ITEM 1. BUSINESS
Overview
During 2019, we completed our transformation
into a clinical stage biopharmaceutical company, developing our clinical stage immuno-oncology and immunology portfolio of monoclonal
antibodies. We are focusing our efforts on the development of our lead product candidate, lenzilumab, our proprietary Humaneered®
(“Humaneered” or “Humaneered®”) anti-human GM-CSF immunotherapy, through a clinical research agreement
(the “Kite Agreement”) with Kite Pharmaceuticals, Inc., a Gilead company (“Kite”) to study the effect of
lenzilumab on the safety of Yescarta®, axicabtagene ciloleucel (“Yescarta” or “Yescarta®”) including
cytokine release syndrome (“CRS”), which is sometimes also referred to as cytokine storm, and neurotoxicity, with a
secondary endpoint of increased efficacy in a multicenter Phase Ib/II clinical trial in adults with relapsed or refractory large
B-cell lymphoma. We believe this study, designated the nomenclature ‘ZUMA-19’, may be the basis for the registration
of lenzilumab, given the similar trial design to Yescarta’s and Novartis’s Kymriah®
(“Kymriah” or “Kymriah®”) registration trials.
We are also exploring the effectiveness
of our GM-CSF neutralization technologies (either through the use of lenzilumab as a neutralizing antibody, or through GM-CSF gene
knockout) in combination with other CAR-T, T-cell engaging, and immunotherapy treatments to break the efficacy/toxicity linkage
including the prevention and/or treatment of graft-versus-host disease (“GvHD”) while preserving graft-versus-leukemia
(“GvL”) benefits in patients undergoing allogeneic HSCT. In this context, GvHD is akin to CRS, or cytokine storm and
we believe the mechanism to be driven by GM-CSF levels. The recent coronavirus pandemic which is due to the SARS-CoV-2 virus and
leads to the condition referred to as COVID-19, is characterized in the later and sometimes fatal stages by lung dysfunction which
is triggered by CRS, or cytokine storm. Recent publications point to GM-CSF being a key cytokine, with elevated levels especially
in those patients who transition to the Intensive Care Unit (ICU). We have established several partnerships with leading institutions
to advance our innovative pipeline and are in active discussion with several government and commercial organizations.
We believe that we have a dominant intellectual
property position in the area of GM-CSF neutralization through multiple approaches and mechanisms, as they pertain to COVID-19,
CAR-T, GvHD and multiple other oncology/transplantation, inflammation, fibrosis and autoimmune conditions which may be driven by
GM-CSF.
During 2019, we also advanced our preclinical
next-generation cell and gene therapies for the treatment of cancers via our novel human granulocyte-macrophage colony-stimulating
factor (“GM-CSF”) neutralization and gene-knockout platforms.
As a leader in GM-CSF pathway science, we
believe that we have the ability to transform prevention of CRS in SARS-CoV-2 infection. The virus associated with the current
COVID-19 pandemic, SARS-Cov-2, is one of a group of several betacoronaviruses, which includes the viruses responsible for Severe
Acute Respiratory Syndrome (SARS-CoV) and Middle East Respiratory Syndrome (MERS-CoV). These viruses infect predominantly the lower
lung and cause fatal pneumonia. Other coronaviruses infect the upper respiratory tract and cause some cases of the common cold.
The clinical course of COVID-19 can be mistaken for influenza infection – patients in both cases often suffer from aches
and pains throughout the body, fever, cough and general malaise. COVID-19 is not typically associated with a productive cough –
rather it tends to be a dry cough – and sneezing is less common. A nasal or throat swab can be used to test for SARS-CoV-2
infection, and blood tests can be run to check for viral titers. Travel to areas where COVID-19 appears to have a large number
of cases and exposure to people who are known to have suffered from the condition or carriers of SARS-CoV-2 also increases the
clinical suspicion of possible infection. Data generated during the SARS and MERS outbreaks point to cytokine storm as a phase
of the illness which is characterized by an immune hyperactive phase, which then can progress to lung dysfunction and death. The
natural history of SARS infection shows viral load actually decreases as patients enter the second phase.
Source: WHO
Recent data from China and the subject of
a pre-publication titled “Aberrant pathogenic GM-CSF+ T cells and inflammatory CD14+CD16+ monocytes in severe pulmonary syndrome
patients of a new coronavirus”, supports the hypothesis that cytokine storm-induced immune mechanisms have contributed to
patient mortality with the current pandemic strain of coronavirus.
The severe clinical features associated
with some COVID-19 infections result from an inflammation-induced lung injury requiring Intensive Care Unit (ICU) care and mechanical
ventilation. This lung injury is a result of a cytokine storm resulting from a hyper-reactive immune response. The lung injury
that leads to death is not directly related to the virus, but appears to be a result of a hyper-reactive immune response to the
virus triggering a cytokine storm that can continue even after viral titers begin to fall.
The authors of the study assessed samples
from patients with severe pneumonia resulting from COVID-19 infection to identify whether inflammatory factors such as GM-CSF,
G-CSF, IL-6, MCP-1, MIP 1 alpha, IFN-gamma and TNF-alpha were implicated.
The authors noted that steroid treatment
in such cases has been disappointing in terms of outcome, but suggested that a monoclonal antibody that targets GM-CSF may prevent
or curb the hyper-active immune response caused by COVID-19 in this setting. Humanigen believes that the authors’ findings
are worthy of further investigation, suggesting that to reduce or eradicate ICU care and prevent deaths from COVID-19 infection,
an intervention may be needed to prevent cytokine storm.
Separate publications
confirm that cytokine storm is characterized by surge of high levels of circulating inflammatory cytokines, and is an overreaction
of the immune system under the conditions, such as CAR-T therapy and patients infected with SARS-CoV-2. These recent studies
revealed that high levels of GM-CSF, along with a few other cytokines, are critically associated with severe clinical complications
in COVID-19 patients. High concentration of GM-CSF was found in the plasma of severe and critically ill patients, which account
for approximately 20% of all patients, especially in those requiring intensive care.
Lenzilumab has been shown to prevent cytokine
storm in animal models and this work has been published in peer reviewed journals. Patients are expected to be enrolled soon in
a clinical study to determine lenzilumab’s effect on cytokine storm associated with the hyper-active immune response associated
with CAR-T therapy in collaboration with Kite Pharma.
We believe that these new data suggest
that GM-CSF may be a critical triggering cytokine in the increased mortality in the current coronavirus pandemic. A potential
program in COVID-19 to prevent cytokine storm is complementary to the programs in CAR-T and GvHD, which are also focused on preventing
or reducing cytokine storm in those disease states.
As a leader in GM-CSF pathway science, we
believe that we have the ability to transform chimeric antigen receptor T-cell (“CAR-T”) therapy and a broad range
of other T-cell engaging therapies, including both autologous and allogeneic cell transplantation. There is a direct correlation
between the efficacy of CAR-T therapy and the incidence of life-threatening toxicities (referred to as the efficacy/toxicity linkage).
We believe that our GM-CSF neutralization
and gene-editing CAR-T platform technologies have the potential to reduce the inflammatory cascade associated with serious and
potentially life-threatening CAR-T therapy-related side-effects while preserving and potentially improving the efficacy of the
CAR-T therapy itself, thereby breaking the efficacy/toxicity linkage. Clinical correlative analysis and preclinical in vivo
evidence points to GM-CSF as the key initiator of the inflammatory cascade resulting in CAR-T therapy’s side-effects,
including cytokine release syndrome (CRS) and neurotoxicity (NT). GM-CSF has also been linked to the suppressive myeloid cell axis
through recruitment of myeloid-derived suppressor cells (“MDSCs”) that reduce CAR-T cell expansion and hamper CAR-T
cell efficacy. Our strategy is to continue to pioneer the use of GM-CSF neutralization and GM-CSF gene knockout technologies to
improve efficacy and prevent or significantly reduce the serious side-effects associated with CAR-T therapy.
We believe that our GM-CSF pathway science,
assets and expertise create two technology platforms to assist in the development of next-generation CAR-T therapies. Lenzilumab
has the potential to be used in combination with any United States Food and Drug Administration (“FDA”)-approved or
development stage T-cell therapy, including CAR-T therapy, as well as in combination with other cell therapies such as allogeneic
hematopoietic stem cell therapy (“HSCT”) to make these treatments safer and more effective.
We have utilized a precision medicine approach
and personalized the development of lenzilumab based on specific genetic mutations or biomarkers at baseline. We recently reported
on a Phase I study of lenzilumab as monotherapy in refractory chronic myelomonocytic leukemia (CMML) and are now planning a potential
Phase II study of lenzilumab in combination with azacitidine (current standard therapy) in newly-diagnosed CMML patients with certain
genetic mutations. We are also planning a potential Phase II/III study focused on early intervention with lenzilumab in patients
at high risk for acute Graft versus Host Disease (GvHD) based on specific biomarkers. We have also reported on a Phase II study
in severe asthma utilizing lenzilumab, which showed a statistically significant improvement in efficacy and favorable safety profile
in patients with eosinophilic asthma, 21 of whom received lenzilumab vs. 20 patients who received placebo. In addition, our GM-CSF
knockout gene-editing CAR-T platform has the potential to create next-generation CAR-T therapies that may inherently avoid any
efficacy/toxicity linkage, thereby potentially preserving the benefits of the CAR-T therapy while reducing or altogether avoiding
its serious and potentially life-threatening side-effects.
Our immediate focus is combining FDA-approved
and development stage CAR-T therapies with lenzilumab, our lead product candidate. A clinical collaboration with Kite was recently
announced to evaluate the use of lenzilumab with Yescarta.
We are also creating next-generation combinatory
gene-edited CAR-T therapies using strategies to improve efficacy while employing GM-CSF gene knockout technologies to control toxicity.
This includes developing our own portfolio of proprietary first-in-class EphA3-CAR-Ts for various solid cancers and EMR1-CAR-Ts
for various eosinophilic disorders.
Our Pipeline
Our clinical-stage pipeline comprises a
further Phase I study which is almost fully enrolled with ifabotuzumab in GBM and potentially other solid cancers, a Phase Ib/II
study which is enrolling alongside YESCARTA in the CAR-T arena (ZUMA-19), an additional Phase II study, in CMML and a Phase II/III
study in acute GvHD, the latter two of which are in advanced planning stages. We also have a focus on creating safer and more effective
CAR-T therapies in hematologic malignancies and solid tumors via three key modalities:
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Combining FDA-approved and development stage CAR-T therapies with lenzilumab;
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Creating next-generation gene-edited CAR-T therapies using GM-CSF gene knockout technologies; and
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Exploring the effectiveness of our GM-CSF neutralization technologies (either through the use of lenzilumab as a neutralizing
antibody or through GM-CSF gene knockout) in combination with other CAR-T, T-cell engaging, and immunotherapy treatments, including
allogeneic HSCT.
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We are also developing our own CAR-T programs
based on the backbone of ifabotuzumab and HGEN005, in high unmet medical need and rare/orphan oncology conditions.
These product candidates are in the early
stage of development and will require substantial time, resources, research and development, and regulatory approval prior to
commercialization. Furthermore, none of these product candidates has advanced into a pivotal registration study and it may be
years before such a study is initiated, if at all. Our current pipeline is depicted below:
Lenzilumab
Lenzilumab
neutralizes human GM-CSF and has the potential to prevent or reduce certain serious side-effects associated with CAR-T therapy
(CRS and neurotoxicity) and improve upon the efficacy of CAR-T therapy. This same mechanism we believe to be the causation
of CRS/cytokine storm which precedes the decline in lung function seen with severe cases of COVID-19. Preclinical data generated
in collaboration with the Mayo Clinic (the “Mayo Clinic”), which was published in ‘blood®’,
a premier journal in hematology, indicates that the use of lenzilumab in combination with CAR-T therapy may also enhance the proliferation
and improve the efficacy of CAR-T therapy. This may also result in durable, or longer term, responses in CAR-T therapies.
There are currently no products approved
by the FDA for the prevention of CRS/cytokine storm associated with COVID-19. Also there are currently no products approved by
the FDA for the prevention of CAR-T therapy-related side effects, nor are there any approved therapies for the treatment of CAR-T
therapy related NT. We continue to advance the development of lenzilumab in combination with CAR-T therapy through a non-exclusive
clinical collaboration with Kite, pursuant to which we are conducting a multi-center Phase Ib/II study of lenzilumab with Kite’s
Yescarta in patients with relapsed or refractory B-cell lymphoma, including diffuse large B-cell lymphoma (“DLBCL”)
(the “Study”). The Study has been designated the nomenclature ‘ZUMA-19’, consistent with the other Kite
CAR-T studies, which also receive a ‘ZUMA’ designation. The primary objective of ZUMA-19 is to determine the effect
of lenzilumab on the safety and efficacy of Yescarta. Kite’s Yescarta is one of two CAR-T therapies that have been approved
by the FDA and is the CAR-T therapy market leader, and our collaboration with Kite is currently the only clinical collaboration
which is now enrolling patients with the potential to improve both the safety and efficacy of CAR-T therapy. We also plan to measure
other potentially beneficial effects on efficacy and healthcare resource utilization. In addition, lenzilumab’s success in
preventing serious and potentially life-threatening side-effects could offer economic benefits to medical system payers by making
the CAR-T therapy capable of being administered, and follow-up care subsequently monitored and managed, potentially on an out-patient
basis in certain patients and circumstances. In turn, we believe that delivering such provider and payer benefits might accelerate
the use of the CAR-T therapy itself, and thereby permit us to generate further revenues from sales of lenzilumab.
In addition to COVID-19 and CAR-T therapy,
we are committed to advancing our diverse platform for GM-CSF axis suppression for a broad range of other T-cell engaging therapies,
including both autologous and allogeneic next generation CAR-T therapies, bi-specific antibody therapies, as well as other cell-based
immunotherapies in development, including allogeneic HSCT, with our current and future partners.
In July 2019, we entered into an exclusive
worldwide license agreement (the “Zurich Agreement”) with the University of Zurich (“UZH”). Under the Zurich
Agreement, we have in-licensed certain technologies that we believe may be used to prevent or treat GvHD, thereby expanding our
development platform to include improving the safety and effectiveness of allogeneic HSCT, a potentially curative therapy for patients
with hematological cancers. There are currently no FDA-approved agents for the prevention of GvHD nor treatment of GvHD in patients
identified as high risk by certain biomarkers. We believe that GM-CSF neutralization with lenzilumab has the potential to prevent
or treat GvHD without compromising, and potentially improving, the beneficial GvL effect in patients undergoing allogeneic HSCT,
thereby making allogeneic HSCT safer. Several recent papers have been published which support this approach, including in Science
Translational Medicine in November 2018 and in ‘blood advances’ in October 2019.
We aim to position lenzilumab as a necessary
companion product to any allogeneic HSCT and as a part of the standard pre-conditioning that all patients receiving allogeneic
HSCT should receive or as an early treatment option in patients identified as high risk for GvHD.
Given our interest in developing lenzilumab
to prevent CRS/cytokine storm in COVID-19 as well as in the treatment of rare cancers and other orphan conditions such as GvHD,
we believe that we have the opportunity to benefit from various regulatory incentives, such as orphan drug exclusivity, breakthrough
therapy designation, fast track designation, priority review and accelerated approval.
GM-CSF Gene Knockout
We are advancing our GM-CSF knockout gene-editing
CAR-T platform through an exclusive worldwide license agreement (the “Mayo Agreement”) that we entered into in June
2019 with the Mayo Foundation for Medical Education and Research (the “Mayo Foundation”). Under the Mayo Agreement,
we have in-licensed certain technologies that we believe may be used to create CAR-T cells lacking GM-CSF
expression through various gene-editing tools, including CRISPR-Cas9. We believe that our GM-CSF knockout gene-editing CAR-T
platform has the potential to create next-generation CAR-T therapies that improve the efficacy and safety profile of CAR-T therapy.
In addition, we have and continue to file intellectual property encompassing a broad range of gene-editing approaches related to
GM-CSF knockout.
Preclinical data
indicates that GM-CSF gene knockout CAR-T cells show improved overall survival in animals compared to wild-type CAR-T cells in
addition to the expected benefits of reduced serious side-effects associated with CAR-T therapy. We are establishing a platform
of next-generation combinatorial gene knockout CAR-T cells that have potential to be applied across both autologous and allogeneic
approaches and we are also investigating multiple CAR-T cell designs using precise dual and triple gene editing to significantly
enhance the anti-tumor activity while simultaneously preventing CAR-T therapy induced toxicities. Through targeted gene expression
and modulating cytokine activation signaling, we may be able to increase the proportion of fitter T-cells produced during expansion,
increase their proliferative potential, and inhibit activation-induced cell death, thereby improving the cancer killing activity
of our engineered CAR-T cells thereby making them more effective and safer in the treatment of cancers. Initial data were published
in an abstract that was presented at the December 2019 American Society of Hematology (ASH) meeting and also won an ASH Abstract
Achievement award.
We plan to continue
development of this technology in combination approaches that could add to the observed efficacy benefits of current generation
CAR-T products. In addition, we anticipate that our GM-CSF knockout gene-editing CAR-T platform may be a future backbone for controlling
the serious side-effects that hamper CAR-T therapy that lead to serious and sometimes fatal outcomes for patients as a result
of the CAR-T therapy itself.
EphA3-CAR: Targeting Tumor Stroma and Tumor Vasculature
We have begun to
generate our own pipeline of CAR-T therapies including an EphA3-CAR-T based on the ifabotuzumab v-region and backbone. Ifabotuzumab
is a Humaneered anti-EphA3 monoclonal antibody (“EphA3”). Ifabotuzumab has the potential to kill tumor cells by targeting
tumor stroma that protects them and the vasculature that feeds them. This unique combination of activities as a backbone of a CAR-T
therapy may provide the potential to generate durable responses in a range of solid tumors by targeting the tissues that surround,
protect, and nourish a growing cancer.
By developing an EphA3-CAR-T using ifabotuzumab
as the backbone, we may have the ability to target the tumor, tumor stroma, and tumor vasculature in a novel manner. We are collaborating
with the Mayo Clinic and plan to move to clinical testing with an anti-EphA3 construct for a range of cancer types after completing
Investigational New Drug (“IND”)-enabling work. We have published initial data from our Phase I study in an abstract
that was accepted for the November 2019 Society of Neuro-Oncology (“SNO”) meeting, showing data in glioblastoma multiforme,
a form of brain cancer.
EMR1-CAR: Targeting Eosinophils
Our epidermal growth factor-like module
containing mucin-like hormone receptor 1 (“EMR1”)-CAR-T product is based on the HGEN005 (anti-EMR1 Humaneered monoclonal
antibody) backbone and targets epidermal growth factor-like module containing mucin-like hormone receptor 1 (“EMR1”).
Our EMR1-CAR-T based on the HGEN005 backbone is another approach in our growing platform of CAR-T therapies. We believe that because
of its high selectivity, EMR1-CAR-T has significant potential to treat serious eosinophil diseases.
In preclinical work, HGEN005’s anti-EMR1
activity resulted in dramatically enhanced killing of eosinophils from normal and eosinophilic donors and also induced a rapid
and sustained depletion of eosinophils in a non-human primate model without any clinically significant adverse events. We have
engaged with U.S. National Institutes of Health (“NIH”) to discuss expanding the initial work they have conducted
utilizing HGEN005 and discussions are underway with a leading center in the U.S. to perform the IND-enabling testing in eosinophilic
leukemia, an orphan condition with significant unmet need, as well as with several other potential partners, although we cannot
assure you that we will reach any agreements for these next steps.
CAR-T Overview and Market Opportunity
Development
and implementation of individualized treatments based on T-cell therapies has the potential to revolutionize the fight against
cancer. The two CAR-T therapies that have been approved by the FDA, Gilead/Kite’s Yescarta and Novartis’s Kymriah,
seek to treat forms of B-cell cancers such as various types of Non-Hodgkin Lymphoma (“NHL”), including DLBCL and acute
lymphoblastic leukemia (“ALL”) that are refractory or in second or later stage relapse. Although patients suffering
from these aggressive cancers frequently undergo multiple treatments, including chemotherapy, radiation and targeted therapy including
stem cell transplants, the five-year survival rate has been severely limited and patients who do not respond to, or have relapsed
following at least two courses of standard treatment, have no other treatment options and a very poor outcome. According to the
Surveillance, Epidemiology, and End Results (“SEER”) program of the National Cancer Institute,
which is a source of epidemiologic information on the incidence and survival rates of cancer in the U.S., it is estimated
that up to 10,000 patients per year in the U.S. with relapsed or refractory (r/r) B-cell NHL and ALL who have failed at least two
prior systemic therapies may be eligible for CAR-T therapy. In addition, if CAR-T therapy is approved as an earlier second line
option versus stem cell transplantation, an additional 10,000 to 12,000 patients may be eligible for treatment. However, this is
predicated on improving the benefit-to-risk profile of CAR-T therapy, addressing the severe life threatening adverse events currently
associated with these agents and breaking the efficacy/toxicity linkage
The
FDA-approved CAR-T therapies have demonstrated the effectiveness of using targeted immuno-cellular engineering to cause a patient’s
own T-cells to fight certain cancers that have not responded to standard therapies. T-cells are often called the “workhorses”
of the immune system because of their role in coordinating the immune response and killing cells infected by pathogens and cancer
cells. As depicted below, each of the FDA-approved CAR-T therapies is currently a one-time treatment that involves multiple
steps:
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Harvesting white blood cells from the patient’s blood, also known as apheresis;
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Engineering T-cells within this population to express cancer-specific receptors;
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Increasing and purifying the number of genetically re-engineered T-cells; and
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Infusing the functional cancer-specific T-cells back into the patient to allow for expansion and targeting the cancer cells.
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Both Kymriah and Yescarta received FDA approval
for adults with r/r DLBCL on the basis of one single-arm Phase II study which served as the pivotal registration trial for each
product in this indication, a markedly accelerated process that indicates the FDA’s view of the strong potential of these
novel CAR-T therapy treatments to address an unmet need and improve patient outcomes. The number of evaluable patients in the studies
that led to FDA approval for Kymriah and Yescarta in large B-cell lymphoma was 68 and 101, respectively. Moreover, Kymriah also
received FDA approval for the treatment of pediatrics and adolescents with r/r ALL based on a single phase II study. The
Novartis-sponsored Kymriah study in ALL showed that 83% of pediatric and adolescent patients with r/r ALL who received treatment
with Kymriah (52 of 63; 95% confidence interval: 71%-91%) achieved a complete response rate (CR) or
a CR with incomplete blood count recovery within three months of infusion. In addition, Novartis announced that no minimal residual
disease, a blood marker that indicates potential relapse, was detected among responding patients. The Novartis-sponsored
Kymriah study in adults with r/r DLBCL showed that 32% of adults achieved a CR within three months of infusion, which
dropped to 30% after six months. In the Kymriah registration study in the DLBCL population, 160 patients were enrolled and 68 were
evaluable.
The single Phase II study that led to the
FDA approval of Yescarta in r/r DLBCL showed similarly positive results. The study enrolled 111 patients (101
were evaluable) with large B-cell lymphoma at advanced stages despite having undergone at least two previous treatments,
with approximately 20% of patients already having undergone a stem cell transplant. The CR
rate within three months of CAR-T treatment, given as a single infusion, was 58%, which dropped to 46% after six months. The CR
rate after two years of CAR-T treatment, given as a single infusion, has been reported as 37%.
Encouraged
by the success of the Phase II studies, since the initial FDA approvals were granted to Novartis for Kymriah, the CAR-T therapy
market has seen rapid expansion, with Gilead/Kite and Novartis and scores of other biotechnology companies actively working to
progress CAR-T therapies as potential treatments for numerous blood and solid tumor cancers. The third entrant to the U.S. market,
lisocabtagene maraleucel (liso-cel) from BMS, is expected to be approved in 2020.
Kymriah, Yescarta and liso-cel are autologous
individualized CD19 targeted CAR-T therapies. Development is also ongoing to move each agent to earlier lines of therapy for DLBCL
(rather than as salvage therapy for patients who have exhausted other options), in
other types of B-cell NHL and for the treatment of chronic lymphocytic leukemia (“CLL”). According to SEER, as well
as the American Cancer Society's Cancer Statistics Center and World Health Organization Union for International Cancer Control,
it is estimated that up to 10,000 patients with r/r B-cell hematologic malignancies (including DLBCL, ALL, CLL) per year may potentially
benefit from CD19 targeted CAR-T therapies. In addition, if CAR-T therapy is approved as
an earlier second-line option versus stem cell transplantation, an additional 10,000 to 12,000 patients may be eligible for treatment.
Moreover, there are two B-cell maturation antigen (“BCMA”) targeted CAR-T therapies in phase II development
for relapsed or refractory multiple myeloma and several other novel CAR-T therapies targeting various antigens and neo-antigens
in development for a number of hematologic and solid cancers. While there may be individual differences between CAR-T therapy products,
the overall toxicity profile is generally expected to be generally consistent with that reported for Yescarta and for Kymriah.
Former FDA Commissioner Scott Gottlieb and
FDA Center for Biologics Evaluation and Research (CBER) Director Peter Marks detailed plans for the FDA to keep pace with an expected
influx of applications for cell and gene therapies over the coming years. Gottlieb and Marks have indicated that by 2020, FDA expects
to receive more than 200 active IND applications for cell and gene therapies each year, adding to the 800 active IND applications
for such products already filed with FDA. By 2025, they predict that FDA will be approving between 10 and 20 cell and gene therapy
products annually. The FDA has also issued final guidance to gene therapy and cell therapy developers, whereby under the Regenerative
Medicine Advanced Therapy (“RMAT”) designation, qualified applications will be eligible for FDA priority review and
accelerated approval.
The global CAR-T therapy market is projected
to grow from approximately $300 million in 2018 to greater than $2 billion in 2021, with continued growth up to $8.5 billion in
2028, according to ‘Evaluatepharma’.
Allogeneic HSCT Overview and Market Opportunity
Allogeneic
HSCT, which involves transferring stem cells from a healthy donor to the patient, has demonstrated effectiveness in treating hematological
cancers. As depicted below, allogeneic HSCT involves multiple steps:
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Collecting blood from a healthy donor;
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Processing the donor’s blood to remove the stem cells before returning the rest of the donor’s blood back to the
donor;
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Pre-conditioning the patient with high-dose chemotherapy and/or radiation; and
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Infusing the donor’s stem cells into the patient to allow for the production of new blood cells.
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The overall number of allogeneic HSCT treatments
continues to increase annually in the U.S. and abroad. In 2019, approximately 10,000 allogeneic HSCT treatments are expected to
be performed in the U.S., with similar trends expected in Europe.
Market Opportunity
CAR-T Therapy
The two FDA-approved CAR-T therapies are
not without significant limitations. Despite the exciting prospects for treating patients with limited options, significant and
potentially life-threatening side-effects from CAR-T therapy, including NT and CRS, remain a significant unmet need that must be
addressed. Because NT and CRS can be life-threatening and have proven fatal in many instances,
and because each product bears a “Boxed” warning from the FDA (the strictest FDA warning label intended to alert patients
and providers about serious and life-threatening risks associated with a particular drug), patients seeking to benefit from Yescarta
or Kymriah generally may only do so if the treatment center is in compliance with the Risk Evaluation
and Mitigation Strategy (“REMS”) program required by FDA.
