What changed in this filing

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Item 1A. Risk Factors

2023-12-15 compared with 2022-12-16 · 197 added, 85 removed, 343 unchanged (45% of the section changed)

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Certain factors may have a material adverse effect on our business, prospects, financial condition and results of operations.

You should carefully consider the risks and uncertainties described below together with all of the other information contained in this Annual Report on Form 10-K, including our financial statements and the related notes, before deciding to invest in our common shares.

The risks and uncertainties described below are not the only ones we face.

Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business.

In addition, many of the following risk factors could be exacerbated by any worsening of the global business and economic environment.

Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business and cause the market price of our securities to decline.

In addition, many of the following risk factors could be exacerbated by any worsening of the global business and economic environment or the resurgence of Covid-19 or other public health threats.

If any of the following risks actually occurs, our business, financial condition, results of operations and future prospects could be materially and adversely affected.

Risks Related to Our Business

In addition, we cannot assure investors that our assumptions and expectations will prove to be correct.

Important factors could cause our actual results to differ materially from those indicated or implied by forward-looking statements.

See “Forward-Looking Statements And Other Matters” for a discussion of some of the forward-looking statements that are qualified by these risk factors.

Summary of Risks

The following summarizes key risks and uncertainties that could materially adversely affect us.

You should read this summary together with the more detailed description of each risk factor contained below.

We are a late-stage biopharmaceutical company with no products approved for commercial sale, and we have incurred significant losses since our inception and expect to continue to incur losses and may never generate profits from operations or maintain profitability.

We will need substantial additional funding to finance our operations through regulatory approval of one or more of our product candidates.

If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs, commercialization efforts or other operations.

We depend heavily on the success of our drug product candidates.

If we are unable to obtain regulatory approval or commercialize one or more of these experimental treatments, or experience significant delays in doing so, our business will be materially harmed.

We cannot give any assurance that we will receive regulatory approval for such product candidates or any other product candidates, which is necessary before they can be commercialized.

We rely significantly on information technology and any failure, inadequacy, interruption or security lapse of that technology, including any cybersecurity incidents, could harm our ability to operate our business effectively.

A successful sPLA2, anti-TLR4 or anti-CXCL10 drug has not been developed to date and we can provide no assurances that we will be successful or that there will be no adverse side effects.

Even if one of our product candidates 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 we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and any of our other current or future product candidates, we may not be successful in commercializing the applicable product candidate if it receives marketing approval.

Even if we are able to commercialize one of our product candidates, the product may become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, which would harm our business.

We face substantial competition, which may result in others discovering, developing or commercializing products to treat our target indications or markets before or more successfully than we do.

We will be dependent on third parties for manufacturing, including optimization, technology transfers and scaling up of clinical scale quantities of all of our product candidates.

The manufacturing of our monoclonal antibody candidates is complex and subject to a multitude of risks.

These manufacturing risks could substantially increase our costs and limit supply of these drug candidates for clinical development, and commercialization.

We rely on third parties to conduct our clinical trials and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such clinical trials.

Even if we complete the necessary clinical trials, the marketing approval process is expensive, time consuming and uncertain.

If we are not able to obtain, or if there are delays in obtaining, required marketing approvals, we will not be able to commercialize our product candidates, and our ability to generate revenue will be materially impaired.

Even if we obtain marketing approval for our product candidates, the terms of approvals and ongoing regulation of our products may limit how we manufacture and market our products, and compliance with such requirements may involve substantial resources, which could materially impair our ability to generate revenue.

If we are unable to obtain and maintain patent protection for our licensed technology and products, or if the scope of the patent protection is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully commercialize our licensed technology and products may be adversely affected.

The ownership of our common shares is highly concentrated, which may prevent you and other shareholders from influencing significant corporate decisions and may result in conflicts of interest that could cause our common shares price to decline.

Risks Related to Our Business, Financial Position and Capital Requirements

Since inception, we have incurred significant operating losses.

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We have devoted substantially all of our efforts to research and development, including clinical trials, and have not completed the development of any of our drug candidates.

We expect to continue to incur significant expenses and operating losses for the foreseeable future as we continue the development of, and seek marketing approvals for our product candidates, prepare for and begin the commercialization of any approved products, and add infrastructure and personnel to support our product development efforts and operations as a public company in the United States and Canada.

We expect to continue to incur significant expenses and operating losses without corresponding revenue for the foreseeable future as we continue the development of, and seek marketing approvals for our product candidates, prepare for and begin the commercialization of any approved products, and add infrastructure and personnel to support our product development efforts and operations as a public company in the U.S.

The net losses we incur may fluctuate significantly from quarter to quarter and year to year.

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Neither we nor a licensee may ever succeed in obtaining marketing approval for, or commercializing our product candidates and, even if marketing approval is obtained, we may never generate revenues that are significant enough to generate profits from operations.

Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods.

Failure to become and remain profitable would impair our ability to sustain operations and adversely affect the price of our securities and our ability to raise capital.

We will need substantial additional funding to finance our operations through regulatory approval of one or more of our product candidates.

If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.

If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs, commercialization efforts or other operations.

