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Item 1A. Risk Factors

2024-02-22 compared with 2023-02-23 · 97 added, 91 removed, 923 unchanged (17% of the section changed)

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The risks and uncertainties described below and in our other filings with the SEC are not the only risks we face.

If one or more of the

following risks are realized, our business, financial condition, results of operations and prospects could be materially and adversely affected.

If one or more of the following risks are realized, our business, financial condition, results of operations and prospects could be materially and adversely affected.

In that event, the market price for our common stock could decline, and you may lose your entire investment.

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You should carefully consider the fuller risk factor disclosure set forth in this Annual Report, in addition to the other information herein, including the section of this report titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes.

• The coronavirus pandemic has caused interruptions or delays of our business plan and may continue to have a significant adverse effect on our business.

• Our business could be materially and adversely affected in the future by the effects of disease outbreaks, epidemics and pandemics.

• Continued inflation and uncertainty in global economic conditions could negatively affect our business, results of operations and financial condition.

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• Our product candidates may cause undesirable adverse effects or have other properties that could delay or prevent their marketing approval, limit the commercial profile of an approved label or result in significant negative consequences following marketing approval, if obtained.

• We are heavily dependent on the success of our product candidates, which are in the early stages of clinical development.

• We are heavily dependent on the success of our product candidates, which are in the early to late stages of clinical development.

We may not be able to generate data for any of our product candidates sufficient to receive regulatory approval in our planned indications, which will be required before they can be commercialized.

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• We incur significant costs and demands upon management as a result of complying with the laws and regulations affecting public companies.

• Our failure to meet the $1.00 minimum bid price or other continued listing requirements of Nasdaq could result in a delisting of our common stock, which could negatively impact the market price and liquidity of our common stock and our ability to access the capital markets.

• The market price of our common stock has been and is expected to continue to be volatile.

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Macroeconomic Risks

The coronavirus pandemic has caused interruptions or delays of our business plan and may continue to have a significant adverse effect on our business.

COVID-19 has had and continues to have a significant impact around the world.

In an effort to contain and mitigate the spread of COVID-19, many countries imposed unprecedented restrictions on travel, quarantines, vaccine mandates and other public health safety measures.

Although some of these restrictions have been loosened or lifted in the United States and other countries, new variants continue to emerge, new outbreaks are periodically reported and significant uncertainty and concern remain.

The extent to which the pandemic may continue to impact our business will depend on future developments, which are highly uncertain and cannot be predicted, but the development of clinical supply materials could be delayed and enrollment of patients in our ongoing studies may be delayed or suspended, if hospitals and clinics in areas where we are conducting trials have to shift resources to cope with the COVID-19 pandemic and may limit access or close clinical facilities due to the COVID-19 pandemic.

Additionally, if our trial participants are unable to travel to our clinical study sites as a result of quarantines, vaccine mandates, travel bans or other restrictions resulting from the COVID-19 pandemic, we may experience higher discontinuation rates or delays in our clinical studies, as occurred in our investigator-sponsored trial of vidofludimus calcium in PSC that was conducted at the Mayo Clinic.

Government-imposed quarantines and restrictions may also require us to temporarily terminate our clinical sites.

Furthermore, if we determine that our trial participants may suffer from exposure to COVID-19 as a result of their participation in our clinical trials, we may voluntarily terminate certain clinical sites as a safety measure until we reasonably believe that the likelihood of exposure has subsided.

As a result, our expected development timelines for our product candidates may be negatively impacted.

We cannot predict the continuing impact of the COVID-19 pandemic, as consequences of such an event are highly uncertain and subject to change.

We do not yet know the full extent of potential delays or impacts that have affected and may continue to affect our business, or our clinical studies in general.

The COVID-19 pandemic has already adversely affected our operations and may further materially disrupt or delay our business operations, further divert the attention and efforts of the medical community to coping with COVID-19, disrupt the marketplace in which we operate, and/or have continuing material adverse effects on our operations.

The COVID-19 pandemic could further disrupt our business and operations, interrupt our sources of supply, hamper our ability to raise additional funds or sell our securities, continue to slow down the overall economy or curtail consumer spending.

Our business could be materially and adversely affected in the future by the effects of disease outbreaks, epidemics and pandemics.

Disease outbreaks, epidemics and pandemics, in regions where we have concentrations of clinical trial sites and other business operations, could adversely affect our business, including by causing significant disruptions in our operations and/or in the operations of manufacturers and CROs upon whom we rely.

Disease outbreaks, epidemics and pandemics may have negative impacts on our ability to initiate new clinical trial sites, enroll new patients and to maintain existing patients who are participating in clinical trials, which may result in increased clinical trial costs, longer timelines and delay in our ability to obtain regulatory approvals of our product candidates, if at all.

Additionally, general supply chain issues may be exacerbated during disease outbreaks, epidemics or pandemics and may also impact the ability of our clinical trial sites to obtain basic medical supplies used in our trials in a timely fashion, if at all.

