These forward-looking statements include, but
are not limited to, statements about:
We undertake no obligation
to update or revise any of the forward-looking statements contained in this Annual Report on Form 10-K after the date of this report,
except as required by law or the rules and regulations of the U.S. Securities and Exchange Commission, or SEC. We caution readers not
to place undue reliance on forward-looking statements. Our actual results could differ materially from those discussed in this Annual
Report on Form 10-K. The forward-looking statements contained in this Annual Report on Form 10-K, and other written and oral forward-looking
statements made by us from time to time, are subject to certain risks and uncertainties that could cause actual results to differ materially
from those anticipated in the forward-looking statements, including the risks, uncertainties and assumptions identified under the heading
“Risk Factors” in this Annual Report on Form 10-K.
Item 1. Business.
Overview
We are a New York
City based clinical-stage biopharmaceutical company committed to advancing transformative therapies for the treatment of cancer and rare
diseases. We were founded on the principle of applying modern scientific, regulatory or manufacturing advancements to established mechanisms
in order to create new development opportunities. We prioritize creativity, diverse perspectives, integrity and tenacity to expedite
our goal of bringing life-changing therapies to people with limited treatment options.
Our portfolio includes two
development programs utilizing TARA-002, an investigational cell therapy based on the broad immunopotentiator, OK-432, which was originally
granted marketing approval by the Japanese Ministry of Health and Welfare as an immunopotentiating cancer therapeutic agent. This cell
therapy is currently approved in Japan and Taiwan for LMs and multiple oncologic indications. We have secured worldwide rights to the
asset excluding Japan and Taiwan and are exploring its use in oncology and rare disease indications. TARA-002 was developed from the
same master cell bank of genetically distinct group A Streptococcus pyogenes as OK-432 (marketed as Picibanil® in Japan and Taiwan
by Chugai Pharmaceutical Co., Ltd., or Chugai Pharmaceutical). We are currently developing TARA-002 in non-muscle invasive bladder cancer,
or NMIBC, and in LMs.
Our lead oncology program
is TARA-002 in NMIBC, which is cancer found in the tissue that lines the inner surface of the bladder that has not spread into the bladder
muscle. Bladder cancer is the sixth most common cancer in the United States, with NMIBC representing approximately 80% of bladder cancer
diagnoses. Approximately 65,000 patients are diagnosed with NMIBC in the United States each year. Very few new therapeutics have been
approved for NMIBC since the 1990s and the current standard of care for NMIBC includes intravesical Bacillus Calmette–Guérin,
or BCG. The mechanism of action of TARA-002 is similar to that of BCG. TARA-002 and BCG are both intravesically administered, elicit
a Th1 type immune response and produce a similar array of locally activated cytokines and immune cells.
We are conducting a Phase 1 dose-finding, open-label clinical trial
to evaluate TARA-002 in treatment-naïve and treatment-experienced NMIBC patients with carcinoma in situ, or CIS, and high-grade papillary
tumors (Ta), known as the ADVANCED-1 trial. In the initial dose escalation phase, or Phase 1a portion, of the trial, patients receive
six weekly intravesical doses of TARA-002. The primary objective of the trial is to evaluate the safety, tolerability and preliminary
signs of anti-tumor activity of TARA-002, with the goal of establishing a recommended dose for a future Phase 2 clinical trial. The trial
is ongoing and we expect data from the Phase 1a portion of the trial in the second quarter of 2023.
We are also pursuing TARA-002 in LMs, which are rare, non-malignant
cysts of the lymphatic vascular system that primarily form in the head and neck region of children before the age of two. In July 2020,
the FDA granted Rare Pediatric Disease designation for TARA-002 for the treatment of LMs and in May 2022, the European Medicines Agency
granted orphan drug designation to TARA-002 for the treatment of LMs. In addition to the clinical experience in Japan, we have secured
the rights to a dataset from one of the largest ever conducted Phase 2 trials in LMs, in which OK-432 was administered via a compassionate
use program led by the University of Iowa to over 500 pediatric and adult patients. We have an open IND for LMs with the Vaccines and
Related Products Division of the FDA, or Vaccines Division. We received feedback from the Vaccines Division on the protocol for our proposed
Phase 2 clinical trial evaluating TARA-002 in LMs. In the second half of 2023 we expect to initiate this Phase 2 single arm, open-label
clinical trial to evaluate the safety and efficacy of TARA-002 in pediatric patients with macrocystic and mixed-cystic LMs. The trial
design includes a safety lead-in phase followed by an expansion phase. We are conducting trial preparation activities and have identified
multiple trial sites.
The third development program in our portfolio is intravenous, or IV,
Choline Chloride, an investigational phospholipid substrate replacement therapy initially in development for patients receiving parenteral
nutrition, or PN, who have intestinal failure associated liver disease, or IFALD. IV Choline Chloride has been granted Orphan Drug Designation
by the FDA for this indication and has also been granted Fast Track Designation for the treatment of IFALD. Following a positive end of
Phase 2 meeting with the FDA, we received feedback on the design of the studies necessary to complete a registration package for IV Choline
Chloride for the treatment of IFALD, including a Phase 1 pharmacokinetic, or PK, trial and a Phase 3 clinical trial. Prior to initiating
these clinical trials, we are conducting a prevalence study to enhance understanding of the PN patient population and we plan to use this
information to determine the next steps for the development program. In September 2021, we reported results of the retrospective part
of the prevalence study, which supported the significant unmet medical need in patients dependent on PN who have IFALD. We are currently
conducting the prospective part of the prevalence study, which is a multi-center, cross-sectional observational study to assess the prevalence
of choline deficiency, as well as cholestasis and steatosis, in patients dependent on PN. We expect to have results of the study in the
third quarter of 2023. In April 2022, the U.S. Patent and Trademark office, or USPTO, issued to us Patent No. US 11,311,503 claiming a
sterile aqueous choline salt composition with a term expiring in 2041.
We have devoted substantial
efforts to the development of these programs but do not have any approved products and have not generated any revenue from product sales.
TARA-002 has not yet been approved for use for treatment of NMIBC, LMs or any other indications. We do not expect to generate revenues
in the near-term, if ever. To finance our current strategic plans, including the conduct of ongoing and future clinical trials and further
research and development costs, we will need to raise additional capital. See “Item 7. Management’s Discussion and Analysis
of Financial Condition and Results of Operations—Liquidity and Capital Resources” for additional information about our liquidity
and capital resource needs.
Our Product Candidate Pipeline
The following chart summarizes
the current status of our product candidate pipeline:
| * | TARA-002
Granted Rare Pediatric Disease Designation for the treatment of LMs |
| ** | Granted
Orphan Drug and Fast Track Designations by the U.S. FDA |
| † | Phase
1 PK study to be conducted in addition to Phase 3 study |
Our Corporate Strategy:
We are an oncology and rare disease company focused on applying modern
scientific advancements to established mechanisms to deliver efficient de-risked clinical programs. Leveraging the drug development and
commercialization experience of our management team, our goal is to build a leading biopharmaceutical company focused on bringing life-saving
therapies to patients with significant unmet needs. Our current key initiatives are listed below:
1. Progress clinical program supporting
TARA-002 for the treatment of NMIBC.
Complete the ongoing Phase
1 clinical trial to assess the safety and tolerability of TARA-002 in patients with high-grade NMIBC, involving a dose escalation phase
in which we are evaluating the safety, tolerability and preliminary signs of anti-tumor activity of TARA-002 to determine dosage for
a future Phase 2 clinical trial. We then intend to further assess safety and preliminary signs of anti-tumor activity of TARA-002 in
both BCG-naïve and BCG-exposed NMIBC patients with CIS in an expanded cohort of our Phase 1 and Phase 2 clinical trials.
2. Progress clinical program for TARA-002
in LMs by initiating a Phase 2 clinical trial in patients with macrocystic and mixed-cystic LMs.
Based on the robust dataset for the originator product OK-432 in LMs
and the full Clinical Study Report, or CSR of the randomized Phase 2 clinical trial of OK-432 in LMs led by the University of Iowa, we
are encouraged by the potential for TARA-002 to treat patients with LMs. Following feedback from the Vaccines Division, we expect to initiate
a Phase 2 clinical trial evaluating TARA-002 in pediatric patients with macrocystic and mixed-cystic LMs.
3. Complete prospective prevalence study
of patients receiving PN and who have IFALD to refine a development pathway for IV Choline Chloride.
We are currently conducting
a prospective prevalence study to enhance understanding of the PN patient population and plan to use this information to inform the next
steps for the development program. We received FDA feedback on a potential design of the studies necessary to complete a registration
package for IV Choline Chloride for the treatment of IFALD, including a Phase 1 pharmacokinetic study and a Phase 3 trial. We intend
to use the results of our multinational prevalence study of the PN patient population to inform our strategy for IV Choline Chloride.
4. Explore opportunities to expand our
pipeline of uses for TARA-002 alone and in combination with other therapies.
We are exploring the use
of TARA-002 in combination with other therapies and are working to identify additional opportunities to develop TARA-002 in indications
beyond NMIBC and LMs. We are conducting non-clinical experiments and modeling to better characterize the potential benefits of combination
therapy with TARA-002, particularly in NMIBC. In addition, our leadership team has a strong track record of licensing, acquiring and
optimizing product candidates and we intend to leverage this skill set to identify opportunities for potential combination opportunities
for TARA-002, in NMIBC and other oncology indications. The immunological activity of TARA-002’s originator product, OK-432, has
been effectively interrogated in patients in numerous indications. We plan to continue to carefully evaluate the case reports and the
literature and perform non-clinical characterization studies to better understand the mechanism of action of TARA-002 and its potential
activity in indications beyond NMIBC and LM in which there is unmet need.
Our Pipeline
TARA-002
TARA-002, our lead program,
is an investigational cell therapy developed from the master cell line of the same genetically distinct Streptococcus pyogenes
(group A, type 3) Su strain as OK-432, a broad immunopotentiator marketed as Picibanil® in Japan and Taiwan by Chugai Pharmaceutical.
We are using the same regulatory starting materials as OK-432 and manufacture TARA-002 using an updated version of the same proprietary
processes used to manufacture OK-432. We have designated this product candidate as TARA-002 in order to differentiate the regulatory
path in the United States and other geographies from that of OK-432 in Japan.
We entered into an agreement
with Chugai Pharmaceutical in June 2019, as amended in July 2020, to support our development of TARA-002. The agreement provides us with
exclusive access to certain materials and documents relating to OK-432 including the master cell bank of Streptococcus pyogenes
used in the manufacturing of OK-432. Additionally, the agreement provides technical support during a certain period. We have utilized
the materials, proprietary manufacturing process and technical support provided by Chugai Pharmaceutical to produce TARA-002 at a cGMP-compliant
facility in the United States. Under the agreement with Chugai Pharmaceutical, we have sole responsibility for the development and commercialization
of TARA-002 worldwide, excluding Japan and Taiwan. This agreement is exclusive through June 17, 2030, or following any termination of
the agreement by either party.
In Japan, OK-432 is indicated
for: the treatment of lymphangiomas (lymphatic malformations); the prolongation of survival time in patients with gastric cancer (postoperative
cases) or primary lung cancer in combination with chemotherapy; and the reduction of cancerous pleural effusion or ascites in patients
with lung cancer or gastrointestinal cancer respectively, head and neck cancer (maxillary cancer, laryngeal cancer, pharyngeal cancer,
and tongue cancer) and thyroid cancer that are resistant to other drugs.
We plan to pursue development
of TARA-002 for the treatment of NMIBC and LMs initially in the United States, and plan to also seek approval in Europe and other regions
in the future and may also explore additional indications where its utility as an immunostimulant has been hypothesized to be of therapeutic
benefit.
TARA-002 in NMIBC
Disease Overview
Bladder cancer is the sixth
most common cancer in the United States, with NMIBC representing approximately 80% of bladder cancer diagnoses. NMIBC is cancer found
in the tissue that lines the inner surface of the bladder that has not spread into the bladder muscle. There are three subtypes of NMIBC:
Ta (non-invasive papillary carcinoma), Tis (carcinoma in situ or CIS), and T1 (carcinoma invading the lamina propria). Among the types
of NMIBC, Ta accounts for most NMIBC cases (70%), whereas T1 and CIS account for 20% and 10%, respectively.
There are approximately 65,000 incident cases of NMIBC in the United
States every year, and based upon currently available data we believe that approximately 45% (approximately 30,000) are made up of High-Grade
tumor types that are considered higher risk, and therefore candidates for immunotherapies, such as TARA-002. In addition, NMIBC has one
of the highest rates of recurrence with three-year rate estimated at up to 80%.
Treatment
Treatment for NMIBC is typically targeted to reduce unresectable persistence,
recurrence after resection and to prevent disease progression to muscle-invasive bladder cancer. The initial treatment for NMIBC includes
cystoscopy and complete transurethral resection of the bladder tumor (TURBT) for papillary Ta or T1, or biopsy for CIS. A single postoperative
instillation of intravesical chemotherapy is recommended in patients with low risk of progression, and for patients with intermediate
and high-risk disease, a longer course of intravesical therapy is administered. The most efficacious intravesical agent to date has been
BCG, a live attenuated form of Mycobacterium bovis. BCG has been the subject of multiple supply shortages in the US in the past
decade due to the inability to meet demand to treat the large population of patients with NMIBC. There has been a significant increase
in bladder cancer recurrence and progression with an escalated number of patients who require cystectomy. As such, with the current BCG
shortage and limited effective alternate therapies or dosing strategies, there continues to be a significant unmet need for treatment
options for patients with NMIBC.
Clinical Development
We are currently conducting our ADVANCED-1 trial. In the initial dose
escalation phase of the trial, patients receive six weekly intravesical doses of TARA-002. The primary objective of the trial is to evaluate
the safety, tolerability and preliminary signs of anti-tumor activity of TARA-002, with the goal of establishing a recommended dose for
a future Phase 2 clinical trial. The trial is ongoing and we expect data from the Phase 1a portion of the trial in the second quarter
of 2023.
Preclinical Development
We continue to conduct pre-clinical
studies on TARA-002 to better characterize the mechanism of action to help us understand how TARA-002 may perform in potential combinations
with other agents used to treat NMIBC. In addition, we use pre-clinical data to help us define other cancer targets for TARA-002 both
within the urothelial cancer space and other types of cancer affecting different parts of the body.
Regulatory Interactions
In October 2021, we announced
that the Office of Tissues and Advanced Therapies Division, or the OTAT Division, of the FDA’s Center for Biologics Evaluation
and Research, or CBER, cleared our Investigational New Drug, or IND, application for TARA-002 in NMIBC, allowing us to commence our ADVANCED-1
trial. The primary objective of the trial is to evaluate the safety, tolerability and preliminary signs of anti-tumor activity of TARA-002,
with the goal of establishing a recommended dose for a future Phase 2 clinical trial.
Manufacturing
We manufacture TARA-002
using an equivalent, but modernized, proprietary manufacturing process as is used to produce OK-432 by Chugai Pharmaceutical, starting
with a master cell line propagated by us but utilizing the same genetically distinct strain of Streptococcus pyogenes (A group,
type 3) Su strain as OK-432. We have contracted a contract development and manufacturing organization, or CDMO, to manufacture TARA-002.
TARA-002 for the Treatment of Lymphatic
Malformations
Disease Overview
We have worked with the FDA to align on a regulatory pathway and development
plan for TARA-002 for the treatment of LMs. The International Society for the Study of Vascular Anomalies classifies LMs as either macrocystic,
microcystic, or mixed-cystic. Macrocystic and microcystic LMs are differentiated by the size of the fluid-containing portion of the malformation.
Macrocystic LMs are characteristically large, fluid-filled cysts with a thin endothelial lining. Macrocystic LMs are composed of cysts
greater than 2 cubic centimeters in size and present as a soft, fluid-filled swelling beneath normal or slightly discolored skin. Macrocystic
LMs are usually located in the antero-lateral cervical region of the neck; however, it is possible for this type of LM to originate in
other areas of the body. In contrast, microcystic LMs have very limited internal space with a thick irregular endothelial lining. Microcystic
LMs are comprised of cysts less than 2 cubic centimeters in size and are often composed of micro-lymphatic channels that integrate and
infiltrate normal soft tissue. Microcystic LMs can involve both superficial and deep aspects including muscle and bone. Microcystic LMs
can thicken or swell causing enlargement of surrounding soft tissue and bones and can be found on any area of the skin or mucous membrane.
Mixed-cystic LMs are comprised of varying degrees of both macrocystic and microcystic LMs.
While the exact prevalence
of LMs is not known, in the United States, the condition is thought to be present in approximately one in every 4,000 live births and
we believe there are approximately 1,400-1,800 LM cases per year.
Treatment
There are no approved pharmacotherapies
for LMs, except in Japan and Taiwan where OK-432 is approved. In these countries, OK-432 has been the standard of care for LMs for over
25 years.
Treatment of LMs varies
depending on the symptoms and complications that present themselves. The standard of care outside Japan and Taiwan for the treatment
of LMs is either a partial or complete surgical excision of the cysts. While surgery is the standard approach to the treatment of LMs
in the head and neck, the region is a difficult area to operate on because of the large number of important anatomical structures in
the area. Major venous and arterial trunks travel through the neck, as do important nerves. Surgery on such malformations frequently
results in high rates of recurrence and complications including life-long chronic conditions, such as damage to nerves and other important
structures of the head and neck.
Clinical Development
Historical Data on OK- 432, predecessor therapy
to TARA-002
When OK-432 is administered
locally for LMs, it is hypothesized that innate immune cells within the cyst are activated and produce a strong immune cascade. Neutrophils
and monocytes infiltrate the cyst and various cytokines, including interleukins IL-6, IL-8, IL-12, interferon, or IFN, -gamma, tumor
necrosis factor, or TNF-alpha, and vascular endothelial growth factor (VEGF) are secreted by immune cells within the cyst in response
to the presence of OK-432. In concert, these immune activities induce a strong local inflammatory reaction in the cyst wall, resulting
in fluid drainage, shrinkage and fibrotic adhesion of the cyst.
A randomized, phase 2 clinical trial led by the University of Iowa
studied the use of OK-432 in patients with LM from 1998 to 2005. Most eligible subjects were between 6 months and 18 years of age with
macrocystic or mixed-cystic LMs (with ≥ 50% macrocytic disease) of the head and/or neck. There were three treatment groups: immediate
treatment (ITG), delayed treatment (DTG), and open label treatment group. The immediate treatment group received treatment with OK-432
upon diagnosis. The delayed treatment group received OK-432 treatment following a six-month observation period; the cross-over design
was intended to investigate spontaneous resolution. The open-label treatment group included infants younger than six months of age, adults
older than 18 years of age, patients with LMs involving sites other than the head and neck (such as the axilla, thorax, and extremities),
and patients treated on an emergent basis. The open label treatment group were treated immediately with OK-432. Response to therapy was
measured by quantitating change in lesion size. Clinical success was defined as a complete (90% to 100%) or substantial (60% to 89%) response
to treatment based on radiographically confirmed shrinkage in lesions.
Results presented in this
report were based on a retrospective analysis of source verified data that included the full dataset of subjects enrolled in the Phase
2 randomized clinical trial between January 1998 and August 2005, including data in the published study (Smith et al. 2009) that included
subjects enrolled between January 1998 and November 2004.
Overall, 310 subjects were enrolled with intent to treat: 246 subjects
were randomized to the immediate (ITG, N=171) and delayed (DTG, N=75) treatment groups; 64 subjects were nonrandomized and assigned to
the open-label group. Analysis of the primary efficacy endpoint (N=150) demonstrated clinical success (complete and/or substantial response)
in 69% of patients in the ITG 6 months after enrollment, while 7.5% of patients in the DTG experienced spontaneous regression of a LM
during this time interval (p < 0.0001)). When the results were analyzed by lesion type across all treatment groups, a successful outcome
was observed in 84% and 60% of patients with macrocystic and mixed-cystic LM, respectively. None of the patients with microcystic LM demonstrated
clinical success with OK-432 therapy. The results of the retrospective analysis were consistent with the results observed in the original
analysis (Smith et al. 2009).
Figure 1: 69% of patients in the immediate treatment group had a complete
or substantial response to OK-432, meeting the primary endpoint, while 7.5% of patients in the delayed treatment group had a complete
or substantial response after six months of observation and before treatment.
| ǂ | Clinical
Success was defined as complete or substantial response. |
| * | Reflects
data prior to dosing with OK-432. After dosing, the clinical success rate was 66%, which
was not statistically different from the ITG. |
Figure 2: patients with radiographically confirmed
macrocystic lesions had the greatest likelihood of clinical success and in those patients with mixed lesions, clinical success was also
present.
| ǂ | Clinical
Success was defined as complete or substantial response. |
| * | Reflects
data prior to dosing with OK-432. After dosing, the clinical success rate was 66%, which
was not statistically different from the ITG. |
| ** | Results
were analyzed by lesion type across all treatment groups. |
TARA-002 Clinical Development
We have an open IND for
LMs with the Vaccines Division. Later in 2023 we expect to initiate a Phase 2 single arm, open-label clinical trial to evaluate the safety
and efficacy of TARA-002 in pediatric patients with macrocystic and mixed-cystic LMs. The trial design includes a safety lead-in phase
followed by an expansion phase. We are conducting trial preparation activities and have identified multiple trial sites.
Historical Safety Profile on OK-432, predecessor
therapy to TARA-002
The most common adverse
events with treatment with OK-432 were local injection site reactions, fever, fatigue, and decreased appetite, with resolution within
two weeks. Treatment emergent serious adverse events or SAEs, (treatment emergent SAEs are defined as any SAE occurring or worsening
on or after the first dose of study drug and within 35 days after the last dose of study drug) associated with OK-432 treatment were
reported in 4.1% of patients, with the most severe events being airway obstruction and facial paralysis due to massive swelling post-injection
that required tracheostomy and hospitalization. Both of these events were reported as resolved.
The safety findings from
the sponsor-conducted retrospective analysis are consistent with the original analysis reported in Smith et al. 2009, and with safety
data in published studies in approximately 865 patients with LMs after treatment with OK-432.
Historical Preclinical Development on
OK-432, predecessor therapy to TARA-002
A comprehensive preclinical
development program for OK-432, including in vitro and in vivo pharmacology and toxicology studies, was conducted by Chugai
Pharmaceutical to support the filing of a NDA with the Japan Pharmaceuticals and Medical Devices Agency. We believe these studies may
help inform the design of a development plan for TARA-002 in LMs.
TARA-002 Regulatory Interactions
In July 2020, the FDA granted
Rare Pediatric Disease designation for TARA-002 for the treatment of LMs. The FDA grants Rare Pediatric Disease designation for serious
diseases that primarily affect children ages 18 years or younger and fewer than 200,000 persons in the United States. Under the FDA’s
Rare Pediatric Disease Priority Review Voucher program, a sponsor who receives an approval of a NDA or BLA for a product for the prevention
or treatment of a rare pediatric disease may be eligible for a voucher, which can be redeemed to obtain priority review for any subsequent
marketing application or may be sold or transferred.