We expect our research and development expenses to increase substantially in the future, particularly for any drug candidates beyond Phase 2 clinical development or if we expand the number of drug candidates in clinical studies.

In addition, if we obtain marketing approval for any of our product candidates that are not then subject to licensing, collaboration or similar arrangements with third parties, we expect to incur significant commercialization expenses related to product sales, marketing, distribution and manufacturing.

If we are unable to raise capital when needed, or on attractive terms, we could be forced to delay, reduce or eliminate research and development programs or future commercialization efforts.

We cannot be certain that additional funding will be available on acceptable terms, or at all.

In addition, future debt financing into which we may enter may impose upon us covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, redeem our shares, make certain investments and engage in certain merger, consolidation or asset sale transactions.

If we are unable to raise additional capital when required or on acceptable terms, we may be required to significantly delay, scale back or discontinue the development or commercialization of one or more of our product candidates, restrict our operations or obtain funds by entering into agreements on unattractive terms, which would likely have a material adverse effect on our business, share price and our relationships with third parties with whom we have business relationships, at least until additional funding is obtained.

If we do not have sufficient funds to continue operations, we could be required to seek bankruptcy protection or other alternatives that would likely result in our securityholders losing some or all of their investment in us.

In addition, our ability to achieve profitability or to respond to competitive pressures would be significantly limited.

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

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, licensing, collaboration or similar arrangements, grants and debt financings.

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 of these securities may include liquidation or other preferences that adversely affect your rights as a holder of our common shares.

Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

Any debt financing or additional equity that we raise may contain terms, such as liquidation and other preferences that are not favorable to us or our existing shareholders.

If we raise additional funds through licensing, collaboration or similar arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research and development programs or product candidates or to grant licenses on terms that may not be favorable to us.

If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development of our product candidates.

To continue to grow our business over the longer term, we plan to commit substantial resources to research and development, clinical trials of our product candidates, and other operations and potential product acquisitions and in-licensing.

We have evaluated and expect to continue to evaluate a wide array of strategic transactions as part of our plan to acquire or in license and develop additional products and product candidates to augment our internal development pipeline.

Strategic transaction opportunities that we may pursue could materially affect our liquidity and capital resources and may require us to incur additional indebtedness, seek equity capital or both.

In addition, we may pursue development, acquisition or in-licensing of approved or development products in new or existing therapeutic areas or continue the expansion of our existing operations.

Accordingly, we expect to continue to opportunistically seek access to additional capital to license or acquire additional products, product candidates or companies to expand our operations, or for general corporate purposes.

Strategic transactions may require us to raise additional capital through one or more public or private debt or equity financings or could be structured as a collaboration or partnering arrangement.

We have no arrangements, agreements, or understandings in place at the present time to enter into any acquisition, in-licensing or similar strategic business transaction.

We partially rely on government grants to contribute to our EB05 (paridiprubart) development program.

If we are unable to satisfy our contractual obligations and manage our covenants or meet expected under both SIF agreements, the development of EB05 may be extended, delayed, modified, or terminated and we may be required to repay all or part of the grant earlier than expected.

In February 2021, we and Edesa Biotech Research signed the 2021 SIF Agreement whereby the Government of Canada agreed to contribute C$14.1 million in nonrepayable funding for an international Phase 2 study and certain pre-clinical experiments.

In the event that we or Edesa Biotech Research breach our obligations under the 2021 SIF Agreement, subject to applicable cure, the SIF may exercise a number of remedies, including demanding repayment of funding previously received and/or terminating the agreement.

The performance obligations of Edesa Biotech Research under the contribution agreement are guaranteed by us.

All potential funding available under the 2021 SIF Agreement has been received.

As of the date of this filing, we have met all of our performance and reporting requirements under the 2021 SIF Agreement.

On October 12, 2023, we and Edesa Biotech Research signed the 2023 SIF Agreement whereby the Government of Canada agreed to contribute up to C$23 million from the SIF in partially repayable funding toward of the development and commercialization of our investigational therapy EB05.

Under the 2023 SIF Agreement, we agreed to complete the project, to be conducted exclusively in Canada except as permitted otherwise under certain circumstances, on or before December 31, 2025.

We also have agreed to certain financial and non-financial covenants and other obligations in relation to EB05, including the achievement of certain headcount requirements in Canada, the maintenance of a collaboration with a Canadian research institute or post-secondary institutions, and the maintenance of certain research and development expenditures in Canada.

In an event of default, such as our breach of our covenants and obligations under either the 2023 SIF Agreement or the 2021 SIF Agreement, the Government of Canada may suspend or terminate its contribution to the project, or require repayment.

As a result, if we default on our obligations under the SIF agreements, we may not have sufficient funds available to continue the Phase 3 clinical study of our investigational therapy EB05, and we cannot be certain that we will be able to obtain additional capital to fund the program.

We are currently not in default of our obligations per the terms of either SIF agreement.

Our existing and any future indebtedness could adversely affect our ability to operate our business.

In October 2023, we entered into a credit agreement with Pardeep Nijhawan Medicine Professional Corporation, an entity controlled by Dr.

