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Item 1A. Risk Factors

2021-02-25 compared with 2020-03-27 · 357 added, 228 removed, 951 unchanged (38% of the section changed)

Risk Factors.

In addition to the other information included in this Annual Report, the following risk factors should be carefully considered when evaluating an investment in us.

These risk factors and other uncertainties may cause our actual future results or performance to differ materially from any future results or performance expressed or implied in the forward-looking statements contained in this report and in other public statements we make.

In addition, because of these risks and uncertainties, as well as other variables affecting our operating results, our past financial performance is not necessarily indicative of future performance.

In addition, because of these risks and uncertainties, as well as other variables

affecting our operating results, our past financial performance is not necessarily indicative of future performance.

See “Forward-Looking statements” in Item 1 of this Annual Report.

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Under SEC rules and regulations, if our public float (the market value of our common stock held by non-affiliates) is less than $75.0 million, then the aggregate market value of securities sold by us or on our behalf under our Form S-3 in any 12-month period is limited to an aggregate of one-third of our public float.

Our public float is currently below $75.0 million and therefore we are currently subject to this limitation.

While our public float is currently more than $75.0 million, we have been subject to this limitation in the past and we may be subject to it again in the future.

If our ability to utilize a Form S-3 registration statement for a primary offering of our securities is limited to one-third of our public float, we may conduct such an offering pursuant to an exemption from registration under the Securities Act or under a Form S-1 registration statement, and we would expect either of those alternatives to increase the cost of raising additional capital relative to utilizing a Form S-3 registration statement.

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We are a clinical-stage biotechnology company and have not yet generated revenues from product sales.

To date, substantially all of our revenues have been derived from grants and contracts with governmental agencies, primarily our BARDA contract for our anthrax vaccine product candidate.

To date, substantially all of our revenues have been derived from grants and contracts with governmental agencies, consisting primarily our BARDA contract for our anthrax vaccine product candidate.

We have incurred net losses in most periods since our inception, including a net loss of $49.0 million and $20.5 million for the years ended December 31, 2020 and 2019, respectively.

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We do not know whether or when we will generate product revenues or become profitable.

We have devoted most of our financial resources to research and development, including preclinical and clinical development of product candidates.

We have devoted most of our financial resources to research and development, including preclinical and clinical development of our product candidates.

We have not completed pivotal clinical trials for any product candidate.

Our leading product candidates remain in early stage clinical development, and it will be several years, if ever, before we have a product candidate ready for commercialization.

Our leading product candidates remain in early stage clinical development, and it may be several years, if ever, before we have a product candidate ready for commercialization.

Even if we obtain regulatory approval to market a product candidate, our future revenues will depend upon the size of any markets in which our product candidates have received approval, our ability to achieve sufficient market acceptance, reimbursement from third-party payers and other factors.

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We review our long-lived tangible and intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

We also test our goodwill and indefinite-lived intangible assets for impairment at least annually in the fourth quarter, or when events or changes in the business environment indicate that the carrying value of the reporting unit may exceed its fair value.

We also test our indefinite-lived intangible assets for impairment at least annually in the fourth quarter, or when events or changes in the business environment indicate that the carrying value of the reporting unit may exceed its fair value.

During 2019, the development activities under our SparVax-L governmental contract were completed with no future funding identified.

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We do not expect to generate revenue from product sales, licensing fees, royalties, milestones, contract research or other sources in an amount sufficient to fully fund our operations for the foreseeable future, if ever.

Therefore, we will use our existing cash resources, together with funding received from BARDA, and will require additional funds to maintain our operations, continue our research and development programs, commence future preclinical studies and clinical trials, seek regulatory approvals and manufacture and market our products.

Therefore, we will use our existing cash resources, together with funding received from BARDA and MTEC, and will require additional funds to maintain our operations, continue our research and development programs, commence future preclinical studies and clinical trials, seek regulatory approvals and manufacture and market our products.

As of December 31, 2020, our cash and short-term investment balance was $216.0 million.

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the scope, progress, results and costs of preclinical development, laboratory testing and clinical trials for our other product candidates;

the amount of funding that we receive from BARDA, other government agencies and other non-dilutive funding sources;

the amount of funding that we receive from BARDA, MTEC, other government agencies and other non-dilutive funding sources;

the number and development requirements of other product candidates that we pursue;

the timing of, and the costs involved in, obtaining regulatory approvals for our product candidates if clinical trials are successful and the outcome of regulatory review of our product candidates;

our ability to contract with third-party manufacturing facilities and establish processes that meet regulatory requirements for commercialization;

our ability to contract with third-party manufacturing facilities for adequate supply and to establish processes that meet regulatory requirements for commercialization;

the cost and timing of future commercialization activities for our products, if any of our product candidates are approved for marketing, including product manufacturing, marketing, sales and distribution costs;

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Raising additional capital may cause dilution to stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates on unfavorable terms.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of public or private equity offerings, debt financings, BARDA funding, and license and development agreements through strategic partnerships with third parties.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of public or private equity offerings, debt financings, BARDA funding, MTEC funding and license and development agreements through strategic partnerships with third parties.

adversely affect your rights as a stockholder.

Debt or preferred stock financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such as incurring additional debt, issuing additional equity, making capital expenditures or declaring dividends.

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Our preclinical and clinical results are not necessarily predictive of the final results of our ongoing or future clinical trials.

We have completed a Phase 2 clinical trial with NasoVAX;

plan to initiate Phase 2 clinical development of HepTcell in 2020;

are in Phase 1 clinical development with NasoShield;

and are completing pre-clinical activities on ALT-801 and ALT-702.

We have completed a Phase 2 clinical trial of NasoVAX;

have initiated a Phase 2 clinical trial of HepTcell;

are conducting a Phase 1/2 clinical trial of T-COVID;

and, are currently in Phase 1 clinical development with NasoShield, ALT-801, and AdCOVID;.

Success in preclinical studies may not be predictive of similar results in humans during clinical trials, and successful results from early or small clinical trials of a product candidate may not be replicated in later and larger clinical trials.

Interim results from clinical trials may not be predictive of final results from clinical trials.

Additionally, we have utilized an “open-label” trial design in the past, and may do so again in the future.

An “open-label” clinical trial is one where both the patient and investigator know whether the patient is receiving the investigational product candidate or either an existing approved drug or placebo.

Most typically, open-label clinical trials test only the investigational product candidate and sometimes may do so at different dose levels.

Open-label clinical trials are subject to various limitations that may exaggerate any therapeutic effect as patients in open-label clinical trials are aware when they are receiving treatment.

Open-label clinical trials may be subject to a “patient bias” where patients perceive their symptoms to have improved merely due to their awareness of receiving an experimental treatment.

In addition, open-label clinical trials may be subject to an “investigator bias” where those assessing and reviewing the physiological outcomes of the clinical trials are aware of which patients have received treatment and may interpret the information of the treated group more favorably given this knowledge.

The results from an open-label trial may not be predictive of future clinical trial results with any of our product candidates for which we include an open-label clinical trial when studied in a controlled environment with a placebo or active control.

Clinical trials are expensive, time consuming and uncertain as to outcome, and we cannot guarantee that any of these activities will be successful.

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For example, we suspended the development of a Densigen platform-based product candidate, Flunisyn, which was being developed as a T-cell vaccine for the treatment of influenza, in favor of NasoVAX.

Clinical trials with this product candidate showed that it was well tolerated and able to induce robust T-cell responses against the viral sequences represented, but a comparison of the entire study population in later-stage clinical trials showed no statistical differences between the vaccinated and placebo groups for several measures of protection.

In addition, we can offer no assurances that we have correctly estimated the resources or personnel necessary to seek partners, co-developers or acquirers for our biodefense programs.

If a larger workforce or one with a different skillset is ultimately required to maintain these operations, we may be unable to maximize our existing anthrax vaccine program.

Our product candidates, all of which are biological drug candidates, are subject to extensive governmental regulations relating to, among other things, research, clinical trials, manufacturing, import, export and commercialization.

Furthermore, the timing of the marketing approval for our NasoShield product candidate is subject to obtaining continued funding and consent from BARDA, which is uncertain.

Our pursuit of a potential vaccine for the COVID-19 is at an early stage and may never enter into clinical testing or be approved.

In response to the global outbreak of coronavirus, we are pursuing the development of a single-dose vaccine to protect against COVID-19.

The development of the vaccine is in very early stages and has not advanced to clinical testing, and we may be unable to produce a vaccine that successfully prevents the virus in a timely manner, if at all.

If the outbreak is effectively contained or the risk of coronavirus infection is diminished or eliminated before we can successfully develop and manufacture our product candidate, if ever, the commercial viability of such product candidate may be diminished.

We are also committing financial resources and personnel to the development of this product candidate which may cause delays in or otherwise negatively impact our other development programs, despite uncertainties surrounding the longevity and extent of coronavirus as a global health concern.

Our business could be negatively impacted by our allocation of significant resources to a global health threat that is unpredictable and could rapidly dissipate or against which our vaccine may not be effective.

Clinical trials with this product candidate showed that it was generally well-tolerated and able to induce robust T-cell responses against the viral sequences represented, but a comparison of the entire study population in later-stage clinical trials showed no statistical differences between the vaccinated and placebo groups for several measures of protection.

In addition, we can offer no assurances that we have correctly estimated the resources or personnel necessary to seek partners, co-developers or acquirers for our programs.

If a larger workforce or one with a different skillset is ultimately required to maintain these operations, we may be unable to maximize our existing programs.

The manufacture of our product candidates is complex and we may encounter difficulties in production, particularly with respect to acquisition of materials, process development or scaling-up of our manufacturing capabilities.

The manufacture of our product candidates is complex, highly-regulated and subject to multiple risks.

The complex processes associated with the manufacture of our product candidates expose us to various manufacturing challenges and risks, which may include delays in manufacturing our product candidates, limits on our ability to increase manufacturing capacity, and the potential for product failure and product variation that may interfere with our clinical development plans and add additional costs.

It is possible that we will make changes to our manufacturing process at various points during product development or commercialization for various reasons, such as controlling costs, achieving scale, decreasing processing time, increasing manufacturing success rate, or other reasons.

Such changes can be costly and carry the risk that they will not achieve their intended objectives, or these changes could cause our product candidates to perform differently and affect the results of current or future clinical trials, or the performance of a commercialized product.

In some circumstances, changes in the manufacturing process may require us to perform analytical or clinical comparability studies and to collect additional data prior to undertaking more advanced clinical trials, and such studies may introduce additional costs or delays to the program.

We may be required to collect additional clinical data from any modified process prior to obtaining marketing approval for the product candidate produced with such modified process.

If clinical data are not ultimately comparable to that seen in the earlier trials in terms of safety or efficacy, we may be required to make further changes to our process

and/or undertake additional clinical testing, either of which could significantly delay the clinical development or commercialization of the associated product candidate .

In 2020, we initiated the manufacture of clinical lots of AdCOVID and in parallel began technology transfer to multiple commercial scale CMOs in preparation for process scale-up.

Although we have added, and are continuing to add, employees with experience in manufacturing products similar to our product candidates, we have limited experience as a company manufacturing product candidates for use in clinical trials and no experience as a company manufacturing product candidates for commercial supply.

We may never be successful in manufacturing product candidates in sufficient quantities or with sufficient quality for some or all of our clinical or commercial uses.

Even if we are successful in developing our manufacturing capabilities sufficient for our clinical and commercial uses, our manufacturing capabilities could be affected by cost-overruns, unexpected delays, equipment failures, labor shortages, operator error, natural disasters, availability of qualified personnel, difficulties with logistics and shipping, problems regarding yields or stability of product, product contamination or other quality control issues, power failures, and numerous other factors that could prevent us from realizing the intended benefits of our manufacturing strategy and have a material adverse effect on our business.

Compliance with cGMP requirements and other quality or regulatory issues may arise during our internal efforts to manufacturing our product candidates, and with our current or any future CMOs.

Furthermore, ongoing stability studies subsequent to manufacture must be periodically conducted to demonstrate that our product candidates do not undergo unacceptable deterioration over its shelf life.

If issues affecting the quality of our product candidates, our manufacturing facilities, or those of our CMOs are discovered, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the issue.

To the extent any adversely affected material is being used in an ongoing clinical trial, the FDA could impose a clinical hold on our study to investigate and remedy the quality issue.