The robust dataset for OK-432 in LMs has informed our development of
TARA-002. At the FDA’s request, we submitted the full CSR of the randomized Phase 2 clinical trial of OK-432 in LMs led by the University
of Iowa to our open IND with the Vaccines Division. We received feedback from the Vaccines Division on the protocol for our proposed Phase
2 clinical trial evaluating TARA-002 in LMs. In the second half of 2023 we expect to initiate this Phase 2 single arm, open-label clinical
trial to evaluate the safety and efficacy of TARA-002 in pediatric patients with macrocystic and mixed-cystic LMs. The trial design includes
a safety lead-in phase followed by an expansion phase. We are conducting trial preparation activities and have identified multiple trial
sites.
Manufacturing
TARA-002 is manufactured
using an equivalent, but modernized, proprietary manufacturing process as is used to produce OK-432 by Chugai Pharmaceutical. Starting
with a master cell line propagated by us but utilizing the same genetically distinct strain of Streptococcus pyogenes (A group,
type 3) Su strain as OK-432. We have contracted a CDMO to manufacture TARA-002.
IV Choline Chloride for the treatment of Intestinal
Failure Associated Liver Disease
IV Choline Chloride is an
IV substrate replacement therapy initially in development for patients receiving PN who have IFALD.
Choline is a known important
substrate for phospholipids that are critical for healthy liver function. Because patients receiving PN cannot sufficiently absorb adequate
levels of choline and no available PN components contain sufficient amounts of choline to correct this deficit, they often experience
a prolonged progression to hepatic failure and death, with the only known intervention being a dual small bowel / liver transplant. If
approved, IV Choline Chloride would be the first approved therapy for IFALD. It has been granted ODD by the FDA for the treatment of
IFALD and the prevention of choline deficiency in PN patients. We are currently undertaking a multinational prevalence study to enhance
understanding of the PN patient population. We expect to complete the prospective part of the study in mid-2023.
We have entered into a license
agreement with Dr. Alan Buchman for exclusive rights to the IND, ODD and other regulatory assets related to IV Choline Chloride, as well
as exclusive rights to the data from previously conducted Phase 1 and Phase 2 clinical trials led by Dr. Buchman.
The results of a randomized,
controlled, Phase 2 clinical trial demonstrated that treatment with IV Choline Chloride resulted in normalization of plasma-free choline
concentrations, improvement of hepatic steatosis, and statistically significant improvement in cholestasis in patients dependent on PN.
We had an end of Phase 2
meeting with the FDA in November 2018 and received the FDA’s feedback on the design of studies necessary to complete the registration
package for IV Choline Chloride for the treatment of IFALD, including a Phase 1 pharmacokinetic study and a Phase 3 trial. We intend
to use the results of our multinational prevalence study of the PN patient population to inform our strategy for IV Choline Chloride.
Disease Overview
IFALD is a rare hepatic/metabolic
disease. IFALD, which occurs in patients dependent upon PN, is characterized by choline deficiency, hepatic steatosis, cholestasis, and
rapid progression of liver disease through to hepatic failure and death, in the absence of intestine-liver transplant. IFALD carries
a relatively poor prognosis, with a 15-34% death rate within one to four years. When IFALD presents in children, mortality is even higher,
with studies reporting death rates of 23-40% within 18 months. A patient is considered to have IFALD if she/he:
|
● |
is
dependent on PN for more than six months (e.g., has chronic intestinal failure); |
|
|
|
|
● |
has
evidence of steatosis, determined by imaging techniques or histologic assessments; |
|
|
|
|
● |
has
evidence of cholestasis (e.g., elevated alkaline phosphatase, or ALP, elevated bilirubin and/or histology); and |
|
|
|
|
● |
may
have evidence of ongoing, progressive liver injury on the basis of multiple abnormal liver function tests, in conjunction with findings
of fibrosis, cirrhosis, and/or end-stage liver disease. |
Many patients receiving
PN are entirely dependent on PN for their nutritional needs. PN delivers nearly all the macro and micro-nutrients necessary for survival
in their patients, with the notable exception of choline. Consequently, patients dependent on PN support have been shown to be choline
deficient. Patients dependent upon PN are unable to synthesize sufficient levels of choline and malabsorption limits the bioavailability
of choline chloride from the PN diet. The American Society for Parenteral and Enteral Nutrition and the Academy of Nutrition and Dietetics’
Dietitians in Nutrition Support both recommend that choline be developed and routinely included in PN products; however, there are currently
no FDA-approved choline chloride PN products.
Dependence on PN and resulting
choline deficiency often leads to IFALD, which is the most common adverse outcome in chronic PN adult patients that is associated with
death. Low free choline plasma concentrations are associated with alanine aminotransferase, or ALT, aspartate aminotransferase, or AST,
and ALP elevations as well as steatosis (fatty liver) and cholestasis (when bile from the liver stops or slows), all indicators of ongoing
liver damage.
Clinical Development
In a Phase 2 randomized,
double-blind, controlled 24-week clinical trial, patients (n=15) receiving nightly PN for > 85% of their nutritional needs (for at
least 12 weeks prior to entry) were randomized to receive via IV infusion (10-12 hours) their usual PN with placebo (n = 8), or PN to
which 2g IV Choline Chloride was added (n = 7).
In the IV Choline Chloride
group, mean choline levels were within or greater than the estimated normal range (i.e., 6.7 to 26.9 nmol/mL) throughout the 24-week
trial and quickly returned to baseline levels when treatment was discontinued.
Steatosis:
Upon conversion of the quantification
of computed tomography, or CT, values to magnetic resonance imaging proton density fat fraction, or MRI-PDFF, significant differences
in the least square, or LS, mean change from baseline in estimated MRI-PDFF were observed in the IV Choline Chloride group in comparison
to placebo group at Week 4 through Week 24, demonstrating a clinically meaningful and statistically significant reduction in steatosis.
When LS mean percent changes from baseline in MRI-PDFF were compared between treatment groups, significant differences in LS mean changes
(range, 31.7% to 53.6%) were observed from Weeks 4 to 24 with p-values of 0.0009 to 0.0297 favoring the IV Choline Chloride group.
Figure 3. Liver CT Images: Before and After Treatment with IV Choline
Chloride
Alkaline Phosphatase:
At baseline, LS mean ALP
concentration was 239.3 ± 118.93 in the IV Choline Chloride group and 148.1 ± 100.2 in the placebo group. The mixed model
for repeated measures, or MMRM, analyses demonstrated statistically significant decreases in ALP concentrations at Week 12 (p = 0.008),
Week 16 (p = 0.005), Week 20 (p = 0.007), and Week 24 (p = 0.005) for the IV Choline Chloride group, demonstrating a reduction in cholestasis.
A trend towards significance was observed at Week 4 (p = 0.076) and Week 6 (p = 0.056). At Week 34, 10 weeks after discontinuation of
IV Choline Chloride treatment, LS mean change from baseline in ALP concentrations still demonstrated statistically significant decreases
(p = 0.002), demonstrating a significant improvement in cholestasis with treatment with IV Choline Chloride (Figure 4).
In the subgroup of subjects
with ALP concentration > 1.5x upper limit of normal (ULN) at baseline, (n=7), mean values at baseline were comparable between the
IV Choline Chloride and placebo groups (294.20 ± 87.947 versus 277.00 ± 128.693, respectively). In the sub-group analysis,
improvement in ALP was consistent and substantial, with 20-30% improvement over 12-24 weeks of treatment. Statistical significance was
observed at 12, 16, and 20 weeks.
In the description of the trials above and
elsewhere in this Annual Report on Form 10-K, “n” represents the number of patients in a particular group and “p”
or “p-values” represent the probability that random chance caused the result (e.g., a p-value of 0.001
means that there is a 0.1% probability that the difference between the placebo group and the treatment group is purely due to random
chance). A p-value of less than or equal to 0.05 is a commonly used criterion for statistical significance, and may
be supportive of a finding of efficacy by regulatory authorities.
Figure 4. Improvement in Cholestasis1: All Patients
| 1 | Protara
Therapeutics re-analysis of patient CRF’s, data on file. |
| * | MMRM
method used for imputation. |
| ǂ | A
placebo subject was excluded from all analyses due to likely IV contrast-induced imaging
abnormalities, confirmed by independent radiologist in subsequent re-analysis. |
Preclinical Development
Table 1. Preclinical Studies Conducted by us
for IV Choline Chloride
Study
Type |
|
Brief
Description |
In vitro protein binding |
|
Evaluation of Protein Binding
by Choline Chloride in Plasma Using Rapid Equilibrium Dialysis |
In vitro cardiac ion channel study |
|
In Vitro Assessment of
the Effect of Choline on Currents Mediated by hERG, Cav1.2, and Peak and Late Nav1.5 Channels Expressed in Human Embryonic Kidney
(HEK) Cells |
In vitro drug-drug interaction |
|
Evaluation of Transporter
Inhibition by Choline Chloride in Transporter-Transfected HEK293 Cells |
|
|
Evaluation of OCT2, MATE1
and MATE2-K Inhibition by Choline Chloride in Transporter-Transfected HEK293 Cells |
|
|
Evaluation of Transporter
Inhibition by Choline Chloride in Caco-2 Cells |
|
|
Evaluation of Time Dependent
Cytochrome P450 Inhibition (IC50 Shift) by Choline Chloride in Human Liver Microsomes |
|
|
Evaluation of Direct Cytochrome
P450 Inhibition by Choline Chloride in Human Liver Microsomes |
|
|
Evaluation of Cytochrome
P450 Induction by Choline Chloride in Human Hepatocytes |
|
|
Evaluation of Transporter
Inhibition by Choline Chloride in Caco-2 Cells |
|
|
Evaluating of Cytochrome
P450 2C8, 2C9, and 2C19 mRNA Induction by Choline Chloride in Human Hepatocytes |
In vitro BSEP inhibition |
|
Assessment of Choline as
an Inhibitor of Human BSEP Mediated Transport |
|
|
Assessment of Choline as
a Substrate of Human BSEP Mediated Transport |
Nonclinical pharmacology studies |
|
Non-GLP Pilot Single Dose,
Escalating Dose Tolerance Study of Choline by Intravenous Infusion in Male Beagle Dogs |
|
|
GLP Single-dose IV Cardiovascular
Study in Surgically Instrumented Male Dogs Monitored by Telemetry |
|
|
GLP Combined Single-dose
IV Neurobehavioral and Respiratory Study |
Regulatory Interactions
We have received feedback
from the FDA on a number of key aspects of the overall clinical program necessary for registration, including a Phase 1 pharmacokinetic
study and a Phase 3 clinical trial. We completed a retrospective, observational study of patients dependent on PN for 6 or more months.
The objective of the study was to understand the incidence of cholestasis, a hallmark pathology of IFALD in this patient population by
measuring serum alkaline phosphatase (ALP) levels greater than 1.5 times the upper limit of normal ULN as a key marker of cholestasis.
Results of the study showed: 31% of all patients, irrespective of baseline levels, presented with ALP levels greater than 1.5 times the
ULN at any given time during 6 to 36 months. In addition, approximately 28% of all patients had persistent ALP elevations greater than
1.5 times the ULN at 36 months. At baseline, approximately 23% of patients presented with ALP levels greater than 1.5 times the ULN with
approximately 76% presenting with greater than 1.5 times the ULN at any given time during 6 to 36 months and approximately 59% with persistent
ALP elevations greater than 1.5 times the ULN at 36 months. While medical management demonstrated some improvement in ALP levels, it
was not sufficient for managing ALP levels over the long term in patients on PN. Results support further exploration in patient population
to determine rates of choline deficiency and steatosis. We have initiated a prospective observational study to further characterize the
prevalence of choline deficiency, as well as cholestasis and steatosis. We plan to use information from this prospective study to determine
the appropriate next steps for the development program.
Manufacturing
Through our CDMO, we have
manufactured sufficient amounts of cGMP drug substance and drug product to initiate the planned clinical trials. Scale up for commercial
demand, if and when applicable, will commence when appropriate. Our end-to-end manufacturing of IV Choline Chloride is conducted in the
United States by a cGMP-compliant CDMO. However, due to current macroeconomic factors, such as rising inflation and supply chain shortages,
scaling up may be more difficult than originally anticipated.
Collaborations and License Agreements
Chugai Agreement
On June 17, 2019, we entered
into an agreement, or the Chugai Agreement, with Chugai Pharmaceutical, a company organized and existing under the laws of Japan. Chugai
Pharmaceutical has developed and commercialized a therapeutic product, OK-432 (or Existing Product), in Japan and Taiwan, or the Chugai
Territory and owns and controls certain materials and documents related to the Existing Product (or the Chugai Materials). Pursuant to
the Chugai Agreement, Chugai Pharmaceutical has provided us with certain materials and documents relating to the Existing Product and
has provided certain technical services to us for our development and commercialization in territories other than the Chugai Territory,
or the Protara Territory of a new therapeutic product, or the New Product or TARA-002 comparable to the Existing Product beginning on
the effective date of the Chugai Agreement and ending on June 30, 2020, or any other date to be agreed to by the parties, or the Chugai
Service Period. Under the Chugai Agreement, Chugai Pharmaceutical will exclusively provide the Existing Product and Chugai Materials
to us and will not provide the Existing Product or Chugai Materials to any third parties during the Chugai Service Period, other than
for medical, compassionate use and/or non-commercial research purposes. Additionally, beginning on the effective date of the Chugai Agreement
and ending on the fifth anniversary of such date or upon the termination of the Chugai Agreement, whichever comes earlier, Chugai Pharmaceutical
will not provide Chugai Materials or technical support to any third-party for the purpose of development and commercialization in the
Protara Territory of a therapeutic product comparable to the Existing Product. We are responsible, at our sole cost and expense, for
the development and commercialization of the New Product in the Protara Territory.
On July 14, 2020, we and Chugai Pharmaceutical entered into an amendment
of the Chugai Agreement, or the Chugai Amendment, with an effective date as of June 30, 2020. The Chugai Amendment extends the date through
which Chugai will exclusively provide the Existing Product and materials to us from June 30, 2020 to June 30, 2021, extends the date through
which Chugai will not provide materials or technical support to any third-party for the purpose of development and commercialization in
a given area from the fifth anniversary to the eleventh anniversary of the original effective date (extended to June 17, 2030), and provides
for further such extensions on the occurrence of certain events and milestones. The Chugai Amendment also provides that, in addition to
the designated fee payable upon the initial indication approval in the Chugai Agreement described below, we will pay Chugai a designated
fee in the low, single digit millions for each additional indication approval.
As consideration for Chugai Pharmaceutical’s performance under
the Chugai Agreement, we agreed to pay Chugai Pharmaceutical a payment in the low, single-digit millions, which will be made in two installments
with an initial payment made in July 2020, and the remaining majority of the total amount will be payable upon FDA approval of the New
Product.
We granted Chugai Pharmaceutical
a right of first refusal on terms to be negotiated between the parties for a license related to the New Product-relevant information,
data and documentation and inventions to develop and commercialize the New Product in the Chugai Territory. We will be responsible for
manufacturing and supplying or causing our CDMO to manufacture and supply the New Product to Chugai Pharmaceutical.
The Chugai Agreement will
remain in full force and effect until the first anniversary of the date of FDA approval of the New Product, unless terminated sooner,
or the Chugai Term. Following the Chugai Service Period and during the Chugai Term, Chugai Pharmaceutical may terminate the Chugai Agreement,
in whole or in part, without cause, by providing us 90 days prior written notice. Following such termination, we would maintain exclusive
access to Chugai Materials, subject to the termination clauses outlined below. We may terminate the Chugai Agreement, in whole only,
by providing Chugai Pharmaceutical 90 days’ prior written notice if (i) we decide to discontinue the New Product development; (ii)
we decide that the FDA’s requirements for the New Product are not likely to be met; or (iii) the FDA identifies a safety issue
regarding the New Product.
In addition, either party
may terminate the Chugai Agreement, in whole or in part, in the event that the other party materially breaches the Chugai Agreement and
fails to cure the breach within 30 days of written notice. Either party may terminate the Chugai Agreement in its entirety immediately
upon notice to the other party if such other party: (i) is dissolved or liquidated or takes any corporate action for such purpose; (ii)
becomes insolvent or is generally unable to pay, or fails to pay, its debts as they become due; (iii) files or has filed against it a
petition for voluntary or involuntary bankruptcy or otherwise becomes subject to any proceeding under any domestic or foreign bankruptcy
or insolvency laws; (iv) makes or seeks to make a general assignment for the benefit of creditors; or (v) applies for or has a receiver,
trustee, custodian or similar agent appointed by order of any court to take charge of or sell any material portion of its property or
business.
In the event that we undergo
a change of control, Chugai Pharmaceutical may terminate the Chugai Agreement upon 90 days’ written notice to us, absent a written
pledge by the new controlling party of its agreement to fulfill and undertake all obligations of ours and to be bound by the Chugai Agreement.
Sponsored Research and License Agreement
On November 28, 2018, we
entered into a sponsored research and license agreement, or the Research Agreement, with The University of Iowa, or the University, pursuant
to which the University will provide access to certain program data related to Chugai Pharmaceutical’s OK-432 and will assist us
in conducting certain clinical studies. As consideration for the University’s performance under the Research Agreement, we will
pay the University $30,000 per year in funding for the project, taking into consideration the time spent by University employees required
for the Project. The parties also agree to discuss in good faith potential additional funding required for completion of the project
pursuant to the Research Agreement as applicable and necessary. In addition, within 45 days of approval of the TARA-002 BLA by the FDA,
we will pay a one-time approval milestone to the University, the amount of which depends on the usefulness of the program data in TARA-002’s
BLA filing, and the milestone amount will range from $0 to $1 million. We will also be responsible for certain tiered royalties on annual
net sales of products for the indication, which royalty rates are in the low single digit percentages. These royalty rates are also subject
to a reduction in the event that regulatory authorities determine that the program data is not sufficient for regulatory approval on
its own and additional pediatric efficacy and safety clinical studies are required. In the event that the annual net sales surpass certain
dollar amount thresholds, we will need to make certain additional milestone payments following the close of the calendar quarter in which
each milestone is reached, with the payments ranging from $62,500 to $125,000.
We may terminate the Research
Agreement upon 30 days’ prior written notice to the University. Either party may terminate the project under the Research Agreement
and all commitments and obligations with respect thereto upon 30 days’ prior written notice to the other party. In the event of
any termination of the project under the Research Agreement by the University, (a) the University agrees to complete certain phases of
the project and (b) we will continue to provide annual funding until the completion of the second phase of the project. Upon termination
of the project by us, the Agreement will terminate and we will reassign to the University the IND for LMs.
Choline License Agreement
On September 27, 2017, we
entered into a choline license agreement, or the Choline Agreement, with Alan L. Buchman, M.D., pursuant to which Dr. Buchman granted
us an exclusive, worldwide, non-transferable license in and to certain licensed orphan designations, a certain licensed IND, certain
existing study data and certain licensed know-how to develop, make, use, sell, offer for sale and import the licensed product during
the term of the Choline Agreement. We are solely responsible for all fees and expenses under the Choline Agreement, including all due
diligence obligations, regulatory authority fees, attorney fees and consulting fees. During the term of the Choline Agreement, Dr. Buchman
may not work with any third parties on any product competing with the licensed product. In consideration for the rights and licenses
granted under the Agreement, we made an initial upfront payment of $50,000 to Dr. Buchman.
Certain milestone and royalty
payments may also be payable to Dr. Buchman. Pursuant to the Choline Agreement, we paid Dr. Buchman $50,000 in October 2019 because we
had not received at least $5 million in working capital from any source or in any manner as of October 15, 2019. We then paid Dr. Buchman
a $550,000 milestone in January 2020 following our receipt of at least $5 million in working capital.
Regardless of whether development or commercialization is undertaken
by us under the Choline Agreement, commencing in November 2022 and during the term of the Choline Agreement, we will pay Dr. Buchman a
minimum annual royalty that ranges from $25,000 to $75,000.
We owe Dr. Buchman sales
royalties based on aggregate net sales of IV Choline Chloride in each calendar quarter, with the royalty rates ranging from 5.0% to 10.5%
of net sales. In the event of development or commercialization activity by any sublicensees, we also agreed to pay Dr. Buchman a royalty
in the mid-single digit percentage of (i) net cash receipts, after payment of taxes, received by us from sublicensees for their sales
of licensed products and (ii) any other consideration received by us from such sublicensees; in each case, including a fair monetary
value for any transaction that is not a bona fide arms-length transaction or that is for consideration other than monetary. Further,
in the event of a sale or transfer of a priority review voucher regarding the license product, regardless of whether any development
or commercialization activity is undertaken by us or our sublicensees, we agreed to pay Dr. Buchman a milestone payment representing
the mid-single digit percentage of (i) net cash receipts, after payment of taxes and (ii) any other consideration; in each case, received
by us, our affiliates, or our sublicensees, including a fair monetary value for any transaction that is not a bona fide arms-length transaction
or that is for consideration other than monetary.
We will also pay Dr. Buchman
up to $775,000 in additional milestone payments upon the achievement of various regulatory approval milestones.
The Choline Agreement will
remain in full force and effect until the last sale of the licensed product under the Choline Agreement. After we received the FDA’s
written minutes from the initial FDA meeting concerning the development of the first licensed product for one or more of the licensed
indications, we paid an additional payment of $100,000 to Dr. Buchman and elected not terminate the Choline Agreement at that time. The
Choline Agreement may be terminated by Dr. Buchman if, following regulatory approval of a licensed product, we have not made our first
sale of a licensed product within such country within a specified time period. We may terminate the Choline Agreement for convenience
upon 90 days’ prior written notice to Dr. Buchman. Dr. Buchman may terminate the Choline Agreement for non-payment of any payment
due that has not been cured. Either party may terminate the Choline Agreement if the other party is in material breach and has not cured
such breach within 60 days’ notice. In addition, Dr. Buchman may terminate the Choline Agreement upon 60 days’ prior written
notice if (a) we cease or threaten to cease to carry on our business; (b) a petition or resolution for the making of an administration
order or for the bankruptcy, winding-up or dissolution of us is presented or passed; (c) we file a voluntary petition in bankruptcy or
insolvency; (d) a receiver or administrator takes possession of our assets or (e) any similar procedure is commenced against us in the
United States.
