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We cannot assure you that any of the events discussed below will not occur.
−Removed: In addition, such risks may be amplified by the COVID-19 pandemic and the current economic environment and the potential impact of such risks on Ovid’s business and the global economy.
Summary of Selected Risks Associated with Our Business
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Some of the more significant risks we face include the following:
−Removed: • We expect to continue to incur substantial operating losses for the foreseeable future and may never achieve or maintain profitability.
+Added: • Historically, we have incurred significant operating losses and expect to continue to incur substantial operating losses for the foreseeable future and may never achieve or maintain profitability.
• Our operating history may make it difficult to evaluate the success of our business to date and to assess our future viability.
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• Even if our current or future drug candidates receive marketing approval, they may fail to achieve market acceptance by physicians, patients, third-party payors or others in the medical community necessary for commercial success.
−Removed: • Under the Takeda License and Termination Agreement, we are entitled to receive royalty and milestone payments in connection with the development and commercialization of soticlestat.
+Added: • Under the RLT Agreement, we are entitled to receive royalty and milestone payments in connection with the development and commercialization of soticlestat.
If Takeda fails to progress, delays or discontinues the development of soticlestat, we may not receive some or all of such payments, which would materially harm our business.
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• We intend to rely on third parties to conduct, supervise and monitor our preclinical studies and clinical trials, and if those third parties perform in an unsatisfactory manner, it may harm our business.
−Removed: • COVID-19 could adversely impact our business, including our preclinical studies, clinical trials and access to capital.
• We may need to expand our organization, and we may experience difficulties in managing this growth, which could disrupt our operations.
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We expect to continue to incur substantial operating losses for the foreseeable future and may never achieve or maintain profitability.
−Removed: We have historically incurred significant operating losses with the exception of net income we reported in 2021 primarily due to a one-time, upfront payment of $196.0 million received pursuant to the royalty, license and termination agreement (the “Takeda License and Termination Agreement”) with Takeda Pharmaceutical Company Limited (“Takeda”).
−Removed: As of September 30, 2022, we had an accumulated deficit of $214.0 million.
+Added: We have historically incurred significant operating losses with the exception of net income we reported in 2021 primarily due to a one-time, upfront payment of $196.0 million received pursuant to the RLT Agreement with Takeda.
+Added: As of March 31, 2023, we had an accumulated deficit of $238.9 million.
We expect to incur increasing operating losses for the foreseeable future.
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• initiate preclinical studies and clinical trials for any additional drug candidates that we may pursue in the future;
−Removed: • experience delays in our preclinical studies and planned clinical studies due to the ongoing COVID-19 pandemic;
• seek marketing approvals for our current and future drug candidates that successfully complete clinical trials;
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Our operating history may make it difficult to evaluate the success of our business to date and to assess our future viability.
−Removed: Our operations have consumed substantial amounts of cash since our inception in April 2014, primarily due to organizing and staffing our company, business planning, raising capital, acquiring assets and undertaking the development of our drug candidates.
−Removed: We have not yet demonstrated the ability to obtain marketing approvals, manufacture a commercial-scale drug or conduct sales and
−Removed: marketing activities necessary for successful commercialization.
+Added: Our operations have consumed substantial amounts of cash since our inception, primarily due to expenses associated with the research and development of our drug candidates, organizing and staffing our company, business planning, raising capital, and acquiring assets.
+Added: We have not yet demonstrated the ability to obtain marketing approvals, manufacture a commercial-scale drug or conduct sales and marketing activities necessary for successful commercialization.
Consequently, any predictions about our future success or viability may not be as accurate as they could be if we had more experience developing drug candidates.
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If we obtain marketing approval for any drug candidates that we develop or otherwise acquire, we expect to incur significant expenses related to manufacturing, marketing, sales and distribution.
−Removed: As of September 30, 2022, our cash, cash equivalents and marketable securities were $137.9 million, and we had an accumulated deficit of $214.0 million.
+Added: As of March 31, 2023, our cash, cash equivalents and marketable securities were $117.7 million, and we had an accumulated deficit of $238.9 million.
We believe that our cash, cash equivalents and marketable securities will fund our current operating plans through at least 12 months from the filing of this Quarterly Report on Form 10-Q.
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Any additional capital raising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our current and future drug candidates.
−Removed: The ongoing COVID-19 pandemic (along with the effects of the war in Ukraine, inflation, rising interest rates, and other economic uncertainty) have already resulted in a significant disruption of global financial markets.
−Removed: If the disruption persists and deepens, we could experience an inability to access additional capital.
−Removed: If we do not raise additional capital in sufficient amounts, or on terms acceptable to us, we may be prevented from pursuing development and commercialization efforts, which will harm our business, operating results and prospects.
−Removed: Raising additional capital or acquiring or licensing assets by issuing equity or debt securities may cause dilution to our stockholders, and raising funds through lending and licensing arrangements may restrict our operations or require us to relinquish proprietary rights.
−Removed: Until such time as we can generate substantial revenue from drug sales, if ever, we expect to finance our cash needs through a combination of equity and debt financings, strategic alliances, and license and development agreements in connection with any collaborations.
−Removed: We do not have any committed external source of funds.
−Removed: To the extent that we issue additional equity securities, our stockholders may experience substantial dilution, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a stockholder.
−Removed: In addition, we may issue equity or debt securities as consideration for obtaining rights to additional compounds.
−Removed: Debt and equity financings, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as redeeming our shares, making investments, issuing additional equity, incurring additional debt, making capital expenditures, declaring dividends or placing limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could negatively impact our ability to conduct our business.
−Removed: If we raise additional capital through future collaborations, strategic alliances or third-party licensing arrangements, we may have to relinquish valuable rights to our intellectual property, future revenue streams, research programs or drug candidates, or grant licenses on terms that may not be favorable to us.
+Added: While the long-term economic impacts of the COVID-19 pandemic and the ongoing war between Russia and Ukraine are difficult to assess or predict, each of these events has caused significant disruptions to the global financial markets and contributed to a general global economic slowdown.
+Added: Furthermore, inflation rates have increased recently to levels not seen in decades.
+Added: Increased inflation may result in increased operating costs (including labor costs) and may affect our operating budgets.
+Added: In response to concerns about inflation, the U.S.
+Added: Federal Reserve has raised, and is expected to further raise, interest rates.
+Added: Increases in interest rates, especially if coupled with reduced government spending and volatility in financial markets, may further increase economic uncertainty and heighten these risks.
+Added: If the disruptions and slowdown deepen or persist, we may not be able to access additional capital on favorable terms, or at all, which could in the future negatively affect our financial condition and our ability to pursue our business strategy.
If we are unable to raise additional capital when needed, we may be required to delay, limit, reduce or terminate our drug development or future commercialization efforts, or grant rights to develop and market drug candidates that we would otherwise develop and market ourselves.
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Under the Tax Cuts and Jobs Act, or the Tax Act, as modified by the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, federal NOLs incurred in taxable years beginning after December 31, 2017, may be carried forward indefinitely, but the utilization of such federal NOLs incurred in taxable years beginning after December 31, 2020, is limited.
−Removed: In addition, under Section 382 and Section 383 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” its ability to use its pre-change NOL carryforwards and other pre-change tax attributes (such as research tax credits) to offset its post-change income may be limited.
+Added: In addition, under Section 382 and Section 383 of the Internal Revenue Code of 1986, as amended ("Code"), and corresponding provisions of state law, if a corporation undergoes an “ownership change,” its ability to use its pre-change NOL carryforwards and other pre-change tax attributes (such as research tax credits) to offset its post-change income may be limited.
A Section 382 “ownership change” generally occurs if one or more stockholders or groups of stockholders that own at least 5% of our stock increase their ownership by more than 50 percentage points (by value) over their lowest ownership percentage over a rolling three-year period.
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In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.
