide-free
RAS in RBD pull-down experiment. Nucleotide-free recombinant WT-KRAS was prepared by
incubation with 20 mM EDTA on ice. ANC 007 or vehicle was incubated 1 h with nucleotide-free
WT-KRAS, followed by addition of GTP and an additional 30 min incubation (left) or, ANC
007 was incubated with WT-KRAS after addition of GTP (GTP-bound, right). RAS-GTP levels
after treatment were determined by the active RAS pull-down assay using GST-RAF1-RBD/glutathione
agarose and detection by Western blotting.
|
|
·
|
B,
ANC 007 inhibits GTP binding to recombinant nucleotide-free RAS in guanine
nucleotide exchange assay. Nucleotide-free recombinant WT-KRAS was prepared by incubation
with 20 mM EDTA on ice. Nucleotide free KRAS was incubated with ANC 007 or vehicle for
1 h on ice, followed by addition of an excess of MgCl2 with fluorogenic MANT-GTP.
Recombinant KRAS not treated with EDTA (GTP-KRAS) was included as a control indicator
of intrinsic turnover rate. The development of fluorescence reflecting MANT-GTP
binding to KRAS was monitored over the course of a 45 min incubation.
|
Source: Mattox et al. AACR 2019; Data on File.
ANC 007 has exhibited potent anti-tumor
activity in RAS-driven tumor models in mice, consistent with the cell based in vitro data. As shown below, ANC 007 inhibited
tumor growth by intratumoral administration in KRAS mutant colon tumor xenograft models (HCT116 and CT26 cell lines).
In Vivo Antitumor Activity in RAS-driven Tumor Models
with ANC 007
Panels:
|
·
|
A:
ANC 007 (MCI-062) inhibits growth of KRAS mutant HCT-116 tumor cells in
a subcutaneous mouse xenograft model. Athymic nude mice were implanted in the right flank
with 10 million tumor cells per mouse. Mice were treated once daily by intratumoral administration.
Control mice received vehicle only (5% DMSO/5% cremophor EL/90% water) once daily by
intratumoral administration. N=8 mice for vehicle group, n=7 mice for 5 mg/kg ANC 007
group, n=4 mice for 10 mg/kg ANC 007 group.
|
|
·
|
B:
Mice were implanted in the right flank with one million CT-26 tumor cells
per mouse. ANC 007 treated mice received 5 mg/kg ANC 007 twice daily by peritumoral administration.
Vehicle-treated mice received 5% DMSO/5% cremophor EL/90% water once daily by peritumoral
administration. Shown on left is control (vehicle-treated) mice and on the right are
mice treated with ANC 007.
|
As shown below, in an immune competent
mouse RAS-mutant tumor model, ANC 007 suppressed tumor growth in association with decreased PD-L1 levels in tumors; decreased
PD-1 in T-cells; increased proportion of CD4+ and CD8+ T-cells in tumors; and reduced Treg cells in tumors (as evidenced by Foxp3
expression). Similar effects on the tumor immune microenvironment have been observed with KRAS G12C inhibitors, including AMG-510,
and this stimulation of anti-tumor immunity appears to be an emerging characteristic of RAS inhibition itself. These lines of
evidence suggest that effective RAS inhibition stimulates several anti-tumor immune mechanisms., and ANC 007 has been shown to
similarly stimulate these anti-tumor T-cell-mediated immune mechanisms.
Inhibition of Tumor Growth with ANC 007 Associated with
Activation of Antitumor Immunity
Panels:
|
·
|
A: ANC 007 (MCI-062) reduces
PD-L1 expression in RAS driven tumor model. Mice were implanted in the right flank with one million CT26 tumor cells per mouse.
ANC 007-treated mice received 5 or 10 mg/kg ANC 007 once daily by intratumoral administration. Vehicle-treated mice received
5% DMSO/5% cremophor EL/90% water once daily by intratumoral administration. RAS-GTP levels in tumor lysates were determined
by the active RAS pull-down and detection by Western blotting. of immune markers was performed on whole tumor lysate.
|
|
·
|
B, C, D, E:
ANC 007 reduces PD-1, increases proportion of CD4+ and CD8+ T-cells, and reduces Tregs. Subcutaneous CT-26
murine tumors were excised from vehicle or ANC 007 treated mice, and digested for 1 h using the gentle-MACS dissociator and
murine tumor digestion protease cocktail. Following digestion, single cell suspensions were recovered by passage through
a cell strainer, and cell counts were normalized by quantitation using a hemacytometer. Fluorescently labelled antibodies
used to quantitate the indicated cell populations by flow cytometry.
|
Preclinical Development
We initiated development of a series of
compounds that exhibit pan-RAS inhibition as detailed in the experiments above. The lead compounds demonstrate low nM IC50 potency
against all RAS isoforms and all mutants tested, in cell lines of several histologies, and in monolayers and spheroids; inhibit
RAS signaling; induce cell cycle arrest and apoptosis; inhibit binding of GTP to nucleotide-free RAS; bind to the GTP catalytic
domain, in computational structural studies; inhibit mutant RAS-driven tumor growth in vivo; and demonstrate in vivo
activation of anti-tumor immunity that includes the down-regulation of PD-L1. Over the next 12-18 months we plan to (1) replicate
and expand on the data generated previously by ADT, including further characterization of the biological activity of the compounds;
(2) undertake structural biology investigations to understand the specific mechanism of action and physical basis of the
compounds binding to RAS; and (3) optimize the initially identified series of compounds, including ANC 007, to identify a
lead development candidate for further preclinical and then clinical development. The preclinical work will be primary performed
by a contract research organization(s) (“CRO”), with oversight and strategic guidance by us.
We have internally initiated experiments
with ANC 007 and have replicated key cell-based data, including monolayer and spheroid cell viability and colony forming assays,
with results consistent with those generated by ADT for the molecule across multiple cell lines and RAS mutations. This work has
independently confirmed similar potency and selectivity results with ANC 007 to those presented.
A key aspect of developing these compounds
is to gain a detailed understanding of their mechanism of action and binding to RAS. To that end, we have embarked on a suite
of biophysical and structural biology studies, including techniques such as nano differential scanning fluorimetry (nanoDSF),
microscale thermophoresis (MST), protein nuclear magnetic resonance (NMR) and x-ray crystallography to understand specifically
how these compounds bind to the RAS protein. This data will be crucial to understanding how this family of compounds exert their
effect and learnings will be integrated into the medicinal chemistry strategy in order to develop an optimized product candidate.
ANC 007 and related compounds require further optimization in order to identify a suitable clinical candidate. Evaluation of orally
bioavailable candidates will include work up of ADME (absorption, distribution, metabolism, and excretion) profile, in vivo
pharmacokinetic profile and efficacy, as well as initial assessment of in vivo toxicity. From the time of lead candidate
nomination, we anticipate that it will take approximately 12 months to perform IND-enabling studies and submit an IND for First
in Human studies, which we would anticipate to commence in 2022.
Clinical Development Plan and Regulatory Pathway
Clinical development will be initiated
once a lead product candidate has been nominated, all necessary IND-enabling studies have been performed and an IND application
has been successfully submitted to and accepted by the U.S. Food and Drug Administration (“FDA”) and adequate financing
has been secured. Initial Phase 1 clinical investigation will be performed in patients with advanced solid tumors harboring a
RAS mutation, with the objective of identifying a recommended Phase 2 dose and to evaluate the safety and tolerability of the
product candidate, as well as to evaluate preliminary anti-tumor activity. Given the initial clinical activity observed in lung
cancer with the KRAS G12C inhibitors in the clinic, we anticipate that NSCLC may be an area of initial focus, as well as colorectal
and pancreatic cancer (given the prevalence of RAS mutations in these cancers). However, we anticipate that this study would enroll
patients with multiple tumor types as long as a RAS mutation is present.
The clinical development path of other
targeted therapies in genetically defined tumors, such as those with EGFR, ALK, ROS1 and TRK aberrations, suggest that there exists
the opportunity for accelerated clinical development of a RAS inhibitor as well, provided the investigational drug exhibits high
response rate with clinically meaningful duration in a well-defined population with a significant unmet medical need. As in these
prior examples, accelerated approval may be initially granted on the basis of a single well-executed, multi-center single arm,
Phase 2 study (with the potential for different cohorts based on tumor type to support multiple indications in a single study).
Given the clinical proof of concept observed in NSCLC with the G12C inhibitors, we anticipate prioritizing RAS mutant NSCLC patients
previously treated with standard of care (i.e., platinum-based chemotherapy/checkpoint inhibitors) as an initial pivotal
cohort. Other potential pivotal cohorts include advanced CRC, after 5-FU/oxaliplatin/irinotecan, and advanced pancreatic adenocarcinoma,
after 5-FU or gemcitabine based therapy. Given the clinical need and the size of the patient population we anticipate this study
would proceed rapidly.
After approval in an initial indication,
we would then pursue indication expansion with additional tumor types, earlier lines of therapy, and combination therapy (including
with chemotherapy, other targeted therapies and checkpoint inhibitors, which have shown potential for synergy with RAS inhibition
preclinically). Beyond initial pivotal cohort considerations, we will investigate RAS mutation in other appropriate tumor types
such as bladder cancer and melanoma, and consider the potential for tumor agnostic indication, particularly in rare tumors and/or
tumor types with infrequent RAS mutations, which is another area with potential for approval based on Phase 2 data. Patients who
have failed G12C-specific inhibitor would also be a defined cohort to evaluate early on—given the hypothesis that resistance
here may be mediated by other RAS isoforms or mutations.
A robust translational medicine effort
is needed as clinical and biomarker data may point to differential activity based on activating mutation or specific RAS gene,
if so development will need to take these considerations into account (patient selection).
An appropriately expansive clinical development
plan will contemplate how to move into investigation of first line treatment once activity is observed in the refractory setting.
Confirmatory studies for initial indication(s) can be randomized Phase 3 studies in earlier lines of therapy with standard
of care comparators. This may likely involve investigation of combination therapy, and therefore we plan for early evaluation
of combination safety and preliminary efficacy, based on tumor types showing activity in monotherapy evaluation to potentially
inform confirmatory studies and other indication expansion, depending on tumor type/setting. Combinations may be with chemotherapy,
checkpoint inhibitors and other rational combination partners based on emerging molecular mechanisms of resistance to RAS inhibition.
Beyond first line treatment in the advanced/metastatic
setting, earlier stage disease/adjuvant setting is an exciting space to consider given the potential to significantly alter the
course of disease. Moving targeted therapy into the adjuvant space has been challenging, but success has been seen with checkpoint
inhibition and smart trial design (e.g., durvalumab in Stage III NSCLC). These are longer trials compared to metastatic
setting, but the relatively large RAS patient populations (e.g., in NSCLC and colorectal cancer) make this attractive/feasible
to consider. Finally, an additional area to consider, based on the preclinical data, is patients with RAS WT tumors with upstream
activation who have failed targeted therapy/standard of care—such as Her2 mutant NSCLC and EGFR mutant NSCLC (e.g.,
T790M/C797S ‘triple mutant’).
As mentioned above,
in light of business circumstances and in order to conserve cash and preserve optionality while alternatives are being identified
and assessed, we made a decision during July 2020 to undertake reductions in headcount and other cost saving measures. These
included plans to temporarily reduce our internal and external research and development work on the Company’s RAS Program
until there is greater clarity regarding Anchiano’s ability to fund the program. We continue to undertake actions for the
promotion of the program and its assets and towards strengthening the protection of all related intellectual property.
PDE10/β-catenin Program
Background
Genetic alterations in components that
make up the Wnt signaling pathway, which includes APC and β-catenin, are prevalent in a number of cancer types, occurring
in approximately 90% of colorectal cancers. This translates into approximately 48,000 deaths annually due to colorectal cancer
carrying Wnt/APC/β-catenin pathway mutations in the Unites States alone. Additionally, germline mutations of APC lead to
the hereditary cancer syndrome, FAP, which affects approximately 16,000 additional patients in the United States annually.
Wnt signaling controls the level of intracellular
activated β-catenin, a key effector of oncogenic signal transduction, and oncogenic alterations in Wnt, APC, or β-catenin
all result in elevated and uncontrolled levels of β-catenin. Wnt signaling is initiated upon binding of secreted Wnt ligands
to Frizzled receptors and low-density lipoprotein receptor-related protein (“LRP”) co-receptors, which induces phosphorylation
of Dishevelled (“Dvl”). Phosphorylated Dvl then associates with Axin, leading to dissociation of the β-catenin
destruction complex (which includes APC and GSK3β). Free β-catenin then accumulates in the cytoplasm and translocates
to the nucleus. Mutations which activate the Wnt pathway all culminate in the accumulation of high levels of oncogenic β-catenin
in the cell nucleus. Therefore, we believe a successful intervention in this pathway requires lowering β-catenin levels or
otherwise inhibiting it. β-catenin, a transcription factor, has been considered historically to be an “undruggable”
target, lacking the deep binding pockets present in enzymes and receptors. As a result, drug screening efforts have primarily
focused on other pathway components.
Recent studies have shown that PDE10 is
overexpressed during early stages of tumorigenesis and is essential for tumor cell growth. PDE10 inhibition increases cyclic GMP
levels in tumor cells to activate protein kinase G (PKG) signaling leading to the degradation of the oncogenic pool of β-catenin
to suppress critical proteins essential for tumor cell proliferation and survival. For the foregoing reasons, we believe that
targeting PDE10 provides a novel approach to selectively suppress β-catenin mediated transcriptional activity.
Wnt/APC/β-catenin and PDE10 pathways
Adapted from Li et al., Oncogene, 2014
Abbreviations:
5’GMP
=
|
guanosine
monophosphate
|
cGMP
=
|
cyclic
guanosine monophosphate
|
GTP
=
|
guanosine
triphosphate
|
NO
=
|
nitric
oxide
|
PDE10
=
|
phosphodiesterase
type 10
|
pGC
=
|
particulate
guanylyl cyclase
|
PKG
=
|
protein
kinase G
|
sGC
=
|
soluble
guanylyl cyclase
|
TCF
=
|
T-cell
factor
|
|
|
Our Approach
Our PDE10/ β-catenin program has identified
small molecule indene derivatives that selectively and potently inhibit PDE10 and suppress Wnt/APC/β-catenin signaling in
preclinical models. PDE10 inhibition has been shown to down regulate β-catenin expression and inhibits polyp and tumor growth.
It has potential for application in the treatment of cancer as well as spontaneous and familial polyposis syndromes. Our orally
available small molecule PDE10 inhibitors have unique advantages over known PDE10 inhibitors with potential for development in
FAP, colon, lung, liver, breast and other cancers.
Inhibition of PDE10 induces cGMP/PKG signaling
to phosphorylate and induce degradation of β-catenin to suppress key proteins essential for tumor cell proliferation and
survival. PDE10 knockdown (“KD”) or inhibition with small molecules inhibits growth and colony formation of colon,
lung, and breast tumor cells.
PDE10 overexpression in colon tumor cells; inhibition
blocks colony formation and ß-catenin/Tcf transcription.
Panels:
|
·
|
A: Differential PDE10 levels
in normal colonocytes (NCM460) and colon tumor cells as measured by Western blot.
|
|
·
|
B: PDE10 siRNA knockdown
inhibits colony formation of HT29 colon tumor cells.
|
|
·
|
C: PDE10 siRNA suppresses
Tcf transcription of key regulatory genes (e.g., survivin, cyclin D, myc, etc.).
|
|
·
|
D: Treatment of HT29 cells
with PDE10 inhibitor ANC 094 (also referred to as ADT-094) leads to reduction of ß-catenin and products of Tcf transcription
as measured by Western blot.
|
Source:
Li et al., Oncogene, 2015; Data on File.
One representative compound in this program,
ANC 061 (also referred to as MCI-030) inhibits PDE10 to activate cGMP/PKG signaling, resulting in the phosphorylation and degradation
of the oncogenic pool of β-catenin to selectively inhibit the growth of colon tumor cells in vitro. Oral administration to
mice with the Apc+/min-FCCC genotype (a mouse strain with the APC mutation that produces an augmented incidence of colorectal
adenomas and small intestinal cancers, used as a model to study polyposis syndromes and colon cancer) significantly inhibited
incidence and multiplicity of colon adenomas and carcinomas in a dose-dependent fashion. Further in vivo studies with ANC
061 are in progress at Fox Chase Cancer Center to confirm these findings. These studies are funded by NCI, and if proof of concept
is established there is the potential to further develop this compound in FAP in collaboration with NCI through its PREVENT Cancer
Preclinical Drug Development Program.
Inhibition of Colon Tumorigenesis in the ApcMin
Model
Panels:
|
·
|
A,
ANC 061 (MCI-030) induced a dose dependent decrease in adenoma incidence from 94.74% in control mice to 76.19% in mice treated
with 1000 parts per million (ppm) ANC 061 and 57.80% of mice treated with 1500 ppm ANC 061.
|
|
·
|
B,
Adenoma multiplicity was also significantly reduced from 4.0 in the control group to 2.9 in mice treated with 1000 ppm ANC
061, and to 1.95 in mice treated with 1500 ppm ANC 061.
|
|
·
|
C,
A reduction in micro adenomas was also observed.
|
|
·
|
D,
Multiplicity of flat adenomas was abolished in mice receiving 1500 ppm and reduced in mice treated with 1000 ppm ANC 061 from
0.32 per mouse in the control group to 0.24, respectively.
|
|
·
|
E, Incidence
of mice with cancer was reduced from 10.53% in the vehicle group to 4.76% in mice treated with 1000 ppm ANC 061 and to 0%
in mice treated with 1500 ppm ANC 061, n=19-21.
|
Source: Ward et al., AACR 2019.
Another compound in this program, ANC 030
(also referred to as MCI-048) administered orally inhibits tumor growth in an orthotopic lung cancer mouse model without apparent
toxicity. ANC 030 significantly extends survival in the A549 mouse model from a median 44 to 77 days with 25% of mice surviving
until the end of the experiment. It was also effective in multiple other mouse models of lung and breast cancer, including models
of metastasis.