Nijhawan, our Chief Executive Officer, Secretary and member of our board of directors, providing for an unsecured revolving credit facility in the principal amount of up to $10 million.

Such credit facility combined with our other financial obligations and contractual commitments, including any future indebtedness, could have adverse consequences, including:

requiring us to dedicate a portion of our cash resources to the payment of interest and principal, thereby reducing money available to fund working capital, capital expenditures, product development and other general corporate purposes;

increasing our vulnerability to adverse changes in general economic, industry and market conditions;

subjecting us to restrictive covenants that may reduce our ability to take certain corporate actions or obtain further debt or equity financing;

limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete.

We depend heavily on the success of our drug product candidates.

If we are unable to obtain regulatory approval or commercialize one or more of these experimental treatments, or experience significant delays in doing so, our business will be materially harmed.

We cannot give any assurance that we will receive regulatory approval for such product candidates or any other product candidates, which is necessary before they can be commercialized.

We have not completed development of and/or obtained regulatory approval for any of our product candidates.

Development will require the commitment of substantial financial resources, extensive product candidate development, and clinical trials.

This process takes years of effort without any assurance of ultimate success.

Our ability to generate product revenues, which may not occur for multiple years, if at all, will depend heavily on the successful development and commercialization of our drug product candidates.

The success of our product candidates will depend on a number of factors, including the following:

The success of our product candidates will depend on a number of factors, including, but not limited to:

our ability to obtain additional capital from potential future licensing, collaboration or similar arrangements or from any future offering of our debt or equity securities;

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Accordingly, we may never be able to generate revenues through the license or sale of any of our product candidates.

Deterioration in general economic conditions in the United States, Canada and globally, including the effect of prolonged periods of inflation on our suppliers, third-party service providers and potential partners, could harm our business and results of operations.

Our product development efforts with respect to our product candidates may fail for many reasons, including but not limited to:

the failure of the product candidate in clinical studies;

adverse patient reactions to the product candidate or indications of other safety concerns;

insufficient clinical trial data to support the effectiveness or superiority of the product candidate;

the inability to manufacture sufficient quantities of the product candidate for development or commercialization activities in a timely and cost-efficient manner;

changes in the regulatory environment, including pricing and reimbursement, that make development of a new product or of an existing product for a new indication no longer attractive.

Deterioration in general economic conditions in the U.S., Canada and globally, including the effect of prolonged periods of inflation on our suppliers, third-party service providers and potential partners, could harm our business and results of operations.

Our business and results of operations could be adversely affected by changes in national or global economic conditions.

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Impacts of such conditions could be passed on to our business in the form of higher costs for labor and materials, higher investigator fees, possible reductions in pharmaceutical industry-wide spending on research and development and acquisitions and higher costs of capital.

Public health threats could have an adverse effect on our operations and financial results.

Public health threats, such as the novel coronavirus (Covid-19), influenza and other highly communicable diseases or viruses could adversely impact our operations and disrupt our ongoing or planned research and development activities.

We cannot presently predict the scope and severity of any potential future business shutdowns or disruptions, but if we or any of the third parties with whom we engage, including the suppliers, clinical trial sites, regulators and other third parties with whom we conduct business, were to experience shutdowns or other business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially and negatively impacted.

Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.

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Any predictions made about our future success or viability may not be as accurate as they could be if we had a longer operating history.

We expect to expand our capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.

We expect to experience growth in the number of our employees and the scope of our operations, particularly in the areas of drug development, regulatory affairs, finance and administration and, potentially, sales and marketing.

To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel.

We may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel.

The physical expansion of our operations may lead to significant costs and may divert our management and business development resources.

Any inability to manage growth could delay the execution of our business plans or disrupt our operations.

Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.

We are highly dependent on Dr.

Pardeep Nijhawan, our Chief Executive Officer and Secretary;

and Michael Brooks, our President;

as well as other principal members of our management and scientific teams.

Although we have employment agreements with each of our executive officers, these agreements do not prevent our executives from terminating their employment with the company at any time.

The unplanned loss of the services of any of these persons could materially impact the achievement of our research, development, financial and commercialization objectives.

Recruiting and retaining qualified personnel will also be critical to our success.

We may not be able to attract and retain these personnel on acceptable terms given the competition among numerous biotechnology and pharmaceutical companies for similar personnel.

In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy.

Our consultants and advisors may have commitments with other entities that may limit their availability to us.

We are exposed to risks related to currency exchange rates.

We conduct a significant portion of our operations outside of the United States.

We conduct a significant portion of our operations outside of the U.S.

Because our financial statements are presented in U.S.

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Our operations are subject to anti-corruption laws, including the U.S.

Foreign Corrupt Practices Act, or the FCPA, and other anti-corruption laws that apply in countries where we do business and may do business in the future.

We are also subject to other laws and regulations governing our international operations, including regulations administered by the government of the United States and authorities in the European Union, including applicable export control regulations, economic sanctions on countries and persons, customs requirements and currency exchange regulations.

Foreign Corrupt Practices Act (FCPA), and other anti-corruption laws that apply in countries where we do business and may do business in the future.

