ITEM 1A.
Risk Factors.
Risks Related to the Proposed Business Combination
The Proposed Business Combination may not be consummated on the terms described in the non-binding Letter of Intent or at all.
On March 14, 2025, we entered into the Letter of Intent relating to the Proposed Business Combination. Although we anticipate entering into a definitive business combination agreement in April 2025, no assurance can be given that we will be able to do so within that timeframe or at all. Execution of a definitive business combination agreement with QumulusAI is subject to a number of conditions in the Letter of Intent, including satisfactory completion of due diligence by each party and, if we so request prior to such execution, receipt of up to $1.5 million in equity financing from QumulusAI or its designees, which due diligence and financing have not been completed as of the date of this report, as well as successful negotiation of the terms and conditions of the definitive business combination agreement. In addition, even if we were to negotiate and enter into a definitive business combination agreement, there is no assurance that the Proposed Business Combination would be consummated on the terms described in the Letter of Intent, or at all.
Failure to consummate the Proposed Business Combination could negatively affect our business, and result in the total loss of your investment.
The terms of a definitive business combination agreement are subject to negotiation, and we cannot guarantee that we will be able to reach acceptable terms. Execution of the definitive business combination agreement is subject to various conditions in the Letter of Intent, including satisfactory completion of due diligence by us and QumulusAI and, if we request it prior to such execution, our receipt of financing from QumulusAI. On February 28, 2025, we announced that a prior binding term sheet for a reverse merger with another party was terminated before the parties to that term sheet were able to enter into a definitive merger agreement, and we announced that we were seeking strategic alternatives, including out-licensing, merger and acquisition opportunities (including reverse mergers), the sale of assets and technologies, and winding down operations. In the event we are unable to negotiate a definitive business combination agreement or consummate the Proposed Business Combination, it will have a material adverse effect on our business, financial condition, and results of operations, including the following:
Incurring costs related to the negotiation of the business combination agreement, such as legal, accounting, and financial advisory fees;
Declines in the market price of our common stock to the extent that such market price reflects an assumption that the Proposed Business Combination will be consummated;
The diversion of management’s attention from day-to-day business operations and the potential disruption to each company’s employees and other personnel and business relationships during the period the definitive business combination agreement is being negotiated and stockholder approval is being solicited; and
Becoming subject to litigation related to the Proposed Business Combination.
Even if we do enter into a definitive business combination agreement with QumulusAI, we cannot guarantee that the terms will be as described in the Letter of Intent or that the closing conditions set forth in such business combination agreement, including obtaining the requisite stockholder approval and listing the combined company’s shares on Nasdaq, will be satisfied. If we are unable to satisfy our closing conditions, or if other mutual closing conditions are not satisfied, QumulusAI will not be obligated to complete the Proposed Business Combination.
If the Proposed Business Combination is not completed, our board of directors would need to evaluate other available strategic alternatives, which alternatives may not be as favorable to our stockholders as the Proposed
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Business Combination or available at all and could include winding down our operations, which may result in a total loss of stockholders’ investment.
Vincerx and QumulusAI will be subject to various uncertainties while the Proposed Business Combination is pending that could adversely affect the anticipated benefits of the Proposed Business Combination.
Uncertainty about the effect of the Proposed Business Combination on counterparties to contracts, employees, consultants, and other parties may have an adverse effect on us and QumulusAI. These uncertainties could cause contract counterparties and others who deal with us or QumulusAI to seek to change existing business relationships and may impair the ability of us and QumulusAI to attract, retain, and motivate key personnel until the Proposed Business Combination is completed and for a period of time thereafter. Retention and recruitment of employees and consultants may be particularly challenging prior to the completion of the Proposed Business Combination. Our employees and consultants, and the employees and consultants and prospective employees and consultants of QumulusAI, may experience uncertainty about their future roles following the Proposed Business Combination.
The negotiations to enter into a definitive business combination agreement, pursuit of the Proposed Business Combination, and the preparation for the combination of the two companies may place a significant burden on management and internal resources. Any significant diversion of management attention away from our business and any difficulties encountered in the negotiations, transition, and integration process could affect each of our businesses and limit us from pursuing other business opportunities and making other changes to our business prior to the entry into a definitive business combination agreement and/or completion of the Proposed Business Combination.
We expect to incur substantial transaction costs in connection with the Proposed Business Combination.
We expect to incur a significant amount of non-recurring expenses in connection with the Proposed Business Combination, including legal, accounting, financial advisory, consulting, printing, mailing, and other expenses. In general, these expenses are payable by us whether or not the Proposed Business Combination is completed. Additional unanticipated costs may be incurred following consummation of the Proposed Business Combination.
Risks Related to the Discovery, Development and Commercialization of Our Product Candidates
We rely on the Bayer License Agreement to provide rights to the core intellectual property relating to all of our current product candidates, which agreement imposes significant payment and other obligations on us. Any failure by us to perform our obligations under the Bayer License Agreement could give Bayer the right to terminate or seek other remedies under the agreement, and any termination or loss of important rights under the Bayer License Agreement would significantly and adversely affect our ability to develop, partner and/or commercialize our current product candidates and our VersAptx platform, raise capital, or continue our operations.
We have licensed our core patents and other intellectual property relating to our current product candidates and our VersAptx platform from Bayer on an exclusive, worldwide basis under the Bayer License Agreement. The Bayer License Agreement continues in effect on a country-by-country and licensed product-by-licensed product basis until there are no remaining royalty payment obligations in the relevant country and can be terminated earlier by Bayer in the event that we materially breach our material obligations, that bankruptcy or other insolvency proceedings are instituted against us or that we seek to revoke or challenge the validity of any licensed patents. If, for any reason, the Bayer License Agreement is terminated or we otherwise lose important rights, it would have a significant and adverse effect on our business and our ability to develop, partner and/or commercialize our current product candidates, raise capital, or continue our operations.
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The Bayer License Agreement imposes on us obligations relating to development, commercialization, funding, payment, diligence, intellectual property protection and other matters. We paid Bayer an upfront license fee of $5.0 million following the closing of the LSAC Business Combination. In addition, we are obligated to make significant future payments to Bayer upon the achievement of certain development and commercial sales milestones involving licensed products. The size and timing of these milestone payments will vary greatly depending on factors such as the particular licensed product, whether it involves a P-TEFb licensed product or a bioconjugation licensed product (and which bioconjugation program), the number of distinct disease indications, the number of different countries with respect to which the milestone is achieved and the level of net commercial sales, and it is therefore difficult to estimate the total payments that could become payable to Bayer and when those payments would be due. If we were to achieve all of the milestones for each of the countries and disease indications, we would be obligated to pay development and commercial milestone payments that range from $110.0 million to up to $318.0 million per licensed product, and upon successful commercialization of at least five licensed products, we could be required to pay aggregate milestone payments in excess of $1.0 billion. In addition to milestone payments, we are also required to pay Bayer under the Bayer License Agreement ongoing royalties in the single digit to low double-digit percentage range on net commercial sales of licensed products.
To the extent we are able to achieve any of these milestones, many of them would be achieved, and the related milestone payments owed, before we are able to generate sufficient revenues (or any revenues in the case of development milestones). Accordingly, we would need to obtain substantial additional funding, or enter into strategic alliances in order to pay these milestones, and there can be no assurance that we would be able to obtain the necessary funding on acceptable terms or at all or that we would be able to enter into strategic alliances at levels sufficient to pay these milestones or at all. If we are unable to raise the necessary additional funding, enter into the necessary strategic alliances, or otherwise pay these milestones, we would be in breach of the Bayer License Agreement, which if not cured would give Bayer the right to terminate the agreement or seek other remedies, which would have a significant and effect on our business and prospects and our ability to develop and commercialize our current product candidates, raise capital, or continue our operations.
We are currently substantially dependent on the success of VIP943, our lead product candidate, and our other product candidates. If we are unable to complete development of, obtain approval for, partner, and/or commercialize these product candidates in a timely manner, our business will be harmed.
Our business is substantially dependent on our ability to timely commence and complete clinical trials, obtain marketing approval for, partner, and/or successfully commercialize our product candidates. Development of these product candidates will require additional clinical development, evaluation of clinical, preclinical, and manufacturing activities, marketing approval from government regulators, substantial investment, and significant marketing efforts before we would be able to generate any revenues from product sales. We are not permitted to market or promote these or any other product candidates before we receive marketing approval from the FDA and comparable foreign regulatory authorities, and we may never receive such marketing approvals.
The success of our product candidates will depend on several factors, many of which we do not control, including certain aspects of clinical development and the regulatory submission process, potential threats to our intellectual property rights, and the manufacturing, marketing, distribution, and sales efforts of any future partner or collaborator. If we are not successful with respect to one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully develop, partner and/or commercialize these product candidates, which would materially harm our business.
We are at an early stage in development efforts for our product candidates, and we may not be able to successfully develop, manufacture, complete clinical trials, partner, and/or commercialize our product candidates on a timely basis or at all.
The potential therapeutic benefits of our bioconjugation product candidates are unproven, and we may never develop, successfully conduct or complete clinical trials, partner, and/or commercialize these product candidates.
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While several bioconjugation and ADC candidates are under development by other companies, there is currently no approved bioconjugation therapy using our proprietary optimized CPT payload or an ADC using KSPi and CellTrapper. We may uncover a previously unknown risk associated with KSPi or our optimized CPT payload, our CellTrapper technology may not be as impermeable as initial testing suggests, our linker technology may not be as effective as initial testing suggests, or other issues that may be more problematic than we currently believe, which may prolong the period of observation required for obtaining, or result in the failure to obtain, regulatory approval or may necessitate additional preclinical and clinical testing. While results from preclinical trials of our bioconjugation product candidates have shown proof-of-concept for each, these product candidates may not demonstrate in patients any or all of the pharmacological benefits we believe they may possess. If the KSPi warhead or optimized CPT payload that we use is not safe in certain product candidates, we would be required to abandon or redesign all of our current bioconjugation product candidates. We have not yet succeeded and may never in demonstrating efficacy and safety of our bioconjugation product candidates.