REMS
is a drug safety program that the FDA can require for certain medications with serious safety concerns to help ensure
the benefits of the medication outweigh its risks and are intended to assist and train certified treatment centers on the
management of these serious side-effects. For example, each hospital and its associated clinics have a minimum of two doses of
tocilizumab available on-site for each patient for the potential treatment of moderate to severe cases of CRS. We believe the REMS
requirement may have adversely impacted both market uptake and usage to date. Both CRS and NT are caused by a large-scale release
of pro-inflammatory cytokines and chemokines induced by the CAR-T therapy, sometimes referred to as a “cytokine storm”.
According
to the package inserts for Yescarta and Kymriah, up to 94% of patients treated with Yescarta or Kymriah in the clinical
trial setting experienced CRS (with up to 49% of cases being severe or grade >3 in nature) and up to 87% experienced
NT (with up to 31% of cases being severe or grade >3 in nature) despite the availability and utilization of tocilizumab.
Moreover, based on feedback from leading treatment centers in the U.S., approximately 30
to 60% of patients receiving CAR-T therapy require admission to the intensive care unit (“ICU”) and in some cases require
an extended stay, with multiple interventions, including ventilator support and other supportive measures, to be urgently administered
to manage these side-effects. Some patients can suffer seizures, coma, brain swelling, heart arrhythmias, organ failure
and serious and life-threatening clotting disorders, not only causing more complex and potentially fatal medical consequences,
but significantly adding to cost of patient care. These can be particularly challenging and concerning issues, especially in younger
and pediatric patients.
Researchers
who evaluated 1,254 patients who underwent CAR-T therapy at 86 hospitals over the past two years reported that the median ICU stay
was 15 to 19 days with a median overall cost ranging from $85,726 to $242,730, not including the cost of the CAR-T therapy itself
(Harris, et al. TCT 2019 Abstracts 500, 501). In addition, there have also been deaths reported as a result of these serious
side-effects. A publication assessing 636 patients who had received either of the two FDA-approved CAR-T therapies (348 patients
on Yescarta and 288 on Kymriah) authored by Anand and Burns, et al. in the Journal of Clinical Oncology (37, 2019 (suppl; abstract
2540)) reported that 15% of CAR-T treated patients (10% receiving Yescarta and 21% receiving Kymriah) died from factors not associated
with disease progression (i.e., non-relapse mortality) and the primary driver of non-relapse mortality was NT and/or CRS. Therefore
these serious side-effects are associated with significant mortality rates, despite the availability of approved supportive care
measures, even as CAR-T therapies are administered only in trained and certified treatment centers staffed by experts in the field.
We expect that the CAR-T therapies under development may be hampered by the same significant side-effects. If such side-effects
can be ameliorated or eradicated, and adequate data is submitted to FDA, the “Black Box” warning and REMS program could
potentially be scaled back or removed.
There
are currently no FDA-approved products for the prevention or treatment of NT or for the prevention of CRS associated with CAR-T
therapy. Medicines used to manage NT and CRS, such as tocilizumab and corticosteroids, have not adequately controlled the side-effects,
and steroids may have a detrimental impact on the efficacy of the CAR-T therapy itself while tocilizumab may increase the risk
of CAR-T therapy induced NT and is correlated with an increased risk of infections, including severe infections. Further, these
medicines have not undergone prospective clinical trials for use in this patient population. Tocilizumab is only approved for the
treatment of severe cases of CRS, but is not approved for prevention of CRS, nor is it approved for either prevention or treatment
of NT.
The
approval in CRS was granted as a result of case studies and not as a result of a planned, prospective clinical study in this patient
population, as would be typical. Studies testing tocilizumab for the prevention of NT have shown tocilizumab to significantly worsen
the rate of NT across all grades as well as the more serious grades 3 and above, as compared to the rate in patients who did not
receive tocilizumab prophylactically. In addition, recent publications question the efficacy of tocilizumab in CRS. For example,
studies testing tocilizumab as a prophylactic therapy for CRS have shown the rates of overall CRS remained unaltered as compared
to the rate in patients who did not receive tocilizumab prophylactically (Locke et al. American Society of Hematology (“ASH”)
2017, Abstract 1547). Further, a publication authored by Le, et al. in The Oncologist (2018, 28(8); 943-947) assessing 60 patients
who had received either Yescarta or Kymriah and had suffered from CRS having received tocilizumab and/or steroids after the onset
of CRS, reported that only approximately half of the patients responded at day 11.
These
data, along with the Anand/Burns data and the Locke data discussed above, demonstrate that improvements in the ability to prevent
or mitigate NT and CRS are needed. Such improvements would help remove these major impediments to uptake and utility of CAR-T therapies,
improve healthcare utilization and improve overall patient outcomes. Managing patients with these side-effects can consume a significant
amount of in-hospital resources, including extended stays in the ICU. The primary driver of non-drug related costs associated with
CAR-T therapy is the length of stay in the hospital, particularly if this includes ICU admission. Non-drug related costs for patients
who develop CRS and/or NT are approximately double that of patients who do not develop these serious toxicities. Further, as the
potential benefit of CAR-T therapies are explored in earlier lines of hematologic cancers (rather than as salvage therapy for patients
who have exhausted other options), as well as moving use of CAR-T therapies into solid tumors, the need to address serious side-effects
becomes paramount.
In
addition to improving patient outcomes, the ability to significantly reduce the incidence and severity of NT and prevent CRS associated
with CAR-T therapy may offer significant benefits in making these treatments more cost-effective. Hospital reimbursement for patients
who are treated only as an out-patient is profoundly different from, and more favorable to the hospital than, the reimbursement
afforded to treatments for patients who are admitted or re-admitted to the hospital within a 72 hour period. Unfortunately, at
present, the need to identify, treat and manage NT and CRS generally has prevented CAR-T therapies from being administered, and
follow-up care monitored and managed, potentially on an out-patient basis. Again,
30-60% of patients receiving CAR-T therapy require admission to the ICU, in some cases requiring an extended stay, with multiple
interventions, investigations and treatments needing to be urgently administered.
As
a result, in some institutions, the treating physician may require the hospital to reserve a bed in the ICU as a prerequisite
to administering the CAR-T therapy in case the patient needs to be hospitalized in an attempt to manage the adverse effects from
NT and CRS. At other institutions, the patient is admitted as an in-patient and is required to remain in the hospital for at least
a week, with discharge being subject to satisfactory short-term outcomes and no emergence of complications. Even in institutions
where the CAR-T therapy is initially administered in an out-patient setting, the patient is closely monitored daily for several
weeks and is required to stay within a short distance from the hospital in case the patient needs to be admitted to the hospital
on an emergency basis, requiring additional lodging, food and other costs to be incurred by the patient, the payer, or both. In
some situations these patients are re-admitted to the hospital on an emergency basis as an in-patient if complications ensue.
If a patient is admitted or re-admitted to the hospital as an in-patient, the hospital reimbursement dynamics may change in a
manner which is negative for the hospital, the payer and the patient. This dynamic also changes typical hospital reimbursement,
depending on when in the treatment cycle the patient is admitted or re-admitted. In addition, certain
treatment centers do not accept patients who are not potentially able to be treated as an out-patient and refer such patients
to other centers who may be willing to treat them as in-patients, primarily as a result of the reimbursement handicap that would
accrue as a result of in-patient coding, billing and reimbursement, which generally leads to the hospital system losing money
because of the in-patient care reimbursement.
The
reimbursement challenges associated with CAR-T therapies are also proving to be an impediment to greater utilization of Kymriah
and Yescarta in Europe and the United Kingdom, where the National Institute of Clinical Excellence (“NICE”) initially
recommended that the UK National Health Service not reimburse Yescarta based on their assessment of the cost per quality-adjusted
life-year (“QALY”). A key driver of the cost per QALY is in-patient and potential ICU-related costs. This
led to Yescarta having to be funded through other mechanisms. A positive recommendation for use of Yescarta within the Cancer
Drugs Fund (“CDF”) was subsequently made by the NICE appraisal committee
in January 2019, but only in compliance with a managed access agreement. When the data collection period finishes (anticipated
by February 2022), the process for exiting the CDF will begin and the review of NICE’s guidance for Yescarta will start.
While
both Kymriah and Yescarta have been approved by European regulators for market authorization, prescriptions have been limited as
Kite and Novartis work to establish reimbursement arrangements intended to facilitate access to the treatments on a discounted
basis consistent with the governmental mandates to curb healthcare spending. These dynamics, and the additional complexity of treating
patients with serious and potentially life-threatening side-effects in the hospital and/or ICU, mean that enabling true out-patient
administration and follow-up would confer significant benefits to patients, payers and the hospital system. Lenzilumab, if proven
to be able to abrogate these serious side-effects as well as improve efficacy, may offer a solution.
Other T-cell Engaging Therapies
In addition to CAR-T therapy, we are committed
to advancing our diverse platform for GM-CSF axis suppression for a broad range of other T-cell engaging therapies, including both
autologous and allogeneic next generation CAR-T therapies, bi-specific antibody therapies, as well as other cell-based immunotherapies
in development, to break the efficacy/toxicity linkage, including for the prevention and/or treatment of GvHD in patients undergoing
allogeneic HSCT. Many of these treatment options may lead to serious side-effects and have ample room for improved efficacy.
We believe that GM-CSF neutralization with
lenzilumab has the potential to prevent or reduce GvHD without compromising, and potentially improving, the beneficial GvL effect
in patients undergoing allogeneic HSCT, thereby making allogeneic HSCT safer. Allogeneic HSCT is a potentially curative therapy
for patients with hematological cancers. Although a potentially life-saving treatment for patients suffering from hematological
cancers, between 40-60% of patients receiving HSCT treatments experience acute or chronic GvHD, which together carries a 50% mortality
rate. After being transplanted into the patient, donor-derived T cells are responsible for mediating the beneficial GvL effect.
In many cases, however, donor-derived T cells that remain within the graft itself have also been linked to destruction of healthy
tissue in the patient (the host), with particular risk of destroying cells in the patient’s skin, gut, and liver, resulting
in GvHD. Although depleting donor grafts of T cells can prevent or reduce the risk of GvHD, this results in a reduced GvL effect,
thereby having a detrimental impact on the efficacy of the allogeneic HSCT treatment itself and leading to increased relapse rates.
We expect that the use of allogeneic HSCT may be hampered by GvHD complications. A recent study published in ‘blood advances’
an official journal of the American Society of Hematology, suggests that neutralizing or blocking GM-CSF may limit or prevent GvHD
in the gastrointestinal tract (Gartlan, K., et al, October 8, 2019, vol 3, no.19).
There are currently no FDA-approved agents
for the prevention of GvHD, and there is a significant unmet medical need for an agent that can uncouple the beneficial GvL effect
from harmful GvHD. At this time, pre-conditioning regimens for HSCT treatments vary significantly by treatment centers, including
by unapproved, or “off-label”, use of agents that have been approved by the FDA for other uses only. We believe there
to be a significant unmet medical need and lenzilumab, if proven to be able to prevent GvHD in allogeneic HSCTs, may offer a solution.
Preclinical studies have shown lenzilumab
can potentially be used to cause apoptosis in CMML cells by depriving them of GM-CSF. We completed dosing in a Phase 1 clinical
trial in patients with CMML to identify the MTD or recommended Phase 2 dose of lenzilumab and to assess lenzilumab’s safety,
pharmacokinetics, and clinical activity and reported the results at the 2019 American Society of Hematology (ASH) conference.
Our Solution
We believe that our GM-CSF pathway science,
assets and expertise create two technology platforms to assist in the development of next-generation CAR-T therapies. Lenzilumab
has the potential to be used in combination with any FDA-approved or development stage T-cell therapies, including CAR-T therapy,
as well as in combination with other cell therapies such as HSCT, to make these treatments safer and more effective. In addition,
our GM-CSF knockout gene-editing CAR-T platform has the potential to create next-generation CAR-T therapies that may inherently
avoid any efficacy/toxicity linkage, thereby potentially preserving the benefits of the CAR-T therapy while reducing or altogether
avoiding its serious and potentially life-threatening side-effects.
In
our review of results of CAR-T clinical trials, as well as preclinical animal models that seek to understand the causation of side-effects,
we noted from independent researchers that CAR-T infusion leads to an early rise in levels of soluble GM-CSF, a cytokine that we
believe is of critical importance in the inflammatory cascade associated with CAR-T therapy related side-effects. GM-CSF is
one of only two cytokines that have been clearly demonstrated to be associated with severe NT and early rise in, and peak levels
of, GM-CSF are associated with NT. GM-CSF is also implicated in the growth of certain hematologic malignancies, such as chronic
myelomonocytic leukemia (“CMML”), juvenile myelomonocytic leukemia (“JMML”), hemophagocytic lymphohistiocytosis
(“HLH”), macrophage activation syndrome (“MAS”), certain solid tumors and other serious conditions, particularly
a broad range of auto-immune conditions. Moreover, there is an abundance of data demonstrating that GM-CSF is upstream in
the cytokine cascade and that the neutralization of GM-CSF is known to inhibit the release of key downstream cytokines known to
be associated with CRS and NT.
Combining CAR-T Therapies with Lenzilumab
Lenzilumab binds
to and neutralizes soluble, circulating GM-CSF, and has been shown to be generally safe and well tolerated in 113 patients in three
Phase I and two Phase II studies conducted for other purposes, including a form of leukemia, CMML. As a result, we have an extensive
safety, tolerability and pharmacokinetics data package on lenzilumab in clinical use in healthy human volunteers as well as in
patients. Accordingly, we believe lenzilumab has the potential to improve the efficacy and safety of CAR-T therapy and that
the use of lenzilumab may minimize or eradicate the incidence, frequency, duration and/or severity of NT and/or CRS associated
with CAR-T therapy while also enhancing CAR-T proliferation and effector functions and potentially confer additional benefits in
terms of durable efficacy and healthcare resource utilization. We also believe lenzilumab may further improve the value proposition
of CAR-T therapies and facilitate their use and acceptance throughout the healthcare systems in the U.S. and abroad.
A strong scientific rationale exists for
GM-CSF neutralization using lenzilumab for the improvement of safety, efficacy and cost-effectiveness of CAR-T therapy. Lenzilumab
is in development to significantly reduce the incidence and severity of CAR-T therapy induced NT and CRS, and to improve the overall
efficacy and duration of response of CAR-T therapy. Robust scientific rationale and independent scientific research from leading
institutions support GM-CSF neutralization as a validated target in this setting. In December 2017, we held a scientific advisory
board at the 2017 ASH annual meeting with leading key opinion leaders in the CAR-T field to validate the scientific rationale of
lenzilumab prophylactic therapy in combination with CAR-T therapy. Based on feedback received from the advisory board, we created
the development plan for lenzilumab. To that end, we initiated preclinical studies using proprietary xenograft models in collaboration
with the Mayo Clinic. In addition, and following subsequent scientific advisory boards convened at the 2018 American Society of
Clinical Oncology and the 2018 ASH annual meeting, we continued to work with leading key opinion leaders and CAR-T centers to advance
lenzilumab into phase Ib/II pivotal trials in combination with FDA-approved, CD19 targeted CAR-T therapies such as Kite’s
Yescarta and potentially with Novartis’s Kymriah.
Following
outreach to key opinion leaders and innovators in the CAR-T field, we have tested the hypothesis of using lenzilumab as a prophylaxis
against these side-effects. A preclinical study conducted in 2018 in collaboration with leading researchers at the Mayo Clinic,
validated our hypothesis that the use of lenzilumab along with CD19 targeted CAR-T therapy neutralized GM-CSF and significantly
reduced NT and CRS. In addition, the Mayo Clinic study showed that the use of lenzilumab enhanced CAR-T proliferation and effector
functions, generally improving the efficacy of the CAR-T therapy. This was the first time it has been demonstrated that the toxicities
associated with CAR-T therapy can be effectively abrogated in vivo. These data were submitted as an abstract to the ASH
and led to a presentation during the CAR-T plenary session at the 2018 annual meeting of the ASH, the receipt of one of ASH’s
coveted ‘Outstanding Abstract Achievement Awards’, and an invitation to submit a manuscript to ‘blood’,
a premier journal in hematology and the official journal of ASH. The manuscript entitled “GM-CSF inhibition reduces cytokine
release syndrome and neuroinflammation but enhances CAR-T cell function in xenografts” was published as a first edition paper
by ‘blood’ in the November 21, 2018 online edition. In February 2019, the editors of ‘blood’ selected our
study and a key image from the associated manuscript for the front cover of the February 14, 2019 edition of the journal.
Our
current clinical and regulatory development plan centers around the collaboration agreement we executed with Kite in May 2019 (the
“Kite Agreement”). Pursuant to the Kite Agreement, the parties have agreed to conduct a multi-center Phase 1b/2 study
(ZUMA-19) of lenzilumab with Kite’s Yescarta in patients with relapsed or refractory B-cell lymphoma. The primary objective
of ZUMA-19 is to determine the effect of lenzilumab on the safety of Yescarta. In addition, efficacy and healthcare resource utilization
will be assessed. The Kite Agreement is non-exclusive. Depending upon FDA feedback, we believe ZUMA-19 may serve as the
basis for registration for lenzilumab.
Combining Allogeneic HSCT with
Lenzilumab
In addition to
CAR-T therapy, we are committed to advancing our diverse platform for GM-CSF axis suppression for a broad range of other T-cell
engaging therapies, including both autologous and allogeneic next generation CAR-T therapies, bi-specific antibody therapies as
well as other cell-based immunotherapies in development, with our current and future partners.
We believe that GM-CSF neutralization using
lenzilumab has the potential to make allogeneic HSCT safer and more effective. Similar to GM-CSF neutralization with lenzilumab
breaking the efficacy/toxicity linkage with CAR-T therapy, GM-CSF neutralization has demonstrated potential to attenuate GvHD while
maintaining the beneficial GvL effect in patients undergoing allogeneic HSCT.
In July 2019, we entered into the Zurich
Agreement with UZH. Under the Zurich Agreement, we have in-licensed certain technologies that we believe may be used to prevent
or treat GvHD, thereby expanding our development platform to include improving the safety and effectiveness of allogeneic HSCT,
a potentially curative therapy for patients with hematological cancers. The technology was recently featured in a November 2018
research article published in Science Translational Medicine, where the authors demonstrated in a murine model of GvHD, that donor
T cell-derived GM-CSF drives GvHD through activation, expansion, and trafficking of myeloid cells but has no effect on the GvL
response. Neutralization of GM-CSF (either using a neutralizing antibody or through GM-CSF gene knock-out) was able to uncouple
the myeloid-mediated immunopathology resulting in GvHD from the T cell-mediated control of leukemic cells. This discovery provides
a clear mechanistic proof-of-concept for neutralizing GM-CSF to prevent GvHD without compromising, and potentially improving, the
GvL effect in patients undergoing allogeneic HSCT. Corroborating data related to the critical effect GM-CSF has on GvHD development
in HSCT was published recently by Gartlan et al.
The strong link between T cell-mediated
efficacy and myeloid cell mediated toxicity mirrors the findings that have been reported with CAR-T therapies where T cell-produced
GM-CSF has emerged as a key driver of the myeloid inflammatory cascade resulting in NT and CRS and potentially impairing improved
CAR-T therapy efficacy through effects on myeloid-derived suppressor cells. GM-CSF neutralization has the potential to eliminate
or reduce the off-target inflammatory cascade while preserving the on-target efficacy of T cell therapies, thereby breaking the
efficacy/toxicity linkage.
We believe that GM-CSF neutralization with
lenzilumab has the potential to prevent or treat GvHD without compromising, and potentially improving, the beneficial GvL effect
in patients undergoing allogeneic HSCT, thereby making allogeneic HSCT safer. Accordingly, we aim to position lenzilumab as a “must
have” companion product to any allogeneic HSCT and as a part of the standard pre-conditioning that all patients receiving
allogeneic HSCT should receive or as an early treatment option in patients identified as high risk for GvHD.
Lenzilumab in CMML
We believe that lenzilumab also holds promise
in CMML, a rare form of hematologic cancer with no FDA-approved treatment options and a three-year overall survival rate of 20%
and median overall survival of 20 months, and potentially in JMML, a rare pediatric form of leukemia. CMML is a clonal stem cell
disorder of which monocytosis is a key feature. Approximately 40% of CMML patients carry NRAS/KRAS/CBL mutations which are associated
with GM-CSF hypersensitivity. CMML has features of myelodysplastic syndrome (“MDS”), including abnormal, dysplastic
bone marrow cells; cytopenia; transfusion dependence; and of myeloproliferative neoplasms, including overproduction of white blood
cells, organomegaly (e.g., splenomegaly and hepatomegaly) and extramedullary disease. About 15 to 20% of CMML cases progress to
acute myeloid leukemia, or AML. According to the American Cancer Society, approximately 1,100 individuals in the United States
are newly diagnosed annually with CMML, with the majority of these new patients being age 60 or older. These patients are typically
unsuitable for stem cell transplants.
In a recently conducted Phase I study, 3
of 6 patients with NRAS/KRAS/CBL mutations demonstrated a clinical response by the MDS/MPN International Working Group criteria.
Final results of this study were presented at the 2019 ASH annual meeting and published in ‘blood’. Building on this
successful Phase I study in CMML with lenzilumab, we may initiate a Phase II study in newly-diagnosed CMML patients who express
NRAS/KRAS/CBL mutations which are known to be hypersensitive to GM-CSF and therefore may lend themselves to responsiveness to lenzilumab
treatment.
Gene-edited CAR-T Therapies using GM-CSF Gene Knockout
We believe that our GM-CSF knockout gene-editing
CAR-T platform has the potential to create next-generation CAR-T therapies that improve the efficacy and safety profile of CAR-T
therapy via gene-edited CAR-T cells which can be engineered to lack the ability to produce GM-CSF, thereby avoiding any efficacy/toxicity
linkage and potentially preserving and improving upon the benefits of the CAR-T therapy while altogether avoiding its serious and
potentially life-threatening side-effects.
We are advancing our GM-CSF knockout gene-editing
CAR-T platform through the Mayo Agreement that we entered into in June 2019 with the Mayo Foundation. Under the Mayo Agreement,
we have in-licensed certain technologies that we believe may be used to create CAR-T cells lacking GM-CSF
expression through various gene-editing tools including CRISPR-Cas9. The Mayo Agreement broadened our leadership position
in the GM-CSF neutralization space and expanded our discovery platform aimed at improving CAR-T therapy to include gene-edited
CAR-T cells.
Preclinical data indicates that GM-CSF
gene knockout CAR-T cells show improved overall survival compared to GM-CSF-expressing CAR-T cells in addition to the expected
benefits of reduced serious side-effects associated with CAR-T therapy. We are establishing a platform of next-generation combinatorial
gene knockout CAR-T cells that have potential to be applied across both autologous and allogeneic approaches and we are also investigating
multiple CAR-T cell designs using precise dual and triple gene editing to significantly enhance the anti-tumor activity while
simultaneously preventing CAR-T therapy induced toxicities. Through targeted gene expression and modulating cytokine activation
signaling, we may be able to increase the proportion of fitter T-cells produced during expansion, increase the proliferative potential,
and inhibit activation induced cell death, thereby improving the cancer killing activity of our engineered CAR-T cells thereby
making them more effective and safer in the treatment of cancers. Preclinical data indicates that CAR-T cells express GM-CSF and
signal through GM-CSF receptors upon activation in an autocrine fashion. GM-CSF knockout CAR-T cells are not able to signal through
this pathway which results in a gene expression profile distinct from GM-CSF-expressing CAR-T cells after in vitro expansion.
This includes lower levels of Fas expression which may indicate a less differentiated state of the CAR-T cells. These data were
presented at the 2019 ASH annual meeting and the abstract was the recipient of an Abstract Achievement Award. We continue to explore
the phenotypic pattern of GM-CSF knockout CAR-T cells relative to GM-CSF-expressing CAR-T cells and possible implications for
improved safety and efficacy. We plan to continue development of this technology in combination approaches that could add to the
observed efficacy benefits of current generation CAR-T products.
EphA3-CAR: Targeting Tumor Stroma and Tumor Vasculature
We have begun to generate our own pipeline
of CAR-T therapies including an EphA3-CAR-T based on the ifabotuzumab v-region and backbone. Ifabotuzumab is a Humaneered anti-EphA3
monoclonal antibody. Ifabotuzumab has the potential to kill tumor cells by targeting tumor stroma that protects them and the vasculature
that feeds them. This unique combination of activities as a backbone of a CAR-T therapy may provide the potential to generate durable
responses in a range of solid tumors by targeting the tissues that surround, protect, and nourish a growing cancer.
Eph receptors are critical for cell positioning
and movement in fetal development. However, in the adult, EphA3 is not expressed in normal tissue but it is thought to be expressed
on the cancer stem cell compartment, in particular the stroma that surrounds and protects the cancer cells and the tumor vasculature
that feeds them. EphA3 expression has been reported in the tumor vasculature of human cancers of the brain, kidney, skin, lung,
colon, and bladder. GBM is the most common form of brain cancer and the most deadly. Targeting antigens expressed by GBM such as
IL-13Ra2 and EGFRvIII is associated with the development of antigen loss variants. There are safety concerns targeting HER2 given
its expression in normal adult tissue. EphA3 is increasingly being recognized as a therapeutic target for GBM given its lack of
expression in normal adult tissues and its expression on stromal cells that support the cancer’s growth and metastatic potential.
Using ifabotuzumab as the backbone, we have
generated an EphA3-CAR-T that may be useful in the treatment of a range of solid tumors and presented data at the 2019 SNO annual
meeting. EphA3 expression in tumor stroma is controlled by HIF in response to the low oxygen environment that characterizes solid
tumors. Preclinical data has shown the EphA3 expressing stroma cells are important for tumor neovascularization.
A Phase I safety and imaging trial of radio-labeled
ifabotuzumab in recurrent glioblastoma multiforme (GBM), a particularly aggressive and deadly form of brain cancer, is enrolling
at two centers in Australia, the Olivia-Newton John Cancer Research Institute in Melbourne (the “ONJCRI”) and the Queensland
Institute for Medical Research in Brisbane. Preliminary imaging data reported at AACR in early 2019 and at SNO in late 2019, demonstrated
that administration of ifabotuzumab resulted in rapid, specific targeting of GBM tumors in all patients. Whole body bio-distribution
imaging demonstrated no normal tissue uptake of the antibody. Post-treatment MRI scans showed predominant T2/Flair changes which
were consistent with treatment effect on tumor vasculature.
By developing an EphA3-CAR-T using ifabotuzumab
as the backbone, we may have the ability to target the tumor, tumor stroma, and tumor vasculature in a novel manner. We are collaborating
with the Mayo Clinic and plan to move to clinical testing with an anti-EphA3 construct for a range of cancer types after completing
IND-enabling work.
EMR1-CAR: Targeting Eosinophils
Our EMR1-CAR-T product is based on the HGEN005
(anti-EMR1 Humaneered monoclonal antibody) backbone and targets EMR1.