Moreover, the extent to which disease outbreaks, epidemics and pandemics may impact our business, results of operations and financial position will depend on future developments, which are highly uncertain and cannot be predicted with confidence.

New health epidemics or pandemics may emerge that result in similar or more severe disruptions to our business.

To the extent any future disease outbreak, epidemic or pandemic adversely affects our business, financial condition, results of operations and growth prospects, it could also have the effect of heightening many of the other risks and uncertainties described in this “Risk Factors” section.

Continued inflation and uncertainty in global economic conditions could negatively affect our business, results of operations and financial condition.

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We have already seen a general increase in many of our costs as a result of inflation, although inflation has not yet had a material impact on our results of operations.

However, the economies of Germany, the United States, Australia and other countries in which we do business have experienced high rates of inflation during 2022 and, if inflation were to continue for a prolonged period of time or the rate of inflation in our markets were to increase, or if a global recession were to occur, our expenses could increase substantially, resulting in increased losses from operations and net loss.

However, the economies of Germany, the United States, Australia and other countries in which we do business have experienced high rates of inflation during 2022 and 2023 and, if inflation were to continue for a prolonged period of time or the rate of inflation in our markets were to increase, or if a global recession were to occur, our expenses could increase substantially, resulting in increased losses from operations and net loss.

A downturn in the economic environment can also lead to limitations on our ability to obtain financing, reduced liquidity and declines in our stock price.

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Our clinical trials of vidofludimus calcium were originally planned to be conducted at more than 60 sites in Ukraine and Russia, but most had to be relocated to other countries because of the invasion of Ukraine by Russia in February 2022 and resulting sanctions imposed on Russia by the United States and other countries.

These disruptions delayed our clinical development program, increased our costs and may disrupt future planned clinical development activities in these two countries.

This military action has continued for more than a year and its future course and effects on our Company are highly unpredictable.

These disruptions delayed our clinical development program, increased our costs and may disrupt future planned clinical development activities in these two

This military action has continued for more than two years and its future course and effects on our Company are highly unpredictable.

We currently have 35 active sites in western Ukraine and the ongoing conflict could put the data associated with these patients in jeopardy as well as extend patient recruitment timelines.

We anticipate that Ukraine will make up approximately 20% of our ENSURE- 1 and ENSURE-2 phase 3 patient population.

In addition, no clinical sites in Russia have been activated or are intended to be used in the future.

Alternative sites to fully and timely compensate for our clinical trial activities in Ukraine may not continue to be available.

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In addition, if we obtain regulatory approval to market a product candidate, our future revenue will depend upon the size of any markets in which our product candidates may receive regulatory approval, and our ability to achieve sufficient market acceptance, pricing, reimbursement from third-party payors, and adequate market share for our product candidates.

Even if we eventually obtain adequate market share for our product candidates, to the extent they receive regulatory and market approval, the potential markets for our product candidates may not be large enough for us to become profitable.

Even if we eventually obtain adequate market share for our product candidates, to the extent they receive regulatory and market approval and authorization for reimbursement, the potential markets for our product candidates may not be large enough for us to become profitable.

We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future, and our expenses will increase substantially if and as we:

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We believe that we will continue to expend substantial resources for the foreseeable future toward the completion of clinical development and regulatory preparedness of our product candidates, preparations for a commercial launch of any approved product candidates, and development of any other current or future product candidates we may choose to further develop.

These expenditures will include costs associated with research and development, conducting preclinical studies and clinical trials, seeking marketing approvals, and manufacturing and supply as well as marketing and selling any products approved for sale.

These expenditures will include costs associated with research and

development, conducting preclinical studies and clinical trials, seeking marketing approvals, and manufacturing and supply as well as marketing and selling any products approved for sale.

In addition, other unanticipated costs may arise.

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In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans.

We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements into the fourth quarter of 2024.

Our estimate as to how long we expect our existing cash and cash

equivalents to continue to fund our operations is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect.

We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements into the third quarter of 2025.

Our estimate as to how long we expect our existing cash and cash equivalents to continue to fund our operations is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect.

Further, changing circumstances, some of which may be beyond our control, could cause us to consume cash and cash equivalents significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned.

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The marketing approval processes of the FDA and comparable foreign regulatory authorities are lengthy, time-consuming and inherently unpredictable, and if we are ultimately unable to obtain marketing approval for our product candidates, our business will be substantially harmed.

None of our current product candidates have gained marketing approval for sale in the United States or any other country, and we cannot guarantee that we will ever have marketable products.

None of our current product candidates have yet advanced to the point when we could seek marketing approval for sale in the United States or any other country, and we cannot guarantee that we will ever have marketable products.

Our business is substantially dependent on our ability to complete the development of, obtain marketing approval for, and successfully commercialize, our product candidates in a timely manner.

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Clinical trials conducted in one country may not be accepted or the results may not be found adequate by regulatory authorities in other countries, and obtaining regulatory approval in one country does not mean that regulatory approval will be obtained in any other country.

