What changed in this filing

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Item 1A. Risk Factors

2022-05-09 compared with 2021-11-03 · 93 added, 58 removed, 1 unchanged (99% of the section changed)

Risk Factors.

The risk factor set forth below updates, and should be read in conjunction with, the risk factors previously disclosed in the section entitled "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 17, 2021.

If we encounter difficulties enrolling patients in our future clinical trials, our clinical development activities could be delayed or otherwise adversely affected.

We have and may in the future experience difficulties in patient enrollment in our clinical trials for a variety of reasons.

The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number of patients who remain in the study until its conclusion.

Patient enrollment is affected by many factors, including:

• the patient eligibility criteria defined in the protocol;

• the size of the patient population required for analysis of the trial’s primary endpoints;

• in the case clinical trials focused on rare disease, the small size of the patient population and the potential of a patient being undiagnosed or misdiagnosed;

• the proximity of patients to trial sites;

• the design of the trial;

• our ability to recruit clinical trial investigators with the appropriate competencies and experience;

• competing clinical trials and clinicians’ and patients’ perceptions as to the potential advantages and risks of the product candidate being studied in relation to other available therapies, including any new drugs that may be approved for the indications that we are investigating;

• the impacts of the COVID-19 pandemic on clinical trial sites, personnel and patient travel (see —Business interruptions resulting from COVID-19 or a similar pandemic, epidemic or outbreak of an infectious disease in the United States or worldwide may adversely affect our business);

• our ability to obtain and maintain patient consents;

• the risk that patients enrolled in clinical trials will drop out of the trials before completion.

In addition, our clinical trials will compete with other clinical trials for product candidates that are in the same therapeutic areas as our product candidates, and this competition will reduce the number and types of patients available to us, because some patients who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one of our competitors.

Since the number of qualified clinical investigators is limited, we expect to conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of patients who are available for our clinical trials in such clinical trial site.

Our inability to enroll a sufficient number of patients for our clinical trials would result in significant delays or might require us to abandon one or more clinical trials altogether.

Delays in patient enrollment may result in increased costs, affect the timing or outcome of the planned clinical trials, product candidate development and approval process and jeopardize our ability to seek and obtain the regulatory approval required to commence product sales and generate revenue, which could prevent completion of these trials, adversely affect our ability to advance the development of our product candidates, cause the value of our company to decline and limit our ability to obtain additional financing if needed.

We are also required to register certain clinical trials and post the results of completed clinical trials on a government-sponsored database, such as www.ClinicalTrials.gov in the United States, within certain timeframes.

Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.

Business interruptions resulting from COVID-19 or a similar pandemic, epidemic or outbreak of an infectious disease in the United States or worldwide may adversely affect our business.

If a pandemic, epidemic or outbreak of an infectious disease occurs in the United States or worldwide our business may be adversely affected.

In December 2019, a novel strain of coronavirus named SARS-CoV-2 was identified in Wuhan, China.

This virus continues to spread globally, including in the United States and the disease it causes, COVID-19, has been declared a pandemic by the World Health Organization.

The COVID-19 pandemic has impacted the global economy and may impact our operations, including the potential interruption of our clinical trial activities, regulatory reviews and our supply chain.

Furthermore, the spread of the virus may affect the operations of key governmental agencies, such as the FDA, which may delay the development or approval process for our product candidates.

The COVID-19 pandemic has and may in the future delay enrollment in our clinical trials due to prioritization of hospital resources or patients being either unwilling to enroll in our trials or unable to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services, which would delay our ability to conduct clinical trials or release clinical trial results and could delay our ability to obtain regulatory approval and commercialize our product candidates.

For example, we had previously observed delays in our trial enrollment in Australia for our PRAX-944 Phase 2a trial due to stringent COVID-19 lockdown restrictions.

While we didn’t experience a material impact on this trial from the delay in enrollment, we cannot predict the scope and severity of potential shutdowns or disruptions of businesses due to COVID-19 in the future.

The spread of COVID-19 may also result in the inability of our suppliers to deliver components or raw materials on a timely basis or at all.

Three vaccines for COVID-19 were granted Emergency Use Authorization by the FDA in late 2020 and early 2021, and more are likely to be authorized in the coming months.

The resultant demand for vaccines and potential for manufacturing facilities and materials to be commandeered under the Defense Production Act of 1950, or equivalent foreign legislation, may make it more difficult to obtain materials or manufacturing slots for the products needed for our clinical trials, which could lead to delays in these trials.