License Agreement
On December 22, 2017, we
entered into a license agreement, or the License Agreement, with The Feinstein Institute for Medical Research, a not-for-profit corporation
organized and existing under the laws of New York, or the Institute. The Institute owns, by assignment, a U.S. patent related to the
treatment of fatty liver disease in humans. Pursuant to the License Agreement, the Institute granted us an exclusive, worldwide license,
with the right to grant sublicenses to non-affiliate third parties, to develop, make, have made, use, sell, offer for sale and import
certain products for use in the field of fatty liver disease in humans receiving total parenteral nutrition, by administering, as monotherapy,
a pharmaceutical composition comprising intravenous choline, wherein the fatty liver disease is selected from IFALD, non-alcoholic fatty
liver, non-alcoholic steatohepatitis, or NASH, NASH-associated liver fibrosis, or non-alcoholic cirrhosis. Notwithstanding the exclusive
rights granted to us, the Institute will retain the right to make, use and practice such patents in its own laboratories solely for non-commercial
scientific purposes and for continued non-commercial research.
As consideration for the
license grant, we agreed to pay the Institute tiered royalties of between 1.0% and 1.5% of all net sales. In addition, we agreed to pay
the Institute a low double digit percentage of net proceeds resulting from agreements entered into within two years from the effective
date of the License Agreement and a mid-single digit percentage of net proceeds resulting from agreements entered into thereafter. We
also agreed to make certain license maintenance payments of $15,000 beginning on the second anniversary of the effective date of the
License Agreement and continuing upon every anniversary thereafter until the first commercial sale of a licensed product. Beginning on
the first anniversary of the effective date of the License Agreement after the first commercial sale of a licensed product and every
anniversary of the effective date of the License Agreement thereafter, we will pay the Institute $30,000 as a license maintenance fee.
Such license maintenance fees are non-refundable but are creditable against future royalty payments due to the Institute during the 12-month
period following each such anniversary.
We agreed to make certain
one-time milestone payments in the aggregate amount of $375,000 upon the achievement of certain regulatory approval milestones, of which
$100,000 was paid on January 28, 2020 upon us having consummated the Private Placements.
Unless terminated earlier,
the License Agreement will expire upon the expiration of the last to expire patent under the License Agreement. We may terminate the
License Agreement by giving the Institute 60 days’ prior notice. Either party may terminate the License Agreement in the event
of a default or breach by the other party that has not been cured within 60 days of such notice. If we (i) make an assignment for the
benefit of creditors or if proceedings for a voluntary bankruptcy are instituted on our behalf; (ii) are declared bankrupt or insolvent
or (iii) are convicted of a felony relating to the manufacture, use or sale of the licensed products or a felony relating to moral turpitude,
the Institute may terminate the License Agreement.
Intellectual Property
Our intellectual property
is critical to our business and we strive to protect it, including by obtaining and maintaining patent protection in the U.S. and internationally
for our product candidates, novel biological discoveries, epitopes, new therapeutic approaches and potential indications, and other inventions
that are important to our business. Throughout the development of our product candidates, we will seek to identify additional means of
obtaining patent protection that would potentially enhance commercial success. We also rely upon trade secrets, know-how, continuing
technological innovation and in-licensing opportunities to develop and maintain our proprietary position.
The patent positions of
biotechnology companies like us are generally uncertain and involve complex legal, scientific and factual questions. We recognize that
the ability to obtain patent protection and the degree of such protection depends on a number of factors, including the extent of the
prior art, the novelty and non-obviousness of the invention, and the ability to satisfy the enablement requirement of the patent laws.
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. Consequently, we may not obtain or maintain adequate patent protection for any of our product candidates.
Any patents that we hold may be challenged, circumvented or invalidated by third parties.
Our commercial success will also depend in part on not infringing the
proprietary rights of third parties. In addition, we have licensed rights under proprietary technologies of third parties to develop,
manufacture and commercialize specific aspects of our products and services. It is uncertain whether the issuance of any third-party patent
would require us to alter our development or commercial strategies, alter our processes, obtain licenses or cease certain activities.
The expiration of patents or patent applications licensed from third parties or our breach of any license agreements or failure to obtain
a license to proprietary rights that it may require to develop or commercialize our future technology may have a material adverse impact
on it. If third parties prepare and file patent applications in the United States that also claim technology to which we have rights,
we may have to participate in interference proceedings in the USPTO, to determine priority of invention. For a more comprehensive discussion
of the risks related to our intellectual property, please see “Risk Factors—Risks Related to Our Intellectual Property.”
TARA-002:
TARA-002 is a genetically
distinct Su strain of Streptococcus pyogenes (group A, type 3). TARA-002 is produced through a proprietary manufacturing process.
We believe a significant barrier to entry exists, as we believe only Chugai Pharmaceutical and we have the specific strain and possess
the know-how to manufacture the product. We anticipate that, if approved by the FDA, TARA-002 will be protected by 12 years of biologic
exclusivity.
IV Choline Chloride:
With respect to IV Choline
Chloride, we have acquired an exclusive, worldwide license to U.S. Patent 8,865,641 B2 from the Feinstein Institute for Medical Research
providing protection in the United States until 2035. The patent applies to a method of treating a fatty liver disease in a subject.
In particular, the method comprises administering to the subject an effective amount of a cholinergic pathway stimulating agent, wherein
the fatty liver disease is selected from non-alcoholic fatty liver, alcoholic fatty liver, NASH, alcoholic steatohepatitis, or ASH, NASH-associated
liver fibrosis, ASH-associated liver fibrosis, non-alcoholic cirrhosis and alcoholic cirrhosis. In addition, in April 2022, the USPTO
issued to us Patent No. US 11,311,503 claiming a sterile aqueous choline salt composition with a term expiring in 2041. We would expect
to list such patent in the FDA’s Orange Book List of Approved Drug Products with Therapeutic Equivalence Evaluations if IV Choline
Chloride is approved by the FDA for the treatment of IFALD.
The term of individual patents
depends upon the legal term of the patents in the countries in which they are obtained. In most countries in which we may file, the patent
term is 20 years from the earliest date of filing a non-provisional patent application related to the patent. A U.S. patent also may
be accorded a patent term adjustment under certain circumstances to compensate for delays in obtaining the patent from the USPTO. In
some instances, such a patent term adjustment may result in a U.S. patent term extending beyond 20 years from the earliest date of filing
a non-provisional patent application related to the U.S. patent. In addition, in the United States, the term of a U.S. patent that covers
an FDA-approved drug may also be eligible for patent term extension, which permits patent term restoration as compensation for the patent
term lost during the FDA regulatory review process. The Hatch-Waxman Act permits a patent term extension of up to five years beyond the
expiration of the patent. The length of the patent term extension is related to the length of time the drug is under regulatory review.
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
one patent applicable to an approved drug may be extended. Similar provisions are available in Europe and other foreign jurisdictions
to extend the term of a patent that covers an approved drug. In the future, if and when our products receive FDA approval, we expect
to apply for patent term extensions on patents covering certain of those products, when applicable.
We also rely on trade secrets
relating to product candidates and seek to protect and maintain the confidentiality of proprietary information to protect aspects of
our business that are not amenable to, or that we do not consider appropriate for, patent protection. Although we take steps to protect
our proprietary information and trade secrets, including through contractual means with our employees and consultants, third parties
may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets,
including through breaches of such agreements with our employees and consultants. Thus, we may not be able to meaningfully protect our
trade secrets. It is our policy to require our employees, consultants, outside scientific partners, sponsored researchers and other advisors
to execute confidentiality agreements upon the commencement of employment or consulting relationships with us. These agreements provide
that all confidential information concerning our business or financial affairs developed or made known to the individual during the course
of the individual’s relationship with us is to be kept confidential and not disclosed to third parties except in specific circumstances.
Our agreements with employees also provide that all inventions conceived by the employee in the course of employment with us or from
the employee’s use of our confidential information are our exclusive property.
Manufacturing
We rely on CDMOs to produce
our drug candidates in accordance with cGMP as well as regulations for use in clinical trials and for commercial product. The manufacture
of pharmaceuticals is subject to extensive cGMP regulations, which impose various procedural and documentation requirements and govern
all areas of record keeping, production processes and controls, personnel and quality control.
The CDMOs that we partner
with have the capability to produce clinical supply required for clinical trials, as well as support commercial scale-up activities for
both products.
We manufacture TARA-002
using an equivalent, but modernized, proprietary manufacturing process as is used to produce OK-432 by Chugai Pharmaceutical, starting
with a master cell line propagated by us but utilizing the same genetically distinct strain of Streptococcus pyogenes (A group,
type 3) Su strain as OK-432. We have contracted a CDMO to manufacture TARA-002.
Both TARA-002 and IV Choline
Chloride are or will be manufactured in the United States. The starting materials for TARA-002 were provided to us pursuant to an agreement
with Chugai Pharmaceutical. The regulatory starting materials for IV Choline Chloride are available commercially.
Sales and Marketing
We plan to become a fully-integrated
commercial biopharmaceutical company pursuing our mission of supporting and improving the lives of patients suffering from cancer and
rare diseases.
If approved by the FDA,
we plan to commercialize both of our current product candidates in the United States first and then in other geographies. As we advance
TARA-002 and IV Choline Chloride through our respective clinical development programs, we plan to grow our commercial organization in
support of anticipated product launches.
Competition
The process for commercialization
of new drugs is very competitive, and we could potentially face worldwide competition from other pharmaceutical companies, biotechnology
companies and ultimately generic or biosimilar products. Our potential competitors may develop or market therapies that are available
sooner, more clinically effective, safer or less expensive than any therapeutic products we develop. Numerous companies are engaged in
the development, patenting, manufacturing and marketing of healthcare products competitive with those that we are developing.
With respect to our lead
product candidate, TARA-002, for the treatment of NMIBC and LMs, the active ingredient in TARA-002 is a genetically distinct strain of
Streptococcus pyogenes (group A, type 3) Su strain. TARA-002 is produced through a proprietary manufacturing process. We anticipate
that, if approved by the FDA, TARA-002 will be protected by 12 years of biologic exclusivity. In addition, based on the prevalence of
the disease, TARA-002 is likely to have seven years of concurrent Orphan Drug Designation exclusivity for the treatment of LMs.
There are no approved pharmacotherapies
currently available for the treatment of LMs and the current treatment options include a high-risk surgical procedure and off-label use
of sclerosants, including doxycycline, bleomycin, ethanol and sodium tetradecyl sulfate. There are a number of drug development companies
and academic researchers exploring oral and topical formulations of various agents for the treatment of LMs including macrolides, phosphodiesterase
inhibitors, and calcineurin/mTOR inhibitors. These are in early development.
TARA-002, if approved for
the treatment of NMIBC, would be subject to competition from existing treatment methods of surgery, chemotherapy and immunomodulatory
therapy. For example, the current standard of care for NMIBC includes intravesical BCG TICE (manufactured by Merck & Co., Inc.). Other
products approved for the treatment of NMIBC include Merck & Co., Inc.’s Keytruda, Endo International plc’s Valstar and
Ferring B.V.’s Adstiladrin. Additional product candidates in development include Japanese BCG Laboratory’s BCG Tokyo, Pfizer
Inc.’s Sasanlimab in combination with BCG, ImmunityBio, Inc.’s VesAnktiva in combination with BCG, CG Oncology Inc.’s
CG0070, Sesen Bio, Inc.’s Vicineum, enGene Inc.’s, EG-70, Seagen Inc.’s PADCEV, Janssen’s TAR200 combined with
gemcitabine plus or minus Cetrelimab, Urogen Pharma Ltd.’s Jelmyto,and Auro BioSciences, Inc.’s Aura-0011. Additional pharmaceutical
and biotechnology companies with product candidates in development for the treatment of NMIBC include but may not be limited to Verity
Pharmaceuticals, Inc., AstraZeneca PLC, Bristol-Myers Squibb Company, Roche Group, Asieris Pharmaceuticals, BeiGene, Ltd, NanOlogy, LLC,
Linton Pharm Co., Ltd., Lindis Biotech GmbH, Theralase Technologies Inc., Taizhou Hanzhong biomedical co. Ltd., Shionogi & Co., Ltd.,
Rapamycin Holdings, Inc., Vaxiion Therapeutics Inc., Incyte Corporation, LiPac Oncology, Inc., Anika Therapeutics Inc., Surge Pharmaceuticals
Pvt. Ltd., and Istari Oncology, Inc.
There are no treatments
currently available for IFALD. With respect to IV Choline Chloride for the treatment of IFALD, IV Choline Chloride is the only sterile
injectable form of choline chloride that can be combined with parenteral nutrition. Further, if approved, IV Choline Chloride will be
protected by Orphan Drug Designation exclusivity for seven years.
Government Regulation and Product Approval
The FDA and other regulatory
authorities at federal, state, and local levels, as well as in foreign countries, extensively regulate, among other things, the research,
development, testing, manufacture, quality control, import, export, safety, effectiveness, labeling, packaging, storage, distribution,
record keeping, approval, advertising, promotion, marketing, post-approval monitoring, and post-approval reporting of drugs and biologics
such as those we are developing. We, along with third-party contractors, will be required to navigate the various preclinical, clinical
and commercial approval requirements of the governing regulatory agencies of the countries in which we wish to conduct studies or seek
approval or licensure of our product candidates.
In the United States, the
FDA regulates drugs under the Federal Food, Drug and Cosmetic Act, or FDCA and biologics additionally under the Public Health Services
Act, or PHSA, as well as their respective implementing regulations. The process required by the FDA before biopharmaceutical product
candidates may be marketed in the United States generally involves the following:
|
● |
completion
of preclinical laboratory tests and animal studies performed in accordance with the FDA’s current Good Laboratory Practices,
or cGLP regulations; |
|
● |
submission
to the FDA of an IND, which must become effective before clinical trials may begin and must be updated annually or when significant
changes are made; |
|
● |
approval
by an independent Institutional Review Board, or IRB, or ethics committee at each clinical site before the trial is commenced; |
|
● |
performance
of adequate and well-controlled human clinical trials to establish the safety and efficacy of a product candidate and the safety,
purity and potency of the proposed biologic product candidate for its intended purpose; |
|
● |
preparation
of and submission to the FDA of an NDA or BLA after completion of all pivotal clinical trials that includes substantial evidence
of safety, purity and potency or efficacy from results of nonclinical testing and clinical trials; |
|
● |
a
determination by the FDA within 60 days of its receipt of an NDA or BLA to accept the application for review; |
|
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satisfactory
completion of an FDA Advisory Committee review, if applicable; |
|
● |
satisfactory
completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the proposed product is produced
to assess compliance with cGMP, and of selected clinical investigation sites to assess compliance with current Good Clinical Practices,
or cGCP; and |
|
● |
FDA
review and approval, or licensure, of the NDA or BLA to permit commercial marketing of the product for particular indications for
use in the United States. |
Preclinical and Clinical Development
Prior to beginning the first
clinical trial with a product candidate, we must submit an IND to the FDA. An IND is a request for authorization from the FDA to administer
an investigational new drug product to humans. The central focus of an IND submission is on the general investigational plan and the
protocol(s) for clinical trials. The IND also includes results of animal and in vitro studies assessing the toxicology, pharmacokinetics,
pharmacology, and pharmacodynamic characteristics of the product candidate; chemistry, manufacturing, and controls information; and any
available human data or literature to support the use of the investigational product. An IND must become effective before human clinical
trials may begin. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period,
raises safety concerns or questions about the proposed clinical trial. In such a case, the IND may be placed on clinical hold and the
IND sponsor and the FDA must resolve any outstanding concerns or questions before the clinical trial can begin. Submission of an IND
therefore may or may not result in FDA authorization to begin a clinical trial.
Clinical trials involve
the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with
GCPs, which include the requirement that all research subjects provide their informed consent for their participation in any clinical
trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the trial, the parameters to be
used in monitoring safety and the effectiveness criteria to be evaluated. A separate submission to the existing IND must be made for
each successive clinical trial conducted during product development and for any subsequent protocol amendments. Furthermore, an independent
IRB for each site proposing to conduct the clinical trial must review and approve the plan for any clinical trial and its informed consent
form before the clinical trial begins at that site, and must monitor the trial until completed. Regulatory authorities, the IRB or the
sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable
health risk or that the trial is unlikely to meet its stated objectives. Some studies also include oversight by an independent group
of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board, which provides authorization for
whether or not a trial may move forward at designated check points based on access to certain data from the trial and may halt the clinical
trial if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy.
There are also requirements governing the reporting of ongoing clinical trials and clinical trial results to public registries.
Human clinical trials are
typically conducted in three sequential phases that may overlap.
| ● | Phase
1—The investigational product is initially introduced into healthy human subjects or
patients with the target disease or condition. These trials are designed to test the safety,
dosage tolerance, absorption, metabolism, distribution and elimination of the investigational
product in humans, the side effects associated with increasing doses, and, if possible, to
gain early evidence on effectiveness. |
|
● |
Phase
2—The investigational product is administered to a limited patient population with a specified disease or condition to evaluate
the preliminary efficacy, optimal dosages and dosing schedule and to identify possible adverse side effects and safety risks. Multiple
Phase 2 clinical trials may be conducted to obtain information prior to beginning larger and more expensive Phase 3 clinical trials. |
|
● |
Phase
3—The investigational product is administered to an expanded patient population to further evaluate dosage, to provide statistically
significant evidence of clinical efficacy and to further test for safety, generally at multiple geographically dispersed clinical
trial sites. These clinical trials are intended to establish the overall risk/benefit ratio of the investigational product and to
provide an adequate basis for product approval. |
In some cases, the FDA may
require, or companies may voluntarily pursue, additional clinical trials after a product is approved to gain more information about the
product. These so-called Phase 4 trials may be made a condition to approval of the NDA or BLA. Concurrent with clinical trials, companies
may complete additional animal studies and develop additional information about the biological characteristics of the product candidate,
and must finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing
process must be capable of consistently producing quality batches of the product candidate and, among other things, must develop methods
for testing the identity, strength, quality and purity of the final product, or for biologics, the safety, purity and potency. Additionally,
appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the product candidate does
not undergo unacceptable deterioration over its shelf life.
Application Submission, Review and Approval
Assuming successful completion
of all required testing in accordance with all applicable regulatory requirements, the results of product development, nonclinical studies
and clinical trials are submitted to the FDA as part of an NDA or BLA requesting approval to market the product for one or more indications.
The NDA or BLA must include all relevant data available from pertinent preclinical and clinical trials, including negative or ambiguous
results as well as positive findings, together with detailed information relating to the product’s chemistry, manufacturing, controls,
and proposed labeling, among other things. The submission of an NDA or BLA requires payment of a substantial application user fee to
the FDA, unless a waiver or exemption applies.
Once an NDA or BLA has been
submitted, the FDA’s goal is to review standard applications within ten months after it accepts the application for filing, or,
if the application qualifies for priority review, six months after the FDA accepts the application for filing. In both standard and priority
reviews, the review process is often significantly extended by FDA requests for additional information or clarification. The FDA reviews
the application to determine, among other things, whether a product is safe, pure and potent and the facility in which it is manufactured,
processed, packed, or held meets standards designed to assure the product’s continued safety, purity and potency. The FDA may convene
an advisory committee to provide clinical insight on application review questions. Before approving an NDA or BLA, the FDA will typically
inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that
the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the
product within required specifications. Additionally, before approving an NDA or BLA, the FDA will typically inspect one or more clinical
sites to assure compliance with GCP. If the FDA determines that the application, manufacturing process or manufacturing facilities are
not acceptable, it will outline the deficiencies in the submission and often will request additional testing or information. Notwithstanding
the submission of any requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory
criteria for approval.
The FDA may issue an approval
letter or a Complete Response letter. An approval letter authorizes commercial marketing of the product with specific prescribing information
for specific indications. A Complete Response letter will describe all of the deficiencies that the FDA has identified in the NDA or
BLA. In issuing the Complete Response letter, the FDA may recommend actions that the applicant might take to place the application in
condition for approval, including requests for additional information or clarification. The FDA may delay or refuse approval of an application
if applicable regulatory criteria are not satisfied, require additional testing or information and/or require post-marketing testing
and surveillance to monitor safety or efficacy of a product.
If regulatory approval of
a product is granted, such approval will be granted for particular indications and may entail limitations on the indicated uses for which
such product may be marketed. For example, the FDA may impose a Risk Evaluation and Mitigation Strategy, or REMS, to ensure the benefits
of the product outweigh its risks. A REMS is a safety strategy to manage a known or potential serious risk associated with a product
and to enable patients to have continued access to such medicines by managing their safe use, and could include medication guides, physician
communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization
tools. The FDA also may condition approval on, among other things, changes to proposed labeling or the development of adequate controls
and specifications. Once approved, the FDA may withdraw the product approval if compliance with pre- and post-marketing requirements
is not maintained or if problems occur after the product reaches the marketplace. The FDA may require one or more Phase 4 post-market
trials and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization, and may limit
further marketing of the product based on the results of these post-marketing trials.
Orphan Drug Designation
Under the Orphan Drug Act,
the FDA may grant orphan designation to a drug or biologic intended to treat a rare disease or condition, which is a disease or condition
that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States for which there
is no reasonable expectation that the cost of developing and making available in the United States a drug or biologic for this type of
disease or condition will be recovered from sales in the United States for that drug or biologic. Orphan designation must be requested
before submitting an NDA or BLA. After the FDA grants orphan designation, the generic identity of the therapeutic agent and its potential
orphan use are disclosed publicly by the FDA. The orphan drug designation does not convey any advantage in, or shorten the duration of,
the regulatory review or approval process.
If a product that has orphan
designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to
orphan exclusivity, which means that the FDA may not approve any other applications, including a full NDA or BLA, to market the same
product for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product
with orphan drug exclusivity. Orphan exclusivity does not prevent FDA from approving a different drug or biologic for the same disease
or condition, or the same drug or biologic for a different disease or condition. Among the other benefits of orphan drug designation
are tax credits for certain research and a waiver of the BLA application fee.
A designated orphan product
may not receive orphan exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation.
In addition, exclusive marketing rights in the United States may be lost if the FDA later determines that the request for designation
was materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients
with the rare disease or condition.
The FDA incentivizes the
development of drugs and biologics that meet the definition of a “rare pediatric disease” defined to mean a serious or life-threatening
disease in which the serious of life-threatening manifestations primarily affect individuals aged from birth to 18 years and the disease
affects fewer than 200,000 individuals in the United States or affects 200,000 or more in the United States and for which there is no
reasonable expectation that the cost of developing and making in the United States a drug for such disease or condition will be received
from sales in the United States of such drug. The sponsor of a product candidate for a rare pediatric disease may be eligible for a voucher
that can be used to obtain a priority review for a subsequent human drug or biologic application after the date of approval of the rare
pediatric disease drug product, referred to as a priority review voucher, or PRV. A rare pediatric disease designation does not guarantee
that a sponsor will receive a PRV upon approval of its NDA or BLA. If a PRV is received, it may be sold or transferred an unlimited number
of times. Congress has extended the PRV program until September 30, 2024, with the potential for PRVs to be granted until September
30, 2026.