We are also subject to other laws and regulations governing our international operations, including regulations administered by the government of the U.S.

and authorities in the EU, including applicable export control regulations, economic sanctions on countries and persons, customs requirements and currency exchange regulations.

There is no assurance that we will be completely effective in ensuring our compliance with all applicable anti-corruption laws.

If we are not in compliance, we may be subject to criminal and civil penalties, disgorgement and other sanctions and remedial measures, and legal expenses, which could have an adverse impact on our business, financial condition, results of operations and liquidity.

Likewise, any investigation of any potential violations of the FCPA, other anti- corruption laws or trade control laws by U.S.

or other authorities could also have an adverse impact on our reputation, our business, results of operations and financial condition.

Similarly, compliance with global privacy and data security requirements could result in additional costs and liabilities to us or inhibit our ability to collect and process data globally, and our failure to comply with data protection laws and regulations could lead to government enforcement actions, which would cause our business and reputation to suffer.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.

We are subject to numerous environmental, health and safety laws and regulations.

Our operations may involve the use of hazardous and flammable materials, including chemicals and biological materials.

Our operations produce hazardous waste products.

We expect to contract with third parties for the disposal of these materials and wastes.

We cannot eliminate the risk of contamination or injury from these materials.

In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources.

We also could incur significant costs associated with civil or criminal fines and penalties.

Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials or other work-related injuries, this insurance may not provide adequate coverage against potential liabilities.

In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations.

These current or future laws and regulations may impair our research, development or production efforts.

Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

Our employees, principal investigators, consultants and commercial partners may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements and insider trading, which could cause significant liability for us and harm our reputation.

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Such actions could have a significant impact on our business and results of operations, including the imposition of significant fines or other sanctions.

We rely significantly on information technology and any failure, inadequacy, interruption or security lapse of that technology, including any cyber security incidents, could harm our ability to operate our business effectively.

Despite the implementation of security measures, our computer systems and those of third parties with which we contract are vulnerable to damage, including damage from cyber attacks, ransomware attacks, computer viruses, unauthorized access, human error and technological errors, natural disasters and telecommunication and electrical failures.

Additionally, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred.

If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a material and adverse impact on our business, financial condition, results of operations and prospects including the imposition of civil, criminal and administrative penalties, damages, monetary fines, disgorgement, imprisonment, loss of eligibility to obtain marketing approvals from the FDA, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, additional reporting requirements if subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with any of these laws, and curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our operating results.

We expect to expand our capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.

We may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel.

The physical expansion of our operations may lead to significant costs and may divert our management and business development resources.

If we are not able to effectively manage our growth and expand our organization, we might be unable to implement successfully the tasks necessary to execute effectively on our planned research, development and commercialization activities and, accordingly, might not achieve our research, development and commercialization goals.

Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.

We are highly dependent on Dr.

Pardeep Nijhawan, our CEO and Secretary;

and Michael Brooks, our President;

as well as other principal members of our management and scientific teams.

Although we have employment agreements with each of our executives, these agreements do not prevent our executives from terminating their employment at any time.

The unplanned loss of the services of any of these persons could materially impact the achievement of our research, development, financial and commercialization objectives.

If we lose the services of any of these individuals, we might not be able to find suitable replacements on a timely basis or at all, and our business could be harmed as a result.

Recruiting and retaining qualified personnel will also be critical to our success.

We may not be able to attract and retain these personnel on acceptable terms given the competition among numerous biotechnology and pharmaceutical companies for similar personnel.

We could have difficulty attracting experienced personnel to our Company and may be required to expend significant financial resources in our employee recruitment and retention efforts.

If we are not able to attract and retain the necessary personnel to accomplish our business objectives, we may experience constraints that will harm our ability to implement our business strategy and achieve our business objectives.

In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy.

These advisors are not our employees and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability to us.

In addition, our advisors may have arrangements with other companies to assist those companies in developing products or technologies that may compete with ours.

Despite the implementation of security measures, our computer systems and those of third parties with which we contract are vulnerable to damage, including damage from cyberattacks, ransomware attacks, computer viruses, unauthorized access, human error and technological errors, natural disasters and telecommunication and electrical failures.

System failures, accidents or security breaches could cause interruptions in our operations, and could result in a material disruption of our clinical and commercialization activities and business operations, in addition to possibly requiring substantial expenditures of resources to remedy.

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Interim, top-line and initial data should be viewed with caution until the final data are available.

In addition, the information we may publicly disclose regarding a particular preclinical or clinical study is based on what is typically extensive information, and you or others may not agree with what we determine is the material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding a particular drug, drug candidate or our business.

In addition, the information we may publicly disclose regarding a particular preclinical or clinical study is based on what is typically extensive information, and you or others may not agree with what we determine is the material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant regarding a particular drug, drug candidate or our business.

If the interim, top-line or initial data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, our product candidates may be harmed or delayed, which could harm our business, financial condition, operating results or prospects.

Any product candidate we advance into and through clinical trials may cause unacceptable adverse events or have other properties that may delay or prevent their regulatory approval or commercialization or limit their commercial potential.

