What changed in this filing

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Item 1A. Risk Factors

2021-10-14 compared with 2021-07-13 · 88 added, 76 removed, 1344 unchanged (11% of the section changed)

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We are very early in our development efforts.

We only recently initiated clinical development of our first drug candidate and all of our other drug candidates are in preclinical development.

We only recently initiated clinical development of our first two drug candidates and all of our other drug candidates are in preclinical development.

If we are unable to advance to clinical development, develop, obtain regulatory approval for and commercialize our drug candidates or experience significant delays in doing so, our business may be materially harmed.

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If serious adverse events, undesirable side effects, or unexpected characteristics are identified during the development of any drug candidates we may develop, we may need to abandon or limit our further clinical development of those drug candidates.

We only recently initiated testing of our lead drug candidate in clinical trials, and we have not tested any of our other drug candidates in clinical trials.

We only recently initiated testing of our two lead drug candidates in clinical trials, and we have not tested any of our other drug candidates in clinical trials.

The results of preclinical studies and early-stage clinical trials may not be predictive of future results.

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If any such collaborations are not successful, we may not be able to capitalize on the market potential of those drug candidates.

We rely on CMOs for the manufacture of both drug substance and finished drug product for our drug candidates for preclinical testing and expect to continue to do so for our clinical trials and commercialization.

We rely on clinical manufacturing organizations (CMOs) for the manufacture of both drug substance and finished drug product for our drug candidates for preclinical testing and expect to continue to do so for our clinical trials and commercialization.

This reliance on third parties may increase the risk that we will not have sufficient quantities of our drug candidates or products or such quantities at an acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts.

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We expect to incur losses over at least the next several years and may never achieve or maintain profitability.

Our net loss was $43.2 million for the fiscal year ended November 30, 2020 and $50.7 million for the six months ended May 31, 2021.

As of May 31, 2021, we had an accumulated deficit of $154.4 million.

Our net loss was $43.2 million for the fiscal year ended November 30, 2020 and $79.5 million for the nine months ended August 31, 2021.

As of August 31, 2021, we had an accumulated deficit of $183.2 million.

To date, we have not generated any revenue from product sales and have financed our operations primarily through our collaborations and sales of our equity interests.

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We filed an IND for NX-2127 in December 2020 and received clearance by the FDA to initiate human clinical trials.

Clinical sites are actively recruiting patients for our Phase 1 clinical trial of NX-2127 and we expect our other three most advanced drug candidates to enter clinical trials in 2021.

Clinical sites are actively recruiting patients for our Phase 1 clinical trials of NX-2127 and NX-1607 and we expect our other two most advanced drug candidates to enter clinical trials in 2021.

We expect to continue to incur significant expenses and increasing operating losses for at least the next several years.

We anticipate that our operating expenses and capital expenditure requirements will increase substantially if and as we:

conduct a Phase 1 clinical trial of our drug candidate NX-2127;

file INDs elsewhere and initiate clinical trials of our other lead drug candidates NX-1607, NX-5948, DeTIL-0255 and other drug candidates;

increase enrollment in the ongoing Phase 1 clinical trials of our drug candidates NX-2127 and NX-1607;

initiate clinical trials of our other drug candidates NX-5948, DeTIL-0255 and other drug candidates;

enter advanced clinical development and scale up external manufacturing capabilities to supply clinical trials;

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We have never generated revenue from product sales and may never be profitable.

We only recently commenced clinical development of our first drug candidate NX-2127, and we are currently only in the preclinical testing stages for our other most advanced drug candidates and research programs.

We only recently commenced clinical development of our drug candidates NX-2127 and NX-1607, and we currently are preparing to initiate clinical development of our other most advanced drug candidates.

We expect that it will be many years, if ever, before we have a drug candidate ready for commercialization.

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To become and remain profitable, we must succeed in developing, obtaining marketing approval for and commercializing products that generate significant revenue.

This will require us to be successful in a range of challenging activities, including completing preclinical testing and clinical trials of our drug candidates,

discovering additional drug candidates, establishing and maintaining arrangements with third parties for the manufacture of clinical supplies of our drug candidates, obtaining marketing approval for our drug candidates and manufacturing, marketing, selling and obtaining reimbursement for any products for which we may obtain marketing approval.

This will require us to be successful in a range of challenging activities, including completing preclinical testing and clinical trials of our drug candidates, discovering additional drug candidates, establishing and maintaining arrangements with third parties for the manufacture of clinical

supplies of our drug candidates, obtaining marketing approval for our drug candidates and manufacturing, marketing, selling and obtaining reimbursement for any products for which we may obtain marketing approval.

If one or more of the drug candidates that we develop is approved for commercial sale, we anticipate incurring significant costs associated with commercializing any approved drug candidate.

