What changed in this filing

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Item 1A. Risk Factors

2023-03-14 compared with 2022-03-28 · 147 added, 85 removed, 613 unchanged (27% of the section changed)

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● We may need additional funding.

If we are unable to raise capital if needed, we would be forced to delay, reduce or eliminate our product development programs or commercialization efforts, including for VS-6766.

If we are unable to raise capital if needed, we would be forced to delay, reduce or eliminate our product development programs or commercialization efforts, including for avutometinib.

● Raising additional capital or entering into certain licensing arrangements may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our product candidates.

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● We rely in part on third parties to conduct our clinical trials and preclinical testing, and if they do not properly and successfully perform their obligations to us, we may not be able to obtain regulatory approvals for and commercialize any of our other product candidates.

● We intend to rely on third parties to conduct investigator sponsored clinical trials of our product candidates.

● We rely on third parties to conduct investigator sponsored clinical trials of our product candidates.

Any failure by a third party to meet its obligations with respect to the clinical development of our product candidates may delay or impair our ability to obtain regulatory approval for our product candidates.

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● We may not be successful in obtaining necessary rights to compounds and product candidates for our development pipeline through acquisitions and in-licenses.

the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our products may be adversely affected.

● If we are unable to obtain and maintain patent protection for our products, or if our licensors are unable to obtain and maintain patent protection for the products that we license from them, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and

commercialize products similar or identical to ours, and our ability to successfully commercialize our products may be adversely affected.

● We depend on Secura for the achievement and payment of the contingent consideration under the asset purchase agreement between us and Secura pursuant to which we sold the COPIKTRA assets to Secura.

If Secura is unsuccessful in developing and commercializing COPIKTRA, we may not receive such payments or otherwise capitalize on the market potential of COPIKTRA.

● Our ability to receive future contingent consideration, including milestone payments and royalties, from the sale of our rights, title, and interest in COPIKTRA to Secura may be adversely affected by lower than expected COPIKTRA sales and Secura’s ability to achieve other developmental and regulatory milestones.

● We have incurred significant losses since our inception.

We may incur losses for the foreseeable future and may never achieve or maintain profitability.

● Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be the source of gain for our stockholders.

● Our common stock may be at risk for delisting from the Nasdaq Global Market in the future.

Delisting could adversely affect the liquidity of our common stock, the market price of our common stock could decrease, and other unfavorable impacts.

Risks Related to the Development of Our Product Candidates.

We may not be successful in obtaining necessary rights to compounds and product candidates for our development pipeline through acquisitions and in-licenses.

We may seek to acquire new compounds and product candidates from other pharmaceutical and biotechnology companies, academic scientists and other researchers, such as our exclusive in-license from Pfizer, and Chugai to research, develop, commercialize, and manufacture products in oncology indications containing defactinib and VS-6766, respectively.

The success of this strategy depends partly upon our ability to identify, select, discover and acquire promising pharmaceutical product candidates and products.

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We are developing product candidates to treat cancer by using targeted agents to cause cell death, inhibition of tumor growth, and disruption of the tumor microenvironment, and thereby thwart the growth and proliferation of cancer cells.

Research on the use of small molecules to cause cell death, inhibition of tumor growth, and disruption of the tumor microenvironment is an emerging field and, consequently, there is still uncertainty about whether defactinib and VS-6766 are effective in improving outcomes for patients with cancer.

Research on the use of small molecules to cause cell death, inhibition of tumor growth, and disruption of the tumor microenvironment is an emerging field and, consequently, there is still uncertainty about whether defactinib and avutometinib are effective in improving outcomes for patients with cancer.

Any products that we develop may not effectively cause cell death, inhibition of tumor growth, and disruption of the tumor microenvironment.

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Smaller and other early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.

These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

These third parties compete with us in recruiting and retaining qualified

scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

In addition, to the extent that products or product candidates of our competitors demonstrate serious adverse side effects or are determined to be ineffective in clinical trials, the commercialization and the development of our product candidates could be negatively impacted.

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Many of these factors are beyond our control, including clinical development, the regulatory submission process, potential threats to our intellectual property rights and the manufacturing, marketing and sales efforts of any collaborator.

If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize our product candidates, which would materially harm our business.

If we do not achieve one or more of these factors in a timely manner or at all, we could experience

significant delays or an inability to successfully commercialize our product candidates, which would materially harm our business.

If serious adverse or unexpected side effects are identified during the development of our product candidates, we may need to abandon or limit our development of some of our product candidates.

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Serious adverse events generally refer to adverse events, that result in death, are life threatening, require hospitalization or prolonging of hospitalization, or cause a significant and permanent disruption of normal life functions, congenital anomalies or birth defects, or require intervention to prevent such outcomes.

VS-6766 and defactinib are in our Phase 1 and Phase 2 clinical trials, and the development program continues to progress.

For both VS-6766 and defactinib, the toxicities reported to date have been predictable and manageable.

Avutometinib and defactinib are being administered and studied in our Phase 1 and Phase 2 clinical trials, and the development program continues to progress.

For both avutometinib and defactinib, the toxicities reported to date have been predictable and manageable.

As a result of adverse events observed to date, or further safety or toxicity issues that we may experience in our clinical trials in the future, we may not receive approval to market any product candidates, which could prevent us from ever generating revenue from the sale of products or achieving profitability.