We cannot assure that any manufactured product or product candidate will not suffer a loss is stability or that other issues relating to the manufacture of our product candidates will not occur in the future.

Additionally, we and our CMOs may experience manufacturing difficulties due to resource constraints, material constraints, or as a result of labor disputes or unstable political environments.

If we or our CMOs were to encounter any of these difficulties, our ability to provide our product candidate to patients in clinical trials, or to provide product for treatment of patients once approved, would be jeopardized.

We may encounter substantial delays in our clinical trials, or our clinical trials may fail to demonstrate the safety and efficacy of our product candidates to the satisfaction of applicable regulatory authorities.

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Events that may prevent successful or timely completion of clinical development include:

delays in reaching a consensus with regulatory agencies on trial design;

delays in reaching agreement on acceptable terms with prospective contract research organizations (“CROs”) and clinical trial sites;

delays in obtaining required approvals from the Institutional Revenue Board (“IRB”) or other similar committees or bodies at each clinical trial site;

delays or failure in reaching a consensus with regulatory agencies on trial design;

delays or failure in reaching agreement on acceptable terms with prospective contract research organizations (“CROs”) and clinical trial sites;

delays or failure in obtaining required approvals from the Institutional Review Board (“IRB”) or other similar committees or bodies at each clinical trial site;

imposition of a clinical hold by regulatory agencies for any reason, including safety concerns raised by other clinical trials of similar product candidates that may reflect an unacceptable risk with the patient population, technology platform, product stability or after an inspection of clinical operations or trial sites;

failure to perform clinical trials in accordance with the FDA’s Good Clinical Practices (“GCP”) or applicable regulatory guidelines in other countries, including the United Kingdom;

delays in the testing, validation, manufacturing and delivery of the product candidates to the clinical sites;

the number of patients required for our clinical trials may be larger than we anticipate, enrollment in our clinical trials may be slower than we anticipate or participants may, including as a result of the COVID-19 pandemic, withdraw from our clinical trials, fail to complete dosing or fail to return for post-treatment follow-up at higher rates than we anticipate, any of which could result in significant delay;

delays or failure in the testing, validation, manufacturing and delivery of the product candidates to the clinical sites;

any shelter-in-place orders from local, state or federal governments or clinical trial site policies resulting from the COVID-19 pandemic that determine essential and non-essential functions and staff, which may impact the ability of site staff to conduct assessments, or result in delays to the conduct of the assessments, as part of our clinical trial protocols, or the ability to enter assessment results into clinical trial databases in a timeline manner;

the number of patients required for our clinical trials may be larger than we anticipate, enrollment in our clinical trials may be slower than we anticipate or participant s may , including as a result of the COVID-19 pandemic, withdraw from our clinical trials, fail to complete dosing or fail to return for post-treatment follow-up at higher rates than we anticipate, any of which could result in significant delay;

withdrawal of clinical trial sites from our clinical trials, including as a result of changing standards of care or the ineligibility of a site to participate;

occurrence of serious adverse events in clinical trials that are associated with the product candidate that are viewed to outweigh its potential benefits;

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the regulatory requirements for product approval may not be explicit, may evolve over time and may diverge by jurisdiction;

evolution in the standard of care that require amendments to ongoing clinical trials and/or the conduct of additional preclinical studies or clinical trials;

changes in regulatory requirements and guidance that require amending or submitting new clinical protocols.

We, the FDA, other regulatory authorities outside the United States, or an IRB may suspend a clinical trial at any time for various reasons, including if it appears that the clinical trial is exposing participants to unacceptable health risks or if the FDA or one or more other regulatory authorities outside the United States find deficiencies in our IND or similar application outside the United States or the conduct of the trial.

Delays, including delays caused by the above factors, can be costly and could negatively affect our ability to complete a clinical trial.

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We cannot give any assurance that we will be able to resolve any future clinical holds imposed by the FDA or other regulatory authorities outside of the United States, or any delay caused by manufacturing failures or other factors described above or any other factors, on a timely basis or at all.

If we are not able to successfully initiate and complete subsequent clinical trials, we will not be able to obtain regulatory approval and will not be able to commercialize our product candidates.

If we are not able to successfully initiate and complete clinical trials, we will not be able to obtain regulatory approval and will not be able to commercialize our product candidates.

Even if our clinical trials are successfully completed as planned, the results may not support approval of our product candidates under the laws and regulations of the FDA or other regulatory authorities outside the United States.

The clinical trial process may fail to demonstrate that our product candidates are both safe and effective for their intended uses.

Pre-clinical and clinical data and analyses are often able to be interpreted in different ways.

Even if we view our results favorably, if a regulatory authority has a different view, we may still fail to obtain regulatory approval of our product candidates.

This, in turn, would significantly adversely affect our business prospects.

We may find it difficult to enroll patients in our clinical trials, which could delay or prevent clinical trials of our product candidates.

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The timing of our clinical trials depends on the speed at which we can recruit patients to participate in testing our product candidates.

If patients are unwilling to participate in our trials because of the COVID-19 pandemic and restrictions on travel or healthcare institution policies, negative publicity from adverse events in the biotechnology industries, public perception of vaccine safety issues or for other reasons, including competitive clinical trials for similar patient populations, the timeline for recruiting patients, conducting studies and obtaining regulatory approval of potential products may be delayed.

obtaining regulatory approval of potential products may be delayed.

These delays could result in increased costs, delays in advancing our product development, delays in testing the effectiveness of our technology or termination of the clinical trials altogether.

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perceived risks and benefits of the product candidate being tested;

willingness or availability of patients to participate in our clinical trials (including due to the COVID-19 pandemic);

proximity and availability of clinical trial sites for prospective patients;

our ability to recruit clinical trial investigators with appropriate competencies and experience;

availability of competing vaccines and/or therapies and related clinical trials;

efforts to facilitate timely enrollment in clinical trials;

our ability to obtain and maintain patient consents;

patient referral practices of physicians;

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Consequently, it may be difficult to predict the time and cost of product development.

For example, the RespirVec platform involves intranasally administered adenovectored vaccines and the Densigen platform involves synthetic peptide T-cell vaccines.

Unforeseen problems with our approaches to vaccines and immunotherapy may prevent further development or approval of our product candidates.

For example, the RespirVec platform involves intranasally administered adenovectored vaccines, the Densigen platform involves synthetic peptide T-cell vaccines and, the EuPort platform involves a novel peptide-based dual GLP-1/glucagon receptor agonist.

Unforeseen problems with our approaches to vaccines and therapies may prevent further development or approval of our product candidates.

Because of the novelty of our approaches, there may be unknown safety risks associated with the vaccines that we develop or the clinical endpoints that we establish in trials may not be generally accepted by regulatory agencies, which may therefore require us to perform large field studies to demonstrate efficacy.

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Development of vaccines with novel adjuvants requires evaluation in larger numbers of patients prior to approval than would be typical for therapeutic drugs.

Guidelines for evaluation of vaccines with novel adjuvants have been established by the FDA and other regulatory bodies and expert committees.

Guidelines for evaluation of vaccines with novel

adjuvants have been established by the FDA and other regulatory bodies and expert committees.

Any vaccine, because of the presence of an adjuvant, may have side effects considered to pose too great a risk to patients to warrant approval of the vaccine.

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however, GSK pulled the vaccine due to low sales resulting from the negative public perception associated with the reports on joint pain.

In addition, parental aversion to new vaccines or vaccines in general may adversely influence later stage clinical trials of our influenza product candidate or, if approved, its commercial success.

In addition, parental aversion to new vaccines or vaccines in general may adversely influence later stage clinical trials of our COVID-19 product candidates or, if approved, its commercial success.

We rely, and expect to continue to rely, on third parties to conduct preclinical studies and clinical trials for our product candidates, and if they do not properly and successfully perform their obligations to us, we may not be able to obtain regulatory approvals for our product candidates.

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We compete with many other companies for the resources of these third parties.

The third parties on whom we rely generally may terminate their engagements at any time and having to enter into alternative arrangements would delay development and commercialization of our product candidates.

The third parties on whom we rely generally may terminate their engagements at any time and causing us to enter into alternative arrangements would delay development and commercialization of our product candidates.

Our reliance on these third parties for research and development activities will reduce our control over these activities but will not relieve us of our responsibilities.

For example, the FDA and foreign regulatory authorities require compliance with applicable law, regulations and standards, including GCP, for designing, conducting, monitoring, recording, analyzing and reporting the results of clinical trials to assure that the data and results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected.

Regulatory authorities enforce these GCP requirements through periodic inspections of trial sponsors, clinical investigators and trial sites.

We cannot be certain that, upon inspection, such regulatory authorities will determine that any of our clinical trials complies with GCP requirements.

Although we rely on third parties to conduct our clinical trials, we are responsible for ensuring that each of these clinical trials is conducted in accordance with applicable law, regulations and standards, including our general investigational plan and protocol.

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If any of these events occur, we may not be able to obtain regulatory approval of our product candidates on a timely basis or at all.

We also expect to rely on other third parties to store and distribute drug supplies for our clinical trials.

Any performance failure on the part of our distributors could delay clinical development or marketing approval of our product candidates or commercialization of our products, producing additional losses and depriving us of potential product revenue.

Any third parties conducting aspects of our preclinical studies or clinical trials will not be our employees and, except for remedies that may be available to us under our agreements with such third parties, we cannot control whether they devote sufficient time and resources to our preclinical studies and clinical trials.

These third parties may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials or other product development activities, which could affect their performance on our behalf.

If these third parties do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they cannot perform their contractual duties or obligations due to the impacts of the COVID-19 pandemic on their operations or at the sites they are overseeing, if they need to be replaced or if the quality or accuracy of the preclinical or clinical data they obtain is compromised due to the failure to adhere to our protocols or regulatory requirements or for other reasons, our development timelines, including clinical development timelines, may be extended, delayed or terminated and we may not be able to complete development of, receive regulatory approval of or successfully commercialize our product candidates.

As a result, our financial results and the commercial prospects for our product candidates would be harmed, our costs could increase and our ability to generate revenue could be delayed.

If any of our relationships with these third parties terminates, we may not be able to enter into arrangements with alternative third parties or to do so on commercially reasonable terms.

Switching or adding additional third party service providers involves

additional cost and requires management time and focus.

In addition, there is a natural transition period when a new third party service provider begins work.

As a result, delays may occur, which can materially impact our ability to meet our desired development timelines.

We face substantial competition from other pharmaceutical and biotechnology companies, which may result in others discovering, developing or commercializing products before, or more successfully, than we do.

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Large and established companies such as Roche, Novartis, Pfizer and Sanofi Pasteur, among others, compete in the same market as our product candidates.

These companies compete with us with their greater experience and resources to support their research and development efforts, conducting testing and clinical trials, obtaining regulatory approvals to market products, manufacturing such products on a broad scale and marketing approved products.

These companies compete with us with their greater experience and resources to support their research and development efforts, conduct testing and clinical trials, obtain regulatory approvals to market products, manufacture such products on a broad scale and market approved products.

These companies also compete with us by having significantly greater research and marketing capabilities than we do and may also have products that have been approved or are in late stages of development and have collaborative arrangements in our target markets with leading companies and research institutions.

Established pharmaceutical companies may also invest heavily to accelerate discovery and development of novel compounds or to in-license novel compounds that could make the product that we develop obsolete.

We also face competition from smaller companies who, like us, rely on investors to fund research and development and compete for co-development and licensing opportunities from large and established pharmaceutical companies.

We face competition for ALT-801, our dual GLP-1/glucagon dual agonist product candidate for the treatment of NASH, from companies such as Genfit SA, which is developing a peroxisime proliferator activated receptor agonist;

Viking Therapeutics, which is developing a thyroid hormone receptor beta selective agonist;

and Intercept Pharmaceuticals, which is developing a farnesoid X receptor agonist.

We face competition for HepTcell, our immunotherapeutic HBV product candidate, from companies such as Transgene which is developing an adenovirus-based vaccine;

Arrowhead Pharmaceuticals, which is developing an HBV therapeutic vaccine;

and Inovio, which is developing a DNA vaccine delivered by in vivo electroporation.

We face competition for ALT-702, our conjugated TLR7/8 agonist

product candidate for the treatment of cancer, from companies such as Curevac, which is developing a CV8102, a TLR7/8/RIG-1 agonist based on noncoding single stranded RNA for the treatment of solid tumors;

and Urogen, which is developing a TLR7 agonist for bladder cancer.