Inhibits Lung Tumorigenesis in A549 Lung Cancer Model
Panels:
|
·
|
A, The A549 human lung
adenocarcinoma cells with luciferase (Luc) tag were generated using lentiviral particles expressing luciferase gene driven
by a CMV promoter and a stable A549Luc clone was selected. Female athymic nude mice were implanted with 1x106 A549Luc
cells intrathoracically. Mice were treated by oral gavage once a day with the vehicle (Maalox) or MCI-048 at doses of
25, 50, or 100 mg/kg (n = 7/group) starting five days before tumor cell implantation. After implantation, treatment
continued for 4 additional weeks. Tumor growth was monitored weekly through the detection of the bioluminescence of
the A549Luc cells using In Vivo Imaging System (IVIS, IVIS Spectrum, Caliper Life Sciences). Signal intensity was quantified
as the average number of photons emitted from a mouse within the chest cavity (Living Image software, version 4.3.1.)
|
|
·
|
B, Female athymic nude
mice were implanted with 1x106 cells per mouse of cultured A549 human lung adenocarcinoma cells into the intrathoracic
space of the left lung on Day 0. Animals were randomly assigned to two treatment groups (n=15) on Day 1 and treated
with either MCI-048 formulated in Maalox by oral gavage at a dose of 100 mg/kg once daily for 8 weeks or with Maalox using
the same schedule starting on Day 1. All surviving mice were euthanized on Day 151.
|
Source: Zhu et al. AACR 2019
Preclinical Development
We initiated development of a series of
compounds that exhibit potent PDE10 inhibition and induce degradation of β-catenin to suppress key proteins essential for
tumor cell proliferation and survival. Initial plans for continued preclinical development will be funded with ADT using SBIR
grants to ADT. While we are excited by the potential for this program, we have made the decision to initially prioritize advancement
of our pan-RAS program. Once a product candidate has been nominated for IND-enabling studies in the pan-RAS program, we plan to
allocate resources for development of the PDE10/ β-catenin program. We estimate approximately six months will be necessary
from that time for lead optimization and product candidate nomination. From lead candidate nomination, we anticipate approximately
12 months to perform IND enabling studies and submit an IND for First in Human studies. Development of the program could potentially
be accelerated with additional resources.
Clinical Development Plan and Regulatory Pathway
Clinical development will be initiated
once a lead product candidate has been nominated, all necessary Investigational New Drug (IND) enabling studies have been performed
and an IND application has been successfully submitted to and accepted by the USA. Initial Phase 1 clinical investigation in cancer
will be performed in patients with advanced solid tumors, focusing on tumor types where the Wnt/APC/β-catenin pathway is
implicated such as colorectal cancer, hepatocellular carcinoma, breast cancer and lung cancer, with the objective of identifying
a recommended Phase 2 dose and to evaluate the safety and tolerability of the product candidate, as well as to evaluate preliminary
anti-tumor activity. We anticipate that colorectal cancer may be an initial indication of focus in pivotal development, given
the prominence of the Wnt/APC/β-catenin pathway in this disease. Subsequent development will be dependent on the signs of
activity observed. If efficacy data allows (i.e. high response rate with meaningful duration of response in an indication of high
unmet need), an accelerated approval path based on Phase 2 data may be considered. If not, a more traditional approach with a
randomized Phase 3 program comparing to standard of care treatment will be required.
A separate development path in FAP may
also be pursued. This would initiate with a Phase 1 dose escalation study in healthy volunteers (single dose) and FAP patients
(multiple dose). A randomized Phase 3 program in patients with FAP is anticipated to be required for registration.
As mentioned above,
in light of business circumstances, and in order to conserve cash and preserve optionality while alternatives are being identified
and assessed, we made a decision during July 2020 to undertake reductions in headcount and other cost saving measures. These
included plans to temporarily reduce our internal and external research and development work on the Company’s PDE10/β-catenin
Programs until there is greater clarity regarding Anchiano’s ability to fund the program. We continue to undertake actions
for the promotion of the program and its assets and towards strengthening the protection of all related intellectual property.
Collaborations and License Agreements
ADT
In September 2019, we entered into
the Collaboration Agreement with ADT pursuant to which we agreed to use commercially reasonable efforts to conduct research and
development activities with respect to the pan-RAS and PDE10/β-catenin programs under the oversight of a steering committee
jointly established with ADT. ADT is a private company focused on discovering, developing and securing patent protection for novel
molecules that inhibit activated RAS- or Wnt-mediated signaling pathways that drive the growth of many human cancers. ADT’s
technology currently comprises a broad, novel proprietary small-molecule class, encompassing at least two distinct mechanistic
subclasses that share a common chemical core; one subclass targets RAS and the other subclass inhibits PDE10 to activate cGMP/PKG
signaling and induce degradation of the oncogenic pool of β-catenin.
Under the terms of the Collaboration Agreement,
we were granted an exclusive option to license the RAS and PDE10/β-catenin programs in exchange for a $3.0 million upfront
payment to ADT and will fund certain research activities. At any time through obtaining an IND designation, we will have the option
to exclusively license the compounds we develop worldwide and will be responsible for all aspects of preclinical and clinical
development and global commercialization. If we exercise our option, we will pay ADT an option exercise fee and will be responsible
for development and commercialization of any compounds or products containing any compounds under the pan-RAS and PDE10/ß-catenin
programs. We will also incur additional payment obligations to ADT for any product candidates developed under the pan-RAS and
PDE10/ß-catenin programs, including milestone payments based on certain events with respect to product development and regulatory
achievements, and royalty payments based on net sales of any commercialized products. We are responsible for all aspects of development
for the pan-RAS and PDE10/ß-catenin programs. We also have the option to sublicense the licenses granted to us by ADT.
In connection with the Collaboration Agreement,
we also entered into a Consulting and Collaboration Research Support Agreement with ADT (the “Support Agreement”),
whereby ADT provides support services for our research and development activities with respect to the pan-RAS and PDE10/ß-catenin
programs, including providing key research and discovery personnel, in exchange for a fee.
ADT may terminate the Collaboration Agreement
in the event of a material default in any of our material obligations under the Collaboration Agreement (following a cure period).
In the event the Collaboration Agreement is terminated, all licenses and options granted to us will be terminated and we will
not be able to develop the compounds under the pan-RAS and PDE10/ß-catenin programs or any products containing such compounds.
The Collaboration Agreement also restricts assignment except to a successor of substantially all of the business to which the
Collaboration Agreement relates, whether in a merger, sale of stock, sale of assets, reorganization or other transaction.
Yissum
On November 14, 2005, we entered into
the License Agreement with Yissum, which was subsequently amended several times, most recently in November 2013. Yissum granted
us an exclusive, worldwide license for the development, use, manufacture and commercialization of products arising out of patents
owned by, and patent applications filed by Yissum in connection with the H19 and IGF2-P4 genes. Yissum retained right, title and
interest in the products, technologies or other inventions arising out of our research and development of these patents and patent
applications, except for intellectual property developed with funding from the Israel Innovation Authority (“IIA”),
which will be owned by us and transferred to Yissum only upon our dissolution or termination of the License Agreement or upon
a decision by the IIA that it no longer requires us to own the intellectual property developed with its funding. We have the right
to grant sub-licenses to third parties in accordance with the terms set forth in the License Agreement.
In November 2019, we discontinued
the pivotal Phase 2 Codex study, evaluating the gene therapy inodiftagene in patients with BCG-unresponsive NMIBC. After a thorough
analysis of the data, we determined that there was a low probability of surpassing the pre-defined futility threshold at the planned
interim analysis, which required 10 complete responses in 35 patients. At the time we discontinued the study, 16 patients were
evaluable after the first disease assessment on treatment, of which three patients, or 19%, had experienced a complete response.
The data also indicated a low probability of achieving an efficacy profile that in the company’s estimation would be necessary
to support regulatory approval. The safety data on the investigational product were consistent with those observed in prior trials.
In April 2020 we notified Yissum that
as a result of our decision to discontinue clinical development of inodiftagene, we will cease payments to maintain intellectual
property (“IP”) we licensed from Yissum that supported the development and as related to the License Agreement. In
August 2020 we agreed with Yissum on termination of the License Agreement, we destroyed or returned all IP documentation
to Yissum, and Yissum and we mutually waived, released and discharged the other from all claims of any type.
Our Competitive Strengths
Our technologies are small molecule targeted
therapies that are directed against two pathways that have been long understood to contribute fundamentally to the pathogenesis
of human cancer, the RAS pathway and the Wnt/APC/β-catenin biochemical pathway. We are initially focusing on our pan-RAS
program, and we are developing compounds that exhibit pan-RAS cytotoxicity.
We believe we can develop these compounds
into product candidates, and that our competitive strengths put us in a unique position for success if we pursue the path towards
further development after the review of strategic alternatives, as follows:
|
·
|
Our product candidates are targeted therapies.
We believe that the application of small molecule targeted therapy approaches to pan-RAS inhibition has a high
likelihood of success. The development of small molecule targeted therapies against the products of mutated driver oncogenes
is one of the most productive endeavors in the field of cancer therapy. Mutated driver oncogenes cause cancer cell proliferation,
the first and most fundamental hallmark of cancer. The RAS genes are the most common example of such mutated driver oncogenes.
These cancer genes have been identified by natural selection as being critical drivers of malignant proliferation and they
are prime therapeutic targets. This potential for therapeutic exploitation has in turn been coupled with progress in physical
methods and chemical engineering that allow the design of small molecules that directly inhibit the function of the key mutated
driver genes. This approach has resulted in successful therapies for cancers whose genetic alterations include mutations in
a variety of oncogenes. An important observation from this field is that, in general, preclinical data, both in vitro
and in vivo, have been very strongly predictive for the development of these therapies. If the physical inhibition
of the target molecule can be established and characterized by structural, chemical and biochemical methods and the target
gene is a mutated positively acting driver gene, then preclinical activity correlates strongly with clinical activity. The
RAS family of genes are driver oncogenes, the most commonly mutated oncogenes known. We believe that our existing preclinical
data demonstrating and characterizing small molecule pan-RAS inhibition forms the foundation for development of these molecules
into product candidates that can be used in clinical settings.
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Our molecules are first-in-class molecules.
There are no small molecule targeted therapies that have successfully been shown to exhibit pan-RAS inhibitory
activity, and whose mechanism of action involves direct inhibition of RAS. A variety of approaches to RAS inhibition have
been tested, including interference with the intracellular localization and processing of RAS, inhibition of its binding to
other signaling molecules, and other approaches. Current clinical–stage investigational drugs, such as AMG-510, have
been shown to bind to and directly inhibit the KRAS G12C mutation, a subset of mutant RAS proteins. KRAS is one of 3 RAS family
genes, and approximately 9% of RAS mutations are KRAS G12C mutations. To our knowledge, no other pan-RAS inhibitors like our
molecules are currently being tested.
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Our preclinical data strongly support
the activity of our molecules against cancer. The characteristics one would predict in molecules with preclinical
pan-RAS inhibitory activity include: selectivity for activated RAS; nanomolar potency against cells harboring mutant RAS;
consistency of biochemical data with RAS inhibition (as opposed to other pathway points of inhibition); evidence for binding
RAS directly; in vivo anti-tumor activity; and immunological stimulation in vivo consistent with other clinical
RAS inhibitors. Our small molecule inhibitors have been demonstrated to have these characteristics, and we believe we can
develop our molecules into product candidates that will have potential for pan-RAS inhibition in a variety of clinical settings.
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Recent data have validated cancer treatment
with a RAS inhibitor. Until recently, the unique biochemistry and biology of the RAS gene family had resisted
efforts of cancer biologists to discover and develop drugs capable of inhibiting the activity of the mutated protein. However,
recent developments have led to the discovery of small molecules capable of inhibiting a particular mutated form of RAS, known
as KRAS G12C. Preliminary successes of drugs under development such as AMG-510 and MRTX849, are field-altering, as for the
first time there is evidence that inhibition of mutated RAS isoforms may be undertaken in the same manner as other successful
small molecule targeted therapies had shown possible against other mutated oncogenes. In other words, RAS is a clinically
validated target susceptible to small-molecule targeted therapy approaches.
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Our development plan addresses substantial
unmet needs. Despite the preliminary success demonstrated by AMG 510 and MRTX849, KRAS is only one of three
mutated isoforms of the RAS gene family, comprising approximately 85% of RAS mutations, and only approximately 11% of KRAS
mutations are of the G12C type. A number of tumor types have large proportions of mutations in other RAS isoforms. Melanoma
exhibits mutations in RAS in approximately 30% of cases, almost all of which are in NRAS. Of the 55% of colorectal cancers
that carry RAS mutations, 5% are NRAS. Approximately half of the mutations in multiple myeloma are in NRAS. The RAS mutations
in thyroid cancer and acute myeloid leukemia are predominantly NRAS (approximately 5-15% (depending on sub-type) and 15% respectively)
. Bladder and head and neck cancers carry largely HRAS mutations. This means that while recent observations have proven that
RAS-directed therapy using small molecule inhibitors is possible with clinical effect, results so far are confined to a small
subset of patients carrying a particular mutation. In a larger sense, even though preliminary success has been demonstrated
by KRAS G12C mutation inhibitors, at this time there are no approved inhibitors of mutated RAS in cancers that carry these
genetic lesions. We believe there is much potential for broader treatment of RAS-mutated tumors, for treatment of tumors that
have become resistant after KRAS G12C mutation-inhibitor therapy, for earlier line treatment and for combination therapy,
and we believe that we can develop our molecules into product candidates capable of potentially meeting these broader needs.
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Intellectual Property
While our policy is to obtain patents by
application, license or otherwise, to maintain trade secrets and to seek to operate without infringing on the intellectual property
rights of third parties, technologies related to our business have been rapidly developing in recent years. Additionally, patent
applications that we may file or license from third parties may not result in the issuance of patents, and our current or future
issued patents may be challenged, invalidated or circumvented. Therefore, we cannot predict the extent of claims that may be allowed
or enforced against our patents, nor be certain of the priority of inventions covered by pending third-party patent applications.
If third parties prepare and file patent applications that also claim technology or therapeutics to which we have rights, we may
have to engage in proceedings to determine priority of invention, which could result in substantial costs to us, even if the eventual
outcome is favorable. Moreover, because of the extensive time required for clinical development and regulatory review of products
we may develop, it is possible that the patent or patents on which we rely to protect such products could expire or be close to
expiration by the commencement of commercialization, thereby reducing the value of such patent. Loss or invalidation of certain
of our patents, or a finding of unenforceability or limited scope of certain of our intellectual property, could have a material
adverse effect on us. See “Risk Factors—Risks Related to Our Intellectual Property and Potential Litigation.”
In addition to patents, we rely on trade
secrets and know-how to develop and maintain our competitive position. Trade secrets and know-how can be difficult to protect.
We seek to protect our proprietary processes, in part, by confidentiality agreements and invention assignment agreements with
our employees, consultants, scientific advisors, contractors and commercial partners. These agreements are designed to protect
our proprietary information. We also seek to preserve the integrity and confidentiality of our data, trade secrets and know-how
by maintaining physical security of our premises and physical and electronic security of our information technology systems. While
we have confidence in these individuals, organizations and systems, such agreements or security measures may be breached, and
we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently
discovered by competitors or others.
Pan-RAS and PDE10/β-catenin Program Patents
Pursuant
to the Collaboration Agreement, we have been granted an exclusive option to license patent rights for our pan-RAS and PDE10/b-catenin
programs. This patent portfolio includes three issued U.S. patents, 2 issued Japanese patents, and one issued patent in each of
China, Australia, Europe and Hong Kong directed to RAS inhibitor compounds, prodrugs and methods of use. In addition to this we
have two pending related U.S. patent applications directed to RAS and PDE10 inhibitor compounds and corresponding foreign pending
counterpart patent applications, and one Patent Cooperation Treaty (“PCT”) patent application directed to RAS inhibitor
compounds. The issued patents, and pending U.S. patent applications, if issued, will expire in 2035. We expect any patents based
on the PCT application, if we continue to pursue patent protection in the United States and elsewhere, if issued, to expire in
2039.
Additional Technologies
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BC-821 - Our licensed
patent portfolio includes two issued U.S. patents directed to composition of matter and method of use, and related issued
foreign patents and patent applications. We expect these patents and patent application, if issued, to expire between 2028
and 2029.
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Cancer-Specific TNF-α and DTA mutual
expression vector - Our licensed patent portfolio includes one U.S. patent directed to nucleic acid
vectors and related issued foreign patents. We expect these patents to expire in 2026.
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H19 targeted siRNA for cancer - Our
licensed patent portfolio includes one issued U.S. patent directed to composition of matter, and related foreign patents.
We expect these patents to expire in 2026.
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H19 targeted siRNA for rheumatoid arthritis -
Our licensed patents include one issued U.S. patent directed to methods for treating rheumatoid arthritis, and related foreign
patents. We expect these patents to expire in 2028.
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Marketing, Sales and Distribution
Given our stage of development, we do not
have any internal sales, marketing or distribution infrastructure or capabilities. In the event we receive regulatory approval
for a future product candidate and secure adequate funding, we intend, where appropriate, to consider commercialization relationships.
In addition, we may consider out-licensing some or all of our worldwide patent rights to more than one party to achieve the fullest
development, marketing and distribution of any future product we develop.
Competition
Competition in the development of human
cancer therapeutics, in particular targeted therapies, is intense and rapidly evolving. We face competition both in the United
States and internationally from small and large private and publicly traded biotechnology and pharmaceutical companies, government
agencies, universities and other research institutions. Many of our competitors have substantially greater resources and capabilities,
in the form of financing, development, manufacturing, and commercialization, than we do. Our ability to create value for our shareholders
depends on our ability to successfully develop product candidates that have differentiated benefits from competing drugs and biologics,
that are either in development or commercially available. While we believe our approach, expertise, focus and intellectual property
provide us with a competitive advantage, we are aware of several companies that inhibit the same molecular target, and in some
cases in the same population, being pursued by us. We believe our primary competitors by program and target are as follows:
Pan-RAS
Program: We are not aware of any competitors with development programs or molecules in clinical testing that target
mutations across all three RAS family of genes (HRAS, KRAS, and NRAS). We are aware of several competitors with clinical and preclinical
development programs that directly target one or more mutations in KRAS family of genes, including Mirati Therapeutics, Inc.,
Amgen, Inc., Boehringer Ingelheim AG, Merck & Co., Inc., and others. It is likely that other companies are
also researching inhibitors in the HRAS and NRAS families of genes. We will continue to monitor scientific and patent publications
for the emergence of other potential competitors.