Enitociclib is a novel P-TEFb/CDK9 inhibitor, and its potential therapeutic benefit is unproven. While several CDK9 inhibitor candidates are under development by other companies, there is currently no approved therapy inhibiting CDK9 for the treatment of cancers, and as a result, the regulatory pathway for enitociclib may present novel issues that could cause delays in development or approval. In addition, enitociclib may not demonstrate in patients any or all of the pharmacological benefits we believe it may possess. Positive results from preclinical studies or early stage clinical trials are not necessarily predictive of the results of planned clinical trials of enitociclib. We have not yet succeeded and may never succeed in demonstrating efficacy and safety for enitociclib.
If we are unable to successfully develop, conduct, or complete clinical trials, obtain marketing approval, partner, and/or commercialize our product candidates, our business would be materially harmed.
Results from early-stage clinical trials may not be predictive of results from late-stage or other clinical trials.
Positive and promising results from preclinical studies and early-stage clinical trials may not be predictive of results from late-stage clinical trials or from clinical trials of the same product candidates for the treatment of other indications. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. Late-stage clinical trials could differ in significant ways from early-stage clinical trials, including changes to inclusion and exclusion criteria, efficacy endpoints, dosing regimen, and statistical design. Moreover, success in clinical trials in a particular indication does not guarantee that a product candidate will be successful for the treatment of other indications. Many companies in the biotechnology industry have suffered significant setbacks in late-stage clinical trials after or results in early-stage development. There can be no assurance that we will not face similar in our clinical trials results observed in early-stage clinical trials.
Interim, “topline,” and preliminary data from our clinical trials that we announce or publish may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.
From time to time, we may publish preliminary interim or “top-line” data from clinical trials. Positive preliminary data may not be predictive of such trial’s subsequent or overall results. Preliminary data are subject to the risk that one or more of the outcomes may materially change as more data become available. Additionally, preliminary data are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Therefore, positive preliminary results in any ongoing clinical trial may not be predictive of such results in the completed trial. We also make assumptions, estimations, calculations, and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully evaluate all data. As a result, preliminary data that we report may differ from future
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results from the same clinical trials, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Preliminary data also remains subject to audit and verification procedures that may result in subsequent or final data being materially different from the preliminary data we previously published. As a result, preliminary data should be viewed with caution until the final data are available. Material adverse changes in the final data compared to preliminary data could materially harm our business and prospects.
Even if approved, our product candidates may not achieve adequate market acceptance among physicians, patients, healthcare payors, and others in the medical community necessary for commercial success.
Even if our product candidates were to receive regulatory approval, they may not gain adequate market acceptance among physicians, patients, healthcare payors, and others in the medical community. Such acceptance would depend on a number of factors, including:
timing of market introduction, number, clinical profile, and potential advantages of competitive drugs;
acceptable evidence of safety and efficacy;
changing standards of medical care;
relative convenience and ease of administration;
restrictions on the use of our product candidates, such as boxed warnings or contraindications in labeling, or a Risk Evaluation and Mitigation Strategy, if any, which may not be required of alternative treatments and competitor products;
pricing and cost-effectiveness, which may be subject to regulatory control;
availability of coverage, reimbursement and adequate payment from health maintenance organizations and other third-party payors; and
prevalence and severity of adverse side effects.
If any of our product candidates were to be approved but does not achieve an adequate level of acceptance by physicians, hospitals, healthcare payors, and patients, it would have a negative effect on our business.
If the market opportunity for any product candidate is smaller than we believe, our potential commercial opportunity may be adversely affected, and our business may suffer.
Our belief regarding addressable patient populations that may benefit from treatment with our product candidates are based on our estimates. These estimates, which have been derived from a variety of sources, may prove to be incorrect. Further, new studies may change the estimated incidence or prevalence of these cancers. Additionally, the potentially addressable patient population for our product candidates may not ultimately be amenable to treatment with our product candidates. Our market opportunity may also be limited by future competitor treatments that enter the market. If any of our estimates prove to be inaccurate, the potential commercial opportunity for any of our product candidates could be significantly diminished and have an adverse material impact on our business.
We face significant competition, and if our competitors develop and market technologies or products more rapidly or that are more effective, safer, or less expensive than our product candidates, our commercial opportunities will be negatively impacted.
Our competitors are developing a large number of drug candidates and new therapies for the treatment of conditions similar to those targeted by our product candidates. Several pharmaceutical and biotechnology companies have CDK9 inhibitors, ADCs, immunotherapies, or other products on the market, in clinical trials, or
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in development that are, or may be, competitive to our product candidates in oncology indications. Our competitors, either alone or together with collaborators, may have significantly greater financial, manufacturing, marketing, drug development, technical and human resources, and commercial expertise than we do and may have begun developing their drug candidates earlier than us. Our competitors may also have more experience:
developing drug candidates;
conducting preclinical and clinical trials;
obtaining regulatory approvals; and
commercializing product candidates.
Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe adverse effects, are more convenient, have a broader label, are marketed more effectively, are reimbursed, or are less expensive than our product candidates. Our competitors also may obtain marketing approval from the FDA or other comparable foreign regulatory authorities for their products more rapidly, which could result in our competitors establishing a strong market position. Technological advances or products developed by our competitors may render our technologies or product candidates obsolete, less competitive, or not economical. If we are unable to compete effectively, our business could be adversely affected.
Clinical trials are expensive, time consuming, subject to enrollment and other delays, and may be required to continue beyond our available funding, and we cannot be certain that we will be able to raise sufficient funds to successfully complete the development, clinical trials, and commercialization of any of our product candidates.
Clinical trials have uncertain outcomes and may be required to continue beyond our available funding. Failure can occur at any stage of the clinical trials, and we may experience numerous unforeseen events that could delay or prevent development and commercialization of our product candidates.
In addition, we had no involvement with or control over the preclinical or clinical development of our product candidates prior to their in-license from Bayer. We are therefore dependent on Bayer having conducted such development in accordance with the applicable protocols and legal, regulatory, and scientific standards, having accurately reported the results of all preclinical studies and clinical trials and other research they conducted prior to our acquisition of the rights to our product candidates, having correctly collected and interpreted the data from these studies, trials, and other research, and having supplied us with complete information, data sets, and reports required to adequately demonstrate the results reported through the date of our acquisition of these product candidates. Problems in any of these areas could result in increased costs and delays in the development of our product candidates, which could adversely affect our business.
If we suffer significant delays, setbacks, or negative results in, or termination of, our clinical trials, we may be unable to continue development of our product candidates, and our development costs could increase significantly. Adverse or inconclusive results from our clinical trials may substantially delay, or halt entirely, any further development of our product candidates.
Adverse or inconclusive results from our clinical trials may substantially delay, or halt entirely, any further development of our product candidates. Many companies have failed to demonstrate the safety or effectiveness of product candidates in later stage clinical trials notwithstanding favorable results in early-stage clinical trials. Previously unforeseen and unacceptable side effects could interrupt, delay, or halt clinical trials of our product candidates and could result in the FDA denying approval of our product candidates. To date, long-term safety and efficacy has not been demonstrated in clinical trials for any of our product candidates.
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Certain toxicity and adverse events have been noted in some of the preclinical and clinical trials involving certain of our product candidates. Even if we believe that the data collected from clinical trials of our product candidates are promising with respect to safety and efficacy, such data may not be deemed sufficient by regulatory authorities to warrant product approval. Regulatory officials could interpret such data in different ways than we do, which could delay, limit, or prevent regulatory approval. The FDA or we may suspend or terminate clinical trials at any time. Any failure or significant delay in completing clinical trials for our product candidates, or in receiving regulatory approval for the commercialization of our product candidates, may materially harm our business.
Our business entails a significant risk of product liability, and if we are unable to obtain sufficient insurance coverage, such inability could have an adverse effect on our business.
Our business exposes us to significant product liability risks inherent in the development, testing, manufacturing, and marketing of therapeutic treatments. Product liability claims could delay or prevent completion of our development programs. Regardless of the merits or eventual outcome, liability claims may also result in injury to our reputation, costs to defend the related litigation, a diversion of management’s time and our resources, and substantial monetary awards to clinical trial participants or patients. Any insurance we have or may obtain may not provide sufficient coverage against potential liabilities. Furthermore, clinical trial and product liability insurance is becoming increasingly expensive and difficult to obtain. As a result, we may be unable to obtain sufficient insurance at a reasonable cost to protect us against losses caused by product liability , which could impact our ability to conduct clinical trials and have an effect on our business and financial condition.
We make use of biomarkers in certain instances, which are not scientifically validated, and our reliance on biomarker data may cause us to direct our resources inefficiently.
We make use of biomarkers in certain instances to facilitate our drug development and to optimize our clinical trials. Biomarkers are proteins or other substances whose presence in the blood or tumor cells can serve as an indicator of specific cell processes. We believe that these biomarkers serve a useful purpose in helping us to evaluate whether our product candidates are having their intended effects through their assumed mechanisms and allow us to improve patient selection in connection with clinical trials and monitor patient compliance with trial protocols.
For most purposes, however, biomarkers have not been scientifically validated. If our understanding and use of biomarkers is inaccurate or flawed, or if our reliance on them is otherwise misplaced, we will not only fail to realize any benefits from using biomarkers but may also be led to invest time and financial resources inefficiently in attempting to develop less promising product candidates. Moreover, biomarker data are not currently accepted by the FDA or other regulatory agencies in the United States, the European Union, or elsewhere in applications for regulatory approval of product candidates, and there is no guarantee that such data will ever be accepted by the relevant authorities. Our biomarker data should not be interpreted as evidence of efficacy.
The failure to attract and retain skilled personnel could impair our drug development and business objectives.
Our business is highly dependent on our ability to attract and retain management, clinical development, scientific, research, technical, and other skilled personnel. There is currently intense competition for personnel with these skills and expertise, and this competition is likely to continue. In addition, our recent workforce reductions and other cost-control measures may negatively impact our ability to attract or retain such personnel. The inability to attract and retain skilled personnel as needed may delay or prevent the achievement of our drug development and other business objectives and could have a material adverse effect on our business.
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We or the third parties upon whom we depend may be adversely affected by natural disasters, health epidemics, and other natural or man-made accidents or incidents, including the impact of climate change, and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.
Any unplanned event, such as a flood, fire, explosion, earthquake, extreme weather condition, health pandemic or epidemic (such as COVID-19), power shortage, telecommunication failure, wars (such as the wars in Ukraine and Israel), or other natural or man-made accidents or incidents, including the impact of climate change, may have a material adverse effect on our business. In addition, the disaster recovery and business continuity plans we have in place may prove inadequate in the event of a serious disaster or similar event. As part of our risk management policy, we maintain insurance coverage at levels that we believe are appropriate for our business. However, in the event of an accident or incident at these facilities, there can be no assurance that the amounts of insurance will be sufficient to satisfy any and . If we, or the third parties on whom we rely, are to operate because of an or or for any other reason, even for a short period of time, our business may be .