−Removed: For the three months ended September 30, 2022, we recorded no U.S.
+Added: For the three months ended March 31, 2023, we recorded no U.S.
federal or state income tax provision, based on a pre-tax loss of approximately $13.4 million.
−Removed: As of September 30, 2022, we had available approximately $170.8 million of unused NOL carryforwards for federal and New York state income tax purposes and approximately $163.9 million of unused NOL carryforwards for New York City income tax purposes that may be applied against future taxable income.
+Added: As of March 31, 2023, we had available approximately $130.9 million of unused NOL carryforwards for federal income tax purposes, $13.0 million of unused NOL carryforwards for Massachusetts income tax purposes, $164.1 million of unused NOL carryforwards for New York income tax purposes, and $163.9 million of unused NOL carryforwards for New York City income tax purposes, that may be applied against future taxable income.
Our NOL carryforwards are significantly limited such that even if we achieve profitability in future periods, we may not be able to utilize a material portion of our NOL carryforwards and certain other tax attributes, which could have a material adverse effect on our cash flow and results of operations.
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If we are unable to successfully develop, receive regulatory approval for and commercialize our drug candidates for these or any other indications, or successfully develop any other drug candidates, or experience significant delays in doing so, our business will be harmed.
−Removed: We are very early in our development efforts and all of the drug candidates (including OV329 and OV350), for which we control developmental and commercial responsibility are still in preclinical development.
−Removed: For example, we previously announced that we anticipate filing three investigational new drug (“IND”) applications in three years, beginning in 2022, the first of which was filed in September 2022.
−Removed: We cannot guarantee success of pre-clinical development to achieve all such IND applications or whether FDA will impose clinical holds on any of these INDs.
+Added: We are very early in our development efforts and most of the drug candidates for which we control developmental and commercial responsibility are still in preclinical development.
+Added: For example, we previously announced that we anticipate filing three IND applications in three years, beginning in 2022;
+Added: however, we cannot guarantee success of preclinical development to achieve all such IND applications or whether FDA will impose clinical holds on any of these INDs.
Following IND acceptance, each of our drug candidates will need to be progressed through clinical development in order to achieve regulatory approval, and we will also need to address issues relating to manufacture and supply, which may involve building our own capacity and expertise.
−Removed: In order to commercialize any product that achieves regulatory approval, we will need to build a commercial organization or successfully outsource commercialization, all of which will require substantial investment and significant marketing efforts before we have the ability to generate any revenue from drug sales.
+Added: In order to commercialize any product that achieves regulatory
+Added: approval, we will need to build a commercial organization or successfully outsource commercialization, all of which will require substantial investment and significant marketing efforts before we have the ability to generate any revenue from drug sales.
We do not have any drugs that are approved for commercial sale, and we may never be able to develop or commercialize marketable drugs.
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Failure to obtain regulatory approval in the United States or other jurisdictions would prevent us from commercializing and marketing our current and future drug candidates.
−Removed: An inability to effectively develop and commercialize our current and future drug candidates, whether due to the impacts of the ongoing COVID-19 pandemic or otherwise, could have an adverse effect on our business, financial condition, results of operations and growth prospects.
−Removed: TAK-935, the most advanced compound we helped to develop, is being developed by Takeda and is currently in a pivotal trial program.
−Removed: If the pivotal trials are unsuccessful, or the compound is not approved, we will not receive the milestone payments and royalties from the Takeda License and Termination Agreement.
+Added: An inability to effectively develop and commercialize our current and future drug candidates could have an adverse effect on our business, financial condition, results of operations and growth prospects.
+Added: Soticlestat, the most advanced compound we helped to develop, is continuing to be developed by Takeda and is currently in a pivotal trial program.
+Added: If the pivotal trials are unsuccessful, or the compound is not approved, we will not receive the milestone payments and royalties from the RLT Agreement.
Without those funds, we may need to raise significant additional capital to pursue the development and commercialization of our current and future pipeline.
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We closed our OV101 program in Angelman syndrome in early 2021.
−Removed: The results from preclinical studies of our current and future drug candidates may
−Removed: not be predictive of the effects of these compounds in later stage clinical trials.
+Added: The results from preclinical studies of our current and future drug candidates may not be predictive of the effects of these compounds in later stage clinical trials.
If we do not observe favorable results in clinical trials of one of our drug candidates, we may decide to delay or abandon clinical development of that drug candidate.
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Also, before a clinical trial can begin to enroll at a site, each clinical site's Institutional Review Board (“IRB”) and its Institutional Biosafety Committee will have to review the proposed clinical trial to assess appropriateness to conduct the clinical trial at that site.
−Removed: In addition, adverse events in clinical trials of gene therapy products conducted by others may cause the FDA or other regulatory authorities outside the U.S.
+Added: In addition, adverse events in clinical trials of gene therapy products conducted by others may
+Added: cause the FDA or other regulatory authorities outside the U.S.
to change the requirements for human research on or for approval of any of our product candidates.
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• delays in opening investigational sites;
−Removed: • delays or difficulty in recruiting and enrollment of suitable patients to participate in our clinical trials, whether as a result of the COVID-19 pandemic or otherwise;
+Added: • delays or difficulty in recruiting and enrollment of suitable patients to participate in our clinical trials;
• imposition of a clinical hold by regulatory authorities because of a serious adverse event, concerns with a class of drug candidates or after an inspection of our clinical trial operations or trial sites;
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• changes in regulatory requirements and guidance that require amending or submitting new clinical protocols;
−Removed: • business interruptions resulting from geo-political actions, including the Russia-Ukraine war or the perception that such hostilities may be imminent, terrorism, natural disasters, or public health epidemics.
−Removed: Clinical site initiation and patient enrollment may be delayed due to prioritization of hospital resources toward the ongoing COVID-19 pandemic.
−Removed: Patients may not be able to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services.
−Removed: Similarly, our ability to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19, could be limited, which in turn could adversely impact our clinical trial operations.
−Removed: Additionally, we may experience interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel, quarantines or social distancing protocols imposed or recommended by federal or state governments, employers and others in connection with the ongoing COVID-19 pandemic.
−Removed: As a result of the COVID-19 pandemic, we have faced and may continue to face delays in meeting our anticipated timelines for our ongoing and planned preclinical studies and clinical trials.
+Added: • business interruptions resulting from geopolitical actions, including the ongoing war between Russia and Ukraine, any other war or the perception that hostilities may be imminent, including, terrorism, natural disasters or public health crises.
Further, clinical endpoints for certain diseases we are targeting have not been established, and accordingly we may have to develop new modalities or modify existing endpoints to measure efficacy, which may increase the time it takes for us to commence or complete clinical trials.
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• be subject to additional post-marketing testing requirements;
−Removed: • be required to perform additional clinical trials to support approval;
+Added: • be required to perform additional clinical trials to support approval or be subject to additional post-marketing testing requirements;
• have regulatory authorities withdraw, or suspend, their approval of the drug or impose restrictions on its distribution in the form of a modified risk evaluation and mitigation strategy (“REMS”);
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If we are not successful in discovering, developing and commercializing additional drug candidates, our ability to expand our business and achieve our strategic objectives would be impaired.
−Removed: A key element of our current strategy is to discover, develop and potentially commercialize a portfolio of drug candidates to treat epilepsies, seizure-related disorders, and rare neurological disorders.
−Removed: However, our business development activities and research activities may present attractive opportunities outside of epilepsies and seizure-related disorders and we may choose to pursue drug candidates in other areas of interest including other disorders that we believe would be in the best interest of the Company and our stockholders.
+Added: A key element of our current strategy is to discover, develop and potentially commercialize a portfolio of drug candidates to treat rare epilepsies, seizure-related disorders, and rare neurological disorders.
+Added: However, our business development activities and research activities may present attractive opportunities outside of rare epilepsies and seizure-related disorders and we may choose to pursue drug candidates in other areas of interest including other disorders that we believe would be in the best interest of the Company and our stockholders.