PDE10/β-catenin
Program: We are aware of several companies that have PDE10 inhibitor programs in preclinical or clinical development,
including among others, H. Lundbeck A/S, Omeros Corporation, and Celon Pharma SA –mainly focused on CNS indications. Likewise,
we are aware of several companies that have β-catenin inhibitor program in preclinical or clinical development, including
among others, PRISM Pharma Co., Ltd, and Fog Pharmaceuticals, Inc. We will continue to monitor scientific and patent publications
for the emergence of other potential competitors.
Government Regulation
We are subject to extensive regulation
by the various national health regulatory authorities, such as the FDA, Health Canada and other national, state and provincial
regulatory agencies.
U.S. Food and Drug Administration
The research, development, and marketing
authorization of drugs and other pharmaceutical products in the United States is subject to the Federal Food, Drug, and Cosmetic
Act (the “FFDCA”), which empowers the FDA to require extensive non-clinical and clinical toxicity testing before a
new drug or biologic is deemed safe and effective and receives marketing authorization. Following initial laboratory and animal
testing that show that investigational use in humans is reasonably safe, a drug can be studied in clinical trials in humans under
an IND in accordance with the regulations at 21 CFR 312.
In order to satisfy FDA data requirements,
an extensive battery of preclinical experiments to assess the safety of such new drugs are conducted, followed by two or three
phases of clinical trials before they are considered for widespread human use. Upon successful completion of a future clinical
trial program, we may be in a position to manufacture and market our prospective pharmaceutical products. The marketing authorization
of our products would be conditional upon obtaining the approval of health authorities in each country in which they would be
marketed, including, but not limited to, the FDA and the EMA. FDA regulations govern the following activities that we may perform,
or that have been performed on our behalf, to ensure that drugs that we develop are safe and effective for their intended uses:
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preclinical (animal)
testing including toxicology studies;
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human testing in
clinical trials, Phases 1, 2 and 3;
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recordkeeping and
retention;
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pre-marketing review
through submission of a new drug application (“NDA”);
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drug manufacturing,
testing and labeling, which must comply with current good manufacturing practice (“cGMP”) regulations;
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drug marketing,
sales and distribution; and
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post-marketing study
commitments (Phase 4), post-marketing pharmacovigilance surveillance, complaint handling, reporting of deaths or serious injuries,
product sample retention, manufacturing deviation reporting and repair or recall of drugs.
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Failure to comply with
applicable regulatory requirements can result in enforcement action by the FDA, which may include any of the following sanctions:
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warning letters,
untitled letters, fines, injunctions, consent decrees and civil penalties;
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disqualification
of clinical investigator and/or sponsor from current and future studies;
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clinical hold on
clinical trials;
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operating restrictions,
partial suspension or total shutdown of production;
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refusal to approve
an NDA;
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post-marketing withdrawal
of approval; and
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The FDA’s preclinical and IND requirements
The first step to obtaining FDA approval
of a new drug involves development, purification and pre-clinical testing of a pharmaceutically active agent in laboratory animals.
Once appropriate preclinical data have been generated to demonstrate that the drug is reasonably safe for initial testing in humans,
an IND can be prepared and submitted to the FDA for review. In the IND review process, FDA physicians and scientists evaluate
the proposed clinical trial protocol, chemistry and manufacturing controls, pharmacologic mechanisms of action of the drug and
toxicological effects of the drug in animals and in vitro. Within 30 days of the IND submission, the drug review division
of the FDA may contact the filer regarding potential concerns and, if necessary, implement a clinical hold until certain issues
are resolved satisfactorily. If the FDA does not take any action, the filer may proceed with clinical trials on the 31st day.
Clinical trials
Clinical trials represent the pre-market
testing ground for unapproved drugs, generally taking several years to complete. Before testing can begin, an institutional review
board (“IRB”) must have been reviewed and approved for the use of human subjects in the clinical trial. During clinical
trials, an investigational compound is administered to humans and evaluated for its safety and effectiveness in treating, preventing
or diagnosing a specific disease or condition. The clinical trials generally consist of Phase 1, Phase 2, and Phase 3 testing.
During clinical trials, the FDA and IRBs closely monitor the studies and may suspend or terminate trials at any time for a number
of reasons, such as finding that patients are being exposed to an unacceptable health risk. The results of clinical trials are
critical factors in the approval or disapproval of a new drug.
Submission and review of an NDA
An NDA requesting approval to market the
drug for one or more indications may be submitted to the FDA once sufficient data has been gathered through preclinical and clinical
testing. The application includes 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 drug’s chemistry,
manufacturing, controls and proposed labeling, among other things. In most cases, the submission of an NDA is subject to a substantial
application fee.
The FDA has 60 days from its receipt of
an NDA to determine whether the application will be accepted for filing based on the agency’s threshold determination that
it is sufficiently complete to permit substantive review. Once the NDA submission is accepted for filing, the FDA begins an in-depth
substantive review. NDAs receive either standard or priority review. The FDA has a goal of ten months from the date of filing
to review and act on a standard NDA for a new molecular entity. A drug representing a significant improvement over existing therapy
in the treatment, prevention or diagnosis of a disease may receive priority review.
The FDA has various specific programs,
including Fast Track, Breakthrough Therapy, Accelerated Approval and Priority Review, each of which is intended to expedite the
process for reviewing drugs, and in certain cases involving Accelerated Review, permit approval of a drug on the basis of a surrogate
endpoint. Even if a drug qualifies for one or more of these programs, the FDA may later decide that the drug no longer meets the
conditions for qualification or that the time period for FDA review or approval will be shortened. Fast Track designation facilitates
the development and expedites the review of drugs to treat serious or life-threatening diseases or conditions and fill unmet medical
needs. Although this designation does not affect the standards for approval, the FDA will attempt to facilitate early and frequent
meetings with a sponsor of a Fast Track designated drug.
The FDA reviews an NDA to determine, among
other things, whether the drug is safe and effective and whether the facility in which it is manufactured, processed, packaged
or held meets standards designed to assure the product’s continued safety, quality and purity. The review process is often
significantly extended by FDA requests for additional information or clarification. The FDA may refer the application to an advisory
committee for review, evaluation and recommendation as to whether the application should be approved. The FDA is not bound by
the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.
Before approving an NDA, the FDA typically
will inspect the facility or facilities where the drug 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 are adequate to assure consistent
production of the drug within required specifications. In addition, before approving an NDA, the FDA will typically inspect one
or more clinical trial sites to assure compliance with good clinical practice requirements.
After evaluating the NDA and all related
information, including the advisory committee recommendation, if any, and inspection reports regarding the manufacturing facilities
and clinical trial sites, the FDA may issue an approval letter, or, in some cases, a complete response letter. A complete response
letter generally contains a statement of specific conditions that must be met in order to secure final approval of the NDA and
may require additional clinical or preclinical testing for the FDA to reconsider the application. Even with submission of this
additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.
If and when those conditions have been met to the FDA’s satisfaction, the FDA will typically issue an approval letter. An
approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications.
If a product receives regulatory approval,
the approval may be significantly limited to specific diseases, subpopulations, and dosages or the indications for use may otherwise
be limited, which could restrict the commercial value of the product. In addition, the FDA may require us to conduct Phase 4 testing,
which involves clinical trials designed to further assess a drug’s safety and/or effectiveness after NDA approval and may
require testing and surveillance programs to monitor the safety of approved products which have been commercialized.
Pervasive and continuing regulation in the United States
After a drug is approved for marketing
and enters the marketplace, numerous regulatory requirements continue to apply. These include, but are not limited to:
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The
FDA’s cGMP regulations require manufacturers, including third-party manufacturers, to follow stringent requirements
for the methods, facilities and controls used in manufacturing, processing, testing and packing of a drug product;
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Labeling
regulations and the FDA prohibitions against the promotion of drug for unapproved uses (known as off-label uses), as well
as requirements to provide adequate information on both risks and benefits during promotion of the drug;
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Approval
of product modifications or use of the drug for an indication other than approved in the NDA;
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Adverse
drug experience regulations, which require companies to report information on rare, latent or long-term drug effects not identified
during pre-market testing;
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Post-market
testing and surveillance requirements, including Phase 4 trials, when necessary, to protect the public health or to provide
additional safety and effectiveness data for the drug; and
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The
FDA’s recall authority, whereby it can ask, or under certain conditions order, drug manufacturers to recall from the
market a product that is in violation of governing laws and regulations.
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After a drug receives approval, any modification
in conditions of use, active ingredient(s), route of administration, dosage form, strength or bioavailability, will require a
new clearance or approval, for which it may be possible to submit a supplemental NDA, referring to preclinical and certain clinical
studies presented in the drug’s original NDA, accompanied by additional clinical data necessary to demonstrate the safety
and effectiveness of the product with the proposed changes. Additional clinical studies may be required for proposed changes.
Fraud and abuse laws in the United States
A variety of U.S. federal and state laws
apply to the sale, marketing and promotion of drugs that are paid for, directly or indirectly, by U.S. federal or state healthcare
programs such as Medicare and Medicaid. The restrictions imposed by these laws are in addition to those imposed by the FDA, the
U.S. Federal Trade Commission and corresponding state agencies. Some of these laws significantly restrict or prohibit certain
types of sales, marketing and promotional activities by drug manufacturers. Violation of these laws may result in significant
criminal, civil and administrative penalties, including imprisonment of individuals, fines and penalties and exclusion or debarment
from United States federal and state healthcare and other programs. Many private health insurance companies also prohibit payment
to entities that have been sanctioned, excluded or debarred by U.S. federal agencies.
Anti-kickback statutes in the United States
The U.S. federal anti-kickback statute
prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration,
directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing, arranging for or
recommending of a good or service, for which payment may be made in whole or in part under a United States federal healthcare
program such as the Medicare and Medicaid programs. The definition of “remuneration” has been broadly interpreted
to include anything of value, including gifts, discounts, the furnishing of supplies or equipment, payments of cash and waivers
of payments. Several courts have interpreted the statute’s intent requirement to mean that, if any one purpose of an arrangement
involving remuneration is to induce referrals or otherwise generate business involving goods or services reimbursed in whole or
in part under federal healthcare programs, the statute has been violated. Penalties for violations include criminal penalties
and civil sanctions such as fines, imprisonment and possible exclusion from Medicare, Medicaid and other U.S. federal healthcare
programs. In addition, some kickback allegations have been claimed to violate the U.S. False Claims Act (as discussed below).
The federal anti-kickback statute is broad
and prohibits many arrangements and practices that are lawful in businesses outside of the healthcare industry. Recognizing that
the statute is broad and may technically prohibit many innocuous or beneficial arrangements, the Office of Inspector General of
the Department of Health and Human Services (“OIG”) has issued a series of regulations, known as “safe harbors.”
These safe harbors set forth provisions which, if met in form and substance, will assure healthcare providers and other parties
that they will not be prosecuted under the federal anti-kickback statute. The failure of a transaction or arrangement to fit precisely
within one or more safe harbors does not necessarily mean that it is illegal or that prosecution will be pursued. However, conduct
and business arrangements that do not fully satisfy an applicable safe harbor may result in increased scrutiny by government enforcement
authorities such as the OIG or the United States Department of Justice.
Many states have adopted laws similar to
the U.S. federal anti-kickback statute. Some of these state prohibitions are broader than the U.S. federal statute, and apply
to the referral of patients and recommendations for healthcare items or services reimbursed by any source, not only the Medicare
and Medicaid programs. Government officials have focused certain enforcement efforts on marketing of healthcare items and services,
among other activities, and have brought cases against individuals or entities with sales personnel who allegedly offered unlawful
inducements to potential or existing physician customers in an attempt to procure their business.
U.S. False Claims Act
The U.S. False Claims Act prohibits any
person from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment by a federal healthcare
program or knowingly making, or causing to be made, a false statement or record in order to have a false claim paid or avoiding,
decreasing or concealing an obligation to pay money to the federal government. The federal government’s interpretation of
the scope of the law has in recent years grown increasingly broad. Most states also have statutes or regulations similar to the
U.S. False Claims Act, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states,
apply regardless of the payor. Sanctions under these federal and state laws may include civil monetary penalties, exclusion of
a manufacturer’s products from reimbursement under government programs, criminal fines and imprisonment. Several drug manufacturers
have been prosecuted under the false claims laws for allegedly providing free drugs to physician customers with the expectation
that the physician customers would bill federal programs for the product. In addition, several recent cases against drug manufacturers
have alleged that the manufacturers improperly promoted their products for “off-label” use, outside of the scope of
the FDA-approved labeling.
U.S. Health Insurance Portability and Accountability
Act of 1996 (HIPAA)
HIPAA created a new federal healthcare
fraud statute that prohibits knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private
payors. A violation of this statute is a felony and may result in fines, imprisonment or exclusion from government-sponsored programs.
Among other things, HIPAA also imposes new criminal penalties for knowingly and willfully falsifying, concealing or covering up
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, along with theft or embezzlement in connection with a healthcare benefits program
and willful obstruction of a criminal investigation involving a federal healthcare offense. Further, HIPAA, as amended by the
Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and their respective implementing regulations,
which also imposes certain obligations, including mandatory contractual terms, with respect to safeguarding the privacy and security
of individually identifiable health information of covered entities subject to the rule, such as health plans, healthcare clearinghouses
and certain healthcare providers as well as their business associates, independent contractors of a covered entity that perform
certain services involving the use or disclosure of individually identifiable health information on its behalf and their subcontractors
that use, disclose, access, or otherwise process individually identifiable health information.
U.S. Affordable Care Act Section 6002 (the Sunshine
Act)
Enacted in 2010 under the Affordable Care
Act of 2010, Public Law No. 111-148 (the “ACA”), the Physician Payments Sunshine Act is a national disclosure
program that promotes transparency by publishing data on the financial relationships between the healthcare industry (applicable
manufacturers) and healthcare providers (physicians and teaching hospitals) on a publicly accessible website. The Sunshine Act
requires that certain manufacturers of drugs, devices, biologicals, or medical supplies report payments or other transfers of
value made to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors) and teaching hospitals
as well as certain ownership or investment interests held by physicians or their immediate family members to the Centers for Medicare &
Medicaid Services (CMS). Beginning in 2022, applicable manufacturers will also be required to report information regarding payments
and other transfers of value provided during the previous year to physician assistants, nurse practitioners, clinical nurse specialists,
certified nurse anesthetists, anesthesiologist assistants, and certified nurse-midwives. A violation of this act may result in
fines and/or civil liabilities. Any payment or transfer of value that is currently prohibited under the anti-kickback statute,
the U.S. False Claims Act, or other health care fraud and abuse laws may still be subject to fines, sanctions, or lawsuit.
Non-U.S. regulation
Marketing authorization requests outside
of the United States are subject to regulatory approval of the respective authorities in the country in which we would like to
market. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary widely from
country to country. No action can be taken to market any product in a country until an appropriate application has been approved
by the regulatory authorities in that country. The current approval process varies from country to country, and the time spent
in gaining approval varies from that required for FDA approval. In certain countries, the sales price of a product must also be
approved prior to its marketing application approval. The pricing review period often begins after market approval is granted.
Even if a product is approved by a regulatory authority, satisfactory prices might not be approved for such product. In the European
Union, authorization can be obtained through one of the following pathways: (i) the “centralized” procedure,
described in greater detail below, with applications made directly to the EMA leading to the grant of a European marketing authorization
by the European Commission, (ii) the “decentralized procedure,” whereby companies may apply for simultaneous
authorization in more than one EU country of medicinal products that have not yet been authorized in any EU country, or do not
fall within the mandatory scope of the centralized procedure, (iii) the “mutual recognition” procedure, in which
applications are made to one or more member states, leading to national marketing authorizations mutually recognized by other
member states, or (iv) a “national authorization” application made to a single EU member state. Based on the
nature of our products, the marketing authorization will be through the centralized procedure.
The EMA is responsible for the centralized
procedure, which results in a single marketing authorization that is valid across the European Union. Applications through the
centralized procedure are submitted directly to the EMA. The procedure consists of three milestones:
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Evaluation
by a scientific committee for up to seven months, at the end of which the committee adopts an opinion on whether the drug
should be approved for marketing. During this period, the EMA may send questions to the company, at which time the aforementioned
review clock stops until answers are provided.
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(ii)
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Formal
decision by the EMA’s Committee for Medicinal Products for Human Use, which is transmitted to the European Commission,
which issues a formal decision on the authorization of the product.
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(iii)
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Marketing
authorization: Once a European Community marketing authorization has been granted, the marketing-authorization holder can
begin to make the medicine available to patients and healthcare professionals in all EU countries.
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Even after a company receives marketing
authorization, EU law regulates the distribution, classification for supply, labeling and packaging, and advertising of medicinal
products for human use. The European Union also regulates the manufacture of medicinal products, requiring cGMP, set forth in
the EU Guidelines to Good Manufacturing Practice — Medicinal Products for Human and Veterinary Use.
EU pharmacovigilance directives and regulations
require a company to establish post-market surveillance systems that include individual adverse reaction case reports, periodic
safety update reports, and company-sponsored post-authorization safety studies. If a medicinal product’s overall risk and
benefit profile is found to have changed significantly for any reason, it may be required to be varied, withdrawn, or have its
use suspended.
Patent term restoration and extension
A patent claiming a new drug product may
be eligible for a limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984 (the
“Hatch-Waxman Act”) which permits a patent restoration of up to five years for patent term lost during product development
and FDA regulatory review. The restoration period granted is typically one-half the time between the effective date of an IND
and the submission date of an NDA, plus the time between the submission date of an NDA and the ultimate approval date. Patent
term restoration cannot be used to extend the remaining term of a patent past a total of 14 years from the product’s approval
date. Only one patent applicable to an approved drug product is eligible for the extension, and the application for the extension
must be submitted prior to the expiration of the patent in question. A patent that covers multiple drugs for which approval is
sought can only be extended in connection with one of the approvals. The PTO reviews and approves the application for any patent
term extension or restoration in consultation with the FDA.