A major limitation of current eosinophil-targeted
therapies is incomplete depletion of tissue eosinophils and/or lack of cell selectivity. Eosinophils are a type of white blood
cell. If too many eosinophils are produced in the body, chronic inflammation and tissue and organ damage may result. The origin
and development of eosinophilic disorders is mostly due to eosinophils infiltrating tissue. EMR1 is expressed exclusively on eosinophils,
making it an ideal target for the treatment of eosinophilic disorders. Regardless of the eosinophilic disorder, mature eosinophils
express EMR1 in tissue, blood and bone marrow in patients with eosinophilia. Our EMR1-CAR-T based on the HGEN005 backbone is another
approach in our growing platform of CAR-T therapies. We believe that because of its high selectivity, EMR1-CAR-T has significant
potential to treat serious eosinophil diseases.
In preclinical work, HGEN005’s anti-EMR1
activity resulted in dramatically enhanced NK killing of eosinophils from normal and eosinophilic donors and also induced a rapid
and sustained depletion of eosinophils in a non-human primate model without any clinically significant adverse events. We have
engaged with NIH to discuss expanding the initial work they have conducted utilizing HGEN005 and discussions are underway with
a leading center in the U.S. to perform the IND-enabling testing in eosinophilic leukemia, an orphan condition with significant
unmet need, as well as with several other potential partners, although we cannot assure you that we will reach any agreements for
these next steps.
Kite Collaboration
Our
current clinical and regulatory development plan centers around the Kite Agreement we executed in May 2019. Pursuant to the Kite
Agreement, the parties have agreed to conduct a multi-center Phase 1b/2 study (ZUMA-19) of lenzilumab with Kite’s Yescarta
in patients with relapsed or refractory B-cell lymphoma, including DLBCL. The primary
objective of ZUMA-19 is to determine the effect of lenzilumab on the safety of Yescarta. In addition, efficacy and healthcare resource
utilization will be assessed. Kite is the sponsor of ZUMA-19 and responsible for its conduct.
The
Kite Agreement provides that we and Kite will split only the out-of-pocket costs incurred in conducting the ZUMA-19 study, including
third-party expenses incurred in accordance with a mutually agreed budget. We currently project we will be responsible for an aggregate
of up to approximately $8 million in out-of-pocket costs, assuming up to a total of 72 patients are recruited for a multi-center
study. Each party will otherwise be responsible for its own internal costs, including internal personnel costs, incurred in connection
with the Study.
In
addition, the parties have agreed to enter into certain additional agreements in connection with ZUMA-19, including a quality and
a supply agreement that will obligate us, at our expense, to supply certain quantities of lenzilumab in final form for administration
to subjects in ZUMA-19. Kite is responsible, at its expense, to supply Yescarta. Kite will be responsible for other costs related
to ZUMA-19.
The
parties have formed a Joint Development Committee (“JDC”) to oversee ZUMA-19, its progress and administration, and
other matters between the parties and their obligations set forth in the Kite Agreement. The JDC comprises representatives of each
of Humanigen and Kite. Kite’s JDC designees will have decision-making authority with respect to (1) certain operational matters
in conducting ZUMA-19, such as selection of participating sites and engagement of third party service providers; and (2) amendments
to the ZUMA-19 protocol established by the JDC that do not directly relate to our investigational product or the part of the ZUMA-19
Study combination that consists solely of our investigational product; but only, in each case, to the extent that such decisions
by the Kite JDC designees do not result in an increase in the mutually agreed-upon budget by fifteen percent or more. Neither Kite
designees nor our designees will have final decision making authority on matters directly related to the investigational product
of the other party, including the other party’s investigational product that is used in or a part of ZUMA-19.
We
and Kite will jointly own all ZUMA-19 data and sample data, including case report forms, findings, conclusions and other results
from ZUMA-19 that relates to each party’s investigational product that is used in combination or sequence in ZUMA-19, and
not solely to either party’s investigational product. ZUMA-19 data and sample data that relates solely to a party’s
own investigational product will be owned solely by that party. We and Kite will own our respective background intellectual property
and neither party has been granted a commercial license to use the respective background intellectual property of the other party.
Each party will own any inventions that relate to its own investigational product used in ZUMA-19 or sample data, however, any
new inventions related to, or covering, the combination of each party’s investigational product used in ZUMA-19 will be jointly
owned by the parties. Kite will control any preparation, filing, prosecution and maintenance of any patent covering any new inventions
related to, or covering, the combination of each party’s investigational product used in ZUMA-19 and the parties will equally
share costs for all such patents. We will continue to own all world-wide rights to lenzilumab and the intellectual property related
to lenzilumab, including use of lenzilumab with CAR-T therapy.
Unless
previously terminated, the Kite Agreement will continue until the first anniversary of the date Kite provides the final ZUMA-19
Study report to us or the termination of the Study. Kite may elect to terminate or suspend the Study at any time. Each party may
terminate the Kite Agreement under certain circumstances, including (1) for an uncured breach by the other party; (2) if a party
determines that the Study may unreasonably affect patient safety; (3) upon certain actions by regulatory authorities that are adverse
to the Study; or (4) if a party determines to discontinue the development of its investigational product.
The
Kite Agreement imposes additional obligations on the parties, such as confidentiality obligations, obligations to comply with applicable
law related to patient privacy and data protection, and potential indemnification obligations. The Kite Agreement is non-exclusive.
Worldwide License for the Prevention of GvHD through GM-CSF
Neutralization from UZH
In July 2019, we entered into the Zurich
Agreement with UZH. Under the Zurich Agreement, we have in-licensed certain technologies that we believe may be used to prevent
GvHD through GM-CSF neutralization. The Zurich Agreement covers various patent applications filed by UZH which complement and broaden
our position in the application of GM-CSF neutralization and expands our development platform to include improving allogeneic HSCT.
Worldwide License to Gene-Editing Technology from the Mayo
Foundation
In June 2019, we entered into an exclusive
worldwide license with the Mayo Foundation. Under the Mayo Agreement, we have in-licensed certain technologies that we believe
may be used to create CAR-T cells lacking GM-CSF expression through various gene-editing tools including CRISPR-Cas9. The license
covers various patent applications and know-how developed by the Mayo Foundation in collaboration with us. These licensed technologies
complement and broaden our leadership position in the CAR-T/GM-CSF neutralization space and expand our discovery platform aimed
at improving CAR-T therapy to include gene-edited CAR-T cells. With this license agreement, we significantly expanded our intellectual
property portfolio to include gene-edited CAR-T cells which can be engineered to lack the ability to produce GM-CSF which may
improve the efficacy and safety profile of CAR-T therapy. In addition, we have and continue to file intellectual property encompassing
a broad range of gene-editing approaches related to GM-CSF knockout.
Lenzilumab
Overview and Mechanism of Action
Lenzilumab, previously referred to as KB003,
is a novel monoclonal antibody designed to target and neutralize human GM-CSF, which could also be described as a ‘myeloid
inflammatory factor’. We used our proprietary and patent-protected Humaneered antibody development platform to develop lenzilumab.
We have completed a 160 patient Phase II
study with lenzilumab in severe asthma. Lenzilumab was found to be safe and well-tolerated in the 78 patients who received it in
the active treatment arm of the study. There was a trend toward improved respiratory function and a statistically significant improvement
in patients with eosinophilic asthma (measured by standard forced expiratory volume measures at 24 weeks vs. baseline). These data
were published in the British Medical Journal.
There is extensive evidence linking GM-CSF expression to serious and potentially life-threatening side-effects in CAR-T therapy
and reduced efficacy through recruitment of MDSCs. Our focus for lenzilumab development is investigating its potential to improve
efficacy of CAR-T therapy and to prevent or ameliorate CAR-T therapy-related NT and CRS. Following CAR-T therapy administration,
GM-CSF produced by CAR-T cells initiates a signaling cascade of inflammation that results in the trafficking and recruitment of
myeloid cells to the tumor site. These myeloid cells produce key cytokines known to be associated with the development of NT and
CRS thereby perpetuating the inflammatory cascade. Peer-reviewed publications in leading journals by well-recognized experts have
reported that GM-CSF blood levels are elevated early after CAR-T cell administration and reach significant peak levels in patients
who suffer serious NT as a side-effect of CAR-T therapy.
GM-CSF seems to be critical for the initiation
of CRS, NT and the inflammatory cascade following CAR-T administration. GM-CSF acts as an upstream ‘initiator’ and
the precursor to other cytokines involved in the cascade. GM-CSF gene knock-out (k/o) mice, or animals that lack a functional
myeloid compartment, do not develop CRS and have normal levels of downstream cytokines, including IL-6, IL-1 and MCP-1/CCL2. Animals
that are k/o for IL-1, INF-gamma and IL-6 still develop CRS in models which recapitulate this syndrome. This is very telling,
given that some investigators believe IL-6 to be causative of CRS. In addition, in pivotal clinical studies, IL-6 has not been
shown to correlate with severe NT or CRS emergence. The lack of GM-CSF does not affect T-cell mediated cancer-killing, or cytotoxicity,
as GM-CSF k/o animals had equivalent effector to target cell (E:T) ratios and cytotoxic activity against tumor cells in our published
studies. GM-CSF is required for CCR2+ monocytes to initiate and sustain neuro-inflammation. It is postulated that GM-CSF
induces CCR2+ inflammatory myeloid derived cells to infiltrate into the CNS, activating microglial cells; the activated microglial
cells then increase their expression of CCL2/MCP-1 to further recruit inflammatory myeloid cells in a self-perpetuating manner,
forming a positive feedback loop. Research from CAR-T clinical trials demonstrated that fever and elevated MCP-1 levels 36 hours
post CAR-T treatment were most predictive of severe CRS and NT across patients with NHL, ALL and CLL, providing further support
for the mechanism by which GM-CSF may contribute to these toxicities.
There are many other publications that point
to the pivotal role of GM-CSF in CRS and NT, as well as potentially hampering efficacy. Based on these publications and extensive
discussions with leading key opinion leaders, we believe that lenzilumab, used as alongside CAR-T therapy offers a number of potential
benefits, including:
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Lower rates of severe/grades >3 CRS and all grades of CRS;
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Lower rates of severe/grades >3 NT and all grades of NT;
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Lower rates of ICU admissions and duration of hospitalization;
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Improved anti-tumor response (e.g. ORR, CR) and overall patient outcomes;
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Improved duration of response and reduced relapse rates;
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Improved cost effectiveness and reduced direct/indirect costs;
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Improved reimbursement, and preferential formulary placement for CAR-T;
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Expansion of CAR-T beyond the relapse/refractory setting to second-line and potential first-line use due to improved benefit-risk
profile, increasing utilization to a significantly larger pool of patients;
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Expansion of CAR-T into solid tumor treatments; and
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Scaling back or removal of current CAR-T required REMS programs and “Black Box” warnings due to improved benefit-risk
profile of CAR-T.
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Preclinical studies in mice conducted at
the Mayo Clinic using human ALL blasts, human CD19 CAR-T, and human peripheral blood mononuclear cells (PBMCs), demonstrated that
blockade of GM-CSF with lenzilumab prevented the onset of CRS, reduced neuro-inflammation by 75% (as assessed by quantitative MRI)
and maintained the integrity of the blood-brain barrier (BBB) compared to CAR-T plus control antibody treatment, where CRS, neuro-inflammation
and BBB disruption can be profoundly affected. The administration of lenzilumab in combination with CAR-T therapy led to a significant
(5-fold) increase in proliferation of CAR-T cells and improved CAR-T effector function, presumably due to a decrease in MDSC expansion
and trafficking which is known to be promulgated by GM-CSF. GM-CSF neutralization in combination with CAR-T therapy reduced relapse,
enhanced anti-tumor response and improved overall survival compared to CAR-T therapy alone and these data were published in ‘blood’.
Moreover, the combination of lenzilumab and CAR-T reduced myeloid cell infiltration into the CNS and resulted in significantly
better leukemic control as quantified by flow cytometry compared to CAR-T and control antibody. Human data from CAR-T clinical
trials suggests that the only cytokines associated with grade > 3 NT are GM-CSF, IL-2 and IL-15. Moreover, in patients
who developed severe NT, there was a 17-fold increase in myeloid cell trafficking into the CNS further establishing the role of
GM-CSF in the expansion and trafficking of myeloid cells in the toxicities associated with CAR-T therapy.
We are also developing lenzilumab alongside
allogeneic HSCT for patients with hematological cancers. Accordingly, we are assessing plans to investigate use of lenzilumab
as a necessary companion product to any allogeneic HSCT and as a part of the standard pre-conditioning that all patients receiving
allogeneic HSCT should receive or as an early treatment option for patients identified as high risk by certain biomarkers.
Clinical data also shows the potential
for lenzilumab as a treatment for certain autoimmune and other inflammatory conditions, including eosinophilic asthma, rheumatoid
arthritis (RA), ankylosing spondylitis (“AS”), psoriatic arthritis (“PsA”), inflammatory bowel disease
(“IBD”), juvenile idiopathic arthritis (“JIA”), giant cell arteritis (“GCA”), atopic dermatitis
(“AD”) and systemic lupus erythematosus (“SLE”). There is potential for a range of other oncology, immunology
and autoimmune conditions and we are investigating partnering lifecycle management opportunities for lenzilumab in high value
markets with strong unmet medical needs.
Development Program
As a Sequenced Therapy In Combination with CD19 Targeted
CAR-T Therapies
Our current clinical and regulatory development
plan centers around the Kite Agreement we executed in May 2019. Pursuant to the Kite Agreement, the parties have agreed to conduct
a multi-center Phase 1b/2 study (ZUMA-19) of lenzilumab with Kite’s Yescarta
in patients with relapsed or refractory B-cell lymphoma, including DLBCL which is currently
enrolling. Kite is the sponsor of ZUMA-19 and is responsible for its conduct.
The primary objective of ZUMA-19 is to determine the effect of lenzilumab on the safety
of Yescarta. In addition, efficacy and healthcare resource utilization will be assessed.
Kite’s Yescarta is one of two CAR-T
therapies that have been approved by FDA and is the leading CAR-T by revenue. Our collaboration with Kite is the only current clinical
collaboration that is enrolling patients with the potential to improve both the safety and efficacy of CAR-T therapy. The Kite
Agreement is non-exclusive. Depending upon FDA feedback, we believe ZUMA-19 may serve
as the basis for registration for lenzilumab.
As a Companion to Allogeneic HSCT
We believe lenzilumab has potential to prevent
or reduce GvHD in allogeneic HSCT, thereby making allogeneic HSCT safer as a potentially curative therapy for patients with hematological
cancers. In July 2019, we entered into an exclusive worldwide license agreement with UZH. Under the Zurich Agreement, we have in-licensed
certain technologies that we believe may be used to prevent GvHD through GM-CSF neutralization, thereby expanding our development
platform to include improving the safety and effectiveness of allogeneic HSCT. A recent study published in ‘blood advances’,
an official journal of the American Society of Hematology, suggests that neutralizing or blocking GM-CSF may limit or prevent GvHD
in the gastrointestinal tract (Gartlan, K., et al, October 8, 2019, vol 3, no.19).
We plan to study lenzilumab as a companion
to allogeneic HSCT for patients with hematological cancers. Accordingly, we are working to initiate pivotal Phase II/III studies
of lenzilumab prophylaxis or early treatment in combination with allogeneic HSCT with a primary objective of preventing or reducing
acute GvHD.
COVID-19
We are exploring the potential for use of
lenzilumab to prevent the emergence of CRS in COVID-19. According to a recent paper published in The Lancet, patients infected
with SARS-CoV-2 have high serum amounts of GM-CSF, MCP1, IL1b, INFg, IP10; patients requiring ICU admission had higher concentrations
of GCSF, IP10, MCP1, MIP1a, and TNFa and it has been shown that GM-CSF, MCP1, MIP1a, IL1b, and IP10 are all produced by GM-CSF
activated myeloid cells. The cytokine storm seen in the context of CAR-T therapy appears to follow the same cascade as in SAR-CoV-2
infection and the COVID-19 disease process.
Other Inflammatory Conditions
Previous clinical studies of lenzilumab
include a repeat-dose, Phase II clinical trial of lenzilumab in RA with the inclusion of a safety run-in portion. On completing
the safety run-in portion of this trial, which showed lenzilumab to be well tolerated with no clinically significant adverse events,
we reassessed the increasingly competitive RA market and chose to redirect our study of lenzilumab to other areas given the competitive
intensity and diminishing levels of unmet need in RA relative to some other medical areas. Results from a subsequent randomized,
double-blinded, placebo-controlled, repeat dose, Phase II clinical trial in severe asthma, showed a statistically significant benefit
on patients with eosinophilic asthma. As a result of a strategic shift and other corporate activities, we terminated development
of lenzilumab in severe asthma. We have generated safety and tolerability data in 113 patients in various clinical studies, including
in CMML, and have demonstrated lenzilumab to be safe and well- tolerated in these settings.
Gene-edited CAR-T Therapies using GM-CSF Gene Knockout
We believe that our GM-CSF knockout gene-editing
CAR-T platform has the potential to create next-generation CAR-T therapies that improve the efficacy and safety profile of CAR-T
therapy via gene-edited CAR-T cells which can be engineered to lack the ability to produce GM-CSF, thereby avoiding any efficacy/toxicity
linkage and potentially preserving and improving upon the benefits of the CAR-T therapy while altogether avoiding its serious
and potentially life-threatening side-effects.
We are advancing our GM-CSF knockout gene-editing
CAR-T platform through the Mayo Agreement that we entered into in June 2019 with the Mayo Foundation. Under the Mayo Agreement,
we have in-licensed certain technologies that we believe may be used to create CAR-T cells lacking GM-CSF
expression through various gene-editing tools including CRISPR-Cas9. The Mayo Agreement broadened our leadership position
in the GM-CSF neutralization space and expanded our discovery platform aimed at improving CAR-T therapy to include gene-edited
CAR-T cells.
Preclinical data indicates that
GM-CSF knockout CAR-T cells show improved overall survival compared to GM-CSF-expressing CAR-T cells, in addition to the expected
benefits of reduced serious side-effects associated with CAR-T therapy. We are establishing a platform of next-generation combinatorial
gene knockout CAR-T cells that have potential to be applied across both autologous and allogeneic approaches and we are also investigating
multiple CAR-T cell designs using precise dual and triple gene editing to significantly enhance the anti-tumor activity while simultaneously
preventing CAR-T therapy induced toxicities. Through targeted gene expression and modulating cytokine activation signaling, we
may be able to increase the proportion of fitter T-cells produced during expansion, increase the proliferative potential, and inhibit
activation-induced cell death, thereby improving the cancer killing activity of our engineered CAR-T cells thereby making them
more effective and safer in the treatment of cancers. Preclinical data indicates that CAR-T cells express GM-CSF and signal through
GM-CSF receptors upon activation in an autocrine fashion. GM-CSF knockout CAR-T cells are not able to signal through this pathway
which results in a gene expression profile distinct from GM-CSF-expressing CAR-T cells after in vitro expansion. This includes
lower levels of Fas expression which may indicate a less exhausted state of the CAR-T cells. These data were presented at the 2019
ASH annual meeting.
We continue to explore exhaustion
markers of GM-CSF knockout CAR-T cells relative to GM-CSF-expressing CAR-T cells and possible implications for improved safety
and efficacy. We plan to continue development of this technology in combination approaches that could add to the observed efficacy
benefits of current generation CAR-T products.
Ifabotuzumab
Ifabotuzumab is a Humaneered immunotherapy,
formerly referred to as KB004, which targets the EphA3 receptor, and in which the antibody carbohydrate chains lack fucose, thereby
enhancing the targeted cell-killing activity of the antibody. We believe that ifabotuzumab has the potential for treating solid
tumors, hematologic malignancies and serious pulmonary conditions. In 2006, we entered into a license agreement with Ludwig Institute
of Cancer Research (“LICR”) pursuant to which LICR granted certain exclusive rights to the ifabotuzumab prototype (referred
to as IIIA4) as well as EphA3 intellectual property.
Ifabotuzumab binds to the EphA3 receptor,
which plays an important role in cell positioning and tissue organization during fetal development, but is not thought to be expressed
nor play a significant role in healthy adults. EphA3 is a tyrosine kinase receptor, aberrantly expressed on the tumor cell surface
in a number of hematologic malignancies and solid tumors. It is also expressed in the stem cell compartment, which includes malignant
stem cells, the vasculature that feeds them, and the stromal cells that protect them. EphA3 expression has been documented in
a number of hematologic and solid tumor types, including AML, chronic myelogenous leukemia (“CML”), CLL, MDS, myelofibrosis,
multiple myeloma, melanoma, breast cancer, small and non-small cell lung cancer (“SCLC” and “NSCLC”),
colorectal cancer, gastric cancer, renal cancer, GBM, and prostate cancer, making it an attractive target for a range of cancers.
Publications related to certain cancers have indicated that EphA3 tumor cell expression correlates with cancer growth and a poor
prognosis. EphA3 is overexpressed in GBM and, in particular, in the most aggressive mesenchymal subtype. Importantly, EphA3 is
highly expressed on the tumor-initiating cell population in glioma and appears to be critically involved in maintaining tumor
cells in a less differentiated state by modulating mitogen-activated protein kinase signaling. EphA3 knockdown or depletion of
EphA3-positive tumor cells may reduce tumorigenic potential to a degree comparable to treatment with a therapeutic radiolabeled
EphA3-specific monoclonal antibody. We believe EphA3 is a functional, targetable receptor in GBM and other solid tumors as well
as certain lymphomas and leukemias. A study published in December 2018 in ‘Cancers’ showed that an antibody drug conjugate
(“ADC”) comprising IIIA4 (a predecessor monoclonal antibody and prototype for ifabotuzumab) showed significant survival
benefit in mice with GBM.
Anti-EphA3 treatment has shown encouraging
preclinical results in multiple experiment types, including patient primary tumor cell assays, colony forming assays, and xenograft
mouse models. Upon binding to EphA3, ifabotuzumab causes cell killing to occur either through antibody-dependent, cell-mediated
cytotoxicity or through direct apoptosis, and in the case of tumor neovasculature, through cell rounding and blood vessel disruption.
Given the expression pattern of EphA3 in multiple tumor types, ifabotuzumab may have the potential to kill cancer cells and the
tumor stem cell microenvironment, providing for long-term responses while sparing normal cells.
Further, by developing ifabotuzumab as the
backbone for a next generation CAR-T construct, we may have the ability to target both the tumor, tumor stroma, and tumor vasculature
in a novel manner and build on the experience with current second generation CD19 CAR-T therapies. We are collaborating with the
Mayo Clinic to make a series of CAR-T constructs based on ifabotuzumab, of which initial constructs have been created and data
presented at the 2019 SNO annual meeting, and plan to move to preclinical testing with these constructs for a range of cancer types.
EphA3 is a tumor specific antigen expressed on the surface of a multitude of solid tumor cells, tumor stroma cells and tumor vasculature
in certain cancers. We completed the Phase I dose escalation portion of a Phase I/II clinical trial of ifabotuzumab in multiple
hematologic malignancies for which the preliminary results were published in the journal Leukemia Research in 2016. A Phase I safety
and imaging trial of radio-labeled ifabotuzumab in recurrent glioblastoma multiforme, a particularly aggressive and deadly form
of brain cancer, has almost fully enrolled at two centers in Australia, the ONJCRI in Melbourne and the Queensland Institute for
Medical Research in Brisbane and data have been presented at both AACR and SNO in 2019. The lead investigators at the ONJCRI, are
also evaluating an antibody-drug conjugate (“ADC” or “ADCs”) based on ifabotuzumab in tumor models. The
current clinical trial has enrolled eight patients to date, and is expected to complete enrollment with a total of twelve patients.
Preliminary imaging data reported at AACR and at SNO demonstrated that administration of ifabotuzumab resulted in rapid, specific
targeting of GBM tumors in all patients. Whole body bio-distribution imaging demonstrated no normal tissue uptake of the antibody.
Post-treatment MRI scans showed predominant T2/Flair changes which were consistent with treatment effect on tumor vasculature.
We continue to explore partnering opportunities to facilitate the further development of ifabotuzumab in a range of cancer types.
We are in discussions with separate and
various parties and may initiate partnerships to pursue some of the following activities:
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Initiate and complete preclinical studies with a CAR-T product;
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Complete the on-going clinical study and preclinical studies with various ADCs that are based on ifabotuzumab (in partnership
with leading centers in Australia); and
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Develop bi-specific antibodies based on ifabotuzumab.
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We have conducted a Phase I/II trial for
ifabotuzumab in multiple hematologic malignancies. The most common adverse event attributed to ifabotuzumab in this trial was infusion
reactions (chills, fever, nausea, hypertension, and rapid heart rate) which is an expected safety finding based on the mechanism
of action. The majority of infusion reactions were mild-to-moderate in severity and resolved with temporary stoppage of infusion
and/or use of medications to treat symptoms. In 2014, we completed the Phase I dose escalation portion of our study, primarily
treating patients with AML as well as patients with MDS and myelofibrosis (“MF”). Responses were observed in patients
with AML, MF and MDS. In this study, ifabotuzumab was well tolerated and clinically active when given as a weekly infusion.
Centers in Australia have worked independently
on IIIA4, the murine antibody parent of ifabotuzumab, as an ADC in mice and a December 2018 publication in the journal ‘Cancers’
showed that in mice engrafted with GBM, treatment with an ADC based on IIIA4 showed significantly improved survival.
HGEN005
Our EMR1-CAR-T product is based on the HGEN005
(anti-EMR1 monoclonal antibody) backbone and targets EMR1.
A major limitation of current eosinophil-targeted
therapies is incomplete depletion of tissue eosinophils and/or lack of cell selectivity. Eosinophils are a type of white blood
cell. If too many eosinophils are produced in the body, chronic inflammation and tissue and organ damage may result. The origin
and development of eosinophilic disorders is mostly due to eosinophils infiltrating tissue. EMR1 is expressed exclusively on eosinophils,
making it an ideal target for the treatment of eosinophilic disorders. Regardless of the eosinophilic disorder, mature eosinophils
express EMR1 in tissue, blood and bone marrow in patients with eosinophilia. Our EMR1-CAR-T based on the HGEN005 backbone is another
approach in our growing platform of CAR-T therapies. We believe that because of its high selectivity, EMR1-CAR-T has significant
potential to treat serious eosinophil diseases.
In preclinical work, HGEN005’s anti-EMR1
activity resulted in dramatically enhanced NK killing of eosinophils from normal and eosinophilic donors and also induced a rapid
and sustained depletion of eosinophils in a non-human primate model without any clinically significant adverse events. We have
engaged with NIH to discuss expanding the initial work they have conducted utilizing HGEN005 and discussions are underway with
a leading center in the U.S. to perform the IND-enabling testing in eosinophilic leukemia, an orphan condition with significant
unmet need, as well as with several other potential partners, although we cannot assure you that we will reach any agreements for
these next steps.