We plan to continuously review our strategies and modify as necessary based on attractive areas of interest and assets that we choose to pursue.
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Identifying new drug candidates requires substantial technical, financial and human resources, whether or not any drug candidates are ultimately identified.
−Removed: The COVID-19 pandemic could also impact our ability to do in-person due diligence, negotiations and other interactions to identify new opportunities.
Even if we identify drug candidates that initially show promise, we may fail to in-license or acquire these assets and may also fail to successfully develop and commercialize such drug candidates for many reasons, including the following:
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Regulatory authorities may draw different conclusions or require additional testing to confirm these determinations, if they occur.
−Removed: In addition, it is possible that as we test our drug candidates in larger, longer and more extensive clinical programs, or as use of these drug candidates becomes more widespread if they receive respective regulatory approval, illnesses, injuries, discomforts and other adverse events that were observed in earlier trials, as well as conditions that did not occur or went undetected in previous trials, will be reported by subjects.
+Added: In addition, it is possible that as we test our drug candidates in larger, longer and more extensive clinical programs, or as use of these drug candidates becomes more widespread if they receive regulatory approval, illnesses, injuries, discomforts and other adverse events that were observed in earlier trials, as well as conditions that did not occur or went undetected in previous trials, will be reported by subjects.
Many times, side effects are only detectable after investigational drugs are tested in large-scale, Phase 3 trials or, in some cases, after they are made available to patients on a commercial scale after approval.
−Removed: For example, adverse events were reported in certain clinical trials for OV101 and OV935, two of our former drug candidates.
+Added: For example, adverse events were reported in certain clinical trials for OV101, our former drug candidate, and soticlestat.
+Added: Clinical trials may not demonstrate any ocular safety benefits for OV329 relative to vigabatrin.
If clinical experience indicates that any of our drug candidates causes adverse events or serious or life-threatening adverse events, the development of that drug candidate may fail or be delayed, or, if the drug candidate has received regulatory approval, such approval may be revoked, which would harm our business, prospects, operating results and financial condition.
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Because the patient populations in the market for our drug candidates may be small or difficult to assess, we must be able to successfully identify patients and acquire a significant market share to achieve profitability and growth.
−Removed: We focus our research and drug development on treatments for epilepsies, seizure-related disorders and other rare neurological disorders.
+Added: We focus our research and drug development on treatments for rare epilepsies, seizure-related disorders and rare neurological disorders.
Given the small number of patients who have the disorders that we are targeting, our eligible patient population and pricing estimates may differ significantly from the actual market addressable by our drug candidates.
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In particular, these companies have greater experience and expertise in securing reimbursement, government contracts, relationships with key opinion leaders, conducting testing and clinical trials, obtaining and maintaining regulatory approvals and distribution relationships to market products, and marketing approved drugs.
−Removed: These companies also have significantly greater research
−Removed: and marketing capabilities than we do.
+Added: These companies also have significantly greater research and marketing capabilities than we do.
If we are not able to compete effectively against existing and potential competitors, our business and financial condition may be harmed.
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Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our current and future drug candidates in certain countries.
−Removed: In certain cases, we are dependent on third parties to obtain such foreign regulatory approvals, and any
−Removed: delay or failure of performance of such third parties could delay or prevent our ability to commercialize our products in the affected countries.
−Removed: Due to the ongoing COVID-19 pandemic, it is possible that we could experience delays in the timing of our interactions with regulatory authorities due to absenteeism by governmental employees, inability to conduct planned physical inspections related to regulatory approval, or the diversion of regulatory authority efforts and attention to approval of other therapeutics or other activities related to COVID-19, which could delay anticipated approval decisions and otherwise delay or limit our ability to make planned regulatory submissions or obtain new product approvals.
+Added: In certain cases, we are dependent on third parties to obtain such foreign regulatory approvals, and any delay or failure of performance of such third parties could delay or prevent our ability to commercialize our products in the affected countries.
Further, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries.
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• production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad;
−Removed: • business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters and public health pandemics, such as COVID-19.
+Added: • business interruptions resulting from geopolitical actions, including the ongoing war between Russia and Ukraine, any other war or the perception that hostilities may be imminent, terrorism, natural disasters or public health crises.
We have no prior experience in these areas.
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Risks Related to Licensing and Collaboration Arrangements
−Removed: Under the Takeda License and Termination Agreement, we are entitled to receive royalty and milestone payments in connection with the development and commercialization of soticlestat.
+Added: Under the RLT Agreement, we are entitled to receive royalty and milestone payments in connection with the development and commercialization of soticlestat.
If Takeda fails to progress or discontinues the development of soticlestat, we may not receive some or all of such payments, which would materially harm our business.
−Removed: In March 2021, we entered into the Takeda License and Termination Agreement, pursuant to which Takeda secured rights to our 50% global share in soticlestat, which we had originally licensed from Takeda, and we granted to Takeda an exclusive worldwide license under our relevant intellectual property rights to develop and commercialize the investigational medicine soticlestat for the treatment of developmental and epileptic encephalopathies, including Dravet syndrome and Lennox-Gastaut syndrome.
+Added: In March 2021, we entered into the RLT Agreement, pursuant to which Takeda secured rights to our 50% global share in soticlestat, which we had originally licensed from Takeda, and we granted to Takeda an exclusive worldwide license under our relevant intellectual property rights to develop and commercialize the investigational medicine soticlestat for the treatment of developmental and epileptic encephalopathies, including Dravet syndrome and Lennox-Gastaut syndrome.
All rights in soticlestat are now owned by Takeda or exclusively licensed to Takeda by us.
−Removed: Following the closing date of the Takeda License and Termination Agreement, Takeda assumed all responsibility for, and costs of, both development and commercialization of soticlestat, and we will no longer have any financial obligation to Takeda under the original collaboration agreement, including for milestone payments or any future development and commercialization costs.
−Removed: Upon closing of the Takeda License and Termination Agreement, we received a one-time, upfront payment of $196.0 million and, if soticlestat is successfully developed, we will be eligible to receive up to an additional $660.0 million upon Takeda achieving specified regulatory and sales milestones.
+Added: Following the closing date of the RLT Agreement, Takeda assumed all responsibility for, and costs of, both development and commercialization of soticlestat, and we will no longer have any financial obligation to Takeda under the original collaboration agreement, including for milestone payments or any future development and commercialization costs.
+Added: Upon closing of the RLT Agreement, we received a one-time, upfront payment of $196.0 million and, if soticlestat is successfully developed, we will be eligible to receive up to an additional $660.0 million upon Takeda achieving specified regulatory and sales milestones.
In addition, if soticlestat achieves regulatory approval, we will be entitled to receive tiered royalties at percentages ranging from the low double-digits, up to 20% on sales of soticlestat.
Royalties will be payable on a country-by-country and product-by-product basis during the period beginning on the date of the first commercial sale of such product in such country and ending on the later to occur of the expiration of patent rights covering the product in such country and a specified anniversary of such first commercial sale.
−Removed: Under the terms of the Takeda License and Termination Agreement, Takeda now has sole discretion over the conduct of the development and commercialization of soticlestat.
−Removed: If for any reason, Takeda fails to progress, or elects to terminate the development of soticlestat as contemplated by the Takeda License and Termination Agreement, or if the development or commercialization of soticlestat is delayed or deprioritized by Takeda, we may not receive some or all of the royalty and milestone payments under such agreement.
+Added: Under the terms of the RLT Agreement, Takeda now has sole discretion over the conduct of the development and commercialization of soticlestat.
+Added: If for any reason, Takeda fails to progress, or elects to terminate the development of soticlestat as contemplated by the RLT Agreement, or if the development or commercialization of soticlestat is delayed or deprioritized by Takeda, we may not receive some or all of the royalty and milestone payments under such agreement.