Our business and operations would be adversely affected in the event that our computer systems or those of our partners, contract research organizations, contractors, consultants, or other third parties we work with were to suffer system failures, cyberattacks, loss of data, or other security incidents, or we fail to comply with applicable data security and privacy laws, regulations, and standards.
Despite the implementation of security measures, our computer systems, as well as those of our partners, contract research organizations, IT service providers, contractors, consultants, law and accounting firms, and other third parties we work with, may sustain damage from computer viruses, unauthorized access, data breaches, phishing attacks, ransomware attacks, denial-of-service attacks, cybercriminals, natural disasters, terrorism, war, and telecommunication and electrical failures. We rely on our partners and third-party providers to implement effective security measures and identify and correct for any such failures, deficiencies, or breaches. The risks of a security breach or disruption, particularly through cyberattacks or cyber , including by computer hackers, foreign governments, and cyber-terrorists, have increased significantly and are becoming increasingly to detect. If a , , or security were to occur and cause in our operations, or the operations of our partners or third-party providers, it could result in a of confidential information, including our intellectual property or financial information or clinical trial participant personal data, a material or in our drug development programs, or significant monetary . For example, the of preclinical or clinical trial data from completed, ongoing, or planned trials, or chemistry, manufacturing, and controls data for our product candidates, could result in in regulatory approval efforts and significantly increase our costs to recover or reproduce the data.
In addition, we must comply with increasingly complex, rigorous, and sometimes conflicting laws, regulations, and standards enacted to protect business and personal data in the United States, Europe, and elsewhere. These laws impose additional obligations on companies regarding the handling of personal data and provide certain individual privacy rights to persons whose data is stored. Compliance with existing, proposed, and recently enacted laws, regulations, and standards can be costly and time consuming, and any failure to comply with these laws, regulations, and standards could subject us to legal and reputational risks. Misuse of or failure to secure personal information, including any breach, loss, or compromise of clinical trial participant personal data, could also result in violation of data privacy laws, regulations, and standards, proceedings against us by governmental entities or others, imposition of fines by governmental authorities, and damage to our reputation and credibility, and could have a impact on our business.
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Risks Related to Our Financial Position and Need for Additional Capital
We previously announced that we are exploring strategic alternatives and also implemented certain workforce reductions and other cost-control measures to streamline our operations and focus our resources, and there can be no assurance that such measures will achieve the intended objectives, or that they will not adversely affect our business.
We previously announced that we are exploring strategic alternatives, including out-licensing, merger and acquisition opportunities (including reverse mergers), the sale of assets and technologies, and winding down operations. In the fourth quarter of 2024, we implemented a series of significant workforce reductions and other cost-control measures to streamline our operations and focus our resources as we pursue our business and a potential strategic transaction. There can be no assurance that these cost-control measures will not adversely affect our business or that a strategic transaction such as the Proposed Business Combination or other strategic alternative can be achieved on a timely basis or at all. Regardless of whether the Proposed Business Combination is consummated, we are currently continuing to pursue monetizing our assets. There can be no assurances that our efforts will be successful.
We have incurred net losses since inception and expect to continue to incur significant net losses for the foreseeable future, and there can be no assurance we will be able to raise capital.
We have incurred net losses in each reporting period since our inception, have not generated any revenue from product sales to date, and have financed our operations through the sale of our equity securities. It will be several years, if ever, before we would be in a position to generate revenue from product sales. We expect to continue to incur significant expenses and operating losses for the foreseeable future. Even if we were to succeed in receiving marketing approval for and partnering and/or commercializing one or more of our product candidates, we expect that we will continue to incur substantial development and other expenses. The size of our future net losses will depend, in part, on the rate of future expenses and our ability to generate revenue. Our prior losses and expected future losses have had and will continue to have an adverse effect on our working capital, need to raise additional capital, and ability to achieve and maintain profitability.
We require substantial capital to finance our operations. If we are unable to raise capital when needed, or on acceptable terms, we may be forced to significantly reduce our operations and expenses, may not be able to continue as a going concern, and may be forced to cease operations.
Developing pharmaceutical products, including conducting preclinical studies and clinical trials, is a very time-consuming, expensive, and uncertain process that takes years to complete. Even if one or more of our product candidates were to be approved for commercial sale, we anticipate incurring significant costs associated with partnering and/or commercializing any approved product candidate. These expenditures would include payments associated with the Bayer License Agreement and development and commercial milestones, in each case prior to generating any product sales. Additionally, following commencement of any commercial sales of our licensed products, we would be responsible for significant further payments upon the achievement of certain sales milestones and tiered royalty payments on net commercial sales.
Our expenses could increase beyond expectations if the FDA or other regulatory agencies were to require clinical trials or preclinical studies in addition to those that we currently anticipate. Other unanticipated costs could also arise. In addition, if we were to obtain marketing approval for any of our product candidates, we would expect to incur significant commercialization expenses related to drug sales, marketing, manufacturing, and distribution. We also expect to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in order to maintain our operations.
As of March 21, 2025, we had approximately $4.7 million in cash. We intend to use our existing capital resources to continue to fund our operations, including our public company costs and expenses associated with completing the Proposed Business Combination or other alternative, to seek to monetize our assets and for
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working capital and other general corporate purposes. Based on our current business plans and assumptions, we believe that our existing cash will be sufficient to fund our expenses and capital expenditure requirements into the third quarter of 2025. Our estimate as to how long we expect our existing cash to be able to continue to fund our operating expenses and capital expenditure requirements is based on plans and assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Changing circumstances, some of which may be beyond our control, could result in less cash available to us or cause us to consume capital significantly faster than we currently anticipate, and we may need or choose to seek additional funds sooner than planned.
We will need to obtain further funding through public or private equity offerings, debt financings, collaborations and licensing arrangements, or other sources, which may dilute our stockholders or restrict our operating activities. Raising additional funds by issuing equity or convertible debt securities may cause our stockholders to experience substantial dilution. Raising additional funds through debt financing may involve covenants that restrict our business activities and options. To the extent that we raise additional funds through collaborations and licensing arrangements, we may have to relinquish valuable rights to our drug discovery and other technologies, development programs, or product candidates, or grant licenses on terms that may not be favorable to us. Additional funding may not be available to us on favorable terms, or at all, particularly in light of the current economic and market conditions. We do not have any committed external source of funds. Market volatility resulting from inflation and other economic and market conditions, the wars in Ukraine and Israel, the inability to maintain our listing on The Nasdaq Capital Market, or other factors could also impact our ability to access capital as and when needed. Our to raise capital as and when needed or on acceptable terms would have a impact on our financial condition, and we may have to significantly reduce our operations and expenses, or or our operations.
In accordance with Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), we have evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern for a period of one year after the date that our audited consolidated financial statements are issued. In light of our existing cash resources and current and expected operating losses and negative cash flows, we expect to need additional capital prior to the one-year anniversary of the issuance of our audited consolidated financial statements, and such additional capital may not be available as and when needed on acceptable terms or at all. As a result, we have concluded that these circumstances and the uncertainties associated with our ability to obtain additional capital raise substantial doubt about our ability to continue as a going concern for a period of one year after the date that our audited consolidated financial statements are issued.
The Bayer License Agreement obligates us to make significant milestone and royalty payments, some of which would be triggered prior to any commercialization of our product candidates, and we may not be able to raise additional capital or enter into strategic alliances at levels sufficient to pay these amounts when due.
We will be responsible for significant future contingent payments and royalties under the Bayer License Agreement upon the achievement of certain development, regulatory, and sales milestone events, some of which could occur prior to any commercialization of our product candidates. In such event, we would be required to make certain of these payments prior to the time at which we are able to generate sufficient revenue, if any, from commercial sales of any of our product candidates. Accordingly, we would need to obtain substantial additional funding or enter into strategic alliances in order to make these payments, and there can be no assurance that we will have the funds necessary to make such payments, be able to obtain the necessary funding on acceptable terms or at all, or enter into strategic alliances at levels sufficient to pay these amounts or at all. If we are unable to pay these amounts, we would be in breach of the Bayer License Agreement, which if not cured would give Bayer the right to terminate the agreement or seek other remedies, which would have a significant and effect on our business and our ability to develop and commercialize our current product candidates, raise capital, or continue our operations.
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We may never achieve or sustain profitability.
We do not know when or whether we will become profitable. To date, we have not commercialized any products or generated any revenues from the sale of products. We do not expect to generate any product revenues in the near term. To become and remain profitable, we must succeed in developing, obtaining regulatory approval for, and partnering and/or commercializing one or more of our product candidates. This will require us to be successful in a range of challenging activities, including completing clinical trials of our product candidates, obtaining regulatory approval for any product candidates that successfully complete clinical trials, establishing commercial alliances and/or commercialization capabilities for any approved products, and achieving market acceptance for any approved products. We may never succeed in these activities. Even if we succeed in these activities, we may never generate revenue in an amount sufficient to achieve or sustain .
Risks Related to Regulatory Approval and Other Legal Compliance Matters
We may be unable to obtain U.S. or foreign regulatory approvals and, as a result, may be unable to partner or commercialize our product candidates.
Our product candidates are subject to extensive governmental regulations relating to, among other things, research, testing, development, manufacturing, safety, dose selection and optimization, efficacy, approval, recordkeeping, reporting, labeling, storage, packaging, advertising, and promotion, pricing, marketing, and distribution. Rigorous preclinical testing and clinical trials and an extensive regulatory approval process must be successfully completed in the United States and in many foreign jurisdictions before a new drug can be marketed. Satisfaction of these and other regulatory requirements is costly, time consuming, uncertain, and subject to unanticipated delays. We cannot provide any assurance that any or our product candidates will progress through all required testing and obtain the necessary regulatory approvals.
We have not conducted, managed, or completed large-scale or pivotal clinical trials nor managed the regulatory approval process with the FDA or any other regulatory authority with respect to our product candidates. The time required to obtain approvals from the FDA and other regulatory authorities is unpredictable and requires successful completion of extensive clinical trials which typically takes many years, depending upon the type, complexity, and novelty of the product candidate. The standards that the FDA and its foreign counterparts use when evaluating clinical trial data can and often does change during drug development, which makes it difficult to predict with any certainty how they will be applied.