Post-Approval Requirements
Any products manufactured
or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things,
requirements relating to quality control and quality assurance, record-keeping, reporting of adverse experiences, periodic reporting,
product sampling and distribution, and advertising and promotion of the product. After approval, most changes to the approved product,
such as adding new indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing user
fee requirements, under which FDA assesses an annual program fee for each product identified in an approved NDA or BLA. Biopharmaceutical
manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies, and are
subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP, which impose certain procedural
and documentation requirements upon sponsors and their third-party manufacturers. Changes to the manufacturing process are strictly regulated,
and, depending on the significance of the change, may require prior FDA approval before being implemented. FDA regulations also require
investigation and correction of any deviations from cGMP and impose reporting requirements upon sponsor and third-party manufacturers.
Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance
with cGMP and other aspects of regulatory compliance.
The FDA may withdraw approval
if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market.
Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with
manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new
safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution restrictions
or other restrictions under a REMS program. Other potential consequences include, among other things:
|
● |
restrictions
on the marketing or manufacturing of a product, mandated modification of promotional materials or issuance of corrective information,
issuance by FDA or other regulatory authorities of safety alerts, Dear Healthcare Provider letters, press releases or other communications
containing warnings or other safety information about the product, or complete withdrawal of the product from the market or product
recalls; |
|
● |
fines,
warning or untitled letters or holds on post-approval clinical trials; |
|
● |
refusal
of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of existing product
approvals; |
|
● |
product
seizure or detention, or refusal of the FDA to permit the import or export of products; or |
|
● |
injunctions,
consent decrees or the imposition of civil or criminal penalties. |
The FDA closely regulates
the marketing, labeling, advertising and promotion of biopharmaceuticals. A company can make only those claims relating to safety and
efficacy, purity and potency of a biopharmaceutical that are approved by the FDA and in accordance with the provisions of the approved
label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. Failure to comply
with these requirements can result in, among other things, adverse publicity, warning letters, corrective advertising and potential civil
and criminal penalties. Physicians may prescribe legally available products for uses that are not described in the product’s labeling
and that differ from those approved by the FDA. Such off-label uses are common across medical specialties. Physicians may believe that
such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians
in their choice of treatments. The FDA does, however, restrict manufacturer’s communications on the subject of off-label use of
their products.
Biosimilars and Reference Product Exclusivity
The Patient Protection and
Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or ACA, signed into law in 2010, includes a subtitle
called the Biologics Price Competition and Innovation Act of 2009, or BPCIA, which created an abbreviated approval pathway for biological
products that are biosimilar to or interchangeable with an FDA-approved reference biological product. To date, a number of biosimilars
have been licensed under the BPCIA, and numerous biosimilars have been approved in Europe. The FDA has issued several guidance documents
outlining its approach to the review and approval of biosimilars.
Biosimilarity, which
requires that there be no clinically meaningful differences between the biological product and the reference product in terms of
safety, purity, and potency, can be shown through analytical studies, animal studies, and a clinical trial or trials.
Interchangeability requires that a product is biosimilar to the reference product and the product must demonstrate that it can be
expected to produce the same clinical results as the reference product in any given patient and, for products that are administered
multiple times to an individual, the biologic and the reference biologic may be alternated or switched after one has been previously
administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic.
Complexities associated with the larger, and often more complex, structures of biological products, as well as the processes by
which such products are manufactured, pose significant hurdles to implementation of the abbreviated approval pathway that are still
being worked out by the FDA.
Under the BPCIA, an application
for a biosimilar product may not be submitted to the FDA until four years following the date that the reference product was first licensed
by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from the date on which
the reference product was first licensed. During this 12-year period of exclusivity, another company may still market a competing version
of the reference product if the FDA approves a full BLA for the competing product containing that applicant’s own preclinical data
and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of its product. The BPCIA also
created certain exclusivity periods for biosimilars approved as interchangeable products. At this juncture, it is unclear whether products
deemed “interchangeable” by the FDA will, in fact, be readily substituted by pharmacies, which are governed by state pharmacy
law.
The BPCIA is complex and
continues to be interpreted and implemented by the FDA. In addition, recent government proposals have sought to reduce the 12-year reference
product exclusivity period. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the
subject of recent litigation. As a result, the ultimate impact, implementation, and impact of the BPCIA is subject to significant uncertainty.
Other U.S. Healthcare Laws and Compliance
Requirements
In the United States, our
current and future operations are subject to regulation by various federal, state and local authorities in addition to the FDA, including
but not limited to, the Centers for Medicare & Medicaid Services, or CMS, other divisions of the U.S. Department of Health and Human
Services, or HHS, (such as the Office of Inspector General, Office for Civil Rights and the Health Resources and Service Administration),
the U.S. Department of Justice, or DOJ and individual U.S. Attorney offices within the DOJ, and state and local governments. For example,
our clinical research, sales, marketing and scientific/educational grant programs will need to comply with the anti-fraud and abuse provisions
of the Social Security Act, the false claims laws, the privacy and security provisions of the Health Insurance Portability and Accountability
Act, or HIPAA, and similar state laws, each as amended, as applicable.
The federal Anti-Kickback
Statute prohibits, among other things, any person or entity, from knowingly and willfully offering, paying, soliciting or receiving any
remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for purchasing, leasing, ordering
or arranging for the purchase, lease or order of any item or service reimbursable, in whole or in part, under Medicare, Medicaid or other
federal healthcare programs. The term remuneration has been interpreted broadly to include anything of value. The Anti-Kickback Statute
has been interpreted to apply to arrangements between therapeutic product manufacturers on one hand and prescribers, purchasers, and
formulary managers on the other. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities
from prosecution. The exceptions and safe harbors are drawn narrowly and practices that involve remuneration that may be alleged to be
intended to induce prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify for an exception or safe
harbor. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make
the conduct per se illegal under the Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case
basis based on a cumulative review of all of its facts and circumstances. Our practices may not in all cases meet all of the criteria
for protection under a statutory exception or regulatory safe harbor.
Additionally, the intent
standard under the Anti-Kickback Statute was amended by the Patient Protection and Affordable Care Act, as amended by the Health Care
and Education Reconciliation Act of 2010, or the Affordable Care Act, to a stricter standard such that a person or entity no longer needs
to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. In addition, the Affordable
Care Act codified case law that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes
a false or fraudulent claim for purposes of the federal False Claims Act, or the FCA (discussed below).
The federal false claims,
including the FCA, and civil monetary penalty laws, which imposes significant penalties and can be enforced by private citizens through
civil qui tam actions, prohibit any person or entity from, among other things, knowingly presenting, or causing to be presented, a false
or fraudulent claim for payment to, or approval by, the federal government, including federal healthcare programs, such as Medicare and
Medicaid, knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim
to the federal government, or knowingly making a false statement to improperly avoid, decrease or conceal an obligation to pay money
to the federal government. A claim includes “any request or demand” for money or property presented to the U.S. government.
For instance, historically, pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly providing
free product to customers with the expectation that the customers would bill federal programs for the product. Other companies have been
prosecuted for causing false claims to be submitted because of the companies’ marketing of the product for unapproved, off-label,
and thus generally non-reimbursable, uses.
HIPAA created additional
federal criminal statutes that prohibit, among other things, knowingly and willfully executing, or attempting to execute, a scheme to
defraud or to obtain, by means of false or fraudulent pretenses, representations or promises, any money or property owned by, or under
the control or custody of, any healthcare benefit program, including private third-party payors, willfully obstructing a criminal investigation
of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up by trick, scheme or device, a material fact
or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits,
items or services. Like the Anti-Kickback Statute, the Affordable Care Act amended the intent standard for certain healthcare fraud statutes
under HIPAA such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in
order to have committed a violation.
Also, many states have similar,
and typically more prohibitive, fraud and abuse statutes or regulations that apply to items and services reimbursed under Medicaid and
other state programs, or, in several states, apply regardless of the payor.
We may be subject to data
privacy and security regulations by both the federal government and the states in which it conducts business. HIPAA, as amended by the
Health Information Technology for Economic and Clinical Health Act, or HITECH, and its implementing regulations, imposes requirements
on “covered entities,” including certain healthcare providers, health plans, and healthcare clearinghouses, as well as their
respective “business associates” that create, receive, maintain or transmit individually identifiable health information
for or on behalf of a covered entity as well as their covered subcontractors relating to the privacy, security and transmission of individually
identifiable health information. Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable to
business associates, independent contractors, or agents of covered entities that receive or obtain protected health information in connection
with providing a service on behalf of a covered entity. HITECH also created four new tiers of civil monetary penalties, amended HIPAA
to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file
civil actions for damages or injunctions in federal courts to enforce HIPAA and seek attorneys’ fees and costs associated with
pursuing federal civil actions. In addition, many state laws govern the privacy and security of health information in specified circumstances,
many of which differ from each other in significant ways, are often not pre-empted by HIPAA, and may have a more prohibitive effect than
HIPAA, thus complicating compliance efforts.
We may develop products
that, once approved, may be administered by a physician. Under currently applicable U.S. law, certain products not usually self-administered
(including injectable drugs) may be eligible for coverage under Medicare through Medicare Part B. Medicare Part B is part of original
Medicare, the federal health care program that provides health care benefits to the aged and disabled, and covers outpatient services
and supplies, including certain biopharmaceutical products, that are medically necessary to treat a beneficiary’s health condition.
As a condition of receiving Medicare Part B reimbursement for a manufacturer’s eligible drugs, the manufacturer is required to
participate in other government healthcare programs, including the Medicaid Drug Rebate Program and the 340B Drug Pricing Program. The
Medicaid Drug Rebate Program requires pharmaceutical manufacturers to enter into and have in effect a national rebate agreement with
the Secretary of HHS as a condition for states to receive federal matching funds for the manufacturer’s outpatient drugs furnished
to Medicaid patients. Under the 340B Drug Pricing Program, the manufacturer must extend discounts to entities that participate in the
program.
In addition, many pharmaceutical
manufacturers must calculate and report certain price reporting metrics to the government, such as average sales price, or ASP, and best
price. Penalties may apply in some cases when such metrics are not submitted accurately and timely. Further, these prices for drugs may
be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation
of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. It
is difficult to predict how Medicare coverage and reimbursement policies will be applied to our products in the future and coverage and
reimbursement under different federal healthcare programs are not always consistent. Medicare reimbursement rates may also reflect budgetary
constraints placed on the Medicare program.
Additionally, the federal
Physician Payments Sunshine Act, or the Sunshine Act, within the Affordable Care Act, and its implementing regulations, require that
certain manufacturers of drugs, devices, biological and medical supplies for which payment is available under Medicare, Medicaid or the
Children’s Health Insurance Program (with certain exceptions) report annually to CMS information related to certain payments or
other transfers of value made or distributed to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors),
other healthcare professionals (such as physicians assistants and nurse practitioners) and teaching hospitals, or to entities or individuals
at the request of, or designated on behalf of, the physicians and teaching hospitals and to report annually certain ownership and investment
interests held by physicians and their immediate family members. Failure to report accurately could result in penalties. In addition,
many states also govern the reporting of payments or other transfers of value, many of which differ from each other in significant ways,
are often not pre-empted, and may have a more prohibitive effect than the Sunshine Act, thus further complicating compliance efforts.
In order to distribute products
commercially, we must comply with state laws that require the registration of manufacturers and wholesale distributors of drug and biological
products in a state, including, in certain states, manufacturers and distributors who ship products into the state even if such manufacturers
or distributors have no place of business within the state. Some states also impose requirements on manufacturers and distributors to
establish the pedigree of product in the chain of distribution, including some states that require manufacturers and others to adopt
new technology capable of tracking and tracing product as it moves through the distribution chain. Several states and/or localities have
enacted legislation requiring pharmaceutical and biotechnology companies to establish marketing compliance programs, file periodic reports
with the state, make periodic public disclosures on sales, marketing, pricing, clinical trials and other activities, and/or register
their sales representatives, as well as to prohibit pharmacies and other healthcare entities from providing certain physician prescribing
data to pharmaceutical and biotechnology companies for use in sales and marketing, and to prohibit certain other sales and marketing
practices. All of our activities are potentially subject to federal and state consumer protection and unfair competition laws.
Ensuring business arrangements
with third parties comply with applicable healthcare laws and regulations is a costly endeavor. If our operations are found to be in
violation of any of the federal and state healthcare laws described above or any other current or future governmental regulations that
apply to it, it may be subject to penalties, including without limitation, significant civil, criminal and/or administrative penalties,
damages, fines, disgorgement, imprisonment, exclusion from participation in government programs, such as Medicare and Medicaid, injunctions,
private “qui tam” actions brought by individual whistleblowers in the name of the government, or refusal to allow it to enter
into government contracts, contractual damages, reputational harm, administrative burdens, diminished profits and future earnings, additional
reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations
of non-compliance with these laws, and the curtailment or restructuring of its operations, any of which could adversely affect our ability
to operate our business and our results of operations.
Coverage, Pricing and Reimbursement
Significant uncertainty
exists as to the coverage and reimbursement status of any product candidates for which we may obtain regulatory approval. In the United
States and in foreign markets, sales of any products for which we receive regulatory approval for commercial sale will depend, in part,
on the extent to which third-party payors provide coverage and establish adequate reimbursement levels for such products. In the United
States, third-party payors include federal and state healthcare programs, private managed care providers, health insurers and other organizations.
Adequate coverage and reimbursement from governmental healthcare programs, such as Medicare and Medicaid in the United States, and commercial
payors are critical to new product acceptance.
Our ability to commercialize
any products successfully also will depend in part on the extent to which coverage and reimbursement for these products and related treatments
will be available from government health administration authorities, private health insurers and other organizations. Government authorities
and other third-party payors, such as private health insurers and health maintenance organizations, decide which therapeutics they will
pay for and establish reimbursement levels. Coverage and reimbursement by a third-party payor may depend upon a number of factors, including
the third-party payor’s determination that use of a therapeutic is:
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● |
a
covered benefit under its health plan; |
|
● |
safe,
effective and medically necessary; |
|
● |
appropriate
for the specific patient; |
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● |
neither
experimental nor investigational. |
We cannot be sure that reimbursement
will be available for any product that it commercializes and, if coverage and reimbursement are available, what the level of reimbursement
will be. Coverage may also be more limited than the purposes for which the product is approved by the FDA or comparable foreign regulatory
authorities. Reimbursement may impact the demand for, or the price of, any product for which we obtain regulatory approval.
Third-party payors are increasingly
challenging the price, examining the medical necessity, and reviewing the cost-effectiveness of medical products, therapies and services,
in addition to questioning their safety and efficacy. Obtaining reimbursement for our products may be particularly difficult because
of the higher prices often associated with branded drugs and drugs administered under the supervision of a physician. We may need to
conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of our products, in addition
to the costs required to obtain FDA approvals. Our product candidates may not be considered medically necessary or cost-effective. Obtaining
coverage and reimbursement approval of a product from a government or other third-party payor is a time-consuming and costly process
that could require us to provide to each payor supporting scientific, clinical and cost-effectiveness data for the use of our product
on a payor-by-payor basis, with no assurance that coverage and adequate reimbursement will be obtained. A payor’s decision to provide
coverage for a product does not imply that an adequate reimbursement rate will be approved. Further, one payor’s determination
to provide coverage for a product does not assure that other payors will also provide coverage for the product. Adequate third-party
reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment
in product development. If reimbursement is not available or is available only at limited levels, we may not be able to successfully
commercialize any product candidate that it successfully develops.
Different pricing and reimbursement
schemes exist in other countries. In the European Union, governments influence the price of biopharmaceutical products through their
pricing and reimbursement rules and control of national health care systems that fund a large part of the cost of those products to consumers.
Some jurisdictions operate positive and negative list systems under which products may only be marketed once a reimbursement price has
been agreed. To obtain reimbursement or pricing approval, some of these countries may require the completion of clinical trials that
compare the cost effectiveness of a particular product candidate to currently available therapies. Other member states allow companies
to fix their own prices for medicines but monitor and control company profits. The downward pressure on health care costs has become
intense. As a result, increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross-border
imports from low-priced markets exert a commercial pressure on pricing within a country.
The marketability of any
product candidates for which we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail
to provide adequate coverage and reimbursement. In addition, emphasis on managed care, the increasing influence of health maintenance
organizations, and additional legislative changes in the United States has increased, and we expect will continue to increase, the pressure
on healthcare pricing. The downward pressure on the rise in healthcare costs in general, particularly prescription medicines, medical
devices and surgical procedures and other treatments, has become very intense. Coverage policies and third-party reimbursement rates
may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which we receive
regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
Healthcare Reform
In the United States and
some foreign jurisdictions, there have been, and continue to be, several legislative and regulatory changes and proposed changes regarding
the healthcare system that could prevent or delay marketing approval of product candidates, restrict or regulate post-approval activities,
and affect the ability to profitably sell product candidates for which marketing approval is obtained. Among policy makers and payors
in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of
containing healthcare costs, improving quality and/or expanding access. In the United States, the pharmaceutical industry has been a
particular focus of these efforts and has been significantly affected by major legislative initiatives.
For example, the Affordable
Care Act has substantially changed healthcare financing and delivery by both governmental and private insurers. Among the Affordable
Care Act provisions of importance to the pharmaceutical and biotechnology industries, in addition to those otherwise described above,
are the following:
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an
annual, nondeductible fee on any entity that manufactures or imports certain specified branded prescription drugs and biologic agents
apportioned among these entities according to their market share in some government healthcare programs; |
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an
increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13% of the
average manufacturer price for most branded and generic drugs, respectively, and capped the total rebate amount for innovator drugs
at 100% of the Average Manufacturer Price, or the AMP; |
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a
new Medicare Part D coverage gap discount program, in which manufacturers must now agree to offer 70% point-of-sale discounts off
negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturers’
outpatient drugs to be covered under Medicare Part D; |
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an
extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid
managed care organizations; |
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an
expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional
individuals and by adding new mandatory eligibility categories for individuals with income at or below 133% of the federal poverty
level, thereby potentially increasing manufacturers’ Medicaid rebate liability; |
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an
expansion of the entities eligible for discounts under the 340B Drug Discount Program; |
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a
new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness
research, along with funding for such research; |
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an
expansion of healthcare fraud and abuse laws, including the FCA and the Anti-Kickback Statute, new government investigative powers,
and enhanced penalties for noncompliance; |
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a
new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled,
infused, instilled, implanted, or injected; |
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a
requirement to report certain financial arrangements with physicians and teaching hospitals; |
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a
requirement to annually report certain information regarding drug samples that manufacturers and distributors provide to physicians; |
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the
establishment of a Center for Medicare and Medicaid Innovation at CMS to test innovative payment and service delivery models to lower
Medicare and Medicaid spending; and |
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a
licensure framework for follow on biologic products. |
There remain legal and political
challenges to certain aspects of the Affordable Care Act. Starting in January 2017, the Trump administration signed several executive
orders and other directives designed to delay, circumvent, or loosen certain requirements mandated by the Affordable Care Act. In December
2017, Congress repealed the tax penalty for an individual’s failure to maintain Affordable Care Act-mandated health insurance as
part of a tax reform bill. Further, the 2020 federal spending package permanently eliminated the Affordable Care Act-mandated “Cadillac”
tax on high-cost employer-sponsored health coverage and medical device tax and also eliminated the health insurer tax. On June 17, 2021,
the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the Affordable Care Act is unconstitutional in its entirety
because the “individual mandate” was repealed by Congress. Thus, the Affordable Care Act will remain in effect in its current
form. Further, prior to the U.S. Supreme Court ruling, on January 28, 2021, President Biden issued an executive order to initiate a special
enrollment period for purposes of obtaining health insurance coverage through the Affordable Care Act marketplace. The executive order
also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare,
including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies
that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the Affordable Care Act. It is
possible that the Affordable Care Act will be subject to judicial or Congressional challenges in the future. It is unclear how such challenges
and the healthcare reform measures of the Biden administration will impact the Affordable Care Act and our business.
We anticipate that the Affordable
Care Act, if substantially maintained in its current form, will continue to result in additional downward pressure on coverage and the
price that we receive for any approved product, and could seriously harm our business. Any reduction in reimbursement from Medicare and
other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures
or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our products.
Such reforms could have an adverse effect on anticipated revenue from product candidates that we may successfully develop and for which
we may obtain regulatory approval and may affect our overall financial condition and ability to develop product candidates.
Further legislation or regulation
could be passed that could harm our business, financial condition and results of operations. Other legislative changes have been proposed
and adopted since the Affordable Care Act was enacted. For example, in August 2011, President Obama signed into law the Budget Control
Act of 2011, which, among other things, created the Joint Select Committee on Deficit Reduction to recommend to Congress proposals in
spending reductions. The Joint Select Committee on Deficit Reduction did not achieve a targeted deficit reduction of at least $1.2 trillion
for fiscal years 2012 through 2021, triggering the legislation’s automatic reduction to several government programs. This includes
aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, which went into effect beginning on April 1, 2013
and will stay in effect through 2031 unless additional Congressional action is taken. However, COVID-19 pandemic relief legislation suspended
the 2% Medicare sequester from May 1, 2020 through March 31, 2021. Under current legislation, the actual reduction in Medicare payments
varied from 1% in 2022 to up to 3% in the final fiscal year of this sequester. Additionally, on March 11, 2021, President Biden signed
the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s
average manufacturer price, for single source and innovator multiple source drugs, beginning January 1, 2024. In January 2013, the American
Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers,
including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government
to recover overpayments to providers from three to five years.
Additionally, there has
been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices. Specifically,
there have been several recent U.S. Congressional inquiries and proposed federal legislation designed to, among other things, bring more
transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer
patient programs, and reform government program reimbursement methodologies for drugs. For example, the Trump administration used several
means to propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy initiatives.