We face competition from multiple biotechnology and bio-pharmaceutical companies, such as Pfizer, Moderna, AstraZeneca, Regeneron and Johnson & Johnson, that are in the process of developing vaccines and therapeutics against COVID-19.

Certain of these vaccine and therapeutic technologies are being developed at a faster rate than AdCOVID and T-COVID or have superior immunogenicity or manufacturability attributes.

We face competition for NasoShield, our single dose intranasal anthrax vaccine product candidate, from Emergent Biosolutions which manufactures the existing anthrax vaccine.

and additionally we generally face substantial competition for government funding from companies that develop products with government contracts and grants.

Finally, we face competition for NasoVAX, our intranasal influenza candidate from Novavax, which is developing an influenza vaccine;

Additionally, we generally face substantial competition for government funding from companies that develop products with government contracts and grants.

We face competition for NasoVAX, our intranasal influenza candidate from Novavax, which is developing an influenza vaccine;

and a number of companies of varying sizes are also pursuing the development of a “universal” flu vaccine.

Any of these smaller companies may develop competing products more rapidly than we do.

We face competition for ALT-801, our dual GLP-1/glucagon dual agonist product candidate for the treatment of NASH, from companies such as Intercept Pharmaceuticals, which is developing a farnesoid X receptor agonist;

Madrigal Pharmaceuticals, which is developing an orally administered, small-molecule, liver-directed, thyroid hormone receptor (THR) β-selective agonist;

and, Akero Therapeutics, which is developing a fibroblast growth factor 21 analog.

Finally, we face competition for HepTcell, our immunotherapeutic HBV product candidate, from companies such as Transgene which is developing an adenovirus-based vaccine;

Arrowhead Pharmaceuticals, which is developing an HBV therapeutic vaccine;

and Inovio, which is developing a DNA vaccine delivered by in vivo electroporation.

Any of these companies may develop competing products more rapidly than we do.

As a result of all of these factors, our competitors may succeed in obtaining patent protection and/or FDA approval or discovering, developing and commercializing products before we do.

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If we are not able to compete effectively against potential competitors, our business will not grow, and our financial condition and operations will suffer.

The market opportunities for any current or future product candidate we develop, if and when approved, may be limited to those patients who are ineligible for established therapies or for whom prior therapies have failed, and may be small.

Cancer therapies are sometimes characterized as first-line, second-line, or third-line, and the FDA often approves new therapies initially only for third-line use.

When cancer is detected early enough, first-line therapy, usually chemotherapy, hormone therapy, surgery, radiation therapy or a combination of these, is sometimes adequate to cure the cancer or prolong life without a cure.

Second- and third-line therapies are administered to patients when prior therapy is not effective.

We expect to initially seek approval of ALT-702 and any other product candidates we develop as a therapy for patients who have received one or more prior treatments.

Subsequently, for those products that prove to be sufficiently beneficial, if any, we would expect to seek approval potentially as a first-line therapy, but there is no guarantee that product candidates we develop, even if approved, would be approved for first-line therapy, and, prior to any such approvals, we may have to conduct additional clinical trials.

Even if we obtain regulatory approval, that approval may be for indications or patient populations that are not as broad as intended or desired or may require labeling that includes significant use or distribution restrictions or safety warnings

We are heavily dependent on the success of our leading product candidates, ALT-801, HepTcell, and NasoShield.

If we ultimately are unable to develop, obtain regulatory approval for or commercialize ALT-801, HepTcell, and NasoShield, or any other product candidate, our business will be substantially harmed.

We are heavily dependent on the success of our leading product candidates, AdCOVID and ALT-801.

If we ultimately are unable to develop, obtain regulatory approval for or commercialize AdCOVID, ALT-801, or any other product candidate, our business will be substantially harmed.

We currently have no products approved for commercial distribution.

Our business strategy is to build a pipeline of product candidates using our proprietary platforms, including our leading product candidates ALT-801, HepTcell, and NasoShield, and to progress those product candidates through clinical development for the treatment of different types of diseases.

Our business strategy is to build a pipeline of product candidates using our proprietary platforms, including our leading product candidates AdCOVID and ALT-801, and to progress those product candidates through clinical development for the treatment of different types of diseases.

We may not be able to develop products that are safe and effective for all or any of the indications that we target.

Even if we are successful in building a product pipeline, the potential product candidates that we identify may not be suitable for clinical development for a number of reasons, including causing harmful side effects or demonstrating other characteristics that indicate a low likelihood of receiving marketing approval or achieving market acceptance.

approval or achieving market acceptance.

If our methods of identifying potential product candidates fail to produce a pipeline of potentially viable product candidates, then our success as a business will be dependent on the success of fewer potential product candidates, which introduces risks to our business model and potential limitations to any success we may achieve .

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Our spending on current and future discovery and preclinical development programs and product candidates for specific indications may not yield any commercially viable products.

Furthermore, until such time as we are able to build a broader product candidate pipeline, if ever, any adverse developments with respect to our leading product candidates, ALT-801, HepTcell, and NasoShield, would have a more significant adverse effect on our overall business than if we maintained a broader portfolio of product candidates.

Furthermore, until such time as we are able to build a broader product candidate pipeline, if ever, any adverse developments with respect to our leading product candidates, AdCOVID and ALT-801, would have a more significant adverse effect on our overall business than if we maintained a broader portfolio of product candidates.

Even if a current or future product candidate receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success.

If any current or future product candidate we develop receives marketing approval, whether as a single agent or in combination with other therapies, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors, and others

in the medical community.

The degree of market acceptance of any product candidate, if approved for commercial sale, will depend on a number of factors, including:

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the ability to obtain sufficient third-party coverage and adequate reimbursement, including with respect to the use of the approved product as a combination therapy;

the cost of treatment in relation to alternative treatments, including generic products;

the extent and strength of our third party manufacturer and supplier support;

the extent and strength of marketing and distribution support;

the limitations or warnings contained in a product’s approved labeling;

distribution and use restrictions imposed by the FDA or other regulatory authorities outside the United States or that are part of a REMS or voluntary risk management plan;

the prevalence and severity of any side effects.

We may not be able to comply with the requirements of foreign jurisdictions in conducting trials within the United Kingdom or any other foreign country.

We have conducted clinical trials in the United Kingdom and South Korea for HepTcell, and future clinical trials may be conducted in other foreign jurisdictions.

Our ability to successfully initiate, enroll and complete a clinical trial in the United Kingdom or any other foreign country is subject to numerous risks unique to conducting business in foreign countries, including:

For example, even if our products have been approved by the FDA, physicians and patients may not immediately be receptive to them and may be slow to adopt them.

If our products do not achieve an adequate level of acceptance among physicians, patients and third party payors, we may not generate meaningful revenues and we may not become profitable.

We may not be able to comply with the requirements of foreign jurisdictions in conducting trials within the United Kingdom, European Union, Australia or any other foreign country.

We are conducting our Phase 2 clinical trial of HepTcell in the U.S., United Kingdom, Canada, Germany and Spain;

conducting our ALT-801 Phase 1 clinical trial in Australia;

and future clinical trials may be conducted in other foreign jurisdictions.

Our ability to successfully initiate, enroll and complete a clinical trial in any other foreign country is subject to numerous risks unique to conducting business in foreign countries, including:

difficulty in establishing or managing relationships with CROs and physicians;

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If we are unable to continue to attract and retain high quality personnel, our ability to pursue our growth strategy will be limited.

A pandemic, epidemic or outbreak of an infectious disease in the United States may adversely affect our business.

A pandemic, epidemic or outbreak of an infectious disease in the United States such as the COVID-19 pandemic may adversely affect our business.

If a pandemic, epidemic or outbreak of an infectious disease occurs in the United States or worldwide, our business may be adversely affected.

In December 2019, a novel strain of coronavirus, COVID-19, was identified in Wuhan, China.

This virus continues to spread globally and, as of March 2020, has spread to over 70 countries, including the United States and has been declared a pandemic by the World Health Organization.

This virus continues to spread globally and has been declared a pandemic by the World Health Organization.

The spread of COVID-19 has impacted the global economy and may impact our operations, including the potential interruption of our clinical trial activities, regulatory reviews and our supply chain.

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These and similar, and perhaps more severe, disruptions in our operations could negatively impact our business, operating results, and financial condition.

In addition, the trading prices for our common stock and other biopharmaceutical companies have been highly volatile as a result of the COVID-19 epidemic.

In addition, the trading prices for our common stock and other biopharmaceutical companies have been highly volatile as a result of the COVID-19 pandemic .

As a result, we may face difficulties raising capital through sales of our common stock or such sales may be on unfavorable terms.

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A significant outbreak of coronavirus and other infectious diseases could result in a widespread health crisis that could adversely affect the economies and financial markets worldwide, resulting in an economic downturn that could impact our business, financial condition and results of operations.

Legal, political and economic uncertainty surrounding the planned exit of the United Kingdom (“U.K.”)), from the European Union (“EU”) may be a source of instability in international markets, create significant currency fluctuations, adversely affect our operations in the U.K.

Legal, political and economic uncertainty surrounding the exit of the U.K., from the European Union (“EU”) may be a source of instability in international markets, create significant currency fluctuations, adversely affect our operations in the U.K.

and pose additional risks to our business, revenue, financial condition, and results of operations.

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ceased being a Member State of the EU on January 31, 2020.

However, the terms of the withdrawal have yet to be fully negotiated.

The implementation period began February 1, 2020 and will continue until December 31, 2020.

During this 11-month period, the UK will continue to follow all of the EU’s rules and its trading relationship will remain the same.

However, regulations (including financial laws and regulations, tax and free trade agreements, intellectual property rights, data protection laws, supply chain logistics, environmental, health and safety laws and regulations, medicine licensing and regulations, immigration laws and employment laws), have yet to be addressed.

The U.K.’s withdrawal from the EU has created significant uncertainty concerning the future relationship between the U.K.

On December 24, 2020, the EU and U.K.

reached an agreement in principle on the framework for their future relationship, the EU-UK Trade and Cooperation Agreement.

The Agreement primarily focuses on ensuring free trade between the EU and the U.K.

in relation to goods, including medicinal products.

Among the changes that will now occur are that Great Britain (England, Scotland and Wales) will be treated as a third country.

Northern Ireland will, with regard to EU regulations, continue to follow the EU regulatory rules.

As part of the Agreement, the EU and the U.K.

will recognize Good Manufacturing Practice (GMP) inspections carried out by the other Party and the acceptance of official GMP documents issued by the other Party.

The Agreement also encourages, although it does not oblige, the parties to consult one another on proposals to introduce significant changes to technical regulations or inspection procedures.

Among the areas of absence of mutual recognition are batch testing and batch release.

has unilaterally agreed to accept EU batch testing and batch release for a period of at least 2 years until 1 January 2023.

However, the EU continues to apply EU laws that require batch testing and batch release to take place in the EU territory.

This means that medicinal products that are tested and released in the U.K.

must be retested and re-released when entering the EU market for commercial use.

As regards marketing authorizations, Great Britain will have a separate regulatory submission process, approval process and a separate national marketing authorization.

Northern Ireland will, however, continue to be covered by the marketing authorizations granted by the European Commission.

This lack of clarity on future UK laws and regulations and their interaction with EU laws and regulations may negatively impact foreign direct investment in the UK, increase costs, depress economic activity, and restrict access to capital.

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Asset valuations, currency exchange rates and credit ratings may also be subject to increased market volatility.

and the EU are unable to negotiate acceptable agreements or if other EU Member States pursue withdrawal, barrier-free access between the UK and other EU Member States or among the European Economic Area overall could be diminished or eliminated.

The long-term effects of Brexit will depend on any agreements (or lack thereof) between the U.K.

and the EU and, in particular, any arrangements for the U.K.

to retain access to EU markets either during a transitional period or more permanently.

Such a withdrawal from the EU is unprecedented, and it is unclear how the U.K’s access to the European single market for goods, capital, services and labor within the EU, or single market, and the wider commercial, legal and regulatory environment, will impact our current and future operations (including business activities conducted by third parties and contract manufacturers on our behalf) and clinical activities (including, without limitation, clinical activities for CTX001) in the U.K.

We may also face new regulatory costs and challenges that could have an adverse effect on our operations.