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If we are unable to raise capital when needed, we may be required to delay, limit, reduce or terminate our research or product development programs or future commercialization efforts.

We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we conduct our Phase 1 clinical trial of NX-2127, and work to prepare for IND submissions and initiate planned Phase 1 clinical trials of our other lead drug candidates NX-1607, NX-5948, DeTIL-0255 and other drug candidates, grow our pipeline of drug candidates, expand the breadth of our DELigase platform, continue research and development, and initiate additional clinical trials of and potentially seek marketing approval for our lead programs and other drug candidates.

We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we conduct our Phase 1 clinical trials of NX-2127 and NX-1607, and work to prepare for IND submissions and initiate planned Phase 1 clinical trials of our other lead drug candidates NX-5948 and DeTIL-0255 and other drug candidates, grow our pipeline of drug candidates, expand the breadth of our DELigase platform, continue research and development, and initiate additional clinical trials of and potentially seek marketing approval for our lead programs and other drug candidates.

In addition, if we obtain marketing approval for any of our drug candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, reimbursement, and sales and distribution.

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If we are unable to raise capital when needed or on attractive terms, we may be required to delay, limit, reduce or terminate our research, product development programs or any future commercialization efforts or grant rights to develop and market drug candidates that we otherwise would prefer to develop and market ourselves.

We had cash, cash equivalents and investments of $496.5 million as of May 31, 2021.

We had cash, cash equivalents and investments of $465.4 million as of August 31, 2021.

We believe that our existing cash, cash equivalents and investments, will be sufficient to fund our operating expenses and capital expenditure requirements through at least the next 12 months.

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Our future capital requirements will depend on many factors, including:

the progress, costs and results of our Phase 1 clinical trial for NX-2127 and our planned Phase 1 clinical trials for our other lead drug candidates NX-1607, NX-5948, DeTIL-0255 and other drug candidates, and any future clinical development of such drug candidates;

the progress, costs and results of our Phase 1 clinical trials for NX-2127 and NX-1607 and our planned Phase 1 clinical trials for our other drug candidates NX-5948, DeTIL-0255 and other drug candidates, and any future clinical development of such drug candidates;

the scope, progress, costs and results of preclinical and clinical development for our other drug candidates and development programs;

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All of our drug candidates are either in preclinical development or have only recently entered clinical development, and their risk of failure is high.

We have invested substantially all of our efforts and financial resources in building our DELigase platform, in the identification and preclinical development of our current drug candidates, and in the initiation of Phase 1 clinical trials for our lead drug candidate, NX-2127.

We have invested substantially all of our efforts and financial resources in building our DELigase platform, in the identification and preclinical development of our current drug candidates, and in the preparation for and initiation of Phase 1 clinical trials for our lead drug candidates.

Our ability to generate revenue from product sales, which we do not expect will occur for many years, if ever, will depend heavily on the successful development and eventual commercialization of one or more of our drug candidates.

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Although we believe NX-2127 may have the ability to degrade the BTK mutation that confers resistance to currently marketed BTK inhibitors, any inherent primary or acquired secondary resistance to our BTK CTMs in patients would prevent or diminish their clinical benefit.

We only recently initiated clinical development of NX-2127, and we have not yet initiated a clinical trial of any other CTM drug candidate, nor have we assessed the safety of any CTM drug candidate in humans.

We only recently initiated clinical development of NX-2127 and we have limited safety data of NX-2127 in humans.

Although some of our drug candidates have produced observable results in animal studies, there is a limited safety data set for their effects in animals.

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We cannot be certain of the timely completion or outcome of our preclinical testing and studies and cannot predict if the FDA or similar regulatory authorities outside the United States will accept our proposed clinical programs or if the outcome of our preclinical testing and studies ultimately will support the further development of our programs.

For example, the FDA has notified us that the IND for our planned Phase 1 trial of DeTIL-0255 was placed on clinical hold pending receipt of additional chemistry, manufacturing and controls (CMC) information relating to a reagent used in the drug candidate’s manufacturing process.

We have submitted our complete response letter to the FDA regarding this CMC matter and currently expect to be in a position to initiate our Phase 1 trial of DeTIL-0255 in the second half of 2021.

However, if the additional information we provided to the FDA is not satisfactory, the initiation of the DeTIL-0255 trial may be delayed.

Clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to the outcome.

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Second- and third-line therapies are administered to patients when prior therapy is not effective.

Our planned clinical trials for our lead drug candidates NX-2127 and NX-1607 and other drug candidates will be with patients who have received one or more prior treatments.

Our planned clinical trials for our drug candidates NX-2127, NX-1607, NX-5948 and DeTIL-0255 will be with patients who have received one or more prior treatments.