For example, on July 24, 2020 and September 13, 2020, the Trump administration announced several executive orders related to prescription
drug pricing that attempt to implement several of the administration’s proposals. The FDA also released a final rule and guidance
implementing a portion of the importation executive order providing pathways for states to build and submit importation plans for drugs
from Canada. Further, on November 20, 2020, the Department of Health and Human Services, or HHS, finalized a regulation removing safe
harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy
benefit managers, unless the price reduction is required by law. The implementation of the rule was delayed by the Biden administration
from January 1, 2022 to January 1, 2023 in response to ongoing litigation. The rule also creates a new safe harbor for price reductions
reflected at the point-of-sale, as well as a new safe harbor for certain fixed fee arrangements between pharmacy benefit managers and
manufacturers, the implementation of which also was delayed until January 1, 2023. On November 20, 2020, CMS issued an interim final
rule implementing former President Trump’s Most Favored Nation, or MFN, executive order, which would tie Medicare Part B payments
for certain physician-administered drugs to the lowest price paid in other economically advanced countries, and was effective as of January
1, 2021. As a result of litigation challenging the MFN model, on August 10, 2021, CMS published a proposed rule that rescinded the MFN
model interim final rule. As a result of litigation challenging the MFN model, on December 27, 2021, CMS published a final rule that
rescinded the Most Favored Nation model interim final rule. In July 2021, the Biden administration released an executive order, “Promoting
Competition in the American Economy,” with multiple provisions aimed at prescription drugs. In response to Biden’s executive
order, on September 9, 2021, HHS released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing
reform and sets out a variety of potential legislative policies that Congress could pursue to advance these principles. No legislation
or administrative actions have been finalized to implement these principles. In addition, on August 16, 2022, President Biden signed
into law the Inflation Reduction Act of 2022, which, among other things, contains substantial drug pricing reforms that will reduce drug
spending by the federal government. For example, the Inflation Reduction Act of 2022 limits the prices paid by Medicare for various prescription
drugs and requires drug manufacturers to pay rebates to Medicare if they increase prices faster than inflation for drugs used by Medicare
beneficiaries. Although the effect of the Inflation Reduction Act of 2022 on our business and the pharmaceutical industry in general
is not yet known, the Inflation Reduction Act of 2022 could affect the prices we can charge and the reimbursement we can receive for
our product candidates, if approved, thereby reducing our profitability. We also expect that additional state and federal healthcare
reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare
products and services, which could result in reduced demand for our product candidates if approved or additional pricing pressures.
The Foreign Corrupt Practices Act
The Foreign Corrupt Practices
Act, or the FCPA, prohibits any U.S. individual or business from paying, offering, or authorizing payment or offering of anything of
value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision
of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies
whose securities are listed in the United States to comply with accounting provisions requiring us to maintain books and records that
accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an
adequate system of internal accounting controls for international operations.
Additional Regulation
In addition to the foregoing,
state and federal laws regarding environmental protection and hazardous substances, including the Occupational Safety and Health Act,
the Resource Conservancy and Recovery Act and the Toxic Substances Control Act, affect our business. These and other laws govern our
use, handling and disposal of various biological, chemical and radioactive substances used in, and wastes generated by, our operations.
If our operations result in contamination of the environment or expose individuals to hazardous substances, we could be liable for damages
and governmental fines. We believe that we are in material compliance with applicable environmental laws and that continued compliance
therewith will not have a material adverse effect on our business. We cannot predict, however, how changes in these laws may affect our
future operations.
Other Regulations
We are also subject to numerous
federal, state and local laws relating to such matters as safe working conditions, manufacturing practices, environmental protection,
fire hazard control, and disposal of hazardous or potentially hazardous substances. We may incur significant costs to comply with such
laws and regulations now or in the future.
Employees
As of December 31, 2022,
we had 25 employees, all of whom were full-time employees. As of December 31, 2022, 13 of our employees were engaged in research and
development activities and 12 of our employees were engaged in business development, legal, finance, market development, information
systems, facilities, human resources or administrative support. As of December 31, 2022, all of our employees were located in the United
States. None of our United States employees are represented by any collective bargaining agreements. We believe that we maintain good
relations with our employees.
COVID-19 and Related Macroeconomic Conditions
The COVID-19 pandemic and
related macroeconomic conditions, such as supply chain shortages, inflation and economic volatility have, and may continue to have, an
impact on our results of operations. We will continue to monitor whether such conditions would have a material impact on our operations,
liquidity and capital resources. Further, rising inflation has, in part, caused a disruption in the capital markets, which may lead to
a recession or market correction that could impact our access to capital, and could in the future negatively affect our liquidity. A
recession or market correction, continued supply chain disruptions and/or inflation could materially affect our business and the value
of our common stock. See “—Risks Related to Our Financial Condition” below.
Corporate Information
On January 9, 2020, Protara
Therapeutics, Inc. (formerly ArTara Therapeutics, Inc., formerly Proteon Therapeutics, Inc., or the Company or Protara), and privately-held
ArTara Subsidiary, Inc., or Private ArTara, completed the merger and reorganization, or the Merger, in accordance with the terms of the
Agreement and Plan of Merger and Reorganization, dated September 23, 2019, or the Merger Agreement, by and among the Company, Private
ArTara and REM 1 Acquisition, Inc., a wholly owned subsidiary of the Company, or Merger Sub, whereby Merger Sub merged with and into
Private ArTara, with Private ArTara surviving as a wholly owned subsidiary of the Company. The Merger was structured as a reverse merger
and Private ArTara was determined to be the accounting acquirer based on the terms of the Merger and other factors.
We were originally incorporated
in Delaware in March 2006, and at that time, acquired Proteon Therapeutics, LLC, the predecessor of Protara, which was formed in June
2001.
Our principal executive
offices are located at 345 Park Avenue South, 3rd Floor, New York, New York 10010, our telephone number is (646) 844-0337
and our website address is www.protaratx.com. The contents of our website are not incorporated into this Annual Report on Form 10-K and
our reference to the URL for our website is intended to be an inactive textual reference only. The information contained on, or that
can be accessed through, our website is not a part of this document.
Unless the context requires
otherwise, references in this Annual Report on Form 10-K to “Protara”, “TARA”, “we”, “us”,
the “Company” and “our” refer to Protara Therapeutics, Inc. (formerly ArTara Therapeutics, Inc., formerly Proteon
Therapeutics, Inc.) and our subsidiaries.
Available Information
Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of
the Securities Exchange Act of 1934, as amended, or the Exchange Act, will be made available free of charge on our website as soon as
reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
Item 1A. Risk Factors.
You should consider carefully
the following information about the risks described below, together with the other information contained in this Annual Report on Form
10-K and in our other public filings, in evaluating our business. If any of the following risks actually occurs, our business, financial
condition, results of operations, and future growth prospects would likely be materially and adversely affected. In these circumstances,
the market price of our common stock would likely decline.
Risks Related to Our Financial Condition
We have a limited operating history and have never generated
any revenues.
We are a clinical stage
biopharmaceutical company with a limited operating history that may make it difficult to evaluate the success of our business to date
and to assess our future viability. Our operations have been limited to organizing and staffing the company, business planning, raising
capital, developing our pipeline assets (TARA-002 and IV Choline Chloride), identifying product candidates, and other research and development.
Although our employees have made regulatory submissions and conducted successful clinical trials in the past across many therapeutic
areas while employed at other companies, we have not yet demonstrated an ability to successfully complete any clinical trials and have
never completed the development of any product candidate, nor have we ever generated any revenue from product sales or otherwise. Consequently,
we have no meaningful operations upon which to evaluate our business, and predictions about our future success or viability may not be
as accurate as they could be if we had a longer operating history or a history of successfully developing and commercializing biopharmaceutical
products.
We expect to incur significant
expenses and significant losses for the foreseeable future and may never generate revenue or achieve or maintain profitability.
Investment in biopharmaceutical
product development is highly speculative because it entails substantial upfront capital and significant risk that a product candidate
will fail to gain regulatory approval or become commercially viable. We have never generated any revenues, and cannot estimate with precision
the extent of our future losses. We expect to incur increasing levels of operating losses for the foreseeable future as we execute on
the plan to continue research and development activities, including the ongoing and planned clinical development of our product candidates,
potentially acquire new products and/or product candidates, seek regulatory approvals of and potentially commercialize any approved product
candidates, hire additional personnel, protect our intellectual property, and incur the additional costs of operating as a public company.
We expect to continue to incur significant and increasing operating losses and negative cash flows for the foreseeable future. These
losses have had and will continue to have an adverse effect on our financial position and working capital.
To become and remain profitable,
we must develop or acquire and eventually commercialize a product with significant market potential. This will require us to be successful
in a range of challenging activities, including completing preclinical studies and clinical trials, obtaining marketing approval, manufacturing,
marketing and selling any product candidate for which we obtain marketing approval, and satisfying post-marketing requirements, if any.
We may never succeed in these activities and, even if we succeed in obtaining approval for and commercializing one or more products,
we may never generate revenues that are significant enough to achieve profitability. In addition, as a young business, we may encounter
unforeseen expenses, difficulties, complications, delays and other known and unknown challenges. Furthermore, because of the numerous
risks and uncertainties associated with biopharmaceutical product development, we are unable to accurately predict the timing or amount
of increased expenses or when, or if, we will be able to achieve profitability. If we achieve profitability, we may not be able to sustain
or increase profitability on a quarterly or annual basis and may continue to incur substantial research and development and other expenditures
to develop and market additional product candidates. Our failure to become and remain profitable would decrease the value of us and could
impair our ability to raise capital, maintain our research and development efforts, expand the business or continue operations. A decline
in our value could also cause you to lose all or part of your investment.
The effects of the COVID-19 pandemic and
resulting macroeconomic factors could materially and adversely impact our business, including our clinical development plans and non-clinical
research.
Following the COVID-19 pandemic
and associated health and safety measures imposed from time to time to contain the continue globally, we have and, in the event of a resurgence
of the pandemic or the onset of another public health crisis, may again experience disruptions that could severely impact our business,
including but not limited to delays or difficulties in clinical trial site operations and in the enrollment, scheduling and retention
of patients in our clinical trials; interruption of key manufacturing, research and clinical development and other activities; and delays
or difficulties conducting and completing non-clinical studies.
If we are not able to respond
to and manage the impact of such events effectively, our business will be harmed.
In addition, macroeconomic
factors, including supply chain disruptions, rising inflation and resulting increases in interest rates, which are, in part, tied to
the lasting impacts of the COVID-19 pandemic, have and will continue to have an impact on our operations.
To the extent the impacts
of the COVID-19 pandemic adversely affect our business and results of operations, they may also have the effect of heightening many of
the other risks and uncertainties described elsewhere in this “Risk Factors” section.
We will need to raise additional financing
in the future to fund our operations, which may not be available to us on favorable terms or at all.
We will require substantial
additional funds to conduct the costly and time-consuming preclinical studies and clinical trials necessary to pursue regulatory approval
of each potential product candidate and to continue the development of TARA-002 and IV Choline Chloride in new indications or uses. Our
future capital requirements will depend upon a number of factors, including: the number and timing of future product candidates in the
pipeline; progress with and results from preclinical testing and clinical trials; the ability to manufacture sufficient drug supplies
to complete preclinical and clinical trials; the costs involved in preparing, filing, acquiring, prosecuting, maintaining and enforcing
patent and other intellectual property claims; and the time and costs involved in obtaining regulatory approvals and favorable reimbursement
or formulary acceptance. Raising additional capital may be costly or difficult to obtain and could significantly dilute stockholders’
ownership interests and divert our management’s focus on achieving our business objectives. As a result of economic conditions,
general global economic uncertainty, U.S. and foreign political conditions, and other factors, including the effects of the COVID-19
pandemic, we do not know whether additional capital will be available when needed, or that, if available, we will be able to obtain additional
capital on reasonable terms. Specifically, because the COVID-19 pandemic has at times significantly disrupted financial markets, it may
limit our ability to access capital, which could in the future negatively affect our liquidity. Further, rising inflation has, in part,
caused a disruption in the capital markets and an increase in interest rates, which may lead to a recession or market correction that
could impact our access to capital, increase the cost of capital, and could in the future negatively affect our liquidity. A recession
or market correction, inflation and/or further increases in interest rates could materially affect our business and the value of our
common stock.
If we raise additional funds
through public or private equity offerings, the terms of these securities may include liquidation or other preferences that adversely
affect the rights of our common stockholders. Further, to the extent that we raise additional capital through the sale of common stock
or securities convertible or exchangeable into common stock, the ownership interests of our common stockholders will be diluted. In addition,
any debt financing may subject us to fixed payment obligations and covenants limiting or restricting our ability to take specific actions,
such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional capital through marketing
and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have
to relinquish certain valuable intellectual property or other rights to our product candidates, technologies, future revenue streams
or research programs or grant licenses on terms that may not be favorable to us. Even if we were to obtain sufficient funding, there
can be no assurance that it will be available on terms acceptable to us or our stockholders.
Our ability to use our net operating loss
carryforwards and certain other tax attributes to offset future taxable income or taxes may be limited.
Under current law, federal
net operating losses incurred in tax years beginning after December 31, 2017, may be carried forward indefinitely, but the deductibility
of such federal net operating losses in tax years beginning after December 31, 2020 is limited to 80% of taxable income. It is uncertain
if and to what extent various states and localities will conform to federal tax laws. In addition, under Sections 382 and 383 of the Internal
Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change”
which is generally defined as a greater than 50% change in its equity ownership value over a six-year period, the corporation’s
ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post- change income or
taxes may be limited. We have experienced ownership changes in the past and we may also experience additional ownership changes in the
future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control. If an ownership change occurs
and our ability to use our net operating loss carryforwards is materially limited, it would harm our future operating results by effectively
increasing our future tax obligations. In addition, at the state level, there may be periods during which the use of net operating loss
carryforwards is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed. As a result, if we earn
net taxable income, we may be unable to use all or a material portion of our net operating loss carryforwards and other tax attributes,
which could potentially result in increased future tax liability to us and adversely affect our future cash flows.
Risks Related to Drug/Biologics
Development and Commercialization
Our business depends on the successful
clinical development and regulatory approval of our product candidates, including TARA-002 and IV Choline Chloride.
The success of our business,
including our ability to finance our operations and generate revenue in the future, primarily depends on the successful development and
regulatory approval of our product candidates, including of TARA-002 and IV Choline Chloride. The clinical success of TARA-002 and IV
Choline Chloride depend on a number of factors, including the following:
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the timely and successful
completion of planned and ongoing preclinical studies and clinical trials, including our ongoing Phase 1 clinical trial of TARA-002
in NMIBC and our planned Phase 2 clinical trial of TARA-002 in LMs, which may be significantly slower or costlier than we currently
anticipate and/or produce results that do not achieve the endpoints of the trials; |
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the results of our prevalence
study and our enhanced understanding of the PN patient population as part of our IV Choline Chloride program; |
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whether we are required
by the FDA or similar foreign regulatory agencies to conduct additional studies beyond those planned to support the approval and
commercialization of TARA-002 and IV Choline Chloride; |
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achieving and maintaining,
and, where applicable, ensuring that our third-party contractors achieve and maintain compliance with their contractual obligations
and with all regulatory requirements applicable to TARA-002 and IV Choline Chloride; |
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the ability of third parties
with whom we contract to manufacture adequate clinical trial and commercial supplies of TARA-002 and IV Choline Chloride, to remain
in good standing with regulatory agencies and to develop, validate and maintain commercially viable manufacturing processes that
are compliant with current good manufacturing practices, or cGMP; |
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a continued acceptable
safety profile during clinical development and following approval of TARA-002 and IV Choline Chloride; and |
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the existence of a regulatory
environment conducive to the successful development of TARA-002 and IV Choline Chloride. |
If any one of these factors
is not present, many of which are beyond our control, we could experience significant delays or an inability to obtain regulatory approval
of TARA-002 or IV Choline Chloride.
Our clinical trials
may fail to demonstrate the safety and efficacy of our product candidates, or serious adverse or unacceptable side effects may be identified
during their development, which could increase our costs or necessitate the abandonment or limitation of the development of the product
candidate.
We have never completed a clinical trial or made a BLA or NDA
submission and may be unable to successfully do so for TARA-002 or IV Choline Chloride.
The conduct of a clinical
trial is a long, expensive, complicated and highly regulated process. Although our employees have conducted successful clinical trials
and made regulatory submissions in the past across many therapeutic areas while employed at other companies, we, as a company, have not
completed any clinical trials, or submitted a BLA or NDA and as a result may require more time and incur greater costs than we anticipate.
Failure to commence or complete, or delays in clinical trials or planned regulatory submissions would prevent us from, or delay us, in
obtaining regulatory approval of and commercializing TARA-002 or IV Choline Chloride, which would adversely impact our financial performance.
We rely and expect to continue to rely
on third-party CROs and other third parties to conduct and oversee our clinical trials. If these third parties do not meet our requirements
or otherwise conduct the trials as required, we may not be able to satisfy our contractual obligations or obtain regulatory approval
for, or commercialize, our product candidates.
We rely and expect to continue
to rely on third-party CROs, to conduct and oversee our TARA-002 and IV Choline Chloride clinical trials and studies and other aspects
of product development. We also rely on various medical institutions, clinical investigators and contract laboratories to conduct our
trials in accordance with our clinical protocols and all applicable regulatory requirements, including the FDA’s regulations and
cGCP, requirements, which are an international standard meant to protect the rights and health of patients and to define the roles of
clinical trial sponsors, administrators and monitors, and state regulations governing the handling, storage, security and record-keeping
for drug and biologic products. These CROs and other third parties have and will continue to play a significant role in the conduct of
these trials and the subsequent collection and analysis of data from the clinical trials. We will rely heavily on these parties for the
execution of our clinical trials and preclinical studies and will control only certain aspects of their activities. We and our CROs and
other third-party contractors will be required to comply with cGCP and cGLP, requirements, which are regulations and guidelines enforced
by the FDA and comparable foreign regulatory authorities. Regulatory authorities enforce these cGCP and cGLP requirements through periodic
inspections of trial sponsors, principal investigators and trial sites. If we or any of these third parties fail to comply with applicable
cGCP and cGLP requirements, or reveal non-compliance from an audit or inspection, including due to COVID-19 and related health and safety
measures and business closures and disruptions, or if the same prevents the FDA or comparable foreign regulatory authorities from conducting
inspections or other regulatory activities, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or
other regulatory authorities may require us to perform additional clinical trials before approving our or our partners’ marketing
applications. We cannot assure that upon inspection by a given regulatory authority, such regulatory authority will determine that any
of our clinical trials or preclinical studies comply with applicable cGCP and cGLP requirements. In addition, our clinical trials generally
must be conducted with product candidate produced under cGMP regulations. Our failure to comply with these regulations and policies may
require us to repeat clinical trials, which would delay the regulatory approval process.
If any of our CROs or clinical
trial sites fail to comply with their contractual commitments or terminate their involvement in one of our clinical trials for any reason,
including due to COVID-19 disruptions, we may not be able to enter into arrangements with alternative CROs or clinical trial sites or
do so on commercially reasonable terms. In addition, if our relationship with clinical trial sites is terminated, we may experience the
loss of follow-up information on patients enrolled in our clinical trials unless we are able to transfer the care of those patients to
another qualified clinical trial site. In addition, principal investigators for our clinical trials may serve as scientific advisors
or consultants to us from time to time and could receive cash or equity compensation in connection with such services. If these relationships
and any related compensation result in perceived or actual conflicts of interest, the integrity of the data generated at the applicable
clinical trial site may be questioned by the FDA.
Interim, topline and preliminary data from
our clinical trials 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
publicly disclose preliminary, interim or topline data from our preclinical studies and clinical trials, which is based on a preliminary
analysis of then-available data, and the results and related findings and conclusions are subject to change as patient enrollment and
treatment continues and more patient data become available. Adverse differences between previous preliminary or interim data and future
interim or final data could significantly harm our business prospects. We may also announce topline data following the completion of
a preclinical study or clinical trial, which may be subject to change following a more comprehensive review of the data related to the
particular study or 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 and carefully evaluate all data. As a result, the interim, topline or preliminary
results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such
results, once additional data have been received and fully evaluated. Preliminary, interim, or topline data also remain subject to audit
and verification procedures that may result in the final data being materially different from the data we previously published. Accordingly,
preliminary, interim, and topline data should be viewed with caution until the final data are available.
Further, others, including
regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret
or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization
of the particular product candidate or product and our company in general. In addition, the information we choose to publicly disclose
regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with
what we determine to be material or otherwise appropriate information to include in our disclosure.
We may in the future conduct clinical trials
for our product candidates outside the United States, and the FDA and applicable foreign regulatory authorities may not accept data from
such trials.
We may in the future choose
to conduct one or more of our clinical trials outside of the United States. Although the FDA or applicable foreign regulatory authority
may accept data from clinical trials conducted outside the United States or the applicable jurisdiction, acceptance of such study data
by the FDA or applicable foreign regulatory authority may be subject to certain conditions or exclusion. Where data from foreign clinical
trials are intended to serve as the basis for marketing approval in the United States, the FDA will not approve the application on the
basis of foreign data alone unless such data are applicable to the U.S. population and U.S. medical practice; the studies were performed
by clinical investigators of recognized competence; and the data are considered valid without the need for an on-site inspection by the
FDA or, if the FDA considers such an inspection to be necessary, the FDA is able to validate the data through an on-site inspection or
other appropriate means. Many foreign regulatory bodies have similar requirements. In addition, such foreign studies would be subject
to the applicable local laws of the foreign jurisdictions where the studies are conducted. There can be no assurance the FDA or applicable
foreign regulatory authority will accept data from trials conducted outside of the United States or the applicable home country. If the
FDA or applicable foreign regulatory authority does not accept such data, it would likely result in the need for additional trials, which
would be costly and time-consuming and delay aspects of our business plan.
TARA-002 is an immunopotentiator, and one indication that we
plan to pursue is the treatment of LMs. There are no FDA-approved therapies for the treatment of LMs and it is difficult to predict the
timing and costs of clinical development for TARA-002 for LMs.
To date, there are no FDA-approved
therapies for the treatment of LMs. The regulatory approval process for novel product candidates such as TARA-002 can be more expensive
and take longer than for other, better known or extensively studied therapeutic approaches. Delay or failure to obtain, or unexpected
costs in obtaining, the regulatory approval necessary to bring TARA-002 to market in LMs could decrease our ability to generate sufficient
revenue to maintain our business.
Our product candidates may cause undesirable
side effects or have other unexpected properties that could delay or prevent their regulatory approval, limit the commercial profile
of an approved label, or result in post-approval regulatory action.
Unforeseen side effects
from TARA-002 or IV Choline Chloride could arise either during clinical development or, if approved, after the product has been marketed.
Undesirable side effects could cause us, any partners with which we may collaborate, or regulatory authorities to interrupt, extend,
modify, delay or halt clinical trials and could result in a more restrictive or narrower label or the delay or denial of regulatory approval
by the FDA or comparable foreign authorities.
Results of clinical trials
could reveal a high and unacceptable severity and prevalence of side effects. In such an event, trials could be suspended or terminated,
and the FDA or comparable foreign regulatory authorities could order us to cease further development of or deny approval of a product
candidate for any or all targeted indications. Any side effects could affect patient recruitment or the ability of enrolled patients
to complete the trial or result in product liability claims. Any of these occurrences may harm our business, financial condition, operating
results and prospects.
Additionally, if we or others
identify undesirable side effects, or other previously unknown problems, in connection with a product after obtaining U.S. or foreign
regulatory approval, a number of potentially negative consequences could result, which could prevent us or our potential partners from
achieving or maintaining market acceptance of the product and could substantially increase the costs of commercializing such product.
A fast track designation by the FDA may
not actually lead to a faster development or regulatory review or approval process for IV Choline Chloride for the treatment of IFALD.