We are dependent upon Takeda’s progression of such development and the resulting payments to fund the regulatory development of our current and future drug candidates.
−Removed: If we are unable to find alternative sources of revenue, our inability to receive royalty or milestone payments under the Takeda License and Termination Agreement would negatively impact our business and results of operations.
+Added: If we are unable to find alternative sources of revenue, our inability
+Added: to receive royalty or milestone payments under the RLT Agreement would negatively impact our business and results of operations.
Risks associated with the in-licensing or acquisition of drug candidates could cause substantial delays in the preclinical and clinical development of our drug candidates.
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• strategic collaborators could terminate the arrangement or allow it to expire, which would delay the development and may increase the cost of developing our drug candidates.
+Added: If we engage in future acquisitions or strategic partnerships, this may increase our capital requirements, dilute our stockholders, cause us to incur debt or assume contingent liabilities and subject us to other risks.
+Added: Our business plan is to continue to evaluate various acquisitions and strategic partnerships, including licensing or acquiring complementary drugs, intellectual property rights, technologies, or businesses.
+Added: Any potential acquisition or strategic partnership may entail numerous risks, including:
+Added: • increased operating expenses and cash requirements;
+Added: • the assumption of additional indebtedness or contingent liabilities;
+Added: • assimilation of operations, intellectual property and drugs of an acquired company, including difficulties associated with integrating new personnel;
+Added: • the diversion of our management’s attention from our existing drug programs and initiatives in pursuing such a strategic partnership, merger or acquisition;
+Added: • retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business relationships;
+Added: • risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing drugs or drug candidates and regulatory approvals;
+Added: • our inability to generate revenue from acquired technology and/or drugs sufficient to meet our objectives in undertaking the acquisition or even to offset the associated acquisition and maintenance costs;
+Added: • challenges related to integrating acquired businesses or entering into or realizing the benefits of strategic transactions generally;
+Added: • risks associated with potential international acquisition transactions, including in countries where we do not currently have a material presence.
+Added: In addition, if we engage in future acquisitions or strategic partnerships, we may issue dilutive securities, assume or incur debt obligations, incur large one-time expenses and acquire intangible assets that could result in significant future amortization expense.
+Added: Moreover, we may not be able to locate suitable acquisition opportunities and this inability could impair our ability to grow or obtain access to technology or drugs that may be important to the development of our business.
We may explore additional strategic collaborations that may never materialize or may fail.
−Removed: Our business strategy is based on acquiring or in-licensing compounds directed at epilepsies, seizure-related disorders, and rare neurological disorders.
+Added: Our business strategy is based on acquiring or in-licensing compounds directed at rare epilepsies, seizure-related disorders, and rare neurological disorders.
As a result, we intend to periodically explore a variety of possible additional strategic collaborations in an effort to gain access to additional drug candidates or resources.
At the current time, we cannot predict what form such a strategic collaboration might take.
−Removed: We are likely to face significant competition in seeking appropriate strategic collaborators, and strategic collaborations can be complicated and time consuming to negotiate and document.
+Added: We are likely to face significant competition in seeking
+Added: appropriate strategic collaborators, and strategic collaborations can be complicated and time consuming to negotiate and document.
We may not be able to negotiate strategic collaborations on acceptable terms, or at all.
We are unable to predict when, if ever, we will enter into any additional strategic collaborations because of the numerous risks and uncertainties associated with establishing them.
−Removed: Further, our business development activities and research activities may present attractive opportunities outside of epilepsies and seizure related disorders and we may choose to pursue drug candidates in other areas of interest including other disorders and diseases that we believe would be in the best interest of the Company and our stockholders.
+Added: Further, our business development activities and research activities may present attractive opportunities outside of rare epilepsies and seizure related disorders and we may choose to pursue drug candidates in other areas of interest including other disorders and diseases that we believe would be in the best interest of the Company and our stockholders.
We plan to continuously review our strategies and modify as necessary based on attractive areas of interest and assets that we choose to pursue.
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The laws that will affect our operations include, but are not limited to:
−Removed: • the federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind, in return for the purchase, recommendation, leasing or furnishing
−Removed: of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs.
+Added: • the federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind, in return for the purchase, recommendation, leasing or furnishing of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs.
This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand, and prescribers, purchasers and formulary managers on the other.
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Supreme Court dismissed a challenge on procedural grounds that argued the PPACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress.
−Removed: Further, prior to the U.S.
−Removed: Supreme Court ruling, on January 28, 2021, President Biden issued an executive order that initiated a special enrollment period for purposes of obtaining health insurance coverage through the PPACA marketplace.
−Removed: The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create barriers to obtaining access to health insurance coverage through Medicaid or the PPACA.
−Removed: On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (the “IRA”) into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in PPACA marketplaces through plan year 2025.
−Removed: The IRA also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost through a newly established manufacturer discount program.It is possible that the PPACA will be subject to judicial or Congressional challenges in the future.
+Added: Further, there have been a number of health reform measures by the Biden administration that have impacted the PPACA.
+Added: For example, on August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (the “IRA”) into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in PPACA marketplaces through plan year 2025.
+Added: The IRA also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and by creating a new manufacturer discount program.
+Added: It is possible that the PPACA will be subject to judicial or Congressional challenges in the future.
It is unclear how any such challenges and the healthcare reform measures of the Biden administration will impact the PPACA and our business.
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These changes include aggregate reductions to Medicare payments to providers of up to 2% per fiscal year pursuant to the Budget Control Act of 2011, which began in 2013, and due to subsequent legislative amendments to the statute will remain in effect until 2031 unless additional Congressional action is taken.
−Removed: However, COVID-19 relief legislation suspended the 2% Medicare sequester from May 1, 2020 through March 31, 2022.
Under current legislation, the actual reduction in Medicare payments will vary from 1% in 2022 to up to 4% in the final fiscal year of this sequester.
−Removed: The American Taxpayer Relief Act of 2012, among other things, further reduced Medicare payments to several providers,
−Removed: including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.
−Removed: Congress is also considering additional health reform measures.
+Added: The American Taxpayer Relief Act of 2012, among other things, further reduced Medicare payments to several providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.
Additional changes that may affect our business include the expansion of new programs such as Medicare payment for performance initiatives for physicians under the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”), which ended the use of the statutory formula and established a quality payment program, also referred to as the Quality Payment Program.
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Also, there has been heightened governmental scrutiny recently over the manner in which drug manufacturers set prices for their marketed products, which have resulted in several Presidential executive orders, Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products.
−Removed: At the federal level, the Trump administration used several means to propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy initiatives.
−Removed: For example, on July 24, 2020 and September 13, 2020, the Trump administration announced several executive orders related to prescription drug pricing that attempt to implement several of the administration’s proposals.
−Removed: Additionally, in July 2021, the Biden administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs.
+Added: At the federal level, in July 2021, the Biden administration released an
+Added: executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs.
In response to Biden’s executive order, on September 9, 2021, the U.S.
Department of Health and Human Services (“HHS”), released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue as well as potential administrative actions HHS can take to advance these principles.
−Removed: Further, the IRA, among other things, (1) directs HHS to negotiate the price of certain single-source drugs and biologics covered under Medicare and (2) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation.
+Added: In addition, the IRA, among other things, (i) directs the Secretary of HHS to negotiate the price of certain high-expenditure, single-source drugs and biologics covered under Medicare Part B and Medicare Part D, and subjects drug manufacturers to civil monetary penalties and a potential excise tax by offering a price that is not equal to or less than the negotiated “maximum fair price” under the law, and (ii) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation.
These provisions will take effect progressively starting in fiscal year 2023, although they may be subject to legal challenges.
−Removed: It is currently unclear how the IRA will be implemented but is likely to have a significant impact on the pharmaceutical industry.