Our Humaneered Technology
Our proprietary and patented Humaneered
technology platform is a method for converting existing antibodies (typically murine) into engineered, high-affinity human antibodies
designed for therapeutic use, particularly for chronic conditions. We have developed or in-licensed targets or research (mouse)
antibodies, typically from academic institutions, and then applied our Humaneered technology to them. Lenzilumab, ifabotuzumab
and HGEN005 are Humaneered antibodies. In aggregate, our Humaneered antibodies have been tested clinically in more than 200 patients
with no evidence of serious immunogenicity. Our Humaneered antibodies are closer to human antibodies than chimeric or conventionally
humanized antibodies and have a high affinity for their target but low immunogenicity. Specifically, our Humaneered technology
generates an antibody from an existing antibody with the required specificity as a starting point and, we believe, provides the
following additional advantages:
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retention of identical target epitope specificity of the starting antibody and frequent generation of higher affinity antibodies;
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very-near-to-human germ line sequence, which we believe means our Humaneered antibodies are less likely to induce an inappropriate
immune response in broad patient populations when used chronically than chimeric or conventionally humanized antibodies, which
has proven to be the case in clinical studies;
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high potency and slow off-rate of the antibody;
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antibodies with physiochemical properties that facilitate process development and formulation (lack of aggregation at high
concentration);
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high antibody expression yields that potentially provide cost-of-goods benefits; and
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an optimized antibody processing time of three to six months.
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As we are focused on progressing our current
portfolio of antibodies through clinical development and out-licensing, we are not currently dedicating additional resources to
the research or development of additional Humaneered antibodies other than our existing portfolio of lenzilumab, ifabotuzumab
and HGEN005.
Intellectual Property
Intellectual property
is an important part of our strategy. We have and continue to file aggressively on our own inventions and in-license intellectual
property and technology as it relates to our therapeutic interests.
Licensing and Collaborations
The University of Zurich
On July 19, 2019, we entered into the Zurich
Agreement with UZH. Under the Zurich Agreement, we have in-licensed certain technologies that we believe may be used to prevent
GvHD through GM-CSF neutralization. The Zurich Agreement covers various patent applications filed by UZH which complement and broaden
our position in the application of GM-CSF neutralization and expands our development platform to include improving allogeneic HSCT.
The Zurich Agreement required an initial
one-time payment of $100,000, which we paid to UZH on July 29, 2019. The Zurich Agreement also requires the payment of annual license
maintenance fees, as well as milestones and royalties upon the achievement of certain regulatory and commercialization milestones.
The Mayo Foundation for Medical Education and Research
On June 19, 2019, we entered into the Mayo
Agreement with the Mayo Foundation. Under the Mayo Agreement, we have in-licensed certain technologies that we believe may be used
to create CAR-T cells lacking GM-CSF expression through various gene-editing tools
including CRISPR-Cas9. The license covers various patent applications and know-how developed by Mayo Foundation in collaboration
with us. These licensed technologies complement and broaden our position in the GM-CSF neutralization space and expand our discovery
platform aimed at improving CAR-T to include gene-edited CAR-T cells.
Pursuant to the Mayo Agreement, we were
required to pay $200,000 to the Mayo Foundation within six months of the effective date of the Mayo Agreement, or upon completion
of a qualified financing, whichever is earlier. We did not make the initial payment as of the due date and until the payment is
made, the overdue amount will incur interest on the unpaid balance at the prime rate plus 2%. The Mayo Agreement also requires
the payment of milestones and royalties upon the achievement of certain regulatory and commercialization milestones.
Kite
On May 30, 2019, we entered into the Kite
Agreement. Pursuant to the Kite Agreement, the parties agreed to conduct a multi-center Phase Ib/II study (ZUMA-19) of lenzilumab
with Kite’s Yescarta in patients with relapsed or refractory B-cell lymphoma. The primary objective of ZUMA-19 is to determine
the effect of lenzilumab on the safety of Yescarta. Various other important parameters, including efficacy and healthcare resource
utilization, will also be measured. Kite is the sponsor of ZUMA-19 and responsible for its conduct.
The Kite Agreement provides that we and
Kite will split only the out-of-pocket costs incurred in conducting ZUMA-19, including third-party expenses incurred in accordance
with a mutually agreed budget. We currently project we will be responsible for an aggregate of up to approximately $8 million in
out-of-pocket costs, assuming up to a total of 72 patients are recruited for ZUMA-19 as a multi-center Study. Each party will otherwise
be responsible for its own internal costs, including internal personnel costs, incurred in connection with ZUMA-19.
The Ludwig Institute for Cancer Research
In 2004, we entered into a license agreement
with the LICR pursuant to which LICR granted to us an exclusive license for intellectual property rights and materials related
to chimeric anti-GM-CSF antibodies that formed the basis for lenzilumab. Under the agreement, we were granted an exclusive license
to develop antibodies related to LICR’s antibodies against GM-CSF. We are responsible for using commercially reasonable
efforts to research, develop, and sell lenzilumab. We pay LICR a quarterly license fee and are obligated to pay to LICR a royalty
from 1.5% to 3% of net sales of licensed products, subject to certain potential offsets and deductions. Our royalty obligation
applies on a country-by-country and licensed product-by-licensed product basis, and will begin on the first commercial sale of
a licensed product in a given country and end on the later of the expiration of the last to expire patent covering a licensed
product in a given country (which in the U.S. is currently expected in 2029 for the composition of matter and 2038 for methods
of use in CAR-T) or 10 years from first commercial sale of such licensed product in the country. We must also pay to LICR a certain
percentage of sublicensing revenue received by us. Payments made to LICR under this license for the twelve months ended December
31, 2019 and 2018 were $0.1 million and $0.1 million, respectively.
Other License Agreements
LICR and ifabotuzumab
In 2006, we entered into a license agreement
with LICR pursuant to which LICR granted to us certain exclusive rights to the ifabotuzumab prototype (IIIA4) which targets the
EphA3 receptor and EphA3-related intellectual property. Under the agreement, we obtained rights to develop and commercialize products
made through use of licensed patents and any improvements thereto, including human or Humaneered antibodies that bind to or modulate
EphA3. We paid LICR an upfront option fee of $0.05 million and a further $0.05 million upon our exercise of the option for the
exclusive license outlined above. We are responsible for contingent milestone payments of less than $2.5 million and royalties
of 3% of net sales subject to certain potential offsets and deductions. In addition, we are obligated to pay to LICR a percentage
of certain payments we receive from any sublicensee in consideration for a sublicense. Our royalty obligation exists on a country-by-country
and licensed product-by-licensed product basis, which will begin on the first commercial sale and end on the later of the expiration
of the last to expire patent covering such licensed product in such country, which in the U.S. is currently expected in 2031, or
10 years from first commercial sale of such licensed product in such country.
BioWa and Lonza
In 2010, we entered into a license agreement
with BioWa, Inc. (“BioWa”), and Lonza Sales AG (“Lonza”) pursuant to which BioWa and Lonza granted us a
non-exclusive, royalty-bearing, sub-licensable license under certain know-how and patents related to antibody expression and antibody-dependent
cellular cytotoxicity enhancing technology using BioWa and Lonza’s Potelligent® CHOK1SV technology. This technology
is used to enhance the cell killing capabilities of antibodies and is currently used by us in connection with our development of
ifabotuzumab. Under this agreement, we owe annual license fees, milestone payments in connection with certain regulatory and sales
milestones and royalties in the low single digits on net sales of products developed under the agreement. The agreement expires
upon the expiration of royalty payment obligations under the agreement, is terminable at will by us upon written notice, is terminable
by BioWa and Lonza if we challenge or otherwise oppose any licensed patents under the agreement, and is terminable by either party
upon the occurrence of an uncured material breach or insolvency. Payment made to BioWa under this license for the twelve months
ended December 31, 2018 was $0.1 million. We have not made a payment for the annual license fee in 2019 as of December 31, 2019,
but have accrued the related expense as of December 31, 2019.
Patents and Trade Secrets
We use a combination of patent, trade secret
and other intellectual property protections to protect our product candidates and platforms. We will be able to protect our product
candidates from unauthorized use by third parties only to the extent they are covered by valid and enforceable patents or to the
extent our technology is effectively maintained as trade secrets. Intellectual property is an important part of our strategy.
We have and continue to file aggressively on our own inventions and in-license intellectual property and technology as it relates
to our therapeutic interests. Our success will depend in part on our ability to obtain, maintain, defend and enforce patent rights
for and to extend the life of patents covering lenzilumab, ifabotuzumab, HGEN005, our Humaneered technology, and our GM-CSF gene-editing
CAR-T platform technologies, to preserve trade secrets and proprietary know how, and to operate without infringing the patents
and proprietary rights of third parties. We actively seek patent protection, if available, in the U.S. and select foreign countries
for the technology we develop. We have 111 registered patents, including 14 registered in the U.S. and 97 registered in foreign
countries. Of the 111 registered patents, 86 are owned by us, 9 are owned jointly with a third party and 16 are exclusively licensed
from a third party. We also have 19 patent applications pending globally, of which 12 are owned by us, 4 are owned jointly with
a third party and 3 are exclusively licensed from a third party.
Using our Humaneered technology, we have
developed and own two composition of matter U.S. patents covering lenzilumab and related anti-GM-CSF antibodies that provide patent
protection through April 2029, a granted composition of matter patent in Europe and certain foreign countries, and have five additional
pending patent applications in the U.S. and one PCT international patent application covering various methods of treatment, including
in the CAR-T space covering a broad and comprehensive range of approaches to neutralizing GM-CSF, including the use of GM-CSF k/o
CAR-T cells, which, if granted, are expected to confer protection to at least October 2038. We also have three currently pending
patent applications in the U.S. and selected foreign countries for anti-EphA3 antibodies and their use, and we developed and own
an issued U.S. composition of matter patent covering ifabotuzumab and related anti-EphA3 antibodies, which is currently expected
to expire in 2031, in addition to three U.S. patents to methods of anti-EphA3 antibodies and six foreign patents countries. The
nine patents to our Humaneered technology cover methods of producing human antibodies that are very specific for target antigens
using only a small region from mouse antibodies.
We cannot be certain that any of our pending
patent applications, or those of our licensors, will result in issued patents. In addition, because the patent positions of biopharmaceutical
companies are highly uncertain and involve complex legal and factual questions, the patents we own and license, or any further
patents we may own or license, may not prevent other companies from developing similar or therapeutically equivalent products,
even though we may be able to prevent their commercial use without our permission if our intellectual property allows for such
limitations. Patents also will not protect our products if competitors devise ways of making or using these products without legally
infringing our patents. We cannot be assured that our patents will not be challenged by third parties or that we will be successful
in any defense we undertake.
In addition, changes in patent laws, rules
or regulations or in their interpretations by the courts may materially diminish the value of our intellectual property or narrow
the scope of our patent protection, which could have a material adverse effect on our business and financial condition. However,
prospective partners may have to license or otherwise come to an agreement with us if they wish to use our products and those products
and methods of use of such products have issued patents in those territories.
We also rely on trade secrets, technical
know-how and continuing innovation to develop and maintain our competitive position. We seek to protect our proprietary information
by requiring our employees, consultants, contractors, outside scientific collaborators and other advisors to execute non-disclosure
and confidentiality agreements and our employees to execute assignment of invention agreements to us on commencement of their employment.
Agreements with our employees also prevent them from bringing any proprietary rights of third parties to us. We also require confidentiality
or material transfer agreements from third parties that receive our confidential data or materials.
Manufacturing
We outsource all development activities,
including the development of formulation prototypes, and have adopted a manufacturing strategy of contracting with third parties
for the manufacture of drug substance and product. Additional contract manufacturers are used to fill, label, package, and distribute
investigational drug products. This allows us to maintain a more flexible infrastructure while focusing our expertise on developing
our products. It does however mean that we have to carefully plan the availability of manufacturing ‘slots’ and the
availability of drug for investigation in preclinical and clinical trials. The use of contract manufacturers can be expensive,
complicated and time consuming and could delay clinical trials, drug approval and potential product launch.
Sales and Marketing
We do not currently have the sales and
marketing infrastructure in place that would be necessary to market and sell our products, if approved. The establishment of a
sales and marketing operation can be expensive, complicated and time consuming and could delay any potential product launch. As
our drug candidates progress, while we may build or contract with expert commercial vendors the type of infrastructure that would
be needed to successfully market and sell any successful drug candidate on our own, we may also seek strategic alliances and partnerships
with third parties including those with existing infrastructure.
Competition
We compete in an industry characterized
by rapidly advancing technologies, intense competition, a changing regulatory and legislative landscape and a strong emphasis on
the benefits of intellectual property protection and regulatory exclusivities. Our competitors include pharmaceutical companies,
other biotechnology companies, academic institutions, government agencies and other private and public research organizations.
We compete with these parties to develop potential biologic therapies to make CAR-T therapy and allogeneic HSCT safer and more
effective and to develop a potential treatment for hematologic cancers, in addition to recruiting highly qualified personnel. Our
product candidates, if successfully developed and approved, may compete with established therapies, with new treatments that may
be introduced by our competitors, including competitors relying to a large extent on our drug approvals or on our biologics approvals,
or with generic copies of our product approved by FDA, as bio-similars, referencing our drug products. Many of our potential competitors
have substantially greater scientific, research, and product development capabilities, as well as greater financial, marketing,
sales and human resources capabilities than we do.
In addition, many specialized biotechnology
firms have formed collaborations with large, established companies to support the research, development and commercialization of
products that may be competitive with ours. Accordingly, our competitors may be more successful with respect to their products
than we may be in developing, commercializing, and achieving widespread market acceptance for our products. In addition, our competitors’
products may be more effective or more effectively marketed and sold than any treatment we or our development partners may commercialize
and may render our product candidates obsolete or non-competitive before we can recover the expenses related to developing and
supporting the commercialization of any of our product candidates. Developments by competitors may render our product candidates
obsolete or noncompetitive. After one of our product candidates is approved, FDA may also approve a generic version with the same
or similar dosage form, safety, strength, route of administration, quality, performance characteristics and intended use as our
product. These bio-similar equivalents would be less costly to bring to market and could generally be offered at lower prices,
thereby limiting our ability to gain or retain market share. However, our product candidates are all biologics and, as such, would
benefit from 12 years market exclusivity from launch in the U.S.
The acquisition or licensing of pharmaceutical
products is also very competitive, and a number of more established companies, which have acknowledged strategies to in-license
or acquire products, may have competitive advantages as may other emerging companies taking similar or different approaches to
product acquisitions. The more established companies may have a competitive advantage over us due to their size, cash flows, institutional
experience and historical corporate reputation.
Lenzilumab and CAR-T-related toxicities competition
Significant ongoing concerns for clinicians,
care-givers, patients and FDA regarding CAR-T therapy include, durability of response, long-term outcomes, manufacturing process,
time to delivery of active CAR-T product, serious and potentially life-threatening side-effects, namely NT and CRS, frequency and
duration of hospitalization and ICU admission, health resource utilization, cost effectiveness and reimbursement. Both Kymriah
and Yescarta carry “Black Box” warnings in their labels for NT and CRS and are subject to a REMS program, such that
on-going data has to be provided to FDA and CAR-T therapy can only be administered in strictly controlled environments at trained
centers.
FDA approval of tocilizumab (anti-IL-6
receptor blocker, Genetech’s Actemra®) with or without high-dose corticosteroids, for the management of severe
cases of CRS, was announced in conjunction with approval of Kymriah solely as part of its REMS program based on a retrospective
analysis of 45 patients who received tocilizumab. Approval was subsequently also granted for tocilizumab as a treatment (not prevention)
of moderate to severe CRS, despite the lack of an IND application, NDA or conduct of a prospective trial of tocilizumab in this
setting. Only 20% of Kymriah or Yescarta patients treated with tocilizumab had resolution of signs and symptoms 6 days after onset
of CRS and ~50% patients responded 11 days after onset of CRS. Tocilizumab is not approved for the prevention of CRS or for the
prevention or treatment of NT. Tocilizumab is also not approved for the treatment of mild cases of CRS.
There are no FDA-approved therapies for
the prevention of CAR-T therapy induced NT and CRS or for the treatment of CAR-T therapy induced NT. The CAR-T therapy-associated
TOXicity Working Group currently recommends intensive monitoring, accurate grading and aggressive supportive care with the anti-IL-6
receptor blocker tocilizumab and/or high-dose corticosteroids. These agents are reserved only for the treatment of severe cases
of CRS and are not approved for prevention. Since corticosteroids have been reported to suppress T-cell function and/or induce
T-cell apoptosis, they may limit the effectiveness of CAR-T therapy and use has been generally limited to treatment of severe cases
of CRS refractory to tocilizumab and severe cases of NT. Sometimes high-dose corticosteroids are used alongside tocilizumab. Tocilizumab
has not been found to be effective in the prevention or management of CAR-T therapy induced NT. In fact, the prophylactic use of
tocilizumab has been shown to increase both overall rates of NT and rates of severe NT with overall rates of CRS remaining unchanged
in an expanded safety cohort from a CAR-T trial. As tocilizumab is an anti-IL-6 receptor blocker, serum IL-6 levels have been shown
to increase shortly after administration of tocilizumab which may increase passive diffusion of IL-6 into the CNS and increase
the risk of NT. In patients who received prophylactic tocilizumab, a 17-fold increase in CD14+ myeloid cells was seen in the CSF
of patients who developed severe NT vs those who did not. A similar dynamic may occur with other cytokine receptor blocking monoclonal
antibodies that are also being explored in this setting (e.g. anti-IL-1Ra, anti-GM-CSFRa). As the antibody directly binds the cytokine
receptor, the receptor may get saturated causing the cytokine to get dislodged which leads to an initial increase in the level
of the circulating cytokine. In this setting, elevated levels of pro-inflammatory cytokines can further propagate the inflammatory
cascade and result in higher levels of NT and CRS when the receptor blocker is administered prophylactically. In addition, IL-1
levels have not been shown to correlate to CRS and NT in CAR-T clinical trials and there is no evidence in the clinical or preclinical
setting available to support the use of GM-CSF receptor alpha blockade with CAR-T cell therapy. There are data that suggest that
the mechanism of GM-CSF receptor alpha blockade may be interfere with CAR-T expansion and potentially efficacy. Our approach with
lenzilumab is a different mechanism of action entirely and we have published data which shows expansion of CAR-T cells and potential
beneficial effects on efficacy in animal models.
Other experimental approaches being explored
include development of next-generation, CAR-T constructs, including introducing suicide genes into CAR-T cells using herpes simplex
virus thymidine kinase (HSV-TK) or inducible caspase-9 (iCasp9) genes with “on / off” switches, incorporating a co-stimulatory
molecule into T-cells, using RNA-guided DNA targeting technology or other epitope-based / gene-editing technology. While it is
possible that some of these approaches could result in lower rates of NT and/or CRS, preliminary data suggests that improvements
in the safety profile are associated with lower rates of efficacy and durable response. This is not surprising given the linkage
that has been shown to exist between CAR-T cell expansion, efficacy and toxicity. In addition, an agent comprised of a mixture
of single-stranded oligonucleotides that is purified from the intestinal mucosa of pigs, defibrotide (Jazz Pharmaceuticals, Defitelio®)
is being evaluated to reduce NT although there is no preclinical data supporting its use in this indication and the mechanisms
of action is uncertain. Defibrotide is approved for the treatment of severe
veno-occlusive disease (VOD) in adults and children who have undergone chemotherapy and a stem-cell transplant and is
associated with a 37% rate of hypotension, or low blood pressure. Hypotension is a hallmark of CRS, which occurs very frequently
with patients receiving CAR-T therapy. There are also several other anti-GM-CSF compounds that are in various stages of
development, however the focus of these compounds appears to be in chronic autoimmune disorders such as rheumatoid arthritis, ankylosing
spondylitis, giant cell arteritis and related disorders.
Government Regulation
Drug Development and Approval in the U.S.
As a biopharmaceutical company operating
in the U.S., we are subject to extensive regulation by FDA and by other federal, state, and local regulatory agencies. FDA regulates
biological products such as our product candidates under the U.S. Federal Food and Cosmetic Act (FDCA), the Public Health Service
Act (PHSA) and their implementing regulations. Under the PHSA, an FDA-approved biologics license application (BLA) is required
to market a biological product, or biologic, in the U.S. These laws and regulations set forth, among other things, requirements
for preclinical and clinical testing, development, approval, labeling, manufacture, storage, record keeping, reporting, distribution,
import, export, advertising, and promotion of our products and product candidates. Biologics receive 12 years market exclusivity
from approval and launch.
Applications Relying on the Applicant’s Clinical Data
The approval process for a BLA under the
PHSA requires the conduct of extensive studies and the submission of large amounts of data by the applicant. The biologic development
process for these applications will generally include the following phases:
Preclinical Testing. Before testing
any new biologic in human subjects in the U.S., a company must generate extensive preclinical data. Preclinical testing generally
includes laboratory evaluation of product chemistry and formulation, as well as toxicological and pharmacological studies in several
animal species to assess the quality and safety of the product. Animal studies must be performed in compliance with FDA’s
Good Laboratory Practice (GLP) regulations and the U.S. Department of Agriculture’s Animal Welfare Act.
IND Application. Human clinical trials
in the U.S. cannot commence until an IND application is submitted and becomes effective. A company must submit preclinical testing
results to FDA as part of the IND application, and FDA must evaluate whether there is an adequate basis for testing the product
in initial clinical studies in human volunteers. Unless FDA raises concerns, the IND application becomes effective 30 days following
its receipt by FDA. Once human clinical trials have commenced, FDA may stop the clinical trials by placing them on “clinical
hold” because of concerns about the safety of the product being tested, or for other reasons.
Clinical Trials. Clinical trials
involve the administration of the product to healthy human volunteers or to patients, under the supervision of a qualified investigator.
The conduct of clinical trials is subject to extensive regulation, including compliance with FDA’s bioresearch monitoring
regulations and Good Clinical Practice (“GCP”) requirements, which establish standards for conducting, recording data
from, and reporting the results of clinical trials. GCP requirements are intended to assure that the data and reported results
are credible and accurate, and that the rights, safety, and well-being of study participants are protected.
Clinical trials must be conducted under
protocols that detail the study objectives, parameters for monitoring safety, and the efficacy criteria, if any, to be evaluated.
Each protocol is submitted to FDA as part of the IND application. In addition, each clinical trial must be reviewed, approved,
and conducted under the auspices of an Institutional Review Board (IRB), at the institution conducting the clinical trial. Companies
sponsoring the clinical trials, investigators, and IRBs also must comply with regulations and guidelines for obtaining informed
consent from the study subjects, complying with the protocol and investigational plan, adequately monitoring the clinical trial,
and timely reporting of adverse events. Foreign studies conducted under an IND application must meet the same requirements that
apply to studies being conducted in the U.S. Data from a foreign study not conducted under an IND application may be submitted
in support of a BLA if the study was conducted in accordance with GCP and FDA is able to validate the data. A study sponsor is
required to publicly post certain details about active clinical trials and clinical trial results on the government website clinicaltrials.gov.
Human clinical trials are typically conducted
in three sequential phases, although the phases may overlap with one another and, notably, in the CAR-T setting, FDA has granted
approval to both currently marketed CAR-T therapies (Kite’s Yescarta and Novartis’s Kymriah) based on Phase II data
and to tocilizumab without any prospective data in the CAR-T setting:
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Phase I clinical trials include the initial administration of the investigational product to humans, typically to a small group
of healthy human subjects, but occasionally to a group of patients with the targeted disease or disorder. Phase I clinical trials
generally are intended to determine the metabolism and pharmacologic actions of the product, the side-effects associated with increasing
doses, and, if possible, to gain early evidence of effectiveness.
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Phase II clinical trials generally are controlled studies that involve a relatively small sample of the intended patient population,
and are designed to develop data regarding the product’s effectiveness, to determine dose response and the optimal dose range,
and to gather additional information relating to safety and potential adverse effects.
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Phase III clinical trials are conducted after preliminary evidence of effectiveness has been obtained and are intended to gather
additional information about safety and effectiveness necessary to evaluate the product’s overall risk-benefit profile, and
to provide a basis for physician labeling. Generally, Phase III clinical development programs consist of expanded, large-scale
studies of patients with the target disease or disorder to obtain statistical evidence of the efficacy and safety of the drug at
the proposed dosing regimen, or with the safety, purity, and potency of a biological product.
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The FDA does not always require every approved therapy to complete Phase I through III studies to secure approval. Approval
through expedited routes is at the discretion of FDA.
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The sponsoring company, FDA, or the IRB
may suspend or terminate a clinical trial at any time on various grounds, including a finding that the subjects are being exposed
to an unacceptable health risk. Further, success in early-stage clinical trials does not assure success in later-stage clinical
trials. Data obtained from clinical activities are not always conclusive and may be subject to alternative interpretations that
could delay, limit, or prevent regulatory approval.
BLA Submission and Review
After completing clinical testing of an
investigational biologic product, a sponsor must prepare and submit a BLA for review and approval by FDA. A BLA is a comprehensive,
multi-volume application that must include, among other things, sufficient data establishing the safety, purity and potency of
the proposed biological product for its intended indication. 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 product’s chemistry, manufacturing, controls and proposed labeling. When a BLA is submitted, FDA conducts
a preliminary review to determine whether the application is sufficiently complete to be accepted for filing. If it is not, FDA
may refuse to file the application and may request additional information, in which case the application must be resubmitted with
the supplemental information and review of the application is delayed.
FDA performance goals, which are target
dates and other aspirational measures of agency performance to which the agency, Congressional representatives, and industry agree
through negotiations that occur every five years, generally provide for action BLA applications within 10 months of submission
or 10 months from acceptance for filing for an original BLA. FDA is not expected to meet those target dates for all applications,
however, and the deadline may be extended in certain circumstances, such as when the applicant submits new data late in the review
period. In practice, the review process is often significantly extended by FDA requests for additional information or clarification.
In some circumstances, FDA can expedite the review of new biologics deemed to qualify for priority review, such as those intended
to treat serious or life-threatening conditions that demonstrate the potential to address unmet medical needs. In those cases,
the targeted action date is six months from submission, or for biologics constituting original biological products, six months
from the date that FDA accepts the application for filing.
As part of its review, FDA may refer a
BLA to an advisory committee for evaluation and a recommendation as to whether the application should be approved. Although FDA
is not bound by the recommendation of an advisory committee, the agency usually has followed such recommendations. FDA may also
determine that a REMS program is necessary to ensure that the benefits of a new product outweigh its risks, and that the product
can therefore be approved. A REMS program may include various elements, ranging from a medication guide or patient package insert
to limitations on who may prescribe or dispense the product, depending on what FDA considers necessary for the safe use of the
product. Under the Pediatric Research Equity Act, a BLA must include an assessment, generally based on clinical study data, of
the safety and effectiveness of the subject drug or biological product in relevant pediatric populations, unless the requirement
is waived or deferred. Receiving orphan drug designation from FDA is one situation where such a requirement may be waived.