However, the failure to obtain regulatory approval in one jurisdiction could have a negative impact on our ability to obtain approval in a different jurisdiction.

However, the failure to obtain regulatory approval in one jurisdiction could have a negative impact on our ability to obtain approval in different jurisdictions.

Approval processes vary among countries and can involve additional product candidate testing and validation and additional administrative review periods.

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Following any approval for commercial sale of our product candidates, certain changes to the product, such as changes in manufacturing processes and additional labeling claims, as well as new safety information, may require costly new studies and will be subject to additional FDA notification, or review and approval.

marketing approval for any of our product candidates may be withdrawn.

Also, marketing approval for any of our product candidates may be withdrawn.

If we are unable to obtain and maintain marketing approval for our product candidates in one or more jurisdictions, or any approval contains significant limitations, our ability to market our product candidates to our full target market will be reduced and our ability to realize the full market potential of our product candidates will be impaired.

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The FDA may evaluate the reported information and conclude that a financial relationship between us and a clinical investigator has created a conflict of interest or otherwise affected interpretation of the study.

The FDA may therefore question the integrity of the data generated at the applicable clinical trial site, and the utility of the clinical trial itself may be jeopardized.

The FDA may therefore question the integrity of the data generated at the applicable clinical trial site, and the utility of the clinical trial itself

may be jeopardized.

The FDA may refuse to accept our marketing applications, and other delays or even denial of marketing approval could result.

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In addition, many of the factors that could cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of marketing approval of our product candidates.

Significant clinical trial delays could also allow our competitors to bring products to market before we can, shorten any periods during which we may have the

exclusive right to commercialize any approved product candidates, and impair our ability to commercialize any approved product candidates, which may harm our business, financial condition, results of operations and prospects.

Significant clinical trial delays could also allow our competitors to bring products to market before we can, shorten any periods during which we may have the exclusive right to commercialize any approved product candidates, and impair our ability to commercialize any approved product candidates, which may harm our business, financial condition, results of operations and prospects.

Use of patient-reported outcomes in our clinical trials may delay the development of our product candidates or increase development costs.

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Our product candidates may cause undesirable adverse effects or have other properties that could delay or prevent their marketing approval, limit the commercial profile of an approved label or result in significant negative consequences following marketing approval, if obtained.

Undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive “approved use” label or the delay or denial of marketing approval by the

FDA or other comparable foreign regulatory authorities.

If any of our current or future product candidates is associated with serious adverse, undesirable or unacceptable side effects, we may need to abandon such candidate’s development or limit development to certain uses or sub-populations in which such side effects are less prevalent, less severe or more acceptable from a risk-benefit perspective.

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Any of these events could prevent us from achieving or maintaining market acceptance of any approved product candidates, and could materially adversely affect our business, financial condition, results of operations and prospects.

We are heavily dependent on the success of our product candidates, most of which are in the early stages of clinical development.

We are heavily dependent on the success of our product candidates, most of which are in the early to late stages of clinical development.

We may not be able to generate data for any product candidates sufficient to receive regulatory approval in its planned indications, which will be required before it can be commercialized.

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We currently generate no revenue from sales of any products, and we may never be able to develop or commercialize a product candidate.

Our most advanced product candidate, vidofludimus calcium, had the first patient enrolled in a Phase 3 program for relapsing multiple sclerosis (“RMS”) in November 2021 and we do not expect the readout of topline data from this trial until the end of 2025.

We are not permitted to market or promote any of our product candidates before we receive regulatory approval from the FDA or comparable foreign regulatory authorities, and we may never receive such regulatory approval for any of our product candidates.

We cannot be certain that any of our product candidates will be successful in clinical trials or receive regulatory approval.

Further, our product candidates may not receive regulatory approval even if they are successful in clinical trials.

Further, our product candidates may not receive regulatory approval even if they are successful in

clinical trials.

If we do not receive regulatory approvals for our product candidates, we may not be able to continue our operations.

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If patients are unwilling to participate in our clinical trials for any reason, the timeline for conducting trials and obtaining regulatory approval of our product candidates may be delayed.

If we experience delays in the completion of, or experiences termination of, any clinical trials of our product candidates, the commercial prospects of our product candidates could be harmed, and our ability to generate product revenue from product candidates could be delayed or impaired.

We have recently experienced delays in our planned clinical trials of vidofludimus calcium at sites in Ukraine and Russia because of the invasion of Ukraine by Russia.

If we experience delays in the completion of, or experience termination of, any clinical trials of our product candidates, the commercial prospects of our product candidates could be harmed, and our ability to generate product revenue from product candidates could be delayed or impaired.

We have recently experienced delays in our planned clinical trials of vidofludimus calcium at sites in Ukraine and Russia because of the invasion of Ukraine by Russia in 2022 and the ongoing conflict.

These and other delays we may encounter in initiating or completing clinical trials would likely increase our overall costs, impair product candidate development and impair our ability to obtain regulatory approval.