Unacceptable adverse events caused by our product candidates in clinical trials could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in the denial of regulatory approval by the FDA or other regulatory authorities for any or all targeted indications and markets.

This, in turn, could prevent us from commercializing the affected product candidate and generating revenues from its sale.

We have not yet completed testing of any of our product candidates for the treatment of the indications for which we intend to seek product approval in humans, and we currently do not know the extent of adverse events, if any, that will be observed in patients who receive any of our product candidates.

If any of our product candidates cause unacceptable adverse events in clinical trials, we may not be able to obtain regulatory approval or commercialize such product or, if such product candidate is approved for marketing, future adverse events could cause us to withdraw such product from the market.

If clinical trials for our product candidates are prolonged or delayed, we may incur additional costs, and may not be able to commercialize our product candidates on a timely basis or at all.

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If the regulatory agencies determine that more data and information are needed, it could delay and/or negatively impact our ability to obtain regulatory approval to market and sell a particular product candidate.

If the commercial opportunity in chronic ACD or ARDS is smaller than we anticipate, our future revenue from EB01 or EB05, as applicable, will be adversely affected and our business will suffer.

It is critical to our ability to grow and become profitable that we successfully identify patients with chronic ACD or ARDS.

Our estimates of the number of people who have these conditions as well as the subset who have the potential to benefit from treatment with EB01 or EB05, are based on a variety of sources, including third-party estimates and analyses in the scientific literature, and may prove to be incorrect.

If the commercial opportunity in chronic ACD, ARDS, vitiligo or fibrotic diseases like systemic sclerosis (SSc) is smaller than we anticipate, our future revenue from our drug candidates will be adversely affected and our business will suffer.

It is critical to our ability to grow and become profitable that we successfully identify patients with chronic ACD, ARDS, vitiligo or SSc.

Our estimates of the number of people who have these conditions as well as the subset who have the potential to benefit from treatment with EB01, EB05, EB06 or EB07, are based on a variety of sources, including third-party estimates and analyses in the scientific literature, and may prove to be incorrect.

Further, new information may emerge that changes our estimate of the prevalence of these diseases or the number of patient candidates for these drug candidates.

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In such cases, our product candidates may prove to be ineffective in the clinical trials for treating those diseases, and adverse clinical trial results would likely negatively impact our business and results from operations.

A successful sPLA2 or anti-TLR4 drug has not been developed to date and we can provide no assurances that we will be successful or that there will be no adverse side effects.

Our sPLA2 and anti-TLR4 product candidates employ novel mechanisms of action.

To our knowledge no drug companies have successfully commercialized an sPLA2 inhibitor or an anti-TLR4 antibody and as a result the efficacy and long-term side effects are not known.

There is no guarantee that we will successfully develop and/or commercialize an sPLA2 inhibitor or anti-TLR4 therapy, and/or that our product candidates will have no adverse side effects.

A successful sPLA2, anti-TLR4 or anti-CXCL10 drug has not been developed to date and we can provide no assurances that we will be successful or that there will be no adverse side effects.

Our sPLA2, anti-TLR4 and anti-CXCL10 product candidates employ novel mechanisms of action.

To our knowledge no drug companies have successfully commercialized an sPLA2 inhibitor, an anti-TLR4 antibody or an anti-CXCL10 antibody and as a result the efficacy and long-term side effects are not known.

There is no guarantee that we will successfully develop and/or commercialize any of these therapies, and/or that our product candidates will have no adverse side effects.

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If an approved product does not achieve an adequate level of acceptance, we may not generate significant product revenues or any profits from operations.

Our ability to negotiate, secure and maintain third-party coverage and reimbursement for our product candidates may be affected by political, economic and regulatory developments in the United States, Canada, the European Union and other jurisdictions.

Governments continue to impose cost containment measures, and third-party payors are increasingly challenging prices charged for medicines and examining their cost effectiveness, in addition to their safety and efficacy.

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Our competitors may also obtain marketing approval for their products more rapidly than we may obtain approval for our products, which could result in our competitors establishing a strong market position before we are able to enter the market.

If approved, our product candidates will compete for a share of the existing market with numerous other products being used to treat ACD, ARDS, or any other indications for which we may receive government approval.

If approved, our product candidates will compete for a share of the existing market with numerous other products being used to treat ACD, ARDS, vitiligo, SSc or any other indications for which we may receive government approval.

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Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even if our product candidates obtain marketing approval.

Our ability to commercialize EB01, EB05 or any other product candidate successfully also will depend in part on the extent to which coverage and adequate reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers and other organizations.

Our ability to commercialize EB01, EB05, EB06, EB07 or any other product candidate successfully also will depend in part on the extent to which coverage and adequate reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers and other organizations.

Government authorities and other third- party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels.

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We will need to increase our insurance coverage when and if we begin conducting more expansive clinical development of our product candidates, and we may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.

If any of our product candidates are approved for commercial sale, we will be highly dependent upon consumer perceptions of us and the safety and quality of our products.

We could be adversely affected if we are subject to negative publicity.

We could also be adversely affected if any of our products or any similar products manufactured and distributed by other companies prove to be, or are asserted to be, harmful to patients.