Depending on the terms of the U.K’s withdrawal from the EU, the U.K.

could lose the benefits of global trade agreements negotiated by the EU on behalf of its members, which may result in increased trade barriers that could make our doing business in the EU and the EEA more difficult.

Furthermore, at present, there are no indications of the effect Brexit will have on the pathway to obtaining marketing approval for any of our product candidates in the U.K., or what, if any, role the EMA may have in the approval process.

Even prior to any change to the U.K’s relationship with the EU, the announcement of Brexit has created economic uncertainty surrounding the terms of Brexit and its consequences could adversely impact customer confidence resulting in customers reducing their spending budgets on our solutions, which could adversely affect our business, revenue, financial condition, results of operations and could adversely affect the market price of our common stock.

Our acquisitions may expose us to unknown liabilities.

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Tax laws could change.

Future changes in tax laws resulting from legislative, administrative or judicial decisions may have adverse tax consequences to a holders of our common stock.

Any such change may or may not be retroactive to a time preceding its occurrence.

The rules dealing with U.S.

federal, state, and local income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S.

Treasury Department.

Changes to tax laws (which changes may have retroactive application) could adversely affect us or holders of our common stock.

In recent years, many such changes have been made and changes are likely to continue to occur in the future.

Future changes in tax laws resulting from legislative, administrative or judicial decisions may have adverse tax consequences on our business, cash flow, financial condition or results of operations or to a holder of our common stock.

Shareholders should consult with their legal and tax advisers regarding the implications of potential changes in tax laws on an investment in our common stock .

We may not be able to utilize a significant portion of our net operating loss carryforwards, which could harm our results of operations.

federal net operating loss carryforwards of approximately $29.6 million as of December 31, 2019.

federal and state net operating loss carryforwards of approximately $45.7 million as of December 31, 2020.

Of this amount, $6.6 million has a 20-year carry forward period that will expire at various dates beginning in 2021.

Under current law, the remaining amount of $23.0 million has an unlimited life.

As of December 31, 2019, we have recorded a valuation allowance of $13.1 million against our net deferred tax asset.

The net operating loss carryforwards are reflective of a 382-limitation related to ownership changes as described below.

Under current law, the remaining amount of $39.1 million has an unlimited life and generally may not be carried back to prior taxable years except that net operating losses generated in 2018, 2019 and 2020 may be carried back five taxable years.

For net operating losses arising in taxable years beginning after December 31, 2017, we are permitted a net operating loss deduction that is limited to 80% of our taxable income in such year.

The net operating loss carryforwards are reflective of a 382-limitation related to ownership changes.

Under Section 382 of the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating losses, or NOLs, to offset future taxable income.

For these purposes, an ownership change generally occurs where the aggregate stock ownership of one or more stockholders or groups of stockholders who owns at least 5% of a corporation’s stock increases its ownership by more than 50 percentage points over its lowest ownership percentage within a specified testing period.

Our existing NOLs are subject to limitations arising from previous ownership changes.

Our existing NOLs are subject to limitations arising from previous ownership changes that impact the timing and amount.

In addition, future changes in our stock ownership, many of which are outside of our control, could result in an ownership change.

Accordingly, we may not be able to utilize a material portion of our NOLs and our this could harm our future operating results by effectively increasing our future tax obligations.

Accordingly, we may not be able to utilize a material portion of our NOLs and this could harm our future operating results by effectively increasing our future tax obligations.

As of December 31, 2020, we have recorded a valuation allowance of $18.7 million against our net deferred tax asset.

Risks Related to the Development of COVID-19 Therapeutics

Our pursuit of potential therapeutic and prophylactic treatments for COVID-19 is at an early stage and subject to many risks.

We may be unable to receive emergency use authorization or approval for any of our COVID-19 product candidates in a timely manner, if at all, and our COVID-19 product candidates may never be authorized for emergency use or approved.

The FDA cleared our IND application in 2020 to proceed with a Phase 1/2 clinical trial of T-COVID, our investigational agent for the treatment of early COVID-19.

The FDA recently cleared our IND for AdCOVID, our intranasal vaccine candidate for COVID-19.

We have initiated the Phase 1 clinical trial for AdCOVID and are enrolling in the T-COVID trial.

We may experience difficulties or delays in enrolling patients in clinical trials due to the impact of the global COVID-19 pandemic or other reasons.

Many of the risks related to the development of these product candidates are beyond our control, including risks related to clinical development, the regulatory submission process, potential threats to our intellectual property rights and manufacturing delays or difficulties.

We may be unable to produce an efficacious and/or approved product for the treatment of patients with early COVID-19 in a timely manner, if at all.

The results of preclinical studies from our COVID-19 product candidates may not be predictive of the results of clinical trials, and the results of any early-stage clinical trials we commence may not be predictive of the results of the later-stage clinical trials.

There can be no assurance that any of our clinical trials for our COVID-19 product candidates, or any other of our product candidates, will ultimately be successful or support further clinical development.

In addition, the interpretation of the data from our clinical trials of T-COVID or AdCOVID by FDA and other regulatory agencies may differ from our interpretation of such data and the FDA or other regulatory agencies may require that we conduct additional studies or analyses.

Any of these factors could delay or prevent us from receiving regulatory approval of T-COVID or AdCOVID and there can be no assurance that either product candidate will be approved in a timely manner, if at all.

If the COVID-19 outbreak is effectively contained or the risk of coronavirus infection is diminished or eliminated before we can successfully develop and manufacture our product candidate, the commercial viability of such product candidate may be diminished or eliminated.

Two vaccines for COVID-19 were granted Emergency Use Authorization by the FDA in late 2020, and more are likely to

be authorized in the coming months .

In addition, other parties are currently developing therapeutic and vaccine candidates for COVID-19, which may be more efficacious than or may be approved prior to T-COVID or AdCOVID.

The regulatory pathway for T-COVID and AdCOVID is continually evolving, and may result in unexpected or unforeseen challenges.

The speed at which parties are acting to create and test many therapeutics and vaccines for COVID-19 is unusual, and evolving or changing plans or priorities within the FDA, including those based on new knowledge of COVID-19 and how the disease affects the human body, may significantly affect the regulatory timeline for our product candidates.

Results from ongoing clinical trials and discussions with regulatory authorities may raise new questions and require us to redesign proposed clinical trials, including revising proposed endpoints or adding new clinical trial sites or cohorts of subjects.

Any such developments could delay the development timeline for our product candidates and materially increase the cost of the development for such candidates.

Risks Related to the Regulatory Approval Process

We cannot guarantee how long it will take regulatory agencies to review our applications for product candidates, and we may fail to obtain the necessary regulatory approvals to market our product candidates.

If we are not able to obtain required regulatory approvals, we will not be able to commercialize our product candidates and our ability to generate revenue will be materially impaired.

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Any unexpected development in the regulatory approval process, including delays or denials of regulatory approvals or significant modifications to our product candidates required by our regulators, could materially and adversely affect our business, results of operations and financial condition, and could substantially harm our stock price.

To obtain marketing approval, United States laws require:

controlled research and human clinical testing;

establishment of the safety and efficacy of the product for each use sought;

government review and approval of a submission containing, among other things, manufacturing, pre-clinical and clinical data;

compliance with cGMP regulations.

The process of reviewing and approving a drug is time-consuming, unpredictable, and dependent on a variety of factors outside of our control.

The FDA and corresponding regulatory authorities in other jurisdictions have a significant amount of discretion in deciding whether or not to approve a marketing application.

Our product candidates could fail to receive regulatory approval from the FDA or comparable regulatory authorities outside the United States for several reasons, including:

disagreement with the design or implementation of our clinical trials ;

failure to demonstrate that our candidate is safe and effective for the proposed indication;

failure of clinical trial results to meet the level of statistical significance required for approval ;

failure to demonstrate that the product candidate’s benefits outweigh its risks;

disagreement with our interpretation of pre-clinical or clinical data;

inadequacies in the manufacturing facilities or processes of third-party manufacturers.

The FDA or a comparable regulatory authority outside the United States may require us to conduct additional pre-clinical and clinical testing, which may delay or prevent approval and our commercialization plans or cause us to abandon the development program.

Further, any approval we receive may be for fewer or more limited indications than we request, may not include labeling claims necessary for successful commercialization of the product candidate, or may be contingent upon our conducting costly post-marketing clinical trials.

Any of these scenarios could materially harm the commercial prospects of a product candidate, and our operations will be adversely effected.

Our product candidates may cause undesirable side effects or have other properties that delay or prevent their regulatory approval or limit their commercial potential.

Undesirable side effects caused by our product candidates or even competing products in development that utilize a common mechanism of action could cause regulatory authorities to interrupt, delay or halt clinical trials and could result in the denial of regulatory approval by the FDA or other regulatory authorities and potential product liability claims.

Significant adverse events caused by our product candidates or even competing products in development that utilize a common mechanism of action could cause us, an IRB or ethics committee, and/or regulatory authorities to interrupt, delay or halt clinical trials and could result in clinical trial challenges such as difficulties in patient recruitment, retention, and adherence, the denial of regulatory approval by the FDA or other regulatory authorities and potential product liability claims.

Serious adverse events deemed to be caused by our product candidates could have a material adverse effect on the development of our product candidates and our business as a whole.

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The most common adverse events observed in clinical trials for product candidates developed using the Densigen platform include injection site reactions, headache, malaise and fatigue.

We have not yet completed a clinical trial using our EuPort platform.

Our understanding of the relationship between our product candidates and these events, as well as our understanding of adverse events reported in future clinical trials of other product candidates, may change as we gather more information, and additional unexpected adverse events may be observed.

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jurisdictions, we will not be able to market our products in those jurisdictions.

Receiving and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be successful in receiving or maintaining regulatory approval of our product candidates in other jurisdictions.

We intend to market certain of our product candidates, if approved, in the United Kingdom and other international markets, in addition to the United States.

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The approval procedures vary among countries and may involve requirements for additional testing, and the time required to obtain approval may differ from that required to obtain FDA approval.

In addition, in many countries outside the United States, such as certain countries of the European Union, a vaccine must be approved for reimbursement, including the price that can be charged, before it can be approved for sale in that country.

In addition, in many

countries outside the United States, such as certain countries of the European Union, a vaccine or therapeutic must be approved for reimbursement, including the price that can be charged, before it can be approved for sale in that country.

In these countries, pricing discussions with governmental authorities can take considerable time after the receipt of marketing approval for a product, and additional clinical research may be required to enable comparison of the cost effectiveness of our product candidate to other available alternatives.

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We may not obtain foreign regulatory approvals on a timely basis, if at all.

Even if we receive regulatory approval for our product candidates, such products will be subject to ongoing regulatory review, which may result in significant additional expense and other restrictions.

Even if we receive regulatory approval for our product candidates, such products will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense and other restrictions, and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our product candidates.

Any regulatory approvals that we receive for our product candidates may be subject to limitations on the approved indicated uses for which the product may be marketed or to conditions of approval.

We may also be required to conduct post-marketing testing, including Phase 4 clinical trials, and surveillance to monitor the safety and efficacy of the product potentially over many years.

If the FDA or other regulatory authority approves any of our product candidates, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion and recordkeeping for the product will be subject to extensive and ongoing regulatory requirements.

If the FDA or other regulatory authority approves any of our product candidates, the manufacturing processes, labeling, packaging, distribution, import, export, adverse event reporting, storage, advertising, promotion and recordkeeping for the product will be subject to extensive and ongoing regulatory requirements.

These requirements include submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with cGMP, and compliance with cGMP and GCP for any clinical trials that we conduct post-approval.

Any such restrictions may result in significant additional expense or could limit sales of the approved product.

If we, or any of the third parties on which we rely, fail to meet those requirements, the FDA or comparable regulatory authorities outside the United States could initiate enforcement action.

Other consequences include the issuance of fines, warning letters, untitled letters or holds on clinical trials, product seizure or detention or refusal to permit the import or export of our product candidates, and permanent injunctions and consent decrees, including the imposition of civil or criminal penalties, among other consequences, that could significantly impair our ability to successfully commercialize a given product.

Later discovery of previously unknown problems with an approved product, including adverse events of unanticipated severity or frequency, or with manufacturing operations or processes, may result in, among other things:

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Even if we complete the necessary preclinical studies and clinical trials, the marketing approval process is expensive, time-consuming and uncertain and may prevent us or any of our existing or future collaboration partners from obtaining approvals for the commercialization of our current product candidates and any other product candidate we develop.

