Item 1A. Risk Factors
Item 1A. Risk Factors
Except as described below, there have been no
material changes to the Risk Factors previously disclosed in our Form 10-K. The risks described in our Form 10-K and below are not the
only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial
also may materially adversely affect our business, financial condition, and/or operating results.
Risks Relating to Our Business and Industry
We rely and will continue to rely on third
parties to conduct our clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected
deadlines or do not successfully perform and comply with regulatory requirements, we may not be able to obtain regulatory approval of
or commercialize our product candidates.
We depend, and will continue
to depend, on third parties, including, but not limited to, CROs, clinical trial sites and clinical trial principal investigators, contract
laboratories, IRBs, manufacturers, suppliers, and other third parties to conduct our clinical trials, including those for our drug candidates
NE3107 and BIV201. We rely heavily on these third parties over the course of our clinical trials, and we control only certain aspects
of their activities. Nevertheless, we retain ultimate responsibility for ensuring that each of our studies is conducted in accordance
with the protocol and applicable legal, regulatory, and scientific standards and regulations, and our reliance on third parties does not
relieve us of our regulatory responsibilities. We and these third parties are required to comply with cGCPs, which are regulations and
guidelines enforced by the FDA and comparable foreign regulatory authorities for the conduct of clinical trials on product candidates
in clinical development. Regulatory authorities enforce cGCPs through periodic inspections and for-cause inspections of clinical trial
principal investigators and trial sites. If, due to the failure of either the Company or a third party, a clinical trial fails to comply
with applicable cGCPs, FDA’s Investigational New Drug (“IND”) requirements, other applicable regulatory requirements,
or requirements set forth in the applicable IRB-approved protocol, including failure to enroll a sufficient number of patients, the Company
may be required to conduct additional clinical trials to support our marketing applications, which would delay the regulatory approval
process. Moreover, our business may be implicated if any of these third parties violates applicable federal, state, or foreign laws and/or
regulations, including but not limited to FDA’s IND regulations, fraud and abuse or false claims laws, healthcare privacy and data
security laws, or provide us or government agencies with inaccurate, misleading, or incomplete data. For example, during routine monitoring
of blinded data from our Phase 3 study (NCT04669028) of NE3107, we uncovered what appears to be potential scientific misconduct and significant
deviation from study protocol and GCP violations at fifteen sites, which resulted in the Company excluding all patients from these sites
and referring them to the FDA’s OSI for further action. The unplanned exclusion of so many patients left our Phase 3 study underpowered
for the primary endpoints. These findings of potential scientific misconduct, significant deviation from protocol and GCP violations may
call into question the rigor, robustness and validity of the entire data set for this study (NCT04669028).
Although we design the
clinical trials for our product candidates, our CROs are tasked with facilitating and monitoring our clinical trials. As a result, many
important aspects of our clinical development programs, including site and investigator selection, and the conduct, timing, and monitoring
of the study, is often outside our direct control, either partially or in whole. Our reliance on third parties to conduct clinical trials
also results in less direct control over the collection, management, and quality of data developed through clinical trials than would
be the case if we were relying entirely upon our own employees. Communicating with third parties can also be challenging, potentially
leading to mistakes as well as difficulties in coordinating activities.
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Successful development
of biopharmaceuticals is highly uncertain and is dependent on numerous factors, many of which are beyond our control.
Product candidates that
appear promising in the early phases of development may fail to reach the market for several reasons. Pre-clinical study results may show
the product candidate to be less effective than desired (e.g., the study failed to meet its primary endpoints) or to have harmful or problematic
side effects. Product candidates may fail to receive the necessary regulatory approvals or may be delayed in receiving such approvals.
Among other things, such delays may be caused by slow enrollment in clinical studies; length of time to achieve study endpoints; additional
time requirements for data analysis; IND and later NDA preparation; discussions with the FDA; an FDA request for additional pre-clinical
or clinical data; unexpected safety or manufacturing issues; manufacturing costs; pricing or reimbursement issues; clinical sites
deviating from the trial protocol, committing scientific misconduct, or other violations of regulatory requirements – which can
render data from those sites unusable in support of regulatory approval; or other factors that make the product not economical. Proprietary
rights of others and their competing products and technologies may also prevent the product from being commercialized.