The FDA has granted fast
track designation to IV Choline Chloride for the treatment of IFALD. If a drug is intended for the treatment of a serious or life-threatening
condition and the drug demonstrates the potential to address unmet medical needs for this condition, the drug sponsor may apply for fast
track designation. Even though we have received fast track designation for IV Choline Chloride for the treatment of IFALD, we may not
experience a faster development process, review or approval. The FDA may withdraw fast track designation if it believes that the designation
is no longer supported by data from our clinical development program.
Although the FDA has granted Rare Pediatric
Disease Designation for TARA-002 for the treatment of LMs, a BLA for TARA-002, if approved, may not meet the eligibility criteria for
a priority review voucher.
Rare Pediatric Disease Designation
has been granted for TARA-002 for the treatment of LMs. In 2012, Congress authorized the FDA to award priority review vouchers to sponsors
of certain rare pediatric disease product applications. This provision is designed to encourage development of new drug and biological
products for prevention and treatment of certain rare pediatric diseases. Specifically, under this program, a sponsor who receives an
approval for a drug or biologic for a “rare pediatric disease” may qualify for a voucher that can be redeemed to receive
a priority review of a subsequent marketing application for a different product. The sponsor of a rare pediatric disease drug product
receiving a priority review voucher may transfer (including by sale) the voucher to another sponsor. The voucher may be further transferred
any number of times before the voucher is used, as long as the sponsor making the transfer has not yet submitted the application. The
FDA may also revoke any priority review voucher if the rare pediatric disease drug for which the voucher was awarded is not marketed
in the U.S. within one year following the date of approval.
For the purposes of this
program, a “rare pediatric disease” is a (a) serious or life-threatening disease in which the serious or life-threatening
manifestations primarily affect individuals aged from birth to 18 years, including age groups often called neonates, infants, children,
and adolescents; and (b) rare disease or conditions within the meaning of the Orphan Drug Act. Congress has only authorized the Rare
Pediatric Disease Priority Review Voucher program until September 30, 2024. However, if a drug candidate received Rare Pediatric Disease
Designation before September 30, 2024, it is eligible to receive a voucher if it is approved before September 30, 2026.
TARA-002 for the treatment
of LMs may not be approved by that date, or at all, and, therefore, we may not be in a position to obtain a priority review voucher prior
to expiration of the program, unless Congress further reauthorizes the program. Additionally, designation of a drug for a rare pediatric
disease does not guarantee that a BLA will meet the eligibility criteria for a rare pediatric disease priority review voucher at the
time the application is approved. Finally, a Rare Pediatric Disease Designation does not lead to faster development or regulatory review
of the product or increase the likelihood that it will receive marketing approval. We may or may not realize any benefit from receiving
a voucher.
Even if a product
candidate obtains regulatory approval, it may fail to achieve the broad degree of physician and patient adoption and use necessary for
commercial success.
The commercial success of
both TARA-002 and IV Choline Chloride, if approved, will depend significantly on the broad adoption and use of them by physicians and
patients for approved indications, and neither may be commercially successful even though the product is shown to be safe and effective.
The degree and rate of physician and patient adoption of a product, if approved, and successful commercialization will depend on a number
of factors, including but not limited to:
|
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patient demand for approved products that treat the
indication for which a product is approved; |
|
● |
the effectiveness of the product compared to other
available therapies; |
|
● |
the availability of coverage and adequate reimbursement
from managed care plans and other healthcare payors; |
|
● |
the cost of treatment in relation to alternative treatments
and willingness to pay on the part of patients; |
|
● |
in the case of TARA-002 for LMs, overcoming physician
or patient biases toward alternative treatments for LMs; |
|
● |
insurers’ willingness to see the applicable indication
as a disease worth treating; |
|
● |
patient satisfaction with the results, administration
and overall treatment experience; |
| ● | the ability to
successfully commercialize TARA-002 and IV Choline Chloride in the United States and internationally,
if either is approved for marketing, sale and distribution in such countries and territories,
whether alone or in collaboration with others; |
| ● | our ability and
our partners’ ability to establish and enforce intellectual property rights in and
to TARA-002 and IV Choline Chloride; |
| ● | patient demand
for approved products that treat the indication for which a product is approved; |
|
● |
limitations or contraindications,
warnings, precautions or approved indications for use different than those sought by us that are contained in the final FDA-approved
labeling for the applicable product; |
|
● |
any FDA requirement to undertake a Risk Evaluation
and Mitigation Strategy; |
|
● |
the effectiveness of our sales, marketing, pricing,
reimbursement and access, government affairs, and distribution efforts; |
|
● |
adverse publicity about a product or favorable publicity
about competitive products; |
|
● |
new government regulations
and programs, including price controls and/or limits or prohibitions on ways to commercialize drugs, such as increased scrutiny on
direct-to-consumer advertising of pharmaceuticals; and |
|
● |
potential product liability claims or other product-related
litigation. |
If either TARA-002 or IV
Choline Chloride is approved for use but fails to achieve the broad degree of physician and patient adoption necessary for commercial
success, our operating results and financial condition will be adversely affected, which may delay, prevent or limit our ability to generate
revenue and continue our business.
Further, even if regulatory
approvals are obtained, we may never be able to successfully commercialize TARA-002 or IV Choline Chloride, or the FDA or comparable
foreign regulatory authorities may require labeling changes or impose significant restrictions on a product’s indicated uses or
marketing or impose ongoing requirements for potentially costly post-approval studies or post-market surveillance. Accordingly, we cannot
assure you that we will be able to generate sufficient revenue through the sale of TARA-002 or IV Choline Chloride to continue our business.
Before obtaining marketing
approvals for the commercial sale of any product candidate, we must demonstrate through lengthy, complex and expensive preclinical testing
and clinical trials that such product candidate is both safe and effective for use in the applicable indication, and failures can occur
at any stage of testing. Clinical trials often fail to demonstrate safety and are associated with side effects or have characteristics
that are unexpected. Based on the safety profile seen in clinical testing, we may need to abandon development or limit development to
more narrow uses in which the side effects or other characteristics are less prevalent, less severe or more tolerable from a risk-benefit
perspective. The FDA or an IRB may also require that we suspend, discontinue, or limit clinical trials based on safety information. Such
findings could further result in regulatory authorities failing to provide marketing authorization for the product candidate. Many pharmaceutical
candidates that initially showed promise in early stage testing and which were efficacious have later been found to cause side effects
that prevented further development of the drug candidate and, in extreme cases, the side effects were not seen until after the drug was
marketed, causing regulators to remove the drug from the market post-approval.
Any adverse developments that occur in
patients undergoing treatment with OK-432 / Picibanil or in patients participating in clinical trials conducted by third parties may
affect our ability to obtain regulatory approval or commercialize TARA-002.
Chugai Pharmaceutical Co.,
Ltd., over which we have no control, has the rights to commercialize TARA-002 and the originator therapy to TARA-002, OK-432, which is
currently marketed under the name Picibanil, in Japan and Taiwan for various indications. In addition, clinical trials using Picibanil
are currently ongoing in various countries around the world. If SAEs occur with patients using Picibanil or during any clinical trials
of Picibanil conducted by third parties, the FDA may delay, limit or deny approval of TARA-002 or require us to conduct additional clinical
trials as a condition to marketing approval, which would increase our costs. If we receive FDA approval for TARA-002 and a new and serious
safety issue is identified in connection with use of Picibanil or in clinical trials of Picibanil conducted by third parties, the FDA
may withdraw the approval of the product or otherwise restrict our ability to market and sell TARA-002. In addition, treating physicians
may be less willing to administer TARA-002 due to concerns over such adverse events, which would limit our ability to commercialize TARA-002.
We may choose not to continue developing
or commercializing any of our product candidates at any time during development or after approval, which would reduce or eliminate the
potential return on investment for those product candidates.
At any time, we may decide
to discontinue the development of any of our product candidates for a variety of reasons, including the appearance of new technologies
that make our product candidates obsolete, competition from a competing product or changes in or failure to comply with applicable regulatory
requirements.
If we terminate a program
in which we have invested significant resources, we will not receive any return on our investment and we will have missed the opportunity
to have allocated those resources to potentially more productive uses.
Other Risks Related to Our Business
Our product candidates,
if approved, will face significant competition and their failure to compete effectively may prevent them from achieving significant market
penetration.
The pharmaceutical industry
is characterized by rapidly advancing technologies, intense competition, uncertain and complex patent terms, and a strong emphasis on
developing newer, fast-to-market proprietary therapeutics. Numerous companies are engaged in the development, patenting, manufacturing
and marketing of healthcare products competitive with those that we are developing, including TARA-002 and IV Choline Chloride. We will
face competition from a number of sources, such as pharmaceutical companies, biotechnology companies, generic drug companies, consumer
products companies and academic and research institutions, many of which have greater financial resources, marketing capabilities, sales
forces, manufacturing capabilities, research and development capabilities, regulatory expertise, clinical trial expertise, intellectual
property portfolios, international reach, experience in obtaining patents and regulatory approvals for product candidates and other resources
than we have. Some of the companies that offer competing products also have a broad range of other product offerings, large direct sales
forces and long-term customer relationships with our target physicians, which could inhibit our market penetration efforts.
With respect to our lead
product candidate, TARA-002, for the treatment of NMIBC and LMs, the active ingredient in TARA-002 is a genetically distinct strain of
Streptococcus pyogenes (group A, type 3) Su strain. TARA-002 is produced through a proprietary manufacturing process. We anticipate
that, if approved by the FDA, TARA-002 will be protected by 12 years of biologic exclusivity. There are no approved pharmacotherapies
currently available for the treatment of LMs and the current treatment options include a high-risk surgical procedure and off-label use
of sclerosants, including doxycycline, bleomycin, ethanol and sodium tetradecyl sulfate. There are a number of drug development companies
and academic researchers exploring oral formulations of various agents including macrolides, phosphodiesterase inhibitors, and calcineurin/mTOR
inhibitors. These are in early development. TARA-002, if approved for the treatment of NMIBC, would be subject to competition from existing
treatment methods of surgery, chemotherapy and immunomodulatory therapy. For example, the current standard of care for NMIBC includes
intravesical BCG TICE (manufactured by Merck & Co. Inc.). Other products approved for the treatment of NMIBC include Merck & Co.,
Inc.’s Keytruda, Endo International plc’s Valstar, and Ferring B.V.’s Adstiladrin. Additional product candidates in
development include Japanese BCG Laboratory’s BCG Tokyo, Pfizer Inc.’s Sasanlimab in combination with BCG, ImmunityBio, Inc.’s
VesAnktiva in combination with BCG, CG Oncology Inc.’s CG0070, Sesen Bio, Inc.’s Vicineum, enGene Inc.’s, EG-70, Seagen
Inc.’s PADCEV, Janssen’s TAR200 combined with gemcitabine plus or minus Cetrelimab, Urogen Pharma Ltd.’s Jelmyto,and
Auro BioSciences, Inc.’s Aura-0011. Additional pharmaceutical and biotechnology companies with product candidates in development
for the treatment of NMIBC include but may not be limited to Verity, AstraZeneca PLC, Bristol-Myers Squibb Company, Roche Group, Asieris
Pharmaceuticals, BeiGene, Ltd, NanOlogy, LLC, Linton Pharm Co., Ltd., Lindis Biotech GmbH, Theralase Technologies Inc., Taizhou Hanzhong
biomedical co. Ltd., Shionogi & Co. Ltd., Rapamycin Holdings, Inc., Vaxiion Therapeutics Inc., Incyte Corporation, LiPac Oncology,
Inc., Anika Therapeutics Inc., Surge Pharmaceuticals Pvt. Ltd., and Istari Oncology, Inc..
There are no treatments
currently available for IFALD. With respect to IV Choline Chloride for the treatment of IFALD, IV Choline Chloride is the only sterile
injectable form of choline chloride that can be combined with parenteral nutrition. Further, if approved, IV Choline Chloride will be
protected by Orphan Drug Designation exclusivity for seven years.
TARA-002 and any future product candidates
for which we intend to seek approval as biologic products may face competition sooner than anticipated.
The Biologics Price Competition
and Innovation Act of 2009, or BPCIA, created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable
with an FDA-licensed reference biological product. Under the BPCIA, an application for a biosimilar product may not be submitted to the
FDA until four years following the date that the reference product was first licensed by the FDA. In addition, the approval of a biosimilar
product may not be made effective by the FDA until 12 years from the date on which the reference product was first licensed. During this
12-year period of exclusivity, another company may still market a competing version of the reference product if the FDA approves a full
BLA for the competing product containing the sponsor’s own preclinical data and data from adequate and well-controlled clinical
trials to demonstrate the safety, purity and potency of their product. The law is complex and is still being interpreted and implemented
by the FDA. As a result, its ultimate impact, implementation and meaning are subject to uncertainty. While it is uncertain when such
processes are intended to be implemented, the BPCIA may be fully adopted by the FDA, and any such processes could have a material adverse
effect on the future commercial prospects for our biological products.
We believe that any of our
product candidates approved as a biological product under a BLA should qualify for the 12-year period of exclusivity. However, there
is a risk that this exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider our product
candidates to be reference products for competing products, potentially creating the opportunity for biosimilar competition sooner than
anticipated. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent
litigation. Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of our reference products in a
way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of
marketplace and regulatory factors that are still developing.
We currently have limited marketing capabilities
and no sales organization. If we are unable to grow our sales and marketing capabilities on our own or through third parties, we will
be unable to successfully commercialize our product candidates, if approved, or generate product revenue.
We currently have limited
marketing capabilities and no sales organization. To commercialize our product candidates, if approved, in the United States, Canada,
the European Union, Latin America and other jurisdictions we may seek to enter, we must build our marketing, sales, distribution, managerial
and other non-technical capabilities or make arrangements with third parties to perform these services, and we may not be successful
in doing so. Although our employees have experience in the marketing, sale and distribution of pharmaceutical products, and business
development activities involving external alliances, from prior employment at other companies, we, as a company, have no prior experience
in the marketing, sale and distribution of pharmaceutical products, and there are significant risks involved in building and managing
a sales organization, including our ability to hire, retain and incentivize qualified individuals, generate sufficient sales leads, provide
adequate training to sales and marketing personnel, and effectively manage a geographically dispersed sales and marketing team. Any failure
or delay in the development of our internal sales, marketing, distribution and pricing/reimbursement/access capabilities would impact
adversely the commercialization of these products.
We have only received the exclusive rights
to the materials required to commercialize TARA-002 in territories other than Japan and Taiwan until June 17, 2030, or an earlier date
if Chugai terminates the agreement with us for any number of reasons, following which such rights become non-exclusive.
Pursuant to an agreement
with Chugai Pharmaceutical dated June 17, 2019, as amended on July 14, 2020 (effective as of June 30, 2020), Chugai Pharmaceutical agreed
to provide us with exclusive access to the starting material necessary to manufacture TARA-002 as well as technical support necessary
for us to develop and commercialize TARA-002 anywhere in the world other than Japan and Taiwan. However, this agreement does not prevent
Chugai from providing such materials and support to any third-party for medical, compassionate use and/or non-commercial research purposes
and this agreement is exclusive only through June 17, 2030 or, the earlier termination of the agreement by either party. Once our rights
to the materials and technology necessary to manufacture, develop and commercialize TARA-002 are not exclusive, third parties, including
those with greater expertise and greater resources, could obtain such materials and technology and develop a competing therapy, which
would adversely affect our ability to generate revenue and achieve or maintain profitability.
Even if we obtain regulatory approval to
begin commercializing any of our products, we would remain subject to ongoing regulatory review, which could subsequently result in a
suspension or termination of sale of these products.
Even after we achieve U.S.
regulatory approval for a product candidate, if any, we will be subject to continued regulatory review and compliance obligations. For
example, with respect to our product candidates, the FDA may impose significant restrictions on the approved indicated uses for which
the product may be marketed or on the conditions of approval. A product candidate’s approval may contain requirements for potentially
costly post-approval studies and surveillance, including Phase 4 clinical trials, to monitor the safety and efficacy of the product.
We will also be subject to ongoing FDA obligations and continued regulatory review with respect to, among other things, the manufacturing,
processing, labeling, packaging, distribution, pharmacovigilance and adverse event reporting, storage, advertising, promotion and recordkeeping
for our product candidates. In addition, manufacturers of drug and biologic products and their facilities are subject to continual review
and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP regulations. If we or a regulatory agency
discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with
the manufacturing, processing, distribution or storage facility where, or processes by which, the product is made, a regulatory agency
may impose restrictions on that product or us, including requesting that we initiate a product recall, or requiring notice to physicians
or the public, withdrawal of the product from the market, or suspension of manufacturing.
We face product liability exposure, and if successful claims
are brought against us, we may incur substantial liability if our insurance coverage for those claims is inadequate.
We face an inherent risk
of product liability or similar causes of action as a result of the clinical testing of our product candidates and will face an even
greater risk if we commercialize any products. This risk exists even if a product is approved for commercial sale by the FDA and manufactured
in facilities licensed and regulated by the FDA or an applicable foreign regulatory authority and notwithstanding that we comply with
applicable laws on promotional activity. Our products and product candidates are designed to affect important bodily functions and processes.
Any side effects, manufacturing defects, misuse or abuse associated with our product candidates could result in injury to a patient or
potentially even death. We cannot offer any assurance that we will not face product liability suits in the future, nor can we assure
you that our insurance coverage will be sufficient to cover our liability under any such cases.
In addition, a liability
claim may be brought against us even if our product candidates merely appear to have caused an injury. Product liability claims may be
brought against us by consumers, healthcare providers, pharmaceutical companies or others selling or otherwise coming into contact with
our product candidates, among others, and under some circumstances even government agencies. If we cannot successfully defend ourselves
against product liability or similar claims, we will incur substantial liabilities, reputational harm and possibly injunctions and punitive
actions. In addition, regardless of merit or eventual outcome, product liability claims may result in:
|
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withdrawal or delay of recruitment or decreased enrollment
rates of clinical trial participants; |
|
● |
termination or increased government regulation of clinical
trial sites or entire trial programs; |
|
● |
the inability to commercialize our product candidates; |
|
● |
decreased demand for our product candidates; |
|
● |
impairment of our business reputation; |
|
● |
product recall or withdrawal from the market or labeling,
marketing or promotional restrictions; |
|
● |
substantial costs of any related litigation or similar
disputes; |
|
● |
distraction of management’s attention and other
resources from our primary business; |
|
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significant delay in product launch; |
|
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substantial monetary awards to patients or other claimants
against us that may not be covered by insurance; |
|
● |
withdrawal of reimbursement or formulary inclusion;
or |
We have obtained product
liability insurance coverage for our clinical trials. Large judgments have been awarded in class action or individual lawsuits based
on drugs that had unanticipated side effects. Our insurance coverage may not be sufficient to cover all of our product liability-related
expenses or losses and may not cover us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly
expensive, restrictive and narrow, and, in the future, we may not be able to maintain adequate insurance coverage at a reasonable cost,
in sufficient amounts or upon adequate terms to protect us against losses due to product liability or other similar legal actions. We
will need to increase our product liability coverage if any of our product candidates receive regulatory approval, which will be costly,
and we may be unable to obtain this increased product liability insurance on commercially reasonable terms or at all and for all geographies
in which we wish to launch. A successful product liability claim or series of claims brought against us, if judgments exceed our insurance
coverage, could decrease our cash and harm our business, financial condition, operating results and future prospects.
Our employees, independent contractors,
principal investigators, other clinical trial staff, consultants, vendors, CROs and any partners with whom we may collaborate may engage
in misconduct or other improper activities, including non-compliance with regulatory standards and requirements.
We are exposed to the risk
that our employees, independent contractors, principal investigators, other clinical trial staff, consultants, vendors, CROs and any
partners with which we may collaborate may engage in fraudulent or other illegal activity. Misconduct by these persons could include
intentional, reckless, gross or negligent misconduct or unauthorized activity that violates: laws or regulations, including those laws
requiring the reporting of true, complete and accurate information to the FDA or foreign regulatory authorities; manufacturing standards;
federal, state and foreign healthcare fraud and abuse laws and data privacy; anticorruption laws, anti-kickback and Medicare/Medicaid
rules, or laws that require the true, complete and accurate reporting of financial information or data, books and records. If any such
or similar actions are instituted against us and we are not successful in defending ourselves or asserting our rights, those actions
could have a significant impact on our business, including the imposition of significant civil, criminal and administrative and punitive
penalties, damages, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs,
debarments, contractual damages, imprisonment, reputational harm, diminished profits and future earnings, injunctions, and curtailment
or cessation of our operations, any of which could adversely affect our ability to operate our business and our operating results.
We may
be subject to risks related to off-label use of our product candidates, if approved.
The FDA strictly regulates
the advertising and promotion of drug products, and drug products may only be marketed or promoted for their FDA approved uses, consistent
with the product’s approved labeling. Advertising and promotion of any product candidate that obtains approval in the United States
will be heavily scrutinized by the FDA, the Department of Justice, the Office of Inspector General of the Department of Health and Human
Services, state attorneys general, members of Congress and the public. For example, the FDA and other agencies actively enforce the laws
and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may
be subject to significant liability. Although physicians may prescribe products for off-label uses as the FDA and other regulatory agencies
do not regulate a physician’s choice of drug treatment made in the physician’s independent medical judgment, they do restrict
promotional communications from companies or their sales force with respect to off-label uses of products for which marketing clearance
has not been issued. Companies may only share truthful and not misleading information that is otherwise consistent with a product’s
FDA approved labeling. Violations, including promotion of our products for unapproved or off-label uses, are subject to enforcement letters,
inquiries and investigations, and civil, criminal and/or administrative sanctions by the FDA. Additionally, advertising and promotion
of any product candidate that obtains approval outside of the United States will be heavily scrutinized by relevant foreign regulatory
authorities.
In the United States, engaging
in impermissible promotion of our product candidates for off-label uses can also subject us to false claims litigation under federal
and state statutes, which can lead to significant civil, criminal and/or administrative penalties and fines and agreements, such as a
corporate integrity agreement, that materially restrict the manner in which we promote or distribute our product candidates. If we do
not lawfully promote our products once they have received regulatory approval, we may become subject to such litigation and, if we are
not successful in defending against such actions, those actions could have a material adverse effect on our business, financial condition
and operating results and even result in having an independent compliance monitor assigned to audit our ongoing operations for a lengthy
period of time.
If we or any partners with which we may
collaborate are unable to achieve and maintain coverage and adequate levels of reimbursement for TARA-002 or IV Choline Chloride following
regulatory approval, their commercial success may be hindered severely.
If TARA-002 or IV Choline
Chloride only becomes available by prescription, successful sales by us or by any partners with which we may collaborate depend on the
availability of coverage and adequate reimbursement from third-party payors. Patients who are prescribed medicine for the treatment of
their conditions generally rely on third-party payors to reimburse most or part of the costs associated with their prescription drugs.
