Item 1A. Risk Factors
ITEM
1A:
Risk
Factors
The
following cautionary statements identify important factors that could cause our actual results to differ materially from those
projected in the forward-looking statements made in this Form 10-K. Please see “Special Note Regarding Forward Looking Statements”
below.
Risks
Associated with Our Business
The
COVID-19 coronavirus could adversely impact our business, including our clinical trials.
In
December 2019, a novel strain of coronavirus, COVID-19, was first reported in China. The coronavirus has since become a worldwide
pandemic, with more than 123 million global cases and approximately 2.7 million total deaths, as of March 12, 2021. As the pandemic
continues, we could very well experience disruptions that could severely impact our business and clinical trials, including:
●
delays
or difficulties in enrolling patients in our clinical trials;
●
delays
or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical
site staff;
●
diversion
of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical
trial sites and hospital staff supporting the conduct of our clinical trials;
●
interruption
of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended
by federal or state governments, employers and others;
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●
limitations
in employee resources that would otherwise be focused on the conduct of our clinical trials, including because of sickness
of employees or their families or the desire of employees to avoid contact with large groups of people;
●
delays
in issuing reports, results and publishing papers;
●
delays
in receiving approval from local regulatory authorities to initiate our planned clinical trials;
●
delays
in clinical sites receiving the supplies and materials needed to conduct our clinical trials;
●
interruption
in global shipping that may affect the transport of clinical trial materials, such as investigational drug product used in
our clinical trials;
●
changes
in local regulations as part of a response to the COVID-19 coronavirus outbreak which may require us to change the ways in
which our clinical trials are conducted, which may result in unexpected costs, or to discontinue the clinical trials altogether;
●
delays
in necessary interactions with local regulators, ethics committees and other important agencies and contractors due to limitations
in employee resources or forced furlough of government employees; and
●
refusal
of the FDA to accept data from clinical trials in affected geographies outside the United States.
The
global outbreak of the COVID-19 coronavirus is ongoing. The extent to which the COVID-19 coronavirus may impact our business and
clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as
the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and social distancing in the
United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United
States and other countries to contain and treat the disease.
The
COVID-19 coronavirus could force the closure of our offices and require workers to work from home.
As
of the date of this report, due to the importance of our COVID-19 work, our offices are open. The current pandemic could lead
to the complete or partial closure of one or more of our offices, or otherwise result in significant disruptions to our business
and operations. Such events could materially and adversely impact our operations. In addition, we may permit employees to work
remotely in certain cases and such policies may remain in place for an indeterminate amount of time or may be made mandatory by
relevant government authorities. There can be no assurance that our technological systems or infrastructure is or will be equipped
to facilitate effective remote working arrangements for our employees.
We
may require additional financing which may not be available.
The
development of our products requires the commitment of substantial resources to conduct the time-consuming research, preclinical
development, and clinical trials that are necessary to bring pharmaceutical products to market. As of December 31, 2020, we had
approximately $54,378,000 in cash, cash equivalents and marketable securities. We believe, based on our current financial condition,
that we have adequate funds to meet our anticipated operational cash needs and fund current clinical trials over approximately
the next twenty-four months. At present we do not generate any material revenues from our operations and we do not anticipate
doing so in the near future. We may need to obtain additional funding in the future for new studies and/or if current studies
do not yield positive results, require unanticipated changes and/or additional studies.
Given
our current focus on Ampligen and the high-cost estimates to bring our facility back online, should we focus on our facility,
we will need to allocate sufficient funds to finance the revalidation process to initiate commercial manufacturing, thereby readying
ourselves for an FDA Pre-Approval Inspection. We also will need to allocate capital to eventually commercialize and sell Ampligen
and/or recommence and increase sales of Alferon N Injection or our other products. We have reviewed our operations at our New
Brunswick facility and believe that some of the equipment most likely should be upgraded to realize greater efficiencies, when
and if we require more API than is currently in storage. We are also exploring engaging a Contract Manufacturing Organization
(“CMO”) to produce API. While we believe we have sufficient API to meet our current needs, we are also continually
exploring new efficiencies so as to maximize our ability to fulfill future obligations.
We
believe, based on our current financial condition, that we have adequate funds to meet our anticipated operational cash needs
and fund current clinical trials over approximately the next twenty-four months. If our funds are not adequate, and we are subsequently
unable to obtain additional funding, through joint venturing, sales of securities and/or otherwise, our ability to develop our
products, commercially produce inventory or continue our operations may be materially adversely affected.
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We
may continue to incur substantial losses and our future profitability is uncertain.
As
of December 31, 2020, our accumulated deficit was approximately $342,605,000. As with many biotechnology companies we have not
yet generated significant revenues from our products and may incur substantial and increased losses in the future. We cannot assure
that we will ever achieve significant revenues from product sales or become profitable. We require, and will continue to require,
the commitment of substantial resources to develop our products. We cannot assure that our product development efforts will be
successfully completed or that required regulatory approvals will be obtained or that any products will be manufactured and marketed
successfully, or be profitable.
Our
drug and related technologies are investigational and subject to regulatory approval. If we are unable to obtain regulatory approval
in a timely manner, or at all, our operations will be materially harmed and our stock adversely affected.
While
we have received regulatory approval for the commercialization of Ampligen in Argentina (pending additional release testing and
subsequent steps), all of our drugs and associated technologies, other than Alferon N Injection, are investigational in the U.S.
and must receive prior regulatory approval by appropriate regulatory authorities for commercial distribution and sale and are
currently legally available only through clinical trials in the U.S. with specified disorders. At present, Alferon N Injection
is approved for the intralesional treatment of refractory or recurring external genital warts in patients 18 years of age or older.
Use of Alferon N Injection for other indications will require regulatory approval in the U.S. and abroad.
Our
products, including Ampligen, are subject to extensive regulation by numerous governmental authorities in the U.S. and other countries,
including, but not limited to, the FDA in the U.S., the Health Protection Branch (“HPB”) of Canada, the Agency for
the European Medicines Agency (“EMA”) in Europe and the Administracion Nacional de Medicamentos, Alimentos y Tecnologia
Medica (“ANMAT”) in Argentina. Obtaining regulatory approvals is a rigorous and lengthy process and requires the expenditure
of substantial resources. In order to obtain final regulatory approval of a new drug, we must demonstrate to the satisfaction
of the regulatory agency that the product is safe and effective for its intended uses and that we are capable of manufacturing
the product to the applicable regulatory standards. We require regulatory approval in order to market Ampligen or any other proposed
product and receive product revenues or royalties. We cannot assure you that Ampligen will ultimately be demonstrated to be safe
and efficacious. While Ampligen is authorized for use in clinical trials in the U.S., we cannot assure you that additional clinical
trial approvals will be authorized in the United States or in other countries, in a timely fashion or at all, or that we will
complete these clinical trials. In addition, although Ampligen has been authorized by the FDA for treatment use under certain
conditions, including provision for cost recovery, there can be no assurance that such authorization will continue in effect.