Subsequently, for those products that prove to be sufficiently beneficial, if any, we would expect to seek approval potentially as a first-line therapy, but any drug candidates we develop, even if approved, may not be approved for first-line therapy, and, prior to any such approvals, we may have to conduct additional clinical trials.

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We have not evaluated any drug candidates in human clinical trials, and there have been very few clinical trials to date involving small molecule drug candidates designed to control cellular protein levels through targeted protein degradation.

It is impossible to

predict when or if any drug candidates we may develop will prove safe in humans.

It is impossible to predict when or if any drug candidates we may develop will prove safe in humans.

There is a limited safety data set for the effects of NX-2127, NX-1607, NX-5948 and DeTIL-0255 in animals and our drug candidates have not been tested on humans at all.

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Many drug candidates that initially showed promise in early-stage testing for treating cancer or other diseases later have been found to cause side effects that prevented further clinical development of the drug candidates or limited their competitiveness in the market.

Clinical sites are actively recruiting patients for our first clinical trial for NX-2127 and we have not tested any of our other drug candidates in clinical trials.

Clinical sites are actively recruiting patients for our clinical trials for NX-2127 and NX-1607.

The results of preclinical studies and early-stage clinical trials may not be predictive of future results.

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In particular, the small number of patients in our planned early clinical trials may make the results of these trials less predictive of the outcome of later clinical trials.

For example, even if successful, the results of our initial clinical trial for NX-2127 and of our planned Phase 1 clinical trials of our other lead drug candidates NX-1607, NX-5948 and DeTIL-0255 and other drug candidates may not be predictive of the results of further clinical trials of these drug candidates or any of our other drug candidates.

For example, even if successful, the results of our initial clinical trials for NX-2127 and NX-1607 and of our planned Phase 1 clinical trials of our other drug candidates NX-5948 and DeTIL-0255 and other drug candidates may not be predictive of the results of further clinical trials of these drug candidates or any of our other drug candidates.

Moreover, preclinical and clinical data often are susceptible to varying interpretations and analyses, and many companies that have believed their drug candidates performed satisfactorily in preclinical studies and clinical trials nonetheless have failed to obtain marketing approval of their products.

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If we experience delays or difficulties in enrolling patients in clinical trials, our receipt of necessary marketing approvals could be delayed or prevented.

We may not be able to initiate or continue clinical trials for our drug candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or similar regulatory authorities outside of the United

In particular, clinical sites are actively recruiting patients for our Phase 1 clinical trial for NX-2127 in patients with CLL and other B-cell malignancies and we are preparing to begin Phase 1 clinical trials for NX-1607 in immune-oncology indications.

In particular, clinical sites are actively recruiting patients for our Phase 1 clinical trial for NX-2127 in patients with CLL and other B-cell malignancies and for NX-1607 in patients with a variety of oncology indications.

We cannot predict how difficult it will be to enroll patients for trials in these indications.

Therefore, our ability to identify and enroll eligible patients for our NX-2127 clinical trial and our planned NX-1607 clinical trial may be limited or may result in slower enrollment than we anticipate.

Therefore, our ability to identify and enroll eligible patients for our NX-2127 and NX-1607 clinical trials may be limited or may result in slower enrollment than we anticipate.

In addition, some of our competitors have ongoing clinical trials for drug candidates that treat the same indications as our drug candidates, and patients who otherwise would be eligible for our planned clinical trials instead may enroll in clinical trials of our competitors’ drug candidates.

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The actual cost to manufacture and process our drug candidates could be greater than we expect and could materially and adversely affect the commercial viability of our drug candidates.

Our third-party manufacturers may encounter difficulties in production, including contamination, equipment failure, improper installation or operation of equipment, vendor or operator error, inconsistency in yields, variability in product characteristics and difficulties in scaling the production process.

variability in product characteristics and difficulties in scaling the production process.

Even minor deviations from normal manufacturing processes could result in reduced production yields, product defects and other supply disruptions.

If any of our third-party manufacturers encounter such difficulties, our ability to provide supply of our current or future drug candidates for clinical trials,

our ability to obtain marketing approval, or our ability to provide supply of our drug candidates for patients, if approved, could be delayed or stopped.

If any of our third-party manufacturers encounter such difficulties, our ability to provide supply of our current or future drug candidates for clinical trials, our ability to obtain marketing approval, or our ability to provide supply of our drug candidates for patients, if approved, could be delayed or stopped.

We have limited experience with the development and manufacturing of adoptive cellular therapeutics, which is a relatively new and expanding category of therapeutics with unique development, manufacturing and regulatory risks.

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and Monte Rosa Therapeutics, all of which currently are in preclinical or clinical development.

Further, several large pharmaceutical companies have disclosed preclinical investments in this field, including Amgen Inc., AstraZeneca plc, Bristol-Myers Squibb Company, Genentech, Inc., GlaxoSmithKline plc and Novartis International AG.