+Added: Further, the Biden administration released an additional executive order on October 14, 2022, directing HHS to report on how the Center for Medicare and Medicaid Innovation can be further leveraged to test new models for lowering drug costs for Medicare and Medicaid beneficiaries.
At the state level, legislatures have increasingly passed and implemented regulations designed to control pharmaceutical and biological product pricing, including pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
We expect that these and other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved drug.
+Added: For example, based on a recent executive order, the Biden administration expressed its intent to pursue certain policy initiatives to reduce drug prices.
Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors.
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Any regulatory approvals that we receive for our current or future drug candidates may also be subject to a REMS, limitations on the approved indicated uses for which the drug may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 trials, and surveillance to monitor the quality, safety and efficacy of the drug.
−Removed: In addition, drug manufacturers and their facilities are subject to payment of user fees and continual review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP requirements and adherence to commitments made in the NDA, BLA or foreign marketing application.
+Added: In addition, drug manufacturers and their facilities are subject to payment of user fees and continual review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP requirements and adherence to
+Added: commitments made in the NDA, BLA or foreign marketing application.
If we, or a regulatory authority, discover previously unknown problems with a drug, such as adverse events of unanticipated severity or frequency, or problems with the facility where the drug is manufactured or if a regulatory authority disagrees with the promotion, marketing or labeling of that drug, a regulatory authority may impose restrictions relative to that drug, the manufacturing facility or us, including requesting a recall or requiring withdrawal of the drug from the market or suspension of manufacturing.
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There is no assurance that all of the potentially relevant prior art relating to our patents and patent applications has been found, which can invalidate a patent or prevent a patent from issuing from a pending patent application.
−Removed: Even if patents do successfully issue and even if such patents cover our current or any future drug candidates, third parties may challenge their validity, enforceability or scope, which may result in such patents being narrowed, invalidated, or held unenforceable.
+Added: Even if patents do successfully issue and even if such patents cover our current or any future drug candidates, third parties may challenge their
+Added: validity, enforceability or scope, which may result in such patents being narrowed, invalidated, or held unenforceable.
Any successful opposition to these patents or any other patents owned by or licensed to us could deprive us of rights necessary for the successful commercialization of any drug candidates or companion diagnostic that we may develop.
Further, if we encounter delays in regulatory approvals, the period of time during which we could market a drug candidate and companion diagnostic under patent protection could be reduced.
−Removed: If the patent applications we hold or have in-licensed with respect to our development programs and drug candidates fail to issue, if their breadth or strength of protection is threatened, or if they fail to provide meaningful exclusivity for our current or any future
−Removed: drug candidates, it could dissuade companies from collaborating with us to develop drug candidates, and threaten our ability to commercialize future drugs.
+Added: If the patent applications we hold or have in-licensed with respect to our development programs and drug candidates fail to issue, if their breadth or strength of protection is threatened, or if they fail to provide meaningful exclusivity for our current or any future drug candidates, it could dissuade companies from collaborating with us to develop drug candidates, and threaten our ability to commercialize future drugs.
Any such outcome could have a negative effect on our business.
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We expect to seek extensions of patent terms in the United States and, if available, in other countries where we are prosecuting patents.
−Removed: In the United States, the Drug
−Removed: Price Competition and Patent Term Restoration Act of 1984 permits a patent term extension of up to five years beyond the normal expiration of the patent, which is limited to the approved indication (or any additional indications approved during the period of extension).
+Added: In the United States, the Drug Price Competition and Patent Term Restoration Act of 1984 permits a patent term extension of up to five years beyond the normal expiration of the patent, which is limited to the approved indication (or any additional indications approved during the period of extension).
However, the applicable authorities, including the FDA and the USPTO in the United States, and any equivalent regulatory authority in other countries, may not agree with our assessment of whether such extensions are available, and may refuse to grant extensions to our patents, or may grant more limited extensions than we request.
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An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing.
−Removed: The initiation of a claim against a third party may also cause the third party to bring counter claims against us such as claims asserting that our patents are invalid or unenforceable.
+Added: The initiation of a claim against a third party may also cause the third party to bring
+Added: counter claims against us such as claims asserting that our patents are invalid or unenforceable.
In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace.
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Filing, prosecuting and defending patents covering our current and any future drug candidates throughout the world would be prohibitively expensive.
−Removed: Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop
−Removed: their own drugs and, further, may export otherwise infringing drugs to territories where we may obtain patent protection, but where patent enforcement is not as strong as that in the United States.
+Added: Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own drugs and, further, may export otherwise infringing drugs to territories where we may obtain patent protection, but where patent enforcement is not as strong as that in the United States.
These drugs may compete with our drugs in jurisdictions where we do not have any issued or licensed patents and any future patent claims or other intellectual property rights may not be effective or sufficient to prevent them from so competing.
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These agreements typically limit the rights of the third parties to use or disclose our confidential information, including our trade secrets.
−Removed: Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements.
+Added: Despite the contractual provisions
+Added: employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are 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 could have an adverse effect on our business and results of operations.
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We do not have our own manufacturing capabilities and will rely on third parties to produce clinical and commercial supplies of our current and any future drug candidates.
−Removed: We do not own or operate, and we do not expect to own or operate, facilities for drug manufacturing, storage and distribution, or testing.
+Added: We do not own or operate, and we do not expect to own or operate, facilities for drug manufacturing, drug formulation, storage and distribution or testing.
We have been in the past, and will continue to be, dependent on third parties to manufacture the clinical supplies of our drug candidates.
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We expect to control only certain aspects of our CROs’ activities.
−Removed: Nevertheless, we will be responsible for ensuring that each of our preclinical studies or clinical trials are conducted in accordance with the applicable protocol, legal, regulatory and scientific standards and our reliance on the CROs does not relieve us of our regulatory responsibilities.
+Added: Nevertheless, we will be responsible for ensuring that each of our preclinical
+Added: studies or clinical trials are conducted in accordance with the applicable protocol, legal, regulatory and scientific standards and our reliance on the CROs does not relieve us of our regulatory responsibilities.
We and our CROs will be required to comply with good laboratory practices (“GLPs”) and GCPs, which are regulations and guidelines enforced by the FDA and are also required by the Competent Authorities of the Member States of the European Economic Area and comparable foreign regulatory authorities in the form of International Council for Harmonization guidelines for any of our drug candidates that are in preclinical and clinical development.
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Risks Related to Our Business Operations, Employee Matters and Managing Growth
−Removed: COVID-19 could adversely impact our business, including our preclinical studies, clinical trials and access to capital.
−Removed: The ongoing COVID-19 pandemic has resulted in travel and other restrictions in order to reduce the spread of the disease.
−Removed: In response to initial state and local orders across the country directing individuals to shelter at their places of residence, directing businesses and governmental agencies to cease non-essential operations at physical locations, prohibiting certain non-essential gatherings, and ordering cessation of non-essential travel, in March 2020 we implemented work-from-home policies for all employees.
−Removed: In June 2022, we adopted a hybrid work model that incorporates a mixture of in-office and remote work in an employee's schedule.
−Removed: Our current plan is to continue with this hybrid work model and adapt the model as appropriate as the pandemic persists and federal, state and local guidelines, rules and regulations regarding the conduct of in-person business operations continue to change and evolve.
−Removed: The effects of our work policies may negatively impact productivity, introduce cybersecurity risks, disrupt our business and delay our clinical programs and timelines, the magnitude of which will depend, in part, on the length and severity of any applicable restrictions and other limitations on our ability to conduct our business in the ordinary course.
−Removed: These and similar, and perhaps more severe, disruptions in our operations could negatively impact our business, operating results and financial condition.
−Removed: Any new imposition of quarantines, shelter-in-place and similar government orders related to COVID-19 may adversely impact our business operations and the business operations of our CROs conducting our preclinical studies and clinical trials and our third-party manufacturing facilities in the United States and other countries.