While
we received approval of our Argentinian NDA from ANMAT for commercial sale of rintatolimod (U.S. tradename: Ampligen) in the Argentine
Republic for the treatment of severe ME/CFS, ANMAT approval is only an initial, but important, step in the overall successful
commercialization of our product. On September 19, 2019, we received clearance from the FDA to ship Ampligen to Argentina for
the commercial launch and subsequent sales. There are a number of additional actions that must occur before we would be able to
commence commercial sales in Argentina. For example, Ampligen is still in the process of release testing the product that has
already been sent.
The
FDA’s regulatory review and approval process is extensive, lengthy, expensive and inherently uncertain. To receive approval
for a product candidate, we must, among other things, demonstrate to the FDA’s satisfaction with substantial evidence from
well-controlled pre-clinical and clinical trials that the product candidate is both safe and effective for each indication for
which approval is sought. Before we can sell Ampligen for any use, or promote Alferon for any use other than as Alferon N Injection
for treatment of refractory or recurring genital warts, we will need to file the appropriate NDA with the FDA in the U.S. and
the appropriate regulatory agency outside of the U.S. where we intend to market and sell such products. At present the only NDA
we have filed with the FDA is the NDA for the use of Ampligen to treat CFS. The FDA issued a Complete Response Letter (“CRL”)
in February 2013 for this NDA and provided recommendations to address certain outstanding issues before they could approve Ampligen
for Commercial Sales. The Agency stated that the submitted data do not provide substantial evidence of efficacy of Ampligen for
the treatment of CFS and that the data do not provide sufficient information to determine whether the product is safe for use
in CFS due to the limited size of the safety database and multiple discrepancies within the submitted data. The FDA indicated
that we needed to conduct additional work. Therefore, ultimate FDA approval, if any, may be delayed indefinitely and may require
us to expend more resources than we have available. It is also possible that additional studies, if performed and completed, may
not be successful or considered sufficient by the FDA for approval or even to make our applications approvable. If any of these
outcomes occur, we may be forced to abandon one or more of our future applications for approval, which might significantly harm
our business and prospects. As a result, we cannot predict if or when we might receive regulatory approval for the use of Ampligen
to treat CFS or for the use of any other products. Even if regulatory approval from the FDA is received for the use of Ampligen
to treat CFS or eventually, for the use of any other product, any approvals that we obtain could contain significant limitations
in the form of narrow indications, patient populations, warnings, precautions or contra-indications or other conditions of use,
or the requirement that we implement a risk evaluation and mitigation strategy. In such an event, our ability to generate revenues
from such products could be greatly reduced and our business could be harmed.
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If
we are unable to gain necessary FDA approvals related to Ampligen and Alferon on a timely basis, or we are unable to generate
the additional data, successfully complete inspections or obtain approvals as required by the FDA on a timely manner, or at all,
or determine that any of our clinical studies are not cost/justified to undertake or if, for that or any other reason, Ampligen,
Alferon or one of our other products or production processes do not receive necessary regulatory approval in the U.S. or elsewhere,
our operations most likely will be materially and/or adversely affected.
Generally,
obtaining approval of a NDA by the FDA, or a comparable foreign regulatory authority, is inherently uncertain. Even after completing
clinical trials and other studies, a product candidate could fail to receive regulatory approval for many reasons, including the
following:
●
not
be able to demonstrate to the satisfaction of the FDA that our product candidate is safe and effective for any indication;
●
the
FDA may disagree with the design or implementation of our clinical trials or other studies;
●
the
results of the clinical trials or other studies may not demonstrate that a product candidate’s clinical and other benefits
outweigh its safety risks;
●
the
FDA may disagree with our interpretation of data from clinical trials or other studies;
●
the
data collected from clinical trials and other studies of a product candidate may not be sufficient to support the submission
of a NDA;
●
the
approval policies or regulations of the FDA may significantly change in a manner rendering our clinical and other study data
insufficient for approval; and
●
the
FDA may not approve the proposed manufacturing processes and facilities for a product candidate.
We
may be subject to product liability claims from the use of Ampligen, Alferon N Injection, or other of our products which could
negatively affect our future operations. We have limited product liability and clinical trial insurance.
We
maintain a limited amount of Products Liability and Clinical Trial insurance coverage world-wide for Ampligen and Alferon due
to the minimal amount of historical loss claims regarding these products in the marketplace. Any claims against our products,
Ampligen and Alferon N Injection, could have a materially adverse effect on our business and financial condition.
We
face an inherent business risk of exposure to product liability claims in the event that the use of Ampligen, Alferon N Injection
or other of our products results in adverse effects. This liability might result from claims made directly by patients, hospitals,
clinics or other consumers, or by pharmaceutical companies or others manufacturing these products on our behalf. Our future operations
may be negatively affected from the litigation costs, settlement expenses and lost product sales inherent to these claims. While
we will continue to attempt to take appropriate precautions, we cannot assure that we will avoid significant product liability
exposure.
Uncertainty
of health care reimbursement for our products.
Our
ability to successfully commercialize our products will depend, in part, on the extent to which reimbursement for the cost of
such products and related treatment will be available from government health administration authorities, private health coverage
insurers and other organizations. Significant uncertainty exists as to the reimbursement status of newly approved health care
products, and from time to time legislation is proposed, which, if adopted, could further restrict the prices charged by and/or
amounts reimbursable to manufacturers of pharmaceutical products. We cannot predict what, if any, legislation will ultimately
be adopted or the impact of such legislation on us. There can be no assurance that third party insurance companies will allow
us to charge and receive payments for products sufficient to realize an appropriate return on our investment in product development.
There
are risks of liabilities associated with handling and disposing of hazardous materials.
Our
business involves the controlled use of hazardous materials, carcinogenic chemicals, and flammable solvents. Although we believe
that our safety procedures for handling and disposing of such materials comply in all material respects with the standards prescribed
by applicable regulations, the risk of accidental contamination or injury from these materials cannot be completely eliminated.
In the event of such an accident or the failure to comply with applicable regulations, we could be held liable for any damages
that result. However, we have obtained insurance coverage to mitigate any potential significant loss in this area.
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We
rely upon information technology and any failure, inadequacy, interruption or security lapse of that technology, including any
cyber security incidents, could harm our ability to operate our business effectively.
Despite
the implementation of security measures, our internal computer systems and those of third parties with which we contract are vulnerable
to damage from cyber-attacks, computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and
electrical failures. System failures, accidents or security breaches could cause interruptions in our operations, and could result
in a material disruption of our business operations, in addition to possibly requiring substantial expenditures of resources to
remedy. The loss of clinical trial data could result in delays in our regulatory approval efforts and significantly increase our
costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of, or damage
to, our data or applications, or inappropriate public disclosure of confidential or proprietary information, we could incur liability
and our product development and commercialization efforts could be delayed.
The
loss of services of key personnel could hurt our chances for success.