Any current or future product candidate we may develop and the activities associated with their development and commercialization, including their design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale, and distribution, are subject to comprehensive regulation by the FDA and other regulatory authorities in the United States and by comparable authorities in other countries.

Any current or future product candidate we may develop and the activities associated with their development and commercialization, including their design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale, import, export and distribution, are subject to comprehensive regulation by the FDA and other regulatory authorities in the United States and by comparable authorities in other countries.

Failure to obtain marketing approval for a product candidate will prevent us from commercializing the product candidate in a given jurisdiction.

We have not received approval to market any product candidates from regulatory authorities in any jurisdiction and it is possible that none of the product candidates we may seek to develop in the future will ever obtain regulatory approval.

We have not received approval to market any product candidates from regulatory authorities in any jurisdiction and it is possible that none of the product candidates we

may seek to develop in the future will ever obtain regulatory approval.

We have no experience in filing and supporting the applications necessary to gain marketing approvals and expect to rely on third-party CROs or regulatory consultants to assist us in this process.

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Any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.

Additionally, product approvals may be delayed as a result of the COVID-19 pandemic.

As of June 23, 2020, the FDA noted it is continuing to ensure timely reviews of applications for medical products during the COVID-19 pandemic in line with its user fee performance goals;

however, the FDA may not be able to continue its current pace and approval timelines could be extended, including where a pre-approval inspection or an inspection of clinical sites is required and due to the COVID-19 pandemic and travel restrictions, the FDA is unable to complete such required inspections during the review period.

In 2020, several companies announced receipt of complete response letters due to the FDA's inability to complete required inspections for their applications.

If we experience delays in obtaining approval or if we fail to obtain approval of any current or future product candidates we may develop, the commercial prospects for those product candidates may be harmed, and our ability to generate revenues will be materially impaired.

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We may also be subject to competition from biosimilar products in Europe.

To date, many biosimilar products have been authorized by the EMA.

To date, many biosimilar products have been authorized by the European Commission, after application at EMA for a centralized marketing authorization.

As in the United States the regulatory approval pathway for biosimilar products in Europe is abbreviated.

A biosimilar sponsor must however still provide all of the preclinical and clinical data required to demonstrate the similarity of their product with the reference product.

The level of data required is assessed on a case by case basis, but it will be less than that required for an original biological product.

The level of data

required is assessed on a case by case basis, but it will be less than that required for an original biological product.

The pathway is more complex than the abridged procedure that may be followed to obtain authorization of a generic version of a non-biological product, but it would still allow the biosimilar product to be brought to market more quickly and less expensively than our original product.

That said, in Europe applications for marketing authorizations in relation to biosimilar products are subject to the same data and market exclusivity rules that apply to generic non-biologic products so no biosimilar product can be approved or placed on the market during the period such exclusivity applies to our product.

Marketing authorization of a biosimilar product in Europe does not guarantee that the biosimilar product may be substituted for the reference product.

That said, in the EU, applications for marketing authorizations in relation to biosimilar products are subject to the same data and market exclusivity rules that apply to generic non-biologic products so no biosimilar product can be approved or placed on the market during the period such exclusivity applies to our product.

Marketing authorization of a biosimilar product in the EU does not guarantee that the biosimilar product may be substituted for the reference product.

Interchangeability of a biosimilar product with the reference product is not assessed by the EMA but this determination is left to each of the member states.

We cannot know at this stage the extent to which any biosimilar product would be interchangeable with our reference product, and this may vary between member states.

Pediatric exclusivity is another type of regulatory market exclusivity our competitors may pursue.

We may pursue pediatric exclusivity for one or more of our product candidates but may not succeed in obtaining it.

There is also a risk that a competitor may achieve pediatric exclusivity that would delay any potential approvals of our product candidates.

In the United States, the FDA has the authority to award additional exclusivity for approved products where the sponsor conducts specified testing on pediatric or adolescent populations upon the written request of the FDA.

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This six-month exclusivity runs from the end of these exclusivity protection periods.

In Europe, as well, pediatric studies are incentivized by the reward of additional exclusivity.

In the EU, as well, pediatric studies are incentivized by the reward of additional exclusivity.

Pediatric Investigation Plans (“PIPs”), are determined by the Pediatric Committee of the EMA.

Where an application for a marketing authorization is submitted in respect of a medicinal product designated as an orphan medicinal product and that application contains the results of the PIP studies, market exclusivity for that orphan medicinal product is extended by two years if the product is authorized across Europe.

We may pursue pediatric exclusivity for one or more of our product candidates but may not succeed in obtaining it.

There is also a risk that a competitor may achieve pediatric exclusivity that would delay any potential approvals of our product candidates.

Where an application for a marketing authorization is submitted in respect of a medicinal product that is not designated as an orphan medicinal product and that application contains the results of the PIP studies, it may be possible to obtain a 6-month extension of a supplementary protection certificate extending patent protection for a medicinal product.

Orphan drug designation presents yet another regulatory incentive that may be available to us and our competitors.

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The animal study endpoint must be clearly related to the desired benefit in humans and the information obtained from animal studies must allow for selection of an effective dose in humans.

The Animal Rule also requires post-marketing studies, such as field studies, to verify and describe the product’s clinical benefit and assess

its safety should an exigency exist that leads to the product being used in humans;

the nature of these studies will be discussed with FDA as part of the BLA process.

The Animal Rule also requires post-marketing studies, such as field studies, to verify and describe the product’s clinical benefit and assess its safety should an exigency exist that leads to the product being used in humans;

the nature of these studies will be discussed with

FDA as part of the BLA process.

Products approved under the Animal Rule are subject to additional requirements, such as restrictions imposed on marketing or distribution or requirements to provide information to patients.

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We therefore may not be able to secure contracts to conduct testing of our anthrax vaccine product candidate in a predictable timeframe or at all.

Additionally, under the Project BioShield Act of 2004 (“Project BioShield”), the Secretary of HHS may, with the concurrence of the Secretary of DHS and upon the approval of the President, contract to purchase unapproved medical countermeasures for the SNS, in specified circumstances.

Our NasoShield anthrax vaccine product candidate and our NasoVAX pandemic influenza vaccine product candidate may potentially be eligible for the Strategic National Stockpile (“SNS”) under Project BioShield, but there is no guarantee that our product candidates will meet the criteria set forth by HHS or the FDA for procurement and Emergency Use Authorization.

Under the Project BioShield Act of 2004 (“Project BioShield”), the Secretary of HHS may, with the concurrence of the Secretary of DHS and upon the approval of the President, contract to purchase unapproved medical countermeasures for the SNS, in specified circumstances.

Congress is notified of a recommendation for a stockpile purchase after Presidential approval.

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The actual length of the extension will depend on the amount of patent term lost while the product was in clinical trials.

However, the applicable authorities, including the USPTO and FDA in the United States, and any equivalent regulatory authority in other countries, may not agree with our assessment of whether such extensions are available, and may refuse to grant extensions to our patents, or may grant more limited extensions than we request.

If any of our biologic products qualify as being a “first licensure” under the Biologics Price Competition and Innovation Act (“BPCIA”) provisions of the Affordable Care Act (“ACA”), we also expect to seek regulatory exclusivity for those products from the FDA, which can grant twelve (12) years of exclusivity under the BPCIA provisions of the ACA.

However, the applicable authorities, including the USPTO and FDA in the United States, and any equivalent regulatory authority in other countries, may not agree with our assessment of whether such extensions are available or whether any of our products qualify as a first licensure, and may refuse to grant extensions to our patents, or may grant more limited extensions than we request, or may not grant regulatory exclusivity.

If this occurs, our competitors may be able to take advantage of our investment in development and clinical trials by referencing our clinical and preclinical data, and then may be able to launch their product earlier than might otherwise be the case.

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and foreign issued patents and pending patent applications owned by third parties exist in the fields in which we are developing and may develop our product candidates.

As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may be subject to claims of infringement of the patent rights of third parties.

As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk

increases that our product candidates may be subject to claims of infringement of the patent rights of third parties.

We may not have identified all U.S.

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Tang’s lab notebooks after the conclusion of his employment in 2012.

We have filed a motion to discuss and believe the claims are without merit.

We have filed a motion to dismiss and believe the claims are without merit.

In some cases, we may have failed to identify such relevant third-party patents or patent applications.

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Litigation may be necessary to defend against these claims.

If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable

intellectual property rights or personnel.

If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel.

Such intellectual property rights could be awarded to a third party, and we could be required to obtain a license from such third party to commercialize our technology or products.

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We are a party to a number of license agreements that are important to our business, and we may enter into additional license agreements in the future.

Certain of our in-licensed intellectual property covers, or may cover, RespirVec and certain of our product candidates.

Certain of our in-licensed intellectual property covers, or may cover, RespirVec technology, EuPort technology, and certain of our product candidates including ALT-801.

Our existing license agreements impose, and we expect that future license agreements will impose, various diligence, milestone payment, royalty and other of our obligations.

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For example, we have experienced threatened or actual opposition for two trademarks that we were pursuing.

We decided to discontinue our use of one of those trademarks, and the other matter was resolved on favorable terms.

We decided to discontinue

our use of one of those trademarks, and the other matter was resolved on favorable terms.

Although these matters have been resolved on terms that did not materially harm the Company, we may become subject to other trademark challenges in the future.

unable to establish long-term name recognition based on our trademarks and trade names, then we may not be able to compete effectively, and our business may be adversely affected.

If we are unable to establish long-term name recognition based on our trademarks and trade names, then we may not be able to compete effectively, and our business may be adversely affected.

Risks Related to Commercialization of the Company’s Product Candidates

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reduced control as a result of using third-party manufacturers for all aspects of manufacturing activities, including regulatory compliance and quality assurance.

We do not have control over third party manufacturers’ compliance with these regulations and standards, but we may ultimately be responsible for any of their failures;

delays as a result of manufacturing problems or re-prioritization of projects at a third-party manufacturer;

our third-party manufacturers might be unable to formulate and manufacture our product candidates in the volume and of the quality required to meet our clinical and commercial needs, if any ;

termination or non-renewal of manufacturing agreements with third parties in a manner or at a time that is costly or damaging to us;

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For example, one of our third-party manufacturers failed on multiple occasions to successfully manufacture sufficient quantities of our NasoVAX product candidate.

This failure required us to delay planned multi-valent clinical trials.

This failure required us to delay our planned multi-valent clinical trials.

In some cases, the technical skills required to manufacture our products or product candidates may be unique or proprietary to the original contract manufacturer and we may have difficulty, or there may be contractual restrictions prohibiting us from, transferring such skills to a back-up or alternate supplier, or we may be unable to transfer such skills at all.

Furthermore, a contract manufacturer may possess technology related to the manufacture of our product candidate that such contract manufacturer owns independently.

This would increase our reliance on such contract manufacturer or require us to obtain a license from such contract manufacturer in order to have another contract manufacturer manufacture our product candidates.

Third-party manufacturers may not be able to comply with applicable cGMP, regulations or similar regulatory requirements outside the United States.

Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed, including clinical holds, fines, injunctions, civil penalties, delays, license revocation, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our product candidates.

In addition, if we are required to change contract manufacturers for any reason, we will be required to verify that the new contract manufacturer maintains facilities and procedures that comply with quality standards and with all applicable regulations.

We will also need to verify, such as through a manufacturing comparability study, that any new manufacturing process will produce our product candidate according to the specifications previously submitted to the FDA or another regulatory authority.

The delays associated with the verification of a new contract manufacturer could negatively affect our ability to develop product candidates or commercialize our products in a timely manner or within budget.

In addition, changes in manufacturers often involve changes in manufacturing procedures and processes, which could require that we conduct bridging studies between our prior clinical supply used in our clinical trials and that of any new manufacturer.

We may be unsuccessful in demonstrating the comparability of clinical supplies which could require the conduct of additional clinical trials.

Our third-party manufacturers may be subject to damage or interruption from, among other things, fire, natural or man-made disaster, power loss, telecommunications failure, unauthorized entry, computer viruses, denial-of-service attacks, acts of terrorism, human error, vandalism or sabotage, financial insolvency, bankruptcy and similar events.

For example, in December 2019, a novel strain of coronavirus (COVID-19) was reported to have surfaced in Wuhan, China.