Success in pre-clinical
and early clinical studies does not ensure that large-scale clinical studies will be successful. Clinical results are frequently susceptible
to varying interpretations that may delay, limit or prevent regulatory approvals. The length of time necessary to complete clinical studies
and to submit an application for marketing approval for a final decision by a regulatory authority varies significantly from one product
to the next, and may be difficult to predict. There can be no assurance that any of our products will develop successfully, and the failure
to develop our products will have a materially adverse effect on our business and will cause you to lose all of your investment.
Adverse Developments Affecting the Financial
Services Industry and Concentration of Risk
As of December 31, 2023, the Company had cash
deposited in certain financial institutions in excess of federally insured levels. The Company regularly monitors the financial stability
of these financial institutions and believes that it is not exposed to any significant credit risk in cash and cash equivalents. However,
in March and April 2023, certain U.S. government banking regulators took steps to intervene in the operations of certain financial institutions
due to liquidity concerns, which caused general heightened uncertainties in financial markets. While these events have not had a material
direct impact on the Company’s operations, if further liquidity and financial stability concerns arise with respect to banks and
financial institutions, either nationally or in specific regions, the Company’s ability to access cash or enter into new financing
arrangements may be threatened, which could have a material adverse effect on its business, financial condition and results of operations.
We are currently subject to securities class action litigation
and may be subject to similar or other litigation in the future, all of which will require significant management time and attention,
result in significant legal expenses and may result in unfavorable outcomes, which may have a material adverse effect on our business,
operating results and financial condition, and negatively affect the price of our common stock.
We are, and may in the future become, subject to various legal proceedings
and claims that arise in or outside the ordinary course of business. For example, on January 19, 2024, a securities class action complaint,
captioned Eric Olmstead v. BioVie Inc. et al., No. 3:24-cv-00035, was filed in the U.S. District Court for the District of Nevada against
the company and certain of its officers and/or directors, asserting violations of Sections 10(b) and 20(a) of the Securities and Exchange
Act of 1934, as amended (the "Exchange Act") stemming from the company’s disclosures and series of events from August
5, 2021 through November 29, 2023 regarding the company's Phase 3 study of NE3107 in Alzheimer’s Disease. The complaint alleges
that the statements previously made during the time period mentioned were materially false and misleading statements and/or omitted material
adverse facts regarding the Phase 3 study of NE3107 and the company's business, operations, prospects. See Part II, Item 1 of this Quarterly
Report on Form 10-Q, entitled “Legal Proceedings” for more information regarding this litigation.
It is possible that additional lawsuits will be filed, or allegations
received from stockholders, with respect to these same or other matters and also naming us and/or our officers and directors as defendants.
Such lawsuits and any other related lawsuits are subject to inherent uncertainties, and the actual defense and disposition costs will
depend upon many unknown factors. The outcome of such lawsuits is necessarily uncertain. We could be forced to expend significant resources
in the defense of the pending lawsuit and any additional lawsuits, and we may not prevail. In addition, we may incur substantial legal
fees and costs in connection with such lawsuits. We currently are not able to estimate the possible cost to us from this matter, as the
pending lawsuit is currently at an early stage, and we cannot be certain how long it may take to resolve the pending lawsuit or the possible
amount of any damages that we may be required to pay. Monitoring, initiating and defending against legal actions is time-consuming for
our management, is likely to be expensive and may detract from our ability to fully focus our internal resources on our business activities.
We could be forced to expend significant resources in the settlement or defense of the pending lawsuit and any potential future lawsuits,
and we may not prevail in such lawsuits.
Although we have insurance coverage that we believe applies to these
actions, the coverage is subject to a $2 million deductible. That means that we are responsible for the first $2 million of loss arising
from these actions, which includes both defense costs and damages, before any insurance coverage will apply. Furthermore, our insurance
coverage may be insufficient, and our assets may be insufficient to cover any amounts that exceed our insurance coverage, and we may have
to pay damage awards or otherwise may enter into a settlement arrangement in connection with such claim. A decision adverse to our interests
in the pending lawsuit, or in similar or related litigation, could result in the payment of substantial damages, or possibly fines, and
could have a material adverse effect on our business, our stock price, cash flow, results of operations and financial condition. We have
not established any reserve for any potential liability relating to the pending lawsuit or any potential future lawsuits. Any such payments
or settlement arrangements in current or future litigation could have a material adverse effect on our business, operating results or
financial condition. In addition, such lawsuits may make it more difficult to finance our operations and affect our ability to make payments
for damages.