Any delay or failure in seeking or obtaining required approvals for a product candidate would have a material and adverse effect on our ability to generate revenue from such product candidate. Furthermore, any regulatory approval to market a product candidate may be subject to significant limitations on the approved uses or indications for which such product candidate may be marketed or the labeling or other restrictions of such product candidate. In addition, the FDA has the authority to require a Risk Evaluation and Mitigation Strategy as part of approving an NDA or BLA, or after approval, which may impose further requirements or restrictions on the distribution or use of an approved product candidate. These limitations and restrictions may significantly limit the size of the market for a product candidate and affect reimbursement by third-party payors.
We are also subject to numerous foreign regulatory requirements governing, among other things, the conduct of clinical trials, manufacturing and marketing authorization, pricing, and third-party reimbursement. The foreign regulatory approval process varies among countries, and generally includes most if not all of the risks associated with FDA approval as well as risks attributable to the satisfaction of local regulations in foreign jurisdictions. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval. Any delay or failure in obtaining foreign regulatory approval for a product candidate would have a material and adverse effect on our ability to generate revenue from such product candidate in that foreign jurisdiction.
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Our product candidates may cause adverse events, toxicities, or other undesirable side effects when used alone or in combination with other approved products or investigational new drugs that may result in a safety profile that could inhibit regulatory approval, prevent market acceptance, limit their commercial potential, or result in significant negative consequences.
If our product candidates are associated with a high and unacceptable severity and prevalence of side effects or unexpected characteristics in preclinical studies or clinical trials when used alone or in combination with other approved products or investigational new drugs, we may need to interrupt, delay, or abandon their development or limit development to more narrow uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe, or more acceptable from a risk-benefit perspective. Such results could result in a more restrictive label, implementation of a Risk Evaluation and Mitigation Strategy or the delay or denial of regulatory approval by the FDA or comparable foreign regulatory authorities. Treatment-related side effects could also affect patient recruitment or the ability of enrolled subjects to complete the trial or result in potential product liability . Any of these occurrences could result in a more restrictive label or the or of regulatory approval by the FDA or comparable foreign regulatory authorities and may prevent us from or maintaining market acceptance of the affected product candidate, which could our business.
If significant adverse events or other side effects are observed in any of our clinical trials, we may have difficulty recruiting patients to such clinical trials, patients may drop out of such clinical trials, or we may be required to abandon the clinical trials or our development efforts of that product candidate altogether. We, the FDA, or other comparable regulatory authorities or an Institutional Review Board may suspend clinical trials of a product candidate at any time for various reasons, including a belief that subjects in such trials are being exposed to unacceptable health risks or adverse side effects. Some potential therapeutics developed in the biotechnology industry that initially showed therapeutic promise in early-stage trials have later been found to cause side effects that prevented their further development. Even if the side effects do not preclude the product candidate from obtaining or maintaining marketing approval, undesirable side effects may inhibit market acceptance due to its tolerability versus other therapies. Any of these developments could materially our business.
Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of such product candidates in other jurisdictions.
Obtaining and maintaining regulatory approval of any of our product candidates in one jurisdiction does not guarantee that we would be able to obtain or maintain regulatory approval in any other jurisdiction. A failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the approval process in others. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from those in the United States, including additional preclinical studies or clinical trials, as clinical trials conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In many jurisdictions outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. Obtaining foreign regulatory approvals and establishing and maintaining compliance with foreign regulatory requirements could result in significant delays, difficulties, and costs. If we fail to comply with the regulatory requirements in international markets or fail to receive applicable marketing approvals, our target market will be reduced, and our business would be .
Even if our product candidates were to receive regulatory approval, they would be subject to significant post-marketing regulatory requirements and oversight.
Any regulatory approvals we might receive for our product candidates would require the submission of reports to regulatory authorities and surveillance to monitor the safety and efficacy of those product candidates, may contain significant limitations related to use restrictions, warnings, precautions, or contraindications, and may include burdensome post-approval studies or risk management requirements. For example, the FDA may require a Risk Evaluation and Mitigation Strategy in order to approve our product candidates, which could entail
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requirements for a medication guide, physician training and communication plans, or additional elements to ensure safe use, such as restricted distribution methods, patient registries, and other risk minimization tools. In addition, if the FDA or foreign regulatory authorities approve any of our product candidates, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion, import, export, and recordkeeping for our product candidates would be subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing information, reports, and registration, as well as on-going compliance with cGMP requirements and good clinical practices for any post-approval clinical trials. In addition, manufacturers of drug products and their facilities are subject to continual review and periodic, unannounced inspections by the FDA and other regulatory authorities for compliance with cGMP regulations and standards. If we or a regulatory agency discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facilities where the product is manufactured, a regulatory agency may impose restrictions on that product, the manufacturing facility, or us, including requiring or withdrawal of the product from the market or of manufacturing. In addition, to comply with FDA and other comparable foreign regulatory requirements could subject the Company to administrative or judicially imposed sanctions, which could our business.
There can be no assurance that we will be able to pursue accelerated or other expedited approval of any of our product candidates, and the failure to obtain such accelerated or other expedited approval would result in a longer time period to commercialization of such product candidates, which could increase the cost of development and harm our competitive position in the marketplace.
Under the accelerated approval program, the FDA may grant expedited approval to a product candidate designed to treat a serious or life-threatening condition that provides meaningful therapeutic benefit over available therapies upon a determination that such product candidate has an effect on a surrogate endpoint or intermediate clinical endpoint that is reasonably likely to predict clinical benefit. The FDA considers a clinical benefit to be a positive therapeutic effect that is clinically meaningful in the context of a given disease, such as irreversible morbidity or mortality. The accelerated approval pathway may be used in cases in which the advantage of a new drug over available therapy may not be a direct therapeutic advantage but is a clinically important improvement from a patient and public health perspective. If granted, accelerated approval is usually contingent on the sponsor’s agreement to conduct, in a diligent manner, additional post-approval confirmatory studies to verify and describe the drug’s clinical . If such post-approval studies to confirm the drug’s clinical , the FDA may withdraw its approval of the drug.
There can be no assurance that we will have the opportunity, or decide, to pursue accelerated approval or any other form of expedited development, review, or approval. Furthermore, even if we were to submit an application for accelerated approval or receive an expedited regulatory designation (e.g., breakthrough therapy designation) for any of our product candidates, there can be no assurance that such submission or application would be accepted or that any expedited development, review, or approval would be granted on a timely basis or at all. The FDA or other comparable foreign regulatory authorities could also require us to conduct further studies prior to considering our application or granting approval of any type. A failure to obtain accelerated approval or any other form of expedited development, review, or approval for our product candidates would result in a longer time period to commercialization of such product candidates, could increase the cost of development of such product candidates, and could harm our competitive position in the marketplace.
We may be required to defend lawsuits or pay damages in connection with the alleged or actual violation of healthcare statutes such as fraud and abuse laws, and our corporate compliance programs cannot guarantee that we will always be in compliance with all relevant laws and regulations.
In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal healthcare laws, commonly referred to as “fraud and abuse” laws, have been applied in recent years to restrict certain marketing practices in the pharmaceutical industry. Other jurisdictions, such as Europe, have
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similar laws. These laws include false claims and anti-kickback statutes. Anti-kickback laws make it illegal for a manufacturer to offer or pay any remuneration in exchange for, or to induce, the referral of business, including the purchase of a product. False claims laws prohibit anyone from knowingly and willingly presenting, or causing to be presented, for payment to third-party payors, including Medicare and Medicaid, claims for reimbursed products or services that are false or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items or services.
Our activities relating to our product candidates will be subject to scrutiny under these laws and regulations. It may be difficult to determine whether or not our activities comply with these complex legal requirements, and our corporate compliance programs cannot guarantee that we will always be in compliance with all relevant laws and regulations. Violations are punishable by significant criminal and civil fines and other penalties, as well as the possibility of exclusion of the affected product from coverage under governmental healthcare programs, including Medicare and Medicaid. If U.S. or foreign governments were to investigate or make allegations against us or any of our employees, or sanction or convict us or any of our employees, for violations of any of these legal requirements, this could have a material adverse effect on our business.
Our employees, agents, contractors, or collaborators may engage in misconduct or other improper activities.
We cannot ensure that our corporate compliance controls, policies, and procedures will in every instance protect us from acts committed by our employees, agents, contractors, or collaborators, including contract research organizations, electronic data capture companies, data management companies, contract clinical research associates, medical institutions, clinical investigators, contract laboratories, and other third parties, that would violate the laws or regulations of the jurisdictions in which we operate, including healthcare, employment, foreign corrupt practices, environmental, competition, and privacy laws and regulations. Such improper actions could subject us to civil or criminal investigations, and civil penalties, and could adversely impact our business.
For example, we are subject to the Foreign Corrupt Practices Act and similar anti-bribery or anti-corruption laws, regulations, and rules of other countries in which we operate. The Foreign Corrupt Practices Act generally prohibits offering, promising, giving, or authorizing others to give, anything of value, either directly or indirectly, to a non-U.S. government official in order to influence official action or otherwise obtain or retain business. The Foreign Corrupt Practices Act also requires public companies to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls. Our business is heavily regulated and therefore involves significant interaction with public officials, including officials of non-U.S. governments. Additionally, in many other countries, the healthcare providers who prescribe pharmaceuticals are employed by their government, and the purchasers of pharmaceuticals are government entities, and our dealings with these prescribers and purchasers are therefore subject to regulation under the Foreign Corrupt Practices Act.
There is no certainty that our employees, agents, contractors, or collaborators, or those of our affiliates, will comply with all applicable laws and regulations, particularly given the high level of complexity of these laws. While we have implemented codes of conduct and other policies and controls to mitigate the risk of non-compliance with anti-corruption and anti-bribery laws, it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from government investigations or other actions stemming from a failure to comply with these laws or regulations. Violations of such laws and regulations could result in, among other things, administrative, civil and criminal fines and sanctions us, our directors, officers, or employees, the of our facilities, requirements to obtain export licenses, exclusion from participation in federal healthcare programs including Medicare and Medicaid, implementation of compliance programs, oversight and reporting obligations, and prohibitions on the conduct of our business. Any such could include prohibitions on our ability to offer our products in one or more countries and could materially our business.