−Removed: In particular, some of our third-party manufacturers which we use for the supply of materials for drug candidates or other materials necessary to manufacture product to conduct preclinical studies
−Removed: and clinical trials are located in countries affected by COVID-19, and should they experience disruptions, such as temporary closures or suspension of services, we would likely experience delays in advancing these tests and trials.
−Removed: Currently, we expect no material impact on the clinical supply of any of our drug candidates.
−Removed: In addition, our previous clinical trials were, and our future clinical trials may be, affected by the COVID-19 pandemic.
−Removed: Clinical site initiation and patient enrollment may be delayed due to prioritization of hospital resources toward the COVID-19 pandemic.
−Removed: Some patients may not be willing or able to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services.
−Removed: Similarly, our ability to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19 and adversely impact our clinical trial operations.
−Removed: As a result of the COVID-19 pandemic, we have faced and may continue to face delays in meeting our anticipated timelines for our previous and planned clinical trials.
−Removed: The spread of COVID-19, which has caused a broad impact globally, may materially affect us economically.
−Removed: While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a sustained, widespread pandemic could result in significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity.
−Removed: In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock.
−Removed: The COVID-19 pandemic continues to evolve.
−Removed: The extent to which the COVID-19 pandemic impacts our business, our clinical development and regulatory efforts will depend on future developments that are highly uncertain and cannot be predicted with confidence, such as the ultimate duration of the outbreak, the extent of sustained or new travel restrictions, social distancing requirements and business closures in the United States, Europe and other countries, and the effectiveness of actions taken in the United States, Europe and other countries to contain and treat the disease, including vaccination efforts.
−Removed: Accordingly, we do not yet know the full extent of potential delays or impacts on our business, our clinical and regulatory activities, healthcare systems or the global economy as a whole.
−Removed: However, these impacts could adversely affect our business, financial condition, results of operations and growth prospects.
−Removed: In addition, to the extent the ongoing COVID-19 pandemic adversely affects our business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties described in this ‘‘Risk Factors’’ section.
We are highly dependent on the services of our senior management team, including our Chairman and Chief Executive Officer, Dr.
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We may need to expand our organization, and we may experience difficulties in managing this growth, which could disrupt our operations.
−Removed: As of September 30, 2022, we had 44 full-time employees.
+Added: As of March 31, 2023, we had 46 full-time employees.
As our development and commercialization plans and strategies for our current pipeline of product candidates develop, we expect to need additional managerial, operational, sales, marketing, financial, legal and other resources.
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Our expected growth could require significant capital expenditures and may divert financial resources from other projects, such as the development of our current and potential future drug candidates.
−Removed: If our management is unable to effectively manage our growth, our expenses may increase more than expected, our
−Removed: ability to generate and grow revenue could be reduced and we may not be able to implement our business strategy.
+Added: If our management is unable to effectively manage our growth, our expenses may increase more than expected, our ability to generate and grow revenue could be reduced and we may not be able to implement our business strategy.
Our future financial performance, our ability to commercialize drug candidates, develop a scalable infrastructure and compete effectively will depend, in part, on our ability to effectively manage any future growth.
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It is not always possible to identify and deter misconduct by our employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations.
−Removed: Further, because of the work from home policies we implemented due to COVID-19, information that is normally protected, including company confidential information, may be less secure.
+Added: Further, because of our hybrid work policies, information that is normally protected, including company confidential information, may be less secure.
If actions are instituted against us and we are not successful in defending ourselves or asserting our rights, those actions could result in the imposition of significant fines or other sanctions, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, imprisonment, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, contractual damages, reputational harm, diminished profits and future earnings and curtailment of operations, any of which could adversely affect our ability to operate our business and our results of operations.
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While all information technology operations are inherently vulnerable to inadvertent or intentional security breaches, incidents, attacks and exposures, the accessibility and distributed nature of our information technology systems, and the sensitive information stored on those systems, make such systems potentially vulnerable to unintentional or malicious, internal and external attacks on our technology environment.
−Removed: In addition, due to the ongoing COVID-19 pandemic, we have enabled all of our employees to work remotely, which may make us more vulnerable to cyberattacks.
+Added: In addition, due to our hybrid work environment, we may be more vulnerable to cyberattacks.
Potential vulnerabilities can be exploited from inadvertent or intentional actions of our employees, third-party vendors, business partners, or by malicious third parties.
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While we have no reason to believe this to be the case, attackers have become very sophisticated in the way they conceal access to systems, and many companies that have been attacked are not aware that they have been attacked.
−Removed: Any event that leads to unauthorized access, use or disclosure of personal information, including but not limited to personal information regarding our patients or employees, could disrupt our business, harm our reputation, compel us to comply with applicable federal and/or state breach notification laws and foreign law equivalents, subject us to time consuming, distracting and expensive litigation, regulatory investigation
−Removed: and oversight, mandatory corrective action, require us to verify the correctness of database contents, or otherwise subject us to liability under laws, regulations and contractual obligations, including those that protect the privacy and security of personal information.
+Added: Any event that leads to unauthorized access, use or disclosure of personal information, including but not limited to personal information regarding our patients or employees, could disrupt our business, harm our reputation, compel us to comply with applicable federal and/or state breach notification laws and foreign law equivalents, subject us to time consuming, distracting and expensive litigation, regulatory investigation and oversight, mandatory corrective action, require us to verify the correctness of database contents, or otherwise subject us to liability under laws, regulations and contractual obligations, including those that protect the privacy and security of personal information.
This could result in increased costs to us, and result in significant legal and financial exposure and/or reputational harm.
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We are subject to laws and regulations covering data privacy and the protection of personal information including health information.
−Removed: The legislative and regulatory landscape for privacy and data protection continues to evolve, and there has been an increasing focus on privacy and data protection issues which may affect our business.
+Added: The legislative and regulatory landscape for privacy and data protection continues to evolve, and there
+Added: has been an increasing focus on privacy and data protection issues which may affect our business.
In the U.S., we may be subject to state security breach notification laws, state health information privacy laws and federal and state consumer protections laws which impose requirements for the collection, use, disclosure and transmission of personal information.
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Risks Related to Being a Public Company
−Removed: We are an “emerging growth company” and a “smaller reporting company” and the reduced disclosure requirements applicable to such companies may make our common stock less attractive to investors.
−Removed: We will remain an emerging growth company (“EGC”), as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), until December 31, 2022.
−Removed: For so long as we remain an EGC, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies.
−Removed: We currently take advantage of some, but not all, of the reduced regulatory and reporting requirements that are available to us.
−Removed: We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions.
−Removed: If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, and our stock price may be more volatile and may decline.
−Removed: In addition, the JOBS Act provides that an EGC may take advantage of an extended transition period for complying with new or revised accounting standards.
−Removed: This allows an EGC to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.
−Removed: We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not an EGC.
−Removed: In addition, we will continue to qualify as a smaller reporting company as defined in the Exchange Act even after we are no longer an emerging growth company.
−Removed: We may take advantage of certain of the scaled disclosures available to smaller reporting companies, including but not limited to:
+Added: We are a “smaller reporting company” and the reduced disclosure requirements applicable to such companies may make our common stock less attractive to investors.
+Added: We are currently a “smaller reporting company” as defined in the Exchange Act.
+Added: We will be a smaller reporting company and may take advantage of the scaled-back disclosures available to smaller reporting companies for so long as (i) the market value of our voting and non-voting ordinary shares held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter or (ii) (a) our annual revenue is less than $100.0 million during the most recently completed fiscal year and (b) the market value of our voting and non-voting ordinary shares held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
+Added: As a smaller reporting company, we are permitted to comply with scaled-back disclosure obligations in our SEC filings compared to other issuers, including with respect to disclosure obligations regarding executive compensation in our periodic reports and proxy statements.