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In many such countries, the pricing review period begins after marketing or product licensing approval is granted.

In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted.

As a result, we might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay our commercial launch of the product, possibly for lengthy time periods, and negatively impact the revenues we are able to generate from the sale

of the product in that country.

In some foreign markets, prescription pharmaceutical pricing remains subject to continuing

governmental control even after initial approval is granted.

Adverse pricing limitations may hinder our ability to recoup our investment in product candidates, even if those product candidates obtain marketing approval.

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Clinics in Europe and United States continue to have delays in startup activities due to the ongoing pandemic and the increase in COVID-19 variant infections.

In addition, participant dosing, study monitoring and data analysis may be paused or delayed due to changes in hospital or academic institution policies, federal, state, or local regulations, prioritization of hospital resources toward pandemic efforts, or other reasons related to the COVID-19 pandemi c.

In addition, participant dosing, study monitoring and data analysis may be paused or delayed due to changes in hospital or academic institution policies, federal, state, or local

regulations, prioritization of hospital resources toward pandemic efforts, or other reasons related to the COVID-19 pandemi c.

● Accessibility limitations on our contract research organizations (“CROs”).

The ability of principal investigators and site staff to perform their functions, who, as healthcare providers, may have

heightened exposure to COVID-19, could be disrupted and cause elongation or de-prioritization of our clinical trials, increase the costs related to such development, and materially adversely impact our clinical trial operations.

The ability of principal investigators and site staff to perform their functions, who, as healthcare providers, may have heightened exposure to COVID-19, could be disrupted and cause elongation or de-prioritization of our clinical trials, increase the costs related to such development, and materially adversely impact our clinical trial operations.

● Capital markets volatility.

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● Work-from-home limitations.

We have asked most employees to primarily work from home, which could impact our ability to effectively plan, execute, communicate, and maintain our corporate culture.

We have adopted a hybrid work program allowing our employees the option to primarily work from home, which could impact our ability to effectively plan, execute, communicate, and maintain our corporate culture.

The remote working environment could increase our cyber security risk, create data accessibility concerns, and make us more susceptible to communication disruptions.

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If Secura is unsuccessful in developing and commercializing COPIKTRA, we may not receive such payments or otherwise capitalize on the market potential of COPIKTRA.

On September 30, 2020, we completed the disposition of the Company’s rights, title, and interest in and to COPIKTRA to Secura.

On September 30, 2020, we completed the disposition of our rights, title, and interest in and to COPIKTRA to Secura.

Under the terms of the asset purchase agreement with Secura, we are entitled to contingent consideration, including milestone payments and royalties, dependent upon the further development and commercial success of COPIKTRA.

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● disputes may arise between Secura and us that result in the delay of payments or in costly litigation that diverts management attention and resources.

Our ability to receive future contingent consideration, including milestone payments and royalties, from the sale of our rights, title, and interest in COPIKTRA to Secura may be adversely affected by lower than expected COPIKTRA sales and Secura’s ability to achieve other developmental and regulatory milestones.

On June 30, 2022, the FDA issued a drug safety communication warning that resulted from a clinical trial showing a possible increased risk of death with COPIKTRA compared to another medicine to treat chronic blood cancer called leukemia and lymphoma.

The aforementioned clinical trial also found that COPIKTRA was associated with a higher risk of serious side effects, including infections, diarrhea, inflammation of the intestines and lungs, skin reactions, and high liver enzyme levels in the blood.

In September 2022, the FDA’s Oncologic Drug Advisory Committee (“ODAC”) voted eight to four against COPIKTRA’s use in patients with relapsed or refractory chronic lymphocytic leukemia/ small lymphocytic lymphoma after at least two prior therapies citing an unfavorable risk/benefit profile.

The FDA drug safety communication warning, the FDA’s ODAC vote, future actions by the FDA, and any safety concerns associated with COPIKTRA, perceived or real, may materially and adversely affect Secura’s development and commercialization success of COPIKTRA and, consequently, our ability to receive future contingent consideration from our sale of our right, title, and interest in COPIKTRA to Secura.

If we do not realize the anticipated benefits of our license agreements with Pfizer for the FAK program and Chugai for the dual RAF/MEK candidate program, our business could be adversely affected.

Our license agreements with Pfizer for defactinib and Chugai for VS-6766 may fail to further our business strategy as anticipated or to achieve anticipated benefits and success.

We may make or have made assumptions relating to the impact of the acquisition of defactinib and VS-6766 on our financial results relating to numerous matters, including:

● the cost of development and commercialization of defactinib and VS-6766;

Our license agreements with Pfizer for defactinib and Chugai for avutometinib may fail to further our business strategy as anticipated or to achieve anticipated benefits and success.

We may make or have made assumptions relating to the impact of the acquisition of defactinib and avutometinib on our financial results relating to numerous matters, including:

● the cost of development and commercialization of defactinib and avutometinib;

● other financial and strategic risks related to the license agreements with Pfizer and Chugai.

Further, we may incur higher than expected operating and transaction costs, and we may encounter general economic and business conditions that adversely affect us relating to our license agreements with Pfizer and Chugai.