After review of a BLA, FDA may determine
that the product cannot be approved, or may determine that it can only be approved if the applicant cures deficiencies in the application,
in which case the agency endeavors to provide the applicant with a complete list of the deficiencies in correspondence known as
a Complete Response Letter (“CRL”). A CRL may request additional information, including additional preclinical or clinical
data. Even if such additional information and data are submitted, FDA may decide that the BLA still does not meet the standards
for approval. Data from clinical trials are not always conclusive and FDA may interpret data differently than the sponsor interprets
them. Additionally, as a condition of approval, FDA may impose restrictions that could affect the commercial success of a drug
or require post-approval commitments, including the completion within a specified time period of additional clinical studies, which
often are referred to as “Phase IV” studies or “post-marketing requirements.” Obtaining regulatory approval
often takes a number of years, involves the expenditure of substantial resources, and depends on a number of factors, including
the severity of the disease in question, the availability of alternative treatments, and the risks and benefits demonstrated in
clinical trials.
Post-approval modifications to the drug
or biologic product, such as changes in indications, labeling, or manufacturing processes or facilities, may require a sponsor
to develop additional data or conduct additional preclinical or clinical trials. The proposed changes would need to be submitted
in a new or supplemental BLA, which would then require FDA approval.
Regulatory Exclusivities
Biologics Price Competition and Innovation Act
In 2010, the Biologics Price Competition
and Innovation Act (BPCIA) was enacted, creating an abbreviated approval pathway for biologic products that are biosimilar
to, and possibly interchangeable with, reference biological products licensed under a BLA. The BPCIA also provides innovator manufacturers
of original reference biological products 12 years of exclusive use before biosimilar versions can be licensed in the U.S.. This
means that FDA may not approve an application for a biosimilar version of a reference biological product until 12 years after the
date of approval of the reference biological product (with a potential six-month extension of exclusivity if certain pediatric
studies are conducted and the results reported to FDA), although a biosimilar application may be submitted four years after the
date of licensure of the reference biological product. Additionally, the BPCIA establishes procedures by which the biosimilar applicant
must provide information about its application and product to the reference product sponsor, and by which information about potentially
relevant patents is shared and litigation over patents may proceed in advance of approval, although the interpretation of those
procedures has been subject to litigation and appears to continue to evolve. The BPCIA also provides a period of exclusivity for
the first biosimilar to be determined by FDA to be interchangeable with the reference product.
FDA approved the first biosimilar product
under the BPCIA in 2015, and the agency continues to refine the procedures and standards it will apply in implementing this approval
pathway. FDA has released guidance documents interpreting specific aspects of the BPCIA in each of the last four years. We would
expect lenzilumab, ifabotuzumab and HGEN005, as biologics, to each receive at least 12 years exclusivity from approval, if they
are approved.
Pediatric Studies and Exclusivity
Under the Pediatric Research Equity
Act, a BLA must contain data adequate to assess the safety and effectiveness of the product for the claimed indications in
all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the
product is safe and effective. Sponsors must also submit pediatric study plans prior to the assessment data. Those plans must
contain an outline of the proposed pediatric study or studies the applicant plans to conduct, including study objectives and design,
any deferral or waiver requests and other information required by regulation. The applicant, the FDA, and the FDA’s internal
review committee must then review the information submitted, consult with each other and agree upon a final plan. The FDA or the
applicant may request an amendment to the plan at any time.
For products intended to treat a serious
or life-threatening disease or condition, the FDA must, upon the request of an applicant, meet to discuss preparation of the initial
pediatric study plan or to discuss deferral or waiver of pediatric assessments. In addition, FDA will meet early in the development
process to discuss pediatric study plans with sponsors and FDA must meet with sponsors by no later than the end-of-Phase I meeting
for serious or life-threatening diseases and by no later than ninety (90) days after FDA’s receipt of the study plan.
The FDA may, on its own initiative or at
the request of the applicant, grant deferrals for submission of some or all pediatric data until after licensing of the product
for use in adults, or full or partial waivers from the pediatric data requirements. Additional requirements and procedures relating
to deferral requests and requests for extension of deferrals are contained in Food and Drug Administration Safety and Innovation
Act (FDASIA). Unless otherwise required by regulation, the pediatric data requirements do not apply to products with orphan
designation.
The FDA Reauthorization Act of 2017 established
new requirements to govern certain molecularly targeted cancer indications. Any company that submits a BLA three years after the
date of enactment of that statute must submit pediatric assessments with the BLA if the biologic is intended for the treatment
of an adult cancer and is directed at a molecular target that FDA determines to be substantially relevant to the growth or progression
of a pediatric cancer. The investigation must be designed to yield clinically meaningful pediatric study data regarding the dosing,
safety and preliminary potency to inform pediatric labeling for the product. Deferrals and waivers as described above are also
available.
Pediatric exclusivity is another type of
exclusivity in the U.S. and, if granted, provides for the attachment of an additional six months of marketing protection to the
term of any existing regulatory exclusivity, including the non-patent and orphan exclusivity. This six-month exclusivity may be
granted if a BLA sponsor submits pediatric data that fairly respond to a written request from the FDA for such data. The data do
not need to show the product to be effective in the pediatric population studied; rather, if the clinical trial is deemed to fairly
respond to the FDA’s request, the additional protection is granted. If reports of requested pediatric studies are submitted
to and accepted by the FDA within the statutory time limits, whatever statutory or regulatory periods of exclusivity or patent
protection cover the product are extended by a further six-months. This is not a patent term extension, but it effectively extends
the regulatory period during which the FDA cannot license another application.
Orphan Drug Designation
The Orphan Drug Act provides incentives
for the development of therapeutic products intended to treat rare diseases or conditions. Rare diseases and conditions generally
are those affecting less than 200,000 individuals in the U.S., but also include diseases or conditions affecting more than 200,000
individuals in the U.S. if there is no reasonable expectation that the cost of developing and making available in the U.S. a drug
for such disease or condition will be recovered from sales in the U.S. of such product.
If a sponsor demonstrates that a therapeutic
product, including a biological product, is intended to treat a rare disease or condition, and meets certain other criteria, FDA
grants orphan drug designation to the product for that use. FDA may grant multiple orphan designations to different companies
developing the same product for the same indication, until the one company is the first to be able to secure successful approval
for that product. The first product approved with an orphan drug designated indication is granted seven years of orphan drug exclusivity
from the date of approval for that indication. During that period, FDA generally may not approve any other application for the
same product for the same indication, although there are exceptions, most notably when the later product is shown to be clinically
superior to the product with exclusivity. FDA can also revoke a product’s orphan drug exclusivity under certain circumstances,
including when the holder of the approved orphan drug application is unable to assure the availability of sufficient quantities
of the product to meet patient needs.
A sponsor of a product application that
has received an orphan drug designation is also granted tax incentives for clinical research undertaken to support the application.
In addition, FDA will typically coordinate with the sponsor on research study design for an orphan drug and may exercise its discretion
to grant marketing approval on the basis of more limited product safety and efficacy data than would ordinarily be required, based
on the limited size of the applicable patient population.
We anticipate submitting applications for
orphan drug designation for all of our current pipeline candidates and the targeted therapeutic indications.
Expedited Programs for Serious Conditions
FDA has implemented a number of expedited
programs to help ensure that therapies for serious or life-threatening conditions, and for which there is unmet medical need, are
approved and available to patients as soon as it can be concluded that the therapies’ benefits justify their risks. Among
these programs are the following:
Fast Track Designation
FDA may designate a product for fast track
review if it is intended, whether alone or in combination with one or more other products, for the treatment of a serious or life-threatening
disease or condition and where non-clinical or clinical data demonstrates the potential to address unmet medical need for such
a disease or condition. A product can also receive fast track review if it receives breakthrough therapy designation.
For fast track products, sponsors may have
greater interactions with FDA and FDA may initiate review of sections of a fast track product’s application before the application
is complete, also referred to as a ‘rolling review’. This rolling review may be available if FDA determines, after
preliminary evaluation of clinical data submitted by the sponsor, that a fast track product may be effective. The sponsor must
also provide, and FDA must approve, a schedule for the submission of the remaining information and the sponsor must pay applicable
user fees. Furthermore, FDA’s time period goal for reviewing a fast track application does not begin until the last section
of the complete application is submitted. Finally, the fast track designation may be withdrawn by FDA if FDA believes that the
designation is no longer supported by data emerging in the clinical trial process.
Breakthrough Therapy Designation
A product may be designated as a breakthrough
therapy if it is intended, either alone or in combination with one or more other products, to treat a serious or life-threatening
disease or condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over
existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical
development. The designation includes all of the features of fast track designation, as well as more intensive FDA interaction
and guidance. FDA may take certain actions with respect to breakthrough therapies, including holding meetings with the sponsor
throughout the development process; providing timely advice to the product sponsor regarding development and approval; involving
more senior staff in the review process; assigning a cross-disciplinary project lead for the review team; and taking other steps
to design efficient clinical trials.
Accelerated Approval
Under the accelerated approval pathway,
FDA may approve a drug or biologic based on a surrogate endpoint that is reasonably likely to predict clinical benefit; qualifying
products must target a serious or life-threatening illness and provide meaningful therapeutic benefit to patients over existing
treatments. In clinical trials, a surrogate endpoint is a measurement of laboratory or clinical signs of a disease or condition
that substitutes for a direct measurement of how a patient feels, functions, or survives. Surrogate endpoints can often be measured
more easily or more rapidly than clinical endpoints. A product candidate approved on this basis is subject to rigorous post-marketing
compliance requirements, including the completion of Phase IV or post-approval clinical trials to confirm the effect on the clinical
endpoint. Failure to conduct required post-approval studies, or to confirm a clinical benefit during post-marketing studies, would
allow FDA to withdraw the product from the market on an expedited basis. All promotional materials for product candidates approved
under accelerated regulations are subject to prior review by FDA.
Priority Review
FDA may designate a product for priority
review if it is a product that treats a serious condition and, if approved, would provide a significant improvement in safety or
effectiveness. FDA generally determines, on a case-by-case basis, whether the proposed product represents a significant improvement
in safety and effectiveness when compared with other available therapies. Significant improvement may be illustrated by evidence
of increased effectiveness in the treatment of a condition, elimination or substantial reduction of a treatment-limiting product
reaction, documented enhancement of patient compliance that may lead to improvement in serious outcomes, and evidence of safety
and effectiveness in a new subpopulation. A priority designation is intended to direct overall attention and resources to the evaluation
of such applications, and will shorten FDA’s goal for taking action on a marketing application from the standard targeted
ten months to a target of six months review.
Created in 2012 under the FDASIA and extended
with the 21st Century Cures Act in 2016, FDA is authorized under section 529 of the FDCA to grant a PRV to BLA
sponsors receiving FDA approval for a product to treat a rare pediatric disease, defined as a disease that affects fewer than 200,000
individuals in the U.S., and where more than 50% of the patients affected are aged from birth to 18 years. We believe that our
product candidates which may assist with the treatment of rare pediatric cancers or other rare pediatric diseases may qualify for
a PRV under this program, depending on the indication.
The PRV program allows the voucher holder
to obtain priority review for a product application that would otherwise not receive priority review, shortening FDA’s target
review period to a targeted six months following acceptance of filing of an NDA or BLA, or four months shorter than the standard
review period. The voucher may be used by the sponsor who receives it, or it may be sold to another sponsor for use in that sponsor’s
own marketing application. The sponsor who uses the voucher is required to pay additional user fees on top of the standard user
fee for reviewing an NDA or BLA.
We anticipate submitting applications for
one or more of these expedited programs for all of our current pipeline candidates and the targeted therapeutic indications.
Regenerative Medicine Advanced Therapy Designation
Recently, through the 21st Century Cures
Act, or Cures Act, Congress also established another expedited program, called a RMAT designation. The Cures Act directs the
FDA to facilitate an efficient development program for and expedite review of RMATs. To qualify for this program, the product must
be a cell therapy, therapeutic tissue engineering product, human cell and tissue product, or a combination of such products, and
not a product solely regulated as a human cell and tissue product. The product must be intended to treat, modify, reverse, or cure
a serious or life-threatening disease or condition, and preliminary clinical evidence must indicate that the product has the potential
to address an unmet need for such disease or condition. Advantages of the RMAT designation include all the benefits of the fast
track and breakthrough therapy designation programs, including early interactions with the FDA. These early interactions may be
used to discuss potential surrogate or intermediate endpoints to support accelerated approval.
Post-Licensing Regulation
Once a BLA is approved and a product marketed,
a sponsor will be required to comply with all regular post-licensing regulatory requirements as well as any post-licensing requirements
that the FDA may have imposed as part of the licensing process. The sponsor will be required to report, among other things, certain
adverse reactions and manufacturing problems to the FDA, provide updated safety and potency or efficacy information and comply
with requirements concerning advertising and promotional labeling requirements. Manufacturers and certain of their subcontractors
are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced
inspections by the FDA and certain state agencies for compliance with ongoing regulatory requirements, including cGMP regulations,
which impose certain procedural and documentation requirements upon manufacturers. Changes to the manufacturing processes are
strictly regulated and often require prior FDA approval before being implemented. Accordingly, the sponsor and its third-party
manufacturers must continue to expend time, money, and effort in the areas of production and quality control to maintain compliance
with cGMP regulations and other regulatory requirements.
In addition, the distribution of prescription
pharmaceutical products is subject to the Prescription Drug Marketing Act (PDMA) and its implementing regulations, as well
as the Drug Supply Chain Security Act (DSCA), which regulate the distribution and tracing of prescription drug samples at
the federal level, and set minimum standards for the regulation of distributors by the states. The PDMA, its implementing regulations
and state laws limit the distribution of prescription pharmaceutical product samples, and the DSCA imposes requirements to ensure
accountability in distribution and to identify and remove counterfeit and other illegitimate products from the market.
Employees
We currently have two full-time employees.
We contract with several part-time independent consultants performing manufacturing, regulatory and clinical development, intellectual
property, public relations, investor relations and finance and accounting functions. None of our employees are represented by labor
unions or covered by collective bargaining agreements.
Bankruptcy
As previously reported, on December 29,
2015, we filed a voluntary petition for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code. The filing was made
in the U.S. Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) (Case No. 15-12628 (LSS)).
On May 9, 2016, we filed with the Bankruptcy
Court a Second Amended Plan of Reorganization (the “Plan”), and related amended disclosure statement pursuant to Chapter
11 of the Bankruptcy Code. On June 16, 2016, the Bankruptcy Court entered an order confirming the Plan. On June 30, 2016 (the “Effective
Date”), the Plan became effective and we emerged from our Chapter 11 bankruptcy proceedings.
On September 17, 2018 the Bankruptcy Court
issued a Final Decree and Order to close the bankruptcy case and terminate the remaining claims and noticing services.
Restructuring Transactions
On December 1, 2017, our obligations matured
under the Credit and Security Agreement dated December 21, 2016, as amended on March 21, 2017 and on July 8, 2017 (the “Term
Loan Credit Agreement”) with Black Horse Capital Master Fund Ltd., as administrative agent and lender (“BHCMF”),
Black Horse Capital LP, as a lender (“BHC”), Cheval Holdings, Ltd., as a lender (“Cheval” and collectively
with BHCMF and BHC, the “Black Horse Entities”) and Nomis Bay LTD, as a lender (“Nomis” and, together with
the Black Horse Entities, the “Term Loan Lenders”).
On December 21, 2017,
we entered into a Securities Purchase and Loan Satisfaction Agreement (the “Restructuring Purchase Agreement”) and
a Forbearance and Loan Modification Agreement (the “Forbearance Agreement” and, together with the Restructuring Purchase
Agreement, the “Restructuring Agreements”), each with the Term Loan Lenders, in connection with a series of transactions
providing for, among other things, the satisfaction and extinguishment of our outstanding obligations under the Term Loan Credit
Agreement and the infusion of $3.0 million of new capital. As of February 27, 2018, the date the Restructuring Transactions were
completed, the aggregate amount of our obligations under the Term Loan Credit Agreement, including the Bridge Loan, the Claims
Advances extended by Nomis Bay (each as discussed below) and all accrued interest and fees, approximated $18.4 million (the “Term
Loans”).
On February 27, 2018
(the “Restructuring Effective Date”), the Restructuring Transactions were completed in accordance with the Restructuring
Agreements. As a result, on the Restructuring Effective Date, we: (i) in exchange for the satisfaction and extinguishment of the
entire $18.4 million balance of the Term Loans, including the Bridge Loan, the Claims Advances extended by Nomis Bay (each as discussed
below) and all accrued interest and fees, (a) issued to the Term Loan Lenders an aggregate of 59,786,848 shares of our common stock
(the “New Lender Shares”), and (b) transferred and assigned to Madison Joint Venture LLC owned 70% by Nomis Bay and
30% by us (Madison), all of our assets related to benznidazole (the “Benz Assets”), our former drug candidate, capable
of being so assigned; and (ii) issued to Cheval an aggregate of 32,028,669 shares of our common stock (the “New Black Horse
Shares” and, collectively with the New Lender Shares, the “New Common Shares”) for total consideration of $3.0
million (collectively, the “Restructuring Transactions”), $1.5 million of which we received on December 22, 2017 in
the form of a bridge loan (the “Bridge Loan”).
On the Restructuring
Effective Date, the aggregate amount of the Term Loans that were deemed to be satisfied and extinguished (i) previously owed to
the Black Horse Entities, including the Bridge Loan and all accrued interest and fees, approximated $9.9 million, and (ii) previously
owed to Nomis Bay, including certain advances previously extended to us by Nomis Bay totaling $0.1 million (the Claims Advances)
and all accrued interest and fees, approximated $8.5 million. In addition, on the Restructuring Effective Date, (i) each of the
Term Loan Credit Agreement, all promissory notes issued thereunder and the Intellectual Property Security Agreement, dated as of
December 21, 2016, by and between us and the Term Loan Lenders, were terminated and are of no further force or effect, and (ii)
all security interests of the Black Horse Entities and Nomis Bay in our assets were released. Although the Term Loans were satisfied
and extinguished, if Madison elected to keep the Benz Assets after the Restructuring Effective Date, Nomis Bay would be obligated
to pay or cause Madison to pay $0.3 million in legal fees and expenses owed by us to our litigation counsel, which remain unpaid
in our Accounts payable at December 31, 2017. On August 23, 2018 Madison elected to keep the Benz Assets and these amounts were
paid by Madison to our litigation counsel.
Upon completion of the Restructuring Transactions,
Nomis Bay held 33,573,530 of our common stock, or approximately 31.4% of our outstanding common stock, and the Black Horse Entities
collectively held 66,870,851 shares of our common stock, or approximately 62.6% of our outstanding common stock. Accordingly, the
completion of the Restructuring Transactions on the Restructuring Effective Date resulted in a change in control of our company,
as the Black Horse Entities and their affiliates owning more than a majority of our outstanding common stock. Dr. Dale Chappell,
a member of our board of directors from June 30, 2016 until November 10, 2017, controls the Black Horse Entities and accordingly,
will be able to exert control over matters of our company and will be able to determine all matters of our company requiring stockholder
approval.
Available Information
We were incorporated on March 15, 2000 in
California and reincorporated as a Delaware corporation in September 2001. Effective August 7, 2017, we changed our legal name
to Humanigen, Inc. Our principal offices are located at 533 Airport Boulevard, Suite 400, Burlingame, CA 94010, and our telephone
number is (650) 243-3100. Our website address is www.humanigen.com. Our common stock is currently traded on the OTCQB Venture Market.
We operate in a single segment.
Our website and the information contained
on, or that can be accessed through, the website will not be deemed to be incorporated by reference in, and are not considered
part of, this Annual Report on Form 10-K. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form
8-K and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as
amended, are available free of charge on the Investor Relations portion of our website as soon as reasonably practicable after
we electronically file such material with, or furnish it to, the SEC. In addition, the SEC maintains an internet site that contains
the reports, proxy and information statements, and other information we electronically file with or furnish to the SEC, located
at www.sec.gov.
ITEM 1A. RISK FACTORS
Risks Related to Our Business and Industry
We have a history of operating losses,
we expect to continue to incur losses, and we may never become profitable.
We have incurred net losses in nearly every
year since our inception. For the fiscal year ended December 31, 2019 we incurred a net loss of $10.3 million, and we have an accumulated
deficit of $284.9 million as of December 31, 2019.
Since inception, we have only recognized
a nominal amount of revenue from payments for funded research and development and for license or collaboration fees, none of which
was recognized in either of the last two years. We expect to make substantial expenditures and incur additional operating losses
in the future to further develop and commercialize our product candidates. Our accumulated deficit is expected to increase significantly
as we continue our development and clinical trial efforts. Our ability to achieve and sustain profitability depends on obtaining
regulatory approvals for and successfully commercializing our product candidates, either alone or with third parties. We do not
currently have the required approvals to market any of our product candidates and we may never receive them. We may not be profitable
even if we or any future development partners succeed in commercializing any of our product candidates. Because of the numerous
risks and uncertainties associated with developing and commercializing our product candidates, we are unable to predict the extent
of any future losses or when we will become profitable, if at all.
Our auditor has
expressed substantial doubt about our ability to continue as a going concern and absent additional financing we may be unable to
remain a going concern.
We need additional capital to continue to
operate our business. If we are unsuccessful in our efforts to raise additional capital, including in the immediate future, based
on our current levels of operating expenses, our current capital is not expected to be sufficient to fund our operations for the
next twelve months. These conditions raise substantial doubt about our ability to continue as a going concern. The Report of Independent
Registered Public Accounting Firm at the beginning of the Consolidated
Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of
this Annual Report on Form 10-K includes an explanatory paragraph about our ability to continue as a going concern.
The Consolidated
Financial Statements for the year ended December 31, 2019 were prepared on the basis of a going concern, which contemplates
that we will be able to realize our assets and discharge liabilities in the normal course of business. Our ability to meet our
liabilities and to continue as a going concern is dependent upon the availability of future funding. The financial statements do
not include any adjustments that might be necessary if we are unable to continue as a going concern.
In addition, our current financial situation,
and the presence of the explanatory paragraph about our ability to continue as a going concern, could also make it more difficult
to raise the capital necessary to address our current needs.
Our ability to execute on all of the
initiatives in our development pipeline is substantially dependent on third parties to plan and conduct the referenced studies
and clinical trials.
We do not have sufficient capital to pursue
the actions in the development pipeline for our product candidates as depicted elsewhere in this Form 10-K. Accordingly, absent
our ability to raise sufficient capital to carry out these actions independently, our success depends on our ability to negotiate
agreements with third parties with resources to plan and conduct the initiatives, studies and clinical trials we are pursuing.
If we are not able to reach agreements with current or future partners for it, we will not be able to execute on each of these
particular initiatives, studies and trials. Our inability to identify and complete negotiations with any such third party therefore
could have a material and adverse impact on our ability to pursue our business plan in respect of the applicable element of our
pipeline, which in turn could have a material adverse effect on our business.
We review and explore strategic alternatives
on an on-going basis, but there can be no assurance that we will be successful in identifying or completing any strategic alternative
or that any such strategic alternative will yield additional value for our stockholders.
We regularly review strategic alternatives
to ensure our current structure optimizes our ability to execute our strategic plan and to maximize stockholder value. The review
of strategic alternatives could result in, among other things, a sale, merger, consolidation or business combination, asset divestiture,
partnering, licensing or other collaboration agreements, or potential acquisitions or recapitalizations, in one or more transactions,
or continuing to operate with our current business plan and strategy. There can be no assurance that the exploration of strategic
alternatives will result in the identification or consummation of any transaction.
In addition, we may incur substantial expenses
associated with identifying and evaluating potential strategic alternatives. The process of exploring strategic alternatives may
be time consuming and disruptive to our business operations and if we are unable to effectively manage the process, our business,
financial condition and results of operations could be adversely affected. We also cannot assure that any potential transaction
or other strategic alternative, if identified, evaluated and consummated, will provide greater value to our stockholders than that
reflected in our current stock price. Any potential transaction would be dependent upon a number of factors that may be beyond
our control, including, among other factors, market conditions, industry trends, the interest of third parties in our business
or product candidates and the availability of financing to potential buyers on reasonable terms.
We need substantial additional capital
to develop and commercialize our product candidates, and our access to funding is uncertain. If we cannot obtain additional financing,
we may not be able to pursue our collaboration with Kite or other business objectives.
As previously disclosed, we do not expect
to recognize any revenues while we continue to pursue the development of lenzilumab and our other product candidates. We require
substantial additional capital to support our business efforts, including our collaboration with Kite. Under the Kite Agreement,
the parties have agreed to conduct a multi-center Phase 1/2 study (ZUMA-19) of lenzilumab with Kite’s Yescarta in patients
with relapsed or refractory B-cell lymphoma. We currently project we will be responsible for an aggregate of approximately $8 million
in out-of-pocket costs assuming a total of 72 patients are enrolled in ZUMA-19, of which $2 million will be required to be paid
to Kite thirty days prior to the initiation of the Study.
We will also require substantial additional
capital to support our other business efforts, including obtaining regulatory approvals for our other product candidates, clinical
trials and other studies, and, if approved, the commercialization of our product candidates. The amount of capital we will require
and the timing of our need for additional capital will depend on many factors, including:
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the type, number, timing, progress, costs, and results of the product candidate development programs that we are pursuing or
may choose to pursue in the future;
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the scope, progress, expansion, costs, and results of our preclinical and clinical trials;
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the timing of and costs involved in obtaining regulatory approvals;
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our costs in connection with the manufacturing of drugs, whether alone or with a manufacturing partner;
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our ability to establish and maintain development partnering arrangements and any associated funding;
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the emergence of competing products or technologies and other adverse market developments;
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the costs of maintaining, expanding, and protecting our intellectual property portfolio, including potential litigation costs
and liabilities;
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the resources we devote to marketing, and, if approved, commercializing our product candidates;
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the scope, progress, expansion and costs of manufacturing our product candidates; and
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the costs associated with being a public company.
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As of December 31, 2019, our current liabilities
of approximately $13.6 million exceeded our current assets of approximately $0.5 million.
We have defaulted on $1.1 million
of unsecured obligations incurred upon our emergence from bankruptcy in 2016.
Our cash position as of June 30, 2019 was
insufficient for us to satisfy in full at maturity on June 30, 2019 all of the outstanding principal amount and accrued but unpaid
interest on unsecured promissory notes we made to certain of our vendors upon our emergence from bankruptcy. As of December 31,
2019, the aggregate principal amount and accrued but unpaid interest on these notes approximates $1.1 million. The outstanding
principal amount and accrued but unpaid interest on these notes is currently payable to the respective holders without demand,
notice or declaration, and the holders, without demand or notice of any kind, may exercise any and all other rights and remedies
available to them under the notes, our bankruptcy plan, at law or in equity. We do not have sufficient funds to repay the principal
and accrued but unpaid notes, as our available cash balance as of March 13,
2020 was approximately $268,000.
Our business depends on the success
of our current product candidates. We cannot be certain that we will be able to obtain regulatory approval for, or successfully
commercialize, any of our product candidates.