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Any marketing approvals that we receive for our product candidates may also be subject to limitations on the approved indicated uses for which the product may be marketed or subject to conditions of approval, or contain requirements for potentially costly post-approval studies, including Phase 4 clinical trials, and surveillance to monitor safety and efficacy.

The FDA may also require us to implement a Risk Evaluation and Mitigation Strategy drug safety program as a condition of approval of our product candidates, which could include requirements for a medication guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries and other risk minimization tools

The FDA may also require us to implement a Risk Evaluation and Mitigation

Strategy drug safety program as a condition of approval of our product candidates, which could include requirements for a medication guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries and other risk minimization tools.

Later discovery of previously unknown problems with an approved product, including adverse events of unanticipated severity or frequency, or problems with manufacturing operations or processes, or failure to comply with regulatory requirements, or evidence of acts that raise questions about the integrity of data supporting the product approval, may result in, among other things:

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If we are found to have improperly promoted our product, including for an off-label use, we may become subject to significant liability.

Numerous drug manufacturers have been the subject of investigations related to off-label promotion resulting in multi-billion dollar settlements, consent decrees, and on-going monitoring under corporate integrity agreements or

deferred prosecution agreements.

In addition, the FDA could also seek permanent injunctions under which specified promotional conduct is monitored, changed or curtailed.

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• Federal civil and criminal false claims laws and civil monetary penalty laws, including the FCA, impose criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for, among other things, knowingly presenting, or causing to be presented, to the federal government, including the Medicare and Medicaid programs, claims for payment that are false or fraudulent or for making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government.

FCA liability is potentially significant in the healthcare industry because the statute provides for treble damages and mandatory penalties (tied to inflation) of $12,537 to $25,076 (after May 9, 2022) per false claim or statement.

FCA liability is potentially significant in the healthcare industry because the statute provides for treble damages and mandatory penalties (tied to inflation) of $13,946 to $27,894 (after January 15, 2024) per false claim or statement.

• The civil monetary penalties statute imposes penalties against any person or entity who, among other things, is determined to have presented or caused to be presented a claim to a federal healthcare program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.

• The federal Health Insurance Portability and Accountability Act of 1996 ("HIPAA") imposes criminal and civil penalties for knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private), knowingly and willfully embezzling or stealing from a health care benefit program, willfully obstructing a criminal investigation of a healthcare offense and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters.

obstructing a criminal investigation of a healthcare offense and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters.

• HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and its implementing regulations impose obligations on covered entities, including healthcare providers, health plans, and healthcare clearinghouses, as well as their respective business associates that create, receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity, with respect to safeguarding the privacy, security and transmission of individually identifiable health information.

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In addition, we cannot predict the nature, scope or effect of future regulatory requirements to which our international operations might be subject or the manner in which existing or future laws might be administered or interpreted.

We are also subject to other laws and regulations governing our international operations, including regulations administered by the governments of the United States and authorities in the European Union, including applicable import and export control regulations, economic sanctions on countries and persons, anti-money laundering laws, customs requirements and currency exchange regulations, collectively referred to as trade control laws.

export control regulations, economic sanctions on countries and persons, anti-money laundering laws, customs requirements and currency exchange regulations, collectively referred to as trade control laws.

We may not be effective in ensuring our compliance with all applicable anti-corruption laws or other legal requirements, including trade control laws.

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There continues to be significant interest in promoting healthcare reform, as evidenced by the enactment in the United States of the Affordable Care Act and efforts to repeal, invalidate or modify portions of the act.

Among other things, the Affordable Care Act contains provisions that may reduce the profitability of drug products, including, for example, revising the methodology by which rebates owed by manufacturers for covered outpatient drugs under the Medicaid Drug Rebate Program are calculated, extending Medicaid rebates to individuals enrolled in Medicaid managed care plans, imposing mandatory discounts for certain Medicare Part D beneficiaries who fall into a coverage gap, and subjecting drug manufacturers to payment of an annual fee based on its market share of prior year total sales of branded programs to certain federal healthcare programs.

There have been judicial and congressional challenges to the Affordable Care Act, some of which have been successful, as well as efforts to repeal or replace certain aspects of the Affordable Care Act.

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

The continuing efforts of the government, insurance companies,

managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare may adversely affect:

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

• the demand for any drug products for which we may obtain marketing approval;

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Even if we are able to satisfy the award requirements, we may not be able to win any contracts or grants in a timely manner, if at all.

In addition, even if we enter into contracts with or receives grants from government agencies, non-profit entities or academic institutions, we may lose such contracts or grants due to failure to comply with applicable terms, limitations, or government regulations.

In addition, even if we enter into contracts with or receive grants from government agencies, non-profit entities or academic institutions, we may lose such contracts or grants due to failure to comply with applicable terms, limitations, or government regulations.

As a result, our business, results of operations, financial condition and prospects could be harmed.