If one or more of these assumptions are incorrect, it could have an adverse effect on our business and operating results, and the benefits from our license agreements with Pfizer for defactinib and Chugai for VS-6766 may not be realized or be of the magnitude expected.

If one or more of these assumptions are incorrect, it could have an adverse effect on our business and operating results, and the benefits from our license agreements with Pfizer for defactinib and Chugai for avutometinib may not be realized or be of the magnitude expected.

Risks Related to Our Financial Position and Need for Additional Capital

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As of December 31, 2022, we had an accumulated deficit of $737.5 million.

To date, we have generated minimal product revenues and have financed our operations primarily through public and private offerings of our common stock, sales of our common stock pursuant to our at-the-market equity offering programs, our loan and security agreement, as amended, with Hercules Capital Inc.

To date, we have generated minimal product revenues and have financed our operations primarily through public and private offerings of our common stock and preferred stock, sales of our common stock pursuant to our at-the-market equity offering programs, our loan and security agreement (the “Loan Agreement”) with Oxford Finance LLC (“Oxford”), our loan and security agreement, as amended, with Hercules Capital Inc.

(“Hercules”), the issuance of our 5.00% Convertible Senior Notes due 2048 (“2018 Notes”), upfront payments under our license and collaboration agreements with Yakult, CSPC, and Sanofi, and the upfront payment under the Secura APA.

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We anticipate that our expenses will increase substantially if and as we:

● continue our ongoing clinical trials with our product candidates, including with defactinib and VS-6766;

● continue our ongoing clinical trials with our product candidates, including with defactinib and avutometinib;

● initiate additional clinical trials for our product candidates;

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We may need additional funding.

If we are unable to raise capital if needed, we would be forced to delay, reduce, or eliminate our product development programs or commercialization efforts, including for VS-6766.

If we are unable to raise capital if needed, we would be forced to delay, reduce, or eliminate our product development programs or commercialization efforts, including for avutometinib.

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the clinical development of our product candidates.

We expect our existing cash resources at December 31, 2022 will be sufficient to fund our current operating plan and capital expenditure requirements through at least next twelve months from the issuance date of these financial statements.

This estimate does not reflect the possibility that we may not be able to access a portion of our existing cash, cash equivalents and investments due to market conditions.

For example, on March 10, 2023, the Federal Deposit Insurance Corporation (the “FDIC”), took control and was appointed receiver of Silicon Valley Bank (“SVB”).

On March 12, 2023, the Department of the Treasury, the Federal Reserve, and the FDIC announced that all depositors of SVB will be fully protected and have access to all their money starting March 13, 2023.

As of March 13, 2023, we had approximately $2 million on deposit at SVB.

If other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to access our existing cash, cash equivalents and investments may be threatened and could have a material adverse effect on our business and financial condition.

We may need to obtain additional funding in connection with our continuing operations, including for our clinical development programs.

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In addition, the U.S.

Bureau of Labor Statistics has reported for the period from January 2021 to January 2022, the Consumer Price Index for All Urban Consumers rose 7.5 percent, which is the largest 12-month increase since the 12 month period ended February 1982.

Bureau of Labor Statistics has reported for the period from June 2021 to June 2022, the Consumer Price Index for All Urban Consumers rose 9.1 percent, which is the largest increase since the 12 month period ended November 1981.

Bureau of Labor Statistics reported for the period from December 2021 to December 2022, the Consumer Price Index for All Urban Consumers increased 6.5 percent.

If the inflationary pressure continues for a prolonged period, it may continue to result in increased costs of labor, cost of clinical trials, and costs of manufacturing which could adversely affect our results of operations.

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We may not be able to use some or all of our NOL and tax credit carryforwards, even if we attain profitability.

Risks Related to Our Indebtedness

Our level of indebtedness and debt service obligations could adversely affect our financial condition and may make it more difficult for us to fund our operations.

In March 2022, we entered into a Loan Agreement with Oxford, as collateral agent and a lender, and Oxford Finance Credit Fund III LP, as a lender (“OFCF III” and together with Oxford, the “Lenders”), pursuant to which the Lenders have agreed to lend us up to an aggregate principal amount of $150.0 million in a series of term loans (the “Term Loans”).

As of December 31, 2022, there was $25.0 million outstanding under the Loan Agreement.

In connection with the Loan Agreement, we granted Oxford a security interest in all of our personal property now owned or hereafter acquired, excluding intellectual property (but including the right to payments and proceeds of intellectual property), and a negative pledge on intellectual property.

This indebtedness may create additional financing risk for us, particularly if our business or prevailing financial market conditions are not conducive to paying off or refinancing our outstanding debt obligations at maturity.

This indebtedness could also have other important negative consequences, including we will need to repay our indebtedness by making payments of interest and principal, which will reduce the amount of money available to finance our operations, our research and development efforts and other general corporate activities.

To the extent additional debt is added to our current debt levels, the risks described above could increase.

We may not have cash available in an amount sufficient to enable us to make interest or principal payments on our indebtedness when due.

Failure to satisfy our current and future debt obligations under the Loan Agreement or breaching any covenants under the Loan Agreement, subject to specified cure periods with respect to certain breaches, could result in an event of default and, as a result, could accelerate all of the amounts due.