Our
success is dependent on the continued efforts of our staff, especially certain doctors and researchers. The loss of the services
of personnel key to our operations could have a material adverse effect on our operations and chances for success. The loss of
key personnel or the failure to recruit additional personnel as needed could have a materially adverse effect on our ability to
achieve our objectives.
Risks
Associated with Our Products
In
addition to the risks disclosed above, the development of Ampligen is subject to a number of significant risks. Ampligen may be
found to be ineffective or to have adverse side effects, fail to receive necessary regulatory clearances, be difficult to manufacture
on a commercial scale, be uneconomical to market or be precluded from commercialization by proprietary right of third parties.
Our investigational products are in various stages of clinical and pre-clinical development and require further clinical studies
and appropriate regulatory approval processes before any such products can be marketed. We do not know when, if ever, Ampligen
or our other products will be generally available for commercial sale for any indication. Generally, only a small percentage of
potential therapeutic products are eventually approved by the FDA for commercial sale.
To
the extent that we are required by the FDA, pursuant to the Ampligen NDA, to conduct additional studies and take additional actions,
approval of any applications that we submit may be delayed by several years, or may require us to expend more resources than we
have available. It is also possible that additional studies, if performed and completed, may not be successful or considered sufficient
by the FDA for approval or even to make our applications approvable. If any of these outcomes occur, we may be forced to abandon
one or more of our future applications for approval, which might significantly harm our business and prospects. As a result, we
cannot predict when or whether regulatory approval will be obtained for any product candidate we develop.
If
approved, one or more of the potential side effects of the drug might deter usage of Ampligen in certain clinical situations and,
therefore, could adversely affect potential revenues and physician/patient acceptability of our product.
Alferon
N Injection. Although Alferon N Injection is approved for marketing in the United States for intralesional treatment of refractory
or recurring external genital warts in patients 18 years of age or older, to date it has not been approved for other indications.
Possible
side effects from the use of Ampligen or Alferon N Injection could adversely affect potential revenues and physician/patient acceptability
of our product.
Ampligen.
We believe that Ampligen has been generally well tolerated with a low incidence of clinical toxicity, particularly given the severely
debilitating or life-threatening diseases that have been treated. A mild flushing reaction has been observed in approximately
15-20% of patients treated in our various studies. This reaction is occasionally accompanied by a rapid heartbeat, a tightness
of the chest, urticaria (swelling of the skin), anxiety, shortness of breath, subjective reports of “feeling hot”,
sweating and nausea. The reaction is usually infusion-rate related and can generally be controlled by reducing the rate of infusion.
Other adverse side effects include liver enzyme level elevations, diarrhea, itching, asthma, low blood pressure, photophobia,
rash, visual disturbances, slow or irregular heart rate, decreases in platelets and white blood cell counts, anemia, dizziness,
confusion, elevation of kidney function tests, occasional temporary hair loss and various flu-like symptoms, including fever,
chills, fatigue, muscular aches, joint pains, headaches, nausea and vomiting. These flu-like side effects typically subside within
several months.
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The
FDA in its February 1, 2013 CRL, provided recommendations to address certain outstanding issues before they could approve Ampligen
for Commercial Sales. The Agency stated that the submitted data do not provide sufficient information to determine whether the
product is safe for use in CFS due to the limited size of the safety database and multiple discrepancies within the submitted
data.
If
approved, one or more of the potential side effects of the drug might deter usage of Ampligen in certain clinical situations and
therefore, could adversely affect potential revenues and physician/patient acceptability of our product.
Alferon
N Injection. At present, Alferon N Injection is approved for the intralesional (within the lesion) treatment of refractory or
recurring external genital warts in adults. In clinical trials conducted for the treatment of genital warts with Alferon N Injection,
patients did not experience serious side effects; however, there can be no assurance that unexpected or unacceptable side effects
will not be found in the future for this use or other potential uses of Alferon N Injection which could threaten or limit such
product’s usefulness.
Risks
Related to our activities associated with Ampligen’s potential effectiveness as a treatment for SARS-CoV-2
It
is not possible to predict the future of the ongoing SARS-CoV-2 global pandemic or the development of potential treatments. No
assurance can be given that Ampligen will aid in or be applied to the treatment of this virus.
Significant
additional testing and trials will be required to determine whether Ampligen will be effective in the treatment of SARS-CoV-2
in humans and no assurance can be given that it will be the case. We base our belief that Ampligen may be effective in the treatment
of SARS-CoV-2 on the result of studies that we reviewed and referenced. No assurance can be given that future studies will not
result in findings that are different from those in the studies that we have relied upon. We are one of many companies trying
to develop a treatment for this virus, most of whom have far greater resources than us. If one of these companies develops an
effective treatment, development of Ampligen for this virus most likely will be adversely affected.
Operating
in foreign countries carries with it many risks.
Some
of our studies are being conducted in the Netherlands and we may conduct other studies and or we may enter into agreements such
as supply agreements. Operating in foreign countries carries with it a number of risks, including potential difficulties in enforcing
intellectual property rights. We cannot assure that our potential foreign operations will not be adversely affected by these risks.
Risks
Associated with Our Intellectual Property
We
may not be profitable unless we can protect our patents and/or receive approval for additional pending patents.
We
need to preserve and acquire enforceable patents covering the use of Ampligen for a particular disease in order to obtain exclusive
rights for the commercial sale of Ampligen for such disease. We obtained all rights to Alferon N Injection, and we plan to preserve
and acquire enforceable patents covering its use for existing and potentially new diseases once we have had a successful FDA Pre
Approval Inspection. Our success depends, in large part, on our ability to preserve and obtain patent protection for our products
and to obtain and preserve our trade secrets and expertise. Certain of our know-how and technology is not patentable, particularly
the procedures for the manufacture of our experimental drug, Ampligen. We also have been issued a patent which affords protection
on the use of Ampligen in patients with Chronic Fatigue Syndrome. We have not yet been issued any patents in the United States
for the use of Ampligen as a sole treatment for any of the cancers which we have sought to target. For more information on Patents,
please see PART I, Item 1 – “Business; Patents”.
We
cannot assure that our competitors will not seek and obtain patents regarding the use of similar products in combination with
various other agents, for a particular target indication prior to our doing so. If we cannot protect our patents covering the
use of our products for a particular disease, or obtain additional patents, we may not be able to successfully market our products.
The
patent position of biotechnology and pharmaceutical firms is highly uncertain and involves complex legal and factual questions.
To
date, no consistent policy has emerged regarding the breadth of protection afforded by pharmaceutical and biotechnology patents.
There can be no assurance that new patent applications relating to our products, process or technology will result in patents
being issued or that, if issued, such patents will afford meaningful protection against competitors with similar technology. It
is generally anticipated that there may be significant litigation in the industry regarding patent and intellectual property rights.
Such litigation could require substantial resources from us and we may not have the financial resources necessary to enforce the
patent rights that we hold. No assurance can be made that our patents will provide competitive advantages for our products, process
and technology or will not be successfully challenged by competitors. No assurance can be given that patents do not exist or could
not be filed which would have a materially adverse effect on our ability to develop or market our products or to obtain or maintain
any competitive position that we may achieve with respect to our products. Our patents also may not prevent others from developing
competitive products or processes using related technology.