Because of our dependence upon consumer perceptions, any adverse publicity associated with illness or other adverse effects resulting from patients’ use or misuse of our products or any similar products distributed by other companies could have a material adverse impact on our financial condition or results of operations.

We will be dependent on third parties for manufacturing, including optimization, technology transfers and scaling up of clinical scale quantities of all of our product candidates.

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The manufacture of our monoclonal antibody candidates requires processing steps that are more complex than those required for most small molecule drugs.

As a result of the complexities in manufacturing biologics, the cost to manufacture biologics in general, and our cell product candidates in particular, is generally higher than traditional small molecule chemical compounds, and the manufacturing processes are less reliable and are more difficult to reproduce.

As a result of the complexities in manufacturing biologics, the cost to manufacture biologics in general, and our monoclonal antibody candidates in particular, is generally higher than traditional small molecule chemical compounds, and the manufacturing processes are less reliable and are more difficult to reproduce.

Although we are working with third parties to develop reproducible and commercially viable manufacturing processes for our product candidates, doing so is a difficult and uncertain task, and there are risks associated with scaling to the level required for advanced clinical trials or commercialization, including, among others, cost overruns, potential problems with process scale-out, process reproducibility, stability issues, lot consistency, and timely availability of reagents or raw materials.

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The inability to manufacture comparable drug product by us or our CMO could delay the continued development of our product candidates.

We also must develop satisfactory methods for testing the identity, strength, quality and purity of the final drug.

In addition, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate the effectiveness of the packaging and that the compound does not undergo unacceptable deterioration over its shelf life.

If we fail at any of these tasks, we may not be able to obtain approval or successfully commercialize our product candidates.

We rely on third parties to conduct our clinical trials and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such clinical trials.

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

We have not received approval to market EB01, EB05 or any other Edesa product candidate from regulatory authorities in any jurisdiction.

We have only limited experience in filing and supporting the applications necessary to obtain marketing approvals for product candidates and expect to rely on third-party consultants to assist us in this process.

We have not received approval to market EB01, EB05, EB06, EB07 or any other Edesa product candidate from regulatory authorities in any jurisdiction.

Securing marketing approval requires the submission of extensive preclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication to establish the product candidate’s safety and effectiveness.

Securing marketing approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the regulatory authorities.

Regulatory authorities may determine that EB01, EB05 or any of our other product candidates is not effective, is only moderately effective or has undesirable or unintended side effects, toxicities, safety profiles or other characteristics that preclude us from obtaining marketing approval or that prevent or limit commercial use.

Regulatory authorities may determine that EB01, EB05, EB06, EB07 or any of our other product candidates is not effective, is only moderately effective or has undesirable or unintended side effects, toxicities, safety profiles or other characteristics that preclude us from obtaining marketing approval or that prevent or limit commercial use.

Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that our data are insufficient for approval and require additional preclinical studies, clinical trials or other trials.

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Thus, the cost of compliance with post-approval regulations may have a negative effect on our operating results and financial condition.

We may not qualify for or ultimately benefit from various expedited regulatory review programs or designations.

If we believe we meet eligibility requirements, we intend to apply for various regulatory incentives in the United States, such as breakthrough therapy designation, fast track designation, accelerated approval and priority review, where available, that provide for expedited review and/or other benefits, and we may also seek similar designations elsewhere in the world.

We may not qualify for or ultimately benefit from various expedited regulatory review programs or other special designations.

We have obtained a Fast Track designation in the U.S.

for EB05 as a treatment for ARDS in critically ill Covid-19 patients, and we may seek additional designations for EB05 or our other product candidates;

however, we may never receive such designations.

If we believe we meet eligibility requirements, we intend to apply for various regulatory incentives in the U.S., such as breakthrough therapy designation, fast track designation, accelerated approval and priority review, where available, that provide for expedited review and/or other benefits, and we may also seek similar designations elsewhere in the world.

Similarly, we may seek orphan drug designation in the U.S.

and other jurisdictions for our product candidates, but we may be unable to obtain such designation or to obtain or maintain the benefits associated with orphan drug designation, including market exclusivity.

Often, regulatory agencies have broad discretion in determining whether or not product candidates qualify for such regulatory incentives and benefits and we cannot guarantee we would be successful in obtaining beneficial regulatory designations by FDA or other regulatory agencies.

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If we are not able to obtain or maintain such designations for EB05 or other product candidates, it could delay and/or negatively impact our ability to obtain regulatory approval.

The FDA has broad discretion regarding Emergency Use Authorizations for Covid-19 medical products, and such authorizations are only valid during the Covid-19 public health emergency.

Regulators have broad discretion regarding emergency use authorizations for medical products, and such authorizations may only be valid during a public health emergency.

While, in most cases, a therapeutic must be approved by FDA before the product may be sold, when a public health emergency is declared, subject to certain conditions, FDA may authorize the emergency use of an unapproved medical product under an Emergency Use Authorization (EUA).

In the event that our Phase 2/3 clinical study of EB05 is successful, and if we believe we meet eligibility requirements, we intend to submit an application with the FDA for EUA.