In the event of an acceleration of amounts due under the Loan Agreement, we may not have enough available cash or be able to raise additional funds through equity or debt financings to repay such indebtedness at the time of such acceleration.

In that case, we may be required to delay, limit, reduce or terminate our product candidate development or grant to others the rights to develop and market our product candidates that we would otherwise prefer to develop and market internally.

Oxford could also exercise its rights as collateral agent to take possession and dispose of the collateral securing the term loans for its benefit, which collateral includes substantially all of our property other than our intellectual property.

Our business, financial condition and results of operations could be materially adversely affected as a result of any of these events.

Risks Related to Our Dependence on Third Parties

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For example, we will remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial.

Moreover, the FDA and other regulatory agencies require us to comply with standards, commonly referred to as Good Clinical Practices (GCP) for conducting, recording, and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected.

Moreover, the FDA and other regulatory agencies require us to comply with standards, commonly referred to as Good Clinical Practices (“GCP”) for conducting, recording, and reporting the results of clinical trials to assure

that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected.

Regulatory authorities enforce these GCP requirements through periodic inspections of trial sponsors, principal investigators, and trial sites.

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If these third parties do not successfully carry out their contractual duties, meet expected deadlines, or conduct our clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing approvals for some of our product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our product candidates.

We intend to rely on third parties to conduct investigator-sponsored clinical trials of our product candidates.

We rely on third parties to conduct investigator-sponsored clinical trials of our product candidates.

We intend to rely on academic and private non-academic institutions to conduct and sponsor clinical trials relating to our product candidates.

We rely on academic and private non-academic institutions to conduct and sponsor clinical trials relating to our product candidates.

We will not control the design or conduct of the investigator sponsored trials, and it is possible that the FDA or non-U.S.

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● collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;

collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or product candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;

collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or product

candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;

● a collaborator with marketing and distribution rights to one or more products may not commit sufficient resources to the marketing and distribution of such product or products;

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Tensions between the Ukraine and Russia have escalated in recent months, culminating in Russia's recent invasion of the Ukraine.

While we do not currently have clinical trials in Ukraine or Russia, we have clinical trial

sites in Europe.

While we do not currently have clinical trials in Ukraine or Russia, we have clinical trial sites in Europe.

We also source clinical supply for our product candidates from third party contract manufacturing organizations in Europe.

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If Pfizer were to terminate its license agreement with us for any reason, we would lose our rights to defactinib.

If Chugai were to terminate its license agreement with us for any reason, we could lose our rights to VS-6766.

If we are unable to obtain and maintain patent protection for our products, or if our licensors are unable to obtain and maintain patent protection for the products that we license from them, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our products may be adversely affected.

If Chugai were to terminate its license agreement with us for any reason, we could lose our rights to avutometinib.

protection obtained is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our products may be adversely affected.

Our success depends in large part on our and our licensors' ability to obtain and maintain patent protection in the United States and other countries with respect to our products.

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Our and our licensors' pending and future patent applications may not result in patents being issued which protect our products or which effectively prevent others from commercializing competitive products.

either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection.

Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection.

The laws of foreign countries may not protect our rights to the same extent as the laws of the United States.

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Such challenges may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated, or held unenforceable, which could limit our ability to stop others from using or commercializing similar or identical products, or limit the duration of the patent protection of our products.

Given the amount of time required for the development, testing, and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized.

Given the amount of time required for the development, testing, and regulatory review of new product candidates, patents protecting such candidates might

expire before or shortly after such candidates are commercialized.

As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.

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Our commercial success depends upon our ability and the ability of our collaborators to commercialize, develop, manufacture, market, and sell our product candidates without infringing the proprietary rights of third parties.

We have yet to conduct comprehensive freedom to operate searches to determine whether our use of certain

of the patent rights owned by or licensed to us would infringe patents issued to third parties.

We have yet to conduct comprehensive freedom to operate searches to determine whether our use of certain of the patent rights owned by or licensed to us would infringe patents issued to third parties.

We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our products, including interference proceedings before the U.S.

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Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses, and could distract our technical and management personnel from their normal responsibilities.

In addition, there could be public announcements of the results of hearings, motions, or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock.

negative, it could have a substantial adverse effect on the price of our common stock.

Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities.

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In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets.

If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them

from using that technology or information to compete with us.

If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them from using that technology or information to compete with us.

If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed.

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The FDA has substantial discretion in the approval process and may refuse to accept any application or may decide that our data is insufficient for approval and require additional preclinical, clinical, or other studies.

In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of a product candidate.

In addition, varying interpretations of the data obtained from preclinical and clinical testing

could delay, limit or prevent marketing approval of a product candidate.

Any marketing approval we ultimately obtain may be subject to more limited indications than those we propose or subject to restrictions or post approval commitments that render the approved product not commercially viable.

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While orphan drug exclusivity for defactinib provides market exclusivity against the same active ingredient for the same indication, we would not be able to exclude other companies from manufacturing and/or selling drugs using the same active ingredient for the same indication beyond that timeframe on the basis of orphan drug exclusivity.

Furthermore, the marketing exclusivity in Europe can be reduced from ten years to six years if the orphan designation criteria are no longer met or if the drug is sufficiently profitable so that market exclusivity is no

longer justified.