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Our management may need to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing our growth.

As we advance our product candidates through clinical trials, we will need to expand our development, regulatory, manufacturing, marketing and sales capabilities or contract with third parties to provide these capabilities.

capabilities.

As our operations expand, we expect that we will need to manage additional relationships with such third parties, as well as additional collaborators and suppliers.

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We do not believe any confidential or proprietary information was compromised and have taken steps to prevent unauthorized action in the future such as implementing two factor authentication for our email accounts.

While we believe that our insurance policies include liability coverage for security breaches, we could be subject to indemnity claims or other damages that exceed, or are outside the scope of, our insurance coverage.

As a result of a new SEC rule on cybersecurity disclosure, we are required to disclose, on a current basis pursuant to new Item 1.05 of SEC Form 8-K, any cybersecurity incident that we determine to be material and describe the material aspects of the nature, scope, and timing of the incident, as well as the material impact or reasonably likely material impact of the incident on us, including our financial condition and results of operations.

We will also be required to describe, on a periodic basis, our processes, if any, for the assessment, identification, and management of material risks from cybersecurity threats, and describe whether any risks from cybersecurity threats have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition, our board’s oversight of risks from cybersecurity threats and management’s role in assessing and managing material risks from cybersecurity threats.

While we believe that our insurance policies include liability coverage for security breaches, we could be subject to liability, indemnity claims or other damages that exceed, or are outside the scope of, our insurance coverage.

As a result, the ramifications of a potential security breach could have a material adverse effect on our business, financial condition, results of operations and prospects, as well as cause a decline in the trading price of our common stock.

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Therefore, in addition to financing the development of our product candidates through additional equity financings or through debt financings, we may decide to enter into collaborations with pharmaceutical or biopharmaceutical companies for the development and potential commercialization of our product candidates in the United States or foreign markets.

We announced in June 2022 that we do not plan further drug development activities in ulcerative colitis without a partner, following the failure of our phase 2 clinical trial to achieve its primary endpoint.

We announced in June 2022 that we do not plan further drug development activities in ulcerative colitis without a partner.

We face significant competition in seeking appropriate collaborators.

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Any of these contingencies may require us to curtail the development of a particular product, reduce or delay one or more of our development programs, delay our potential commercialization or reduce the scope of our sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense.

elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all.

If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all.

If we do not have sufficient funds, we will not be able to bring any approved product candidates to market and generate product revenue.

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Moreover, increasing efforts by governmental and private payors in the United States and other jurisdictions to limit or reduce healthcare costs may result in restrictions on coverage and the level of reimbursement for new products and, as a result, they may not cover or provide adequate payment for our products.

We expect to experience pricing pressures in connection with products due to the increasing trend toward managed healthcare, including the increasing influence of health maintenance organizations, pharmacy benefit management organizations and additional legislative changes.

We expect to experience pricing pressures in connection

with products due to the increasing trend toward managed healthcare, including the increasing influence of health maintenance organizations, pharmacy benefit management organizations and additional legislative changes.

The downward pressure on healthcare costs in general, and prescription drugs in particular, has and is expected to continue to increase in the future.

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Our competitors in the United States and elsewhere include major pharmaceutical, biotechnology and biosimilar manufacturers.

Some of these competitors may have more extensive research and development, regulatory compliance, manufacturing, marketing and sales capabilities than we have.

Some of these competitors may have more extensive research and development, regulatory compliance, manufacturing, marketing and sales capabilities than we have, and are already marketing products approved by the FDA for these indications.

Many competitors also have significantly greater financial resources.

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These events could also result in the suspension, discontinuation, or clinical hold of, or modifications to, our clinical trials.

Our product candidates may not be accepted by the general public or the medical community and potential clinical trial subjects may be discouraged from enrolling in our clinical trials.

Our product candidates may not be accepted by the general public or the medical community and potential

clinical trial subjects may be discouraged from enrolling in our clinical trials.

As a result, we may not be able to continue, or may be delayed in conducting, our development programs.

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Delays in production by third parties could delay our clinical trials or have an adverse impact on any commercial activities.

In addition, our dependence on third parties for the manufacture of and formulation of our product candidates subjects us to the risk that such product candidates may have manufacturing defects that we has limited ability to prevent or control.

Although we oversee these activities to ensure compliance with our quality standards, budgets and timelines, we have, and will continue to have, less control over the manufacturing of our product candidates than if we were to manufacture our product candidates.

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In addition, it may be very challenging, and in some cases impossible, to find replacement service providers that can develop and manufacture our drug candidates in an acceptable manner and at an acceptable cost and on a timely basis.

sale of products containing any defects or any delays in the supply of necessary products or services could adversely affect our business, financial condition, results of operations, and prospects.

The sale of products containing any defects or any delays in the supply of necessary products or services could adversely affect our business, financial condition, results of operations, and prospects.

Growth in the costs and expenses of components or raw materials may also adversely affect our business, financial condition, results of operations, and prospects.