Further, several large pharmaceutical companies have disclosed preclinical investments in this field, including Amgen Inc., AstraZeneca plc, Bayer AG, Bristol-Myers Squibb Company, Genentech, Inc., GlaxoSmithKline plc and Novartis International AG.

Many of our current or potential competitors, either alone or with their collaboration partners, have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do.

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

We rely on third-party clinical research organizations (CROs) to conduct our Phase 1 clinical trial program for NX-2127, and we will rely on third-party CMOs to conduct our planned Phase 1 clinical trial programs for NX-1607, NX-5948 and DeTIL-0255, and any other clinical trials for other drug candidates.

We rely on third-party clinical research organizations (CROs) to conduct our Phase 1 clinical trial programs for NX-2127 and NX-1607, and we will rely on third-party CMOs to conduct our planned Phase 1 clinical trial programs for NX-5948 and DeTIL-0255, and any other clinical trials for other drug candidates.

We currently do not plan to conduct any clinical trials independently.

with these CROs might terminate for a variety of reasons, including for their failure to perform.

Agreements with these CROs might terminate for a variety of reasons, including for their failure to perform.

Entry into alternative arrangements, if necessary, could significantly delay our product development activities.

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

Our ability to commercialize any drug candidates 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 healthcare programs, private health insurers and other organizations.

Government authorities and 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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Government authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications.

Increasingly, government authorities and third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging

the prices charged for medical products.

Increasingly, government authorities and third-party payors are requiring that drug

companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products.

Coverage and reimbursement may not be available for any product that we commercialize and, even if these are available, the level of reimbursement may not be satisfactory.

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Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation or administrative proceedings, there is a risk that some of our confidential information could be compromised by disclosure.

Uncertainties resulting from the litigation of patent litigation and other proceedings could delay our research development efforts, adversely affect our ability to raise additional funds, and could limit our ability to continue our operations.

Uncertainties resulting from the litigation of patent litigation and other proceedings could delay our research and development efforts, adversely affect our ability to raise additional funds, and could limit our ability to continue our operations.

Any of the foregoing could have a material adverse effect on our business.

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We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our products in any jurisdiction, which would materially impair our ability to generate revenue.

The United Kingdom’s recent exit from the European Union (EU), commonly referred to as “Brexit,” continues to create political and economic uncertainty, particularly in the United Kingdom and the EU.

Following the UK’s departure from the EU on January 31, 2020 and the expiry of a transition period on December 31, 2020, the UK is now being treated as a ‘third country’ by the EU and new UK legislation has taken effect.

The United Kingdom’s exit from the European Union (EU) continues to create political and economic uncertainty, particularly in the United Kingdom and the EU.

The UK is now being treated as a ‘third country’ by the EU and new UK legislation has taken effect.

This means that some regulatory activities, such as batch testing and Qualified Person certification conducted in Great Britain is no longer recognized in the EU.

However, the UK and EU have concluded a Trade and Cooperation Agreement, which, subject to ratification by the EU, has limited the immediate disruption to the supply of medicines, particularly by enabling tariff and quota-free trade between the UK and the EU (provided that the rules of origin requirements are met), and has streamlined some issues, for example by enabling mutual recognition of good manufacturing practice (GMP) inspections and certificates.

However, the UK and EU have concluded a Trade and Cooperation Agreement (TCA), which has been approved by the UK Parliament, European Council and European Parliament and has limited the disruption to the supply of medicines, particularly by enabling tariff and quota-free trade between the UK and the EU (provided that the rules of origin requirements are met), and has streamlined some issues, for example by enabling mutual recognition of good manufacturing practice (GMP) inspections and certificates.

The regulatory framework for medicines that existed before the end of the transition period has also effectively been preserved in UK domestic legislation as ‘retained EU law.’ By retaining a snapshot of EU legislation at its core, the UK has prevented substantial divergence to the regulation of medicines (although divergence has appeared in some areas).

However, some changes to the UK legislation have been immediately necessary, including the implementation of the Northern Ireland Protocol (NIP), pursuant to which, the EU pharmaceutical legal framework acquis continues to apply in Northern Ireland (subject to periodic consent of the Northern Ireland Legislative Assembly), and only products compliant with EU law can be placed in the Northern Ireland market - adding an extra layer of regulatory complexity.

A consequence of the withdrawal of the United Kingdom from the EU is that companies now need to comply with a separate UK regulatory legal framework in order to commercialize medicinal products in Great Britain (namely, England, Wales and Scotland, as EU law continues to apply in Northern Ireland).

As companies now need to comply with a separate UK regulatory legal framework in order to commercialize medicinal products in Great Britain (namely, England, Wales and Scotland, as EU law continues to apply in Northern Ireland).