The availability of coverage and adequate reimbursement from governmental healthcare programs, such as Medicare and Medicaid in the United
States, and private third-party payors is often critical to new product acceptance. Coverage decisions may depend on clinical and economic
standards that disfavor new drug products when more established or lower-cost therapeutic alternatives are already available or subsequently
become available, or may be affected by the budgets and demands on the various entities responsible for providing health insurance to
patients who will use TARA-002 or IV Choline Chloride. Even if we obtain coverage for our products, the resulting reimbursement payment
rates might not be adequate or may require co-payments that patients find unacceptably high. Patients are unlikely to use a product unless
coverage is provided, and reimbursement is adequate to cover a significant portion of the cost.
In addition, the market
for our products will depend significantly on access to third-party payors’ drug formularies or lists of medications for which
third-party payors provide coverage and reimbursement. The industry competition to be included in such formularies often leads to downward
pricing pressures on pharmaceutical companies and there may be time limitations on when a new drug may even apply for formulary inclusion.
Also, third-party payors may refuse to include products in their formularies or otherwise restrict patient access to such products when
a less costly biosimilar or generic equivalent or other treatment alternative is available in the discretion of the formulary.
Third-party payors, whether
foreign or domestic, or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs.
In addition, in the United States, although private third-party payors tend to follow Medicare practices, no uniform or consistent policy
of coverage and reimbursement for drug products exists among third-party payors. Therefore, coverage and reimbursement for drug products
can differ significantly from payor to payor as well as from state to state. Consequently, the coverage determination process is often
a time-consuming and costly process that must be played out across many jurisdictions and different entities and that will require us
to provide scientific, clinical and health economics support for the use of our products compared to current alternatives and do so to
each payor separately, with no assurance that coverage and adequate reimbursement will be obtained and in what time frame.
Further, we believe that
future coverage and reimbursement likely will be subject to increased restrictions both in the United States and in international markets.
Third-party coverage and reimbursement for our products may not be available or adequate in either the United States or international
markets, which could harm our business, financial condition, operating results and prospects. Further, coverage policies and third-party
reimbursement rates may change at any time. Therefore, even if favorable coverage and reimbursement status is attained, less favorable
coverage policies and reimbursement rates may be implemented in the future.
Healthcare
reform measures could hinder or prevent the commercial success of our product candidates.
Existing regulatory policies
may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of any future
product candidates we may develop. For example, the Trump administration and certain members of the U.S. Congress sought to repeal all
or part of the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act, or collectively,
the Affordable Care Act, and implement a replacement program. In another example, the so-called “individual mandate” was
repealed as part of tax reform legislation adopted in December 2017, informally titled the Tax Cuts and Jobs Act, or Tax Act, such that
the shared responsibility payment for individuals who fail to maintain minimum essential coverage under section 5000A of the Internal
Revenue Code was eliminated beginning in 2019. Additionally, on June 17, 2021 the U.S. Supreme Court dismissed a challenge on procedural
grounds that argued the Affordable Care Act is unconstitutional in its entirety because the individual mandate was repealed by Congress.
Thus, the Affordable Care Act will remain in effect in its current form. Further, prior to the U.S. Supreme Court ruling, on January
28, 2021, President Biden issued an executive order that initiated a special enrollment period for purposes of obtaining health insurance
coverage through the Affordable Care Act marketplace. The executive order also instructed certain governmental agencies to review and
reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration
projects and waiver programs that include work requirements, and policies that create barriers to obtaining access to health insurance
coverage through Medicaid or the Affordable Care Act. It is possible that the Affordable Care Act will be subject to judicial or Congressional
challenges in the future. It is unclear how such challenges and the healthcare reform measures of the Biden administration will impact
the Affordable Care Act and our business.
Additionally, there has
been increasing legislative and enforcement interest in the United States with respect to drug pricing practices. For example, the Trump
administration used several means to propose or implement drug pricing reform, including through federal budget proposals, executive
orders and policy initiatives. For example, on July 24, 2020 and September 13, 2020, the Trump administration announced several executive
orders related to prescription drug pricing that attempted to implement several of the administration’s proposals. The FDA also
released a final rule and guidance implementing a portion of the importation executive order providing pathways for states to build and
submit importation plans for drugs from Canada. Further, on November 20, 2020, the Department of Health and Human Services, or HHS, finalized
a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either
directly or through pharmacy benefit managers, unless the price reduction is required by law. The rule also creates a new safe harbor
for price reductions reflected at the point-of-sale, as well as a new safe harbor for certain fixed fee arrangements between pharmacy
benefit managers and manufacturers. The implementation of the rule has been delayed until January 1, 2026. On November 20, 2020, the
Centers for Medicare & Medicaid Services, or CMS, issued an interim final rule implementing former President Trump’s Most Favored
Nation, or MFN, executive order, which would tie Medicare Part B payments for certain physician-administered drugs to the lowest price
paid in other economically advanced countries, and was effective as of January 1, 2021. As a result of litigation challenging the MFN
model, on December 27, 2021, CMS published a final rule that rescinded the MFN model interim final rule. Further, in July 2021, the Biden
administration released an executive order that included multiple provisions aimed at prescription drugs. In response to Biden’s
executive order, on September 9, 2021, HHS released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for
drug pricing reform. The plan sets out a variety of potential legislative policies that Congress could pursue as well as potential administrative
actions HHS could take to advance these principles. No legislation or administrative actions have been finalized to implement these principles.
In addition, on August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022, which, among other things, contains
substantial drug pricing reforms that will reduce drug spending by the federal government. For example, the Inflation Reduction Act of
2022 limits the prices paid by Medicare for various prescription drugs and requires drug manufacturers to pay rebates to Medicare if
they increase prices faster than inflation for drugs used by Medicare beneficiaries. Although the effect of the Inflation Reduction Act
of 2022 on our business and the pharmaceutical industry in general is not yet known, the Inflation Reduction Act of 2022 could affect
the prices we can charge and the reimbursement we can receive for our product candidates, if approved, thereby reducing our profitability.
We also expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the
amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our
product candidates if approved or additional pricing pressures.
There are also calls to
place additional restrictions on or to ban direct-to-consumer advertising of pharmaceuticals, which would limit our ability to market
our product candidates. The United States is in a minority of jurisdictions that allow this kind of advertising and its removal could
limit the potential reach of a marketing campaign. Further, it is possible that additional government action is taken in response to
the COVID-19 pandemic.
We are subject to
strict healthcare laws, regulation and enforcement, and our failure to comply with those laws could adversely affect our business, operations
and financial condition.
Certain federal and state
healthcare laws and regulations pertaining to fraud and abuse, privacy, transparency, and patients’ rights are and will be applicable
to our business. We are subject to regulation by both the federal government and the states in which we or our partners conduct business.
The healthcare laws and regulations that may affect our ability to operate include but are not limited to: the federal Anti-Kickback
Statute; federal civil and criminal false claims laws and civil monetary penalty laws; the federal Health Insurance Portability and Accountability
Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act; the Prescription Drug Marketing Act
(for sampling of drug product among other things); the federal physician sunshine requirements under the Affordable Care Act; the Foreign
Corrupt Practices Act as it applies to activities outside of the United States; the federal Right-to-Try legislation; and similar state
laws of such federal laws, which may be broader in scope.
Because of the breadth of
these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities
could be subject to challenge under one or more of such laws. In addition, recent healthcare reform legislation has strengthened these
laws. For example, the Affordable Care Act, among other things, amended the intent requirement of the federal Anti-Kickback Statute and
certain criminal healthcare fraud statutes. A person or entity no longer needs to have actual knowledge of the statute or specific intent
to violate it. In addition, the Affordable Care Act provided that the government may assert that a claim including items or services
resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil
False Claims Act.
Achieving and sustaining
compliance with these laws may prove costly. In addition, any action against us for violation of these laws, even if we successfully
defend against it, could cause us to incur significant legal expenses and divert management’s attention from the operation of our
business and result in reputational damage. If our operations are found to be in violation of any of the laws described above or any
other governmental laws or regulations that apply to us, we may be subject to significant penalties, including administrative, civil
and criminal penalties, damages, including punitive damages, fines, disgorgement, the exclusion from participation in federal and state
healthcare programs, imprisonment, additional oversight and reporting obligations, or the curtailment or restructuring of our operations,
and injunctions, any of which could adversely affect our ability to operate our business and financial results.
We may in-license and acquire product candidates
and may engage in other strategic transactions, which could impact our liquidity, increase our expenses and present significant distractions
to our management.
Part of our strategy is
to in-license and acquire product candidates and we may engage in other strategic transactions. Additional potential transactions that
we may consider include a variety of different business arrangements, including spin-offs, strategic partnerships, joint ventures, restructurings,
divestitures, business combinations and investments. Any such transaction may require us to incur non-recurring or other charges, may
increase our near- and long-term expenditures and may pose significant integration challenges or disrupt our management or business,
which could adversely affect our operations and financial results. Accordingly, there can be no assurance that we will undertake or successfully
complete any transactions of the nature described above, and any transaction that we do complete could harm our business, financial condition,
operating results and prospects.
Our failure to successfully in-license,
acquire, develop and market additional product candidates or approved products would impair our ability to grow our business.
We may in-license, acquire,
develop and market additional products and product candidates. Because our internal research and development capabilities are limited,
we may be dependent on pharmaceutical and biotechnology companies, academic or government scientists and other researchers to sell or
license products or technology to us. The success of this strategy depends partly on our ability to identify and select promising pharmaceutical
and biologic product candidates and products, negotiate licensing or acquisition agreements with their current owners, and finance these
arrangements.
The process of proposing,
negotiating and implementing a license or acquisition of a product candidate or approved product is lengthy and complex. Other companies,
including some with substantially greater financial, marketing, sales and other resources, may compete with us for the license or acquisition
of product candidates and approved products. We have limited resources to identify and execute the acquisition or in-licensing of third-party
products, businesses and technologies and integrate them into our current infrastructure. Moreover, we may devote resources to potential
acquisitions or licensing opportunities that are never completed, or we may fail to realize the anticipated benefits of such efforts.
We may not be able to acquire the rights to additional product candidates on terms that we find acceptable or at all.
Further, any product candidate
that we acquire may require additional development efforts prior to commercial sale, including preclinical or clinical testing and approval
by the FDA and applicable foreign regulatory authorities. All product candidates are prone to risks of failure typical of pharmaceutical
product development, including the possibility that a product candidate will not be shown to be sufficiently safe and effective for approval
by regulatory authorities. In addition, we cannot provide assurance that any approved products that we acquire will be manufactured or
sold profitably or achieve market acceptance.
We expect to rely on collaborations with
third parties for the successful development and commercialization of our product candidates.
We expect to rely upon the
efforts of third parties for the successful development and commercialization of our current and future product candidates. The clinical
and commercial success of our product candidates may depend upon maintaining successful relationships with third-party partners which
are subject to a number of significant risks, including the following:
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our partners’ ability to execute their responsibilities
in a timely, cost-efficient and compliant manner; |
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reduced control over delivery and manufacturing schedules; |
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price increases and product reliability; |
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manufacturing deviations from internal or regulatory
specifications; |
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the failure of partners to perform their obligations
for technical, market or other reasons; |
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misappropriation of our current or future product candidates;
and |
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other risks in potentially meeting our current and
future anticipated commercialization schedule for product candidates or satisfying the requirements of our end-users. |
We cannot assure you that
we will be able to establish or maintain third-party relationships in order to successfully develop and commercialize our product candidates.
We rely completely on third-party contractors
to supply, manufacture and distribute clinical drug supplies for our product candidates, which may include sole-source suppliers and
manufacturers; we intend to rely on third parties for commercial supply, manufacturing and distribution if any of our product candidates
receive regulatory approval; and we expect to rely on third parties for supply, manufacturing and distribution of preclinical, clinical
and commercial supplies of any future product candidates.
We do not currently have,
nor do we plan to acquire, the infrastructure or capability to supply, store, manufacture or distribute preclinical, clinical or commercial
quantities of drug substances or products. Additionally, we have not entered into a long-term commercial supply agreement to provide
us with such drug substances or products. As a result, our ability to develop our product candidates is dependent, and our ability to
supply our products commercially will depend, in part, on our ability to obtain active pharmaceutical ingredient, or API, and other substances
and materials used in our product candidates successfully from third parties and to have finished products manufactured by third parties
in accordance with regulatory requirements and in sufficient quantities for preclinical and clinical testing and commercialization. If
we fail to develop and maintain supply and other technical relationships with these third parties, we may be unable to continue to develop
or commercialize our products and product candidates.
We do not have direct control
over whether our contract suppliers and manufacturers will maintain current pricing terms, be willing to continue supplying us with API
and finished products or maintain adequate capacity and capabilities to serve our needs, including quality control, quality assurance
and qualified personnel. We are dependent on our contract suppliers and manufacturers for day-to-day compliance with applicable laws
and cGMP for production of both API and finished products. If the safety or quality of any product or product candidate or component
is compromised due to a failure to adhere to applicable laws or for other reasons, we may not be able to commercialize or obtain regulatory
approval for the affected product or product candidate successfully, and we may be held liable for injuries sustained as a result.
In order to conduct larger
or late-stage clinical trials for our product candidates and supply sufficient commercial quantities of any of our products, if approved,
our contract manufacturers and suppliers will need to produce our API and other substances and materials used in our product candidates
in larger quantities, more cost-effectively and, in certain cases, at higher yields than they currently achieve. If our third-party contractors
are unable to scale up the manufacture of any of our product candidates successfully in sufficient quality and quantity and at commercially
reasonable prices, or are shut down or put on clinical hold by government regulators, and we are unable to find one or more replacement
suppliers or manufacturers capable of production at a substantially equivalent cost in substantially equivalent volumes and quality,
and we are unable to transfer the processes successfully on a timely basis, the development of that product candidate and regulatory
approval or commercial launch for any resulting products may be delayed, or there may be a shortage in supply, either of which could
significantly harm our business, financial condition, operating results and prospects.
We expect to continue to
depend on third-party contract suppliers and manufacturers for the foreseeable future. Our supply and manufacturing agreements, if any,
do not guarantee that a contract supplier or manufacturer will provide services adequate for our needs. Additionally, any damage to or
destruction of our third-party manufacturers’ or suppliers’ facilities or equipment, even by force majeure, may significantly
impair our ability to have our products and product candidates manufactured on a timely basis. Our reliance on contract manufacturers
and suppliers further exposes us to the possibility that they, or third parties with access to their facilities, will have access to
and may misappropriate our trade secrets or other proprietary information. In addition, the manufacturing facilities of certain of our
suppliers may be located outside of the United States. This may give rise to difficulties in importing our products or product candidates
or their components into the United States or other countries.
In addition, we cannot be
certain that any prolonged, intensified or worsened effect of the COVID-19 pandemic would not impact our supply chain.
The manufacture of biologics is complex
and our third-party manufacturers may encounter difficulties in production. If our CDMO encounters such difficulties, the ability to
provide supply of TARA-002 for clinical trials, our ability to obtain marketing approval, or our ability to obtain commercial supply
of TARA-002, if approved, could be delayed or stopped.
We have no experience in
biologic manufacturing and do not own or operate, and we do not expect to own or operate, facilities for product manufacturing, storage
and distribution, or testing. We are completely dependent on CDMOs to fulfill our clinical and commercial supply of TARA-002. The process
of manufacturing biologics is complex, highly regulated and subject to multiple risks. Manufacturing biologics is highly susceptible
to product loss due to contamination, equipment failure, improper installation or operation of equipment, vendor or operator error, inconsistency
in yields, variability in product characteristics and difficulties in scaling the production process. Even minor deviations from normal
manufacturing processes could result in reduced production yields, product defects and other supply disruptions and higher costs. If
microbial, viral or other contaminations are discovered at the facilities of our manufacturer, such facilities may need to be closed
for an extended period of time to investigate and remedy the contamination, which could delay clinical trials, result in higher costs
of drug product and adversely harm our business. Moreover, if the FDA determines that our manufacturer is not in compliance with FDA
laws and regulations, including those governing cGMP, the FDA may deny BLA approval until the deficiencies are corrected or we replace
the manufacturer in our BLA with a manufacturer that is in compliance.
In addition, there are risks
associated with large scale manufacturing for clinical trials or commercial scale including, among others, cost overruns, potential problems
with process scale-up, process reproducibility, stability issues, compliance with cGMP, lot consistency and timely availability of raw
materials. Even if we obtain regulatory approval for TARA-002 or any future product candidates, there is no assurance that our manufacturers
will be able to manufacture the approved product to specifications acceptable to the FDA or other regulatory authorities, to produce
it in sufficient quantities to meet the requirements for the potential launch of the product or to meet potential future demand. If our
manufacturers are unable to produce sufficient quantities for clinical trials or for commercialization, commercialization efforts would
be impaired, which would have an adverse effect on our business, financial condition, results of operations and growth prospects. Scaling
up a biologic manufacturing process is a difficult and uncertain task, and any CDMO we contract may not have the necessary capabilities
to complete the implementation and development process of further scaling up production, transferring production to other sites, or managing
its production capacity to timely meet product demand.
If we fail to attract and retain management
and other key personnel, we may be unable to continue to successfully develop or commercialize our product candidates or otherwise implement
our business plan.
Our ability to compete in
the highly competitive biopharmaceuticals industry depends on our ability to attract and retain highly qualified managerial, scientific,
medical, legal, sales and marketing and other personnel. We are highly dependent on our management and scientific personnel. The loss
of the services of any of these individuals could impede, delay or prevent the successful development of our product pipeline, completion
of our planned clinical trials, commercialization of our product candidates or in-licensing or acquisition of new assets and could impact
negatively our ability to implement successfully our business plan. If we lose the services of any of these individuals, we might not
be able to find suitable replacements on a timely basis or at all, and our business could be harmed as a result. We might not be able
to attract or retain qualified management and other key personnel in the future due to the intense competition for qualified personnel
among biotechnology, pharmaceutical and other businesses.
In addition, over the past
few years the United States has experienced a decrease in unemployment rates and an increasingly competitive labor market, which may
continue to result in difficulties in hiring or retaining sufficient qualified personnel to maintain and grow our business. We are uncertain
as to the employment environment in the future, or how that environment will impact our workforce, including our ability to retain qualified
management and other key personnel.
We may be adversely affected by natural
disasters, pandemics and other catastrophic events and by man-made problems such as terrorism and war that could disrupt our business
operations, and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.
Our office is located in
New York, New York. If a disaster, power outage, computer hacking, or other event occurred that prevented us from using all or a significant
portion of an office, that damaged critical infrastructure, such as enterprise financial systems, IT systems, manufacturing resource
planning or enterprise quality systems, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible
for us to continue our business for a substantial period of time. For example, we are expanding our clinical development of TARA-002
in NMBIC to clinical trial sites outside the United States, including potentially in Ukraine and in other countries in Europe and Asia
and may expand to other geographies. If political or civil conditions require it, our sites may need to delay or suspend clinical trial
activities. In addition, enrollment and retention of patients at such sites could be disrupted by geopolitical events, including civil
or political unrest, such as the current ongoing conflict between Russia and Ukraine. All of the aforementioned risks may be further
increased if we do not implement a disaster recovery plan or our partners’ or manufacturers’ disaster recovery plans prove
to be inadequate. To the extent that any of the above should result in delays in the research, development, regulatory approval, manufacture,
distribution or commercialization of TARA-002 or IV Choline Chloride, our business, financial condition, operating results and prospects
would suffer.
Risks Related to Our Common Stock
We expect our stock price to
be highly volatile.
The market price of our
shares could be subject to significant fluctuations. Market prices for securities of biotechnology and other life sciences companies
historically have been particularly volatile, even subject to large daily price swings. For example, the closing price of our common
stock from the period January 1, 2022 to December 31, 2022 has ranged from a low of $2.43 to a high of $6.90. Some of the factors that
may cause the market price of our shares to fluctuate include, but are not limited to:
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the results of current
and any future clinical trials of TARA-002 or IV Choline Chloride and any clinical trial failure, including any failure resulting
from difficulties or delays in identifying patients, enrolling patients, retaining patients, meeting specific trial endpoints or
completing and timely reporting the results of any trial; |
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our ability to obtain regulatory
approvals for TARA-002, IV Choline Chloride or future product candidates, and delays of, or failures to obtain such approvals; |
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the failure of TARA-002
or IV Choline Chloride or future product candidates, if approved, to achieve commercial success; |
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the effects of the COVID-19
pandemic or any other public health crisis; |
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potential side effects
associated with TARA-002 or IV Choline Chloride or future product candidates; |
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issues in manufacturing,
or the inability to obtain adequate supply of, TARA-002, IV Choline Chloride or future product candidates; |
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the entry into, or termination
of, or breach by partners of key agreements, including key commercial partner agreements; |
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the initiation of, material
developments in, or conclusion of, any litigation or other actions to enforce or defend any intellectual property rights or defend
against the intellectual property rights of others; |
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announcements of any dilutive
equity financings; |
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inability to obtain additional
funding; |
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announcements by commercial
partners or competitors of new commercial products, clinical progress or the lack thereof, significant contracts, commercial relationships
or capital commitments; |
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failure to elicit meaningful
stock analyst coverage and downgrades of our stock by analysts; |
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the loss of key employees; |
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changes in laws or regulations application to TARA-002
or IV Choline Chloride or future product candidates; and |
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sales of our common stock by us, our insiders or our
other stockholders. |
Moreover, the stock markets
in general have experienced substantial volatility in our industry that has often been unrelated to the operating performance of individual
companies or a certain industry segment. These broad market fluctuations may also adversely affect the trading price of our shares.
In the past, following periods
of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigation
against those companies. Such litigation, if instituted, could result in substantial costs and diversion of management attention and
resources, which could significantly harm our profitability and reputation. In addition, such securities litigation often has ensued
after a reverse merger or other merger and acquisition activity. Such litigation if brought could impact negatively our business.
We incur costs and demands upon management
as a result of complying with the laws and regulations affecting public companies.
As a public company, we
have incurred, and will continue to incur, significant legal, accounting and other expenses, including costs associated with public company
reporting and other SEC requirements. We have also incurred, and will continue to incur, costs associated with corporate governance requirements,
including requirements under the Exchange Act, the Sarbanes-Oxley Act and other applicable legislation, as well as rules implemented
by the SEC and Nasdaq.
We expect the rules and
regulations applicable to public companies will continue to substantially increase our legal and financial compliance costs and to make
some activities more time-consuming and costly. Our executive officers and other personnel will need to continue to devote substantial
time to managing operations as a public company and compliance with applicable laws and regulations. These rules and regulations may
also make it expensive for us to operate our business.
If we fail to maintain proper and effective
internal controls, our ability to produce accurate financial statements on a timely basis could be impaired.