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In the event we have to perform under these indemnification provisions, it could have a material adverse effect on our business, financial condition and results of operations.

In the normal course of business, we periodically enter into academic, commercial, service, collaboration, licensing, consulting and other agreements that contain indemnification provisions.

In the normal course of business, we periodically enter into academic, commercial, service, collaboration, licensing, consulting, financial advisory and other agreements that contain indemnification provisions.

With respect to our academic and other research agreements, we typically indemnify the institution and related parties from losses arising from claims relating to the products, processes or services made, used, sold or performed pursuant to the agreements for which we have secured licenses, and from claims arising from our or our sublicensees’ exercise of rights under the agreements.

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If our contract manufacturers fail to comply with continuing regulations, resulting enforcement action could adversely affect us.

If any of our contract manufacturers fail to comply with regulatory requirements or if previously unknown problems with products, manufacturers or manufacturing processes are discovered, we or the manufacturer could be subject to administrative or judicially imposed sanctions, including restrictions on the products or the manufacturers or manufacturing processes we use, warning letters, untitled letters (which the FDA uses as an initial notification of violations), civil or criminal penalties, fines, injunctions, product seizures or detentions, import bans, voluntary or mandatory product recalls and publicity requirements, suspension or withdrawal of regulatory approvals, total or partial suspension of production, and refusal to approve pending applications for marketing approval of new products.

suspension or withdrawal of regulatory approvals, total or partial suspension of production, and refusal to approve pending applications for marketing approval of new products.

Risks Related to Our Intellectual Property

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Our commercial success will depend in part on our ability to obtain additional patents and protect our existing patent position as well as our ability to maintain adequate protection of other intellectual property for our technologies, product candidates, and any future products in the United States and other countries.

If we do not adequately protect our intellectual

property, competitors may be able to use our technologies and erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability.

If we do not adequately protect our intellectual property, competitors may be able to use our technologies and erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability.

The laws of some foreign countries, in particular China and India, do not protect our proprietary rights to the same extent or in the same manner as U.S.

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The Hatch-Waxman Act allows extension of a maximum of one patent per FDA-approved product.

Patent term extension or special protection certificates also may be available in certain foreign countries upon regulatory approval of our product candidates.

Patent term extension or special protection certificates also may be available in certain foreign countries

upon regulatory approval of our product candidates.

Nevertheless, we may not be granted patent term extension either in the United States or in any foreign country because of, among other things, failing to apply prior to applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements.

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In addition, even though some regulatory authorities may provide some other exclusivity for a product under their own laws and regulations, we may not be able to qualify the product or obtain exclusivity.

If we are unable to obtain patent term extension, restoration or some other exclusivity, we could be subject to increased competition and our opportunity to establish or maintain product revenue could be substantially reduced or eliminated.

substantially reduced or eliminated.

Furthermore, we may not have sufficient time to recover our development costs prior to the expiration of our U.S.

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To counter infringement or unauthorized use, we may be required to file infringement claims, directly or through our licensors, which can be expensive and time-consuming.

In addition, in an infringement proceeding, a court may decide that a patent of our licensor is not valid or is unenforceable, or

may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question.

In addition, in an infringement proceeding, a court may decide that a patent of our licensor is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question.

An adverse result in any litigation or defense proceedings could put one or more of the patents we own or license at risk of being invalidated or interpreted narrowly and could put our licensors’ patent applications at risk of not issuing.

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Therefore, patent applications covering our product candidates may have been filed by others without the knowledge of us or our licensors.

Additionally, pending patent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our product candidates or the use or manufacture of our product candidates.

Additionally,

pending patent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our product candidates or the use or manufacture of our product candidates.

We may also face misappropriation claims if a third party believes that we inappropriately obtained and used its trade secrets.

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If a court of competent jurisdiction held that any third-party patents covers aspects of our materials, formulations, methods of manufacture or methods for treatment, the holders of any such patents would be able to block our ability to develop and commercialize the applicable product candidate until such patent expired or unless we obtain a license.

A license may not be

available on acceptable terms, if at all.

A license may not be available on acceptable terms, if at all.

Even if we were able to obtain a license, the rights could be nonexclusive, which could result in our competitors having access to our licensed intellectual property.

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A third party that files a patent application in the USPTO after that date, but before we or our licensor files a patent application, could therefore be awarded a patent covering an invention of ours even if we or our licensor had made the invention before the third party.

This will require us to be cognizant going forward of the time from invention to filing of a patent application.

Furthermore, our ability to obtain and maintain valid and enforceable patent rights depends on whether the differences between the licensor’s or our technology and the prior art allow our technology to be patentable over the prior art.

This will require us to be cognizant going forward of the time

from invention to filing of a patent application.

Furthermore, our ability to obtain and maintain valid and enforceable patent rights depends on whether the differences between the licensors or our technology and the prior art allow our technology to be patentable over the prior art.