Even if we are the first to obtain marketing authorization for an orphan drug indication, there are circumstances under which the FDA may approve a competing product for the same indication during the seven-year period of marketing exclusivity, such as if the later product is the same compound as our product but is shown to be clinically superior to our product, or if the later product is a different drug than our product candidate.

Further, the seven-year marketing exclusivity would not prevent competitors from obtaining approval of the same compound for other indications or of another compound for the same use as the orphan drug.

A decision in 2021 by the U.S.

Court of Appeals for the Eleventh Circuit in Catalyst Pharmaceuticals, Inc.

Becerra regarding interpretation of the Orphan Drug Act’s exclusivity provisions as applied to drugs and biologics approved for orphan indications narrower than the product’s orphan designation has the potential to significantly broaden the scope of orphan exclusivity for such products.

FDA announced on January 24, 2023 that despite the Catalyst decision, it will continue to apply its longstanding regulations, which tie the scope of orphan exclusivity to the uses or indications for which the drug is approved, rather than to the designation.

FDA’s application of its orphan drug regulations post- Catalyst could be the subject of future legislation or to further challenges in court, which could impact our ability to obtain or seek to work around orphan exclusivity, and might affect our ability to retain orphan exclusivity that the FDA previously has recognized for our products.

We may seek fast track designation for one or more of our product candidates, but we might not receive such designation, and even if we do, such designation may not actually lead to a faster development or regulatory review or approval process, and it does not ensure that we will receive marketing approval.

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If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may fail to obtain any marketing approvals, lose any marketing approval that we may have obtained and we may not achieve or sustain profitability.

Our relationships with customers and third-party payors will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.

Our business operations, including our relationships with healthcare providers, third-party payors, and patients, will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.

Healthcare providers, including physicians, and third-party payors play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval.

Our future arrangements with healthcare providers, third-party payors, and other parties within the healthcare industry may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell, and distribute any products for which we obtain marketing approval.

Our future arrangements with healthcare providers, third-party payors, patients and other parties within the healthcare industry may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell, and distribute any products for which we obtain marketing approval.

Restrictions under applicable federal and state healthcare and regulatory laws and regulations within the United States include the following:

● the federal healthcare anti-kickback statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under federal and state healthcare programs such as Medicare and Medicaid.

kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under federal and state healthcare programs such as Medicare and Medicaid.

A person or entity does not need to have actual knowledge of the anti-kickback statute or specific intent to violate it in order to have committed a violation;

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In addition, the government may assert that a claim including items and services resulting from a violation of the federal anti-kickback statute constitutes a false or fraudulent claim for purposes of the FCA;

● the federal civil monetary penalties laws, which impose civil fines for, among other things, the offering or transfer of remuneration to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary's selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state healthcare program, unless an exception applies;

● the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA) imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program and HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, also establishes requirements related to the privacy, security, and transmission of individually identifiable health information which apply to many healthcare providers, physicians, and third-party payors with whom we interact;

● the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended, which imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program and also establishes requirements related to the privacy, security, and transmission of individually identifiable health information which apply to many healthcare providers, physicians, and third-party payors with whom we interact;

● the federal false statements statute prohibits knowingly and willfully falsifying, concealing, or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services;

● the federal anti-kickback prohibition known as Eliminating Kickbacks in Recovery Act, or EKRA, enacted in 2018 prohibits certain payments related to referrals of patients to certain providers (recovery

homes, clinical treatment facilities, and laboratories) and applies to services reimbursed by private health plans as well as government health care programs;

● the federal anti-kickback prohibition known as Eliminating Kickbacks in Recovery Act, or EKRA, which prohibits certain payments related to referrals of patients to certain providers (recovery homes, clinical treatment facilities, and laboratories) and applies to services reimbursed by private health plans as well as government health care programs;

● the FDCA, which, among other things, strictly regulates drug product and medical device marketing, prohibits manufacturers from marketing such products for off-label use and regulates the distribution of samples;

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● the so-called federal "sunshine law"

or Open Payments that requires manufacturers of drugs, devices, biologics, and medical supplies to report to the Department of Health and Human Services information related to payments and other transfers of value to physicians and teaching hospital and, other healthcare practitioners, as well as ownership and investment interests held by physicians and their immediate family members;

● analogous state laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non- governmental third-party payors, including private insurers, and some state laws regulate interactions between pharmaceutical companies and healthcare providers and require pharmaceutical companies to comply with the pharmaceutical industry's voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments to physicians and other healthcare providers or marketing expenditures and pricing information.

or Open Payments which requires manufacturers of drugs, devices, biologics, and medical supplies to report to the Centers for Medicare & Medicaid Services information related to payments and other transfers of value to teaching hospitals, physicians, and other healthcare practitioners, as well as ownership and investment interests held by physicians and their immediate family members;

● analogous state laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non- governmental third-party payors, including private insurers, and state laws which regulate interactions between pharmaceutical companies and healthcare providers, require pharmaceutical companies to comply with the pharmaceutical industry's voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, require pharmaceutical companies to report information on transfers of value to other healthcare providers, marketing expenditures or pricing information and/or require licensing of sales representatives.

State laws also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

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In connection with the separation from the European Union, the United Kingdom adopted similar legislation.