Two vaccines for COVID-19 were granted Emergency Use Authorization by the FDA in late 2020, and more are likely to be authorized in the coming months.

The resultant demand for vaccines and potential for manufacturing facilities and materials to be commandeered under the Defense Production Act of 1950, or equivalent foreign legislation, may make it more difficult to obtain materials or manufacturing slots for the products needed for our clinical trials, which could lead to delays in these trials.

Since March 2020, foreign and domestic inspections by the FDA have largely been on hold with FDA announcing plans in July 2020 to resume prioritized domestic inspections.

FDA has stated that foreign inspections not deemed mission-critical remain temporarily postponed, while those that are deemed “mission-critical” will be considered for inspection on a case-by-case basis.

Should FDA determine that an inspection is necessary for approval of a marketing application and an inspection cannot be completed during the review cycle due to restrictions on travel, FDA has stated that it generally intends to issue a complete response letter.

Further, if there is inadequate information to make a determination on the acceptability of a facility, FDA may defer action on the application until an inspection can be completed.

In 2020, several companies announced receipt of complete response letters due to the

FDA's inability to complete required inspections for their applications.

Regulatory authorities outside the U.S.

may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic and may experience delays in their regulatory activities.

The extent to which the novel coronavirus may impact our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others.

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We may not be able to enter into any necessary third-party manufacturing arrangements on acceptable terms, or on a timely basis.

In addition, we may

have to enter into technical transfer agreements and share our know-how with the third-party manufacturers, which can be time consuming and may result in delays.

In addition, we may have to enter into technical transfer agreements and share our know-how with the third-party manufacturers, which can be time consuming and may result in delays.

No known manufacturer has received FDA clearance to manufacture large scale quantities of commercial products with the modified version of adenovirus used in the production of product candidates based on our proprietary RespirVec technology.

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Any delay or interruption in the manufacture of our products could have a material adverse effect on our business, financial condition, results of operations and cash flows.

If we are unable to establish sales, marketing and distribution capabilities, we may not be successful in commercializing our product candidates if and when they are approved.

If we are unable to establish sales, marketing and distribution capabilities, we may not be successful in commercializing our product candidates if they are approved.

We do not have a sales or marketing infrastructure and have no experience in the sale, marketing or distribution of pharmaceutical products.

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We face significant competition in seeking appropriate partners for our product candidates, and the negotiation process is time consuming and complex.

In order for the Company to successfully partner our product candidates, potential partners must view these product candidates as economically valuable in markets they determine to be attractive in light of the terms that we are seeking and other products available for licensing from other companies.

In order for the Company to successfully partner our product candidates, potential partners must view these product candidates as

economically valuable in markets they determine to be attractive in light of the terms that we are seeking and other products available for licensing from other companies.

Even if we are successful in our efforts to establish strategic partnerships, the terms that we agree upon may not be favorable to the Company, and we may not be able to maintain such strategic partnerships if, for example, development or approval of a product is delayed or sales of an approved product are disappointing.

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We may experience losses related to investments in other companies, which could harm our financial condition and results of operations.

identify or complete these transactions in a timely manner, on a cost-effective basis, or at all, and we may not realize the anticipated benefits of any acquisition, license, strategic alliance or joint venture.

We may not identify or complete these transactions in a timely manner, on a cost-effective basis, or at all, and we may not realize the anticipated benefits of any acquisition, license, strategic alliance or joint venture.

To finance such a transaction, we may choose to issue shares of our common stock as consideration, which would dilute the ownership of our stockholders.

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Failure to obtain and retain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of products we develop.

We currently carry liability insurance covering residual liability related to previously completed clinical trials in the amount of $5.0 million in the U.S., product liability insurance covering our clinical trials in the United Kingdom in the amount of £5.0 million in the aggregate, and clinical trial liability insurance covering our clinical trials in South Korea in the amount of $1.0 million.

Although we maintain product liability insurance, any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage.

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The costs associated with following such advice may or may not be reimbursed by BARDA under the contract.

We may decide not to follow the advice provided by

BARDA and instead pursue activities that we believe are in the best interest of our anthrax vaccine program and our business as a whole, even if BARDA would not reimburse us under our contract.

We may decide not to follow the advice provided by BARDA and instead pursue activities that we believe are in the best interest of our anthrax vaccine program and our business as a whole, even if BARDA would not reimburse us under our contract.

Most of our immediately foreseeable future revenues are contingent upon grants, contracts and loans from the U.S.

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Further, changes in government budgets and agendas, funding strategies, cost overruns in our programs, or advances by our competitors, may result in changes in the timing of funding for, a decreased and de-prioritized emphasis on, or termination of, government contracts that support the development and/or procurement of the biodefense product we are developing.

For example, the outbreak of Ebola in 2014 changed the near-term focus and priorities of BARDA to help ensure sufficient progress was being made on a solution for that disease.

For example, the outbreak of Ebola in 2014 changed the near-term focus and priorities of BARDA to help ensure sufficient progress was being made on

a solution for that disease.

This resulted in a delay of funding to some non-Ebola programs until Congress appropriated additional funds to BARDA specific for this purpose.

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In addition, we could be forced to expend considerable funds to defend any potential award.

If a protest is successful, the government may be ordered to terminate our contract and re-evaluate bids.

If a protest is successful, the government may be ordered to

terminate our contract and re-evaluate bids.

The government could even be directed to award a potential contract to one of the other bidders.

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Publication of discounts by third-party payers or authorities may lead to further pressure on the prices or reimbursement levels within the country of publication and other countries.

In the United States, concerns about drug pricing have been expressed by members of Congress and President Trump.

In the United States, concerns about drug pricing have been expressed by members of Congress and prior presidential administrations.

There can be no assurance that our product candidates, if approved, will be considered cost-effective by third-party payers, that an adequate level of reimbursement will be available or that the third-party payers’ reimbursement policies will not adversely affect our ability to sell our products profitably.

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We are subject to multiple and substantial federal and state health care and other laws, and the complexity of our regulatory compliance obligations is likely to increase in the event our product candidates are commercialized.

Our business operations and activities may be directly or indirectly subject to various federal and state fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute and the federal FCA, and their implementing regulations, such as recent rules finalized by OIG which added safe harbor protections under the Anti-Kickback Statute for certain coordinated care and value-based arrangements among clinicians, providers, and others and that (with exceptions) became effective January 19, 2021.

If we obtain FDA approval for any of our product candidates and begin commercializing those products in the United States, our potential exposure under such laws will increase significantly, and our costs associated with compliance with such laws are also likely to increase.

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In addition, we may be subject to patient privacy regulation by the federal government and state governments in which we conduct our business.

In addition to the Anti-Kickback Statute, FCA and Physician Payments Sunshine Act, the laws that may affect our ability to operate include, but are not limited to:

The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created additional federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters.

In addition to the Anti-Kickback Statute, FCA and Physician Payments Sunshine Act and their implementing regulations, the laws that may affect our ability to operate include, but are not limited to:

HIPAA, which created additional federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters.

Similar to the Anti-Kickback Statute, a person or entity can be found guilty of violating HIPAA without actual knowledge of the statute or specific intent to violate it.

The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”) and their respective implementing regulations, and other health privacy measures, which impose requirements on parties with respect to the use and disclosure of individually-identifiable information, such as medical records information, including requirements relating to the privacy, security and transmission of individually identifiable health information.

HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions;

federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers;

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Our financial prospects could be affected by changes in health care spending and policy in the United States and abroad.

We operate in a highly regulated industry and new laws or judicial decisions, or new interpretations of existing laws or decisions, related to health care availability, the method of delivery or payment for health care products and services could negatively impact our business, operations and financial condition.

For example, in the United States there is significant interest in promoting health care reform, as evidenced by the enactment in the United States of the Patient Protection and Affordable Care Act and the Health Care Reform Law.

The Health Care Reform Law increased federal oversight of private health insurance plans and included a number of provisions designed to reduce Medicare expenditures and the cost of health care generally, to reduce fraud and abuse, and to provide access to increased health coverage.

The Health Care Reform Law has also imposed substantial changes to the U.S.

system for paying for health care, including programs to extend medical benefits to millions of individuals who have lacked insurance coverage.

Generally, implementation of the Health Care Reform Law has thus far included significant cost-saving, revenue and payment reduction measures with respect to, for example, several government health care programs that might cover our products in the United States, should they be commercialized, including Medicaid and Medicare.

Additional downward pricing pressure associated with the Health Care Reform Law includes that the Health Care Reform Law established and provided significant funding for a Patient-Centered Outcomes Research Institute to coordinate and fund Comparative Effectiveness Research, as those terms are defined in the Health Care Reform Law.

We operate in a highly regulated industry and new laws, regulations, or judicial decisions, or new interpretations of existing laws, regulations, or decisions, related to, among other things, health care availability, or the method of delivery of or payment for health care products and services could negatively impact our business, operations and financial condition.

For example, in the United States there is significant interest in promoting health care reform, as evidenced by the enactment in the United States of the Health Care Reform Law.

The Health Care Reform Law substantially changed the way health care is financed by both governmental and commercial payers and significantly impacts the pharmaceutical industry.

The Health Care Reform Law contains provisions that may reduce the profitability of drug products, including, for example, by increasing the minimum rebates owed by manufacturers under the Medicaid Drug Rebate Program, extending the rebate program to individuals enrolled in Medicaid managed care plans, addressing a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected, and imposing certain annual fees based on pharmaceutical companies’ share of sales to federal health care programs.

The Health Care Reform Law established and provided significant funding for a new Patient-Centered Outcomes Research Institute to coordinate and fund comparative effectiveness research.

While the stated intent of comparative effectiveness research is to develop information to guide providers to the most efficacious therapies, outcomes of comparative effectiveness research could influence the reimbursement or coverage for therapies that are determined to be less cost effective than others.

Should any of our products be approved for sale, but then determined to be less cost effective than alternative

therapies, the levels of reimbursement for these products, or the willingness to reimburse at all, could be impacted, which could materially impact our financial results.

Since its enactment, there have been numerous judicial, administrative, executive, and legislative challenges to certain aspects of the ACA, and we expect there will be additional challenges and amendments to the ACA in the future.

Various portions of the ACA are currently undergoing legal and constitutional challenges in the Fifth Circuit Court and the United States Supreme Court;

the Trump Administration has issued various Executive Orders which eliminated cost sharing subsidies and various provisions that would impose a fiscal burden on states or a cost, fee, tax, penalty or regulatory burden on individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices;

and Congress has introduced several pieces of legislation aimed at significantly revising or repealing the ACA.

It is unclear whether the ACA will be overturned, repealed, replaced, or further amended.

We cannot predict what affect further changes to the ACA would have on our business.

Another provision of the Health Care Reform Law, generally referred to as the Physician Payment Sunshine Act or Open Payments Program, has imposed new reporting and disclosure requirements for pharmaceutical and medical device manufacturers and distributions with certain FDA approved products, such as approved vaccines, with regard to payments or other transfers of value made to certain U.S.

health care practitioners, such as physicians and academic medical centers, and with regard to certain ownership interests held by physicians in reporting entities.

The CMS publishes information from these reports on a publicly available website, including amounts transferred and the physician and teaching hospital identities.

Under the Physician Payment Sunshine Act, should any of our products be approved for sale, we may be required to collect and report detailed information regarding certain financial relationships we have with physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals.

Effective January 1, 2022, these reporting obligations will extend to include transfers of value made to certain non-physician providers such as physician assistants and nurse practitioners.

Our compliance with these rules may also impose additional costs.

It is difficult to predict how the new requirements, which also preempt similar state law reporting requirements, may impact our relationships between pharmaceutical companies and physicians or teaching hospitals.

It is likely that federal and state legislatures within the United States and foreign governments will continue to consider changes to existing health care legislation.

We cannot predict the reform initiatives that may be adopted in the future or whether initiatives that have been adopted will be repealed or modified.

The continuing efforts of the government, insurance companies, managed care organizations and other payers of health care services to contain or reduce costs of health care may adversely affect:

Should any of our products be approved for sale, but then determined to be less cost effective than alternative therapies, the levels of reimbursement for these products, or the willingness to reimburse at all, could be impacted, which could materially impact our financial results .

Certain provisions of the Health Care Reform Law have been subject to judicial challenges, as well as efforts to repeal, replace or otherwise modify them or to alter their interpretation or implementation.