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Risks Related to Our Dependence on Third Parties
Our manufacturing processes are complex, and we do not have our own manufacturing capabilities and rely on third-party manufacturers for the development, clinical trials, and commercialization of any product candidate we may develop or sell.
The processes for manufacturing our product candidates, particularly our bioconjugation candidates, are very complex and take significant time and resources to develop and implement. In addition, our supply chain of raw materials, consumables, intermediates, drug substances, and drug products for use in our clinical trials and, if approved by regulatory authorities, commercialization rely on a worldwide supply chain. We do not operate our own manufacturing facilities or have our own manufacturing capabilities for clinical or commercial production of our product candidates under development and rely on third-party manufacturers. Third-party manufacturers that have the capabilities, processes, and expertise that we need for our product candidates and that can meet our quality standards may be difficult to identify or retain, and even if retained, such third-party manufacturers may not be able to perform the manufacturing services we require within our planned timeframes. We anticipate relying on a limited number of third-party manufacturers until such time, if ever, as we decide to expand our operations to include manufacturing capabilities. Certain of our key third-party manufacturers are located in China, and the United States and China are currently experiencing geopolitical tensions that could result in legislation or government intervention that adversely impacts our ability to manufacture in China, which could necessitate transitioning such manufacturing to other third-party manufacturers and increase costs, manufacturing, and lengthen timelines. In addition, the European Union, which is experiencing, and could continue to experience, the impact of the wars in Ukraine and Israel on supply chains, and other economic matters, including inflation. Such third-party manufacturers may implement, and certain of such manufacturers have implemented, price increases that could impact our ability to afford their services.
If the FDA or comparable foreign regulatory authorities approve any of our product candidates for commercial sale, we would need to manufacture them in larger quantities, and we may not be able to successfully increase the manufacturing capacity for any of our product candidates in a timely or economic manner or at all. Until such time, if any, that we directly control the manufacturing of our product candidates, we will have limited control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance, and qualified personnel, and we will be dependent on our third-party manufacturing partners for compliance with current cGMP requirements for the manufacture of our product candidates. If our third-party manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or comparable foreign regulatory authorities, we may not be able to secure or maintain regulatory approval for our product candidates. In addition, if any third-party manufacturer makes improvements in the manufacturing process for our product candidates, we may not own, or may have to share, the intellectual property rights to such improvements.
Any inability to identify and retain third-party manufacturers on a cost-effective basis, any performance failure on the part of such manufacturers, or any disruption in our supply chain as a result of economic uncertainty, political unrest, the wars in Ukraine and Israel, trade disputes, natural disasters, pandemics or epidemics, climate change, or otherwise, would harm our business.
If we fail to enter into and maintain successful collaborative arrangements or strategic alliances for our product candidates, our ability to develop and commercialize such product candidates will be adversely affected.
An important element of our strategy for developing, manufacturing, and commercializing our product candidates is entering into collaborative arrangements or strategic alliances with pharmaceutical companies, research institutions, or other industry participants to advance our programs. We face significant competition in seeking such collaborations and alliances. We may not be able to negotiate such collaborations or alliances on acceptable terms if at all. In addition, such collaborations or alliances may be unsuccessful. If we fail to create and maintain suitable collaborations or alliances, our ability to develop and commercialize such product
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candidates will be adversely affected. In addition, these kinds of collaborative arrangements and strategic alliances may place certain aspects of the development of our product candidates outside of our control, require us to relinquish important rights, limit our commercial opportunities, or otherwise be on terms unfavorable to us.
Dependence on collaborative arrangements or strategic alliances will subject us to several risks, including the risks that:
we may not be able to control the amount and timing of resources that our collaborators may devote to our product candidates;
our collaborators may experience financial difficulties;
we may be required to relinquish important rights such as marketing and distribution rights;
business combinations or significant changes in a collaborator’s business strategy may adversely affect its willingness or ability to complete its obligations under any arrangement;
a collaborator could independently move forward with a competing product candidate developed either independently or in collaboration with others, including our competitors; and
collaborative arrangements are often terminated or allowed to expire, which would delay development and may increase the cost of developing our product candidates.
Changes in methods of product candidate manufacturing or formulation may result in additional costs or delay.
As product candidates proceed through preclinical and clinical trials towards potential approval, and commercialization, various aspects of the development program, such as manufacturing methods and formulation, may be altered along the way to optimize processes and results or due to other factors. Such changes carry the risk that they will not achieve these intended objectives. Any of these changes could cause our product candidates to perform differently and affect the costs, results, or timing of preclinical or clinical trials conducted with the altered materials. Such changes may also require additional testing, FDA notification, or FDA approval, which could increase our expenses and harm our business.
Our applications for regulatory approval could be delayed or denied due to problems with studies conducted before we in-licensed the rights to some of our product candidates.
We currently license all of our product candidates from Bayer pursuant to the Bayer License Agreement and rely to a certain extent upon previous development conducted by Bayer or other third parties over whom we had no control and before we in-licensed such product candidates. To receive regulatory approval of a product candidate, we must present all relevant data and information obtained during its development, including research conducted prior to our licensure of such product candidate. Although we are not currently aware of any such problems, any problems that emerge with preclinical or clinical development conducted prior to our in-licensing may affect our ability to document prior development and conduct clinical trials, which could delay, limit, or prevent regulatory approval for our product candidates.
Due to our reliance in part on contract research organizations and other third parties to conduct clinical trials, we may be unable to directly control the timing, conduct, and expense of all aspects of our clinical trials.
We rely in part on contract research organizations, electronic data capture companies, data management companies, contract clinical research associates, medical institutions, clinical investigators, contract laboratories, and other third parties in conducting clinical trials and obtaining regulatory approvals for our product candidates. If these third parties do not successfully carry out their contractual duties or regulatory obligations or meet expected deadlines, need to be replaced, or the quality or accuracy of the data they obtain is compromised due to
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their failure to adhere to our clinical protocols or regulatory requirements or for other reasons, our clinical trials could be extended, delayed, suspended, or terminated, and we may not be able to obtain regulatory approval for or successfully partner and/or commercialize our product candidates.
Risks Related to Our Intellectual Property
If we fail to comply with our obligations under any license, collaboration, or other agreement, including the Bayer License Agreement, we may be required to pay damages and could lose intellectual property rights that are necessary for developing and protecting our product candidates.
Pursuant to the Bayer License Agreement, we have been granted a license from Bayer to certain intellectual property rights covering our current product candidates. If, for any reason, our licenses under the Bayer License Agreement are terminated or we otherwise lose those rights, our business will be significantly and adversely affected. The Bayer License Agreement imposes, and any future collaboration agreements or license agreements we may choose to enter are likely to impose, various development, commercialization, funding, milestone payment, royalty, diligence, sublicensing, patent prosecution and enforcement, or other obligations on us. If we breach any material obligations, or use the intellectual property licensed to us in an unauthorized manner, we may be required to pay damages, and Bayer and any other licensor, may have the right to terminate the license, which could result in us being unable to develop, manufacture, and sell products that are covered by the licensed technology or having to negotiate new or reinstated licenses on less terms, or a competitor to access to the licensed technology.
Moreover, disputes may arise regarding intellectual property subject to a licensing agreement, including:
the scope of rights granted under the license agreement and other interpretation-related issues;
the extent to which our product candidates, technology, and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement;
the sublicensing of patent and other rights under our third-party relationships;
our diligence obligations under the license agreement and what activities satisfy those diligence obligations;
the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by us, our licensors, and our partners; and
the priority of invention of patented technology.
In addition, the Bayer License Agreement under which we license our core intellectual property and technology is complex, and certain provisions in the agreement may be susceptible to multiple interpretations. The resolution of any disagreement that may arise as a matter of contract interpretation could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our financial or other obligations under that agreement, either of which could have a material adverse effect on our business and prospects. Moreover, if disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected product candidate, which could have a material adverse effect on our business and prospects.
Our business depends on our ability to protect our intellectual property and our proprietary technologies.
Our business depends in part on our ability to obtain and maintain intellectual property for our product candidates, proprietary technologies, and their uses as well as our ability to operate without infringing upon the proprietary rights of others. We generally seek to protect our proprietary position by filing patent applications in the U.S. and abroad related to our product candidates, technologies, and their uses that are important to our business. We also seek to protect our proprietary position by acquiring or in-licensing relevant issued patents or pending applications from third parties.
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Pending patent applications cannot be enforced against third parties practicing the technology claimed in such applications unless, and until, patents issue from such applications, and then only to the extent the issued claims cover the technology. There can be no assurance that our patent applications or the patent applications of our licensors will result in additional patents being issued or that issued patents will afford sufficient protection against competitors with similar technology, nor can there be any assurance that the patents issued will not be infringed, designed around, or invalidated by third parties.
Even issued patents may later be found invalid or unenforceable or may be modified or revoked in proceedings instituted by third parties before various patent offices or in courts. The degree of future protection for our and our licensors’ proprietary rights is uncertain. Only limited protection may be available and may not adequately protect our rights or permit us to gain or keep any competitive advantage. These uncertainties and/or limitations in our ability to properly protect the intellectual property rights relating to our product candidates could have a material adverse effect on our business and prospects.
Although we have licensed issued patents that cover certain of our product candidates and technologies, we do not have issued patents covering all our product candidates and technologies, and we may need additional issued patents covering such product candidates and technologies. We cannot be certain that the claims in any of our U.S. pending patent applications, corresponding international patent applications, or those of our licensors, will be considered patentable by the USPTO, courts in the U.S., or the patent offices and courts in foreign countries, nor can we be certain that the claims in our issued patents or our licensor’s issued patents will not be found invalid or unenforceable if challenged.
The patent application process is subject to numerous risks and uncertainties, and there can be no assurance that we or any of our potential future collaborators will be successful in protecting our product candidates by obtaining and defending patents. These risks and uncertainties include the following:
the USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment, and other provisions during the patent process, the noncompliance with which can result in abandonment or lapse of a patent or patent application, and partial or complete loss of patent rights in the relevant jurisdiction;
patent applications may not result in any patents being issued;
patents may be challenged, invalidated, modified, revoked, circumvented, found to be unenforceable, or otherwise may not provide any competitive advantage;
our competitors, many of whom have substantially greater resources than we do and many of whom have made significant investments in competing technologies, may seek, or may have already obtained, patents that will limit, interfere with, or eliminate our ability to make, use, and sell our potential product candidates;
there may be significant pressure on the U.S. government and international governmental bodies to limit the scope of patent protection both inside and outside the U.S. for disease treatments that prove successful as a matter of public policy regarding worldwide health concerns; and
countries other than the U.S. may have patent laws less favorable to patentees than those upheld by U.S. courts, allowing foreign competitors a better opportunity to create, develop, and market competing product candidates.