FDA does not have review deadlines with respect to such submissions and, therefore, the timing of any potential approval of an EUA submission would be uncertain.

We would not be able to guarantee that the FDA would review our data in a timely manner, or that the FDA would accept the data when reviewed.

The FDA may decide that our data are insufficient for an EUA and require additional studies and refuse to approve our application.

In addition, even if granted, the FDA may revoke an EUA where it is determined that the underlying health emergency no longer exists or warrants such authorization.

Similar systems are in place in Canada and the EU.

In the event that our clinical study of EB05 is successful, and if we believe we meet eligibility requirements, we intend to submit an application with the regulators for emergency use.

Regulators typically do not have review deadlines with respect to such submissions and, therefore, the timing of any potential approval of an emergency use submission would be uncertain.

Regulators may refuse to approve our application.

In addition, even if granted, the regulators may revoke an emergency use where it is determined that the underlying health emergency no longer exists or warrants such authorization.

If we are unsuccessful in obtaining an EUA, or if any granted EUA is revoked after a short period of time, it could have a material adverse effect on our future business, financial condition and operating results.

Use of social media platforms presents new risks.

Increasing use of social media platforms could give rise to liability, breaches of data security and privacy laws, or reputational damage.

We believe that our potential patient population is active on social media.

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We are dependent on license relationships with third parties for our key drug development programs.

In 2016, we entered into an exclusive license agreement with Yissum Research Development Company of the Hebrew University of Jerusalem to obtain exclusive rights to certain know-how, patents and data relating to a pharmaceutical product.

In 2016, we entered into the Yissum License Agreement to obtain exclusive rights to certain know-how, patents and data relating to a pharmaceutical product.

We are using the exclusive rights to develop the product for therapeutic, prophylactic and diagnostic uses in topical dermal applications and anorectal applications, including for the development of EB01 to treat ACD and EB02 to treat HD.

In 2021, we also entered into a license agreement with the inventor of the same pharmaceutical product to acquire global rights for all fields of use beyond those named under the 2016 license agreement with Yissum.

If we default or fail to perform any of the terms, covenants, provisions or our obligations under the License Agreement, Yissum has the option to terminate the License Agreement, subject to advance notice to cure such default.

In 2021, we also entered into the Inventor License Agreement to acquire global rights for all fields of use beyond those named under the Yissum License Agreement.

If we default or fail to perform any of the terms, covenants, provisions or our obligations under the Yissum License Agreement, Yissum has the option to terminate the Yissum License Agreement, subject to advance notice to cure such default.

Any termination of this license agreement would have a materially adverse impact on our business and results from operations.

In April 2020, we entered into an exclusive license agreement with NovImmune SA to obtain exclusive rights throughout the world to certain know-how, patents and data relating to the monoclonal antibodies targeting TLR4 and CXCL10.

In April 2020, we entered into the NovImmune License Agreement to obtain exclusive rights throughout the world to certain know-how, patents and data relating to the monoclonal antibodies targeting TLR4 and CXCL10.

We are using these rights to develop EB05 as a potential treatment for ARDS and other disease indications.

If we default or fail to perform any of the terms, covenants, provisions or our obligations under the License Agreement, including milestone payments, NovImmune has the option to terminate the License Agreement, subject to advance notice to cure such default.

If we default or fail to perform any of the terms, covenants, provisions or our obligations under the NovImmune License Agreement, including milestone payments, NovImmune has the option to terminate the NovImmune License Agreement, subject to advance notice to cure such default.

Any termination of this license agreement would have a materially adverse impact on our business and results from operations.

Our success will partially depend on our ability to obtain and maintain patent protection in the United States and other countries with respect to our proprietary technology and products.

We intend to protect our proprietary position by filing patent applications in the United States, in Europe and in certain additional jurisdictions related to our novel technologies and product candidates that are important to our business.

Our success will partially depend on our ability to obtain and maintain patent protection in the U.S.

and other countries with respect to our proprietary technology and products.

We intend to protect our proprietary position by filing patent applications in the U.S., in Europe and in certain additional jurisdictions related to our novel technologies and product candidates that are important to our business.

This process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner.

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Patent applications that we file may not result in patents being issued which protect our technology or products, in whole or in part, or which effectively prevent others from commercializing competitive technologies and products.

Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may also diminish the value of patents issued to us, narrow the scope of our patent protection or make enforcement more difficult or uncertain.

Changes in either the patent laws or interpretation of the patent laws in the U.S.

and other countries may also diminish the value of patents issued to us, narrow the scope of our patent protection or make enforcement more difficult or uncertain.

We may become involved in lawsuits or other enforcement proceedings to protect or enforce our patents or other intellectual property, which could be expensive, time consuming and potentially unsuccessful.

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There is considerable intellectual property litigation in the biotechnology and pharmaceutical industries, and we may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our products and technology.

The risks of being involved in such litigation and office proceedings may also increase as our product candidates approach commercialization, and as our business gains greater visibility operating as a publicly traded company in the United States.

The risks of being involved in such litigation and office proceedings may also increase as our product candidates approach commercialization, and as our business gains greater visibility.