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There
can be no assurance that we will be able to obtain necessary licenses if we cannot enforce patent rights we may hold. In addition,
the failure of third parties from whom we currently license certain proprietary information or from whom we may be required to
obtain such licenses in the future, to adequately enforce their rights to such proprietary information, could adversely affect
the value of such licenses to us.
If
we cannot enforce the patent rights we currently hold we may be required to obtain licenses from others to develop, manufacture
or market our products. There can be no assurance that we would be able to obtain any such licenses on commercially reasonable
terms, if at all. We currently license certain proprietary information from third parties, some of which may have been developed
with government grants under circumstances where the government maintained certain rights with respect to the proprietary information
developed. No assurances can be given that such third parties will adequately enforce any rights they may have or that the rights,
if any, retained by the government will not adversely affect the value of our license.
There
is no guarantee that our trade secrets will not be disclosed or known by our competitors.
To
protect our rights, we require all employees and certain consultants to enter into confidentiality agreements with us. There can
be no assurance that these agreements will not be breached, that we would have adequate and enforceable remedies for any breach,
or that any trade secrets of ours will not otherwise become known or be independently developed by competitors.
Risks
Associated with Our R&D
Due
to the inherent uncertainty involved in the design and conduct of clinical trials and the applicable regulatory requirements,
including the factors discussed above in “Our Products”, we cannot predict what additional studies and/or additional
testing or information may be required by the FDA. Accordingly, we are unable to estimate the nature, timing, costs and necessary
efforts to complete these projects nor the anticipated completion dates. In addition, we have no basis for estimating when material
net cash inflows may commence. We have yet to generate significant revenues from the sale of these developmental products. As
of December 31, 2020, we had approximately $54,378,000 in Cash, Cash Equivalents and Marketable Securities inclusive of Marketable
Securities. Please see “ We may require additional financing which may not be available ” above.
Risks
Associated with Our Manufacturing
Our
Alferon N Injection Commercial Sales were halted due to lack of finished goods inventory. If we are unable to gain the necessary
FDA approvals related to Alferon, our operations most likely will be materially and/or adversely affected.
While
our facility is FDA approved under the BLA by the FDA for Alferon, this status will need to be reaffirmed upon the completion
of the facility’s upgrades for Alferon. We cannot provide any guarantee that the facility will necessarily pass an FDA pre-approval
inspection for Ampligen or Alferon manufacture, which are conducted in separately dedicated areas within the overall New Brunswick
manufacturing complex. We have reviewed our operations at the facility and believe that some of the equipment most likely should
be upgraded to realize greater efficiencies, when and if we require more API than is currently in storage. We are also exploring
engaging a Contract Manufacturing Organization (“CMO”) to produce API.
If
we are unable to gain the necessary FDA approvals related to the manufacturing process and/or final product of new Alferon inventory
or contract with a CMO, our operations most likely will be materially and/or adversely affected. For more information on Alferon
N Injection regarding potential commercial sales, please see PART I, Item 1 - “Business; Manufacturing”.
There
are no long-term agreements with suppliers of required materials and services for Ampligen and there are a limited number of raw
material suppliers. If we are unable to obtain the required raw materials and/or services, we may not be able to manufacture Ampligen.
A
number of essential raw materials are used in the production of Ampligen as well as packaging materials utilized in the fill and
finish process. We do not have, but continue to work toward having, long-term agreements for the supply of such materials, when
possible. There can be no assurance we can enter into long-term supply agreements covering essential materials on commercially
reasonable terms, if at all.
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There
are a limited number of suppliers in the United States and abroad available to provide the raw and packaging materials/reagents
for use in manufacturing Ampligen and Alferon. At present, we do not have any agreements with third parties for the supply of
any of these materials or we are relying on a limited source of reagent suppliers necessary for the manufacture of Alferon. Jubilant
Hollister-Stier LLC has manufactured batches of Ampligen for us pursuant to purchase orders. We anticipate that additional orders
will be placed upon approved quotes and purchase orders provided by us to Jubilant. On December 22, 2020, we added Pharmaceutics
International Inc. (“Pii”) as a “Fill & Finish” provider to enhance our capacity to produce the drug
Ampligen. This addition amplifies our manufacturing capability by providing redundancy and cost savings. The contracts augment
our existing fill and finish capacity. If we are unable to place adequate acceptable purchase orders with Jubilant or Pii in the
future at acceptable prices upon acceptable terms, we will need to find another manufacturer. If we need to find another contract
manufacturer to produce Ampligen, it would create a significant delay and expense to get the manufacturer up and running. The
costs and availability of products and materials we would need for the production of Ampligen are subject to fluctuation depending
on a variety of factors beyond our control, including competitive factors, changes in technology, ownership of intellectual property,
FDA and other governmental regulations. There can be no assurance that we will be able to obtain such products and materials on
terms acceptable to us or at all.
While
we have produced limited quantities of active pharmaceutical ingredients (“API”) for our products in our New Brunswick,
NJ facility, we have reviewed our operations at the facility and believe that some of the equipment most likely should be
upgraded to realize greater efficiencies, when and if we require more API than is currently in storage. We are also exploring
engaging a Contract Manufacturing Organization (“CMO”) to produce API. While we believe we have sufficient API to
meet our current needs, we are also continually exploring new efficiencies so as to maximize our ability to fulfill future obligations.
Currently, the Alferon manufacturing process is on hold and there is no definitive timetable to have the facility back online.
If we are unable to acquire FDA approvals related to the manufacturing process and/or final product of new Alferon inventory or
contract with a CMO, our operations most likely will be materially and/or adversely affected. In light of these contingencies,
there can be no assurances that the approved Alferon N Injection product will be returned to production on a timely basis, if
at all, or that if and when it is again made commercially available, it will return to prior sales levels.
If
we are unable to obtain or manufacture the required materials/reagents, and/or procure services needed in the final steps in the
manufacturing process, we may be unable to manufacture Ampligen. The costs and availability of products and materials we need
for the production of Ampligen are subject to fluctuation depending on a variety of factors beyond our control, including competitive
factors, changes in technology, ownership of intellectual property, FDA and other governmental regulations. There can be no assurance
that we will be able to obtain such products and materials on terms acceptable to us or at all. For more information on Ampligen
manufacturing, please see PART I, Item 1 - “Business; Our Products; Manufacturing” above.
There
are a limited number of organizations in the United States available to provide the final manufacturing steps of formulation,
fill, finish and packing sets for Alferon N Injection and Ampligen.
There
are a limited number of organizations in the United States available to provide the final steps in the manufacturing for Alferon
N Injection and Ampligen. To formulate, fill, finish and package our products (“fill and finish”), we require an FDA
approved third party CMO.