The patent prosecution process is also expensive and time-consuming, and we and our licensors may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner or in all jurisdictions where protection may be commercially advantageous. It is also possible that we or our licensors will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection.
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In addition, although we enter non-disclosure and confidentiality agreements with parties who have access to patentable aspects of our research and development output, such as our employees, outside scientific collaborators, contract research organizations, third-party manufacturers, consultants, advisors, and other third parties, any of these parties may breach such agreements and disclose such output before a patent application is filed, thereby jeopardizing our ability to obtain patent protection.
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 intellectual property may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
If the scope of any patent protection we obtain is not sufficiently broad, or if we lose any of our patent protection, our ability to prevent our competitors from commercializing similar or identical product candidates would be adversely affected.
The patent position of biopharmaceutical companies generally is highly uncertain, involves complex legal and factual questions, and has been the subject of much litigation in recent years. As a result, the issuance, scope, validity, enforceability, and commercial value of our patent rights are highly uncertain. Our pending and future patent applications and those of our licensors may not result in patents being issued which protect our product candidates or which effectively prevent others from commercializing competitive product candidates.
In addition, the coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be reinterpreted after issuance. Even if patent applications we own or in-license currently or in the future issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors or other third parties from competing with us, or otherwise provide us with any competitive advantage. Any patents that we own or in-license may be challenged or circumvented by third parties or may be narrowed or invalidated as a result of challenges by third parties. Consequently, we do not know whether our product candidates will be protectable or remain protected by valid and enforceable patents. Our competitors or other third parties may be able to circumvent our patents or the patents of our licensors by developing similar or alternative technologies or products in a non-infringing manner which could materially adversely affect our business and prospects.
Furthermore, our ability to obtain and maintain valid and enforceable patents also depends on whether the differences between our technology and the prior art allow our technology to be patentable over the prior art. Since patent applications in the United States and most other countries are confidential for a period after filing, we may not be certain that we or our licensors are the first to file any patent application related to our drug product candidates or technologies, potentially having a material adverse effect on our business and prospects. This will require us to be to be aware of the possibility of adverse determinations in any such submissions or proceedings, potentially reducing the scope or enforceability of, or invalidate, our patent rights, which would adversely affect our competitive position.
The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our patents or the patents of our licensors may be challenged in the courts or patent offices in the U.S. and abroad. We may be subject to a third-party pre-issuance submission of prior art to the USPTO, or become involved in opposition, derivation, revocation, reexamination, post-grant review and inter partes review, or other similar proceedings challenging our owned patent rights. An adverse determination in any such submission, proceeding, or litigation could reduce the scope of, or invalidate or render unenforceable, our patent rights, allow third parties to commercialize our product candidates, and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights. Moreover, our patents or the patents of our licensors may become subject to post-grant challenge proceedings, such as in a foreign patent office, that our priority of or other features of patentability with respect to our patents and patent applications and those of our licensors. Such may result in
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of patent rights, loss of exclusivity, 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 technology and products, or limit the duration of the patent protection of our product candidates. Such proceedings also may result in substantial cost and require significant time from our scientists and management, even if the eventual outcome is favorable to us. In addition, if the breadth or strength of protection provided by our patents and patent applications or the patents and patent applications of our licensors is threatened, regardless of the outcome, it could dissuade companies from collaborating with us to license, develop, or commercialize current or future product candidates.
The validity, scope, and enforceability of any patents that cover a biologic subject to approval by the FDA via a BLA, such as VIP943 and VIP924, can be challenged by third parties.
For biologics subject to approval by the FDA via a BLA, such as VIP943 and VIP924, the BPCIA provides a mechanism for one or more third parties to seek FDA approval to manufacture or sell biosimilar or interchangeable versions of brand name biological products. If a biosimilar applicant successfully challenges our asserted patent claims, it could result in the invalidation of, or render unenforceable, some or all our relevant patent claims or result in a finding of non-infringement. Such litigation or other proceedings to enforce or defend our intellectual property rights are complex in nature, may be very expensive and time-consuming, and may result in unfavorable results that could limit our ability to prevent third parties from competing with our biological product candidates.
We may be involved in lawsuits to protect or enforce our patents or our licensors’ patents, which could be expensive, time consuming, and unsuccessful. Further, our issued patents or our licensors’ patents could be found invalid or unenforceable if challenged in court.
Competitors may infringe our intellectual property rights. To prevent infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. In addition, in a patent infringement proceeding, a court may decide that a patent we own or in-license is not valid, is unenforceable, or is not infringed. If we or any of our potential future collaborators were to initiate legal proceedings against a third party to enforce a patent directed at one of our product candidates, the defendant could counterclaim that our patents or the patents of our licensors are invalid or unenforceable in whole or in part.
Third parties may also raise similar invalidity claims before the USPTO or patent offices abroad, even outside the context of litigation, and prior art could render our patents or our licensors’ patents invalid. Such mechanisms include re-examination, post-grant review, inter partes review, derivation proceedings, and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). Such proceedings could result in the revocation of, cancellation of or amendment to our patents or our licensors’ patents in such a way that they no longer cover our current or future product candidates, technologies, or VersAptx platform. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we and the patent examiner were during . There is also no assurance that there is not prior art of which we are aware, but which we do not believe affects the validity or enforceability of a claim in our patents and patent applications or the patents and patent applications of our licensors, which may, nonetheless, ultimately be found to affect the validity or enforceability of a claim.
If a third party were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our current or future product candidates, technologies, or VersAptx platform. In addition, if the breadth or strength of protection provided by our patents and patent applications or the patent and patent applications of our licensors is threatened, it could dissuade companies from collaborating with us to license, develop, or commercialize current or future product candidates. Such a loss of patent protection would have a material adverse impact on our business and prospects. Moreover, the issuance of a patent does not necessarily give us the right to practice the patented invention. Third parties may have blocking
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patents that could prevent us from marketing our own patented products and practicing our own patented technologies.
Even if resolved in our favor, litigation or other legal proceedings relating to our intellectual property rights may cause us to incur significant expenses and could distract our technical and management personnel from their normal responsibilities. In addition, 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. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could compromise our ability to compete in the marketplace. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation or other legal proceedings relating to our intellectual property rights, there is a risk that some of our confidential information could be compromised by disclosure during this type of or other proceedings.
Intellectual property litigation may lead to unfavorable publicity that harms our reputation and causes the market price of our common stock to decline.
During any intellectual property litigation, there could be public announcements of the initiation of the litigation as well as results of hearings, rulings on motions, and other interim proceedings in the litigation. If securities analysts or investors regard these announcements as negative, the perceived value of our existing products, programs, or intellectual property could be diminished. Accordingly, the market price of shares of our common stock may decline. Such announcements could also harm our reputation or the market for our future products, which could have a material adverse effect on our business and prospects.
Derivation proceedings may be necessary to determine priority of inventions, and an unfavorable outcome may require us to cease using the related technology or to attempt to license rights from the prevailing party.
Derivation proceedings provoked by third parties or brought by us or declared by the USPTO may be necessary to determine the priority of inventions with respect to our patents or patent applications or those of our licensors. An unfavorable outcome could require us to cease using relevant inventions or to attempt to license rights from the prevailing party. Our business could be harmed if the prevailing party would not offer us a license on commercially reasonable terms. Our defense of derivation proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. In addition, the uncertainties associated with such proceedings could have a material adverse effect on our ability to raise the funds necessary to continue clinical trials or research programs, license necessary technology from third parties, or enter into development or manufacturing partnerships that would help us bring our product candidates to market.
Changes in U.S. patent law, or laws in other countries, could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.
Obtaining and enforcing patents in the pharmaceutical industry involve a high degree of technological and legal complexity. Changes in either the patent laws or in the interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property, increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents and weaken our ability to obtain new patents or to enforce our existing patents and the patents we might obtain or license in the future.
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We may be subject to claims challenging the inventorship or ownership of our licensor’s patents, our patents and other intellectual property.
We may also be subject to claims that former employees or other third parties have an ownership interest in our licensor’s patents, our patents, or other intellectual property. Litigation or other proceedings may be necessary to defend against these and other claims challenging inventorship or ownership. For example, because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in United States federal courts necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action. If we fail in defending any such claims, in addition to paying monetary , we may intellectual property rights. Such an outcome could have a material effect on our business and prospects. Even if we are in such , could result in substantial costs and to management and other employees.
Patent terms may not protect our competitive position on our product candidates for an adequate amount of time.
Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Even if patents covering our product candidates are obtained, once the patent life has expired, we may be open to competition from products of third parties. 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 patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
If we do not obtain patent term extension for our product candidates, our business may be materially harmed.
Depending upon the timing, duration and specifics of FDA marketing approval of our product candidates, one or more of our patents or in-licensed patents may be eligible for limited patent term restoration under the Drug Price Competition and Patent Term Restoration Act of 1984. This Act permits a patent restoration term of up to five years as compensation for patent term lost during product development and FDA regulatory review. A maximum of one patent may be extended per FDA approved product as compensation for the patent term lost during FDA regulatory review. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, and only those claims covering such approved drug product, a method for using it, or a method for manufacturing it may be extended. Patent term extension may also be available in certain foreign countries upon regulatory approval of our product candidates. However, we may not be granted an extension because of, for example, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents, or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. If we are to obtain patent term extension or restoration or the term of any such extension is less than we request, our competitors may obtain approval of competing products following our patent expiration, and our revenue could be reduced, possibly materially. Further, if this occurs, our competitors may take of our investment in development and trials by referencing our clinical and preclinical data to launch their product earlier than might otherwise be the case.
We may not be able to protect our intellectual property rights throughout the world.
Filing, prosecuting, and defending patents in all countries throughout the world can be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property
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rights to the same extent as the laws of the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as in the United States. These products may compete with our product candidates, and our patents, the patents of our licensors, or other intellectual property rights may not be effective or sufficient to prevent them from competing.
The requirements for patentability differ regionally. Some countries limit the enforceability of patents against government agencies or government contractors, while others have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. If we are forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired, and our business and prospects may be adversely affected.