The UK government is currently trying to renegotiate fundamental aspects of the Northern Ireland Protocol so this is an unpredictable area for companies in the near future.

The TCA allows for future deviation from the current regulatory framework and it is not known if and/or when any deviations may occur, which may have an impact on development, manufacture, marketing authorization, commercial sales and distribution of pharmaceutical products.

It is also important to note that obtaining a marketing authorization is not sufficient to gain effective access to the market in the EU and in the UK;

companies still need to agree a reimbursement price for the products and in some jurisdictions, such as the UK and Germany, a further positive

recommendation from health technology on cost-effectiveness is required for the products to be actually prescribed and reimbursed by the respective national health systems (see below).

companies still need to agree a reimbursement price for the products and in some jurisdictions, such as the UK and Germany, a further positive recommendation from health technology on cost-effectiveness is required for the products to be actually prescribed and reimbursed by the respective national health systems (see below).

If we fail to comply with the regulatory requirements in international markets and thus receive applicable marketing approvals, our target market will be reduced, our ability to realize the full market potential of our drug candidates will be harmed and our business will be adversely affected.

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for example, if the product is sufficiently profitable not to justify maintenance of market exclusivity.

Although the UK has left the EU, its regulatory legal framework provides for similar periods of protection (namely regulatory data protection, marketing protection and market exclusivity).

The UK’s regulatory legal framework provides for similar periods of protection (namely regulatory data protection, marketing protection and market exclusivity).

Competition that our drug candidates may face from generic versions of our drug candidates could materially and adversely impact our future revenue, profitability and cash flows and substantially limit our ability to obtain a return on the investments we have made in those drug candidates.

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HIPAA, as amended by HITECH, and its implementing regulations, which also imposes obligations, including mandatory contractual terms, on certain types of people and entities with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

the federal Food, Drug, and Cosmetic Act which among other things, strictly regulates drug marketing, prohibits manufacturers from marketing such products for off-label use and regulates the distribution of samples;

the federal Food, Drug, and Cosmetic Act which among other things, strictly regulates drug marketing, prohibits manufacturers from marketing such products for off-label use or misbranding or adulterating their products, and regulates the distribution of samples;

the federal and state laws that require pharmaceutical manufacturers to report certain calculated product prices to the government or provide certain discounts or rebates to government authorities or private entities, often as a condition of product coverage and reimbursement under federal healthcare programs

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It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations.

If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be

subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion of drug candidates from government-funded healthcare programs, such as Medicare and Medicaid, disgorgement, contractual damages, reputational harm, diminished profits and future earnings, and the curtailment or restructuring of our operations.

our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion of drug candidates from government-funded healthcare programs, such as Medicare and Medicaid, disgorgement, contractual damages, reputational harm, diminished profits and future earnings, and the curtailment or restructuring of our operations.

If any physicians or other healthcare providers or entities with whom we expect to do business are found not to be in compliance with applicable laws, they may also be subject to criminal, civil or administrative sanctions, including exclusions from government-funded healthcare programs.

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For example, included in the Consolidated Appropriations Act, 2021 were several drug price reporting and transparency measures, such as a new requirement for certain Medicare plans to develop tools to display Medicare Part D prescription drug benefit information in real time and for group and health insurance issuers to report information on pharmacy benefit and drug costs to the Secretaries of the Departments of Health and Human Services, Labor and the Treasury.

Any future measures will require authorization through additional legislation or regulation to become effective, and it is uncertain whether Congress or the new Biden Administration will seek new legislative and/or administrative measures to control drug costs.

Additionally, both Congress and the new Biden administration have each indicated that it will continue to seek new legislative and/or administrative measures to address prescription drug costs.

For example, on July 9, 2021, President Biden issued an Executive Order to promote competition in the U.S.

economy that included several initiatives addressing prescription drugs.

Among other provisions, the Executive Order stated that the Biden administration will “support aggressive legislative reforms that would lower prescription drug prices, including by allowing Medicare to negotiate drug prices, by imposing inflation caps, and through other related reforms.” In response to the Executive Order, on September 9, 2021, the Department of Health and Human Services issued a Comprehensive Plan for Addressing High Drug Prices that identified potential legislative policies and administrative tools that Congress and the agency can pursue in order to make drug prices more affordable and equitable, improve and promote competition throughout the prescription drug industry, and foster scientific innovation.

Congress has also continued to conduct inquiries into the prescription drug industry’s pricing practices .

At the state level, individual states are increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing.

These include legislation and regulations regarding price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, legislative action designed to encourage importation from other countries and bulk purchasing.

In addition, regional health care authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other health care programs.

regional health care authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other health care programs.