In
January 2017, we approved a quote and provided a purchase order with Jubilant Hollister-Stier LLC pursuant to which Jubilant manufactured
batches of Ampligen for us. We anticipate that additional orders will be placed upon approved quotes and purchase orders provided
by us to Jubilant. If we are unable to place adequate acceptable purchase orders with Jubilant in the future at acceptable prices
upon acceptable terms our business would be materially and adversely affected. Please see the prior risk factor.
In
December 2020, we added Pharmaceutics International Inc. (“Pii”) as a “Fill & Finish” provider to
enhance our capacity to produce the drug Ampligen. This addition amplifies our manufacturing capability by providing redundancy
and cost savings. The contracts augment our existing fill and finish capacity.
Should
there be an unanticipated delay in receiving new product or should we experience an unexpected demand for Ampligen, our ability
to supply Ampligen most likely will be adversely affected. If we are unable to procure services needed in the final steps in the
manufacturing process, we may be unable to manufacture Alferon N Injection and/or Ampligen. The costs and availability of products
and materials we need for the production of Ampligen and the commercial production of Alferon N Injection and other products which
we may commercially produce are subject to fluctuation depending on a variety of factors beyond our control, including competitive
factors, changes in technology, and FDA and other governmental regulations and there can be no assurance that we will be able
to obtain such products and materials on terms acceptable to us or at all. For more information on Ampligen and Alferon N Injection
manufacturing, please see PART I, Item 1 - “Business; Our Products; Manufacturing” above.
21
There
is no assurance that upon successful manufacture of a drug on a limited scale basis for investigational use will lead to a successful
transition to commercial, large-scale production.
Changes
in methods of manufacturing, including commercial scale-up, may affect the chemical structure of Ampligen and other RNA drugs,
as well as their safety and efficacy. The transition from limited production of pre-clinical and clinical research quantities
to production of commercial quantities of our products will involve distinct management and technical challenges and may require
additional management, technical personnel and capital to the extent such manufacturing is not handled by third parties. While
we believe that we could successfully upgrade our production capability at our New Brunswick, NJ facility in a commercial scale-up
of Ampligen, there can be no assurance that our manufacturing will be successful or that any given product will be determined
to be safe and effective, or capable of being manufactured under applicable quality standards, economically, and in commercial
quantities, or successfully marketed.
We
have limited manufacturing experience for Ampligen and Alferon. We may not be profitable unless we can produce Ampligen, Alferon
or other products in commercial quantities at costs acceptable to us .
Ampligen
has been produced to date in limited quantities for use in our clinical trials and Early Access Programs. In addition, in Argentina,
Ampligen is still in the process of release testing the product that has already been sent. To be successful, our products must
be manufactured in commercial quantities in compliance with regulatory requirements and at acceptable costs. We believe that it
will not be necessary to increase our current product plans to meet our production obligations. We believe, but cannot assure,
that our enhancements to our manufacturing facilities will be adequate for our future needs for the production of our proposed
products for large-scale commercialization. We intend to ramp up our existing facility and/or utilize third party facilities if
and when the need arises or, if we are unable to do so, to build or acquire commercial-scale manufacturing facilities. We will
need to comply with regulatory requirements for such facilities, including those of the FDA pertaining to cGMP requirements or
maintaining our BLA status. There can be no assurance that such facilities can be used, built, or acquired on commercially acceptable
terms, or that such facilities, if used, built, or acquired, will be adequate for the production of our proposed products for
large-scale commercialization or our long-term needs.
We
have never produced Ampligen, Alferon or any other products in large commercial quantities. We must manufacture our products in
compliance with regulatory requirements in large commercial quantities and at acceptable costs in order for us to be profitable.
We intend to utilize third party manufacturers and/or facilities if and when the need arises or, if we are unable to do so, to
build or acquire commercial-scale manufacturing facilities. If we cannot manufacture commercial quantities of Ampligen and/or
Alferon, or continue to maintain third party agreements for its manufacture at costs acceptable to us, our operations will be
significantly affected. If and when the Ampligen NDA is approved, we may need to find an additional vendor to manufacture the
product for commercial sales. Also, each production lot of Alferon N Injection is subject to FDA review and approval prior to
releasing the lots to be sold. This review and approval process could take considerable time, which would delay our having product
in inventory to sell, nor can we provide any assurance as to the receipt of FDA approval of our finished inventory product. There
can be no assurances that the Ampligen and/or Alferon can be commercially produced at costs acceptable to us.
Risks
Associated with Our Licensing/Collaborations/Joint Ventures
If
we are unable to achieve licensing, collaboration and/or joint ventures, our marketing strategy for Ampligen will be part of the
differing health care systems around the world along with the different marketing and distribution systems that are used to supply
pharmaceutical products to those systems.
We
have received approval of our NDA from ANMAT for commercial sale of rintatolimod (U.S. tradename: Ampligen) in the Argentine Republic
for the treatment of severe CFS. The product will be marketed by GP Pharm, our commercial partner in Latin America. On September
19, 2019, we received clearance from the FDA to ship Ampligen to Argentina for the commercial launch and subsequent sales. We
are currently working with GP Pharma on the commercial launch of Ampligen in Argentina. Commercialization in Argentina will require,
among other things, GP Pharm to establish disease awareness, medical education, creation of an appropriate reimbursement level,
design of marketing strategies and completion of manufacturing preparations for launch.
The
next steps in the commercial launch of Ampligen include ANMAT conducting a final inspection of the product and release tests before
granting final approval to begin commercial sales. This testing and approval process is currently delayed due to the COVID-19
pandemic and ANMAT’s internal processes. Once final approval by ANMAT is obtained, GP Pharm will begin distributing Ampligen
in Argentina. We continue to pursue our Ampligen NDA, for the treatment of CFS with the FDA.
22
Risks
Associated with Our Marketing and Distribution
We
have limited marketing and sales capability. If we are unable to obtain additional distributors and our current and future distributors
do not market our products successfully, we may not generate significant revenues or become profitable.
We
have limited marketing and sales capability. We are dependent upon existing and, possibly future, marketing agreements and third-party
distribution agreements for our products in order to generate significant revenues and become profitable. As a result, any revenues
received by us will be dependent in large part on the efforts of third parties, and there is no assurance that these efforts will
be successful.
Our
commercialization strategy for Ampligen, if and when it is approved for marketing and sale by the FDA, may include licensing/co-marketing
agreements utilizing the resources and capacities of a strategic partner(s). We continue to seek a world-wide marketing partner
with the goal of having a relationship in place before approval is obtained. In parallel to partnering discussions, appropriate
pre-marketing activities will be undertaken. It is our current intention to control manufacturing of Ampligen on a world-wide
basis.
Our
commercialization strategy for Alferon N Injection may include the utilization of internal functions and/or licensing/co-marketing
agreements that would utilize the resources and capacities of one or more strategic partners. Accordingly, we have engaged Asembia,
formerly Armada Healthcare, LLC, to undertake the marketing, education and sales of Alferon N Injection throughout the United
States along with GP Pharm for both Ampligen and Alferon in Argentina along with other South American countries.