In addition, hospitals may reduce staffing and reduce or postpone certain treatments in response to the spread of an infectious disease.

Such events may result in a period of business disruption, and in reduced operations, or doctors and medical providers may be unwilling to participate in our clinical trials, any of which could materially affect our business, financial condition and results of operations.

We continue to closely monitor the COVID-19 pandemic as we evolve our business continuity plans, clinical development plans and response strategy.

The extent to which the COVID-19 pandemic impacts our business will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the novel coronavirus and the actions to contain the coronavirus or treat its impact, among others.

At present, we are not experiencing significant impact or delays from the COVID-19 pandemic on our business, operations and, if approved, commercialization plans.

In addition, we have taken steps to mitigate against COVID-19 pandemic-related delays, and may take additional measures, intended to help minimize the risk of the virus to our employees, including temporarily requiring all employees to work remotely, suspending all non-essential travel worldwide for our employees, and discouraging employee attendance at industry events and in-person work-related meetings, which could negatively affect our business.

While we have taken and are continuing to take steps to mitigate against possible delays, our planned clinical trials may be affected by the COVID-19 pandemic, including (i) delays or difficulties in enrolling and retaining patients in our planned clinical trials, including patients that may not be able or willing to comply with clinical trial protocols if

quarantines impede patient movement or interrupt healthcare services;

(ii) delays or difficulties in clinical site initiation, including difficulties in recruiting and retaining clinical site investigators and clinical site staff;

(iii) diversion or prioritization of healthcare resources away from the conduct of clinical trials and towards the COVID-19 pandemic, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials, and because, who, as healthcare providers, may have heightened exposure to COVID-19 and adversely impact our clinical trial operations;

(iv) interruption of our future clinical supply chain or key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal, state/provincial or municipal governments, employers and others;

and (v) limitations in outsourced third-party resources that would otherwise be focused on the conduct of our planned clinical trials, including because of sickness of third-party personnel or their families, or the desire of third-party personnel to avoid contact with large groups of people.

A significant outbreak of other infectious diseases in the future also could result in a widespread health crisis that could adversely affect the economies and financial markets worldwide, resulting in an economic downturn that could impact our business, financial condition and results of operations.

We will no longer be an “emerging growth company” or a “smaller reporting company” and the reduced disclosure requirements applicable to emerging growth companies and smaller reporting companies will no longer apply to us.

We are currently an emerging growth company but because as of June 30, 2021, the market value of our common stock that was held by non-affiliates exceeded $700 million, we be a large-accelerated filer and will no longer qualify for such status commencing December 3, 2021.

As a result, we will be subject to certain disclosure requirements that are applicable to other public companies that have not been applicable to us as an emerging growth company.

These requirements include:

• compliance with the auditor attestation requirements in the assessment of our internal control over financial reporting;

• compliance with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;

• full disclosure obligations regarding executive compensation;

• compliance with the requirements of holding a nonbinding advisory vote on executive compensation and

We are also currently a smaller reporting company, but based on the market value of our common stock that was held by non-affiliates as of June 30, 2021, we have determined that we will no longer be a smaller reporting company as of January 1, 2022.

However, for so long as we remain a smaller reporting company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not smaller reporting companies.

Similar to emerging growth companies, smaller reporting companies are able to provide simplified executive compensation disclosure and have certain other reduced disclosure obligations, including, among other things, being required to provide only two years of audited financial statements and not being required to provide selected financial data, supplemental financial information or risk factors.

As of January 1, 2022, we will no longer be able to rely on these reduced requirements.

There have otherwise been no material changes from the risk factors previously disclosed in the section entitled "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2021.

Preclinical and clinical drug development involves a lengthy, complex and expensive process, with an uncertain outcome.

The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and the results of our clinical trials may not satisfy the requirements of the FDA or comparable foreign regulatory authorities.

To obtain the requisite regulatory approvals to commercialize any product candidates, we must demonstrate through extensive preclinical studies and clinical trials that our product candidates are safe and effective in humans.

Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain.

In particular, pivotal clinical trials typically involve hundreds of patients, have significant costs and take years to complete.

A product candidate can fail at any stage of testing, even after observing promising signs of activity in earlier preclinical studies or clinical trials.

The results of preclinical studies and early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials.

In addition, initial success in clinical trials may not be indicative of results obtained when such trials are completed.

There is typically an extremely high rate of attrition from the failure of product candidates proceeding through clinical trials.

Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy profile despite having progressed through preclinical studies and initial clinical trials.