These measures could reduce the ultimate demand for our products, once approved, or put pressure on our product pricing.

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Increased scrutiny by the U.S.

Congress of the FDA’s approval process may

significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.

Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.

Governments outside of the United States tend to impose strict price controls, which may adversely affect our revenues from the sales of drugs, if any.

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The outbreak of COVID-19 may adversely affect our business and the market price of our common stock.

The ongoing global pandemic of COVID-19 is impacting worldwide economic activity and poses the risk that we or our employees, contractors, suppliers, and other partners may be prevented from conducting business activities for an indefinite period of time, including due to shutdowns that may be requested or mandated by governmental authorities.

The ongoing global pandemic of COVID-19, including the resurgence of cases relating to the spread of the Delta variant, is impacting worldwide economic activity and poses the risk that we or our employees, contractors, suppliers, and other partners may be prevented from conducting business activities for an indefinite period of time, including due to shutdowns that may be requested or mandated by governmental authorities.

Although it is not possible at this time to estimate the impact that COVID-19 could have on our business, the continued spread of COVID-19 and the measures taken by the governments of countries affected could disrupt the supply chain and the manufacture or shipment of both drug substance and finished drug product for our drug candidates for preclinical testing and clinical trials, cause diversion of healthcare resources away from the conduct of preclinical and clinical trial matters to focus on pandemic concerns, limit travel in a manner that interrupts key trial activities, such as trial site initiations and monitoring, delay regulatory filings with regulatory agencies in affected areas or adversely affect our ability to obtain regulatory approvals.

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On March 18, 2020, the FDA announced its intention to temporarily postpone routine surveillance inspections of domestic manufacturing facilities and provided guidance regarding the conduct of clinical trials.

On July 10, 2020, the FDA announced that it is working toward the goal of restarting on-site inspections it deems to be “mission critical.” On August 19, 2020, the FDA published guidance clarifying how it intends to conduct inspections during the COVID-19 pandemic, including how it plans to determine which inspections are “mission critical.” Additionally, on April 15, 2021, the FDA issued a guidance document in which the FDA described its plans to conduct voluntary remote interactive evaluations of certain drug manufacturing facilities and clinical research sites.

On July 10, 2020, the FDA announced that it is working toward the goal of restarting on-site inspections it deems to be “mission critical.” On August 19, 2020, the FDA published guidance clarifying how it intends to conduct inspections during the COVID-19 pandemic, including how it plans to determine which inspections are “mission critical,” and published an updated form of this guidance on May 17, 2021.

Additionally, on April 14, 2021, the FDA issued a guidance document in which the FDA described its plans to conduct voluntary remote interactive evaluations of certain drug manufacturing facilities and clinical research sites.

According to the guidance, the FDA intends to request such remote interactive evaluations in situations where an in-person inspection would not be prioritized, deemed mission-critical, or where direct inspection is otherwise limited by travel restrictions, but where the FDA determines that remote evaluation would still be appropriate.

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It is currently not possible to predict how long the COVID-19 outbreak will last or the time that it will take for economic activity to return to prior levels.

The extent to which the COVID-19 outbreak impacts our results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions taken to contain its impact.

severity of the virus and the actions taken to contain its impact.

See also the section titled “—Risks Related to Dependence on Third Parties.”

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We are highly dependent on our management and scientific personnel, including our President and Chief Executive Officer, Arthur T.

Sands, M.D., Ph.D., and our Chief Scientific

Officer, Gwenn Hansen, Ph.D.

Sands, M.D., Ph.D., and our Chief Scientific Officer, Gwenn Hansen, Ph.D.

The loss of the services of Drs.

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We filed our first IND for NX-2127 in December 2020 and received clearance by the FDA to initiate human clinical trials.

We expect our four most advanced drug candidates to enter clinical trials in 2021.

Clinical sites are actively recruiting patients for our Phase 1 clinical trials of NX-2127 and NX-1607 and we expect our other two most advanced drug candidates to enter clinical trials in 2021.

As our drug candidates enter and advance through preclinical studies and clinical trials, we will need to expand our development, regulatory and manufacturing capabilities or contract with other organizations to provide these capabilities for us.

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In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices.

These laws and regulations regulate a wide

range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements.

These laws and regulations regulate a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements.

While we have adopted a code of conduct and implemented other internal controls applicable to all of our employees, it is not always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective.

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To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or those of our third-party vendors and other contractors and consultants, or inappropriate disclosure of confidential or proprietary information, we could incur liability and reputational damage and the further development and commercialization of our drug candidates could be delayed.

The costs to us to mitigate network security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be material, and although we have implemented security measures to protect our data security and information technology systems, our efforts to address these problems may not be successful, and these problems could result in unexpected interruptions, delays, cessation of service and other harm to our business and our competitive position.