The number and complexity of both federal and state laws continues to increase;

the laws contain ambiguous requirements or require administrative guidance for implementation;

government interpretations of the laws continue to evolve;

and additional governmental resources are being used to enforce these laws and to prosecute companies and individuals who are believed to be violating them.

Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs.

It is possible that governmental authorities will conclude that our business practices, including arrangements we may have with physicians and other healthcare providers, or patient assistance programs, may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations.

Governmental authorities may potentially conclude that our business practices, including arrangements we may have with physicians and other healthcare providers, or patient assistance programs, may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations.

If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion from government funded healthcare programs, such as Medicare and Medicaid, 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, and the curtailment or restructuring of our operations.

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Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and affect the prices we may obtain.

In the United States and some foreign jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could, among other things, prevent or delay marketing approval of our product candidates, restrict or regulate post approval activities, and affect our ability to profitably sell any of our product candidates for which we obtain marketing approval.

among other things, prevent or delay marketing approval of our product candidates, restrict or regulate post approval activities, and affect our ability to profitably sell any of our product candidates for which we obtain marketing approval.

healthcare industry generally and U.S.

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government and individual states have been aggressively pursuing healthcare reform.

For example, in March 2010, President Obama signed into law the Health Care Reform Act, a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for healthcare and health insurance industries, impose new taxes and fees on the health industry, and impose additional health policy reforms.

For example, the Healthcare Reform Act, enacted in March 2010, was intended to broaden access to health insurance through a Medicaid expansion and the implementation of the individual mandate for health insurance coverage, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for healthcare and health insurance industries, impose new taxes and fees on the health industry, and impose additional health policy reforms.

The law, for example, increased drug rebates under state Medicaid programs for brand name prescription drugs and extended those rebates to Medicaid managed care and assessed a fee on manufacturers and importers of brand name prescription drugs reimbursed under certain government programs, including Medicare and Medicaid.

The provisions of the Healthcare Reform Act have been subject to judicial and Congressional challenges, as well as efforts to modify certain requirements of the Healthcare Reform Act by executive branch order.

For example, on January 20, 2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under the Healthcare Reform Act to waive, defer, grant exemptions from, or delay the implementation of any provision of the Healthcare Reform Act that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices.

On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, beginning January 1, 2024.

In Congress, there have been a number of legislative initiatives to modify, repeal and/or replace portions of the Healthcare Reform Act.

Tax reform legislation enacted at the end of 2017 eliminated the tax penalty for individuals who do not maintain sufficient health insurance coverage beginning in 2019.

The Bipartisan Budget Act of 2018 contained various provisions that affect coverage and reimbursement of drugs, including an increase in the discount that manufacturers of Medicare Part D brand name drugs must provide to Medicare Part D beneficiaries during the coverage gap from 50% to 70% starting in 2019.

Congress may consider other legislation to modify, repeal and/or replace certain elements of the Healthcare Reform Act.

On June 17, 2021, the U.S.

Supreme Court dismissed the most recent judicial challenge to the

Healthcare Reform Act brought by several states without specifically ruling on the constitutionality of the Healthcare Reform Act.

Prior to the Supreme Court’s decision, President Biden issued an Executive Order to (i) initiate a special enrollment period from February 15, 2021 through August 15, 2021 for purposes of obtaining health insurance coverage through the government marketplace and (ii) instruct 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 unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the Healthcare Reform Act.

We continue to evaluate the effect that the Healthcare Reform Act and its possible repeal, replacement or modification may have on our business.

Such legislation and other healthcare reform measures that may be adopted in the future could have a material adverse effect on our industry generally and on our ability to successfully commercialize our products and product candidates.

There have been ongoing efforts to modify or repeal certain provisions of the Healthcare Reform Act For example, tax reform legislation was enacted at the end of 2017 that eliminated the tax penalty for individuals who do not maintain mandated health insurance coverage beginning in 2019.

The Healthcare Reform Act has also been subject to judicial challenge.

In 2021, the U.S.

Supreme Court dismissed the most recent judicial challenge to the Healthcare Reform Act brought by several states without specifically ruling on the constitutionality of the Healthcare Reform Act.

Beyond the Healthcare Reform Act, there have been ongoing health care reform efforts, some of which affect pricing or payment for drug products.

For example, legislation enacted in 2018 increased the discount that manufacturers of Medicare Part D brand name drugs must provide to Medicare Part D beneficiaries during the coverage gap from 50% to 70% starting in 2019.

The Biden Administration has focused on increasing access to health care coverage as well as drug pricing and payment reform.

As an example, legislation enacted in 2021 eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, beginning January 1, 2024.

As another example, in 2022, the Inflation Reduction Act (IRA) of 2022 contains numerous drug pricing and payment reforms.

Among other provisions, the IRA imposes a yearly cap ($2,000 in 2025) on out-of-pocket prescription drug costs in Medicare Part D, implements a new Medicare Part D manufacturer discount drug program in 2025;

requires manufacturers to pay a rebate to the federal government if prices for single-source drugs and biologicals covered under Medicare Part B and nearly all covered drugs under Part D increase faster than the rate of inflation and, starting in 2026, creates a drug price negotiation program under which the prices for certain high Medicare spend drugs and biologicals without generic or biosimilar competition will be limited by a cap that is defined by reference to, among other things, a specified non-federal average manufacturer price.