A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or emergence of unacceptable safety issues, notwithstanding promising results in earlier trials.

Most product candidates that commence clinical trials are never approved as products and there can be no assurance that any of our future clinical trials will ultimately be successful or support further clinical development of our product candidates.

The commencement and rate of completion of preclinical studies and clinical trials for a product candidate may be delayed by many factors, including, for example:

• inability to generate sufficient preclinical or other in vivo or in vitro data to support the initiation of clinical studies;

• timely completion of preclinical laboratory tests, animal studies and formulation studies in accordance with the Good Laboratory Practice requirements and other applicable regulations of the U.S.

Food and Drug Administration, or FDA;

• approval by an independent Institutional Review Board, or IRB, or ethics committee at each clinical site before each trial may be initiated;

• delays in reaching a consensus with regulatory agencies on study design and obtaining regulatory authorization to commence clinical trials;

delays in reaching agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and clinical trial sites;

• delays in identifying, recruiting and training suitable clinical investigators;

• delays in recruiting suitable patients to participate in our clinical trials;

• delays in manufacturing, testing, releasing, validating or importing/exporting sufficient stable quantities of our product candidates for use in clinical trials or the inability to do any of the foregoing;

• insufficient or inadequate supply or quality of product candidates or other materials necessary for use in clinical trials, or delays in sufficiently developing, characterizing or controlling a manufacturing process suitable for clinical trials;

• imposition of a temporary or permanent clinical hold by regulatory authorities;

• developments on trials conducted by competitors for related technology that raises FDA or foreign regulatory authority concerns about risk to patients of the technology broadly, or if the FDA or a foreign regulatory authority finds that the investigational protocol or plan is clearly deficient to meet its stated objectives;

• delays in recruiting, screening and enrolling patients and delays caused by patients withdrawing from clinical trials or failing to return for post-treatment follow-up;

• difficulty collaborating with patient groups and investigators;

• failure by our CROs, other third parties or us to adhere to clinical trial protocols;

failure to perform in accordance with the FDA’s or any other regulatory authority’s Good Clinical Practice requirements, or applicable regulatory guidelines in other countries;

• occurrence of adverse events associated with the product candidate that are viewed to outweigh its potential benefits, or occurrence of adverse events in trials of the same class of agents conducted by other companies;

• changes to the clinical trial protocols;

• clinical sites deviating from trial protocol or dropping out of a trial;

• changes in regulatory requirements and guidance that require amending or submitting new clinical protocols;

• changes in the standard of care on which a clinical development plan was based, which may require new or additional trials;

• selection of clinical endpoints that require prolonged periods of observation or analyses of resulting data;

• the cost of clinical trials of our product candidates being greater than we anticipated;

• clinical trials of our product candidates producing negative or inconclusive results, which may result in our deciding, or regulators requiring us, to conduct additional clinical trials or abandon development of such product candidates;

• transfer of manufacturing processes to larger-scale facilities operated by a contract manufacturing organization, or CMO, and delays or failure by our CMOs or us to make any necessary changes to such manufacturing process;

• third parties being unwilling or unable to satisfy their contractual obligations to us.

In addition, disruptions caused by the COVID-19 pandemic may increase the likelihood that we encounter such difficulties or delays in initiating, enrolling, conducting or completing our planned and ongoing preclinical studies and clinical trials.

Clinical trials must be conducted in accordance with the FDA and other applicable regulatory authorities’ legal requirements, regulations or guidelines, and are subject to oversight by these governmental agencies and ethics committees or IRBs at the medical institutions where the clinical trials are conducted.

Before commencing a clinical trial, the FDA or comparable foreign regulatory authorities could raise questions or concerns with our proposed clinical protocol, including issuing a clinical hold on a trial until such questions or concerns are resolved, which could delay our clinical development plans.

For example, in April 2022, our Investigational New Drug application for the study of PRAX-222 was placed on clinical hold by the FDA.

We have not received the clinical hold letter that will provide full details on the reasons for the hold and will need to assess the impact, if any, once we have received the letter.

We could also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such trials are being conducted, by a Data Safety Monitoring Board for such trial or by the FDA or comparable foreign regulatory authorities.

Such authorities may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or comparable foreign regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of

adequate funding to continue the clinical trial.

In addition, we may need to amend clinical trial protocols that could require us to resubmit our clinical trial protocols to IRBs or ethics committees for reexamination, which may impact the costs, timing or successful completion of a clinical trial.