The costs to us to mitigate network security problems, bugs, viruses,

worms, malicious software programs and security vulnerabilities could be material, and although we have implemented security measures to protect our data security and information technology systems, our efforts to address these problems may not be successful, and these problems could result in unexpected interruptions, delays, cessation of service and other harm to our business and our competitive position.

If the information technology systems of our third-party vendors and other contractors and consultants become subject to disruptions or security breaches, we may have insufficient recourse against such third parties and we may have to expend significant resources to mitigate the impact of such an event, and to develop and implement protections to prevent future events of this nature from occurring.

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If such an event were to occur that causes interruptions in our operations, or those of our third-party vendors and other contractors and consultants, it could result in a material disruption or delay of our product development programs.

For example, the loss of clinical trial data from completed, ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or

reproduce the data.

Furthermore, significant disruptions of our internal information technology systems or those of our third-party vendors and other contractors and consultants, or security breaches could result in the loss, misappropriation, and/or unauthorized access, use, or disclosure of, or the prevention of access to, confidential information (including trade secrets or other intellectual property, proprietary business information, and personal information), which could result in financial, legal, business, and reputational harm to us.

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We cannot be sure how these regulations will be interpreted, enforced or applied to our operations.

In addition to the risks associated with enforcement activities and potential contractual liabilities, our ongoing efforts to comply with evolving laws and regulations at the federal and state level may be costly and require ongoing modifications to our policies, procedures and systems.

In addition to the risks associated with enforcement activities and potential

contractual liabilities, our ongoing efforts to comply with evolving laws and regulations at the federal and state level may be costly and require ongoing modifications to our policies, procedures and systems .

Data privacy remains an evolving landscape at both the domestic and international level, with new regulations coming into effect.

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Although the CCPA includes limited exceptions, including exceptions for personal health information collected by covered entities or business associates subject to HIPAA, among others, the CCPA may regulate or impact our processing of personal information depending on the context.

Additionally, the CPRA expands on the requirements of the CCPA

by granting California residents expanded privacy rights and additional requirements for businesses.

Additionally, the CPRA expands on the requirements of the CCPA by granting California residents expanded privacy rights and additional requirements for businesses.

The CCPA and CPRA may increase our compliance costs and potential liability, particularly in the event of a data breach, and could have a material adverse effect on our business, including how we use personal information, financial condition, results of operations or prospects.

Additionally, the CCPA has prompted a number of proposals for new federal and state-level privacy legislation, such as in Nevada, New Hampshire, Illinois and Nebraska.

One of these, the Virginia Consumer Data Protection Act, is very similar to the CCPA and was recently passed.

It will go into effect on January 1, 2023.

The CCPA has prompted a number of proposals for new federal and state-level privacy legislation.

Additional states have passed privacy laws, such as the Virginia Consumer Data Protection Act and the Colorado Privacy Act, both of which are similar to the CCPA.

Such new privacy laws add additional complexity, requirements, restrictions and potential legal risk, require additional investment in resources for compliance programs, and could impact business strategies and the availability of previously useful data.

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These obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other requirements or our practices.

The GDPR imposes substantial fines for breaches and violations (up to the greater of €20 million or 4% of our global turnover).

The GDPR imposes substantial fines for breaches and violations (up to the

greater of €20 million or 4% of our global turnover).

The GDPR allows data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies and obtain compensation for damages resulting from violations of the GDPR.

Further, following the end of the Brexit Transition Period (on 31 December 2020) the EU GDPR has been implemented in the United Kingdom (as the UK GDPR).

Further, following the end of the Brexit Transition Period (on 31 December 2020) the EU GDPR has been implemented in the United Kingdom (as the UK GDPR) - non-compliance with which may lead to similar compliance and operational costs as the EU GDPR with potential fines of up to £17 million or 4% of global turnover.

The UK GDPR site alongside the UK Data Protection Act 2018 which implements certain derogations in the EU GDPR into UK law.

Under the UK GDPR, companies not established in the UK but who process personal information in relation to the offering of goods or services to individuals in the UK, or to monitor their behavior will be subject to the UK GDPR – the requirements of which are (at this time) largely aligned with those under the EU GDPR and as such, may lead to similar compliance and operational costs with potential fines of up to £17 million or 4% of global turnover.

However, the UK has not formally acknowledged the new EU Standard Contractual Clauses and on August 11, 2020, the UK Information Commissioner’s Office launched a public consultation on consulting on its own form of Standard Contractual Clauses and issuing a UK addendum that can be used with the EU Standard Contractual Clauses.

The ICO is also consulting on its own form of UK Schrems II data transfer assessment.

These developments may in turn, require us to develop separate approaches to international transfer from the EEA and the UK.