Pharmaceutical coverage, pricing and reimbursement
Significant uncertainty exists as to the
coverage and reimbursement status of any products for which we may seek to obtain regulatory approval. In the United States and
other markets, sales of any future product for which we receive regulatory approval for commercial sale will depend in part on
the availability of reimbursement from third-party payors. Third-party payors include government health administrative authorities,
managed care providers, private health insurers and other organizations. The process for determining whether a payor will provide
coverage for a drug product may be separate from the process for setting the price or reimbursement rate that the payor will pay
for the drug product. Third-party payors may limit coverage to specific drug products on an approved list, or formulary, which
might not include all of the FDA-approved drug products for a particular indication. Third-party payors are increasingly challenging
the price and examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety
and efficacy. We may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness
of our prospective products, in addition to the costs required to obtain the FDA approvals. Additionally, a future product may
not be considered medically necessary or cost-effective. A payor’s decision to provide coverage for a drug product does
not imply that an adequate reimbursement rate will be approved. 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.
In March 2010, a significant healthcare
reform was signed into law in the United States. The healthcare reform law substantially changes the way healthcare will be financed
by both governmental and private insurers, and significantly impacts the pharmaceutical industry. The healthcare reform law contains
a number of provisions, including those governing enrollment in federal healthcare programs, reimbursement changes and fraud and
abuse, which has impacted existing government healthcare programs and resulted in the development of new programs, including Medicare
payment for performance initiatives and improvements to the physician quality reporting system and feedback program.
Additionally, the healthcare reform law:
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Increased
the minimum level of Medicaid rebates payable by manufacturers of brand-name drugs from 15.1% to 23.1%;
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Required
collection of rebates for drugs paid by Medicaid managed care organizations; and
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Imposed
a non-deductible annual fee on pharmaceutical manufacturers or importers who sell “branded prescription drugs”
to specified federal government programs.
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There have been executive, judicial and
Congressional challenges to certain aspects of the healthcare reform law. The U.S. Supreme Court is currently reviewing the constitutionality
of the healthcare reform law, although it is unknown when a decision will be made. It is unclear how the Supreme Court ruling,
other such litigation, and the healthcare reform measures of the Biden administration will impact the healthcare reform law and
our business.
In addition, there has been increasing
legislative and enforcement interest in the United States with respect to drug pricing practices. Specifically, there have been
several recent U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things,
bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, and reform
government program reimbursement methodologies for drugs. At the federal level, the Trump administration used several means to
propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy initiatives.
It is unclear whether the Biden administration will work to reverse these measures or pursue similar policy initiatives. We expect
additional healthcare reform initiatives to be adopted in the future, particularly in light of the new presidential administration.
We also expect these initiatives to increase pressure on drug pricing. Further, it is possible that additional governmental action
is taken in response to the evolving effects of the COVID-19 pandemic.
In the European Union, pricing and reimbursement
schemes vary widely from country to country. Some countries provide that drug products may be marketed only after agreeing on
a reimbursement price. Some countries may require the completion of additional studies that compare the cost-effectiveness of
a particular drug to currently available therapies. For example, the European Union provides options for its member states to
restrict the range of drug products for which their national health insurance systems provide reimbursement and to control the
prices of medicinal products for human use. European Union member states may approve a specific price for a drug product or may
instead adopt a system of direct or indirect controls on the profitability of the company placing the drug product on the market.
Other member states allow companies to set their own prices for drug products, but monitor and control company profits. The downward
pressure on health care costs in general, particularly prescription drugs, 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 competitive pressure that may reduce pricing within a country. Any country that has price controls or reimbursement
limitations for drug products may not allow favorable reimbursement and pricing arrangements.
Environmental, Health and Safety Matters
We, our agents and our service providers,
including our manufacturers, may be subject to various environmental, health and safety laws and regulations, including those
governing air emissions, water and wastewater discharges, noise emissions, the use, management and disposal of hazardous, radioactive
and biological materials and wastes and the cleanup of contaminated sites. We believe that our business, operations and facilities,
including, to our knowledge, those of our agents and service providers, are being operated in compliance in all material respects
with applicable environmental and health and safety laws and regulations. All information with respect to any chemical substance
is filed and stored as a Material Safety Data Sheet, as required by applicable environmental regulations. Based on information
currently available to us, we do not expect environmental costs and contingencies to have a material adverse effect on us. However,
significant expenditures could be required in the future if we, our agents or our service providers are required to comply with
new or more stringent environmental or health and safety laws, regulations or requirements.
Employees
As of December 31, 2020, we had 3
employees based in Jerusalem, Israel and our Cambridge, Massachusetts office. The following table sets forth the total number
of full-time employees as of the periods indicated by function and geography:
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As
of December 31,
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2020
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2019
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Function:
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Administrative
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3
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8
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Research and development
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0
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8
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Total
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3
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16
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Geography:
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Israel
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2
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9
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Cambridge, Massachusetts, USA
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1
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7
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Total
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3
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16
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Local labor laws govern the length of the
workday and workweek, minimum wages for employees, procedures for hiring and dismissing employees, determination of severance
pay, annual leave, sick days, advance notice of termination, Social Security payments or regional equivalents, and other conditions
of employment and include equal opportunity and anti-discrimination laws. None of our employees is party to any collective bargaining
agreements. We generally provide our employees with benefits and working conditions beyond the required minimums. We have a good
relationship with our employees, and have never experienced any employment-related work stoppages.
Available Information
The SEC maintains an internet site that
contains reports, proxy and information statements, and other information regarding issuers that file electronically with the
SEC. Our filings with the SEC are available to the public through this website at http://www.sec.gov.
We maintain a corporate website at www.anchiano.com.
Our reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, including our Annual Reports
on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to those reports,
are accessible through our website, free of charge, as soon as reasonably practicable after these reports are filed electronically
with, or otherwise furnished to, the SEC. Information contained on, or that can be accessed through, our website is not incorporated
by reference into this Annual Report on Form 10-K, and you should not consider information on our website to be part of this
Annual Report on Form 10-K.
You should consider carefully the following
information about the risks described below, together with the other information contained in this Annual Report 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.
Risk Factors Summary
Risks Related to the Proposed Merger with Chemomab
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If
the proposed merger with Chemomab is not consummated, Anchiano could suffer materially
and Anchiano’s share price could decline.
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If
the Merger is not completed, Anchiano’s board of directors may decide to pursue
a dissolution and liquidation of Anchiano. In such an event, the amount of cash available
for distribution to our shareholders, if any, will depend heavily on the timing of such
liquidation as well as the amount of cash that will need to be reserved for commitments
and contingent liabilities.
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Our
shareholders may not realize a benefit from the Merger commensurate with the ownership
dilution they will experience in connection with the Merger.
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Should
the Merger be consummated, the combined company may not pursue the advancement of Anchiano’s
existing developmental programs.
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Risks Related to Our Business
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The
current pandemic of COVID-19 and the future outbreak of other highly infectious or contagious
diseases could seriously affect our business.
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We
will require substantial additional funds to complete our research and development activities,
and, if additional funds are not available, we may need to significantly scale back or
cease our business.
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There
is substantial doubt as to whether we can continue as a going concern.
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We
depend completely on the success of our two preclinical programs and, if we are not able
to advance these successfully through the preclinical and clinical development process,
our business prospects will be materially and adversely affected.
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Risks Related to our Preclinical Development
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Our
preclinical developmental programs are at an early stage. As a result, we are unable
to predict if, or when, we will successfully develop or commercialize any product under
either program.
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If
the preclinical and clinical studies that we are required to conduct to gain regulatory
approval are delayed or unsuccessful, we may not be able to market any product that we
develop in the future.
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If
toxicities or serious adverse or undesirable side effects are identified during preclinical
or clinical development, we may need to abandon or limit such development.
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Risks Related to our Dependence on Third Parties
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We
are substantially dependent on our Collaboration Agreement with ADT. If we fail to comply
with our obligations under the Collaboration Agreement into which we entered with ADT,
we could lose development and commercialization rights that are critical to the continuation
of our business if the Merger is not consummated.
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We
expect to rely significantly on preclinical contract research organizations and clinical
research organizations to assist us with the development of the Compounds and any product
that we develop in the future.
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If
we, or if our service providers or any third-party manufacturers, fail to comply with
regulatory requirements, we or they could be subject to enforcement actions, which could
adversely affect our ability to market and sell a product we develop in the future.
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Risks Related to our Operations
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If
we are unable to re-hire and retain qualified employees, our ability to implement our
business plan may be adversely affected.
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Product
liability claims or lawsuits could cause us to incur substantial liabilities.
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Significant
disruptions of our information technology systems, or those of our third-party vendors,
or security breaches could adversely affect our business operations and/or result in
the loss, misappropriation and/or unauthorized access, use or disclosure of, or the prevention
of access to, confidential information, including, among other things, trade secrets
or other intellectual property, proprietary business information and personal information,
and could result in financial, legal, business, and reputational harm to us.
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Risks Related to Government Regulation
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Our
relationships with customers and third-party payors will be subject to applicable anti-kickback,
fraud and abuse and other healthcare laws and regulations, which could expose us to criminal
sanctions, civil penalties, program exclusion, contractual damages, reputational harm
and diminished profits and future earnings.
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Coverage
and adequate reimbursement may not be available for any future product candidates, which
could make it difficult for us to sell profitably, if approved.
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Risks Related to Our Intellectual Property
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We
may be required in the future to license patent rights from third-party owners in order
to develop a product. If we cannot obtain such licenses, or if such owners do not properly
maintain or enforce the patents underlying such licenses, our competitive position and
business prospects will be harmed.
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If
we are unable to obtain and enforce patent protection for our inventions, our ability
to develop and commercialize any product that we develop in the future will be harmed.
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Intellectual
property rights do not necessarily address all potential threats to our competitive advantage.
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Risks Related to the ADSs
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The
ADS price could continue to be highly volatile and you may not be able to resell your
ADSs at or above the price you paid for them.
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A
limited number of shareholders will have the ability to influence the outcome of director
elections and other matters requiring shareholder approval.
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Because
we no longer qualify as a foreign private issuer, we are required to comply fully with
the reporting requirements of the Exchange Act applicable to U.S. domestic issuers and,
as a result, are have incurred and will continue to incur significant legal, accounting
and other expenses that we would not incur as a foreign private issuer.
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You
may be subject to limitations on transfer of your ADSs.
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Risks Related to the Proposed Merger with Chemomab (the
“Merger”)
If the proposed merger with Chemomab
is not consummated, Anchiano could suffer materially and Anchiano’s share price could decline.
The
consummation of the proposed Merger with Chemomab is subject to a number of closing conditions, including the approval by our
shareholders, approval by Nasdaq of our initial listing application of our ordinary shares represented by American Depositary
Shares in connection with the Merger, and other customary closing conditions. In addition, at the closing date of the Merger,
the net cash held by Anchiano, as described in the Merger Agreement, shall be positive or zero, or, if it is negative, the deficit
in such net cash at the closing date of the Merger shall be no greater than $300,000. We are targeting a closing of the transaction
in March-April 2021.
If the proposed Merger
is not consummated, we may be subject to a number of material risks, and our share price could be adversely affected, as follows:
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We
have incurred and expect to continue to incur significant expenses related to the proposed
Merger with Chemomab, even if the Merger is not consummated.
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The
Merger Agreement contains covenants restricting our solicitation of competing acquisition
proposals and the conduct of our business between the date of signing the Merger Agreement
and the closing of the Merger. As a result, significant business decisions and transactions
before the closing of the Merger require the consent of Chemomab. Accordingly, we may
be unable to pursue business opportunities that would otherwise be in our best interest
as a standalone company. We have invested significant time and resources in the transaction
process and if the Merger Agreement is terminated we will have a limited ability to continue
our current operations without obtaining additional financing.
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Our
collaborators and other business partners and investors in general may view the failure
to consummate the Merger as a poor reflection on our business or prospects.
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Some
of our collaborators and other business partners may seek to change or terminate their
relationships with us as a result of the proposed Merger or the failure thereof.
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As
a result of the Merger, current and prospective employees could experience uncertainty
about their future roles within the combined company. This uncertainty may adversely
affect our ability to retain our key employees, who may seek other employment opportunities.
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Our
management team may be distracted from day to day operations as a result of the proposed
Merger.
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Nasdaq
could determine to delist our ADSs which could have an adverse effect on the value of
our ADSs and any future ability to raise capital.
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In addition, if the
Merger Agreement is terminated and our board of directors determines to seek another business combination, it may not be able
to find a third party willing to provide equivalent or more attractive consideration than the consideration to be provided by
each party in the Merger. In such circumstances, our board of directors may elect to, among other things, divest all or a portion
of our business, or take the steps necessary to liquidate all of our business and assets, and in either such case, the consideration
that we receive may be less attractive than the consideration to be received by us pursuant to the Merger Agreement and related
financing.
If the Merger is not completed, Anchiano’s
board of directors may decide to pursue a dissolution and liquidation of Anchiano. In such an event, the amount of cash available
for distribution to our shareholders, if any, will depend heavily on the timing of such liquidation as well as the amount of cash
that will need to be reserved for commitments and contingent liabilities.
There
can be no assurance that the Merger will be completed. If the Merger is not completed, our board of directors may decide to pursue
a dissolution and liquidation of Anchiano. In such an event, the amount of cash available for distribution to our shareholders
will depend heavily on the timing of such decision, as with the passage of time the amount of cash available for distribution
will be reduced as we continue to fund our operations. In addition, if our board of directors were to approve and recommend, and
our shareholders were to approve, a dissolution and liquidation, we would be required under Israeli law to pay our outstanding
obligations, as well as to make reasonable provision for contingent and unknown obligations, prior to making any distributions
in liquidation to our shareholders. As a result of this requirement, a portion of our remaining cash assets may need to be reserved
pending the resolution of such obligations. In addition, we may be subject to litigation or other claims related to a dissolution
and liquidation. If a dissolution and liquidation were pursued, our board of directors, in consultation with its advisors, would
need to evaluate these matters and make a determination about a reasonable amount to reserve. Accordingly, holders of Anchiano
ADSs could lose all or a significant portion of their investment in the event of Anchiano’s liquidation, dissolution or
winding up.
Some Anchiano officers and directors
have interests in the Merger that may influence them to support or approve the Merger.
Some of our officers
and directors participate in arrangements that provide them with interests in the Merger that are different from our shareholders,
including, among others, the continued service as an officer or director of the combined company, continued indemnification and
the potential ability to sell an increased number of shares of the combined company in accordance with Rule 144 under the
Securities Act of 1933, as amended. These interests, among others, may influence our officers and directors to support or approve
the Merger.
The Merger may be completed even though
material adverse changes may result from the announcement of the Merger, industry-wide changes and other causes.
In
general, either party can refuse to complete the Merger if there is a material adverse change affecting the other party following
December 14, 2020, the date of the Merger Agreement. However, some types of changes do not permit either party to
refuse to complete the Merger, even if such changes would have a material adverse effect on Anchiano, to the extent they resulted
from the following (unless, in some cases, they have a disproportionate effect on Anchiano or Chemomab, as the case may be):
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changes
or conditions generally affecting the industries or markets in which Anchiano and Chemomab
operate, and changes in the industries in which Anchiano and Chemomab operate regardless
of geographic region (including legal and regulatory changes);
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acts
of war, armed hostilities or terrorism;
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changes
in financial, banking or securities markets;
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any
change in, or any compliance with or action taken for the purpose of complying with,
any federal, state, national, foreign, material local or municipal or other law, statute,
constitution, principle of common law, resolution, ordinance, code, edict, decree, rule,
regulation, ruling or requirement issued, enacted, adopted, promulgated, implemented
or otherwise put into effect by or under the authority of any governmental body (including
under the authority of Nasdaq or the Financial Industry Regulatory Authority), or changes
in any interpretations thereof;
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any
change in U.S. generally accepted accounting principles or interpretations thereof;
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the
announcement of the Merger Agreement or the pendency of the Merger;
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the
taking of any action required to be taken by the Merger Agreement;
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pandemics
(including the COVID-19 pandemic), including any worsening thereof, man-made disasters,
natural disasters, acts of God or other force majeure event; and
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changes
in U.S. or non-U.S. general economic or political conditions, or in the financial, credit
or securities markets in general, including any shutdown of any governmental authority.
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If adverse changes occur
but Anchiano and Chemomab must still complete the Merger, the combined company’s share price may suffer.
The market price of the combined
company’s shares may decline as a result of the Merger.
The market price
of the combined company’s shares may decline as a result of the Merger for a number of reasons, including if:
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the
combined company does not achieve the perceived benefits of the Merger as rapidly or
to the extent anticipated by financial or industry analysts;
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the
effect of the Merger on the combined company’s business and prospects is not consistent
with the expectations of financial or industry analysts; or
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investors
react negatively to the effect on the combined company’s business and prospects
from the Merger.
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Our shareholders may not realize a
benefit from the Merger commensurate with the ownership dilution they will experience in connection with the Merger.
If the combined company
is unable to realize the strategic and financial benefits currently anticipated from the Merger, our shareholders will have experienced
substantial dilution of their ownership interest without receiving any commensurate benefit. Significant management attention
and resources will be required to integrate the two companies. Delays in this process could adversely affect the combined company’s
business, financial results, financial condition and share price following the Merger. Even if the combined company were able
to integrate the business operations successfully, there can be no assurance that this integration will result in the realization
of the full benefits of synergies, innovation and operational efficiencies that may be possible from this integration and that
these benefits will be achieved within a reasonable period of time.
During the pendency of the Merger,
we will be subject to contractual limitations set forth in the Merger Agreement that restrict our ability to enter into business
combination transactions with another party.
Covenants
in the Merger Agreement impede our ability to make acquisitions or complete other transactions that are not in the ordinary course
of business pending completion of the Merger. As a result, if the Merger is not completed, we may be at a disadvantage to our
competitors. In addition, while the Merger Agreement is in effect and subject to limited exceptions, we are prohibited from soliciting,
initiating, encouraging or taking actions designed to facilitate any inquiries or the making of any proposal or offer that
could lead to entering into certain extraordinary transactions with any third party, such as a sale of assets, an acquisition
of such party’s securities, a tender offer for such party’s securities, a merger or other business combination outside
the ordinary course of business. Any such transactions could be favorable to our shareholders.