We continue to evaluate federal and state health care reform efforts and the effect that such efforts may have on our business.

Healthcare reform measures that may be adopted in the future could have a material adverse effect on our industry generally and on our ability to successfully commercialize our products and product candidates.

In addition, other broader legislative changes have been adopted that could have an adverse effect upon, and could prevent, our products’ commercial success.

The Budget Control Act of 2011, as amended, or the Budget Control Act, includes provisions intended to reduce the federal deficit, including reductions in Medicare payments to providers through 2029.

Pursuant to the CARES Act, as well as subsequent legislation, these reductions were suspended from May 1, 2020 through December 31, 2021 due to the COVID-19 pandemic.

Any significant spending reductions affecting Medicare, Medicaid or other publicly funded or subsidized health programs, or any significant taxes or fees imposed as part of any broader deficit reduction effort or legislative replacement to the Budget Control Act, or otherwise, could have an adverse impact on our anticipated product revenues.

For example, the Budget Control Act of 2011, as amended, resulted in the imposition of reductions in Medicare (but not Medicaid) payments to providers in 2013 and remains in effect through 2031 (except May 1, 2020 to March 31, 2022) unless additional Congressional action is taken.

Any significant spending reductions affecting Medicare, Medicaid or other publicly funded or subsidized health programs that may be implemented and/or any significant taxes or fees that may be imposed on us could have an adverse impact on our results of operations.

Individual states in the United States have also become increasingly active in passing legislation and implementing regulations designed to control pharmaceutical product pricing, including price constraints, restrictions on copayment assistance by pharmaceutical manufacturers, marketing cost disclosure and transparency measures, and, in some cases, measures designed to encourage importation from other countries and bulk purchasing.

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Our future success depends on our ability to retain our chief executive officer and other key executives and to attract, retain and motivate qualified personnel.

We are highly dependent on Brian Stuglik, Chief Executive Officer, Daniel Paterson, our President and Chief Operating Officer, and Robert Gagnon, our Chief Business and Financial Officer.

Although we have formal employment agreements with Brian Stuglik, Daniel Paterson, and Robert Gagnon, these agreements do not prevent them from terminating their employment with us at any time.

We are highly dependent on Brian Stuglik, Chief Executive Officer and Daniel Paterson, our President and Chief Operating Officer.

Although we have formal employment agreements with Brian Stuglik and Daniel Paterson, these agreements do not prevent them from terminating their employment with us at any time.

We do not maintain “key person” insurance for any of our executives or other employees.

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Our business and operations may be materially adversely affected in the event of computer system breaches or failures.

Despite the implementation of security measures, our internal computer systems, and those of our contract research organizations and other third parties on which we rely, are vulnerable to damage from computer viruses, unauthorized access, natural disasters, fire, terrorism, war, and telecommunication and electrical failures.

Cybersecurity breaches may be the result of unauthorized activity by our employees and contractors, as well as by third parties who use cyberattack techniques involving malware, hacking and phishing, among others.

Despite our effort to implement security measures, our internal computer systems, and those of our contract research organizations and other third parties, including software providers, on which we rely, are vulnerable to damage from computer viruses, ransomware, unauthorized access, natural disasters, fire, terrorism, war, and telecommunication and electrical failures.

Cybersecurity breaches may be the result of negligent or unauthorized activity by our employees and contractors, as well as by third parties who use cyberattack techniques involving malware, ransomware, hacking and phishing, among others.

If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our key business processes and clinical development programs.

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

To the extent that any disruption or security breach results in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could be exposed to liability, which could have a material adverse effect on our operating results and financial condition and possibly delay the further development and commercialization of our product candidates.

Risks Related to Our Common Stock

commercial confidence, erode goodwill, and possibly delay the further development and commercialization of our product candidates.

Risks Related to Our Capital Stock

Provisions in our corporate charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

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Such litigation, if instituted against us, could result in substantial costs and diversion of management's attention and resources, which could materially and adversely affect our business and financial condition.

Failure to comply with The Nasdaq Global Market continued listing requirements may result in our common stock being delisted from The Nasdaq Global Market.

If our stock price falls below $1.00 per share, we may not continue to qualify for continued listing on The Nasdaq Global Market (Nasdaq).

To maintain listing, we are required, among other things, to maintain a minimum closing bid price of $1.00 per share.

If the closing bid price of our common stock is below $1.00 per share for 30 consecutive business days, we will receive a deficiency notice from Nasdaq advising us that we have a certain period of time, typically 180 days, to regain compliance by maintaining a minimum closing bid price of at least $1.00 for at least ten consecutive business days, although Nasdaq could require a longer period.

Our common stock may be at risk for delisting from the Nasdaq Global Market in the future.

Delisting could adversely affect the liquidity of our common stock, the market price of our common stock could decrease, and other unfavorable impacts.

Our common stock is currently listed on the Nasdaq Global Market.

The Nasdaq Stock Market LLC (“Nasdaq”) has minimum requirements that a company must meet in order to remain listed on the Nasdaq Global Market, including a requirement that we maintain a minimum closing bid price of $1.00 per share.