Some countries also are considering or have passed legislation requiring local storage and processing of data, or similar requirements, which could increase the cost and complexity of delivering our products and services.

It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our practices and our efforts to comply with the evolving data protection rules may be unsuccessful.

In addition to the possibility of fines, lawsuits, regulatory

investigations, public censure, other claims and penalties, and significant costs for remediation and damage to our reputation, we could be materially and adversely affected if legislation or regulations are expanded to require changes in our data processing practices and policies or if governing jurisdictions interpret or implement their legislation or regulations in ways that negatively impact our business.

In addition to the possibility of fines, lawsuits, regulatory investigations, public censure, other claims and penalties, and significant costs for remediation and damage to our reputation, we could be materially and adversely affected if legislation or regulations are expanded to require changes in our data processing practices and policies or if governing jurisdictions interpret or implement their legislation or regulations in ways that negatively impact our business.

Compliance with these and any other applicable privacy and data security laws and regulations is a rigorous and time-intensive process, and we may be required to put in place additional mechanisms ensuring compliance with the new data protection rules.

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Additionally, we use our best judgment in attempting to quantify and reserve for these tax obligations.

However, a challenge by a taxing authority, our ability to utilize tax benefits such as carryforwards or tax credits, or a deviation from other tax-related assumptions could have a material adverse effect on our business, results of operations, or financial condition.

However, a challenge by a taxing authority,

our ability to utilize tax benefits such as carryforwards or tax credits, or a deviation from other tax-related assumptions could have a material adverse effect on our business, results of operations, or financial condition.

Our ability to utilize our net operating loss carryforwards may be subject to limitations.

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State NOLs can be carried forward 20 years and begin expiring in 2029.

other pre-change tax attributes (such as research tax credits) to offset its post-change income may be limited.

Under Sections 382 and 383 of the Code, if a corporation undergoes an “ownership change” (generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period), the corporation’s ability to use its pre-change NOLs and other pre-change tax attributes (such as research tax credits) to offset its post-change income may be limited.

We have identified two ownership changes since our inception that have triggered a limitation on pre-change NOLs under Section 382.

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Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.

Based on the beneficial ownership of our common stock as of May 31, 2021, our executive officers, directors and affiliates beneficially owned a substantial percentage of our outstanding voting stock.

Based on the beneficial ownership of our common stock as of August 31, 2021, our executive officers, directors and affiliates beneficially owned a substantial percentage of our outstanding voting stock.

As a result, these stockholders, if acting together, could have significant influence over the outcome of corporate actions requiring stockholder approval, including the election of directors, amendment of our organizational documents, any merger, consolidation or sale of all or substantially all of our assets and any other significant corporate transaction.

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For example, in March 2021, we sold an additional 5,175,000 shares of our common stock in a follow-on public offering.

In addition, we currently have on file with the SEC a shelf registration statement on Form S-3 which allows us to offer and sell registered common stock, preferred stock, debt securities, warrants, subscriptions rights and or units from time to time pursuant to one or more offerings at prices and terms to be determined at the time of sale.

In August 2021, we entered into an Equity Distribution Agreement with Piper Sandler & Co.

(Piper Sandler) pursuant to which, from time to time, we may offer and sell through Piper Sandler up to $150.0 million of the common stock registered under the shelf registration statement pursuant to one or more “at the market” offerings.

Sales of our common stock under the Equity Distribution Agreement with Piper Sandler could be subject to business, economic or competitive uncertainties and contingencies, many of which may be beyond our control, and which could cause actual results from the sale of our common stock to differ materially from expectations.

To the extent additional capital is raised through the sale and issuance of shares or other securities convertible into shares, the ownership interest of our stockholders will be diluted.

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While there can be no assurance that federal or state courts will follow the holding of the Delaware Supreme Court or determine that the Federal Forum Provision should be enforced in a particular case, application of the Federal Forum Provision means that suits brought by our stockholders to enforce any duty or liability created by the Securities Act must be brought in federal court and cannot be brought in state court.

Section 27 of the Exchange Act creates exclusive federal jurisdiction over all claims brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder and neither the exclusive forum provision nor the Federal Forum Provision applies to suits brought to enforce any duty or liability created by the Exchange Act.

Exchange Act.

Accordingly, actions by our stockholders to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder must be brought in federal court.

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In addition, this material weakness also resulted in the revision to the diluted weighted-average number of shares outstanding and basic and diluted net income per share calculations for the three-month period ended May 31, 2020.

The material weakness has not been remediated as of May 31, 2021 and could result in a misstatement of substantially all of our account balances or disclosures that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected.

The material weakness has not been remediated as of August 31, 2021 and could result in a misstatement of substantially all of our account balances or disclosures that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

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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-Q

Item 1A. Risk Factors