+Added: We have elected to adopt the accommodations available to smaller reporting companies.
+Added: Until we cease to be a smaller reporting company, the scaled-back disclosure in our SEC filings will result in less information about our company being available than for other public companies.
+Added: If investors consider our common shares less attractive as a result of our election to use the scaled-back disclosure permitted for smaller reporting companies, there may be a less active trading market for our common shares and our share price may be more volatile.
+Added: We may take advantage of certain of the scaled-back disclosures available to smaller reporting companies, including but not limited to:
• reduced disclosure obligations regarding executive compensation arrangements;
• being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure.
−Removed: However, as of June 30, 2022, in addition to being classified as a “smaller reporting company,” we are classified as an “accelerated filer” pursuant to SEC rules and are required to provide, among other items, an auditor’s attestation of management’s assessment of internal control over financial reporting required under Sarbanes-Oxley Act Section 404(b) beginning with our annual report for the year ending December 31, 2022.
−Removed: Effective as of December 31, 2022, we will no longer be an EGC, which will increase our costs and demands on management.
−Removed: We will cease to be an EGC on December 31, 2022.
−Removed: In addition, as a result of the market value of our common stock held by non-affiliates as of June 30, 2022, we will also qualify as a smaller reporting company and an accelerated filer as of December 31, 2022.
−Removed: We are not required to reflect the change in our reporting status and comply with the associated increased disclosure obligations until our annual report for the year ending December 31, 2022.
−Removed: Due to our exit from EGC status and our qualification as a smaller reporting company that is also classified as an accelerated filer, we will be subject to certain disclosure and compliance requirements that apply to other public companies that did not previously apply to us due to our status as an EGC.
+Added: Effective as of December 31, 2022, we ceased to be an "emerging growth company", which will increase our costs and demands on management.
+Added: On December 31, 2022, we ceased to be an emerging growth company (“EGC”), as defined in the Jumpstart Our Business Startups Act of 2012.
+Added: In addition, as a result of the market value of our common stock held by non-affiliates as of June 30, 2022, we also qualified as a smaller reporting company and an accelerated filer.
+Added: Due to our exit from EGC status and our qualification as a smaller reporting company that is also classified as an accelerated filer, we are subject to certain disclosure and compliance requirements that apply to other public companies that did not previously apply to us due to our status as an EGC.
These requirements include, but are not limited to:
• the requirement that our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002 (“Section 404”);
−Removed: • the requirement that we hold a non-binding advisory vote on executive compensation and obtain stockholder approval of any golden parachute payments not previously approved.
−Removed: We expect that compliance with the additional requirements will increase our legal and financial compliance costs and may cause management and other personnel to divert attention from operational and other business matters to devote increased time to public company reporting requirements.
+Added: • the requirement that we hold a non-binding advisory vote on executive compensation, the frequency of such advisory vote on executive compensation, and obtain stockholder approval of any golden parachute payments not previously approved.
+Added: We expect that compliance with these additional requirements will increase our legal and financial compliance costs and may cause management and other personnel to divert attention from operational and other business matters to devote increased time to public company reporting requirements.
In addition, if we are not able to comply with changing requirements in a timely manner, the market price of our common stock could decline, and we could be subject to sanctions or investigations by The Nasdaq Stock Market LLC, the SEC or other regulatory authorities, which would require additional financial and management resources.
−Removed: We will continue to incur increased costs as a result of operating as a public company, and our management will devote substantial time to new compliance initiatives.
−Removed: As a public company, and particularly after we are no longer an EGC, we will incur significant legal, accounting and other expenses that we did not incur as a private company.
−Removed: In addition, the Sarbanes-Oxley Act of 2002 and rules subsequently implemented by the SEC and The Nasdaq Stock Market LLC have imposed various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices.
−Removed: Our management and other personnel devote a substantial amount of time to these and other compliance initiatives.
−Removed: Moreover, these rules and regulations will continue to increase our legal and financial compliance costs and will make some activities more time-consuming and costly.
If we fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately report our financial condition, results of operations or cash flows, which may adversely affect investor confidence in us and, as a result, the value of our common stock.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for financial reporting and disclosure controls and procedures.
−Removed: We are required, under Section 404 of the Sarbanes-Oxley Act (“Section 404”), to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting.
+Added: We are required, under Section 404, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting.
This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting.
Section 404 also generally requires an attestation from our independent registered public accounting firm on the effectiveness of our internal control over financial reporting.
−Removed: While we have been EGC, our independent registered public accounting firm has not been required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404.
−Removed: This exemption will no longer apply to us as of December 31, 2022.
−Removed: Accordingly, beginning with our annual report for the year ending December 31, 2022, we will be required to include an attestation from our independent registered public accounting firm on the effectiveness of our internal control over financial reporting.
−Removed: Our compliance with Section 404 will require that we incur substantial expense and expend significant management efforts.
−Removed: We currently do not have an internal audit group, and we will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge and compile the system and process documentation necessary to perform the evaluation needed to comply with Section 404.
+Added: While we were an EGC, our independent registered public accounting firm was not required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404.
+Added: This exemption no longer applied to us as of December 31, 2022.
+Added: Accordingly, beginning with our Annual Report on Form 10-K for the year ending December 31, 2022, we are required to include and have included an attestation from our independent registered public accounting firm on the effectiveness of our internal control over financial reporting.
+Added: Our compliance with Section 404 requires that we incur substantial expense and expend significant management efforts.
+Added: We currently do not have an internal audit group, and rely on experienced consultants to support this function.
+Added: We may need to hire additional consultants or accounting and financial staff with appropriate public company experience and technical accounting knowledge and compile the system and process documentation necessary to perform the evaluation needed to comply with Section 404.
We may not be able to complete our evaluation, testing and any required remediation in a timely fashion.
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We cannot assure you that there will not be material weaknesses or significant deficiencies in our internal control over financial reporting in the future.
−Removed: Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial
−Removed: condition, results of operations or cash flows.
−Removed: If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting once that firm begins its Section 404 reviews, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by The Nasdaq Stock Market LLC, the SEC or other regulatory authorities.
+Added: Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition, results of operations or cash flows.
+Added: If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by The Nasdaq Stock Market LLC, the SEC or other regulatory authorities.
Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.
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The market price of our common stock has been and likely will remain volatile.
−Removed: The stock market in general and the market for biopharmaceutical or pharmaceutical companies in particular, has experienced extreme volatility that has often been unrelated to the operating performance of particular companies, including very recently in connection with the ongoing COVID-19 pandemic, which has resulted in decreased stock prices for many companies notwithstanding the lack of a fundamental change in their underlying business models or prospects.
−Removed: Broad market and industry factors, including potentially worsening economic conditions and other adverse effects or developments relating to the ongoing COVID-19 pandemic, may negatively affect the market price of our common stock, regardless of our actual operating performance.
+Added: The stock market in general and the market for biopharmaceutical or pharmaceutical companies in particular, has experienced extreme volatility that has often been unrelated to the operating performance of particular companies, including very recently in connection with the
+Added: ongoing COVID-19 pandemic, which has resulted in decreased stock prices for many companies notwithstanding the lack of a fundamental change in their underlying business models or prospects.
+Added: Broad market and industry factors, including potentially worsening economic conditions and other adverse effects or developments relating to new or ongoing public health crises or other inflationary factors, may negatively affect the market price of our common stock, regardless of our actual operating performance.
As a result of this volatility, you may lose all or part of your investment in our common stock since you might be unable to sell your shares at or above the price you paid for the shares.
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We may sell additional equity or debt securities or enter into other arrangements to fund our operations, which may result in dilution to our stockholders and impose restrictions or limitations on our business.
−Removed: Until we can generate a sufficient amount of revenue from our products, if ever, we expect to finance future cash needs through public or private equity or debt offerings.