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Risks Relating To Our Common Stock
You may experience future dilution as a
result of future equity offerings or if we issue shares subject to options, warrants, stock awards or other arrangements.
In order to raise additional capital, we may in
the future offer additional shares of our common stock or other securities convertible into or exchangeable for our common stock, including
under the Controlled Equity Offering Sales Agreement (the “Sales Agreement”), dated as of August 31, 2022, with Cantor Fitzgerald
& Co. (the “Agent”), pursuant to which the Company may issue and sell from time to time shares of common stock through
the Agent. We may sell shares or other securities in any other offering at a price per share that is less than the current market price
of our securities, and investors purchasing shares or other securities in the future could have rights superior to existing stockholders.
The sale of additional shares of common stock or other securities convertible into or exchangeable for our common stock would dilute all
of our stockholders, and if such sales of convertible securities into or exchangeable into our common stock occur at a deemed issuance
price that is lower than the current exercise price of our outstanding warrants sold to Acuitas Group Holdings, LLC (“Acuitas”)
in August 2022, the exercise price for those warrants would adjust downward to the deemed issuance price pursuant to price adjustment
protection contained within those warrants.
In addition, as of December 31, 2023, there
were warrants outstanding to purchase an aggregate of 7,770,285 shares of common stock at exercise prices ranging from $1.82 to
$12.50 per share and 4,173,325 shares issuable upon exercise of outstanding options at exercise prices ranging from $1.69 to $42.09 per
share and restricted stock units totaling 687,428. Our Loan Agreement entered into on November 30, 2021 contains a conversion feature
whereby at the option of lender, up to $5 million of the outstanding loan amount may be converted into shares of common stock at a conversion
price of $6.98 per share. We may grant additional options, warrants or equity awards. To the extent such shares are issued, the interest
of holders of our common stock will be diluted.
Moreover, we are obligated to issue shares of
common stock upon achievement of certain clinical, regulatory and commercial milestones with respect to certain of our drug candidates
(i.e., NE3107, NE3291, NE3413, and NE3789) pursuant to the asset purchase agreement, dated April 27, 2021, by and among the Company, NeurMedix,
Inc. and Acuitas, as amended on May 9, 2021. The achievement of these milestones could result in the issuance of up to 18 million shares
of our common stock, further diluting the interest of holders of our common stock.
Certain stockholders who are also officers
and directors of the Company may have significant control over our management.
As of December 31, 2023, our directors and executive
officers and affiliates currently own aggregate 23,551,161 shares of our Common Stock, which currently constitutes 59.1% of our issued
and outstanding Common Stock. As a result, directors and executive officers and affiliates may have a significant influence on our affairs
and management, as well as on all matters requiring member approval, including electing and removing members of our Board of Directors,
causing us to engage in transactions with affiliates entities, causing or restricting our sale or merger, and certain other matters. Our
majority shareholder, Mr. Terren Peizer, may be deemed to beneficially own the 23,166,210 shares of Common Stock held by Acuitas, which
constitutes 58.1% of our issued and outstanding Common Stock Such concentration of ownership and control could have the effect of delaying,
deferring or preventing a change in control of us even when such a change of control would be in the best interests of our stockholders.
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We may, in the future, issue additional
common stock, which would reduce investors’ percent of ownership and may dilute our share value.
As of December 31, 2023, our Articles of Incorporation,
as amended, authorize the issuance of 800,000,000 shares of Common Stock, and we had 39,866,714 shares of Common Stock issued and
39,843,834 issued and outstanding. Accordingly, we may issue up to an additional 760,156,166 shares of Common Stock. The future issuance
of Common Stock may result in substantial dilution in the percentage of our Common Stock held by our then existing stockholders. We may
value any Common Stock in the future on an arbitrary basis. The issuance of Common Stock for future services or acquisitions or other
corporate actions may have the effect of diluting the value of the shares held by our investors, might have an adverse effect on any trading
market for our Common Stock and could impair our ability to raise capital in the future through the sale of equity securities.
Item 2. Unregistered sales of equity securities
None.
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
None
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.