Third parties may assert infringement claims against us based on existing or future intellectual property rights and to restrict our freedom to operate.

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Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable.

In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets.

In addition, some courts inside and outside the U.S.

are less willing or unwilling to protect trade secrets.

If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us.

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The price of our common shares may continue to be volatile.

Market prices for securities of early-stage pharmaceutical, biotechnology and other life sciences companies have historically been particularly volatile, and the market price of our common shares has been subject to significant fluctuations.

Market prices for securities of clinical-stage pharmaceutical, biotechnology and other life sciences companies have historically been particularly volatile, and the market price of our common shares has been subject to significant fluctuations.

This volatility can be exacerbated by low trading volume.

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Our common shares are listed on The Nasdaq Capital Market.

There can be no assurance that we will be able to continue to maintain compliance with the Nasdaq continued listing requirements, and if we are unable to maintain compliance with the continued listing requirements, including the $1.00 Minimum Bid Price Requirement set forth in Nasdaq Listing Rule 5550(a)(2), our securities may be delisted from Nasdaq, which could reduce the liquidity of our common shares materially and result in a corresponding material reduction in the price of our common shares.

We must satisfy the continued listing requirements of Nasdaq, to maintain the listing of our common shares on The Nasdaq Capital Market.

As previously reported, on June 22, 2023, we received notice from Nasdaq’s Listing Qualifications Staff indicating that, based upon the closing bid price of our common shares for the prior 30 consecutive business days, we were not in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on Nasdaq, as set forth in Nasdaq Listing Rule 5550(a)(2) (the Bid Price Rule).

We had 180 days, or through December 19, 2023, to regain compliance with the Bid Price Rule.

On October 11, 2023, we effected a one-for-seven reverse split of our common shares.

By letter dated October 25, 2023, Nasdaq advised us that we had regained compliance with the Bid Price Rule.

There can be no assurance that we will be able to continue to maintain compliance with the Nasdaq continued listing requirements, and if we are unable to maintain compliance with the continued listing requirements, including the Bid Price Rule, our securities may be delisted from Nasdaq, which could reduce the liquidity of our common shares materially and result in a corresponding material reduction in the price of our common shares.

In addition, delisting could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees, suppliers and business development opportunities.

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Thus, delisting from Nasdaq could adversely affect our ability to raise additional financing through the public or private sale of equity securities, would significantly impact the ability of investors to trade our securities and would negatively impact the value and liquidity of our common shares.

Raising additional capital may cause dilution to our investors, restrict our operations or require us to relinquish rights to our technologies or product candidates

We do not have any committed external source of funds.

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

Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends or other distributions.

If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

We do not currently intend to pay dividends on our common shares in the foreseeable future, and consequently, any gains from an investment in our common shares will likely depend on appreciation in the price of our common shares.

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In addition, our board of directors could authorize the creation of a new series of our preferred shares that is convertible into our common shares, which could result in dilution to existing shareholders.

Failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes- Oxley Act of 2002 could have a material adverse effect on our share price.

Failure to maintain effective internal control over financial reporting could have a material adverse effect on our share price.

Section 404 of the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the SEC require an annual management assessment of the effectiveness of our internal control over financial reporting.

As a smaller reporting company as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, we are currently exempt from the auditor attestation requirement of Section 404(b).

As a smaller reporting company as defined in Rule 12b-2 under the Exchange Act, we are currently exempt from the auditor attestation requirement of Section 404(b).

If we lose this eligibility, we will incur increased personnel and audit fees in connection with the additional audit requirements.

If we fail to maintain the adequacy of our internal control over financial reporting, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the SEC.

If we cannot in the future favorably assess the effectiveness of our internal control over financial reporting, investor confidence in the reliability of our financial reports may be adversely affected, which could have a material adverse effect on our share price.

We cannot assure you that there will not be material weaknesses or significant deficiencies in our internal control over financial reporting in the future.

Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition, results of operations or cash flows.

If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting once that firm begins its Section 404 reviews, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common shares could decline, and we could be subject to sanctions or investigations by Nasdaq, the SEC, or other regulatory authorities.

Failure to remedy any material weakness or significant deficiencies in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also adversely affect investor confidence in the reliability of our financial reports and restrict our future access to the capital markets.

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There can be no assurance, however, that we will not be considered to be a PFIC for any particular year in the future because PFIC status is factual in nature, depends upon factors not wholly within our control, generally cannot be determined until the close of the taxable year in question, and is determined annually.

If we are deemed to be a PFIC during the current or any future taxable year, U.S.

If we are deemed to be a PFIC during the current or a future taxable year, U.S.

shareholders would be subject to special taxation rules related to gain on sale or disposition of our shares and excess distributions unless they make a timely election to treat our shares as a qualified electing fund (QEF election).

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UNRESOLVED STAFF COMMENTS.

We currently lease approximately 2,800 square feet of office space in Markham, Ontario, from a related company under a lease that expires in December 2022, with an option to renew for another two-year term.

We anticipate extending the lease through December 2024.

CYBERSECURITY.

Not applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors