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, contract research organizations (“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 bezisterim (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 IND requirements, other applicable regulatory
requirements, or requirements set forth in the applicable IRB-approved protocol, the Company may be required to conduct additional clinical
trials to support our marketing applications, which would delay the regulatory approval process. For example, our drug product candidate
bezisterim (NE3107) was cleared by FDA for use in a Phase 3, randomized, double blind, placebo controlled, parallel group, multicenter
study in subjects who have mild to moderate AD. Enrollment in that trial began in August 2021, with a planned primary completion in late
2022/early 2023. On November 29, 2023, the Company announced topline efficacy data from its Phase 3 clinical trial (NCT04669028) of bezisterim
(NE3107) in the treatment of mild to moderate AD. Upon trial completion, as the Company began the process of analyzing the trial data,
the Company found significant deviations from the protocol and cGCP violations at 15 study sites (virtually all of which were from one
geographic area). This highly unusual level of suspected improprieties led the Company to exclude all patients from these sites. We subsequently
notified FDA’s OSI of such significant deviations from study protocol, the suspected improprieties, and the study sites involved.
The identification of significant deviations from study protocol and numerous GCP violations at multiple study sites raised questions
regarding the validity and robustness of data from these study sites. The unplanned exclusion of so many patients left the trial underpowered
for its primary endpoints. However, based on the remaining dataset from those other sites determined to be in compliance with the protocol
and GCP’s, a preliminary signal of efficacy was detected. The Company is considering: (1) employing the adaptive trial feature
of the protocol to continue enrolling patients to achieve statistical significance; and/or (2) designing a new Phase 3 study of bezisterim
(NE3107) that leverages the most recent scientific literature relating to AD along with the company's understanding regarding the effects
of bezisterim (NE3107) in persons with mild-moderate AD.
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Although we design the clinical trials for our product
candidates, our CROs are tasked with facilitating and monitoring these trials. As a result, many aspects of our clinical development
programs, including site and investigator selection, and the conduct, timing, and monitoring of the study, is 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.
Our business may be impacted 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, cGCPs, 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.
Adverse Developments Affecting the Financial
Services Industry and Concentration of Risk
As of September 30, 2024,
the Company had cash deposited in a certain financial institution in excess of federally insured levels. The Company regularly monitors
the financial stability of the financial institution and believes that it is not exposed to any significant credit risk in cash and cash
equivalents. Bank failures, events involving limited liquidity, defaults, non-performance, or other adverse developments that affect financial
institutions, or concerns or rumors about such events, may lead to liquidity constraints. In 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 previous bank failures 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.
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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.
As of September 30, 2024, our Articles of Incorporation,
as amended, authorize the issuance of 800,000,000 shares of Common Stock, and we had 7,982,986 shares of Common Stock issued and 7,956,660
issued and outstanding. Accordingly, we may issue up to an additional 792,043,340 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.
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. We may sell
shares or other securities in offerings 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 our 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.
As of September 30, 2024, there were warrants outstanding
to purchase an aggregate of 4,316,002 shares of our Common Stock at exercise prices ranging from $1.53 to $125.00 per share and 517,996
shares issuable upon exercise of outstanding options at exercise prices ranging from $4.70 to $420.90 per share and restricted stock units
totaling 34,566. In addition, pursuant to the Loan and Security Agreement and the Supplement to the Loan and Security Agreement, each
entered into on November 30, 2021, with Avenue Venture Opportunities Fund II, L.P. and Avenue Venture Opportunities Fund, L.P., the lenders
have the option to convert up to $5 million of the outstanding loan amount into shares of our Common Stock at a conversion price of $69.80
per share. We may also 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 our
Common Stock upon achievement of certain clinical, regulatory and commercial milestones with respect to certain of our drug candidates
(i.e., bezisterim (NE3107), NE3291, NE3413, and NE3789) pursuant to the asset purchase agreement, dated April 27, 2021, by and among the
Company, NeurMedix and Acuitas, as amended on May 9, 2021. The achievement of these milestones could result in the issuance of up to 1.8
million shares of our Common Stock, further diluting the interest of holders of our Common Stock.
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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.