Ernexa Therapeutics Inc. 10-Q

Item 1A. Risk Factors. An investment in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below and in the “Risk Factors” section of our Current Report on Form 8-K filed with the SEC on May 11, 2021, together with all other information contained or incorporated by reference in this report, before you invest in common stock. If any of the risks described in this report or in such Current Report occur, our business, financial condition, results of operations and future growth prospects could be materially and adversely affected. Under these circumstances, the trading price of common stock could decline, and you may lose all or part of your investment. Because our gene-editing and cell therapy product candidates are based on novel technologies, we cannot assure you that we will be successful, or predict the related cost and time we will spend, in initiating, conducting and completing clinical development, and obtaining the necessary regulatory and reimbursement approvals, required for commercialization. Cell programming technology and platform for generating cell therapy products using allogenic MSCs derived from iPSCs represent novel therapeutic approaches, and to our knowledge no iPSC-derived cell products are currently approved for commercial sale anywhere in the world. As such, it is difficult to accurately predict the type and scope of challenges that we will incur during development of our respective product candidates, and we thus face uncertainties associated with the preclinical and clinical development, manufacture, and regulatory compliance for the initiation and conduct of clinical trials, regulatory approval, and reimbursement required for successful commercialization of product candidates. In addition, because the iPSC-derived cell product candidates are in the pre-clinical stage, no human data are yet available to assess the long-term effects of treatment. Animal models and assays may not accurately predict the safety and efficacy of our product candidate in our target patient populations, and appropriate models and assays may not exist for demonstrating the safety and purity of the product candidates, as required by the FDA and other regulatory authorities for ongoing clinical development and regulatory approval. The pre-clinical and clinical development, manufacture, and regulatory requirements for approval of the product candidates may be more expensive and take longer than for other more well-known or extensively studied pharmaceutical or biopharmaceutical product candidates due to a lack of prior experiences on the side of both developers and regulatory agencies. Additionally, due to the uncertainties associated with the pre-clinical and clinical development, manufacture, and regulatory requirements for approval of the product candidates, we may be required to modify or change pre-clinical and clinical development plans or manufacturing activities and plans, or be required to meet stricter regulatory requirements for approval. Any such modifications or changes could delay or prevent our ability to develop, manufacture, obtain regulatory approval or commercialize the product candidates, which would adversely affect our business, financial condition and results of operations. 33 Table of Contents Cellular immunotherapies, and stem cell therapies and iPSC-derived cell therapies in particular, represent relatively new therapeutic areas, and the FDA has cautioned consumers about potential safety risks associated with cell therapies. To date, there are relatively few approved cell therapies. As a result, the regulatory approval process for a gene-editing or cellular therapy product candidate is uncertain and may be more expensive and take longer than the approval process for product candidates based on other, better known or more extensively studied technologies and therapeutic approaches. For example, there are currently no FDA approved products with a label designation that supports the use of a product to treat and reduce the severity of ARDS in patients with COVID-19, which makes it difficult to determine the clinical endpoints and data required to support an application or regulatory approval, and the time and cost required to obtain regulatory approval in the United States for our product candidate. Regulatory requirements in the United States governing cell therapy products have changed frequently and the FDA or other regulatory bodies may change the requirements, or identify different regulatory pathways, for approval of the product candidates. For example, within the FDA, the Center for Biologics Evaluation and Research, or CBER, restructured and created a new Office of Tissues and Advanced Therapies to better align its oversight activities with FDA Centers for Drugs and Medical Devices. It is possible that over time new or different divisions may be established or be granted the responsibility for regulating cell and/or gene therapy products, including iPSC-derived cell products. As a result, we may be required to change its regulatory strategy or to modify its applications for regulatory approval, which could delay and impair its ability to complete the pre-clinical and clinical development and manufacture of, and obtain regulatory approval for, our product candidates. Changes in regulatory authorities and advisory groups, or any new requirements or guidelines they promulgate, may lengthen the regulatory review process, require us to perform additional studies, increase its development and manufacturing costs, lead to changes in regulatory pathways, positions and interpretations, delay or prevent approval and commercialization of the product candidates or lead to significant post-approval limitations or restrictions. As we advance our product candidates, we will be required to consult with the FDA and other regulatory authorities, and our product candidates will likely be reviewed by an FDA advisory committee. We also must comply with applicable requirements, and if we fail to do so, we may be required to delay or discontinue development of our product candidates. Delays or unexpected costs in obtaining, or the failure to obtain, the regulatory approval necessary to bring the product candidates to market could impair our ability to generate sufficient product revenues to maintain our respective businesses. We own only a 25% interest in NoveCite, Inc., and that interest may be diluted unless we invest additional funds. In July 2021, we acquired 25% of the outstanding common stock of NoveCite, Inc. As a result, we will only be entitled to a portion of any benefits that flow from the development by NoveCite, Inc. of any product candidates. In the event that NoveCite, Inc. issues additional equity securities in the future, our percentage ownership would be diluted unless we were to invest additional funds. Dilution of our equity ownership would decrease our portion of any benefit that might be derived from a NoveCite, Inc. drug candidate’s successful development. If we were to determine that it would be in the best interests of our company and stockholders to invest additional amounts in NoveCite, Inc. to prevent dilution of our interests, the required funds may not be available to us on reasonable terms, or at all.