Because the lack of a public market
for Chemomab’s ordinary shares makes it difficult to evaluate the fairness of the Merger, Chemomab’s shareholders
may receive consideration in the Merger that is greater than the fair market value of Chemomab’s ordinary shares.
The outstanding share
capital of Chemomab is privately held and is not traded in any public market. The lack of a public market makes it difficult to
determine the fair market value of Chemomab’s ordinary shares. Since the number of Anchiano ADSs to be issued to Chemomab’s
shareholders was determined based on negotiations between the parties, it is possible that the value of the our ADSs to be issued
in connection with the Merger will be greater than the fair market value of Chemomab’s ordinary shares.
The combined company
will incur significant transaction costs as a result of the Merger, including investment banking, legal and accounting fees. In
addition, the combined company will incur significant consolidation and integration expenses which cannot be accurately estimated
at this time. Actual transaction costs may substantially exceed estimates and may have an adverse effect on the combined company’s
financial condition and operating results.
Should the Merger be consummated, Chemomab’s
principal shareholders, and certain executive officers and directors, will own a significant percentage of Anchiano shares and
will be able to exert significant control over matters submitted to the shareholders for approval.
Under
the terms of the Merger Agreement, on a pro-forma basis and after closing of the Merger but prior to the closing of the planned
financing to occur as a condition to the completion of the Merger of at least $30 million , the Chemomab securityholders
immediately before the Merger are expected to own approximately 90% of the aggregate number of ordinary shares of Anchiano (on
a fully diluted basis) and the securityholders of Anchiano immediately before the Merger are expected to own approximately 10%
of the aggregate number of ordinary shares of Anchiano (on a fully diluted basis), subject to certain assumptions and to the net
cash adjustment mechanism set forth in the Merger Agreement.
After the Merger with
Anchiano, certain of Chemomab’s officers and directors, and shareholders who held more than 5% of the Chemomab ordinary
shares, will beneficially own a significant percentage of Anchiano securities. This significant concentration of share ownership
may adversely affect the trading price for Anchiano securities because investors often perceive disadvantages in owning shares
in companies with controlling shareholders. These shareholders, if they acted together, could significantly influence all matters
requiring approval by the shareholders following the Merger, including the election of directors and the approval of mergers or
other business combination transactions. The interests of these shareholders may not always coincide with the interests of other
shareholders.
Certain shareholders could attempt
to influence changes within Anchiano that could adversely affect Anchiano’s operations, financial condition and the value
of Anchiano’s ordinary shares.
Anchiano’s shareholders
may from time to time seek to acquire a controlling stake in Anchiano, engage in proxy solicitations, advance shareholder proposals
or otherwise attempt to effect changes. Campaigns by shareholders to effect changes at publicly-traded companies are sometimes
led by investors seeking to increase short-term shareholder value through actions such as financial restructuring, increased debt,
special dividends, stock repurchases or sales of assets or the entire company. Responding to proxy contests and other actions
by activist shareholders can be costly and time-consuming and could disrupt Anchiano’s operations and divert the attention
of the Anchiano board of directors and senior management from the pursuit of the proposed transaction. These actions could adversely
affect Anchiano’s operations, financial condition, Anchiano’s ability to consummate the Merger and the value of Anchiano
ordinary shares.
Should the Merger be consummated, the
combined company may not pursue the advancement of Anchiano’s existing developmental programs.
In
September 2019, we entered into an option to license agreement with ADT Pharmaceuticals, LLC pursuant to which the parties
agreed to conduct research and development activities of novel small-molecule inhibitors (RAS and PDE10/β-catenin).
As part of the arrangement, we are primarily responsible for the research, development, manufacturing and regulatory activities
and ADT assists with the research activities as necessary in exchange for a quarterly fee from us. In connection with the agreement,
ADT also granted us exclusive rights to research, develop, manufacture and commercialize the aforementioned compounds relating
to patents owned by ADT and any products containing such compounds worldwide.
Following
the effective time of the Merger, Chemomab (as successor in interest to Anchiano) will have sole authority over whether and how
to pursue the continued development of the RAS compounds pursuant to the ADT License Agreement (if at all), and there is no guarantee
that Chemomab will pursue the continued development. Anchiano and Chemomab (as successor in interest to Anchiano following
the Merger) may decide to assign the license agreement or terminate the agreement at any time in its entirety or on a compound-by-compound
basis after providing 90 days written notice to ADT.
Anchiano and Chemomab have become involved
in securities litigation in connection with the Merger and may become involved in additional securities litigation or shareholder
derivative litigation in connection with the Merger, which has and may continue to divert the attention of Anchiano and Chemomab
management and harm the combined company’s business, and insurance coverage may not be sufficient to cover all related costs
and damages.
Securities litigation
or shareholder derivative litigation frequently follows the announcement of certain significant business transactions, such as
the sale of a business division or announcement of a business combination transaction. As disclosed in Note 10 of Notes to Consolidated
Financial Statements, Anchiano and Chemomab have been named as defendants in securities litigation in connection with the Merger
and may become involved in additional securities litigation or shareholder derivative litigation in connection with the Merger,
and the combined company may become involved in this type of litigation in the future. Litigation often is expensive and diverts
management’s attention and resources, which could adversely affect the business of Anchiano, Chemomab and the combined company.
Should the Merger be consummated, following
which Chemomab’s business is expected to constitute a significant portion of the business of the combined company, additional
significant risks may apply to the combined business as detailed in the proxy statement/prospectus previously filed on February 12,
2021, and incorporated by reference herein (File No. 333-252070), and will include “Risks Related to Chemomab’s
Business, Research and Development and the Biopharmaceutical Industry,” “Risks Related to Chemomab’s Intellectual
Property Rights,” “Risks Related to Chemomab’s Regulatory Approvals,” “Risks Related to Commercialization
of Chemomab’s Product Candidates,” “Risks Related to Chemomab’s Incorporation and Location in Israel,”
or “Risks Related to the Combined Company” occur, those events could cause the potential benefits of the Merger not
to be realized.
Risks Related to our Business
The
current pandemic of COVID-19 and the future outbreak of other highly infectious or contagious diseases could seriously
affect our business.
Broad-based business or economic disruptions
could adversely affect our planned research and development activities and ability to raise additional funds. For example, to
date, the COVID-19 pandemic has caused significant disruptions to the Israeli, United States and global economy and has contributed
to significant volatility and negative pressure in financial markets. The global impact of the outbreak is continually evolving
and, as additional cases of the virus are identified, many countries, including Israel and the United States, have reacted by
instituting quarantines, restrictions on travel and mandatory closures of businesses. Most countries, including where we or the
third parties with whom we engage operate, have also reacted by instituting quarantines, restrictions on travel, “shelter
in place” rules, and restrictions on types of business that may continue to operate.
The extent to which COVID-19 may impact our
activities and operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence,
such as the duration of the outbreak, the severity of COVID-19, or the effectiveness of actions to contain and treat COVID-19.
The continued spread of COVID-19 globally could adversely impact our activities and operations in Israel and the United States,
including our ability to raise additional funds, identify third parties we engage, or seek to engage for preclinical and clinical
development activities, and identify and engage with third parties within the framework of other business and strategic initiatives.
These could all delay progress, increase our operating expenses, and have a material adverse effect on our financial results.
We cannot presently predict the scope and
severity of any potential business shutdowns or disruptions. If we or any of the third parties with whom we engage, however, were
to experience shutdowns or other business disruptions, our ability to conduct our business in the manner and on the timelines
presently planned could be materially and negatively affected, which could have a material adverse impact on our business and
our results of operation and financial condition.
We recently changed our business strategy,
are now a preclinical development company, and may encounter difficulties in managing this transition, which could significantly
disrupt our business.
On November 15, 2019, we announced
the discontinuation of our Phase 2 Codex study evaluating the gene therapy inodiftagene vixteplasmid in patients with bladder
cancer. After analysis of the data, we determined that there is a low probability of surpassing the predefined futility threshold
at the planned interim analysis, which required 10 complete responses in 35 patients. The data also indicated a low probability
of achieving an efficacy profile that, in our estimation, would be necessary to support regulatory approval. As a result, we changed
our business strategy in November 2019 to devote our full resources to our small molecule pan-RAS inhibitor and PDE10/β-catenin
inhibitor programs that we acquired in September 2019. To manage this change, we undertook a workforce reduction in order
to accommodate our new business strategy. In particular, as previously announced, we closed our office and laboratories located
in Israel due to the discontinuation of our Phase 2 Codex study. Following the closure of the Israeli facilities, our sole
office was located in Cambridge, Massachusetts. Our lease for this office in Cambridge, Massachusetts terminated on February 28,
2021. We are allowed, however, to continue using this address to receive mail. Due to our limited resources, we may not be able
to effectively manage this change in our business strategy. If our current management team is unable to effectively manage this
transition, our expenses may increase more than expected and we may not be able to implement our business strategy. In addition,
as discussed above, our strategy may be subject to review.
We will require substantial additional
funds to complete our research and development activities, and, if additional funds are not available, we may need to significantly
scale back or cease our business.
We have generated substantial accumulated
losses since inception. We have not generated any revenues to date and do not expect to generate any revenue in the near future.
As a result, we expect to continue to experience negative cash flow for the foreseeable future. We can offer no assurance that
we will ever operate profitably or that we will generate positive cash flow in the future. A significant portion of our research
and development activities has been financed by the issuance of equity securities (including in our initial public offering in
February 2019). There is no certainty that we will be able to obtain additional sources of funding for our research and development
activities (see the risk factor entitled “Raising additional capital may cause dilution to our existing shareholders, restrict
our operations or require us to relinquish rights to our technologies or assets”). A lack of adequate funding may cause
a cessation of all or part of our research and development activities and business.
We will require substantial funds to discover,
develop, protect and conduct research and development for our prospective products, including pre-clinical studies and clinical
trials, and to manufacture and market any such product that may be approved for commercial sale. As of December 31, 2020,
we held approximately $5.4 million in cash and cash equivalents. Our current available funds are not sufficient for all of these
activities and we expect our current available funds to be adequate to satisfy our capital and operating needs through to the
completion of the contemplated merger. Our financing needs may also increase substantially because of the results of our research
and development, preclinical studies and clinical trials and costs arising from additional regulatory approvals. We may not succeed
in raising additional funds in a timely manner. The timing of our need for additional funds will depend on a number of factors,
which are difficult to predict or may be outside of our control, including:
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the resources, time and costs required to initiate
and complete our research and development and to initiate and complete preclinical studies and clinical trials and to obtain
regulatory approvals for any products that we develop in the future;
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progress in our research and development programs;
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the timing and amount of milestone, royalty
and other payments; and
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costs necessary to protect any intellectual
property rights.
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If our estimates and predictions relating
to any of these factors are incorrect, we may need to modify our business plan. Additional funds may not be available to
us when needed on acceptable terms, or at all. If we are unable to raise funds on acceptable terms, we may not be able to execute
our business plan, take advantage of future opportunities, or respond to competitive pressures or unanticipated requirements.
This may seriously harm our business, financial condition and results of operations. If we are not able to continue operations,
investors may suffer a complete loss of their investments in our securities.
We are now an early-stage preclinical
biotechnology company and may never be able to successfully develop a marketable product. We have only recently acquired two preclinical
programs, and there is no assurance that our future operations will generate any revenue. If we cannot develop a marketable product
or generate sufficient revenues, we may be required to suspend or cease operations.
We are now an early-stage preclinical biotechnology
company that recently acquired an option to develop, manufacture and commercialize two developmental programs targeting oncogenic
pathways that are focused on small molecule inhibitors RAS and PDE10/ß-catenin (the “Compounds”) pursuant to
a collaboration and license agreement we entered into with ADT on September 20, 2019 (the “Collaboration Agreement”).
Our operations prior to that date were not relevant to the development of the Compounds. Our operations relating to our two current
preclinical programs have been limited to business planning, performing research, analyzing preclinical data and preparing to
advance identified molecules through additional preclinical studies. The Compounds identified by us in connection with both our
Pan-RAS and PDE10/ß-catenin programs are in the concept, research and preclinical stages. As a result, we cannot be certain
that our research and development efforts will be successful or, if successful, that any products that are developed from the
Compounds will ever be approved by the U.S. FDA. Typically, it takes 10 to 12 years to develop one new medicine from the time
it is discovered to when it is available for treating patients, and longer timeframes are not uncommon. Even if approved, any
products that are developed from the Compounds may not generate sufficient commercial revenues for us to continue operating. Our
operating history should not be considered when evaluating our performance as it relates to our abandoned bladder cancer product
candidate. As a result, we are subject to all of the business risks associated with a new enterprise, including, but not limited
to, risks of unforeseen capital requirements, failure of business strategy either in research, preclinical testing or in clinical
trials, failure to establish business relationships, and competitive disadvantages against other companies. If we fail to become
profitable, we may be forced to suspend or cease our operations.
We do not have a history of commercial
sales and do not anticipate earning operating income over the coming years, and our failure to receive marketing approval for
a product that we develop in the future would negatively impact our ability to continue our business operations.
Our predecessor entity, BioCancell Therapeutics
Inc. (“BTI”), was formed on July 26, 2004, and since then we have been a development-stage company. We have never
received marketing approval for any product candidate and, as a result, have not recorded any sales. We expect that we will operate
at a loss over the coming years, as we do not expect to generate any revenue from operations in the near term. We may not be able
to develop, or receive marketing approval for, any product from our current preclinical research and development efforts. In addition,
even if we obtain all necessary approvals to market a product, there is no certainty that there will be sufficient demand to justify
the production and marketing of any such product.
There is substantial doubt as to whether
we can continue as a going concern.
Our consolidated financial statements as
of December 31, 2020 contain an explanatory paragraph that states that our recurring losses from operations raise substantial
doubt about our ability to continue as a going concern. Our financial statements do not include any measurement or presentation
adjustment for assets or liabilities that might result if we would be unable to continue as a going concern. We have incurred
operating losses since inception, have not generated any revenues and have not achieved profitable operations. Our net loss, accumulated
during the development stage through December 31, 2020, totaled approximately $117 million, and we expect to continue to
incur substantial losses in future periods while we continue our research and development activities.
We depend completely on the success
of our two preclinical programs and, if we are not able to advance these successfully through the preclinical and clinical development
process, our business prospects will be materially and adversely affected.
We have no products that are in active
clinical development or approved for commercial sale. We expect that a substantial portion of our efforts and expenditures over
the next few years will be devoted to the research and development of small molecule inhibitors (pan-RAS and PDE10/β-catenin
programs). Our business depends completely on the successful preclinical and clinical development of products derived from the
Compounds. We cannot be certain that any such product candidate will be developed or receive regulatory approval given that the
Compounds remain in early preclinical stages of development.
Our ability to develop, obtain regulatory
approval for, and ultimately commercialize, a product derived from the Compounds effectively will depend on many factors, including
the following:
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successful completion of preclinical studies
and clinical trials, which will depend substantially upon the satisfactory performance of third-party contractors;
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successful achievement of the objectives of
planned preclinical studies and clinical trials, including the demonstration of a favorable risk-benefit outcome;
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receipt of marketing approvals from the FDA
and similar regulatory authorities outside the United States;
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establishing efficient and effective commercial
manufacturing, supply and distribution arrangements;
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establishing sufficient market share and promoting
acceptance of the product by patients, the medical community and third-party payors;
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successfully executing an effective pricing
and reimbursement strategy;
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maintaining a continued acceptable safety and
adverse event profile following regulatory approval; and
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qualifying for, identifying, registering, maintaining,
enforcing and defending intellectual property rights and claims.
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The Compounds will require additional non-clinical
and clinical development, regulatory review and approval in multiple jurisdictions, substantial investment, access to sufficient
commercial manufacturing capacity and significant marketing efforts before we can be in a position to generate any revenue from
product sales. We are not permitted to market or promote any product derived from the Compounds before we receive regulatory approval
from the FDA or comparable foreign regulatory authorities, and we may never receive such regulatory approval. If we are unable
to develop or receive marketing approval in a timely manner or at all, we could experience significant delays or an inability
to commercialize products derived from the Compounds, which would materially and adversely affect our business, financial condition
and results of operations.
Raising additional capital may cause
dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies or assets.
Until such time, if ever, as we can generate
sufficient revenues, we expect to finance our cash needs through equity offerings, debt financings or other third-party funding,
marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements. We will require
substantial funding to fund our developmental efforts, our operating expenses and other activities. To the extent that we raise
additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, certain
price protection rights may be triggered and the terms of the newly issued securities may include liquidation or other preferences
that adversely affect your rights. Investors in the June 2018 fundraising are entitled to certain price protection rights
with respect to their ordinary shares and warrants in the event of a future share issue by us where the price per share is less
than the price per share reflected in our initial public offering, which triggered these rights. Additionally, debt financing,
if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such
as incurring additional debt, making capital expenditures or declaring dividends. If we are unable to obtain funding on a timely
basis, we may be required to significantly curtail one or both of our preclinical development programs, which would adversely
impact our potential revenues, results of operations and financial condition.
We may allocate our limited resources
to pursue a particular drug candidate or indication and fail to capitalize on drug candidates or indications that may later prove
to be more profitable or for which there is a greater likelihood of success.
Because we have limited financial and managerial
resources, we must limit our licensing, research, and development programs to specific drug candidates that we identify for specific
indications. As a result, we may forego or delay pursuit of opportunities with other drug candidates or for other indications
that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on
viable commercial drugs or profitable market opportunities. In addition, if we do not accurately evaluate the commercial potential
or target market for a particular drug candidate, we may relinquish valuable rights to that drug candidate through collaboration,
licensing, or other royalty arrangements when it would have been more advantageous for us to retain sole development and commercialization
rights to such drug candidate.
The pharmaceutical and biotechnology
market is highly competitive. If we are unable to compete effectively with existing products, new treatment methods and new technologies,
we may be unable to commercialize any products that we may develop in the future.
The biotechnology market is highly competitive,
is subject to rapid technological change and is significantly affected by existing rival drugs and medical procedures, new product
introductions and the market activities of other participants. Pharmaceutical and biotechnology companies, academic institutions,
governmental agencies and other public and private research organizations may pursue the research and development of technologies,
drugs or other therapeutic products for the treatment of some or all of the diseases that we are target. We also may face competition
from products that have already been approved and accepted by the medical community for the treatment of these same indications.
We are aware of a number of companies developing small molecule drugs for the treatment of cancer. Our competitors may develop
products more rapidly or more effectively than us. Many of our competitors have:
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much greater experience, financial, technical
and human resources than we have at every stage of the discovery, development, manufacture and commercialization process;
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more extensive experience in preclinical studies,
conducting clinical trials, obtaining and maintaining regulatory approvals and manufacturing and marketing products;
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products that have been approved or are in late
stages of development;
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established distribution networks;
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collaborative arrangements with leading companies
and research institutions; and
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entrenched and established relationships with
healthcare providers and payors.
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In addition, many of these companies, in
contrast to us, are well-capitalized. As a result of any of the foregoing factors, our competitors may develop or commercialize
products, including small molecule inhibitors, with significant advantages over any product that we may develop in the future.
If our competitors are more successful in commercializing their products than us, their success could adversely affect our competitive
position and harm our business prospects.
Even if we receive regulatory approval
to market a product that we develop in the future, the market may not be receptive to the product upon its commercial introduction.
We may have difficulties convincing the
medical community and third-party payors to accept and use any product that we are able to develop in the future even following
our receipt of regulatory approval for commercialization. Key participants in pharmaceutical marketplaces, such as physicians,
third-party payors and consumers, may not accept a product that we develop. Even if such a product is accepted by these participants,
the medical community may not consider effectiveness and safety alone as a sufficient basis for prescribing such as product in
lieu of other alternative treatment methods and medications that are available.
Risks Related to our Preclinical Development
Our preclinical developmental programs
are at an early stage. As a result, we are unable to predict if, or when, we will successfully develop or commercialize any product
under either program.
We currently have no products beyond preclinical
studies and our internal product development programs are at an early stage of preclinical development. Any product that we develop
in the future will require significant investment in both preclinical studies and later clinical trials. We cannot be certain
that preclinical and clinical development of any product derived from our current product development programs will be successful
or that we will obtain regulatory approval or be able to successfully commercialize any product and generate revenue. Success
in preclinical studies does not ensure that clinical trials will be successful, and the clinical trial process may fail to demonstrate
that a product that we develop is safe and effective for its proposed use. Any such failure could cause us to abandon further
development of one or more products and may delay development of other potential products. Any delay in, or termination of, our
preclinical studies or clinical trials will delay and possibly preclude the filing of a new drug application with the FDA or comparable
regulatory authorities and, ultimately, our ability to generate any product revenue.
Any product that we develop in the
future will be required to undergo a time-consuming, costly and burdensome pre-market approval process, and we may be unable to
obtain regulatory approval for such product.
Any product that we develop in the future
will be subject to extensive governmental regulations relating to development, clinical trials, manufacturing and commercialization.
Rigorous preclinical studies, clinical trials and extensive regulatory approval processes are required to be successfully completed
in the United States and in many foreign jurisdictions, such as the European Union and Japan, before a new product may be offered
and sold in any of these countries or regions. Satisfaction of these and other regulatory requirements is costly, time-consuming,
uncertain and subject to unanticipated delays.
Preclinical studies and clinical trials
are expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. Because
any product that we develop in the future will be based on new technologies, we expect that it will require extensive research
and development and necessitate substantial manufacturing and processing costs. In addition, costs to treat potential side effects
that may result from a product we develop may be significant. Accordingly, our preclinical and clinical trial costs could be significantly
higher than for more conventional therapeutic technologies or drug products.
In the United States, the products that
we intend to develop and market are regulated by the FDA under its drug development and review process. The time required to obtain
FDA and other approvals for any product that we develop in the future is inherently unpredictable. Before such products can be
marketed, we must obtain clearance from the FDA first through submission of an IND, then through successful completion of human
testing under three phases of clinical trials and finally through submission of an NDA. Even after successful completion of clinical
testing, there is a risk that the FDA may request further information from us, disagree with our findings or otherwise undertake
a lengthy review of our NDA submission.
There can be no assurance that the FDA
will grant a license for any NDA that we may submit. It is possible that none of the products that we develop in the future will
obtain the appropriate regulatory approvals necessary for us to commence the offer and sale of such products. Any delay or failure
in obtaining required approvals could have a material adverse effect on our ability to generate revenues from a particular prospective
product.
If we decide to market any drug that we
develop in jurisdictions in addition to the United States, we may incur the same costs or more in satisfying foreign regulatory
requirements governing the conduct of preclinical and clinical trials, manufacturing and marketing and commercialization of any
product that we develop in the future. Approval by the FDA by itself does not assure approval by regulatory authorities outside
the United States. Each of these foreign regulatory approval processes includes all of the risks associated with the FDA approval
process, as well as risks attributable to having to satisfy local regulations within each of these foreign jurisdictions. Our
inability to obtain regulatory approval outside the United States may adversely compromise our business prospects.
If the preclinical and clinical studies
that we are required to conduct to gain regulatory approval are delayed or unsuccessful, we may not be able to market any product
that we develop in the future.
We may experience delays in any phase of
the preclinical or clinical development of a product, including during its research and development. The completion of any of
these studies may be delayed or halted for numerous reasons, including, but not limited to, the following:
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the FDA, IRBs, the European Union regulatory
authorities (the European Medicines Agency (“EMA”) and national authorities), or other regulatory authorities
do not approve a clinical study protocol or place a clinical study on hold;
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patients do not enroll in a clinical study or
results from patients are not received at the expected rate;
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patients discontinue participation in a clinical
study prior to the scheduled endpoint at a higher than expected rate;
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patients experience adverse events from a product
we develop;
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patients die during a clinical study for a variety
of reasons that may or may not be related to the product that is the subject of the study;
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third-party clinical
investigators do not perform the studies in accordance with the anticipated schedule or consistent with the study protocol
and good clinical practices or other third-party organizations do not perform data collection and analysis in a timely or
accurate manner;
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third-party clinical investigators engage in
activities that, even if not directly associated with our studies, result in their debarment, loss of licensure, or other
legal or regulatory sanction;
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regulatory inspections of manufacturing facilities,
which may, among other things, require us to undertake corrective action or suspend the preclinical or clinical studies;
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changes in governmental regulations or administrative
actions;
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the interim results of the preclinical or clinical
study, if any, are inconclusive or negative; and
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the study design, although approved and completed,
is inadequate to demonstrate effectiveness and safety.
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We
have limited experience in conducting and managing preclinical studies and any product that we develop in the future may not have
favorable results in later clinical trials or receive regulatory approvals.
We have limited experience in conducting
and managing the preclinical studies and clinical trials necessary to obtain regulatory approvals for a product. We may
rely on third parties for preclinical and clinical development activities and our reliance on third parties will reduce our control
over these activities. Accordingly, third-party contractors may not complete activities on schedule, or may not conduct
preclinical studies and clinical trials in accordance with regulatory requirements or our trial design. If these third parties
do not successfully carry out their contractual duties or meet expected deadlines, we may be required to replace them, which may
delay the affected trial.
Clinical failure can occur at any stage
of preclinical or clinical development. Preclinical studies and clinical trials may produce negative or inconclusive results,
and our collaborators or we may decide, or regulators may require us, to conduct additional clinical trials or nonclinical studies.
In addition, data obtained from trials and studies are susceptible to varying interpretations, and regulators may not interpret
our data as favorably as we do, which may delay, limit or prevent regulatory approval. Success in pre-clinical studies and early
clinical trials does not ensure that subsequent clinical trials will generate the same or similar results or otherwise provide
adequate data to demonstrate the efficacy and safety of a product. A number of companies in the pharmaceutical industry, including
those with greater resources and experience than us, have suffered significant setbacks in preclinical studies and clinical trials,
even after seeing promising results in earlier trials or studies.
We may experience difficulties in identifying
and recruiting suitable patients for clinical studies, which may significantly compromise our ability to develop a product in
the future.
We may experience difficulties in identifying
and recruiting suitable patients for clinical studies because of the high demand for such patients’ involvement in current
and future studies and trials for potential drugs or because the supply of suitable patients may be low because of strict inclusion
criteria requirements. The realization of any of the foregoing risks may significantly compromise our ability to develop a future
product, which would adversely impact our potential revenues, results of operations and financial condition.
If toxicities or serious adverse or
undesirable side effects are identified during preclinical or clinical development, we may need to abandon or limit such development.
We do not have a product candidate in clinical
development and, as a result, the risk we are unable to successfully develop a future product is high. A product’s preclinical
toxicology profile might not support moving the product into clinical studies, and even then, it is impossible to predict when,
or if, any future product that we develop will prove effective or safe in humans or will receive regulatory approval. If any such
product is associated with undesirable side effects or has characteristics that are unexpected, we may need to abandon its development
or limit development to certain uses or subpopulations in which the undesirable side effects or other characteristics are less
prevalent, less severe or more acceptable from a risk-benefit perspective.
The commercial value of any clinical
study that we may commence and conduct in the future will significantly depend upon our choice of medical indication and our selection
of a patient population for our clinical study of an indication, and our inability to commence clinical testing or our choice
of clinical strategy may significantly compromise our business prospects.
If we successfully complete a clinical
study, the commercial value of any such study will depend significantly upon our choice of indication and our selection of a patient
population for that indication. We may incorrectly assess the market opportunities of an indication or may incorrectly estimate
or fail to appreciate fully the scientific and technological difficulties associated with treating an indication. Furthermore,
the quality and robustness of the results and data of any clinical study that we may conduct in the future will depend upon our
selection of a patient population for clinical testing. Our inability to commence clinical testing or our choice of clinical strategy
may significantly compromise our business prospects.
Risks Related to our Dependence on Third
Parties
We are substantially dependent on our
Collaboration Agreement with ADT. If we fail to comply with our obligations under the Collaboration Agreement into which we entered
with ADT, we could lose development and commercialization rights that are critical to the continuation of our business if the
Merger is not consummated.
On September 20, 2019, we entered
into the Collaboration Agreement with ADT in which we agreed to use commercially reasonable efforts to conduct research and development
activities with respect to the Compounds under the oversight of a jointly established steering committee. As part of the arrangement,
we are primarily responsible for the research, development, manufacturing and regulatory activities relating to the Compounds.
In consideration for the rights granted under the Collaboration Agreement, we agreed to make milestone payments to ADT with respect
to the development and commercialization of any products containing the Compounds. ADT also granted us an exclusive option to
research, develop, manufacture and commercialize Compounds relating to patents owned by ADT and any products containing such Compounds
worldwide in exchange for an additional fee. We agreed to pay ADT royalties ranging in the low- to mid-single digit percentage
on sales of any products containing the Compounds. ADT may terminate the Collaboration Agreement in the event of our material
default in any of our material obligations under the Collaboration Agreement (following a cure period). In the event the Collaboration
Agreement is terminated, all licenses and options granted to us will be terminated and we will not be able to develop the Compounds
or any products containing the Compounds. The Collaboration Agreement also restricts assignment except to a successor of substantially
all of the business to which the Collaboration Agreement relates, whether in a merger, sale of stock, sale of assets, reorganization
or other transaction. If the Merger is not consummated, the loss of such rights would materially adversely affect our business,
financial condition, operating results and prospects. To the extent the strategic review results in a determination to monetize
the pan-RAS program, we may be limited in our ability to do so.
The failure of ADT to effectively perform
its obligations under the Collaboration Agreement could materially and adversely affect us.
Pursuant to the terms and conditions set
forth in the Collaboration Agreement, ADT contractually agreed to collaborate with us in order to conduct research and development
activities of the Compounds under the oversight of a joint steering committee that we established with ADT. As part of the arrangement,
ADT is required to assist us with research activities relating to the Compounds as necessary. In connection with the Collaboration
Agreement, ADT also granted us an exclusive option to research, develop, manufacture and commercialize Compounds relating to patents
owned by ADT and any products containing such Compounds worldwide. Our right to research, develop, manufacturer and commercialize
the Compounds is exclusively based upon the rights provided to us by ADT as part of the Collaboration Agreement. If ADT or a successor
company fails or refuses to perform its obligations under, or comply with the terms and conditions set forth in, the Collaboration
Agreement for any reason, we may not be able to research, develop, manufacture and/or commercialize the Compounds or any products
containing the Compounds, which would materially adversely affect our business, financial condition, operating results and prospects.
We are dependent on ADT for certain
support services related to our research and development activities with respect to the Compounds and any failure or delay by
ADT to provide such services could harm our business.
In connection with the Collaboration Agreement,
we also entered into a Consulting and Collaboration Research Support Agreement with ADT (the “Support Agreement”),
whereby ADT provides support services for our research and development activities with respect to the Compounds, including providing
key research and discovery personnel. We are dependent upon ADT’s continued performance under this Support Agreement. To
the extent ADT is unable to, or determines not to, perform these support services, we may not be able to undertake the research
and development activities to develop the Compounds on our own or find other collaborators on acceptable terms. This could impact
our ability to develop the Compounds and materially adversely impact our business, financial condition, operating results and
prospects.
We expect to rely significantly on
preclinical contract research organizations and clinical research organizations to assist us with the development of the Compounds
and any product that we develop in the future.
Our reliance on clinical research organizations
may result in delays in completing, or a failure to complete, non-clinical testing or clinical trials if they fail to perform
under our agreements with them. In the course of product development, we expect to engage clinical manufacturing organizations
to manufacture drug material for us to be used in non-clinical and clinical testing and contract research organizations to conduct
and manage non-clinical and clinical studies. As a result, many important aspects of our preclinical research activities and clinical
testing will be out of our direct control. If any of these organizations we may engage in the future fail to perform their obligations
under our agreements with them or fail to perform non-clinical testing and/or clinical trials in a satisfactory manner, we may
face delays in completing such testing or trials. Furthermore, any loss or delay in obtaining contracts with such entities may
also delay the completion of our preclinical studies, clinical trials, regulatory filings and the potential market approval of
our potential drug compounds.
We may seek to enter into further collaborations
in the future, and, if we are not able to establish them on commercially reasonable terms, we may have to alter our development
and commercialization plans.
Any collaboration or license agreements
that we may enter into in the future may impose various development, commercialization, funding, royalty, diligence, sublicensing,
insurance and other obligations on us. Our obligations under any of these license agreements could include, without limitation:
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annual maintenance fees;
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providing progress reports;
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maintaining insurance coverage;
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paying fees related to prosecution, maintenance
and enforcement of patent rights;
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minimum annual payments; and
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undertaking diligent efforts to develop and
introduce therapeutic products into the commercial market as soon as practicable.
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If we were to breach
any of our material obligations as described above, the counterparties to any such agreements may have the right to terminate
the agreement and any licenses contemplated thereby, which could result in our inability to develop, manufacture and sell products
that are covered by the licensed technology or a competitor gaining access to the licensed technology.
If we, or if our service providers
or any third-party manufacturers, fail to comply with regulatory requirements, we or they could be subject to enforcement actions,
which could adversely affect our ability to market and sell a product we develop in the future.
If we, or if our service providers or any
third-party manufacturers, fail to comply with applicable federal, state or foreign laws or regulations, we could be subject to
enforcement actions, which could adversely affect our ability to successfully develop, market and sell a product we develop in
the future and could harm our reputation. These enforcement actions may include:
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restrictions on, or prohibitions against, marketing;
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restrictions on importation;
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suspension of review or refusal to approve new
or pending applications;
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suspension or withdrawal of product approvals;
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civil and criminal penalties and fines.
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Risks Related to our Operations
If we are unable to re-hire and retain
qualified employees, our ability to implement our business plan may be adversely affected.
The loss of the service of key employees
during the strategic review process that we went through during 2020 would likely delay our achievement of product development
and our other business objectives should the proposed merger not complete.
Recruiting and retaining qualified scientific,
clinical, manufacturing and sales and marketing personnel will be critical to our success. We may not be able to attract and retain
these personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar
personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions.
Difficulty in hiring employees to fill key roles could slow or prevent our ability to develop and commercialize our products.
Our financial condition and the announcement of our process of exploring strategic opportunities may result in difficulties retaining
and attracting qualified employees.
In addition, we would expect to work extensively
with consultants and advisors, including scientific and clinical advisors, who provide advice and/or services in various business
and development functions, including preclinical and clinical development, operations and strategy, regulatory matters, legal,
and finance, to assist us in formulating our research and development and commercialization strategy. The potential success of
our drug development programs depends, in part, on collaborations with certain of these consultants and advisors. Our consultants
and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other
entities that may limit their availability to us. We do not know if we will be able to build and maintain such relationships or
that such consultants and advisors will not enter into other arrangements with competitors, any of which could have a detrimental
impact on our development objectives and our business.
Under applicable employment laws, we
may not be able to enforce covenants not to compete.
Our employment agreements generally include
covenants not to compete. These agreements prohibit our employees, if they cease working for us, from competing directly with
us or working for our competitors for a limited period. We may be unable to enforce these agreements under the laws of the jurisdictions
in which our employees work. For example, Israeli courts have required employers seeking to enforce covenants not to compete
to demonstrate that the competitive activities of a former employee will harm one of a limited number of material interests of
the employer, such as the secrecy of a company’s confidential commercial information or the protection of its intellectual
property. If we cannot demonstrate that such an interest will be harmed, we may be unable to prevent our competitors from benefiting
from the expertise of our former employees or consultants and our competitiveness may be diminished.
We may be subject to claims that our
employees have wrongfully used or disclosed alleged trade secrets of their former employers.
Many of our employees, including our senior
management, were previously employed at other biotechnology or pharmaceutical companies, including our potential competitors.
Some of these employees may have executed proprietary rights, non-disclosure and non-competition agreements in connection with
such previous employment. Although we try to ensure that our employees do not use the proprietary information or know-how of others
in their work for us, we may be subject to claims that we or these employees have used or disclosed intellectual property, including
trade secrets or other proprietary information, of any such employee’s former employer. We are not aware of any threatened
or pending claims related to these matters or concerning the agreements with our senior management, but future litigation may
be necessary to defend against such claims. If we fail in defending any such claims, in addition to paying monetary damages, we
may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation
could result in substantial costs and be a distraction to management.
Our business may be affected by litigation
and government investigations.
We may from time to time receive inquiries
and subpoenas and other types of information requests from government authorities and others and we may become subject to claims
and other actions related to our business activities. While the ultimate outcome of investigations, inquiries, information requests
and legal proceedings is difficult to predict, defense of litigation claims can be expensive, time-consuming and distracting,
and adverse resolutions or settlements of those matters may result in, among other things, modification of our business practices,
costs and significant payments, any of which could have a material adverse effect on our business, financial condition, results
of operations and prospects.
Product liability claims or lawsuits
could cause us to incur substantial liabilities.
We will face an inherent risk of product
liability exposure related to the testing of our drug candidates in human clinical trials. If we cannot successfully defend ourselves
against claims that our products caused injuries, we could incur substantial liabilities. Although we maintain product liability
insurance coverage, it may not be adequate to cover all liabilities that we may incur. Insurance coverage may be increasingly
expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability
that may arise.
We are exposed to a risk of substantial
loss due to claims that may be filed against us in the future because our insurance policies may not fully cover the risk of loss
associated with our operations.
We are exposed to the risk of having claims
seeking monetary damages being filed against us for loss or harm suffered by participants of our preclinical and clinical studies
or for loss or harm suffered by users of any drug that may receive approval for commercialization in the future. In either event,
the FDA or the regulatory authorities of other countries or regions may commence investigations of the safety and effectiveness
of any such trial or commercialized drug, the manufacturing processes and facilities or marketing programs utilized in respect
of any such trial or drug, and may result in mandatory or voluntary recalls of any commercialized drug or other significant enforcement
action such as limiting the indications for which any such drug may be used, or suspension or withdrawal of approval for any such
drug. Investigations by the FDA or any other regulatory authority in other countries or regions also could delay or prevent the
completion of any of our other clinical development programs. In the event that we are required to pay damages for any such claim,
we may be forced to seek bankruptcy or to liquidate because our asset and revenue base may be insufficient to satisfy the payment
of damages and any insurance that we have obtained or may obtain for product, preclinical study or clinical trial liability may
not provide sufficient coverage against potential liabilities. Our insurance policy for the discontinued inodiftagene compound
provides coverage in the amount of up to $10 million in the aggregate.
Significant disruptions of information technology systems
or security breaches could adversely affect our operations.
We are increasingly dependent upon information
technology systems, infrastructure and data to operate our business. In the ordinary course of business, we collect, store and
transmit large amounts of confidential information (including, among other things, trade secrets or other intellectual property,
proprietary business information and personal information). It is critical that we do so in a secure manner to maintain the confidentiality
and integrity of such confidential information. We also have outsourced elements of our operations to third parties, and as a
result we manage a number of third-party vendors that may or could have access to our confidential information. Attacks on information
technology systems are increasing in their frequency, levels of persistence, sophistication and intensity, and they are being
conducted by increasingly sophisticated and organized groups and individuals with a wide range of motives and expertise. The size
and complexity of our information technology systems, and those of third-party vendors with whom we contract, and the large amounts
of confidential information stored on those systems, make such systems vulnerable to service interruptions or to security breaches
from inadvertent or intentional actions by our employees, third-party vendors, and/or business partners, or from cyber-attacks
by malicious third parties. Cyber-attacks could include the deployment of harmful malware, ransomware, denial-of-service attacks,
social engineering and other means to affect service reliability, and threated the confidentiality, integrity, and availability
of information.
Significant disruptions of our information
technology systems, or those of our third-party vendors, or security breaches could adversely affect our business operations and/or
result in the loss, misappropriation and/or unauthorized access, use or disclosure of, or the prevention of access to, confidential
information, including, among other things, trade secrets or other intellectual property, proprietary business information and
personal information, and could result in financial, legal, business, and reputational harm to us.
Any failure or perceived failure by us
or any third-party collaborators, service providers, contractors or consultants to comply with our privacy, confidentiality, data
security or similar obligations to third parties, or any data security incidents or other security breaches that result in the
unauthorized access, release or transfer of sensitive information, including personally identifiable information, may result in
governmental investigations, enforcement actions, regulatory fines, litigation or public statements against us, could cause third
parties to lose trust in us or could result in claims by third parties asserting that we have breached our privacy, confidentiality,
data security, or similar obligations, any of which could have a material adverse effect on our reputation, business, financial
condition, or results of operations. Moreover, data security incidents and other security breaches can be difficult to detect,
and any delay in identifying them may lead to increased harm. While we have implemented data security measures intended to protect
our information technology systems and infrastructure, there can be no assurance that such measures will successfully prevent
service interruptions or data security incidents.
Our business and operations would suffer in the event
of system failures.
Despite the implementation of security
measures, our internal computer systems and those of our CROs and other contractors and consultants are vulnerable to damage from
computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. While
we have not experienced any such system failure, accident or security breach to date, if such an event were to occur and cause
interruptions in our operations, it could result in a material disruption of our drug development programs. For example, the loss
of preclinical or clinical data from completed or ongoing or planned preclinical studies or clinical trials could result in delays
in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any
disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure of
confidential or proprietary information, we could incur liability and the further development of a product could be delayed.
Risks Related to Government Regulation
Our relationships with customers and third-party payors
will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose us
to criminal sanctions, civil penalties, program exclusion, contractual damages, reputational harm and diminished profits and future
earnings.
Healthcare providers, and third-party payors
play a primary role in the recommendation of any product for which we obtain marketing approval. Our future arrangements with
third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations
that may constrain the business or financial arrangements and relationships through which we market, sell and distribute products
for which we obtain marketing approval. Restrictions under applicable federal and state healthcare laws and regulations, include
the following:
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the federal healthcare anti-kickback statute,
as mentioned above, prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or
providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual
for, or the purchase, order or recommendation of, any good or service, for which payment may be made under federal and state
healthcare programs such as Medicare and Medicaid;
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the federal False Claims Act imposes civil penalties,
including civil whistleblower actions, against individuals or entities for knowingly presenting, or causing to be presented,
claims for payment to the federal government that are false or fraudulent or making a false statement to avoid, decrease or
conceal an obligation to pay money to the federal government;
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the federal Health Insurance Portability and
Accountability Act of 1996 (“HIPAA”), as amended by the Health Information Technology for Economic and Clinical
Health Act, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program and also
imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission
of individually identifiable health information;
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the federal false statements
statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false
statement in connection with the delivery of or payment for healthcare benefits, items or services;
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the federal transparency requirements under
applicable healthcare laws will require manufacturers of drugs, devices, biologics and medical supplies to report to the Department
of Health and Human Services information related to physician payments and other transfers of value and physician ownership
and investment interests; and
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analogous state laws and regulations, such as
state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items
or services reimbursed by non-governmental third-party payors, including private insurers, and some state laws require pharmaceutical
companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance
promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments
to physicians and other health care providers or marketing expenditures.
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Some state laws require pharmaceutical
companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance
promulgated by the federal government and may require drug manufacturers to report information related to payments and other transfers
of value to physicians and other healthcare providers or marketing expenditures. State and foreign laws also govern the privacy
and security of health information in some circumstances, many of which differ from each other in significant ways and often are
not preempted by HIPAA, thus complicating compliance efforts.
Efforts to ensure that
our business arrangements with third parties comply with applicable healthcare laws and regulations will involve substantial costs.
It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes,
regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found
to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant
civil, criminal and administrative penalties, damages, fines and exclusion from government funded healthcare programs, such as
Medicare and Medicaid, and the curtailment or restructuring of our operations. If any of the physicians or other providers or
entities with whom we expect to do business are found not to be in compliance with applicable laws, they may be subject to criminal,
civil or administrative sanctions, including exclusions from government-funded healthcare programs.
Coverage and adequate reimbursement may not be available
for any future product candidates, which could make it difficult for us to sell profitably, if approved.
Market acceptance and sales of any product
candidates that we commercialize, if approved, will depend in part on the extent to which coverage and reimbursement for these
drugs and related treatments will be available from third-party payors, including government health administration authorities,
managed care organizations and other private health insurers. Third-party payors decide which therapies they will pay for and
establish reimbursement levels. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting
their own coverage and reimbursement policies. However, decisions regarding the extent of coverage and amount of reimbursement
to be provided for any product candidates that we develop will be made on a payor-by-payor basis. One third-party payor’s
determination to provide coverage for a drug does not assure that other payors will also provide coverage, and adequate reimbursement,
for the drug. Additionally, a third-party payor’s decision to provide coverage for a therapy does not imply that an adequate
reimbursement rate will be approved. Each third-party payor determines whether or not it will provide coverage for a therapy,
what amount it will pay the manufacturer for the therapy, and on what tier of its formulary it will be placed. The position on
a third-party payor’s list of covered drugs, or formulary, generally determines the co-payment that a patient will need
to make to obtain the therapy and can strongly influence the adoption of such therapy by patients and physicians. Patients who
are prescribed treatments for their conditions and providers prescribing such services generally rely on third-party payors to
reimburse all or part of the associated healthcare costs. Patients are unlikely to use our products unless coverage is provided
and reimbursement is adequate to cover a significant portion of the cost of our products. Third-party payors have attempted to
control costs by limiting coverage and the amount of reimbursement for particular medications. We cannot be sure that coverage
and reimbursement will be available for any drug that we commercialize and, if reimbursement is available, what the level of reimbursement
will be. Inadequate coverage and reimbursement may impact the demand for, or the price of, any drug for which we obtain marketing
approval. If coverage and adequate reimbursement are not available, or are available only to limited levels, we may not be able
to successfully commercialize any future product candidates that we may develop.
Healthcare legislative reform measures may have a negative
impact on our business and results of operations.
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 our ability to profitably sell any product candidates for which we obtain marketing approval. We expect that healthcare
reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure
on the price that we receive for any approved drug. Any reduction in reimbursement from Medicare or other government programs
may result in a similar reduction in payments from private third-party payors. The implementation of cost containment measures
or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize any product
candidate that we may develop.
Inadequate funding for the FDA, the SEC and other government
agencies could hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from
being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal business functions
on which the operation of our business may rely, which could negatively impact our business.
The ability of the FDA to review and approve
new products can be affected by a variety of factors, including government budget and funding levels, the ability to hire and
retain key personnel and to accept the payment of user fees, and statutory, regulatory, and policy changes. Average review times
at the FDA have fluctuated in recent years as a result. In addition, government funding of the SEC and other government agencies
on which our operations may rely, including those that fund research and development activities is subject to the political process,
which is inherently fluid and unpredictable.
Risks Related to Our Intellectual Property
We may be required in the future to license patent rights
from third-party owners in order to develop a product. If we cannot obtain such licenses, or if such owners do not properly maintain
or enforce the patents underlying such licenses, our competitive position and business prospects will be harmed.
We currently license patents from ADT in
conducting our research and development activities pursuant to the Collaboration Agreement. We may be required to obtain additional
licenses in the future if we believe it is necessary or useful for our business and our research and development efforts to use
third-party intellectual property or if our efforts would infringe upon the intellectual property rights of third parties. Our
business prospects depend in part on the ability of ADT and any future licensor, to obtain, maintain and enforce patent protection
for our licensed intellectual property. Our licensors may terminate our license, may not successfully prosecute or may fail to
maintain their patent applications that we have licensed, may determine not to pursue litigation against other persons that are
infringing these patents or may pursue such litigation less aggressively than we would. Without protection for the intellectual
property that we have licensed and that we may license in the future, other companies might be able to offer substantially identical
products for sale, which could adversely affect our competitive position and harm our business prospects.
Confidentiality agreements with employees and others
may not adequately prevent disclosure of trade secrets and other proprietary information.
We currently rely, and intend to rely in
the future, on trade secrets, know-how and technology that are not protected by patents to maintain our competitive position.
In order to protect our proprietary technology and processes, we also rely in part on confidentiality agreements with our collaborators,
employees, consultants, outside scientific collaborators and sponsored researchers and other advisors. These agreements may not
effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized
disclosure of confidential information. In addition, others may independently discover trade secrets and proprietary information,
and in such cases we could not assert any trade secret rights against such party. Costly and time-consuming litigation could be
necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection
could adversely affect our competitive position and harm our business prospects.
If we are unable to obtain and enforce patent protection
for our inventions, our ability to develop and commercialize any product that we develop in the future will be harmed.
Our success depends,
to a considerable extent, on our ability to protect proprietary methods and technologies that we develop under the patent and
other intellectual property laws of the United States and other countries, so that we may prevent others from unlawfully using
our inventions and proprietary information. The patent position of pharmaceutical or biotechnology companies, including ours,
is generally uncertain and involves complex legal and factual considerations. The standards that the U.S. Patent and Trademark
Office (the “PTO”) and its foreign counterparts use to grant patents are not always applied predictably or uniformly
and may change. There also is no uniform, worldwide policy regarding the subject matter and scope of claims granted or allowable
in pharmaceutical or biotechnology patents. Even if our rights are not directly challenged, disputes among third parties could
lead to the weakening or invalidation of our intellectual property rights. Accordingly, we do not know the degree of future protection
for our proprietary rights or the breadth of claims that will be allowed with respect to any patents issued to us or to others.
Additionally, the mere issuance of a patent does not guarantee that it is valid or enforceable against third parties.
We may become involved in lawsuits to protect or enforce
our patents, which could be expensive, time consuming and unsuccessful.
A third party may sue us for infringing
its patent rights or may claim that we have improperly obtained or used its confidential or proprietary information. Likewise,
we may need to resort to litigation to enforce a patent issued or licensed to us or to determine the scope and validity of third-party
proprietary rights. In addition, during an infringement proceeding, a court may decide that the patent rights we are asserting
are invalid or unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our
patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents
at risk of being invalidated or interpreted narrowly. Furthermore, because of the substantial amount of discovery required in
connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised
by disclosure during this type of litigation. In addition, our licensors may have rights to file and prosecute such claims and
we are reliant on them. The cost to us of any litigation or other proceeding relating to intellectual property rights, even if
resolved in our favor, could be significant, and the litigation would divert our management’s efforts. From a financial
perspective, there is a risk that we would not be able to sustain the costs of any such litigation and would be forced to seek
bankruptcy or to liquidate because of our limited asset and revenue base.
We may become subject to claims for remuneration or royalties
for assigned service invention rights by our employees, which could result in litigation and adversely affect our business.
We may be subject to claims that former
employees, collaborators or other third parties have an interest in, or right to compensation, with respect to our current patent
and patent applications, future patents or other intellectual property as an inventor or co-inventor. For example, we may have
inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing a product for
us. Litigation may be necessary to defend against these and other claims challenging inventorship or claiming the right to compensation.
If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights,
such as exclusive ownership of, or the right to use, valuable intellectual property. Such an outcome could have a material adverse
effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs
and be a distraction to management and other employees.
We generally enter into
assignment-of-invention agreements with our employees pursuant to which such individuals assign to us all rights to any inventions
created in the scope of their employment or engagement with us. Although our employees have agreed to assign to us service invention
rights and have specifically waived their right to receive any special remuneration for such assignment beyond their regular salary
and benefits, we may face claims demanding remuneration in consideration for assigned inventions.
Intellectual property rights do not necessarily address
all potential threats to our competitive advantage.
The degree of future protection afforded
by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately
protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:
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Others may be able to make products that are
similar to a product we develop, but that are not covered by the claims of the patents that we own or have exclusively licensed.
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We or our licensors or strategic partners might
not have been the first to make the inventions covered by the issued patent or pending patent application that we own or have
exclusively licensed.
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We or our licensors or strategic partners might
not have been the first to file patent applications covering certain of our inventions.
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Others may independently develop similar or
alternative technologies or duplicate any of our technologies without infringing our intellectual property rights.
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It is possible that our pending patent applications
will not lead to issued patents.
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Issued patents that we own or have exclusively
licensed may not provide us with any competitive advantages, or may be held invalid or unenforceable, as a result of legal
challenges by our competitors.
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Our competitors might conduct research and development
activities in countries where we do not have patent rights and then use the information learned from such activities to develop
competitive products for sale in our major commercial markets.
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We may not develop additional proprietary technologies
that are patentable.
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The patents of others may have an adverse effect
on our business.
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Should any of these events occur, they
could significantly harm our business, results of operations and prospects.
Risks Related to the ADSs
The ADS price could continue to be highly volatile and
you may not be able to resell your ADSs at or above the price you paid for them.
The trading price of the ADSs has been
highly volatile, and is likely to continue to be highly volatile as we undertake the strategic review process, and such volatility
may continue or become more severe if and when a transaction or business arrangement is announced or we announce that we are no
longer exploring strategic opportunities. From our initial public offering on February 12, 2019 to December 31, 2020,
the ADS price has ranged from $0.54 to $11.50 per ADS. The following factors, among others, could have a significant impact on
the market price of the ADSs:
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actual or anticipated fluctuations in our results
of operations;
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changes in operational strategy;
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variance in our financial performance from the
expectations of market analysts;
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announcements by us or our competitors of significant
business developments, changes in strategic relationships, acquisitions or development plans;
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announcements by us regarding the clinical development,
commercialization and market acceptance of a therapeutic candidate;
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our involvement in litigation;
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our sale of ADSs, ordinary shares or other securities
in the future;
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the trading volume of
the ADSs, particularly as a microcap company with a few significant shareholders;
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changes in the estimation
of the future size and growth rate of our markets;
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market conditions in
our industry; and
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general economic and
market conditions.
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The ADSs may have a low trading volume
for a number of reasons, including that a substantial portion of the ADSs are held by a few significant shareholders, limiting
our public float. As a result, holders of our ADSs may encounter difficulty selling their ADSs or obtaining a suitable price at
which to sell such ADSs.
In addition, the stock markets have experienced
extreme price and volume fluctuations, and securities of small cap and microcap companies are particularly volatile. Broad market
and industry factors may materially harm the market price of the ADSs, regardless of our operating performance. In the past, following
periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted
against that company. If we were involved in any similar litigation, we could incur substantial costs and our management’s
attention and resources could be diverted.