For example, the Tax Cuts and Jobs Act enacted on December 22, 2017, eliminated the tax-based payment for individuals who fail to maintain minimum essential coverage under section 5000A of the Internal Revenue Code of 1986, as amended, commonly referred to as the “individual mandate,” effective January 1, 2019.

Further, the Bipartisan Budget Act of 2018 among other things, amended the Medicare statute, effective January 1, 2019, to reduce the coverage gap in most Medicare prescription drug plans, commonly known as the “donut hole,” by raising the manufacturer discount under the Medicare Part D coverage gap discount program to 70%.

Additional legislative changes, regulatory changes and judicial challenges related to the Health Care Reform Law remain possible.

It is unclear how the Health Care Reform Law and its implementation, as well as efforts to repeal, replace or otherwise modify, or invalidate, the Health Care Reform Law, or portions thereof, will affect our business.

We cannot predict what affect further changes to the Health Care Reform Law would have on our business, especially including under the Biden administration.

Another provision of the Health Care Reform Law, generally referred to as the Physician Payment Sunshine Act or Open Payments Program, requires manufacturers of drugs, devices, biologics, and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program (with certain exceptions) to report annually to CMS information related to direct or indirect payments and other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors) and teaching hospitals, as well as ownership and investment interests held in the company by physicians and their immediate family members.

Effective January 1, 2022, these reporting obligations will extend to include transfers of value made (starting in 2021) to certain non-physician providers such as physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, and certified nurse-midwives.

CMS publishes information from these reports on a publicly available website.

Our compliance with these rules may also impose additional costs and may impact our relationships with physicians, teaching hospitals, and other non-physician health care providers.

In addition, other legislative changes have been proposed and adopted since the Health Care Reform Law was enacted.

For example, the Budget Control Act of 2011, as amended by the American Taxpayer Relief Act of 2012, among other things led to aggregate reductions in Medicare payments for all items and services, including prescription drugs and biologics, to service providers of, on average, 2% per fiscal year beginning April 1, 2013, and, due to subsequent legislation, will continue until 2030 (with the exception of a temporary suspension from May 1, 2020, through March 31, 2021) unless Congress takes additional action.

Additional legislative changes, regulatory changes or guidance could be adopted, which may impact the marketing approvals and reimbursement for our product candidates.

Further, there has been increasing legislative, regulatory and enforcement interest in the United States with respect to drug pricing practices.

There have been several Congressional inquiries and proposed and enacted federal and state legislation and regulatory initiatives designed to, among other things, bring more transparency to product pricing, evaluate the relationship between pricing and manufacturer patient programs, and reform government healthcare program reimbursement methodologies for drug products.

For example, on November 20, 2020, CMS issued an interim final rule to implement a “Most Favored Nation” demonstration project to test Medicare Part B reimbursement of certain separately payable drugs and biologicals based on international reference prices.

The rule has become subject to judicial challenges, and federal courts have enjoined the rule at this time.

If the rule survives judicial scrutiny, the Most Favored Nation model will subject certain drugs or biologicals identified by CMS as having the highest annual Medicare Part B spending to an alternative payment methodology based on international reference prices, with the list of products to be updated annually to add more products and products not to be removed absent limited circumstances.

There has also been legislation that would establish an international reference price-based Medicare Part B drug and biological payment methodology.

It is possible that the Health Care Reform Law, as currently enacted or may be amended or otherwise modified in the future, as well as other health care reform measures that may be adopted in the future, may result in additional reductions in Medicare payment and other health care financing, more rigorous coverage criteria, and new payment methodologies and in additional downward pressure on coverage and payment and the price that we receive for any approved product.

Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from commercial payors.

We cannot predict the

reform initiatives that may be adopted in the future or whether initiatives that have been adopted will be repealed or modified.

These continuing health care reform initiatives may adversely affect :

the demand for any product candidates for which we may obtain regulatory approval;

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The laws that would govern our conduct in the United States upon the commercialization of our product candidates are enforceable by criminal, civil and administrative penalties.

Violations of laws such as the FD&C Act, the FCA, the PHS Act, or provisions of the U.S.

Social Security Act known as the “Anti-Kickback Law” and the “Civil Monetary Penalties Law,” or any regulations promulgated under their authority, may result in jail sentences, fines or exclusion from federal and state programs, as may be determined by Medicare, Medicaid, the Department of Defense, other regulatory authorities and the courts.

Violations of laws such as anti-kickback and false claims laws, the FD&C Act, or any regulations promulgated under their authority, may result in jail sentences, fines or exclusion from federal and state programs, as may be determined by Medicare, Medicaid, the Department of Defense, other regulatory authorities and the courts.

There can be no assurance that our activities will not come under the scrutiny of regulators and other government authorities or that our practices will not be found to violate applicable laws, rules and regulations or prompt lawsuits by private citizen “relators” under federal or state false claims laws.

Some of these laws, referred to as “false claims laws,” prohibit the submission or causing the submission of false or fraudulent claims for reimbursement to federal, state and other health care payers and programs.

Other laws, referred to as “anti-kickback laws,” prohibit soliciting, offering, receiving or paying remuneration in order to induce the referral of a patient or ordering, purchasing, leasing or arranging for, or recommending ordering, purchasing or leasing of, items or services that are paid for by federal, state and other health care payers and programs.

For example, the federal Anti-Kickback Law prohibits providers and others, such as us, from knowingly and willfully, directly or indirectly soliciting, receiving, offering or paying any remuneration with the intent of generating referrals of individuals or purchasers, orders or recommendations for services or items covered by a government health care program.

Many states have enacted similar laws.

In the United States, among the laws that may affect our ability to operate and market our products include, but are not limited to:

The federal Anti-Kickback Law prohibits, among other activities, any person from knowingly and willfully, directly or indirectly soliciting, receiving, offering or paying any remuneration with the intent of (or in return for) generating referrals of individuals or purchases, orders or recommendations for services or items reimbursable by federal health care programs like Medicare and Medicaid.

Courts have interpreted this law very broadly, including by holding that a violation has occurred if even one purpose of the remuneration is to generate referrals, even if there are other lawful purposes.

There are statutory and regulatory exceptions, or safe harbors, that outline arrangements that are deemed lawful.

However, the fact that an arrangement does not fall within a safe harbor does not necessarily render the conduct illegal under the Anti-Kickback Law.

In sum, even common business arrangements, such as discounted terms and volume incentives for customers in a position to recommend or choose drugs for patients, such as physicians and hospitals, can result in substantial legal penalties, including, among others, exclusion from Medicare and Medicaid programs, and arrangements with referral sources must be structured with care to comply with applicable requirements.

Also, certain business practices, such as payment of consulting fees to health care providers, sponsorship of educational or research grants, charitable donations, interactions with health care providers that prescribe products for uses not approved by the FDA and financial support for continuing medical education programs, must be conducted within narrowly prescribed and controlled limits to avoid the possibility of wrongfully influencing health care providers to prescribe or purchase particular products or as a reward for past prescribing.

Violations of the Anti-Kickback Law may be punished by civil and criminal penalties or exclusion from participation in federal health care programs, including Medicare and Medicaid.

In addition, the government may assert that a claim including items or services resulting from a violation of the Anti-Kickback law constitutes a false or fraudulent claim for purposes of the FCA or federal civil money penalties statute.

The FCA is violated by any entity that “presents or causes to be presented” knowingly false, fictitious, or fraudulent claims for payment to the federal government.

In addition, the Health Care Reform Law amended the FCA to create a cause of action against any person who knowingly makes a false statement material to an obligation to pay money to the government or knowingly conceals or improperly decreases an obligation to pay or transmit money or property to the government.

For the purposes of these recent amendments, an “obligation” includes an identified overpayment, which is defined broadly to include “any funds that a person receives or retains under Medicare and Medicaid to which the person, after applicable reconciliation, is not entitled…”

Moreover, liability under the Anti-Kickback Law may be established without proving actual knowledge of the law or specific intent to violate.

There are statutory exceptions and regulatory safe harbors that protect certain arrangements from prosecution or administrative sanctions, but the exceptions and safe harbors are drawn narrowly.

The fact that an arrangement does not fall within a safe harbor does not necessarily render the conduct illegal under the Anti-Kickback Law, but the arrangement may be subject to scrutiny based on the facts and circumstances.

Practices that involve remuneration to those who prescribe, purchase, or recommend pharmaceutical products, including certain discounts, or engaging such individuals as consultants, advisors and speakers, may be subject to scrutiny if they do not fit squarely within an exception or safe harbor.

Moreover, there are no safe harbors for many common practices, such as educational and research grants, charitable donations, product support and patient assistance programs.

Violations of the Anti-Kickback Law may be punished by civil and criminal penalties, damages, fines, or exclusion from participation in federal health care programs like Medicare and Medicaid.

In addition, the government may assert that a claim including items or services resulting from a violation of the Anti-Kickback law constitutes a false or fraudulent claim for purposes of the FCA.

The FCA prohibits any person from, among other things, knowingly presenting or causing to be presented a false or fraudulent claim for payment of government funds, or making, or causing to be made, a false statement material to a false or fraudulent claim, or knowingly concealing or knowingly and improperly avoiding, or decreasing, an obligation to pay or transmit money or property to the government.

The FCA is commonly used to sue those who submit allegedly false Medicare or Medicaid claims, as well as those who induce or assist others to submit a false claim.

“False claims” can result not only from non-compliance with the express requirements of applicable governmental reimbursement programs, such as Medicare or Medicaid, but also from non-compliance with other laws, such as the Anti-Kickback Law, FDA laws on off-label promotion, or laws that require quality care in service delivery.

The fraud and abuse regulations have been subject to varying interpretations, as well as heightened enforcement activity over the past few years.

Significant enforcement activity has been the result of actions brought by relators, who file complaints in the name of the United States (and if applicable, particular states) under federal and state FCA statutes.

The qui tam and whistleblower provisions of the FCA allow private individuals to bring actions on behalf of the government alleging that the government was defrauded, with tremendous potential financial gain to private citizens who prevail.

Violations of the FCA can result in treble damages and each false claim submitted can be subject to a civil penalty.

Most states have adopted similar state false claims laws, and these state laws have their own penalties which may be in addition to federal FCA penalties.

The bringing of any FCA action, even if unsuccessful, could require us to devote resources to investigate and defend the action, as well as result in reputational harm.

Failure to comply with the fraud and abuse laws could result in significant civil and criminal penalties and costs, including the loss of licenses and the ability to participate in federal and state health care programs, and could have a material adverse effect on our business.

In addition, many of these laws are vague or indefinite and have not been interpreted by the courts, and have been subject to frequent modification and varied interpretation by prosecutorial and regulatory authorities, increasing the risk of noncompliance.

We cannot predict whether changes in applicable law, or interpretation of laws, or changes in our services or marketing practices in response to changes in applicable law or interpretation of laws could have a material adverse effect on our business.

The FDA and comparable foreign regulatory authorities, in addition to prohibiting the promotion of the safety or effectiveness of product candidates not yet approved for commercialization, an act known as pre-approval promotion, also generally restrict companies from promoting approved products for indications other than those indications for which a product is approved, which is also referred to as off-label use.

Actions under the FCA may be brought by the government or by whistleblowers referred to as relators, who may initiate an action in the name of the government and may share in any monetary recovery.

Violations of the FCA can result in treble damages, mandatory per claim penalties, and exclusion from participation in federal health care programs.

HIPAA created additional federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters.

Similar to the Anti-Kickback Law, a

person or entity can be found guilty of violating the HIPAA fraud statute without actual knowledge of the statute or specific intent to violate it .

The Physician Payments Sunshine Act, implemented as the Open Payments program, imposes reporting requirements for pharmaceutical, biologic, and device manufacturers regarding payments or other transfers of value made to physicians, teaching hospitals, and other healthcare providers, including investment interests in such manufacturers held by physicians and their immediate family members during the preceding calendar year.

Annual reporting of such transfers of value by manufacturers has increased scrutiny of the financial relationships between industry and the physicians, teaching hospitals and other healthcare providers.

Failure to submit required annual information may result in civil monetary penalties, which may increase significantly for “knowing failures.”

Analogous state laws and regulations, including anti-kickback and false claims laws, which apply to items and services reimbursed under Medicaid or, in several states, regardless of the payer, including private payers.

Some state laws require pharmaceutical companies to report expenses relating to the marketing and promotion of pharmaceutical products and to report gifts and payments to individual health care providers in those states.