Since patent applications in the United States and most other countries are confidential for a period of time after filing, we cannot be certain if we (or our licensor) was the first to either (i) file any patent application related to our product candidates or (ii) invent any of the inventions claimed in our patents or patent applications.

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However, current or former employees, consultants, contractors and advisers may unintentionally or willfully disclose our confidential information to competitors, and confidentiality agreements may not provide an adequate remedy in the event of unauthorized disclosure of confidential information.

Enforcing a claim that a third party obtained illegally and is using trade secrets and/or confidential know-how is challenging, expensive, time-consuming and unpredictable.

Enforcing a claim that a third

party obtained illegally and is using trade secrets and/or confidential know-how is challenging, expensive, time-consuming and unpredictable.

The extent to which confidentiality agreements may be enforced does vary from jurisdiction to jurisdiction.

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Despite these contractual restrictions, the need to share trade secrets and other confidential information increases the risk that such trade secrets could become known to our competitors, could be inadvertently incorporated into the technology of others, or could be disclosed or used in violation of these agreements.

Given that our proprietary position is based, in part, on our know-how and trade secrets, a competitor’s discovery of our trade secrets or other unauthorized use or disclosure would impair our competitive position and may have a material adverse effect on our business.

that our proprietary position is based, in part, on our know-how and trade secrets, a competitor’s discovery of our trade secrets or other unauthorized use or disclosure would impair our competitive position and may have a material adverse effect on our business.

In the future we may also conduct joint research and development programs that may require us to share trade secrets under the terms of our research and development or similar agreements.

Despite our efforts to protect our trade secrets, our competitors may discover our trade secrets, either through breach of our agreements with third parties, independent

development, or publication of information by any of our third-party collaborators.

Despite our efforts to protect our trade secrets, our competitors may discover our trade secrets, either through breach of our agreements with third parties, independent development, or publication of information by any of our third-party collaborators.

A competitor’s discovery of our trade secrets would impair our competitive position and have an adverse impact on our business.

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As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers of our company, which may adversely affect investor confidence in us and could cause our business and stock price to suffer.

Effective December 31, 2019, we are no longer an “emerging growth company,” and the reduced disclosure requirements applicable to “emerging growth companies” no longer apply, and we are required to report on internal control over financial reporting, which will increase our costs as a public company and increase the demands on management.

Effective December 31, 2019, we are no longer an “emerging growth company,” and the reduced disclosure requirements applicable to “emerging growth companies” no longer apply, and we are required to report on internal control over financial reporting, which has increased our costs as a public company and increased the demands on management.

Effective December 31, 2019, the fiscal year-end following the fifth anniversary of the completion of our initial public offering, we are no longer an “emerging growth company” as defined in the Jumpstart Our Business Startups Act.

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Any failure of our internal control over financial reporting could have a material adverse effect on the company’s stated operating results and harm our reputation.

If we are unable to implement these changes effectively or efficiently, it could harm our operations, financial reporting and financial results and could result in an adverse opinion on internal control from our independent registered public accounting firm.

If we are unable to implement these changes effectively or efficiently, it could harm our operations, financial reporting and

financial results and could result in an adverse opinion on internal control from our independent registered public accounting firm.

In addition, we are no longer eligible for reduced disclosure requirements applicable to emerging growth companies regarding executive compensation and exemptions from the requirements of holding advisory say-on-pay votes on executive compensation.

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Risks Related to Our Common Stock

Our failure to meet the $1.00 minimum bid price or other continued listing requirements of Nasdaq could result in a delisting of our common stock, which could negatively impact the market price and liquidity of our common stock and our ability to access the capital markets.

Any Nasdaq action relating to a delisting could have a negative effect on the price of our common stock, impair the ability to sell or purchase our common stock when persons wish to do so, and any such delisting action may materially adversely affect our ability to raise capital or pursue strategic restructuring, refinancing or other transactions on acceptable terms, or at all.

Delisting from the Nasdaq Global Select Market could also have other negative results, including the potential loss of institutional investor interest, reduced coverage by equity research analysts and fewer business development opportunities.

In the event of any delisting or potential delisting, we may attempt to take actions to restore our compliance with Nasdaq’s listing requirements, such as seeking stockholder approval of a reverse stock split, but we can provide no assurance that any such action taken by us would allow our common stock to remain listed or be re-listed, stabilize the market price or improve the liquidity of our common stock, maintain a minimum closing bid price of $1.00 per share for 10 consecutive trading days as required for continued listing on the Nasdaq Global Select Market pursuant to Nasdaq Listing Rule 5450(a)(1) or prevent future non-compliance with Nasdaq’s listing requirements.

The market price of our common stock has been and is expected to continue to be volatile.

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Some of the factors that may cause the market price of our common stock to fluctuate include:

• reports on or the perception of clinical trial progress, or the lack thereof, which we experienced in October 2022 when our stock price and market capitalization decreased significantly after announcing Phase 1b interim analysis of IMU-935 for the first two dose patient cohorts with moderate-to-severe psoriasis;

• reports on or the perception of clinical trial progress, or the lack thereof;

• our ability to obtain regulatory approvals for our product candidates, and delays or failures to obtain such approvals;

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Such litigation, if instituted, could result in substantial costs and diversion of management attention and resources, which could significantly harm our profitability and reputation.