We have a limited pipeline of product candidates
and we do not plan to conduct active research at this time for discovery of new molecules or antibodies. We depend on the successful
continued development and regulatory approval of our current product candidates for our future business success. Since the fall
of 2017, our primary focus has been the development of lenzilumab for use with FDA-approved CAR-T therapies. We are also working
to create next-generation gene-edited CAR-T therapies using GM-CSF gene knockout technologies, as well as working to develop ifabotuzumab
and related products. We will need to successfully enroll and complete clinical trials of lenzilumab and ifabotuzumab, and potentially
obtain regulatory approval to market these products. The future clinical, regulatory and commercial success of our product candidates
is subject to a number of risks, including the following:
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we may not be able to enroll adequate numbers of eligible patients in the clinical trials we propose to conduct, whether alone
or through collaborations, including the ZUMA-19 collaboration with Kite announced in May 2019;
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we may not have sufficient financial and other resources to fund our clinical trials or collaborations;
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we may not be able to provide acceptable evidence of safety and efficacy for our product candidates;
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the results of our clinical trials or collaborations may not meet the level of statistical or clinical significance, or product
safety, required to move to the next stage of development or, ultimately, obtain marketing approval from the FDA;
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we may not be able to obtain, maintain and enforce our patents and other intellectual property rights; and
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we may not be able to obtain and maintain commercial manufacturing arrangements with third-party manufacturers or establish
commercial-scale manufacturing capabilities.
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Furthermore, even if we do receive regulatory
approval to market any of our product candidates, any such approval may be subject to limitations on the indicated uses for which
we may market the product. If any of our product candidates are unsuccessful, that could have a substantial negative impact on
our business.
Accordingly, even if we are able to obtain
the requisite financing to continue to fund our development programs, we cannot assure you that our product candidates will be
successfully developed or commercialized. If we or any future development partners are unable to develop, or obtain regulatory
approval for or, if approved, successfully commercialize, one or more of our product candidates, we may not be able to generate
sufficient revenue to continue our business.
Our product candidates are at an early
stage of development and may not be successfully developed or commercialized.
Our product candidates are in the early
stages of development and will require substantial clinical development, testing, and regulatory approval prior to commercialization.
None of our product candidates have advanced into a pivotal study and it may be years before such a study is initiated, if at all.
Of the large number of drugs in development, only a small percentage successfully complete the FDA regulatory approval process
and are commercialized. Accordingly, even if we are able to obtain the requisite financing to continue to fund our development
programs, we cannot assure you that our product candidates will be successfully developed or commercialized. If we or any future
development partners are unable to develop, or obtain regulatory approval for or, if approved, successfully commercialize, one
or more of our product candidates, we may not be able to generate sufficient revenue to continue our business.
The adoption of CAR-T therapies as
the potential standard of care for treatment of certain cancers is uncertain, and dependent on the efforts of a limited number
of market entrants, and if not adopted as anticipated, the market for lenzilumab or next-generation gene-edited CAR-T therapies
may be limited or not develop.
We are seeking to advance the development
of lenzilumab to address the serious side-effects associated with CAR-T therapies and to improve the efficacy of these treatments.
We are also working to create next-generation gene-edited CAR-T therapies using GM-CSF gene knockout technologies. Although two
CAR-T therapies have been approved by FDA to date, the use of engineered T cells as a potential cancer treatment is a recent development
and may not be broadly accepted by physicians, patients, hospitals, cancer treatment centers, payers and others in the medical
community. The degree of market acceptance of any approved product candidates will depend on a number of factors, including:
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the efficacy and safety as demonstrated in clinical trials;
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the clinical indications for which the product candidate is approved;
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acceptance by physicians, major operators of hospitals and clinics, and patients of the product candidate as a safe and effective
treatment;
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the potential and perceived advantages of product candidates over alternative treatments;
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the safety of product candidates seen in a broader patient group, including its use outside the approved indications;
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competitive approaches to tackle similar issues;
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the cost of treatment in relation to alternative treatments;
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the availability of adequate reimbursement and pricing by payers;
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relative convenience and ease of administration;
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the prevalence and severity of adverse events;
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the effectiveness of sales and marketing efforts; and
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the ability to manage any unfavorable publicity relating to the product candidate.
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If the medical and payer community is not
sufficiently persuaded of the safety, efficacy and cost-effectiveness of CAR-T therapy and the potential advantages of using lenzilumab
compared to existing and future therapeutics, and there is not significant market acceptance of CAR-T therapy as the standard of
care for treatment of certain cancers, the market for lenzilumab or next-generation gene-edited CAR-T therapies may be limited
or not develop, and our stock price could be adversely affected.
CAR-T therapies currently in early
development purport to incorporate technology that may minimize or eliminate the adverse side-effects that we believe have impaired
the uptake of the approved CAR-T therapies. If these developing therapies are proven equally efficacious in their proposed indications
and approved for use by FDA and other regulatory agencies, the market growth for the currently-approved CAR-T therapies may be
limited, impairing demand for lenzilumab.
In recent months, several biotechnology
companies describing business plans focusing on development of CAR-T therapies have completed or announced they are pursing initial
public offerings, or “IPOs”. Several of these companies have described their belief that their therapies will not result
in the same level of CRS or NT as has been experienced in use of previously FDA-approved CAR-T therapies. While these products
are in early stage development, the data is limited and these products have not yet been approved for use by FDA, if any such product
were also proven equally efficacious and subsequently approved, the market for lenzilumab may not develop or grow as anticipated.
Any such failure of a market for lenzilumab to develop could adversely affect our stock price.
Our business could target benefits
from various regulatory incentives, such as orphan drug exclusivity, breakthrough therapy designation, fast track designation,
and priority review, but we may not ultimately qualify for or benefit from these arrangements.
We may seek various regulatory incentives,
such as orphan drug exclusivity, breakthrough therapy designation, fast track designation, accelerated approval, priority review
and Priority Review Vouchers (“PRVs”), where available, that provide for certain periods of exclusivity, expedited
review and/or other benefits, and we may also seek similar designations elsewhere in the world. Often, regulatory agencies have
broad discretion in determining whether or not products qualify for such regulatory incentives and benefits. We cannot guarantee
that we will be able to receive orphan drug status from FDA or equivalent regulatory designations elsewhere. We also cannot guarantee
that we will obtain breakthrough therapy or fast track designation, which may provide certain potential benefits such as more frequent
meetings with FDA to discuss the development plan, intensive guidance on an efficient drug development program, and potential eligibility
for rolling review or priority review. Legislative developments in the U.S., including recent proposed legislation that would restrict
eligibility for PRVs, may affect our ability to qualify for these programs in the future.
Even if we are successful in obtaining beneficial
regulatory designations by FDA or other regulatory agency for our product candidates, such designations may not lead to faster
development or regulatory review or approval, and it does not increase the likelihood that our product candidates will receive
marketing approval. We may not be able to obtain or maintain such designations for our product candidates, and our competitors
may obtain these designations for their product candidates, which could impact our ability to develop and commercialize our product
candidates or compete with such competitors, which would adversely impact our business, financial condition or results of operations.
There is a limited amount of information
about us upon which investors can evaluate our product candidates and business prospects, including because we have a limited operating
history developing product candidates, have not yet successfully commercialized any products, have changed our strategy and have
a small management team.
On August 29, 2017, we shifted our primary
focus toward developing our proprietary monoclonal antibody portfolio, which comprises lenzilumab and ifabotuzumab and HGEN005,
for use in addressing significant unmet needs in oncology and CAR-T therapy. We are also currently developing our GM-CSF knockout
gene-editing CAR-T platform to create next-generation CAR-T therapies that preserve the benefits of CAR-T therapy while altogether
avoiding its serious and potentially life-threatening side-effects. Our relatively new team, new strategic business focus and limited
operating history developing clinical-stage product candidates may make it more difficult for us to succeed or for investors to
be able to evaluate our business and prospects. In addition, as an early-stage clinical development company, we have limited experience
in development activities, including conducting clinical trials, or seeking and obtaining regulatory approvals, even though our
executives have had relevant experience at other companies. We only have two employees and therefore are heavily dependent on external
consultants for scientific, clinical manufacturing and regulatory expertise. We have not yet demonstrated an ability to successfully
overcome many of the risks and uncertainties frequently encountered by companies in the biopharmaceutical area. To execute our
business plan we will need to successfully:
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execute our product candidate development activities, including successfully completing our clinical trial programs, including
through our collaboration with Kite;
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obtain required regulatory approvals for the development and commercialization of our product candidates;
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manage our costs and expenses related to clinical trials, regulatory approvals, manufacturing and commercialization;
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secure substantial additional funding;
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develop and maintain successful strategic relationships;
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build and maintain a strong intellectual property portfolio;
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build and maintain appropriate clinical, sales, manufacturing, distribution, and marketing capabilities on our own or through
third parties; and
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gain market acceptance and favorable reimbursement status for our product candidates.
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If we are unsuccessful in accomplishing
these objectives, we may not be able to develop product candidates, raise capital, expand our business, or continue our operations.
Our collaboration with Kite is critically
important to our business. If we are unable to maintain this collaboration, or if this collaboration is not successful, our business
could be adversely affected.
In May 2019, we entered into the Kite Agreement
to conduct a multi-center Phase 1b/2 study (ZUMA-19) of
lenzilumab with Kite’s Yescarta in patients with relapsed or refractory B-cell lymphoma.
See "Business — Kite Collaboration."
Pursuant to the terms of the Kite Agreement,
Kite may elect to terminate or suspend the Study at any time. Because we currently rely on Kite for a substantial portion of our
discovery capabilities, if Kite delays or fails to perform its obligations under the Kite Agreement, disagrees with our interpretation
of the terms of the collaboration or our discovery plan or terminates the Kite Agreement, our pipeline of product candidates would
be adversely affected. Kite may also fail to properly maintain or defend the intellectual property we have licensed from them,
or even infringe upon, our intellectual property rights, leading to the potential invalidation of our intellectual property or
subjecting us to litigation or arbitration, any of which would be time-consuming and expensive. Additionally, either party has
the right to terminate the Kite Agreement under certain circumstances. If our collaboration with Kite is terminated, the development
of lenzilumab would be materially delayed or harmed.
In addition to our collaboration with
Kite, we may, in the future, seek to enter into collaborations with other third parties for the discovery, development and commercialization
of our product candidates. If our collaborators cease development efforts under our collaboration agreements, or if any of those
agreements are terminated, these collaborations may fail to lead to commercial products and we may never receive milestone payments
or future royalties under these agreements.
We may in the future seek to enter into
agreements with other third-party collaborators for research, development and commercialization of other therapeutic technologies
or product candidates. Biopharmaceutical companies are our likely future collaborators for any marketing, distribution, development,
licensing or broader collaboration arrangements. If we fail to enter into future collaborations on commercially reasonable terms,
or at all, or such collaborations are not successful, we may not be able to execute our strategy to develop our product candidates
or therapies that we believe could benefit from the resources of either larger biopharmaceutical companies or those specialized
in a particular area of relevance.
With respect to our existing Kite Agreement
and with any future collaboration agreements, we have limited control over the amount and timing of resources that our collaborators
dedicate to the development or commercialization of our product candidates. Moreover, our ability to generate revenues from these
arrangements will depend on our collaborators' abilities to successfully perform the functions assigned to them in these arrangements.
Collaborations involving our product candidates
pose the following risks to us:
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collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations;
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collaborators may not pursue development and commercialization of our product candidates or may elect not to continue or renew
development or commercialization programs based on preclinical studies or clinical trial results, changes in the collaborators'
strategic focus or available funding, or external factors such as an acquisition that diverts resources or creates competing priorities;
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collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or
abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical
testing;
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collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with
our product candidates if the collaborators believe that competitive products are more likely to be successfully developed or can
be commercialized under terms that are more economically attractive than ours;
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collaborators with marketing and distribution rights to one or more products may not commit sufficient resources to the marketing
and distribution of such product or products;
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collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in
such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or
expose us to litigation or potential liability;
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collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential
liability;
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disputes may arise between the collaborators and us that result in the delay or termination of the research, development or
commercialization of our product candidates or that result in costly litigation or arbitration that diverts management attention
and resources; and
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collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development
or commercialization of the applicable product candidates.
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As a result of the foregoing, our current
and any future collaboration agreements may not lead to development or commercialization of our product candidates in the most
efficient manner or at all. If a collaborator of ours were to be involved in a business combination, the continued pursuit and
emphasis on our product development or commercialization program could be delayed, diminished or terminated. Any failure to successfully
develop or commercialize our product candidates pursuant to our current or any future collaboration agreements could have a material
and adverse effect on our business, financial condition, results of operations and prospects.
Moreover, to the extent that any of our
existing or future collaborators were to terminate a collaboration agreement, we may be forced to independently develop these
product candidates, including funding preclinical studies or clinical trials, assuming marketing and distribution costs and defending
intellectual property rights, or, in certain instances, abandon product candidates altogether, any of which could result in a change
to our business plan and have a material adverse effect on our business, financial condition, results of operations and prospects.
We have relied and may in the future
rely on third parties to conduct investigator-sponsored trials (“ISTs”) of our products, which is cost-effective for
us but affords the investigators the ability to retain significant control over the design and conduct of the trials, as well as
the use of the data generated from their efforts.
We
have relied and may in the future rely on third parties to conduct and sponsor clinical trials relating to lenzilumab, our
GM-CSF gene knockout platform and our other immunotherapies, ifabotuzumab and HGEN005. Such
ISTs may provide us with valuable clinical data that can inform our future development strategy in a cost-efficient
manner, but we do not control the design or conduct of the ISTs, and it is possible that the FDA or non-U.S. regulatory authorities
will not view these ISTs as providing adequate support for future clinical trials, whether controlled by us or third parties, for
any one or more reasons, including elements of the design or execution of the trials or safety concerns or other trial results.
These
arrangements provide us limited information rights with respect to the ISTs, including access to and the ability to use and
reference the data, including for our own regulatory filings, resulting from the ISTs. However, we would not have control over
the timing and reporting of the data from ISTs, nor would we own the data from the ISTs. If we are unable to confirm
or replicate the results from the ISTs or if negative results are obtained, we would likely be further delayed or prevented from
advancing further clinical development. Further, if investigators or institutions breach their obligations with respect to the
clinical development of our product candidates, or if the data proves to be inadequate compared to the first-hand knowledge we
might have gained had the ISTs been sponsored and conducted by us, then our ability to design and conduct any future clinical trials
ourselves may be adversely affected.
If the third parties conducting our
clinical trials do not conduct the trials in accordance with our agreements with them, our ability to pursue our clinical development
programs could be delayed or unsuccessful and we may not be able to obtain regulatory approval for or commercialize our product
candidates when expected or at all.
We do not have the ability to conduct all
aspects of our preclinical testing or clinical trials ourselves. Therefore, the timing of the initiation and completion of these
trials is uncertain and may occur on substantially different timing from our estimates. We also use contract research organizations
(“CROs”) to conduct our clinical trials and rely on medical institutions, clinical investigators, CROs, and consultants
to conduct our trials in accordance with our clinical protocols and regulatory requirements. Our CROs, investigators, and other
third parties play a significant role in the conduct of these trials and subsequent collection and analysis of data.
There is no guarantee that any CROs, investigators,
or other third parties on which we rely for administration and conduct of our clinical trials will devote adequate time and resources
to such trials or perform as contractually required. If any of these third parties fails to meet expected deadlines, fails to adhere
to our clinical protocols, or otherwise performs in a substandard manner, our clinical trials may be extended, delayed, or terminated.
If any of our clinical trial sites terminates for any reason, we may experience the loss of follow-up information on subjects enrolled
in our ongoing clinical trials unless we are able to transfer those subjects to another qualified clinical trial site. In addition,
principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and may
receive cash or equity compensation in connection with such services. If these relationships and any related compensation result
in perceived or actual conflicts of interest, the integrity of the data generated at the applicable clinical trial site may be
jeopardized.
We may experience delays in commencing
or conducting our clinical trials, in receiving data from third parties or in the continuation or completion of clinical testing,
which could result in increased costs to us and delay our ability to generate product candidate revenue.
Before we can initiate clinical trials in
the U.S. for any new product candidates, we are required to submit the results of preclinical testing to FDA as part of an IND
application, along with other information including information about product candidate chemistry, manufacturing, and controls
and our proposed clinical trial protocol. For our programs already underway, we are required to report or provide information to
appropriate regulatory authorities in order to continue with our testing programs. If we are unable to make timely regulatory submissions
for any of our programs, it will delay our plans for our clinical trials. If those third parties do not make the required data
available to us, we will likely have to identify and contract with another third party, and/or develop all necessary preclinical
and clinical data on our own, which will lead to significant delays and increase development costs of the product candidate. In
addition, FDA may require us to conduct additional preclinical testing for any product candidate before it allows us to initiate
clinical testing under any IND application, which may lead to additional delays and increase the costs of our preclinical development.
Moreover, despite the presence of an active IND application for a product candidate, clinical trials can be delayed for a variety
of reasons, including delays in:
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identifying, recruiting, and enrolling qualified subjects to participate in a clinical trial;
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identifying, recruiting, and training suitable clinical investigators;
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reaching agreement on acceptable terms with prospective contract research organizations, or CROs, and trial sites, the terms
of which can be subject to extensive negotiation, may be subject to modification from time to time, and may vary significantly
among different CROs and trial sites;
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obtaining and maintaining sufficient quantities of a product candidate for use in clinical trials, either as a result of transferring
the manufacturing of a product candidate to another site or manufacturer, deferring ordering or production of product in order
to conserve resources or mitigate risk, having product in inventory become no longer suitable for use in humans, or other reasons
that reduce or delay availability of drug supply;
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obtaining and maintaining Institutional Review Board (“IRB”) or ethics committee approval to conduct a clinical
trial at an existing or prospective site;
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retaining or replacing participants who have initiated a clinical trial but may withdraw due to adverse events from the therapy,
insufficient efficacy, fatigue with the clinical trial process, or personal issues;
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developing any companion diagnostic necessary to ensure the study enrolls the target population;
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being required by the FDA to add more patients or sites or to conduct additional trials; or
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the FDA placing a clinical trial on hold.
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Once a clinical trial has begun, recruitment
and enrollment of subjects may be slower than we anticipate. Numerous companies and institutions are conducting clinical studies
in similar patient populations which can result in competition for qualified patients. In addition, clinical trials will take longer
than we anticipate if we are required, or believe it is necessary, to enroll additional subjects than originally planned. Clinical
trials may also be delayed as a result of ambiguous or negative interim results. Further, a clinical trial may be suspended or
terminated by us, an IRB, an ethics committee, or a data safety monitoring committee overseeing the clinical trial, any of our
clinical trial sites with respect to that site, or FDA or other regulatory authorities, due to a number of factors, including:
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failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols;
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inspection of the clinical trial operations or clinical trial site by the FDA or other regulatory authorities;
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inability to provide timely supply of drug product;
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unforeseen safety issues, known safety issues that occur at a greater frequency or severity than we anticipate, or any determination
that the clinical trial presents unacceptable health risks; or
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lack of adequate funding to continue the clinical trial or unforeseen significant incremental costs related to the trial.
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Additionally, if any future development
partners do not develop the licensed product candidates in the time and manner that we expect, or at all, the clinical development
efforts related to these licensed product candidates could be delayed or terminated. In addition, our ability to enforce our partners’
obligations under any future collaboration efforts may be limited due to time and resource constraints, competing corporate priorities
of our future partners, and other factors.
Any delays in the commencement of our clinical
trials may delay or preclude our ability to further develop or pursue regulatory approval for our product candidates. Changes
in U.S. and foreign regulatory requirements and guidance also may occur and we may need to amend clinical trial protocols to reflect
these changes. Amendments may require us to resubmit our clinical trial protocols to IRBs for re-examination, which may affect
the costs, timing, and likelihood of a successful completion of a clinical trial. If we or any future development partners experience
delays in the completion of, or if we or any future development partners must terminate, any clinical trial of any product candidate
our ability to obtain regulatory approval for that product candidate will be delayed and the commercial prospects, if any, for
the product candidate may suffer as a result. In addition, many of these factors may also ultimately lead to the denial of regulatory
approval of a product candidate.
The scientific rationale behind the
hypothesis that GM-CSF is a cause of the cytokine storm that leads to adverse results in COVID-19 patients is still being tested
and may not prove accurate.
The hypothesis that elevated GM-CSF+ T cells may contribute
to cytokine storm-induced immune mechanisms that places patients at greater risk of ICU admission and mortality with the current
pandemic strain of coronavirus is unproven. Certain data are the subject of pre-publication papers that have not been peer-reviewed
and may not be substantiated. If this hypothesis is not ultimately proven, the potential for lenzilumab to play a meaningful role
in a COVID-19 therapy likely would decrease or be eliminated. We cannot assure you that our exploratory efforts in this respect
will be fruitful.
Our product candidates are subject
to extensive regulation, compliance with which is costly and time consuming, may cause unanticipated delays, or may prevent the
receipt of the required approvals to commercialize our product candidates.
The clinical development, approval, manufacturing,
labeling, storage, record-keeping, advertising, promotion, import, export, marketing, and distribution of our product candidates
are subject to extensive regulation by FDA in the U.S. and by comparable authorities in foreign markets. In the U.S., we are not
permitted to market our product candidates until we receive regulatory approval from FDA. The process of obtaining regulatory approval
is expensive, often takes many years, and can vary substantially based upon the type, complexity, and novelty of the products involved,
as well as the target indications. Approval policies or regulations may change and FDA has substantial discretion in the drug approval
process, including the ability to delay, limit, or deny approval of a product candidate for many reasons. Despite the time and
expense invested in clinical development of product candidates, regulatory approval is never guaranteed. FDA or other comparable
foreign regulatory authorities can delay, limit, or deny approval of a product candidate for many reasons, including:
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such authorities may disagree with the design or implementation of our or any future development partners’ clinical trials;
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such authorities may not accept clinical data from trials that are conducted at clinical facilities or in countries where the
standard of care is potentially different from the U.S.;
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the results of clinical trials may not demonstrate the safety or efficacy required by such authorities for approval;
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we or any future development partners may be unable to demonstrate that a product candidate’s clinical and other benefits
outweigh its safety risks;
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such authorities may disagree with our interpretation of data from preclinical studies or clinical;
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such authorities may find deficiencies in the manufacturing processes or facilities of third-party manufacturers with which
we or any future development partners contract for clinical and commercial supplies; or
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the approval policies or regulations of such authorities may significantly change in a manner rendering our or any future development
partners’ clinical data insufficient for approval.
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With respect to foreign markets, approval
procedures vary widely among countries and, in addition to the aforementioned risks, can involve additional product testing, administrative
review periods, and agreements with pricing authorities. In addition, events raising questions about the safety of certain marketed
pharmaceuticals may result in increased caution by FDA and comparable foreign regulatory authorities in reviewing new drugs based
on safety, efficacy or other regulatory considerations and may result in significant delays in obtaining regulatory approvals.
Any delay in obtaining, or inability to obtain, applicable regulatory approvals may delay or prevent us or any future development
partners from commercializing our product candidates.
The results of preclinical studies
and early clinical trials are not always predictive of future results. Any product candidate we or any future development partners
advance into clinical trials may not have favorable results in later clinical trials, if any, or receive regulatory approval.
Drug development has substantial inherent
risk. We or any future development partners will be required to demonstrate through adequate and well-controlled clinical trials
that our product candidates are effective, with a favorable benefit-risk profile, for use in their target populations for their
intended indications before we can seek regulatory approvals for their commercial sale. Drug development is a long, expensive and
uncertain process, and delay or failure can occur at any stage of development, including after commencement of any of our clinical
trials. Success in early clinical trials does not mean that later clinical trials will be successful because product candidates
in later-stage clinical trials may fail to demonstrate sufficient safety or efficacy despite having progressed through initial
clinical testing. In addition, serious adverse or undesirable side-effects may emerge or be identified during later stages of development
that were not observed in earlier stages. Furthermore, our future trials will need to demonstrate sufficient safety and efficacy
for approval by regulatory authorities in larger patient populations. Companies frequently suffer significant setbacks in advanced
clinical trials, even after earlier clinical trials have shown promising results. In addition, only a small percentage of drugs
under development result in the submission of a New Drug Application (“NDA”) or Biologic License Application (“BLA”)
to FDA and even fewer are approved for commercialization.
If we fail to attract and retain key
management and clinical development personnel, or if the attention of such personnel is diverted, we may be unable to successfully
manage our business and develop or commercialize our product candidates.
We will need to effectively manage our managerial,
operational, financial, and other resources in order to successfully pursue our clinical development and commercialization efforts.
As a company with a limited number of personnel, we are heavily affected by turnover and highly dependent on the expertise of the
members of our senior management team, in particular our Chief Executive Officer, Dr. Cameron Durrant, and Dr. Dale Chappell, the
controlling owner of the Black Horse Entities and our current ex-officio chief scientific officer. Furthermore, we rely on third
party consultants for a variety of services. We cannot predict the impact of the loss of such individuals or the loss of services
of any of our other senior management, should they occur, or the difficulty in replacing such individuals. Such losses could delay
or prevent the further development and potential commercialization of our product candidates and, if we are not successful in finding
suitable replacements, could harm our business.
Any product candidate we or any future
development partner may advance into clinical trials may cause unacceptable adverse events or have other properties that may delay
or prevent its regulatory approval or commercialization or limit its commercial potential.
Unacceptable adverse events caused by any
of our product candidates that we advance into clinical trials could cause us or regulatory authorities to interrupt, delay, or
halt clinical trials and could result in the denial of regulatory approval by FDA or other regulatory authorities for any or all
targeted indications and markets. This in turn could prevent us from completing development or commercializing the affected product
candidate and generating revenue from its sale.
We have not yet successfully completed testing
of any of our product candidates for the treatment of the indications for which we intend to seek approval in humans, and we currently
do not know the extent of adverse events, if any, that will be observed in individuals who receive any of our product candidates.
If any of our product candidates cause unacceptable adverse events in clinical trials, we may not be able to obtain regulatory
approval or commercialize such product candidates.
If our competitors develop treatments
for the target indications of our product candidates that are approved more quickly, marketed more successfully or are demonstrated
to be safer or more effective than our product candidates, or if FDA approves generic or biosimilar competitors to our products
post-approval, our commercial opportunity will be reduced or eliminated.
We compete in an industry characterized
by rapidly advancing technologies, intense competition, a changing regulatory and legislative landscape and a strong emphasis on
the benefits of intellectual property protection and regulatory exclusivities. Our competitors include pharmaceutical companies,
other biotechnology companies, academic institutions, government agencies and other private and public research organizations.
We compete with these parties in immunotherapy and oncology treatments and in recruiting highly qualified personnel. Our product
candidates, if successfully developed and approved, may compete with established therapies, with new treatments that may be introduced
by our competitors, including competitors relying on our biologics approvals under section 351(k) of the Public Health Service
Act, or with generic copies of our products approved by FDA under an abbreviated new drug application (“ANDA”), referencing
our drug products. We believe that competitors are actively developing competing products to our product candidates. See “Competition”
in the “Business” section of this Annual Report on Form 10-K for a discussion of competition with respect to our current
product candidates.