On November 4, 2022 we received a letter from the listing qualifications department (the “Staff”) of Nasdaq notifying us that for the last 30 consecutive business days the bid price of our common stock had closed below $1.00 per share minimum bid price requirement for continued inclusion on the Nasdaq Global Market pursuant to Nasdaq Listing Rule 5450(a)(1) (the “Bid Price Requirement”).

In accordance with Nasdaq Listing Rule 5810(c)(3)(A) (the “Compliance Period Rule”), we have been provided a period of 180 calendar days, or until May 3, 2023 (the “Compliance Date”), to regain compliance with the Bid Price Requirement.

If, at any time before the Compliance Date, the bid price for the common stock closes at $1.00 or more for a minimum of 10 consecutive business days, as required under the Compliance Period Rule, the Staff will provide written notification to us that it has regained compliance with the Bid Price Requirement.

If we do not regain compliance with the Bid Price Requirement by the Compliance Date, we may be eligible for an additional 180 calendar day compliance period.

To qualify, we will be required to meet the continued listing requirement for market value of its publicly held shares and all other initial listing standards for The Nasdaq Global Market, with the exception of the Bid Price Requirement, and will need to provide written notice of our intention to cure the deficiency during the second 180 calendar day compliance period, by effecting a reverse stock split, if necessary.

If we do not regain compliance with the Bid Price Requirement by the Compliance Date and are not eligible for an additional compliance period at that time, or the Staff concludes that we will not be able to cure the deficiency during the additional compliance period, the Staff will provide written notification to us that our common stock will be subject to delisting.

At that time, we may appeal the Staff’s delisting determination to a Nasdaq hearings panel.

However, there can be no assurance that, if we receive a delisting notice and appeals the delisting determination by the listing qualifications department of Nasdaq to the Nasdaq hearings panel, such appeal would be successful.

We intend to monitor the closing bid price of our common stock and may, if appropriate, consider available options to regain compliance with the Bid Price Requirement, which could include seeking to effect a reverse stock split.

However, there can be no assurance that we will be able to regain compliance with the Bid Price Requirement.

The delisting of our common stock would significantly affect the ability of investors to trade our common stock and negatively impact the liquidity and price of our common stock.

In addition, the delisting of our common stock could materially adversely impact our ability to raise capital on acceptable terms or at all.

Delisting from Nasdaq could also have other negative results, including the potential loss of confidence by our current or prospective third-party providers and collaboration partners, the loss of institutional investor interest, the triggering of a default under the Loan Agreement with Oxford, which in turn could cause our borrowings to become immediately due, and fewer licensing and partnering opportunities.

Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be the source of gain for our stockholders.

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As a result, capital appreciation, if any, of our common stock will be the sole source of gain for our stockholders for the foreseeable future.

We can issue and have issued shares of preferred stock, which may adversely affect the rights of holders of our common stock.

We have in the past issued, and we may at any time in the future issue, shares of preferred stock, and as of February 28, 2023 we have 1,000,000 shares of our Series A convertible preferred stock, par value $0.0001 per share (the “Series A Preferred Stock”) and 1,200,000 shares of our Series B convertible preferred stock, par value $0.0001 per share (the “Series B Preferred Stock” and together with the Series A Preferred Stock, the “Preferred Stock”) outstanding.

Our amended and restated certificate of incorporation authorizes us to issue up to 5,000,000 shares of preferred stock with designations, rights and preferences determined from time-to-time by our board of directors.

Accordingly, our board of directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights superior to those of holders of our common stock.

For example, our Series B Preferred Stock ranks senior to our common stock, and the holders of our Series B Preferred Stock are entitled to a liquidation preference of $1.00 per share of Series B Preferred Stock in the event of our liquidation, dissolution or winding up, which could limit or eliminate any payments that the holders of our common stock could expect to receive upon our liquidation.

Additionally, holders of our Preferred Stock are entitled to receive, on an as converted basis, dividends and consideration in the event of certain transactions equivalent to the dividends and consideration received by the holders of our common stock, which would make paying dividends and engaging in certain transactions more expensive.

We also may not make any changes to our amended and restated certificate of incorporation that would limit the rights of the holders of our either series of our preferred stock without the affirmative vote of a majority of such series of preferred stock, which may make it more difficult to take certain corporate actions in the future.

Our stockholders will experience substantial dilution if shares of our Series B Preferred Stock are converted into common stock.

As of February 28, 2023, there were 1,200,000 shares of our Series B Preferred Stock outstanding, which are convertible without payment of additional consideration into 50,838,840 shares of our common stock, subject to certain ownership limitations.

The conversion of the outstanding shares of our Series B Preferred Stock into common stock would be substantially dilutive to existing stockholders.

Any dilatation or potential dilution may cause our stockholders to sell their shares, which may contribute to a downward movement in the stock price of our common stock.

Raising additional capital or entering into certain licensing arrangements may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our product candidates.

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To the extent that we raise additional capital through the sale of equity or convertible debt, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing stockholders.

To the extent that we enter into certain licensing arrangements, the ownership interest of our existing stockholders may be diluted if we elect to make certain payments in shares of our common stock.

extent that we enter into certain licensing arrangements, the ownership interest of our existing stockholders may be diluted if we elect to make certain payments in shares of our common stock.

Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

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

What changed 10-K

Item 1A. Risk Factors