The standards applied by the USPTO and foreign patent offices in granting patents are not always applied uniformly or predictably. As such, we do not know the degree of future protection that we will have on our technologies and product candidates. While we will endeavor to protect our technologies and product candidates with intellectual property rights such as patents, the process of obtaining patents is time consuming, expensive, and unpredictable. Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of some countries do not favor patent enforcement and other intellectual property protection, which could make it difficult for us to stop infringement of our patents or our licensors’ patents or marketing of competing products in violation of our proprietary rights.
Beginning in March 2023, European patent applicants have the option of participating in the Unitary Patent System (“UPS”), subject to the jurisdiction of the Unitary Patent Court (“UPC”), on an issued patent-by-issued patent, or patent application-by-patent application basis. This new system is a significant change in European patent practice, and the UPC is a new court system, with no established legal precedent, resulting in uncertainty for patent holders and applicants. We will consider, case-by-case, with each individual patent or application, the risks and benefits of participating in the UPS. We will continue to monitor the evolution of the UPS and UPC, especially over the course of its seven-years’ transitional period as the new system and the new court gains footing.
Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents or the patents of our licensors at risk of not issuing or being invalidated or interpreted narrowly and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
Geopolitical actions in the United States and in foreign countries could increase the uncertainties and costs surrounding the prosecution, maintenance, or enforcement of our patent applications or issued patents or those of any current or future licensors. For example, United States and foreign government actions related to Russia’s invasion of Ukraine have limited and prevented the filing, prosecution, and maintenance of patent applications and issued patents in Russia, and actions by the Russian government allow Russian companies and individuals to exploit inventions owned by patentees from the United States without consent or compensation. These actions could adversely affect our business.
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Obtaining and maintaining our patent protection depends on compliance with various procedural, documentary, fee payment, and other requirements imposed by regulations and governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
Periodic maintenance fees, renewal fees, annuity fees, and various other governmental fees on patents and applications will be due to the USPTO and various foreign patent offices at many points over the lifetime of our licensor’s patents and applications and those that we own. We rely on our outside patent annuity service to pay these fees when due. Additionally, the USPTO and various foreign patent offices require compliance with many procedural, documentary, fee payment, and other similar provisions during the patent application process. We employ reputable law firms and other professionals to help us comply, and in many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with rules applicable to the relevant jurisdiction. However, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. If such an event were to occur, it could have a material adverse effect on our business.
If our trademarks and trade names are not adequately protected, we may not be able to build name recognition in our markets of interest, and our business may be adversely affected.
We use registered and unregistered trademarks or trade names to brand and market ourselves and our products and technologies. Our trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks and trade names, which we need to build name recognition among potential business partners or customers in our markets of interest. At times, competitors may adopt trade names or trademarks like ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names. Our efforts to enforce or protect our proprietary rights related to trademarks and trade names may be ineffective and could result in substantial costs and of resources. If we are to enforce and protect our trademarks and tradenames and establish name recognition based on our trademarks and trade names, we may not be to compete effectively, and our business could be affected.
If we are unable to protect the confidentiality of our proprietary information, our business and competitive position would be harmed.
We rely on the protection of our proprietary information, including our technologies and know-how, to maintain our competitive position. Although we have taken steps to protect such information, including entering confidentiality agreements with third parties and confidential information and inventions agreements with employees, consultants, and advisors, we cannot provide any assurances that these parties would not breach such agreements and disclose our proprietary information, and we may not be able to obtain adequate remedies in the event of such breaches. Enforcing claims that a party illegally used or disclosed such information is difficult, expensive, and time-consuming, and the outcome is unpredictable. Moreover, third parties may obtain or come upon this or similar information independently, and we would have no right to prevent them from using that information to compete with us. If any of these events occurs or if we otherwise lose such protection, the value of our proprietary information may be reduced, and our competitive position would be .
We may be subject to claims that we or our employees, agents, or consultants have wrongfully used or disclosed alleged confidential information or trade secrets of third parties.
We have entered and may enter in the future into non-disclosure and confidentiality agreements to protect the proprietary positions of third parties, such as outside scientific collaborators, contract research organizations, third-party manufacturers, consultants, advisors, potential partners, and other third parties. In addition, we may engage employees, agents, and consultants to assist us in the development of our product candidates who were
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previously employed at, or have previously provided or are currently providing services to, other pharmaceutical companies, including our competitors or potential competitors. We may become subject to claims or litigation where a third party asserts that we or our employees, agents, or consultants used or disclosed trade secrets or other information proprietary to such third parties. Defense of such matters, regardless of their merit, could involve substantial litigation expense and be a diversion from our business, and we cannot predict whether we would prevail in any such actions. In addition, third parties making claims against us may be able to sustain the costs of complex intellectual property litigation more effectively than we can because they have substantially greater resources. Moreover, intellectual property litigation, regardless of its outcome, may cause negative publicity, result in the disclosure of our confidential information in discovery, and impact our ability to market or otherwise commercialize our product candidates and technologies. to any such claim could subject us to significant liability for monetary or prevent or our developmental and commercialization efforts, which could affect our business and prospects. Even if we are in such , such could result in substantial costs and be a to our management team and other employees.
We may need to license intellectual property from third parties, and such licenses may not be available on commercially reasonable terms or at all.
Third parties may hold intellectual property, including patent rights, that are important or necessary to the development or commercialization of our product candidates. in which case we would be required to obtain a license from such third parties on commercially reasonable terms. Such a license may not be available, or it may not be available on commercially reasonable terms. Our business would be harmed if we are not able to obtain such a license on commercially reasonable terms or at all or if a non-exclusive license is offered and our competitors gain access to the same intellectual property rights. In addition, even if we are able to obtain such a license, we may not have control over, nor the ability to provide input with respect to, the prosecution, maintenance, or enforcement of the patents that we license, and our licensors may fail to take the steps that we believe are necessary or desirable in order to obtain, maintain, defend and enforce the licensed patents.
Our business depends significantly on our ability to operate without infringing the patents and other proprietary rights of third parties. Claims by third parties that we infringe their proprietary rights may result in liability for damages or prevent or delay our developmental and commercialization efforts.
Our commercial success depends in part on avoiding infringement of the patents and proprietary rights of third parties. However, our research, development, and commercialization activities may be subject to claims that we infringe or otherwise violate patents or other intellectual property rights owned or controlled by third parties. Other entities may have or obtain patents or proprietary rights that could limit our ability to make, use, sell, offer for sale, or import our current or future product candidates, which could impair our competitive position. There is a substantial amount of litigation and administrative proceedings, both within and outside the United States, involving patent and other intellectual property rights in the biopharmaceutical industry, including patent infringement lawsuits, oppositions, reexaminations, inter partes review proceedings, and post-grant review proceedings. Numerous third-party U.S. and foreign issued patents and pending patent applications exist in the fields in which we are developing product candidates. There may be third party patents or patent applications with to materials, formulations, methods of manufacture, or methods for treatment related to the use or manufacture of our product candidates.
As the pharmaceutical industry expands and more patents are issued, the risk increases that our product candidates may be subject to claims of infringement of the patent rights of third parties. Because patent applications are maintained as confidential, until the relevant application is published, we may be unaware of third-party patents that may be infringed by commercialization of any of our product candidates, and we cannot be certain that we were the first to file a patent application related to a product candidate or technology. Moreover, because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that our product candidates may infringe. In addition,
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identification of third-party patent rights that may be relevant to our technology is difficult because patent searching is imperfect due to differences in terminology among patents, incomplete databases, and the difficulty in assessing the meaning of patent claims. There is also no assurance that prior art that we do not believe is relevant to our business may, ultimately, be found to limit our ability to make, use, sell, offer for sale, or import our current or future products and impair our competitive position. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. Any claims of patent infringement asserted by third parties would be time consuming and could:
result in costly litigation that may cause negative publicity or, if we were found to be infringing willfully, result in treble damages;
require us to enter into royalty or licensing agreements, which may not be available on commercially reasonable terms, or at all, or which might be non-exclusive, which could result in our competitors gaining access to the same technology;
require us to develop non-infringing technology, which may not be possible on a cost-effective basis or at all;
cause development delays;
prevent us from commercializing any of our product candidates until the asserted patent expires or is held finally invalid or not infringed in a court of law;
subject us to significant liability to third parties; or
divert the time and attention of our technical personnel and management.
Although no third party has asserted a claim of patent infringement against us as of the date of this report, others may hold proprietary rights that could prevent our product candidates from being marketed. For example, we are aware of issued patents that claim a method of treatment based upon a general mode of action. These claims could be alleged to cover enitociclib in certain treatment indications. While we believe that these patents are difficult to enforce and that we would have valid defenses to these claims of patent infringement, we cannot be certain that we would prevail in any dispute and we cannot be certain how an adverse determination would affect our business.
Parties making claims against us may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. Furthermore, because of the large amount of discovery required in connection with intellectual property litigation or administrative proceedings, there is a risk that some of our confidential information could be compromised by disclosure. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have material adverse effect on our ability to raise capital or otherwise have a material adverse effect on our business.
If we were to pursue invalidity proceedings with respect to third-party patents, the outcome following legal assertions of invalidity would be unpredictable. Even if resolved in our favor, these legal proceedings could distract our technical and management personnel from their normal responsibilities and may cause us to incur significant expenses, which could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing, or distribution activities. In addition, we may not have sufficient financial or other resources to conduct such proceedings adequately. Some of these third parties may be able to sustain the costs of such proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent proceedings could compromise our ability to compete in the marketplace. If we fail to prevail in any such patent proceedings, such third parties may assert a claim of patent directed at our technologies or product candidates, which could have a material effect on our business.
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Intellectual property rights do not necessarily address all potential threats to our competitive advantage.
The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations and may not adequately protect our business. For example:
others may be able to develop products that are similar to our product candidates but that are not covered by the claims of the patents that we own or license;
we or our licensors or collaborators might not have been the first to file patent applications covering certain of our inventions;
others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights;
it is possible that the pending patent applications we own or license will not lead to issued patents;
issued patents that we own or license may be held invalid or unenforceable, as a result of legal challenges by our competitors;
our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;
the patents of others may have an adverse effect on our business; and
we may choose not to file a patent to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property.
Should any of these events occur, it could significantly harm our business.