A limited number of shareholders will have the ability
to influence the outcome of director elections and other matters requiring shareholder approval.
According
to a Schedule 13D filed on December 14, 2020, Clal Biotechnology Industries Ltd., or CBI, is the beneficial owner of approximately
25.1% of our outstanding shares and Access Industries Holdings LLC, or AIH, Access Industries Management, LLC, or AIM,
Access Industries, LLC, or LLC, and Len Blavatnik beneficially own approximately 42.7% of Anchiano’s outstanding shares
(which includes the shares beneficially owned by CBI). In addition, according to a Schedule 13G filed on January 2, 2020,
the Shavit Capital Funds collectively beneficially own approximately 21.7% of Anchiano’s outstanding shares.
As a result of their significant holdings
in our shares, Access, CBI and the Shavit Capital Funds have the ability to exert substantial influence over matters requiring
approval by our shareholders, including electing directors and approving mergers, acquisitions or other business combination or
corporate restructuring transactions. This concentration of ownership may also discourage, delay or prevent a change in control
of our Company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale
of our Company and might reduce our share price.
If equity research analysts do not publish research or
reports about our business or if they issue unfavorable commentary or downgrade the ADSs, the price of the ADSs could decline.
The trading market for the ADSs relies
in part on the research and reports that equity research analysts publish about us and our business. The price of the ADSs could
decline if one or more securities analysts downgrade the ADSs or if those analysts issue other unfavorable commentary or cease
publishing reports about us or our business. The analysts at many brokerage firms do not currently monitor the trading activity
or otherwise provide coverage of lower priced stocks, such as the ADSs. As a result, many investment funds are reluctant to invest
in lower priced stocks. Market prices for securities of biotechnology and other life sciences companies historically have been
particularly volatile, subject even to large daily price swings, due in part to the failure to elicit meaningful stock analyst
coverage and downgrades of the company’s stock by analysts.
Because we no longer qualify as a foreign private issuer,
we are required to comply fully with the reporting requirements of the Exchange Act applicable to U.S. domestic issuers and, as
a result, have incurred and will continue to incur significant legal, accounting and other expenses that we would not incur as
a foreign private issuer.
Beginning on January 1, 2020, we have
been required to comply fully with the reporting requirements of the Exchange Act applicable to U.S. domestic issuers because
we no longer qualify as a foreign private issuer. The regulatory and compliance costs to us under U.S. securities laws as a U.S.
domestic issuer are expected to be significantly higher. We are now required to file periodic reports, proxy materials and registration
statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive than the forms available to a foreign
private issuer.We have also been required to modify certain of our corporate governance policies and committee charters to comply
with accepted governance practices and requirements associated with U.S. domestic listed issuers. In addition, we lost our ability
to rely upon exemptions from certain Nasdaq corporate governance requirements that are available to foreign private issuers.
As a result of becoming a public company, our management
is required to devote substantial additional time to new compliance initiatives as well as to compliance with ongoing public reporting
requirements.
As a public company in the United States,
we incur significant additional accounting, legal and other expenses that we did not incur before our initial public offering.
We incur costs associated with corporate governance requirements of the SEC and Nasdaq, as well as requirements under Section 404
and other provisions of the Sarbanes-Oxley Act. These rules and regulations increase our legal and financial compliance costs,
introduce new costs such as investor relations, stock exchange listing fees and shareholder reporting, and make some activities
more time consuming and costly. The implementation and testing of such processes and systems require us to hire outside consultants
and incur other significant costs. Any future changes in the laws and regulations affecting public companies in the United States,
including Section 404 and other provisions of the Sarbanes-Oxley Act, and the rules and regulations adopted by the SEC
and Nasdaq, for so long as they apply to us, will result in increased costs to us as we respond to such changes. These laws, rules and
regulations could make it more difficult or more costly for us to obtain certain types of insurance, including director and officer
liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to
obtain the same or similar coverage. The impact of these requirements could also make it more difficult for us to attract and
retain qualified persons to serve on our board of directors, our board committees, if any, or as executive officers.
We do not intend to pay dividends in the foreseeable
future.
We do not anticipate paying any cash dividends
on the ADSs. We currently intend to retain all available funds and any future earnings to fund the development and growth of our
business. As a result, capital appreciation, if any, of our ordinary shares will be the investors’ sole source of gain for
the next several years. In addition, Israeli law limits our ability to declare and pay dividends, and may subject us to certain
Israeli taxes.
You may not receive the same distributions or dividends
as those we make to the holders of our ordinary shares, and, in some limited circumstances, you may not receive dividends or other
distributions on our ordinary shares and you may not receive any value for them, if it is illegal or impractical to make them
available to you.
The depositary for the ADSs has agreed
to pay to you the cash dividends or other distributions it or the custodian receives on ordinary shares or other deposited securities
underlying the ADSs, after deducting its fees and expenses. You will receive these distributions in proportion to the number of
ordinary shares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical
to make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder
of ADSs if it consists of securities that require registration under the Securities Act, but that are not properly registered
or distributed under an applicable exemption from registration. In addition, conversion into U.S. dollars from foreign currency
that was part of a dividend made in respect of deposited ordinary shares may require the approval or license of, or a filing with,
any government or agency thereof, which may be unobtainable. In these cases, the depositary may determine not to distribute such
property and hold it as “deposited securities” or may seek to affect a substitute dividend or distribution, including
net cash proceeds from the sale of the dividends that the depositary deems an equitable and practicable substitute. We have no
obligation under U.S. securities laws to register any ADSs, ordinary shares, rights or other securities received through such
distributions. We also have no obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights
or anything else to holders of ADSs. In addition, the depositary may deduct from such dividends or distributions its fees and
may withhold an amount on account of taxes or other governmental charges to the extent the depositary believes it is required
to make such withholding. This means that you may not receive the same distributions or dividends as those we make to the holders
of our ordinary shares, and, in some limited circumstances, you may not receive any value for such distributions or dividends
if it is illegal or impractical for us to make them available to you. These restrictions may cause a material decline in the value
of the ADSs.
ADS holders may not be entitled to a jury trial with
respect to claims arising under the deposit agreement, which could augur less favorable results to the plaintiff(s) in any
such action.
The deposit agreement governing the ADSs
representing our ordinary shares provides that holders and beneficial owners of ADSs irrevocably waive the right to a trial by
jury in any legal proceeding arising out of or relating to the deposit agreement or the ADSs, including claims under federal securities
laws, against us or the depositary to the fullest extent permitted by applicable law. If this jury trial waiver provision is prohibited
by applicable law, an action could nevertheless proceed under the terms of the deposit agreement with a jury trial. To our knowledge,
the enforceability of a jury trial waiver under the federal securities laws has not been finally adjudicated by a federal court.
However, we believe that a jury trial waiver provision is generally enforceable under the laws of the State of New York, which
govern the deposit agreement, by a court of the State of New York or a federal court, which have non-exclusive jurisdiction over
matters arising under the deposit agreement. In determining whether to enforce a jury trial waiver provision, New York courts
and federal courts will consider whether the visibility of the jury trial waiver provision within the agreement is sufficiently
prominent such that a party has knowingly waived any right to trial by jury. We believe that this is the case with respect to
the deposit agreement and the ADSs. In addition, New York courts will not enforce a jury trial waiver provision in order to bar
a viable setoff or counterclaim sounding in fraud or one that is based upon a creditor’s negligence in failing to liquidate
collateral upon a guarantor’s demand, or in the case of an intentional tort claim (as opposed to a contract dispute), none
of which we believe are applicable in the case of the deposit agreement or the ADSs. No condition, stipulation or provision of
the deposit agreement or ADSs serves as a waiver by any holder or beneficial owner of ADSs or by us or the depositary of compliance
with any provision of the federal securities laws. If you or any other holder or beneficial owner of ADSs brings a claim against
us or the depositary in connection with matters arising under the deposit agreement or the ADSs, you or such other holder or beneficial
owner may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging
lawsuits against us and/or the depositary. If a lawsuit is brought against us and/or the depositary under the deposit agreement,
it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil
procedures and may augur different results than a trial by jury would have had, including results that could be less favorable
to the plaintiff(s) in any such action, depending on, among other things, the nature of the claims, the judge or justice
hearing such claims, and the venue of the hearing.
Holders of ADSs must act through the depositary to exercise
their rights as our shareholders.
Holders of the ADSs do not have the same
rights as our shareholders and may only exercise the voting rights with respect to the underlying ordinary shares in accordance
with the provisions of the deposit agreement for the ADSs. Under Israeli law and our articles of association, the minimum notice
period required to convene a shareholders’ meeting is no less than 35 or 14 calendar days, depending on the proposals on
the agenda for the shareholders meeting. When a shareholder meeting is convened, holders of the ADSs may not receive sufficient
notice of a shareholders’ meeting to permit them to withdraw their ordinary shares to allow them to cast their vote with
respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders
of the ADSs or carry out their voting instructions in a timely manner. We will make all reasonable efforts to cause the depositary
to extend voting rights to holders of the ADSs in a timely manner, but we cannot assure holders that they will receive the voting
materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, the depositary and its agents
are not responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the
effect of any such vote. As a result, holders of the ADSs may not be able to exercise their right to vote and they may lack recourse
if their ADSs are not voted as they requested. In addition, in the capacity as a holder of ADSs, they will not be able to call
a shareholders’ meeting.
You may be subject to limitations on transfer of your
ADSs.
Your ADSs are transferable on the books
of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient
in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers
of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deem it advisable
to do so because of any requirement of law or of any government or governmental body, under any provision of the deposit agreement,
or for any other reason in accordance with the terms of the deposit agreement.
Our U.S. shareholders may suffer adverse tax consequences
if we are characterized as a passive foreign investment company, or PFIC.
Generally, if for any taxable year, 75%
or more of our gross income is passive income, or at least 50% of our assets are held for the production of, or produce, passive
income, we would be characterized as a PFIC for U.S. federal income tax purposes. We believe that we were a PFIC in 2017, 2018
and 2019 and, based on estimates of our gross income and gross assets and the nature of our business, we believe that we will
be classified as a PFIC for the taxable year ending December 31, 2020. Because PFIC status is based on our income, assets
and activities for the entire taxable year, it is not possible to determine with certainty whether we will be characterized as
a PFIC for the 2020 taxable year until after the close of the year. Moreover, we must determine our PFIC status annually based
on tests that are factual in nature, and our status in future years will depend on our income, assets and activities in those
years. In any taxable year in which we are characterized as a PFIC for U.S. federal income tax purposes, a U.S. holder that owns
ADSs could face adverse U.S. federal income tax consequences, including having gains realized on the sale of the ADSs classified
as ordinary income, rather than as capital gain, the loss of the preferential rate applicable to dividends received on the ADSs
by individuals who are U.S. holders, and having interest charges apply to distributions by us and the proceeds of ADS sales. Certain
elections exist that may alleviate some adverse consequences of PFIC status and would result in an alternative treatment (such
as mark-to-market treatment) of the ADSs. If we are a PFIC in any year, U.S. holders may be subject to additional Internal Revenue
Service (“IRS”) filing requirements, including the filing of IRS Form 8621, as a result of directly or indirectly
owning stock of a PFIC.
We may be treated as a U.S. corporation for U.S. federal
income tax purposes.
For U.S. federal income tax purposes, a
corporation generally is considered tax resident in the place of its incorporation. We are incorporated under the laws of the
State of Israel and, therefore, we should be a non-U.S. corporation under this general rule. However, Section 7874 of the
Internal Revenue Code of 1986, as amended (the “Code”), contains rules that may result in a foreign corporation
being treated as a U.S. corporation for U.S. federal income tax purposes. The application of these rules is complex and there
is little guidance regarding certain aspects of their application.
Under Section 7874 of the Code, a
corporation created or organized outside the United States will be treated as a U.S. corporation for U.S. federal tax purposes
when (i) the foreign corporation directly or indirectly acquires substantially all of the properties held directly or indirectly
by a U.S. corporation, (ii) the former shareholders of the acquired U.S. corporation hold at least 80% of the vote or value
of the shares of the foreign acquiring corporation by reason of holding stock in the U.S. acquired corporation, and (iii) the
foreign corporation’s “expanded affiliated group” does not have “substantial business activities”
in the foreign corporation’s country of incorporation relative to its expanded affiliated group’s worldwide activities.
For this purpose, “expanded affiliated group” generally means the foreign corporation and all subsidiaries in which
the foreign corporation, directly or indirectly, owns more than 50% of the stock by vote and value, and “substantial business
activities” generally means at least 25% of employees (by number and compensation), assets and gross income of our expanded
affiliated group are based, located and derived, respectively, in the country of incorporation.
We were incorporated on September 22,
2011 under the laws of the State of Israel for the purpose of a reincorporation merger (“Reincorporation”), which
merged BTI with and into a wholly-owned subsidiary of BioCancell Ltd. We do not believe that we should be treated as a U.S. corporation
as a result of the Reincorporation under Section 7874 of the Code because we believe that we have substantial business activities
in Israel. However, the IRS may disagree with our conclusion on this point. In addition, there could be legislative proposals
to expand the scope of U.S. corporate tax residence and there could be changes to Section 7874 of the Code or the Treasury
Regulations promulgated thereunder that could result in us being treated as a U.S. corporation.
If it were determined that we should be
treated as a U.S. corporation for U.S. federal income tax purposes, we could be liable for substantial additional U.S. federal
income tax on our taxable income since the Reincorporation. In addition, payments of dividends to non-U.S. holders may be subject
to U.S. withholding tax.
Failure to achieve and maintain effective internal controls
in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business, results of
operation or financial condition. In addition, current and potential shareholders could lose confidence in our financial reporting,
which could have a material adverse effect on the price of the ADSs.
Effective internal controls are necessary
for us to provide reliable financial reports and effectively prevent fraud. We are required to document and test our internal
control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, which requires annual management
assessments of the effectiveness of our internal controls over financial reporting. If we fail to maintain the adequacy of our
internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that
we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404.
Disclosing deficiencies or weaknesses in our internal controls, failing to remediate these deficiencies or weaknesses in a timely
fashion or failing to achieve and maintain an effective internal control environment may cause investors to lose confidence in
our reported financial information, which could have a material adverse effect on the price of the ADSs. If we cannot provide
reliable financial reports or prevent fraud, our operating results could be harmed.
As an “emerging growth company” under the
Jumpstart Our Business Startups Act, we are permitted to, and intend to continue to, rely on exemptions from certain disclosure
requirements, which could make the ADSs less attractive to investors.
For as long as we are deemed an emerging
growth company, we are permitted to and intend to take advantage of specified reduced reporting and other regulatory requirements
that are generally unavailable to other public companies, including:
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an exemption from the
auditor attestation requirement in the assessment of our internal controls over financial reporting required by Section 404
of the Sarbanes-Oxley Act; and
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an exemption from compliance
with any new requirements adopted by the Public Company Accounting Oversight Board (the “PCAOB”) requiring mandatory
audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional
information about our audit and our financial statements.
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We will be an emerging growth company until
the earliest of (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07 billion or more,
(ii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt,
(iii) December 31, 2024 or (iv) the date on which we are deemed a “large accelerated issuer” as defined
in Regulation S-K of the Securities Act.
We cannot predict if investors will find
the ADSs less attractive because we may rely on these exemptions. If some investors find the ADSs less attractive as a result,
there may be a less active trading market for the ADSs and the market price of the ADSs may be more volatile.
We could now be treated as a smaller reporting
company given that as of January 1, 2020 we are reporting as a U.S. domestic issuer.
We may take advantage of reduced disclosure and governance
requirements applicable to smaller reporting companies, which could make the ADSs less attractive to investors.
We have a public float of less than $250 million
and therefore qualify as a smaller reporting company under the rules of the SEC. As a smaller reporting company we are able
to take advantage of reduced disclosure requirements, such as simplified executive compensation disclosures and reduced financial
statement disclosure requirements in its SEC filings. Decreased disclosures in our SEC filings due to our status as a smaller
reporting company may make it harder for investors to analyze our results of operations and financial prospects. We cannot predict
if investors will find the ADSs less attractive if we rely on these exemptions. If some investors find the ADSs less attractive
as a result, there may be a less active trading market for the ADSs and our share 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.
The ADSs may be delisted from Nasdaq if we fail to comply
with continued listing standards.
If we fail to meet any of the continued
listing standards of Nasdaq, the ADSs could be delisted from The Nasdaq Capital Market. These continued listing standards include
specifically enumerated criteria, such as:
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a $1.00 minimum closing
bid price;
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shareholders’
equity of $2.5 million;
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500,000 shares of publicly-held
shares with a market value of at least $1 million;
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300 round-lot shareholders;
and
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compliance with Nasdaq’s
corporate governance requirements, as well as additional or more stringent criteria that may be applied in the exercise of
Nasdaq’s discretionary authority.
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There can be no assurance that we will
be able to maintain compliance and remain in compliance in the future. In particular, our share price may continue to decline
for a number of reasons, including many that are beyond our control. See “—The ADS price could continue to be highly
volatile and you may not be able to resell your ADSs at or above the price you paid for them.”
If we fail to comply with Nasdaq’s
continued listing standards, we may be delisted and the ADSs will trade, if at all, only on the over-the-counter market, such
as the OTC Bulletin Board or OTCQX market, and then only if one or more registered broker-dealer market makers comply with quotation
requirements. In addition, delisting of the ADSs could depress our share price, substantially limit liquidity of the ADSs and
materially adversely affect our ability to raise capital on terms acceptable to us, or at all. Further, delisting of the ADSs
would likely result in the ADSs becoming a “penny stock” under the Exchange Act.
Recent changes to the composition of our board of directors
and senior management may disrupt our business plans.
Four of our directors have recently resigned
from our board of directors and our CEO and CFO were replaced. It is possible that these changes in the board’s composition
and any future changes to the composition of our senior management team may disrupt our business and may create uncertainty among
investors, employees and our collaboration partner concerning our future direction and performance. Any such disruption or uncertainty
could have a material adverse impact on our results of operations and financial condition and the market price of the ADSs.