Many of our competitors and potential competitors
have substantially greater scientific, research, and product development capabilities, as well as greater financial, marketing,
sales and human resources capabilities than we do. In addition, many specialized biotechnology firms have formed collaborations
with large, established companies to support the research, development and commercialization of products that may be competitive
with ours. Accordingly, our competitors may be more successful with respect to their products than we may be in developing, commercializing,
and achieving widespread market acceptance for our products. If a competitor obtains approval for an orphan drug that is the same
drug or the same biologic as one of our candidates before we do, we will be blocked from obtaining FDA approval for seven years
from the date of the competitor’s product, unless we can establish that our product is clinically superior to the previously-approved
competitor’s product or we can meet another exception, such as by showing that the competitor has failed to provide an adequate
supply of its product to patients after approval. In addition, our competitors’ products may be more effective or more effectively
marketed and sold than any treatment we or our development partners may commercialize and may render our product candidates obsolete
or non-competitive before we can recover the expenses related to developing and supporting the commercialization of any of our
product candidates. Developments by competitors may render our product candidates obsolete or noncompetitive. After one of our
product candidates is approved, FDA may also approve a generic version with the same dosage form, safety, strength, route of administration,
quality, performance characteristics and intended use as our product. These generic equivalents would be less costly to bring to
market and could generally be offered at lower prices, thereby limiting our ability to gain or retain market share.
The acquisition or licensing of pharmaceutical
products is also very competitive, and a number of more established companies, which have acknowledged strategies to in-license
or acquire products, may have competitive advantages as may other emerging companies taking similar or different approaches to
product acquisitions. The more established companies may have a competitive advantage over us due to their size, cash flows, institutional
experience and historical corporate reputation.
We are subject to a multitude of manufacturing
risks, any of which could substantially increase our costs and limit supply of our products.
We are, and will for the foreseeable future
continue to be, wholly dependent on third party contract manufacturers for the timely supply of adequate quantities of our products
which meet or exceed requisite quality and production standards for use in clinical and nonclinical studies. Given the extensive
risks, scope, complexity, cost, regulatory requirements and commitment of resources associated with developing the capabilities
to manufacture one or more of our products, we have no present plan or intention of developing in-house manufacturing capabilities
for nonclinical, clinical or commercial scale production, beyond our current supervision and management of our third-party contract
manufacturers. In addition, in order to balance risk and conserve financial and human resources, we have and may continue from
time to time to defer commitment to production of product, which could result in delays to the continued progress of our clinical
and nonclinical testing.
In addition to the foregoing, the process
of manufacturing our products is complex, highly regulated and subject to several risks, including but not limited to the following:
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We, and our contract manufacturers, must comply with FDA’s current Good Manufacturing Practice, (“cGMP”),
regulations and guidance. We, and our contract manufacturers, may encounter difficulties in achieving quality control and quality
assurance and may experience shortages in qualified personnel. We, and our contract manufacturers, are subject to inspections by
FDA and comparable agencies in other jurisdictions to confirm compliance with applicable regulatory requirements. Any failure to
follow cGMP or other regulatory requirements or any delay, interruption or other issues that arise in the manufacture, fill-finish,
packaging, or storage of our products as a result of a failure of our facilities or the facilities or operations of third parties
to comply with regulatory requirements, or a failure to pass any regulatory authority inspection, could significantly impair our
ability to develop and commercialize our products, including leading to significant delays in the availability of products for
our clinical studies or the termination or hold on a clinical study, or the delay or prevention of a filing or approval of marketing
applications for our product candidates. Significant noncompliance could also result in the imposition of sanctions, including
injunctions, civil penalties, failure of regulatory authorities to grant marketing approvals for our product candidates, delays,
suspension or withdrawal of approvals, license revocation, seizures or recalls of products, operating restrictions, adverse publicity,
and criminal prosecutions, any of which could damage our reputation. If we are not able to maintain regulatory compliance, we may
not be permitted to market our products and/or may be subject to product recalls, seizures, injunctions, or criminal prosecution.
Any adverse developments affecting manufacturing operations for our products may result in shipment delays, inventory shortages,
lot failures, product withdrawals or recalls, or other interruptions in the supply of our products. Once our product candidates
are approved, we may also have to take inventory write-offs and incur other charges and expenses for products that fail to meet
specifications, undertake costly remediation efforts or seek more costly manufacturing alternatives.
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The manufacturing facilities in which our products are made could be adversely affected by equipment failures, plant closures,
capacity constraints, competing customer priorities or changes in corporate strategy or priorities, process changes or failures,
changes in business models or operations, materials or labor shortages, natural disasters, power failures and numerous other factors.
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We are wholly dependent upon third party CMOs for the timely supply of adequate quantities of requisite quality product for
our nonclinical, clinical and, if approved by regulatory authorities, commercial scale production.
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The process of manufacturing biologics is extremely susceptible to product loss due to contamination, equipment failure or
improper installation or operation of equipment, or vendor or operator error. Even minor deviations from normal manufacturing processes
could result in reduced production yields, product defects and other supply disruptions. If microbial, viral or other contaminations
are discovered in our products or in the manufacturing facilities in which our products are made, such manufacturing facilities
may need to be closed for an extended period of time to investigate and remedy the contamination.
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If any product candidate that we successfully
develop does not achieve broad market acceptance among physicians, patients, healthcare payers and the medical community, the revenue
that it generates may be limited.
Even if our product candidates receive regulatory
approval, they may not gain market acceptance among physicians, patients, healthcare payers, and the medical community. Coverage
and reimbursement of our product candidates by third-party payers, including government payers, generally is also necessary for
commercial success. The degree of market acceptance of any approved product candidates will depend on a number of factors, including:
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the efficacy and safety as demonstrated in clinical trials;
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the clinical indications for which the product candidate is approved;
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acceptance by physicians, major operators of hospitals and clinics, and patients of the product candidate as a safe and effective
treatment;
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the potential and perceived advantages of product candidates over alternative treatments;
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the safety of product candidates seen in a broader patient group, including its use outside the approved indications;
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the cost of treatment in relation to alternative treatments;
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the availability of adequate reimbursement and pricing by payers;
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relative convenience and ease of administration;
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the prevalence and severity of adverse events;
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the effectiveness of our sales and marketing efforts; and
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the ability to manage any unfavorable publicity relating to the product candidate.
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If any product candidate is approved but
does not achieve an adequate level of acceptance by physicians, hospitals, healthcare payers, and patients, we may not generate
sufficient revenue from that product candidate and may not become or remain commercially attractive as a standalone indication
for that product.
Reimbursement may be limited or unavailable
in certain market segments for our product candidates, which could make it difficult for us to sell our product candidates profitably.
Market acceptance and sales of our product
candidates will depend significantly on the availability of adequate insurance coverage and reimbursement from third-party payers
for any of our product candidates and may be affected by existing and future health care reform measures. Government authorities
and third-party payers, such as private health insurers and health maintenance organizations, decide which drugs they will pay
for and establish reimbursement levels. Reimbursement by a third-party payer may depend upon a number of factors including the
third-party payer’s determination that use of a product candidate is:
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a covered benefit under its health plan;
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safe, effective, and medically necessary;
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appropriate for the specific patient;
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neither experimental nor investigational.
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Obtaining coverage and reimbursement approval
for a product candidate from a government or other third-party payer is a time-consuming and costly process that could require
us to provide supporting scientific, clinical, and cost effectiveness data for the use of our product candidates to the payer.
We may not be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement. We cannot be sure
that coverage or adequate reimbursement will be available for any of our product candidates. Also, we cannot be sure that reimbursement
amounts will not reduce the demand for, or the price of, our product candidates. If reimbursement is not available or is available
only to limited levels or with restrictions, we may not be able to commercialize certain of our product candidates profitably,
or at all, even if approved.
In the U.S. and in certain foreign jurisdictions,
there have been a number of legislative and regulatory changes to the health care system that could affect our ability to sell
our product candidates profitably. In particular, the Medicare Modernization Act of 2003 revised the payment methods for many product
candidates under Medicare. This has resulted in lower rates of reimbursement. There have been numerous other federal and state
initiatives designed to reduce payment for pharmaceuticals.
As a result of legislative proposals and
the trend toward managed health care in the U.S., third-party payers are increasingly attempting to contain health care costs by
limiting both coverage and the level of reimbursement of new drugs. They may also refuse to provide coverage of approved product
candidates for medical indications other than those for which FDA has granted market approvals. As a result, significant uncertainty
exists as to whether and how much third-party payers will reimburse patients for their use of newly approved drugs, which in turn
will put pressure on the pricing of drugs. We could be subject to pricing pressures in connection with the sale of our product
candidates due to the trend toward managed health care, the increasing influence of health maintenance organizations, and additional
legislative proposals as well as country, regional, or local healthcare budget limitations.
Similar concerns about the costs of treatment
have been raised in Europe and the United Kingdom, where the cost effectiveness of CAR-T
therapies have been an impediment to utilization of Kymriah and Yescarta. If CAR-T companies are not able to convince regulators
and payers in national healthcare systems that the benefits of a CAR-T therapy outweigh its costs, the market for lenzilumab might
not develop.
If we are unable to establish sales
and marketing capabilities or fail to enter into agreements with third parties to market and sell any product candidates we may
successfully develop, we may not be able to effectively market and sell any such product candidates.
We do not currently have the sales and marketing
infrastructure in place that would be necessary to sell and market products. As our drug candidates progress, while we may build
the infrastructure that would be needed to successfully market and sell any successful drug candidate, we currently anticipate
seeking strategic alliances and partnerships with third parties, particularly for any drug candidates that we determine would require
larger sales efforts. The establishment of a sales and marketing operation can be expensive and time consuming and could delay
any product candidate launch.
Governments may impose price controls,
which may adversely affect our future profitability.
We intend to seek approval to market our
future product candidates in the U.S. and potentially in foreign jurisdictions. If we obtain approval in one or more foreign jurisdictions,
we will be subject to rules and regulations in those jurisdictions relating to our product candidates. In some foreign countries,
particularly in the European Union, the pricing of prescription pharmaceuticals and biologics is subject to governmental control.
In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing
approval for a product candidate. If reimbursement of our future products is unavailable or limited in scope or amount, or if pricing
is set at unsatisfactory levels, we may be unable to achieve or sustain profitability.
We face potential product liability
exposure and, if successful claims are brought against us, we may incur substantial liability for a product candidate and may have
to limit its commercialization.
The use of our product candidates in clinical
trials and the sale of any product candidates for which we may obtain marketing approval expose us to the risk of product liability
claims. Product liability claims may be brought against us or any future development partners by participants enrolled in our clinical
trials, patients, health care providers, or others using, administering, or selling our product candidates. If we cannot successfully
defend ourselves against any such claims, or have insufficient insurance protection, we would incur substantial liabilities. Regardless
of merit or eventual outcome, product liability claims may result in:
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withdrawal of clinical trial participants;
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termination of clinical trial sites or entire trial programs;
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costs of related litigation;
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substantial monetary awards to trial participants or other claimants;
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decreased demand for our product candidates and loss of revenue;
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impairment of our business reputation;
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diversion of management and scientific resources from our business operations; and
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the inability to commercialize our product candidates.
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We have obtained limited product liability
insurance coverage for our clinical trials domestically and in selected foreign countries where we are conducting clinical trials.
As such, our insurance coverage may not reimburse us or may not be sufficient to reimburse us for any expenses or losses we may
suffer. Moreover, insurance coverage is becoming increasingly expensive and in the future we may not be able to maintain insurance
coverage at a reasonable cost or in sufficient amounts to protect us against losses due to product liability. We intend to expand
our insurance coverage for product candidates to include the sale of commercial products if we obtain marketing approval for our
product candidates in development; however, we may be unable to obtain commercially reasonable product liability insurance for
any product candidates approved for marketing. Large judgments have been awarded in class action lawsuits based on drugs that had
unanticipated side-effects. A successful product liability claim or series of claims brought against us, particularly if judgments
exceed our insurance coverage, could decrease our working capital and adversely affect our business.
Our insurance policies are expensive
and protect us only from some business risks, which leaves us exposed to significant uninsured liabilities.
We do not carry insurance for all categories
of risk that our business may encounter. Some of the policies we currently maintain include general liability, employment practices
liability, property, auto, workers’ compensation, products liability, and directors’ and officers’ insurance.
We do not know, however, if we will be able to maintain existing insurance with adequate levels of coverage. Any significant, uninsured
liability may require us to pay substantial amounts, which would adversely affect our working capital and results of operations.
Our employees and consultants may
engage in misconduct or other improper activities, including noncompliance with regulatory standards, which could have a material
adverse effect on our business.
We are exposed to the risk of employee fraud
or other misconduct. Misconduct by employees or consultants could include intentional failures to comply with FDA regulations
or similar regulations of comparable foreign regulatory authorities, failure to provide accurate information to FDA or comparable
foreign regulatory authorities, failure to comply with manufacturing standards, failure to comply with federal and state healthcare
fraud and abuse laws and regulations and similar laws and regulations established and enforced by comparable foreign regulatory
authorities, failure to report financial information or data accurately, violations of anti-bribery laws, or failure to disclose
unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry
are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These
laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission,
customer incentive programs and other business arrangements. Employee or consultant misconduct could also involve the
improper use of confidential information obtained in the course of our business, which could result in civil or criminal legal
actions, regulatory sanctions, or serious harm to our reputation. We have adopted a Code of Business Conduct and Ethics
and other corporate policies, but it is not always possible to identify and deter employee misconduct, and the precautions we take
to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us
from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If
any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions
could have a significant impact on our business and results of operations, including the imposition of significant fines or other
sanctions.
We may encounter difficulties in managing
our growth and expanding our operations successfully.
As we seek to advance our product candidates
through clinical trials we will need to expand our development, regulatory, manufacturing, marketing, and sales capabilities, and
contract with third parties to provide these capabilities for us. As our operations expand we expect that we will need to manage
additional relationships with various development partners, suppliers, and other third parties. Future growth will impose significant
added responsibilities on members of management. Our future financial performance and our ability to commercialize our product
candidates and to compete effectively will depend in part on our ability to manage any future growth effectively. To that end,
we must be able to manage our development efforts and clinical trials effectively. We may not be able to accomplish these tasks
and our failure to accomplish any of them could prevent us from successfully growing our company.
We and any future development partners,
third-party manufacturers and suppliers use hazardous materials, and any claims relating to improper handling, storage, or disposal
of these materials could be time consuming or costly.
We and any future development partners,
third-party manufacturers and suppliers may use hazardous materials, including chemicals and biological agents and compounds that
could be dangerous to human health and safety or the environment. Our operations and the operations of our development partner,
third-party manufacturers and suppliers also produce hazardous waste products. Federal, state, and local laws and regulations govern
the use, generation, manufacture, storage, handling, and disposal of these materials and wastes. Compliance with applicable environmental
laws and regulations may be expensive and current or future environmental laws and regulations may impair our product development
efforts. In addition, we cannot entirely eliminate the risk of accidental injury or contamination from these materials or wastes.
We do not carry specific biological or hazardous waste insurance coverage and our property, casualty, and general liability insurance
policies specifically exclude coverage for damages and fines arising from biological or hazardous waste exposure or contamination.
Accordingly, in the event of contamination or injury we could be held liable for damages or be penalized with fines in an amount
exceeding our resources, and our clinical trials or regulatory approvals could be suspended.
Our internal computer systems, or
those of our current or future development partners, third-party clinical research organizations or other contractors or consultants,
may fail or suffer security breaches, which could result in a material disruption of our product development programs.
Despite the implementation of security measures,
our internal computer systems and those of our development partners, third-party clinical research organizations 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 programs. For example,
the loss of clinical trial data for any of our product candidates could result in delays in our regulatory approval efforts and
significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach results
in a loss of or damage to our data or applications or other data or applications relating to our technology or product candidates,
or inappropriate disclosure of confidential or proprietary information, we could incur liabilities and the further development
of our product candidates could be delayed.
Healthcare reform measures, when implemented,
could hinder or prevent our commercial success.
There have been, and likely will continue
to be, legislative and regulatory proposals at the federal and state levels directed at broadening the availability of health care
and containing or lowering the cost of health care. We cannot predict the initiatives that may be adopted in the future. The continuing
efforts of the government, insurance companies, managed care organizations, and other payers of healthcare services to contain
or reduce costs of health care may adversely affect:
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the demand for any drug products for which we may obtain regulatory approval;
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our ability to set a price that we believe is fair for our product candidates;
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our ability to generate revenue and achieve or maintain profitability;
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the level of taxes that we are required to pay; and
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the availability of capital.
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We and any of our current or future
development partners will be required to report to regulatory authorities if any of our approved products cause or contribute to
adverse medical events, and any failure to do so would result in sanctions that would materially harm our business.
If we and any future development partners
are successful in commercializing our products, FDA and foreign regulatory authorities would require that we and any future development
partners report certain information about adverse medical events if those products may have caused or contributed to those adverse
events. The timing of our obligation to report would be triggered by the date we become aware of the adverse event as well as the
nature of the event. We and any future development partners may fail to report adverse events we become aware of within the prescribed
timeframe. We and any future development partners may also fail to appreciate that we have become aware of a reportable adverse
event, especially if it is not reported to us as an adverse event or if it is an adverse event that is unexpected or removed in
time from the use of our products. If we and any future development partners fail to comply with our reporting obligations, FDA
or a foreign regulatory authority could take action including criminal prosecution, the imposition of civil monetary penalties,
seizure of our products, or delay in approval or clearance of future products.
Our product candidates for which we
intend to seek approval as biologic products may face competition sooner than anticipated.
With the enactment of the Biologics Price
Competition and Innovation Act of 2009, or the BPCIA, as part of the Affordable Care Act, an abbreviated pathway for the approval
of biosimilar and interchangeable biological products was created. The abbreviated regulatory pathway establishes legal authority
for FDA to review and approve biosimilar biologics, including the possible designation of a biosimilar as ‘‘interchangeable’’
based on its similarity to an existing brand product. Under the BPCIA, an application for a biosimilar product cannot be approved
by FDA until 12 years after the original branded product was approved under a BLA. The law is complex and is still being interpreted
and implemented by FDA. As a result, its ultimate impact, implementation, and meaning are subject to uncertainty. While it is uncertain
when such processes intended to implement BPCIA may be fully adopted by FDA, any such processes could have a material adverse effect
on the future commercial prospects for our biological products.
We believe that any of our product candidates
approved as biological products under a BLA should qualify for the 12-year period of exclusivity. However, there is a risk that
FDA will not consider our product candidates to be reference products for competing products, potentially creating the opportunity
for biosimilar competition sooner than anticipated. Moreover, the extent to which a biosimilar, once approved, will be substituted
for any one of our reference products in a way that is similar to traditional generic substitution for non-biological products
is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing. Finally, there is
a risk that the 12-year exclusivity period could be reduced which could negatively affect our products.
In addition, foreign regulatory authorities
may also provide for exclusivity periods for approved biological products. For example, biological products in Europe may be eligible
for a 10-year period of exclusivity. However, biosimilar products have been approved under a sub-pathway of the centralized procedure
since 2006. The pathway allows sponsors of a biosimilar product to seek and obtain regulatory approval based in part on the clinical
trial data of an originator product to which the biosimilar product has been demonstrated to be ‘‘similar.’’
In many cases, this allows biosimilar products to be brought to market without conducting the full suite of clinical trials typically
required of originators. It is unclear whether we and our development partner would face competition to our products in European
markets sooner than anticipated.
We may in the future be subject to
various U.S. federal and state laws pertaining to health care fraud and abuse, including anti-kickback, self-referral, false claims
and fraud laws, and any violations by us of such laws could result in fines or other penalties.
If one or more of our product candidates
is approved, we will likely be subject to the various U.S. federal and state laws intended to prevent health care fraud and abuse.
The federal anti-kickback statute prohibits the offer, receipt, or payment of remuneration in exchange for or to induce the referral
of patients or the use of products or services that would be paid for in whole or part by Medicare, Medicaid or other federal health
care programs. Remuneration has been broadly defined to include anything of value, including cash, improper discounts, and free
or reduced price items and services. Many states have similar laws that apply to their state health care programs as well as private
payers. Violations of the anti-kickback laws can result in exclusion from federal health care programs and substantial civil and
criminal penalties.
The False Claims Act imposes liability on
persons who, among other things, present or cause to be presented false or fraudulent claims for payment by a federal health care
program. The False Claims Act has been used to prosecute persons submitting claims for payment that are inaccurate or fraudulent,
that are for services not provided as claimed, or for services that are not medically necessary. The False Claims Act includes
a whistleblower provision that allows individuals to bring actions on behalf of the federal government and share a portion of the
recovery of successful claims. If our marketing or other arrangements were determined to violate the False Claims Act or anti-kickback
or related laws, then our revenue could be adversely affected, which would likely harm our business, financial condition, and results
of operations.
State and federal authorities have aggressively
targeted medical technology companies for alleged violations of these anti-fraud statutes, based on improper research or consulting
contracts with doctors, certain marketing arrangements that rely on volume-based pricing, off-label marketing schemes, and other
improper promotional practices. Companies targeted in such prosecutions have paid substantial fines in the hundreds of millions
of dollars or more, have been forced to implement extensive corrective action plans or corporate integrity agreements, and have
often become subject to consent decrees severely restricting the manner in which they conduct their business. If we become the
target of such an investigation or prosecution based on our contractual relationships with providers or institutions, or our marketing
and promotional practices, we could face similar sanctions, which would materially harm our business.
Also, the Foreign Corrupt Practices Act
and similar worldwide anti-bribery laws generally prohibit companies and their intermediaries from making improper payments to
non-U.S. officials for the purpose of obtaining or retaining business. We cannot assure you that our internal control policies
and procedures will protect us from reckless or negligent acts committed by our employees, future distributors, partners, collaborators
or agents. Violations of these laws, or allegations of such violations, could result in fines, penalties, or prosecution and have
a negative impact on our business, results of operations and reputation.
Legislative or regulatory healthcare
reforms in the U.S. may make it more difficult and costly for us to obtain regulatory approval of our product candidates and to
produce, market, and distribute our products after approval is obtained.
From time to time, legislation is drafted
and introduced in Congress that could significantly change the statutory provisions governing the regulatory approval, manufacture,
and marketing of regulated products or the reimbursement thereof. In addition, FDA regulations and guidance are often revised or
reinterpreted by FDA in ways that may significantly affect our business and our products. Any new regulations or revisions or reinterpretations
of existing regulations may impose additional costs or lengthen review times of our current product candidates or any future product
candidates. We cannot determine what effect changes in regulations, statutes, legal interpretation or policies, when and if promulgated,
enacted or adopted may have on our business in the future. Such changes could, among other things, require:
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changes to manufacturing methods;
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additional studies, including clinical studies;
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recall, replacement, or discontinuance of one or more of our products; and
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additional record-keeping.
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Each of these would likely entail substantial
time and cost and could materially harm our business and our financial results. In addition, delays in receipt of or failure to
receive regulatory approvals for any future products would harm our business, financial condition, and results of operations.
Even if we are able to obtain regulatory
approval for our product candidates, we will continue to be subject to ongoing and extensive regulatory requirements, and our failure
to comply with these requirements could substantially harm our business.
If we receive regulatory approval for our
product candidates, we will be subject to ongoing FDA obligations and continued regulatory oversight and review, such as continued
safety reporting requirements, and we may also be subject to additional FDA post-marketing obligations. If we are not able to maintain
regulatory compliance, we may not be permitted to market our product candidates and/or may be subject to product recalls or seizures.
If the FDA approves any of our product candidates,
the labeling, manufacturing, packaging, storage, distribution, export, adverse event reporting, advertising, promotion and record-keeping
for our products will be subject to extensive regulatory requirements. Violations of these regulatory requirements or the subsequent
discovery of previously unknown problems with the products, including adverse events of unanticipated severity or frequency, may
result in:
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the issuance of warning or untitled letters;
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requirements to conduct post-marking clinical trials;
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restrictions on the marketing and distribution of the product, including potential withdrawal of the product from the market;
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suspension of ongoing clinical trials;
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the issuance of product recalls, import and export restrictions, seizures, and detentions; and
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the issuance of injunctions, or imposition of other civil and/or criminal penalties.
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Our ability to utilize our net operating
loss carryforwards and certain other tax attributes may be limited.
We have incurred substantial losses during
our history and do not expect to become profitable in the foreseeable future and may never achieve profitability. To the extent
that we continue to generate taxable losses, unused losses will carry forward to offset future taxable income, if any, until such
unused losses expire. We may be unable to use these losses to offset income before such unused losses expire. Under Section 382
of the Internal Revenue Code, if a corporation undergoes an ‘‘ownership change’’ (generally defined as
a greater than 50% change (by value) in its equity ownership over a three-year period), the corporation’s ability to use
its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income may be limited.
We have recently and in the past experienced ownership changes that have resulted in limitations on the use of a portion of our
net operating loss carryforwards. On February 27, 2018, upon the closing of the Restructuring Transactions, we experienced an ownership
change that may result in limitations on the use of a portion of our net operating losses. If we experience further ownership changes
our ability to utilize our net operating loss carryforwards could be further limited.
We rely completely on third parties,
most of which are sole source suppliers, to supply drug substance and manufacture drug product for our clinical trials and preclinical
studies and intend to rely on other third parties to produce commercial supplies of product candidates, and our dependence on third
parties could adversely impact our business.
We are completely dependent on third-party
suppliers, most of which are sole source suppliers of the drug substance and drug product for our product candidates. We regularly
evaluate potential alternate sources of supply but there can be no assurance that any such suppliers would be available, acceptable
or successful. The costs of manufacturing our drug candidates are high, and we will require additional capital to ensure that we
can maintain an adequate supply to conduct our contemplated development programs.
If our third-party suppliers do not supply
sufficient quantities for product candidates to us on a timely basis and in accordance with applicable specifications and other
regulatory requirements, there could be a significant interruption of our supplies, which would adversely affect clinical development
of the product candidate, including affecting our ability to enroll in and timely progress clinical trials. Furthermore, if any
of our contract manufacturers cannot successfully manufacture material that conforms to our specifications and with regulatory
requirements, we will not be able to secure and/or maintain regulatory approval, if any, for our product candidates.
We will also rely on our contract manufacturers
to purchase from third-party suppliers the materials necessary to produce our product candidates for our anticipated clinical trials.
There are a small number of suppliers for certain capital equipment and raw materials used to manufacture our product candidates.
We do not have any control over the process or timing of the acquisition of these raw materials by our contract manufacturers.
Moreover, we currently do not have agreements in place for the commercial production of these raw materials. Any significant delay
in the supply of a product candidate or the raw material components thereof for an ongoing clinical trial could considerably delay
completion of that clinical trial, product candidate testing, and potential regulatory approval of that product candidate.
We do not expect to have the resources or
capacity to commercially manufacture any of our proposed product candidates if approved, and will likely continue to be dependent
on third-party manufacturers. Our dependence on third parties to manufacture and supply us with clinical trial materials and any
approved product candidates may adversely affect our ability to develop and commercialize our product candidates on a timely basis.
We may not be successful in establishing
and maintaining development partnerships and licensing agreements, which could adversely affect our ability to develop and commercialize
product candidates.