Some of our trials are, have been, and may in the future be open-label studies, where both the patient and investigator know whether the patient is receiving the investigational product candidate or either an existing approved drug or placebo.

Most typically, open-label clinical trials test only the investigational product candidate and sometimes do so at different dose levels.

Open-label clinical trials are subject to various limitations that may exaggerate any therapeutic effect as patients in open-label clinical trials are aware when they are receiving treatment.

For example, prior major depressive disorder studies have exhibited a high placebo effect.

In addition, open-label clinical trials may be subject to an “investigator bias” where those assessing and reviewing the physiological outcomes of the clinical trials are aware of which patients have received treatment and may interpret the information of the treated group more favorably given this knowledge.

Therefore, it is possible that positive results observed in open-label trials will not be replicated in later placebo-controlled trials.

Additionally, the trial design differences and placebo effects that may be possible in clinical research for the indications we are studying may make it difficult to extrapolate the results of earlier clinical trials to later clinical trials or to interpret the clinical data in any of our trials.

Further, conducting clinical trials in foreign countries, as we have done and may continue to do, for our product candidates, presents additional risks that may delay completion of our clinical trials.

These risks include the failure of enrolled patients in foreign countries to adhere to clinical protocol as a result of differences in healthcare services or cultural customs, managing additional administrative burdens associated with foreign regulatory schemes, as well as political and economic risks relevant to such foreign countries.

Moreover, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive compensation in connection with such services.

Under certain circumstances, we may be required to report some of these relationships to the FDA or comparable foreign regulatory authorities.

The FDA or comparable foreign regulatory authority may conclude that a financial relationship between us and a principal investigator has created a conflict of interest or otherwise affected interpretation of the study.

The FDA or comparable foreign regulatory authority may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized.

This could result in a delay in approval, or rejection, of our marketing applications by the FDA or comparable foreign regulatory authority, as the case may be, and may ultimately lead to the denial of marketing approval of one or more of our product candidates.

Delays in the completion of any preclinical studies or clinical trials of our product candidates will increase our costs, slow down our product candidate development and approval process and delay or potentially jeopardize our ability to commence product sales and generate product revenue.

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

Any delays to our preclinical studies or clinical trials that occur as a result could shorten any period during which we may have the exclusive right to commercialize our product candidates and our competitors may be able to bring products to market before we do, and the commercial viability of our product candidates could be significantly reduced.

Any of these occurrences may harm our business, financial condition and prospects significantly.

Our business is subject to economic, political, regulatory and other risks associated with international operations.

Our business is subject to risks associated with conducting business internationally.

Some of our suppliers and collaborative relationships are located outside the United States.

Accordingly, our future results could be harmed by a variety of factors, including:

• economic weakness, including inflation, or political instability in particular non-U.S.

economies and markets;

• differing and changing regulatory requirements in non-U.S.

• challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States, including our ability to prosecute or maintain patents in Russia due to the sanctions imposed by the United States and other countries on Russia as a result of Russia’s invasion of Ukraine and our ability to enforce patents due to Russia's March 2022 decree that allows the use of inventions, utility models and industrial designs that are held by owners from "unfriendly countries," including the United States, without consent or paying any compensation;

• difficulties in compliance with non-U.S.

laws and regulations;

• changes in non-U.S.

regulations and customs, tariffs and trade barriers;

• changes in non-U.S.

currency exchange rates and currency controls;

• changes in a specific country’s or region’s political or economic environment;

• trade protection measures, import or export licensing requirements or other restrictive actions by U.S.

• negative consequences from changes in tax laws;

• compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;

• workforce uncertainty in countries where labor unrest is more common than in the United States;

• difficulties associated with staffing and managing international operations, including differing labor relations

• potential liability under the Foreign Corrupt Practices Act, U.K.

Bribery Act of 2010 or comparable foreign laws, including expanded sanctions imposed by the United States and other countries on Russia due to Russia's invasion of Ukraine;

• business interruptions resulting from geo-political actions, including war and terrorism, such as Russia's invasion of Ukraine, natural disasters including earthquakes, typhoons, floods and fires, or health epidemics such as COVID-19;

• cyberattacks, which are growing in frequency, sophistication and intensity, and are becoming increasingly difficult to detect, including an increased likelihood that Russia's invasion of Ukraine could result in more cyberattacks or cybersecurity incidents.

These and other risks associated with our planned international operations may materially adversely affect our ability to attain profitable operations.

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

What changed 10-Q

Item 1A. Risk Factors