We
cannot assure that our U.S. or foreign marketing strategy will be successful or that we will be able to establish future marketing
or third party distribution agreements on terms acceptable to us, or that the cost of establishing these arrangements will not
exceed any product revenues. Our inability to establish viable marketing and sales capabilities would most likely have a materially
adverse effect on us. There can be no assurances that the approved Alferon N Injection product will be returned to prior sales
levels.
Risks
Associated with Our Competition
Rapid
technological change may render our products obsolete or non-competitive.
The
pharmaceutical and biotechnology industries are subject to rapid and substantial technological change. Technological competition
from pharmaceutical and biotechnology companies, universities, governmental entities and others diversifying into the field is
intense and is expected to increase. Most of these entities have significantly greater research and development capabilities than
us, as well as substantial marketing, financial and managerial resources, and represent significant competition for us. There
can be no assurance that developments by others will not render our products or technologies obsolete or noncompetitive or that
we will be able to keep pace with technological developments.
Our
products may be subject to substantial competition.
Ampligen.
our flagship product, Ampligen is being evaluated as a potential treatment for COVID-19, myalgic encephalomyelitis/chronic
fatigue syndrome (ME/CFS) and COVID-induced CFS symptoms (“Long Haulers”); as well as multiple types of cancers. With
regards to COVID-19, multiple global companies are actively working to develop therapies for COVID-19, including several companies
which have successfully developed vaccines. It is possible that these or other companies may be developing therapies that are
similar to that which we are attempting to develop, and could therefore develop them first. Some of these potential products may
have an entirely different approach or means of accomplishing similar therapeutic effects to products being developed by us. These
competing products may be more effective and less costly than our products. In addition, conventional drug therapy, surgery and
other more familiar treatments may offer competition to our products. Furthermore, many of our competitors have significantly
greater experience than we do in preclinical testing and human clinical trials of pharmaceutical products and in obtaining FDA,
The Health Protection Branch of the Canada Department of National Health and Welfare (HPB) and other regulatory approvals of products.
Accordingly, our competitors may succeed in obtaining FDA, HPB or other regulatory product approvals more rapidly than us. There
are no drugs approved for commercial sale with respect to treating CFS in the United States. The dominant competitors with drugs
to treat disease indications which we plan to address include Pfizer, GlaxoSmithKline, Merck & Co., Novartis and AstraZeneca.
Biotech competitors include Baxter International, Fletcher/CSI, AVANT Immunotherapeutics, AVI BioPharma and Genta. These potential
competitors are among the largest pharmaceutical companies in the world, are well known to the public and the medical community,
and have substantially greater financial resources, product development, and manufacturing and marketing capabilities than we
have. Although we believe our principal advantage is the unique mechanism of action of Ampligen on the immune system, we cannot
assure that we will be able to compete.
23
Alferon
N Injection. Our competitors are among the largest pharmaceutical companies in the world, are well known to the public and
the medical community, and have substantially greater financial resources, product development, and manufacturing and marketing
capabilities than we have. Alferon N Injection currently competes with Merck’s injectable recombinant alpha interferon product
(Intron® A) for the treatment of genital warts. In addition, other pharmaceutical firms offer self-administered topical cream,
for the treatment of external genital and perianal warts such as Graceway Pharmaceuticals (Aldara®), Perrigo Company (Imiquimod
Cream - Generic Equivalent to Aldara®), Watson Pharma (Condylox®) and MediGene (Veregen®). Alferon N Injection also
competes with surgical, chemical, and other methods of treating genital warts. We cannot assess the impact products developed
by our competitors, or advances in other methods of the treatment of genital warts, will have on the commercial viability of Alferon
N Injection. If and when we obtain additional approvals of uses of this product, we expect to compete primarily on the basis of
product performance. Our competitors have developed or may develop products (containing either alpha or beta interferon or other
therapeutic compounds) or other treatment modalities for those uses. There can be no assurance that, if we are able to obtain
regulatory approval of Alferon N Injection for the treatment of new indications, we will be able to achieve any significant penetration
into those markets. In addition, because certain competitive products are not dependent on a source of human blood cells, such
products may be able to be produced in greater volume and at a lower cost than Alferon N Injection. Currently, our wholesale price
on a per unit basis of Alferon N Injection is higher than that of the competitive recombinant alpha and beta interferon products.
Please see risk factor “We may not be profitable unless we can protect our patents and/or receive approval for additional
pending patents” above for additional information.
Other
companies may succeed in developing products earlier than we do, obtaining approvals for such products from the FDA more rapidly
than we do, or developing products that are more effective than those we may develop. While we will attempt to expand our technological
capabilities in order to remain competitive, there can be no assurance that research and development by others or other medical
advances will not render our technology or products obsolete or non-competitive or result in treatments or cures superior to any
therapy we develop.
Risks
Associated with an Investment in Our Common Stock:
The
market price of our stock may be adversely affected by market volatility
The
market price of our common stock has been and is likely to be volatile. This is especially true given the current significant
instability in the financial markets, primarily caused by the COVID-19 coronavirus and the major adverse effects it has had and
will continue to have on US and worldwide economies and markets. The market price of our stock has significantly increased over
the past year, most likely due to our activities related to researching Ampligen’s effectiveness in treating SARS-CoV-2.
Should our progress slow or results of testing or activities by others negatively impact our efforts, it is just as likely that
our stock price will be significantly adversely affected, and in such case, investors could sustain substantial losses. In addition
to the foregoing and, general economic, political and market conditions, the price and trading volume of our stock could fluctuate
widely in response to many factors, including:
●
announcements
of the results of clinical trials by us or our competitors;
●
announcements
of availability or projections of our products for commercial sale;
●
announcements
of legal actions against us and/or settlements or verdicts adverse to us;
●
adverse
reactions to products;
●
governmental
approvals, delays in expected governmental approvals or withdrawals of any prior governmental approvals or public or regulatory
agency comments regarding the safety or effectiveness of our products, or the adequacy of the procedures, facilities or controls
employed in the manufacture of our products;
●
changes
in U.S. or foreign regulatory policy during the period of product development;
●
developments
in patent or other proprietary rights, including any third-party challenges of our intellectual property rights;
●
announcements
of technological innovations by us or our competitors;
●
announcements
of new products or new contracts by us or our competitors;
●
actual
or anticipated variations in our operating results due to the level of development expenses and other factors;
●
changes
in financial estimates by securities analysts and whether our earnings meet or exceed the estimates;
●
conditions
and trends in the pharmaceutical and other industries;
24
●
new
accounting standards;
●
overall
investment market fluctuation;
●
restatement
of prior financial results;
●
notice
of NYSE American non-compliance with requirements; and
●
occurrence
of any of the risks described in these risk factors and the risk factors incorporated by reference herein.
Our
common stock is listed for quotation on the NYSE American. For the year ended December 31, 2020, the trading price of our common
stock has ranged from $0.56 to $6.10 per share. We expect the price of our common stock to remain volatile. The average daily
trading volume of our common stock varies significantly.
Sales
of a significant number of shares of our common stock in the public markets, or the perception that such sales could occur, could
depress the market price of our common stock.
We
may issue shares to be used to meet our capital requirements or use shares to compensate employees, consultants and/or Directors.
In this regard, we completed a rights offering to our stockholders and certain option and warrant holders in March 2019, pursuant
to which we issued Preferred stock convertible into an aggregate of 26,560,000 shares of common stock and warrants exercisable
for up to an additional 26,560,000 shares of common stock. In September 2019 we sold 1,740,550 shares of our common stock and
warrant exercisable for 16,037,170 shares of common stock. All of these shares of common stock, including shares issuable upon
exercise of warrants, have been registered for public sale. In addition, we have registered securities for public sale pursuant
to a universal shelf registration statement and we had been selling shares under this shelf registration statement. Since December
31, 2020, we have sold an aggregate of 5,655,731 shares under our equity distribution agreement with Maxim. As of the date of
this report, we no longer have any equity distribution agreements.
We
are unable to estimate the amount, timing or nature of future sales of outstanding common stock or instruments convertible into
or exercisable for our common stock. Sales of a significant number of shares of our common stock in the public markets, or the
perception that such sales could occur as a result of our utilization of our shelf registration statement or otherwise could depress
the market price of our common stock and impair our ability to raise capital through the sale of additional equity securities.
We cannot predict the effect that future sales of our common stock or the market perception that we are permitted to sell a significant
number of our securities would have on the market price of our common stock. Please see Item 7- “Management’s Discussion
and Analysis of Financial Condition and Result of Operations; Liquidity and Capital Resources” in PART II.
Provisions
of our Certificate of Incorporation and Delaware law could defer a change of our Management which could discourage or delay offers
to acquire us.
Provisions
of our Certificate of Incorporation and Delaware law may make it more difficult for someone to acquire control of us or for our
stockholders to remove existing management, and might discourage a third party from offering to acquire us, even if a change in
control or in Management would be beneficial to our stockholders. For example, our Certificate of Incorporation allows us to issue
shares of preferred stock without any vote or further action by our stockholders. Our Board of Directors has the authority to
fix and determine the relative rights and preferences of preferred stock. Our Board of Directors also has the authority to issue
preferred stock without further stockholder approval. As a result, our Board of Directors could authorize the issuance of a series
of preferred stock that would grant to holders the preferred right to our assets upon liquidation, the right to receive dividend
payments before dividends are distributed to the holders of common stock and the right to the redemption of the shares, together
with a premium, prior to the redemption of our common stock. On November 14, 2017, at the direction of the Board, we amended and
restated the Rights Agreement between us and, American Stock Transfer & Trust Company, LLC, its current Rights Agent. Pursuant
to the original Rights Agreement, our Board of Directors declared a dividend distribution of one Right for each outstanding share
of common stock to stockholders of record at the close of business on November 29, 2002. Each Right entitles the registered holder
to purchase from us a unit consisting of one one-hundredth of a share (a “Unit”) of Series A Junior Participating
Preferred Stock, par value $0.01 per share at a Purchase Price of $21.00 per Unit, subject to adjustment.
Special
Note Regarding Forward Looking Statements
Certain
statements in this Report contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section
21E of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act. These statements are based on our
management’s current beliefs, expectations and assumptions about future events, conditions and results and on information
currently available to us. Discussions containing these forward-looking statements may be found, among other places, in this “Risk
Factors” section; Item 1. “Business”, Part I; Item 3. “Legal Proceedings” and Part II; Item 7. “Management’s
Discussion and Analysis of Financial Condition and Results of Operations”.
25
All
statements, other than statements of historical fact, included or incorporated herein regarding our strategy, future operations,
financial position, future revenues, projected costs, plans, prospects and objectives are forward-looking statements. Words such
as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,”
“estimate,” “think,” “may,” “could,” “will,” “would,”
“should,” “continue,” “potential,” “likely,” “opportunity” and similar
expressions or variations of such words are intended to identify forward-looking statements but are not the exclusive means of
identifying forward-looking statements.
Among
the factors that could cause actual results to differ materially from those indicated in the forward-looking statements are risks
and uncertainties inherent in our business including, without limitation: our ability to adequately fund our projects as we will
need additional funding to proceed with our objectives, the potential therapeutic effect of our products, the possibility of obtaining
regulatory approval, our ability to find senior co-development partners with the capital and expertise needed to commercialize
our products and to enter into arrangements with them on commercially reasonable terms, our ability to manufacture and sell any
products, our ability to enter into arrangements with third party vendors, market acceptance of our products, our ability to earn
a profit from sales or licenses of any drugs, our ability to discover new drugs in the future, changing market conditions, changes
in laws and regulations affecting our industry, and issues related to our New Brunswick, New Jersey facility.
With
the outbreak of the COVID-19 coronavirus and our prior research into Ampligen’s antiviral activity against Severe Acute
Respiratory Syndrome, or SARS, we now are focusing on the potential of Ampligen to serve as a protective prophylaxis and an early-onset
therapeutic for the virus. Significant testing and trials will be required to determine whether Ampligen will be effective in
the treatment of the COVID-19 coronavirus in humans and no assurance can be given that it will be the case. Our beliefs rely on
a number of studies. No assurance can be given that future studies will not result in findings that are different from those reported
in the studies we refer to. The pandemic is disrupting world health and world economies and most likely will continue to do so
for a long time. While we are able to continue to operate, clearly, like all businesses, we are unable to gauge how bad this pandemic
will affect our operations in the future. We reached out to numerous foreign governments related to the COVID-19 coronavirus and,
if successful, will be working in these countries. Operating in foreign countries carries with it a number of risks, including
potential difficulties in enforcing intellectual property rights. We cannot assure that our potential operations in foreign countries
will not be adversely affected by these risks. We have filed provisional patent applications related to the COVID-19 coronavirus.
However, these filings do not assure that patents will ultimately be granted.
In
February 2013, we received a Complete Response Letter (CRL) from the Food and Drug Administration, or FDA, for our Ampligen New
Drug Application, or NDA, for the treatment of CFS. The FDA communicated that we should conduct at least one additional clinical
trial, complete various nonclinical studies and perform a number of data analyses. Accordingly, the remaining steps to potentially
gain FDA approval of the Ampligen NDA, the final results of these and other ongoing activities could vary materially from our
expectations and could adversely affect the chances for approval of the Ampligen NDA. These activities and the ultimate outcomes
are subject to a variety of risks and uncertainties, including but not limited to risks that (i) the FDA may ask for additional
data, information or studies to be completed or provided; and (ii) the FDA may require additional work related to the commercial
manufacturing process to be completed or may, in the course of the inspection of manufacturing facilities, identify issues to
be resolved.
In
August 2016, we received approval of our NDA from Administracion Nacional de Medicamentos, Alimentos y Tecnologia Medica, or ANMAT,
for commercial sale of rintatolimod (U.S. tradename: Ampligen®) in the Argentine Republic for the treatment of severe CFS.
The product will be marketed by GP Pharm, our commercial partner in Latin America. We believe, but cannot assure, that this approval
provides a platform for potential sales in certain countries within the European Union under regulations that support cross-border
pharmaceutical sales of licensed drugs. In Europe, approval in a country with a stringent regulatory process in place, such as
Argentina, should add further validation for the product as the Early Access Program, or EAP, as discussed below and underway
in Europe in pancreatic cancer. ANMAT approval is only an initial, but important, step in the overall successful commercialization
of our product. There are a number of actions that must occur before we could be able to commence commercial sales in Argentina.
In September 2019, we received clearance from the FDA to ship Ampligen to Argentina for the commercial launch and subsequent sales.
We are currently working with GP Pharma on the commercial launch of Ampligen in Argentina. Commercialization in Argentina will
require, among other things, an appropriate reimbursement level, appropriate marketing strategies, completion of manufacturing
preparations for launch and ANMAT conducting a final inspection of the product and release tests before granting final approval
to begin commercial sales. This testing and approval process is currently delayed due to the COVID-19 pandemic and ANMAT’s
internal processes. Approval of rintatolimod for severe CFS in the Argentine Republic does not in any way suggest that the Ampligen
NDA in the United States or any comparable application filed in the European Union or elsewhere will obtain commercial approval.
26
In
May 2016, we entered into a five-year agreement with myTomorrows, a Netherlands based company, for the commencement and management
of an EAP in Europe and Turkey related to CFS. Pursuant to the agreement, myTomorrows, as our exclusive service provider and distributor
in this territory, is performing EAP activities. In January 2017, the EAP was extended to pancreatic cancer patients beginning
in the Netherlands. In February 2018, we signed an amendment to extend the territory to cover Canada to treat pancreatic cancer
patients, pending government approval. In March 2018, we signed an amendment to which myTomorrows will be our exclusive service
provider for special access activities in Canada for the supply of Ampligen for the treatment of CFS. No assurance can be given
that we can sufficiently supply product should we experience an unexpected demand for Ampligen in our clinical studies, the commercial
launch in Argentina or pursuant to the EAPs. No assurance can be given that Ampligen will prove effective in the treatment of
pancreatic cancer.
Currently,
six Ampligen clinical trials are underway, in various phases of development and activity, with a number of subjects enrolled
at university cancer centers testing whether tumor microenvironments can be reprogrammed to increase the effectiveness of
cancer immunotherapy, including checkpoint blockade. One is at Roswell Park and the other is at the University of Pittsburgh
Medical Center. Two additional studies have been approved for enrollment and subjects are being screened for enrollment
recruited at Roswell Park and the University of Pittsburgh Medical Center using Ampligen in conjunction with pembrolizumab.
No assurance can be given as to the results of these underway trials. Four additional cancer trials in collaboration with
University Medical/Cancer Research Centers using Ampligen plus checkpoint blockade are in various pre-enrollment stages. No
assurance can be given as to whether some or all of the planned additional oncology clinical trials will occur and they are
subject to many factors including lack of regulatory approval(s), lack of study drug, or a change in priorities at the
sponsoring universities or cancer centers. Even if these additional clinical trials are initiated, as we are not the sponsor,
we cannot assure that these clinical studies or the two studies underway will be successful or yield any useful data. In
addition, initiation of planned clinical trials may not occur secondary to many factors including lack of regulatory
approval(s) or lack of study drug. Even if these clinical trials are initiated, we cannot assure that the clinical studies
will be successful or yield any useful data or require additional funding.
Our
overall objectives include plans to continue seeking approval for commercialization of Ampligen in the United States and abroad
as well as seeking to broaden commercial therapeutic indications for Alferon N Injection presently approved in the United States
and Argentina. We continue to pursue senior co-development partners with the capital and expertise needed to commercialize our
products and to enter into arrangements with them on commercially reasonable terms. Our ability to commercialize our products,
widen commercial therapeutic indications of Alferon N Injection and/or capitalize on our collaborations with research laboratories
to examine our products are subject to a number of significant risks and uncertainties including, but not limited to our ability
to enter into more definitive agreements with some of the research laboratories and others that we are collaborating with, to
fund and conduct additional testing and studies, whether or not such testing is successful or requires additional testing and
meets the requirements of the FDA and comparable foreign regulatory agencies. We do not know when, if ever, our products will
be generally available for commercial sale for any indication.
We
strived to maximize the outsourcing of certain components of our manufacturing, quality control, marketing and distribution while
maintaining control over the entire process through our quality assurance and regulatory groups. We cannot provide any guarantee
that the facility or our contract manufacturers will pass an FDA pre-approval inspection for Alferon manufacturing.
The
production of new Alferon Active Pharmaceutical Ingredient, or API, inventory will begin at our New Brunswick facility once the
validation phase is complete. While the facility has already been approved by the FDA under the Biological License Application,
or BLA, for Alferon, this status will need to be reaffirmed by a successful Pre-Approval Inspection by the FDA prior to commercial
sale of newly produced inventory product. If and when we obtain a reaffirmation of FDA BLA status and has begun production of
new Alferon API, it will need FDA approval as to the quality and stability of the final product before commercial sales can resume.
We will need additional funds to finance the revalidation process in our facility to initiate commercial manufacturing, thereby
readying ourselves for an FDA Pre-Approval Inspection. If we are unable to gain the necessary FDA approvals related to the manufacturing
process and/or final product of new Alferon inventory, our operations most likely will be materially and/or adversely affected.
In light of these contingencies, there can be no assurances that the approved Alferon N Injection product will be returned to
production on a timely basis, if at all, or that if and when it is again made commercially available, it will return to prior
sales levels.
There
have been delays related to importing Ampligen to China. We are working with Smoore to alleviate these issues and to identify
a mutually beneficial course of action that would allow us to move forward with the proposed testing of Ampligen. We will announce
when the shipment for testing purposes has been completed. If we are unable to resolve these issues, we will explore inhalation
therapy elsewhere. The MTA with Smoore expires on April 1, 2021, with the possibility of continued cooperation between us and
Smoore under ongoing consideration.
We
believe, and are investigating, Ampligen’s potential role in enhancing the activity of influenza vaccines. While certain
studies involving rodents, non-human primates (monkeys) and healthy human subjects indicate that Ampligen may enhance the activity
of influenza vaccines by conferring increased cross-reactivity or cross-protection, further studies will be required and no assurance
can be given that Ampligen will assist in the development of a universal vaccine for influenza or other viruses.
27
Because
forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified
and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events.
The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could
differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New
risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors
and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements
contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
This
Report also refers to estimates and other statistical data made by independent parties and by us relating to market size and growth
and other data about our industry. This data involves a number of assumptions and limitations, and you are cautioned not to give
undue weight to such estimates. In addition, projections, assumptions and estimates of our future performance and the future performance
of the markets in which we operate are necessarily subject to a high degree of uncertainty and risk.
ITEM
1B.
Unresolved
Staff Comments.
None.