Part of our strategy is to enter into development
partnerships and licensing agreements. We face significant competition in seeking appropriate partners and the negotiation process
is time consuming and complex. Even if we are successful in securing a development partnership, we may not be able to continue
it. Moreover, we may not be successful in our efforts to establish a development partnership or other alternative arrangements
for any of our other existing or future product candidates and programs because, among other reasons, our research and development
pipeline may be insufficient, our product candidates and programs may be deemed to be at too early a stage of development for collaborative
effort and/or third parties may not view our product candidates and programs as having the requisite potential to demonstrate safety
and efficacy. Even if we are successful in our efforts to establish new development partnerships, the terms that we agree upon
may not be favorable to us and we may not be able to maintain such development partnerships if, for example, development or approval
of a product candidate is delayed or sales of an approved product candidate are disappointing. Any delay in entering into new development
partnership agreements related to our product candidates could delay the development and commercialization of our product candidates
and reduce their competitiveness if they reach the market.
Moreover, if we fail to establish and maintain
additional development partnerships related to our product candidates:
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the development of our current or future product candidates may be terminated or delayed;
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our cash expenditures related to development of certain of our current or future product candidates would increase significantly
and we may need to seek additional financing;
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we may be required to hire additional employees or otherwise develop expertise, such as sales and marketing expertise, for
which we have not budgeted; and
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we will bear all of the risk related to the development of any such product candidates.
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Our or any new partner’s failure to
develop, manufacture or effectively commercialize our product would result in a material adverse effect on our business and results
of operations and would likely cause our stock price to decline.
Risks Related to Intellectual Property
If we fail to adequately protect or
enforce our intellectual property rights or secure rights to patents of others, the value of our intellectual property rights would
diminish, and our business and competitive position would suffer.
Our success, competitive position and future
revenues will depend in part on our ability and the abilities of our licensors and licensees to obtain and maintain patent protection
for our products, methods, processes and other technologies, to preserve our trade secrets, to prevent third parties from infringing
on our proprietary rights and to operate without infringing the proprietary rights of third parties. We have an active patent protection
program that includes filing patent applications on new compounds, formulations, delivery systems and methods of making and using
products and prosecuting these patent applications in the U.S. and abroad. As patents issue, we also file continuation applications
as appropriate. Although we have taken steps to build a strong patent portfolio, we cannot predict:
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the degree and range of protection any patents will afford us against competitors, including whether third parties find ways
to invalidate or otherwise circumvent our licensed patents;
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if and when patents will issue in the U.S. or any other country;
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whether or not others will obtain patents claiming aspects similar to those covered by our licensed patents and patent applications;
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whether we will need to initiate litigation or administrative proceedings to protect our intellectual property rights, which
may be costly whether we win or lose;
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whether any of our patents will be challenged by our competitors alleging invalidity or unenforceability and, if opposed or
litigated, the outcome of any administrative or court action as to patent validity, enforceability or scope;
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whether a competitor will develop a similar compound that is outside the scope of protection afforded by a patent or whether
the patent scope is inherent in the claims modified due to interpretation of claim scope by a court;
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whether there were activities previously undertaken by a licensor that could limit the scope, validity or enforceability of
licensed patents and intellectual property; or
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whether a competitor will assert infringement of its patents or intellectual property, whether or not meritorious, and what
the outcome of any related litigation or challenge may be.
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Our success also depends upon the skills,
knowledge and experience of our scientific and technical personnel, our consultants and advisors as well as our licensors, sublicensees
and contractors. To help protect our proprietary know-how and our inventions for which patents may be unobtainable or difficult
to obtain, we rely on trade secret protection and confidentiality agreements. To this end, we require all employees, consultants
and board members to enter into agreements that prohibit the disclosure of confidential information and, where applicable, require
disclosure and assignment to us of the ideas, developments, discoveries and inventions important to our business. These agreements
may not provide adequate protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized
use or disclosure or the lawful development by others of such information. If any of our trade secrets, know-how or other proprietary
information is disclosed, the value of our trade secrets, know-how and other proprietary rights would be significantly impaired,
and our business and competitive position would suffer.
Due to legal and factual uncertainties
regarding the scope and protection afforded by patents and other proprietary rights, we may not have meaningful protection from
competition.
Our long-term success will substantially
depend upon our ability to protect our proprietary technologies from infringement, misappropriation, discovery and duplication
and avoid infringing the proprietary rights of others. Our patent rights and the patent rights of biopharmaceutical companies in
general, are highly uncertain and include complex legal and factual issues. These uncertainties also mean that any patents that
we own or may obtain in the future could be subject to challenge, and even if not challenged, may not provide us with meaningful
protection from competition. Patents already issued to us or our pending applications may become subject to dispute, and any dispute
could be resolved against us.
If some or all of our or any licensor’s
patents expire or are invalidated or are found to be unenforceable, or if some or all of our patent applications do not result
in issued patents or result in patents with narrow, overbroad, or unenforceable claims, or claims that are not supported in regard
to written description or enablement by the specification, or if we are prevented from asserting that the claims of an issued patent
cover a product of a third party, we may be subject to competition from third parties with products in the same class of products
as our product candidates or products with the same active pharmaceutical ingredients as our product candidates, including in those
jurisdictions in which we have no patent protection.
Our commercial success will depend in part
on obtaining and maintaining patent and trade secret protection for our product candidates, as well as the methods for treating
patients in the product indications using these product candidates. We will be able to protect our product candidates and the methods
for treating patients in the applicable product indications using these product candidates from unauthorized use by third parties
only to the extent that we or our exclusive licensor owns or controls such valid and enforceable patents or trade secrets.
Even if our product candidates and the methods
for treating patients for prescribed indications using these product candidates are covered by valid and enforceable patents and
have claims with sufficient scope, disclosure and support in the specification, the patents will provide protection only for a
limited amount of time. Our and any licensor’s ability to obtain patents can be highly uncertain and involve complex and
in some cases unsettled legal issues and factual questions. Furthermore, different countries have different procedures for obtaining
patents, and patents issued in different countries provide different degrees of protection against the use of a patented invention
by others. Therefore, if the issuance to us or any licensor, in a given country, of a patent covering an invention is not followed
by the issuance, in other countries, of patents covering the same invention, or if any judicial interpretation of the validity,
enforceability, or scope of the claims in, or the utility, written description or enablement in, a patent issued in one country
is not similar to the interpretation given to the corresponding patent issued in another country, our ability to protect our intellectual
property in those countries may be limited. Changes in either patent laws or in interpretations of patent laws in the U.S. and
other countries may materially diminish the value of our intellectual property or narrow the scope of our patent protection.
We may be subject to competition from third
parties with products in the same class of products as our product candidates, or products with the same active pharmaceutical
ingredients as our product candidates in those jurisdictions in which we have no patent protection. Even if patents are issued
to us or any licensor regarding our product or methods of using them, those patents can be challenged by our competitors who can
argue such patents are invalid or unenforceable on a variety of grounds, including lack of utility, lack sufficient written description
or enablement, utility, or that the claims of the issued patents should be limited or narrowly construed. Patents also will not
protect our product candidates if competitors devise ways of making or using these products without legally infringing our patents.
The current U.S. regulatory environment may have the effect of encouraging companies to challenge branded drug patents or to create
non-infringing versions of a patented product in order to facilitate the approval of abbreviated new drug applications (“ANDAs”)
for generic substitutes. These same types of incentives encourage competitors to submit new drug applications (“NDAs”)
that rely on literature and clinical data not prepared for or by the drug sponsor, providing another less burdensome pathway to
approval.
If we infringe the rights of third
parties, we could be prevented from selling products and be forced to defend against litigation and pay damages.
There is a risk that we are infringing the
proprietary rights of third parties because numerous U.S. and foreign issued patents and pending patent applications, which are
owned by third parties, exist in the fields that are the focus of our development and manufacturing efforts. Others might have
been the first to make the inventions covered by each of our or any licensor’s pending patent applications and issued patents
and/or might have been the first to file patent applications for these inventions. In addition, because patent applications take
many months to publish and patent applications can take many years to issue, there may be currently pending applications, unknown
to us or any licensor, which may later result in issued patents that cover the production, manufacture, synthesis, commercialization,
formulation or use of our product candidates. In addition, the production, manufacture, synthesis, commercialization, formulation
or use of our product candidates may infringe existing patents of which we are not aware. Defending ourselves against third-party
claims, including litigation in particular, would be costly and time consuming and would divert management’s attention from
our business, which could lead to delays in our development or commercialization efforts. If third parties are successful in their
claims, we might have to pay substantial damages or take other actions that are adverse to our business.
If our products, methods, processes and
other technologies infringe the proprietary rights of other parties, we could incur substantial costs and may have to:
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obtain licenses, which may not be available on commercially reasonable terms, if at all;
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redesign our products or processes to avoid infringement, which may not be possible or could require substantial funds and
time;
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stop using the subject matter claimed in patents held by others, which could cause us to lose the use of one or more of our
drug candidates;
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pay damages royalties, or other amounts; or
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grant a cross license to our patents to another patent holder.
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We expect that, as our drug candidates move
further into clinical trials and commercialization and our public profile is raised, we will be more likely to be subject to such
claims.
We may fail to comply with any of
our obligations under existing agreements pursuant to which we license or have otherwise acquired rights or technology, which could
result in the loss of rights or technology that are material to our business.
We are a party to technology licenses and
have acquired certain assets and rights that are important to our business and we may enter into additional licenses or acquire
additional assets and rights in the future. We currently hold licenses from Ludwig Institute for Cancer Research (“LICR”),
BioWa, Inc. (“BioWa”), Lonza Sales AG (“Lonza”) Mayo Foundation (“Mayo”) and the University
of Zurich (“UZH”). These licenses impose various commercial, contingent payments, royalty, insurance, indemnification,
and other obligations on us. If we fail to comply with these obligations, the licensor may have the right to terminate the license
or take back rights or assets, in which event we would lose valuable rights under our collaboration agreements, potential claims
and our ability to develop product candidates.
We may be subject to claims that our
consultants or independent contractors have wrongfully used or disclosed alleged trade secrets of their other clients or former
employers to us.
As is common in the biotechnology and pharmaceutical
industry, we engage the services of consultants to assist us in the development of our product candidates. Many of these consultants
were previously employed at, or may have previously or may be currently providing consulting services to, other biotechnology or
pharmaceutical companies including our competitors or potential competitors. We may become subject to claims that our company or
a consultant inadvertently or otherwise used or disclosed trade secrets or other information proprietary to their former employers
or their former or current clients. Litigation may be necessary to defend against these claims. Even if we are successful in defending
against these claims, litigation could result in substantial costs and be a distraction to our management team.
We may not be able to protect our
intellectual property rights throughout the world.
Filing, prosecuting and defending patents
on product candidates in all countries throughout the world would be prohibitively expensive, and we intend to seek patent protection
only in selected countries. Our intellectual property rights in some countries outside the U.S. can be less extensive than those
in the U.S. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal
and state laws in the U.S. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries
outside the U.S., or from selling or importing products made using our inventions in and into the U.S. or other jurisdictions.
Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products
and further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as
strong as that in the U.S.. These products may compete with our product candidates and our patents or other intellectual property
rights may not be effective or sufficient to prevent them from competing.
Many companies have encountered significant
problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries,
particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection,
particularly those relating to biopharmaceuticals, which could make it difficult for us to stop the infringement of our patents
or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights
in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business,
could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing
and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages
or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property
rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we
develop or license.
Risks Related to Our Common Stock
The sale or issuance of our common
stock to Lincoln Park may cause dilution and the sale of the shares of common stock acquired by LPC, or the perception that such
sales may occur, could cause the price of our common stock to fall.
On November 8, 2019, we entered into the
Purchase Agreement with Lincoln Park Capital Fund, LLC (“LPC”), pursuant to which LPC has committed to purchase up
to $20,000,000 of our common stock from time to time over a 36-month period. Upon the execution of the Purchase Agreement, we issued
706,592 Commitment Shares to LPC as consideration for its commitment to purchase shares of our common stock under the Purchase
Agreement. We generally have the right to control the timing and amount of any future sales of our shares to LPC. Sales of our
common stock, if any, to LPC will depend upon market conditions and other factors to be determined by us, and the price we receive
from any sales will be based on market prices near the time of sale. Therefore, sales to LPC by us could result in substantial
dilution to the interests of other holders of our common stock. We may ultimately decide to sell to LPC all, some or none of the
additional shares of our common stock that may be available for us to sell pursuant to the Purchase Agreement. LPC may resell all,
some or none of these shares it has acquired form us at any time or from time to time in its discretion. Any such sales by Lincoln
Park could cause the market price of our common stock to decline. Additionally, the sale of a substantial number of shares of our
common stock to LPC, or the anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities
in the future at a time and at a price that we might otherwise wish to effect sales.
We may not have access to the full
amount available under the Purchase Agreement with LPC.
Under our Purchase Agreement with LPC, we
may, at our discretion from time to time over a 36-month period, on any single business day on which the closing price of our common
stock is above $0.15 per share (subject to adjustment for any reorganization, recapitalization, non-cash dividend, stock split,
or other similar transaction as provided in the Purchase Agreement), direct LPC to purchase shares of our common stock in amounts
up to 100,000 shares, which amounts may be increased to up to 250,000 shares depending on the market price of our common stock
at the time of sale and subject to a maximum commitment by LPC of $750,000 per single regular purchase. Although the Purchase Agreement
provides that we may sell up to $20,000,000 of our common stock to LPC, only 14,500,000 shares of our common stock were initially
registered for resale, which represents: (i) 706,592 Commitment Shares that were issued
to LPC as consideration for making the commitment under the Purchase Agreement, and (ii) an additional 13,793,408 shares which
may be issued to LPC in the future under the Purchase Agreement, if and when we sell shares to LPC under the Purchase Agreement.
Depending on the market prices of our common
stock at the time we elect to issue and sell shares to LPC under the Purchase Agreement, we may need to register for resale additional
shares of our common stock in order to receive aggregate gross proceeds equal to the $20,000,000 total commitment available to
us under the Purchase Agreement.
The extent we rely on LPC as a source of
funding will depend on a number of factors including, the prevailing market price of our common stock and the extent to which we
are able to secure working capital from other sources. If obtaining sufficient funding from LPC were to prove unavailable or prohibitively
dilutive, we will need to secure another source of funding in order to satisfy our working capital needs. If we elect to issue
and sell more than the 14,500,000 shares initially registered under the Registration Statement on Form S-1 to LPC, which we have
the right, but not the obligation, to do, we must first register for resale under the Securities Act any such additional shares,
which could cause additional substantial dilution to our stockholders. Even if we sell all $20,000,000 under the Purchase Agreement
to LPC, we may still need additional capital to fully implement our business, operating and development plans. Should the financing
we require to sustain our working capital needs be unavailable or prohibitively expensive when we require it, the consequences
could be a material adverse effect on our business, operating results, financial condition and prospects.
The Black Horse
Entities currently own more than a majority of our outstanding common stock and control the outcome of all matters subject to stockholder
approval.
As of March 12,
2020, the Black Horse Entities collectively hold approximately 59.5% of our outstanding common stock. Dr. Chappell, a member of
our board of directors from June 30, 2016 until November 10, 2017 and our current ex-officio chief scientific officer, controls
the Black Horse Entities. As a result, Dr. Chappell has the ability to control the election of the members of our board of directors
and the outcome of all matters requiring stockholder approval, including the ability to cause or prevent a change of control of
our company. The control possessed by Dr. Chappell could prevent or discourage unsolicited acquisition proposals or offers for
our common stock that may be in the best interest of our other stockholders.
The interests of the Black Horse Entities
may not in all cases be aligned with the interests of our other stockholders. For example, a sale of a substantial number of shares
of our common stock in the future by the Black Horse Entities could cause our stock price to decline. Additionally, the Black Horse
Entities are in the business of making investments in companies and may from time to time acquire and hold interests in businesses
that compete directly or indirectly with us. Accordingly, the Black Horse Entities may also pursue acquisition opportunities that
may be complementary to our business, and as a result, those acquisition opportunities may not be available to us. In addition,
Black Horse Entities may have an interest in pursuing acquisitions, divestitures and other transactions that, in their judgment,
could enhance their equity investment, even though such transactions might involve risks to holders of our common stock.
The concentration of our common stock
owned by insiders may limit the ability of our other stockholders to influence corporate matters and may contribute to volatility
in our stock price.
We have a relatively small public float
due to the ownership percentage of our executive officers and directors, and greater than 5% stockholders. Our directors, executive
officers, and the Black Horse Entities and the other holders of more than 5% of our common stock together with their affiliates
beneficially own approximately 90.3% of our common stock as of March 12, 2020. Some
of these persons or entities may have interests that are different from our other stockholders. This significant concentration
of ownership may adversely affect the trading price of our common stock because investors often perceive disadvantages in owning
stock in companies with controlling stockholders.
As a result of our small public float, our
common stock may be less liquid and have greater stock price volatility than the common stock of companies with broader public
ownership. In addition, the trading of a relatively small volume of shares of our common stock may result in significant volatility
in our stock price. If and to the extent ownership of our common stock becomes more concentrated, whether due to increased ownership
by our directors and executive officers or other principal stockholders, or other factors, our public float would further decrease,
which in turn would likely result in increased stock price volatility.
Additionally, because a large amount of
our stock is closely held, we may experience low trading volume or large fluctuations in share price and volume due to large sales
by our principal stockholders. If our existing stockholders, particularly our directors, executive officers and the holders of
more than 5% of our common stock, or their affiliates or associates, sell substantial amounts of our common stock in the public
market, or are perceived by the public market as intending to sell substantial amounts of our common stock, the trading price of
our common stock could decline significantly.
There is a limited trading market
for our securities and we do not currently have an active public market for our securities. An active trading market for our common
stock may not develop or be sustained and the market price of our securities is subject to volatility.
While our common stock is currently quoted
on the OTCQB Venture Market, trading in our common stock is limited. We cannot predict whether an active market for our common
stock will ever develop in the future. In the absence of an active trading market:
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investors may have difficulty buying and selling shares of our common stock;
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market visibility for shares of our common stock may be limited;
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a lack of visibility for shares of our common stock may have a depressive effect on the market price for shares of our common
stock; and
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significant sales of our common stock, or the expectation of these sales, could materially and adversely affect the market
price of our common stock.
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An inactive market may also impair our ability
to raise capital to continue as a going concern and to fund operations by selling shares and may impair our ability to acquire
additional intellectual property assets by using our shares as consideration.
No assurance can be given that an active
market will develop for the common stock or as to the liquidity of the trading market for the common stock. The common stock may
be traded only infrequently in transactions arranged through brokers or otherwise, and reliable market quotations may not be available.
Raising additional funds by issuing
securities or through licensing or lending arrangements may cause dilution to our existing stockholders, restrict our operations
or require us to relinquish proprietary rights.
To the extent that we raise additional capital
by issuing equity securities, the share ownership of existing stockholders will be diluted. To the extent that additional capital
is raised through the sale of equity or convertible debt securities, the issuance could result in further dilution to our stockholders
by causing a reduction in their proportionate ownership and voting power.
Any future debt financing may involve covenants
that restrict our operations, including, among other restrictions, limitations on our ability to incur liens or additional debt,
pay dividends, redeem our stock, make certain investments, and engage in certain merger, consolidation, or asset sale transactions.
In addition, if we raise additional funds through licensing arrangements, it may be necessary to grant potentially valuable rights
to our product candidates or grant licenses on terms that are not favorable to us.
We have identified
material weaknesses in our internal control over financial reporting and may be unable to maintain effective control over financial
reporting.
In the course of the preparation and external
audit of our Consolidated Financial Statements for the fiscal year ended December 31, 2019, we and our independent registered public
accounting firm identified a “material weakness” in our internal control over financial reporting related to our limited
number of accounting and financial reporting personnel. A material weakness in internal control over financial reporting is a deficiency,
or combination of deficiencies, in internal control over financial reporting that results in more than a reasonable possibility
that a material misstatement of annual or interim Consolidated Financial Statements will not be prevented or detected on a timely
basis. We identified an insufficient degree of segregation of duties amongst our accounting and financial reporting personnel.
We intend to work to remediate the material
weaknesses identified above, which could include the addition of accounting and financial reporting personnel and/or the engagement
of accounting and personnel consultants on a limited-time basis until we add a sufficient number of personnel. However, our current
financial position could make it difficult for us to add the necessary resources.
Any material weaknesses in our internal
control over financing reporting in the future could adversely affect investor confidence, impair the value of our common stock
and increase our cost of raising capital.
If we are unable to remediate our material
weakness over financial controls or we identify other material weaknesses or significant deficiencies in the future, our operating
results might be harmed, we may fail to meet our reporting obligations or fail to prevent or detect material misstatements in our
financial statements. Any such failure could, in turn, affect the future ability of our management to certify that internal control
over our financial reporting is effective. Inferior internal control over financial reporting could also subject us to the scrutiny
of the SEC and other regulatory bodies which could cause investors to lose confidence in our reported financial information and
could subject us to civil or criminal penalties or stockholder litigation, which could have an adverse effect on our results of
operations and the market price of our common stock.
In addition, if we or our independent registered
public accounting firm identify deficiencies in our internal control over financial reporting, the disclosure of that fact, even
if quickly remedied, could reduce the market’s confidence in our financial statements and harm our share price. Furthermore,
deficiencies could result in future non-compliance with Section 404 of the Sarbanes-Oxley Act of 2002. Such non-compliance could
subject us to a variety of administrative sanctions, including review by the SEC or other regulatory authorities.
Our stock price is volatile and purchasers
of our common stock could incur substantial losses.
The market price of our common stock may
fluctuate significantly in response to a number of factors. These factors include those discussed in these “Risk Factors”
and others such as:
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delay or failure in initiating or completing preclinical studies or clinical trials, or unsatisfactory results of these trials
and the resulting impact on ongoing product development;
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the success, progress, timing and costs of our efforts to evaluate or consummate various strategic alternatives if in the best
interests of our stockholders;
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our ability to successfully re-list and maintain the listing of our common stock on a national securities exchange;
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announcements regarding equity or debt financing transactions;
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sales or potential sales of substantial amounts of our common stock or securities convertible into our common stock;
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announcements about us or about our competitors including clinical trial results, regulatory approvals, or new product candidate
introductions;
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developments concerning our development partner, licensors or product candidate manufacturers;
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litigation and other developments relating to our patents or other proprietary rights or those of our competitors;
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conditions in the pharmaceutical or biotechnology industries and the economy as a whole;
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governmental regulation and legislation;
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recruitment or departure of members of our board of directors, management team or other key personnel;
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changes in our operating results;
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any financial projections we may provide to the public, any changes in these projections, our failure to meet these projections,
or changes in recommendations by any securities analysts that elect to follow our common stock;
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change in securities analysts’ estimates of our performance, or our failure to meet analysts’ expectations; and
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price and volume fluctuations in the overall stock market or resulting from inconsistent trading volume levels of our shares.
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In recent years, the stock market in general,
and the market for pharmaceutical and biotechnological companies in particular, has experienced extreme price and volume fluctuations
that have often been unrelated or disproportionate to changes in the operating performance of the companies whose stock is experiencing
those price and volume fluctuations. Broad market and industry factors may seriously affect the market price of our common stock,
regardless of our actual operating performance.
Our common stock may be considered
to be a “penny stock” and, as such, any market for our common stock may be further limited by SEC rules applicable
to penny stocks. Some brokers may be unwilling to trade our securities, and you may have difficulty reselling your shares, which
may cause the value of your investment to decline.
To the extent the price of our common stock
continues to trade at prices below $5.00 per share, our common stock may be subject to the “penny stock” rules promulgated
by the SEC. Those rules impose certain sales practice requirements on brokers who sell penny stock to persons other than established
customers and accredited investors. For transactions covered by the penny stock rules, the broker must make a special suitability
determination for the purchaser and receive the purchaser’s written consent to the transaction prior to the sale. Furthermore,
the penny stock rules generally require, among other things, that brokers engaged in secondary trading of penny stocks provide
customers with written disclosure documents, monthly statements of the market value of penny stocks, disclosure of the bid and
asked prices and disclosure of the compensation to the brokerage firm and disclosure of the sales person working for the brokerage
firm. These rules and regulations may adversely affect the ability of brokers to sell our common stock and limit the liquidity
of our common stock, and because of the imposition of these additional sales practices, it is possible that brokers will not want
to make a market in our shares. This could prevent a holder of our shares from reselling those shares and may cause the value of
such investment to decline.
In addition, under applicable SEC rules
and interpretations, issuers of penny stocks are subject to disclosure requirements that can increase the cost and complexity of
registering shares for sale in a public offering, including a public offering proposed to be made to facilitate sales by existing
stockholders. These penny stock disclosure requirements may pose challenges or impediments to achieving our goals of increasing
our public float and the liquidity of the trading market for our shares.
If securities analysts do not publish
research or publish unfavorable research about our business, our stock price and trading volume could decline.
The trading market for a company’s
common stock often is based in part on the research and reports that securities and industry analysts publish about the company.
We are not currently aware of any well-known analysts that are covering our common stock, and without analyst coverage it could
be hard to generate interest in investments in our common stock. Furthermore, if analyst coverage does develop, and an analyst
downgrades our stock or publishes unfavorable research about our business, or if our clinical trials or operating results fail
to meet the analysts’ expectations, our stock price would likely decline.
We have never paid and do not intend
to pay cash dividends and, consequently, the ability to achieve a return on any investment in our common stock will depend on appreciation
in the price of our common stock.
We have never paid cash dividends on any
of our capital stock, and we currently intend to retain future earnings, if any, to fund the development and growth of our business.
Therefore, a holder of our stock is not likely to receive any dividends on our common stock for the foreseeable future. Since we
do not intend to pay dividends, the ability to receive a return on an investment in our common stock will depend on any future
appreciation in the market value of our common stock. There is no guarantee that our common stock will appreciate or even maintain
the price at which it was purchased.
Anti-takeover provisions in our charter
documents and Delaware law, could discourage, delay, or prevent a change in control of our company and may affect the trading price
of our common stock.
We are a Delaware corporation and the anti-takeover
provisions of the Delaware General Corporation Law may discourage, delay, or prevent a change in control by prohibiting us from
engaging in a business combination with an interested stockholder for a period of three years after the person becomes an interested
stockholder, even if a change in control would be beneficial to our existing stockholders.
Our Amended and Restated Certificate of
Incorporation, as amended (the “Charter”), and our Second Amended and Restated Bylaws (the “Bylaws”) may
discourage, delay, or prevent a change in our management or control over us that stockholders may consider favorable. Our Charter
and Bylaws:
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provide that vacancies on our board of directors, including newly created directorships, may be filled only by a majority vote
of directors then in office;
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do not provide stockholders with the ability to cumulate their votes; and
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require advance notification of stockholder nominations and proposals.
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In addition, our Charter permits the Board
to issue up to 25 million shares of preferred stock with such powers, rights, terms and conditions as may be designated by the
Board upon the issuance of shares of preferred stock at one or more times in the future. Specifically, the Charter permits the
Board to approve the future issuance of all or any shares of the preferred stock in one or more series, to determine the number
of shares constituting any series and to determine any voting powers, conversion rights, dividend rights, and other designations,
preferences, limitations, restrictions and rights relating to such shares without any further authorization by our stockholders.
The Board’s power to issue preferred stock could have the effect of delaying, deterring or preventing a transaction or a
change in control of our company that might otherwise be in the best interest of our stockholders.