+Added: Until such time as we can generate substantial revenue from drug sales, if ever, we expect to finance our cash needs through a combination of equity and debt financings, strategic alliances, and license and development agreements in connection with any collaborations.
+Added: We do not have any committed external source of funds.
+Added: To the extent that we issue additional equity securities, our stockholders may experience substantial dilution, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a stockholder.
+Added: In addition, we may issue equity or debt securities as consideration for obtaining rights to additional compounds.
In November 2020, we filed a shelf registration statement on Form S-3 (Registration No.
333-250054) that allows us to sell up to an aggregate of $250.0 million of our common stock, preferred stock, debt securities and/or warrants (the “S-3 Registration Statement”), which includes a prospectus covering the issuance and sale of up to $75.0 million of common stock pursuant to an at-the-market (“ATM”) offering program.
−Removed: As of March 31, 2022, we had $250.0 million available under our S-3 Registration Statement, including $75.0 million available pursuant to our ATM program.
−Removed: Financing activities may have an adverse impact on our stockholders’ rights as well as on our operations, and such additional funding may not be available on reasonable terms, if at all.
−Removed: If we raise additional funds through the issuance of additional debt or equity securities, it may result in dilution to our existing stockholders and/or increased fixed payment obligations.
−Removed: Furthermore, these securities may have rights senior to those of our common stock and could contain covenants that would restrict our operations and potentially impair our competitiveness, such as redeeming our shares, making investments, issuing additional equity, limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.
−Removed: Additionally, if we seek funds through arrangements with collaborative partners, these arrangements may require us to relinquish rights to some of our technologies or drug candidates or otherwise agree to terms unfavorable to us.
+Added: As of December 31, 2022, we had $250.0 million available under our S-3 Registration Statement, including $75.0 million available pursuant to our ATM program.
+Added: Debt and equity financings, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as redeeming our shares, making investments, issuing additional equity, incurring additional debt, making capital expenditures, declaring dividends or placing limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could negatively impact our ability to conduct our business.
+Added: If we raise additional capital through future collaborations, strategic alliances or third-party licensing arrangements, we may have to relinquish valuable rights to our intellectual property, future revenue streams, research programs or drug candidates, or grant licenses on terms that may not be favorable to us.
Any of these events could significantly harm our business, financial condition and prospects.
You will be diluted by any conversions of outstanding Series A convertible preferred stock and exercises of outstanding options.
−Removed: As of September 30, 2022, we had outstanding options to purchase an aggregate of 13,013,259 shares of our common stock at a weighted average exercise price of $4.13 per share and 1,250,000 shares of common stock issuable upon conversion of outstanding Series A convertible preferred stock for no additional consideration.
+Added: As of March 31, 2023, we had outstanding options to purchase an aggregate of 15,418,177 shares of our common stock at a weighted average exercise price of $3.86 per share and 1,250,000 shares of common stock issuable upon conversion of outstanding Series A convertible preferred stock for no additional consideration.
Such Series A convertible preferred stock is convertible any time at the option of the holder thereof subject to the beneficial ownership limitations described in Note 7 to the financial statements contained in this Quarterly Report on Form 10-Q.
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Concentration of ownership of our common stock among our executive officers, directors and principal stockholders may prevent new investors from influencing significant corporate decisions.
−Removed: Based upon our shares of our common stock outstanding as of September 30, 2022, our executive officers, directors and stockholders who owned more than 5% of our outstanding common stock, in the aggregate, beneficially own shares representing approximately 45% of our outstanding common stock.
−Removed: Takeda, a greater than 5% holder, has agreed to, among other things, (i) a standstill provision, (ii) restrictions on its ability to sell or otherwise transfer it shares of our stock, (iii) vote its shares on certain matters in accordance with the holders of a majority of shares of our common stock and (iv) restrictions on the percentage of our outstanding common stock it may own, in accordance with the terms of the Takeda License and Termination Agreement.
+Added: Based upon our shares of our common stock outstanding as of March 31, 2023, our executive officers, directors and stockholders who owned more than 5% of our outstanding common stock, in the aggregate, beneficially own shares representing approximately 49% of our outstanding common stock.
+Added: Takeda, a greater than 5% holder, has agreed to, among other things, (i) a standstill provision, (ii) restrictions on its ability to sell or otherwise transfer its shares of our stock, (iii) vote its shares on certain matters in accordance with the holders of a majority of shares of our common stock and (iv) restrictions on the percentage of our outstanding common stock it may own, in accordance with the terms of the RLT Agreement with Takeda.
If our executive officers, directors and stockholders who owned more than 5% of our outstanding common stock acted together, they may be able to significantly influence all matters requiring stockholder approval, including the election and removal of directors and approval of any merger, consolidation or sale of all or substantially all of our assets.
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We do not have any control over these analysts.
−Removed: If additional analysts covering our business downgrade their evaluations of our stock, the price of our stock could decline.
+Added: If additional analysts covering our business downgrade their evaluations of our stock, the price of our
+Added: stock could decline.
If additional analysts cease to cover our stock or fail to regularly publish reports, we could lose visibility in the market for our stock, which in turn could cause our stock price to decline.
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We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business.
−Removed: In addition, the terms of any future debt agreements may preclude us from
−Removed: paying dividends.
+Added: In addition, the terms of any future debt agreements may preclude us from paying dividends.
As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.
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Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.
−Removed: Additionally, the Takeda standstill provisions and transfer restrictions in the Takeda License and Termination Agreement may delay or prevent a merger, acquisition or other change in control of us that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares.
+Added: Additionally, the Takeda standstill provisions and transfer restrictions in the RLT Agreement may delay or prevent a merger, acquisition or other change in control of us that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares.
We may be subject to securities litigation, which is expensive and could divert management attention.
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Any provision of our amended and restated certificate of incorporation or amended and restated bylaws or Delaware law that has the effect of delaying or deterring a change of control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.
−Removed: If we engage in future acquisitions or strategic partnerships, this may increase our capital requirements, dilute our stockholders, cause us to incur debt or assume contingent liabilities and subject us to other risks.
−Removed: Our business plan is to continue to evaluate various acquisitions and strategic partnerships, including licensing or acquiring complementary drugs, intellectual property rights, technologies, or businesses.
−Removed: Any potential acquisition or strategic partnership may entail numerous risks, including:
−Removed: • increased operating expenses and cash requirements;
−Removed: • the assumption of additional indebtedness or contingent liabilities;
−Removed: • assimilation of operations, intellectual property and drugs of an acquired company, including difficulties associated with integrating new personnel;
−Removed: • the diversion of our management’s attention from our existing drug programs and initiatives in pursuing such a strategic partnership, merger or acquisition;
−Removed: • retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business relationships;
−Removed: • risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing drugs or drug candidates and regulatory approvals;
−Removed: • our inability to generate revenue from acquired technology and/or drugs sufficient to meet our objectives in undertaking the acquisition or even to offset the associated acquisition and maintenance costs;
−Removed: • challenges related to integrating acquired businesses or entering into or realizing the benefits of strategic transactions generally;
−Removed: • risks associated with potential international acquisition transactions, including in countries where we do not currently have a material presence.
−Removed: In addition, if we engage in future acquisitions or strategic partnerships, we may issue dilutive securities, assume or incur debt obligations, incur large one-time expenses and acquire intangible assets that could result in significant future amortization expense.
−Removed: Moreover, we may not be able to locate suitable acquisition opportunities and this inability could impair our ability to grow or obtain access to technology or drugs that may be important to the development of our business.
Sales of a substantial number of shares of our common stock in the public market could cause the market price of our common stock to drop significantly.
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OVID THERAPEUTICS INC.
−Removed: November 8, 2022
/s/ Jeremy M.
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(Principal Executive Officer)
−Removed: November 8, 2022
/s/ Jeffrey Rona
2 unchanged sentences
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.