Risks Related to Operating as a Public Company
If we are not able to maintain compliance with the continued listing requirements of The Nasdaq Capital Market, our common stock may be delisted, which could negatively impact the liquidity and price of our common stock, our ability to complete a business combination or access the capital markets, and the confidence of investors and others.
On September 14, 2023, we received written notice from The Nasdaq Stock Market LLC (“Nasdaq”) that the closing bid price of our common stock for the prior 30 consecutive business days was lower than the minimum bid price requirement of $1.00 per share. On January 12, 2024, we received written notice from Nasdaq that we had regained compliance with the minimum bid price requirement.
On May 22, 2024, we received a subsequent notice from Nasdaq that based upon the closing bid price of our shares of common stock for the prior 30 consecutive business days was again lower than the minimum bid price requirement In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we were provided with a period of 180 calendar days, to November 18, 2024, to regain compliance with the minimum bid price requirement. On November 14, 2024, we submitted a request to Nasdaq for an additional 180-day extension to May 19, 2025 to regain compliance with the minimum bid price requirement, which request was granted on November 19, 2024. On January 27, 2025, we effected a 1-for-20 reverse stock split. On February 11, 2025, we received written notice from Nasdaq that we had regained compliance with the minimum bid price requirement.
Although we have regained compliance with the Nasdaq minimum bid price requirement, as of the date of this report, our common stock is trading below $1.00 per share. Because we have effected a reverse stock split within the past year, if our common stock fails to meet the minimum bid price requirement, our common stock will be delisted unless we submit a timely request for a delisting hearing, and are granted a stay of delisting until the conclusion of the hearing process. There can be no assurance that we will be able to continue to maintain
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compliance with the Nasdaq continued listing requirements or achieve a stay of delisting, and if we fail to do so and Nasdaq delists our common stock, we could face material adverse consequences, including:
limited availability of market quotations and decreased liquidity for our common stock, resulting in a decline in the trading price of our common stock;
adverse impact on the ability of stockholders to sell our common stock;
limited news and analyst coverage and negative publicity; and
decreased ability to raise capital and potential loss of confidence by investors, suppliers, customers, collaborators, and employees.
As a public company, we face significant expenses and administrative burdens, which could have an adverse effect on our business, financial condition, and results of operations.
As a public company, we face significant legal, accounting, administrative, and other costs and expenses. The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the Public Company Accounting Oversight Board, the securities exchanges, and the rules and regulations thereunder impose additional reporting and other obligations on public companies. Compliance with public company requirements results in significant costs and makes certain activities more time-consuming, including expenses associated with SEC reporting requirements. In addition, if any issues in complying with those requirements are identified (for example, if the auditors identify a material weakness or significant deficiency in our internal control over financial reporting), we could incur additional costs in rectifying those issues, and the existence of those issues could adversely affect our reputation or investor perceptions of us and also increase our costs of obtaining director and officer liability insurance. Risks associated with our status as a public company may make it more difficult to attract and retain qualified persons to serve on our board of directors or as executive officers. The reporting and other obligations imposed by these rules and regulations increase our legal and financial compliance costs and the costs of related legal, accounting, and administrative activities. These costs require us to divert a significant amount of money that could otherwise be used to expand our business and our strategic objectives. Advocacy efforts by stockholders and third parties may also prompt additional changes in governance and reporting requirements, which could further increase costs.
We are an “emerging growth company” within the meaning of the Securities Act, and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our stock less attractive to investors.
We are an emerging growth company, as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including exemption from compliance with the auditor attestation requirements of Section 404, reduced disclosure obligations regarding executive compensation, exemptions from the requirements of holding a nonbinding advisory vote on executive compensation, and stockholder approval of any golden parachute payments not previously approved. We will cease to be an emerging growth company on the date that is the earliest of (a) the last day of the fiscal year in which we have total annual gross revenue of $1.235 billion or more, (b) December 31, 2025, the last day of our fiscal year following the fifth anniversary of the date of the completion of our initial public offering, (c) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years, or (d) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
In addition, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting
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company,” which would allow us to take advantage of many of the same exemptions from disclosure requirements, including exemption from compliance with the auditor attestation requirements of Section 404 and reduced disclosure obligations regarding executive compensation in this report and our periodic reports and proxy statements.
We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, and the market price of our common stock may be more volatile.
Our failure to timely and effectively implement controls and procedures required by Section 404(a) of the Sarbanes-Oxley Act could have a material adverse effect on our business.
As a public company, we will be required to provide management’s attestation on internal controls in the future under Section 404(a) of the Sarbanes-Oxley Act. Management may not be able to effectively and timely implement controls and procedures that adequately respond to these increased regulatory compliance and reporting requirements. If we are not able to implement the additional requirements of Section 404(a) in a timely manner or with adequate compliance, we may not be able to assess whether our internal controls over financial reporting are effective, which may subject us to adverse regulatory consequences and could harm investor confidence and the market price of our common stock.
Any material weaknesses in or other inability to maintain effective internal control over financial reporting could adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with GAAP. Our management is likewise required, on a quarterly basis, to evaluate the effectiveness of our internal controls and to disclose any changes and material weaknesses identified through such evaluation in those internal controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We have in the past and may in the future determine that there are material weaknesses in our internal control over financial reporting. Any material weaknesses or other inability to maintain effective internal control over financial reporting could impact our ability to report our financial position and results of operations on a timely and accurate basis. If our consolidated financial statements are not accurate, investors may not have a complete understanding of our operations and may confidence in our financial reporting and our business, reputation, results of operations, liquidity, financial condition, stock price, and ability to access the capital markets could be affected. In addition, we may be to maintain or compliance with applicable securities laws, stock market listing requirements, and covenants regarding the timely filing of periodic reports, we may be subject to regulatory and , and we may face invoking the federal and state securities laws. Any such or , whether or not, could have a material effect on our business and prospects.
General Risk Factors
Our stock price has been volatile and our stock has been thinly traded, and you may not be able to sell shares of our common stock at or above the price you paid.
The trading price of our common stock has been volatile and is subject to wide fluctuations. Since the completion of the LSAC Business Combination, our common stock has been thinly traded. As a result of the low trading volume of our common stock, the trading of relatively small quantities of shares by our stockholders
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could disproportionately influence the market price of our common stock in either direction. The price for our shares could, for example, decline significantly in the event that a large number of shares of our common stock are sold on the market without commensurate demand, as compared to an issuer with a higher trading volume that could better absorb those sales without an adverse impact on its stock price.
There are numerous factors that can influence our stock price volatility and trading volume, some of which are beyond our control. These factors could include:
our ability to develop or commercialize products;
results of our clinical trials and nonclinical studies;
our capital levels, capital requirements and capital raising activities, including issuances of securities or the incurrence of debt;
our ability to enter into and maintain collaboration arrangements;
actual or anticipated fluctuations in our financial results or the financial results of companies perceived to be similar;
changes in the market’s expectations about our operating results;
success of competitors;
our operating results failing to meet the expectation of securities analysts or investors in a particular period;
changes in financial estimates and recommendations by securities analysts concerning us or the oncology industry in general;
operating and share price performance of other companies that investors deem comparable to us;
changes in laws and regulations affecting our business;
our ability to meet compliance requirements and obtain regulatory approvals;
our ability to obtain and maintain proprietary protection for our current and future product candidates;
commencement of, or involvement in, litigation involving us;
the volume of shares of our common stock available for public sale;
any major change in our board of directors or management;
sales of shares of common stock by our directors, executive officers, or significant stockholders, or the perception that such sales could occur; and
general economic and political conditions such as recessions, interest rates, inflation, fuel prices, international currency fluctuations and acts of war or terrorism.
In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies, particularly those in the biotechnology industry. These fluctuations have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors, as well as general economic, political, regulatory, and market conditions, may negatively affect the market price of our common stock, regardless of our actual operating performance.
Volatility in our stock price could subject us to securities class action litigation.
In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because biotechnology companies have
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experienced significant stock price declines and volatility in recent years. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business and prospects.
If securities or industry analysts do not publish research or reports about us, or publish negative reports, our stock price and trading volume could decline.
The trading market for our common stock will depend, in part, on the research and reports that securities or industry analysts publish about us. We do not have any control over these analysts. If our operating results fail to meet analyst estimates or one or more of the analysts who cover us downgrade our common stock or change their opinion, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.
Future sales of shares of our common stock may depress the market price of our common stock.
Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. As of December 31, 2024, we had outstanding warrants to purchase an aggregate of approximately 1,810,000 shares of common stock (adjusted to give effect to the 1-for-20 reverse stock split). Additionally, up to 200,000 Earnout Shares (adjusted to give effect to the 1-for-20 reverse stock split) may be issued in connection with the LSAC Business Combination, provided that certain conditions are met. To the extent that any of the warrants are exercised or otherwise converted into shares of our common stock or conditions to receive Earnout Shares are met, additional shares of our common stock will be issued, which will result in dilution to the holders of our common stock and increase the number of shares eligible for sale in the public market. Sales, or potential sales, of substantial numbers of shares in the public market could increase the volatility of, or adversely affect, the market price of our common stock.
Our Certificate of Incorporation provides, subject to limited exceptions, that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees, or stockholders.
Our Certificate of Incorporation requires, to the fullest extent permitted by law, that derivative actions brought in our name, actions against directors, officers, and employees for breach of fiduciary duty, and other similar actions may be brought solely and exclusively in the Court of Chancery in the State of Delaware or, if that court lacks subject matter jurisdiction, another federal or state court situated in the State of Delaware. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to the forum provisions in our Certificate of Incorporation. In addition, our Certificate of Incorporation and our Bylaws provide that the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act and the Exchange Act. In March 2020, the Delaware Supreme Court found that an exclusive forum provision providing for claims under the Securities Act to be brought in federal court is facially valid under Delaware law. We intend to enforce this provision, but we do not know whether courts in other jurisdictions will agree with this decision or enforce it.
This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees, or stockholders, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provision contained in our Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business and prospects.
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We have never paid dividends on our capital stock and we do not anticipate paying dividends in the foreseeable future.
We have never paid dividends on any of our capital stock and currently intend to retain any future earnings to fund the growth of our business. In addition, we may enter into credit agreements or other borrowing arrangements in the future that will restrict our ability to declare or pay cash dividends on our common stock. Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, general business conditions, and other factors that our board of directors may deem relevant. As a result, capital appreciation, if any, of our common stock will be the sole source of gain for the foreseeable future.