Additionally, a decrease in our stock price may cause our common stock to no longer satisfy the continued listing standards of The Nasdaq Global Select Market.

If we are not able to maintain the requirements for listing on The Nasdaq Global Select Market, we could be delisted, which would likely result in an immediate and significant decline in the trading price and liquidity of our stock, and would have a materially adverse effect on our ability to raise additional funds.

If our stockholders do not approve an increase in the number of authorized shares of our common stock, our ability to raise additional capital to fund our operations and to incentivize our employees will be extremely limited.

We currently have 130,000,000 shares of common stock authorized for issuance and a total of 89,929,016 shares issued and outstanding as of January 31, 2024.

We have asked our stockholders to approve an amendment to our certificate of incorporation to increase our authorized shares of common stock to 500,000,000 shares, at a Special Meeting of Stockholders to be held on March 4, 2024.

The Securities Purchase Agreement with investors in our January 4, 2024 private placement requires us to submit this proposal to our stockholders for approval at the Special Meeting and, if not approved, to resubmit this proposal to stockholders for approval at least semi-annually until approval is obtained.

If holders of a majority of the total outstanding shares of our common stock do not vote in favor of this proposal at the Special Meeting on March 4, 2024, our ability to raise additional equity financing will be severely limited, which will impair our ability to fund the future needs of our business, unless and until we are able to generate sufficient revenue from operations.

Anti-takeover provisions in our organizational documents and Delaware law might discourage or delay acquisition attempts for the company that stockholders might consider favorable.

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These anti-takeover provisions and other provisions under Delaware law could discourage, delay or prevent a transaction involving a change in control of our company, including actions that our stockholders may deem advantageous, or could negatively affect the trading price of our common stock.

These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and to cause us to take other corporate actions they desire.

These provisions could

also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and to cause us to take other corporate actions they desire.

We may experience adverse consequences because of required indemnification of officers and directors.

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General Risk Factors

If we fail to maintain proper and effective internal controls, our ability to produce accurate financial

statements on a timely basis could be impaired.

If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could be impaired.

We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and Nasdaq rules and regulations.

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Effective internal control over financial reporting is necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, is designed to prevent fraud.

We must perform system and process evaluation and testing of our internal controls over financial reporting to allow

management to report on the effectiveness of our internal controls over financial reporting in our Annual Report on Form 10-K for each year, as required by Section 404 of the Sarbanes-Oxley Act ("Section 404").

We must perform system and process evaluation and testing of our internal controls over financial reporting to allow management to report on the effectiveness of our internal controls over financial reporting in our Annual Report on Form 10-K for each year, as required by Section 404 of the Sarbanes-Oxley Act ("Section 404").

This requires significant management efforts and requires us to incur substantial professional fees and internal costs to expand our accounting and finance functions.

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A proxy contest would require us to incur significant legal and advisory fees, proxy solicitation expenses and administrative and associated costs and require significant time and attention by our board of directors and management, diverting their attention from the pursuit of our business strategy.

Any perceived uncertainties as to our future direction and control, our ability to execute on our strategy, or changes to the composition of our board of directors or management team arising from a proxy contest or initiatives of activist stockholders could lead to the perception of a change in the direction of our business or instability, which may result in the loss of potential business opportunities, make it more difficult to pursue strategic initiatives, or limit our ability to attract and retain qualified personnel and business partners, any of which could adversely affect our business and operating results and the trading price of our stock.

personnel and business partners, any of which could adversely affect our business and operating results and the trading price of our stock.

If individuals are ultimately elected to our board of directors with a specific agenda, our ability to effectively implement our business strategy and create additional value for our stockholders may be adversely effected.

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The trading market for our common stock is influenced by the research and reports that equity research analysts publish about us and our business.

Equity research analysts may elect not to provide research coverage of our common stock, and such lack of research coverage may adversely affect the market price of our common stock.

Equity research analysts may elect not to provide, or cease to provide, research coverage of our common stock, and such lack of research coverage may adversely affect the market price of our common stock.

If we do have equity research analyst coverage, we will not have any control over the analysts or the content and opinions included in their reports.

The price of our common stock could substantially decline immediately if one or more equity research analysts downgrade our stock or issue other

unfavorable commentary or research.

The price of our common stock could substantially decline immediately if one or more equity research analysts downgrade our stock or issue other unfavorable commentary or research.

If one or more equity research analysts ceases coverage of us or fails to publish reports on us regularly, demand for our common stock could decrease, which in turn could cause our stock price and trading volume to decline.

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NOLs arising after December 31, 2017, with certain exceptions, may not be carried back to previous taxable years, but may be carried forward indefinitely.

Unresolved Staff Comments.

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