Some of these states also prohibit certain marketing related activities including the provision of gifts, meals, or other items to certain health care providers.

Some states restrict the ability of manufacturers to offer co-pay support to patients for certain prescription drugs.

Some states require the posting of information relating to clinical studies and their outcomes.

Other states and cities require identification or licensing of sales representatives.

In addition, several states require pharmaceutical companies to implement compliance programs or marketing codes of conduct.

The FDCA and comparable foreign laws, in addition to prohibiting the promotion of the safety or effectiveness of product candidates not yet approved for commercialization, an act known as pre-approval promotion, also generally restrict companies from promoting approved products for indications other than those indications for which a product is approved, which is also referred to as off-label use.

This means, for example, that we may not make claims about the use of our products, should they be approved for sale, outside of their approved indications, and we may not proactively discuss or provide information regarding any of their off-label uses subject to very specific and limited exceptions.

In the United States, pharmaceutical companies have, to a limited extent, been recognized by the FDA as permitted to disseminate to physicians certain truthful and accurate information regarding unapproved uses of approved products, or results of studies involving investigational products.

If we or our business partners fail to comply with applicable laws and regulations governing off-label uses of our product candidates, if approved, then we could be subject to administrative or judicially imposed sanctions, including, but not limited to:

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Similar actions for off-label promotion have been initiated by several states for Medicaid fraud.

The Health Care Reform Law significantly strengthened provisions of the FCA, Medicare and Medicaid Anti-Kickback provisions, and other health care fraud provisions, leading to the possibility of greatly increased qui tam suits by relators for perceived violations.

Violations or allegations of violations of the foregoing restrictions could materially and adversely affect our business.

The bringing of any FCA or other enforcement investigation or action, even if unsuccessful, could require us to devote resources to investigate and defend the action, as well as result in reputational harm.

In addition, many of these laws are vague, subject to modification, and subject to evolving interpretation by prosecutorial and regulatory authorities, increasing the risk of noncompliance.

If our product candidates are commercialized, then we would also be required to report detailed and complex pricing information, net of included discounts, rebates and other concessions, to CMS for the purpose of calculating national reimbursement levels, certain federal prices and certain federal and state rebate obligations, and we would need to develop the expertise, as well as the systems for collecting and reporting this data accurately to CMS and have instituted a compliance program to assure that the information collected is complete in all respects.

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We must operate in compliance with various data privacy and security regulations in the United States by both the federal government and the states in which we conduct our business, as well as in other jurisdictions outside of the United States, such as the United Kingdom, where we conduct clinical trials.

For example, the federal law, HIPAA, as amended by HITECH and its implementing regulations, imposes specified requirements relating to the privacy, security and transmission of individually identifiable health information, such as information that identifies individuals who participate in our clinical trials as research subjects.

HIPAA requires, among other things, the implementation of various recordkeeping, operational, notice and other practices intended to safeguard protected health information, limit its use to allowed purposes, and notify individuals in the event of privacy and security breaches.

In the U.S., we may be subject to data privacy and security laws and regulations by both the federal government and the states in which we conduct our business, including, for example, state data breach notification laws, state health information and/or genetic privacy laws and federal and state consumer protection laws (e.g., Section 5 of the FTC Act and the CCPA), govern the collection, use, disclosure, and protection of health-related and other personal information.

Many of these laws differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

Compliance with these laws is difficult, constantly evolving, and time consuming.

Federal regulators, state attorneys general, and plaintiffs’ attorneys, including class action attorneys, have been and will likely continue to be active in this space .

HIPAA, for example, imposes specific requirements relating to the privacy, security and transmission of individually identifiable health information.

Failure to comply with these laws and regulations can result in substantial penalties and other liabilities.

HITECH created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions.

In addition, state laws govern the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same requirements, thus complicating compliance efforts.

In the United Kingdom, the collection and use of “personal data” is primarily governed by the Data Protection Act 1998 (“DPA”), which implemented the EU Directive (95/46/EEC) on data protection.

Breach of the United Kingdom data protection laws can result in criminal as well as civil liability.

The DPA applies to the “processing” of personal data, or individually identifiable data relating to living individuals.

All obligations under the DPA fall on the “data controller” who determines the purposes for which and the manner in which any personal data is, or is to be, processed.

A person may be a data controller even if the information is held by a third party.

If we are the data controllers for any personal data, including, for example, with respect to clinical trials carried out in the United Kingdom, we will need to comply with the DPA to ensure compliance by any third party who holds any relevant personal data.

In addition, the European Parliament and the Council of the European Union have adopted a new pan-European General Data Protection Regulation (“GDPR”), effective May 25, 2018, which increases privacy rights for individuals in Europe, extends the scope of responsibilities for data controllers and data processors and imposes increased requirements and potential penalties on companies, offering goods or services to individuals who are located in Europe or monitoring the behavior of such individuals (including by companies based outside of Europe).

The GDPR governs the collection, use, storage, disclosure, transfer, or other processing of personal data regarding individuals in the EU, including personal health data, is subject to the EU General Data Protection Regulation, or GDPR, which became effective on May 25, 2018.

It is wide-ranging in scope and imposes numerous requirements on companies that process personal data, including requirements relating to processing health and other sensitive data, obtaining consent of the individuals to whom the personal data relates, providing information to individuals regarding data processing activities, implementing safeguards to protect the security and confidentiality of personal data, providing notification of data breaches, and taking certain measures when engaging third-party processors.

We may obtain health information from third parties, such as research institutions, that are subject to privacy and security requirements under HIPAA.

Although we are not directly subject to HIPAA other than with respect to providing certain employee benefits, we could potentially be subject to criminal penalties if we, our affiliates, or our agents knowingly obtain, use, or disclose individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA.

The CCPA became effective on January 1, 2020 and establishes certain requirements for data use and sharing transparency, and provides California residents certain rights concerning the use, disclosure, and retention of their personal data.

The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation.

The CCPA and its implementing regulations have already been amended multiple times since their enactment.

The CCPA could mark the beginning of a trend toward more stringent state privacy legislation in the U.S., which could increase our potential liability and adversely affect our business.

The obligations to comply with the CCPA and other evolving legislation may require us, among other things, to update our notices and develop new processes internally and with our partners.

In addition, the European Parliament and the Council of the European Union have adopted a new pan-European General Data Protection Regulation (“GDPR”), effective May 25, 2018, which increases privacy rights for individuals in Europe, extends the scope of responsibilities for data controllers and data processors and imposes increased requirements and potential penalties on companies, offering goods or services to individuals who are located in the EU or monitoring the behavior of such individuals (including by companies based outside of the EU).

The GDPR governs the collection, use, storage, disclosure, transfer, or other processing of personal data regarding individuals in the EU, including personal health data.

It is wide-ranging in scope and imposes numerous requirements on companies that process personal data, including requirements relating to processing health and other sensitive data, providing information to individuals regarding data processing activities, implementing safeguards to protect the security and confidentiality of personal data, providing notification of data breaches, and taking certain measures when engaging third-party processors.

The GDPR also imposes strict rules on the transfer of personal data to countries outside the EU, including the United States, and permits data protection authorities to impose large penalties for violations of the GDPR.

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There is a risk that we may be subject to fines and penalties, litigation, and reputational harm in connection with our European activities.

Further, the United Kingdom’s decision to

leave the EU, often referred to as Brexit, has created uncertainty with regard to data protection regulation in the United Kingdom.

In particular, it is unclear how data transfers to and from the United Kingdom will be regulated now that the United Kingdom has left the EU.

Further, the United Kingdom’s decision to leave the EU, often referred to as Brexit, has created uncertainty with regard to data protection regulation in the United Kingdom.

The EU-UK Trade and Cooperation Agreement of 24 December 2020 allows for personal data to be transferred from the EU to the United Kingdom without the need to use a transfer mechanism as set out in Chapter V GDPR until 30 June 2021.

This means that personal data may flow freely from the EU to the United Kingdom until 30 June 2021.

It is unclear how data transfers to and from the United Kingdom will be regulated after that date.

However, the intention of the 6 month grace period is to give the European Commission sufficient time to adopt an adequacy decision in respect of the United Kingdom so that personal data may flow freely from the EU to the United Kingdom after 30 June 2021 as well.

We must also ensure that we maintain adequate safeguards to enable the transfer of personal data outside of the EEA, in particular to the United States in compliance with European data protection laws.

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Any such investigation or charges by European data protection authorities could have a negative effect on our existing business and on our ability to attract and retain new clients or pharmaceutical collaboration partners.

We may also experience hesitancy, reluctance, or refusal by European or multi-national clients or pharmaceutical partners to continue to use our products due to the potential risk exposure as a result of the current (and, in particular, future) data protection obligations imposed on them by certain data protection authorities in interpretation of current law, including the GDPR.

including the GDPR.

Such clients or pharmaceutical collaboration partners may also view any alternative approaches to compliance as being too costly, too burdensome, too legally uncertain, or otherwise objectionable and therefore decide not to do business with us.

Further, Brexit has created uncertainty with regard to data protection regulation in the United Kingdom.

In particular, it is unclear how data transfers to and from the United Kingdom will be regulated now that the United Kingdom has officially left the EU.

Any of the foregoing could materially harm our business, prospects, financial condition and results of operations .

We are also subject to data protection laws and regulations (i.e., laws and regulations that address privacy and data security).

The legislative and regulatory landscape for data protection continues to evolve, and in recent years there has been an increasing focus on privacy and data security issues.

In the U.S., numerous federal and state laws and regulations, including state data breach notification laws, state health information privacy laws, and federal and state consumer protection laws, govern the collection, use, disclosure, and protection of health-related and other personal information.

For example, in June 2018, the State of California enacted the California Consumer Privacy Act of 2018 (the “CCPA”), which came into effect on January 1, 2020 and provides new data privacy rights for consumers and new operational requirements for companies, which may increase our compliance costs and potential liability.

The CCPA gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used.

The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation.

While there is currently an exception for protected health information that is subject to HIPAA and clinical trial regulations, as currently written, the CCPA may impact certain of our business activities.

The CCPA could mark the beginning of a trend toward more stringent state privacy legislation in the U.S., which could increase our potential liability and adversely affect our business.

We are subject to extensive government regulatory compliance and ethics oversight, and we will need to develop more extensive compliance and ethics policies in the future.

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It is also possible that these regulations could adversely affect our ability to sell our products to non-U.S.

Our product candidates may also be subject to export control laws within the United Kingdom and European Union resulting in the need for authorization from customs authorities before they can leave the United Kingdom or European Union customs territories

and restrictions on export from these territories to certain countries.

Again, such laws could adversely affect our ability to sell to customers in certain countries and non-compliance can result in civil and criminal penalties.

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recruitment or departure of key personnel.

overhang of our convertible securities.

In the past, stockholders have initiated class action lawsuits against pharmaceutical and biotechnology companies following periods of volatility in the market prices of these companies’ stock.

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New investors could also receive rights, preferences and privileges senior to those of existing holders of our common stock.

In addition, in the event of stock dividends, stock splits, reorganizations or similar events affecting our common stock, we may be required to proportionally adjust the conversion price, exercise price or number of shares issuable upon exercise of our outstanding warrants.

In addition, in the event of stock dividends, stock splits, reorganizations or similar events affecting our common stock, we may be

required to proportionally adjust the conversion price, exercise price or number of shares issuable upon exercise of our outstanding warrants.

If we do not meet the continued listing standards of The NASDAQ Global Market our common stock could be delisted from trading, which could limit investors’ ability to make transactions in our common stock and subject us to additional trading restrictions.

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Shares that we may issue in the future in connection with certain capital-raising transactions and shares available for future issuance upon exercise of warrants and options could dilute our stockholders and depress the market price of our common stock.

The issuance or even the expected issuance of a large number of shares of our common stock upon purchase, conversion or exercise of the securities described above could depress the market price of our stock and the issuance of such shares will dilute the

stock ownership of our existing stockholders.

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Our principal executive offices are located in Gaithersburg, Maryland, where we occupy approximately 18,598 square feet of laboratory and office space.

For additional information, see Commitment and Contingencies , Note 16 to our Consolidated Financial Statements.

For additional information, see Note 6 to our consolidated financial statements.

Management believes that these facilities are suitable and adequate to meet our anticipated needs.

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What changed 10-K

Item 1A. Risk Factors