We are subject to the reporting
requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of Nasdaq. The Sarbanes-Oxley Act requires, among
other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We must perform
system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness
of our internal controls over financial reporting in our Annual Report on Form 10-K filing for that year, as required by Section 404
of the Sarbanes-Oxley Act. This will require that we incur substantial professional fees and internal costs to expand our accounting
and finance functions and that we expend significant management efforts. We may experience difficulty in meeting these reporting requirements
in a timely manner.
We may discover weaknesses
in our system of internal financial and accounting controls and procedures that could result in a material misstatement of our financial
statements. Our internal control over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter
how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will
be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements
due to error or fraud will not occur or that all control issues and instances of fraud will be detected.
If we are not able to comply
with the requirements of Section 404 of the Sarbanes-Oxley Act, or if we are unable to maintain proper and effective internal controls,
we may not be able to produce timely and accurate financial statements. If that were to happen, the market price of our common stock
could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities or by Nasdaq.
We are able to take advantage of reduced
disclosure and governance requirements applicable to smaller reporting companies, which could result in our common stock being less attractive
to investors.
We qualify as a smaller
reporting company under the rules of the SEC. As a smaller reporting company, we are able to take advantage of reduced disclosure requirements,
such as certain simplified executive compensation disclosures and reduced financial statement disclosure requirements in our SEC filings.
Comparatively reduced disclosures in our SEC filings due to our status as a smaller reporting company may make it harder for our investors
to analyze our results of operations and financial prospects. We cannot predict if investors will find our common stock less attractive
due to our reliance 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 our stock price may be more volatile. We may take advantage of the reporting exemptions applicable
to a smaller reporting company until we are no longer a smaller reporting company, which status would end once we have a public float
greater than $250 million. In that event, we could still be a smaller reporting company if our annual revenues were below $100 million
and we have a public float of less than $700 million.
We do not anticipate paying
any dividends in the foreseeable future.
The current expectation
is that we will retain our future earnings to fund the development and growth of our business. As a result, capital appreciation, if
any, of your shares of our stock will be your sole source of gain, if any, for the foreseeable future.
If equity research analysts do not publish research or reports,
or publish unfavorable research or reports, about us, our business or our market, our stock price and trading volume could decline.
The trading market for
our common stock is influenced by the research and reports that equity research analysts publish about us and our business. Equity research
analysts may elect not to provide research coverage of our common stock, and such lack of research coverage may adversely affect the
market price of our common stock. In the event we do have equity research analyst coverage, we will not have any control over the analysts
or the content and opinions included in their reports. The price of our common stock could decline if one or more equity research analysts
downgrade our stock or issue other unfavorable commentary or research. If one or more equity research analysts ceases coverage of us
or fails to publish reports on us regularly, demand for our common stock could decrease, which in turn could cause our stock price or
trading volume to decline.
Risk Related to Our Ownership
Structure and Governance
Certain stockholders have the ability to
control or significantly influence certain matters submitted to our stockholders for approval.
Certain stockholders have
consent rights over certain significant matters of our business. These include decisions to effect a merger or other similar transaction,
changes to our principal business, and the sale or other transfer of TARA-002 or other assets with an aggregate value of more than $2,500,000.
As a result, these stockholders, have significant influence over certain matters that require approval by our stockholders.
Anti-takeover provisions in our charter
documents and under Delaware law could make an acquisition of our business more difficult and may prevent attempts by our stockholders
to replace or remove management.
Provisions in our certificate
of incorporation and bylaws may delay or prevent an acquisition or a change in management. In addition, because we are incorporated in
Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, or DGCL, which prohibits stockholders
owning in excess of 15% of the outstanding voting stock from merging or combining with us. These provisions may frustrate or prevent
any attempts by our stockholders to replace or remove then current management by making it more difficult for stockholders to replace
members of the board of directors, which is responsible for appointing the members of management.
Our certificate of incorporation provides
that the Court of Chancery of the State of Delaware is the exclusive forum for certain disputes between us and our stockholders, which
could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other
employees.
Our certificate of incorporation
provides that the Court of Chancery of the State of Delaware is the sole and exclusive forum for any derivative action or proceeding
brought on our behalf, any action asserting a breach of fiduciary duty owed by any of our directors, officers or other employees to us
or our stockholders, any action asserting a claim against us arising pursuant to any provisions of the DGCL, our certificate of incorporation
or our bylaws, or any action asserting a claim against us that is governed by the internal affairs doctrine. The choice of forum provision
may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for certain disputes with us or
our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees.
If a court were to find the choice of forum provision contained in the certificate of incorporation to be inapplicable or unenforceable
in an action, we may incur additional costs associated with resolving such action in other jurisdictions.
Risks Related to Intellectual Property Rights
We may not be able to obtain, maintain
or enforce global patent rights or other intellectual property rights that cover our product candidates and technologies that are of
sufficient breadth to prevent third parties from competing against us.
Our success with respect
to our product candidates will depend, in part, on our ability to obtain and maintain patent protection in both the United States and
other countries, to preserve our trade secrets and to prevent third parties from infringing on our proprietary rights. Our ability to
protect our product candidates from unauthorized or infringing use by third parties depends in substantial part on our ability to obtain
and maintain valid and enforceable patents around the world.
The patent application process,
also known as patent prosecution, is expensive and time-consuming, and we and our current or future licensors and licensees may not be
able to prepare, file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner in all
the countries that are desirable. It is also possible that we or our current licensors, or any future licensors or licensees, will fail
to identify patentable aspects of inventions made in the course of development and commercialization activities before it is too late
to obtain patent protection on them. Therefore, these and any of our patents and applications may not be prosecuted and enforced in a
manner consistent with the best interests of our business. Moreover, our competitors independently may develop equivalent knowledge,
methods and know-how or discover workarounds to our patents that would not constitute infringement. Any of these outcomes could impair
our ability to enforce the exclusivity of our patents effectively, which may have an adverse impact on our business, financial condition
and operating results.
Due to legal standards relating
to patentability, validity, enforceability and claim scope of patents covering pharmaceutical inventions, our ability to obtain, maintain
and enforce patents is uncertain and involves complex legal and factual questions especially across countries. Accordingly, rights under
any existing patents or any patents we might obtain or license may not cover our product candidates or may not provide us with sufficient
protection for our product candidates to afford a sustainable commercial advantage against competitive products or processes, including
those from branded, generic and over-the-counter pharmaceutical companies. In addition, we cannot guarantee that any patents or other
intellectual property rights will issue from any pending or future patent or other similar applications owned by or licensed to us. Even
if patents or other intellectual property rights have issued or will issue, we cannot guarantee that the claims of these patents and
other rights are or will be held valid or enforceable by the courts, through injunction or otherwise, or will provide us with any significant
protection against competitive products or otherwise be commercially valuable to us in every country of commercial significance that
we may target.
Competitors in the field
of immunology and oncology therapeutics have created a substantial amount of prior art, including scientific publications, posters, presentations,
patents and patent applications and other public disclosures including on the Internet. Our ability to obtain and maintain valid and
enforceable patents depends on whether the differences between our technology and the prior art allow our technology to be patentable
over the prior art. We do not have outstanding issued patents covering all of the recent developments in our technology and are unsure
of the patent protection that we will be successful in obtaining, if any. Even if the patents do successfully issue, third parties may
design around or challenge the validity, enforceability or scope of such issued patents or any other issued patents we own or license,
which may result in such patents being narrowed, invalidated or held unenforceable. If the breadth or strength of protection provided
by the patents we hold or pursue with respect to our product candidates is challenged, it could dissuade companies from collaborating
with us to develop or threaten our ability to commercialize or finance our product candidates.
The laws of some foreign
jurisdictions do not provide intellectual property rights to the same extent or duration as in the United States, and many companies
have encountered significant difficulties in acquiring, maintaining, protecting, defending and especially enforcing such rights in foreign
jurisdictions. If we encounter such difficulties in protecting, or are otherwise precluded from effectively protecting, our intellectual
property in foreign jurisdictions, our business prospects could be substantially harmed, especially internationally.
Proprietary trade secrets
and unpatented know-how are also very important to our business. Although we have taken steps to protect our trade secrets and unpatented
know-how by entering into confidentiality agreements with third parties, and intellectual property protection agreements with officers,
directors, employees, and certain consultants and advisors, there can be no assurance that binding agreements will not be breached or
will be enforced by courts, that we would have adequate remedies for any breach, including injunctive and other equitable relief, or
that our trade secrets and unpatented know-how will not otherwise become known, inadvertently disclosed by us or our agents and representatives,
or be independently discovered by our competitors. If trade secrets are independently discovered, we would not be able to prevent their
use and if we and our agents or representatives inadvertently disclose trade secrets and/or unpatented know-how, we may not be allowed
to retrieve this and maintain the exclusivity we previously enjoyed.
We may not be able to protect
our intellectual property rights throughout the world.
Filing, prosecuting and
defending patents on our product candidates does not guarantee exclusivity. The requirements for patentability differ in certain countries,
particularly developing countries. In addition, the laws of some foreign countries do not protect intellectual property rights to the
same extent as laws in the United States, especially when it comes to granting use and other kinds of patents and what kind of enforcement
rights will be allowed, especially injunctive relief in a civil infringement proceeding. Consequently, we may not be able to prevent
third parties from practicing our inventions in all countries outside the United States and even in launching an identical version of
our product notwithstanding we have a valid patent in that country. Competitors may use our technologies in jurisdictions where we have
not obtained patent protection to develop their own products, or produce copy products, and, further, may export otherwise infringing
products to territories where we have patent protection but enforcement on infringing activities is inadequate or where we have no patents.
These products may compete with our products, and our patents or other intellectual property rights may not be effective or sufficient
to prevent them from competing.
Many companies have encountered
significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain
countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection,
particularly those relating to pharmaceuticals, which could make it difficult for us to stop the infringement of our patents or marketing
of competing products in violation of our proprietary rights generally. 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 global patents
at risk of being invalidated or interpreted narrowly and our global patent applications at risk of not issuing, and could provoke third
parties to assert claims against us. We may not prevail in any lawsuits that we initiate or infringement actions brought against us,
and the damages or other remedies awarded, if any, may not be commercially meaningful when we are the plaintiff. When we are the defendant
we may be required to post large bonds to stay in the market while we defend ourselves from an infringement action.
In addition, certain countries
in Europe and certain developing countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses
to third parties, especially if the patent owner does not enforce or use its patents over a protracted period of time. In some cases,
the courts will force compulsory licenses on the patent holder even when finding the patent holder’s patents are valid if the court
believes it is in the best interests of the country to have widespread access to an essential product covered by the patent. In these
situations, the royalty the court requires to be paid by the license holder receiving the compulsory license is not calculated at fair
market value and can be inconsequential, thereby adversely affecting the patent holder’s business. In these countries, we may have
limited remedies if our patents are infringed or if we are compelled to grant a license to our patents to a third-party, which could
also materially diminish the value of those patents. This would limit our potential revenue opportunities. 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 own or license, especially in comparison to what we enjoy from enforcing our intellectual property rights in the Unites
States. Finally, our ability to protect and enforce our intellectual property rights may be adversely affected by unforeseen changes
in both U.S. and foreign intellectual property laws, or changes to the policies in various government agencies in these countries, including
but not limited to the patent office issuing patents and the health agency issuing pharmaceutical product approvals for example, in Brazil,
pharmaceutical patents require initial approval of the Brazilian health agency (ANVISA). Finally, many countries have large backlogs
in patent prosecution, and in some countries in Latin America it can take years, even decades, just to get a pharmaceutical patent application
reviewed notwithstanding the merits of the application.
Obtaining and maintaining patent protection
depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by governmental patent
agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
Periodic maintenance and
annuity fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of
the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee
payment and other similar provisions during the patent application process. While an inadvertent lapse can, in many cases, be cured by
payment of a late fee or by other means in accordance with the applicable rules, there are situations in which non-compliance 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
just for failure to know about and/or timely pay a prosecution fee. Non-compliance events that could result in abandonment or lapse of
a patent or patent application include failure to respond to official actions within prescribed time limits, non-payment of fees in prescribed
time periods, and failure to properly legalize and submit formal documents in the format and style the country requires. If we or our
licensors fail to maintain the patents and patent applications covering our product candidates for any reason, our competitors might
be able to enter the market, which could materially adversely affect our business, financial condition, operating results and prospects.
If we fail to comply with our obligations
under our intellectual property license agreements, we could lose license rights that are important to our business. Additionally, these
agreements may be subject to disagreement over contract interpretation, which could narrow the scope of our rights to the relevant intellectual
property or technology or increase our financial or other obligations to our licensors.
We have entered into in-license
arrangements with respect to certain of our product candidates. These license agreements impose various diligence, milestone, royalty,
insurance and other obligations on us. If we fail to comply with these obligations, the respective licensors may have the right to terminate
the license, in which event we may not be able to develop or market the affected product candidate. The loss of such rights could materially
adversely affect our business, financial condition, operating results and prospects.
If we are sued for infringing intellectual
property rights of third parties, such litigation could be costly and time consuming and could prevent or delay us from developing or
commercializing our product candidates.
Our commercial success depends
on our ability to develop, manufacture, market and sell our product candidates and use our proprietary technologies without infringing
the proprietary rights of third parties. We cannot assure that marketing and selling such candidates and using such technologies will
not infringe existing or future patents. Numerous U.S.- and foreign-issued patents and pending patent applications owned by third parties
exist in the fields relating to our product candidates. As the biotechnology and pharmaceutical industries expand and more patents are
issued, the risk increases that others may assert that our product candidates, technologies or methods of delivery or use infringe their
patent rights. Moreover, it is not always clear to industry participants, including us, which patents and other intellectual property
rights cover various drugs, biologics, drug delivery systems or their methods of use, and which of these patents may be valid and enforceable.
Thus, because of the large number of patents issued and patent applications filed in our fields across many countries, there may be a
risk that third parties may allege they have patent rights encompassing our product candidates, technologies or methods.
In addition, there may be
issued patents of third parties that are infringed or are alleged to be infringed by our product candidates or proprietary technologies
notwithstanding patents we may possess. Because some patent applications in the United States may be maintained in secrecy until the
patents are issued, because patent applications in the United States and many foreign jurisdictions are typically not published until
18 months after filing and because publications in the scientific literature often lag behind actual discoveries, we cannot be certain
that others have not filed patent applications for technology covered by our own and in-licensed issued patents or our pending applications.
Our competitors may have filed, and may in the future file, patent applications covering our product candidates or technology similar
to our technology. Any such patent application may have priority over our own and in-licensed patent applications or patents, which could
further require us to obtain rights to issued patents covering such technologies, which may mean paying significant licensing fees or
the like. If another party has filed a U.S. patent application on inventions similar to those owned or in-licensed to us, or, in the
case of in-licensed technology, the licensor may have to participate, in the United States, in an interference proceeding to determine
priority of invention.
We may be exposed to, or
threatened with, future litigation by third parties having patent or other intellectual property rights alleging that our product candidates
or proprietary technologies infringe such third parties’ intellectual property rights, including litigation resulting from filing
under Paragraph IV of the Hatch-Waxman Act or other countries’ laws similar to the Hatch-Waxman Act. These lawsuits could claim
that there are existing patent rights for such drug, and this type of litigation can be costly and could adversely affect our operating
results and divert the attention of managerial and technical personnel, even if we do not infringe such patents or the patents asserted
against us are ultimately established as invalid. There is a risk that a court would decide that we are infringing the third-party’s
patents and would order us to stop the activities covered by the patents. In addition, there is a risk that a court would order us to
pay the other party significant damages for having violated the other party’s patents.
Because we rely on certain
third-party licensors and partners and will continue to do so in the future, if one of our licensors or partners is sued for infringing
a third-party’s intellectual property rights, our business, financial condition, operating results and prospects could suffer in
the same manner as if we were sued directly. In addition to facing litigation risks, we have agreed to indemnify certain third-party
licensors and partners against claims of infringement caused by our proprietary technologies, and we have entered or may enter into cost-sharing
agreements with some our licensors and partners that could require us to pay some of the costs of patent litigation brought against those
third parties whether or not the alleged infringement is caused by our proprietary technologies. In certain instances, these cost-sharing
agreements could also require us to assume greater responsibility for infringement damages than would be assumed just on the basis of
our technology.
The occurrence of any of
the foregoing could adversely affect our business, financial condition or operating results.
We may be subject to claims that our officers,
directors, employees, consultants or independent contractors have wrongfully used or disclosed to us alleged trade secrets of their former
employers or their former or current customers.
As is common in the biotechnology
and pharmaceutical industries, certain of our employees were formerly employed by other biotechnology or pharmaceutical companies, including
our competitors or potential competitors. Moreover, we engage the services of consultants to assist us in the development of our products
and product candidates, many of whom were previously employed at, or may have previously been or are currently providing consulting services
to, other biotechnology or pharmaceutical companies, including our competitors or potential competitors. We may be subject to claims
that these employees and consultants or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information
of their former employers or their former or current customers. Although we have no knowledge of any such claims being alleged to date,
if such claims were to arise, litigation may be necessary to defend against any such claims. Even if we are successful in defending against
any such claims, any such litigation could be protracted, expensive, a distraction to our management team, not viewed favorably by investors
and other third parties, and may potentially result in an unfavorable outcome.
General Risk
Factors
If our information
technology systems or data, or those of third parties upon which we rely, are or were compromised, we could experience adverse consequences
resulting from such compromise, including, but not limited to, regulatory investigations or actions; litigation; fines and penalties;
disruptions of our business operations; loss of revenue or profits; interruptions to our operations such as our clinical trials; harm
to our reputation; loss of customers or sales; and other adverse consequences.
In the ordinary course of
our business, we may Process (as defined above) proprietary, confidential and sensitive information, including personal data (including,
key-coded data, health information and other special categories of personal data), intellectual property, trade secrets, and proprietary
business information owned or controlled by ourselves or other parties, or collectively, Sensitive Information.
We may use third-party service
providers and subprocessors to help us operate critical business systems to Process Sensitive Information on our behalf in a variety
of contexts, including without limitation, encryption and authentication technology, employee email, and other functions. Our ability
to monitor these third parties’ information security practices is limited, and these third parties may not have adequate information
security measures in place. We may share or receive Sensitive Information with or from third parties.
If we, our service providers,
partners or other relevant third parties have experienced, or in the future experience, any security incident(s) that result in, any
data loss; deletion or destruction; unauthorized access to; loss, unauthorized acquisition, disclosure, or exposure of, Sensitive Information,
or compromise related to the security, confidentiality, integrity or availability of our (or their) information technology, software,
services, communications or data, or collectively, a Security Incident, it may materially adversely affect our business, financial condition,
operating results and prospects, including the diversion of funds to address the breach, and interruptions, delays, or outages in our
operations and development programs. In the first quarter of 2020, our email server was compromised in a cyber-attack. We quickly isolated
the incident and have, since, implemented additional risk prevention measures.
Cyberattacks, malicious
internet-based activity and online and offline fraud are prevalent and continue to increase. These threats are becoming increasingly
difficult to detect. These threats come from a variety of sources, including traditional computer “hackers”, threat actors,
employee error, theft or misuse, sophisticated nation-states, and nation-state supported actors. We and the third parties upon which
we rely may be subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through phishing
attacks); software bugs; malicious code (such as viruses and worms); denial-of-service attacks (such as credential stuffing); malware
(including as a result of advanced persistent threat intrusions); supply-chain attacks, server malfunctions, software and hardware failures;
loss of data or other information technology assets; adware; natural disasters; terrorism; war; telecommunication and electrical failures;
ransomware attacks; and other similar threats.
Ransomware attacks, including
those from organized criminal threat actors, nation-states and nation-state supported actors, are becoming increasingly prevalent and
severe and can lead to significant interruptions, delays, or outages in our operations, loss of data, loss of income, significant extra
expenses to restore data or systems, reputational loss and the diversion of funds. To alleviate the financial, operational and reputational
impact of a ransomware attack, it may be preferable to make extortion payments, but we may be unwilling or unable to do so (including,
for example, if applicable laws or regulations prohibit such payments).
Similarly, supply chain
attacks have increased in frequency and severity, and we cannot guarantee that third parties and infrastructure in our supply chain have
not been compromised or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our systems
and networks or the systems and networks of third parties that support us and our services. We may also be the subject of server malfunction,
software or hardware failures, loss of data or other computer assets, and other similar issues. A significant portion of our workforce
and third-party partners work remotely from time to time, and reliance on remote working technologies and the prevalent use of mobile
devices that access confidential and personal data information increase the risk of Security Incidents, which could lead to the loss
confidential information, personal data, trade secrets or other intellectual property.
We may be required to expend
additional, significant resources, fundamentally change our business activities and practices, or modify our operations, including our
clinical trial activities, or information technology in an effort to protect against Security Incidents and to mitigate, detect, and
remediate actual and potential vulnerabilities. Certain data privacy and security obligations may require us to implement specific security
measures or use industry-standard or reasonable measures to protect our information technology systems and Sensitive Information. Even
if we were to take and have taken security measures designed to protect against Security Incidents, there can be no assurance that such
security measures or those of our service providers, partners and other third parties will be effective in protecting against all Security
Incidents and material adverse impacts that may arise from such Security Incidents. We may be unable in the future to detect vulnerabilities
in our information technology systems because such threats and techniques change frequently, are often sophisticated in nature, and may
not be detected until after a Security Incident has occurred. Despite our efforts to identify and remediate vulnerabilities, if any,
in our information technology systems, our efforts may not be successful. Further, we may experience delays in developing and deploying
remedial measures designed to address any such identified vulnerabilities.
If we (or a third-party
upon whom we rely) experience a Security Incident or are perceived to have experienced a Security Incident, we may experience adverse
consequences. These consequences may include: government enforcement actions (for example, investigations, fines, penalties, audits,
and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive information (including personal
data); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions;
interruptions in our operations (including availability of data); financial loss; and other similar harms. In addition, our actual or
prospective customers, collaborators, partners and/or clinical trial participants may stop using our product candidates or working with
us. This discontinuance, or failure to meet the expectations of such third parties, could result in material harm to our operations,
financial performance or reputation and affect our ability to grow and operate our business.
Failures or significant
downtime of our information technology or telecommunication systems or those used by our third-party service providers could cause significant
interruptions in our operations and adversely impact the confidentiality, integrity and availability of Sensitive Information, including
preventing us from conducting clinical trials, tests or research and development activities and prevent us from managing the administrative
aspects of our business.
Applicable Data Protection
Requirements (as defined below) may require us to notify relevant stakeholders of Security Incidents, including affected individuals,
partners, collaborators, customers, regulators, law enforcement agencies, credit reporting agencies and others. Such disclosures are
costly, and the disclosures or the failure to comply with such requirements could materially adversely affect our business, financial
condition, operating results and prospects.
Our contracts may not contain
limitations of liability, and even where they do, there can be no assurance that any limitations or exclusions of liability in our contracts
would be enforceable or adequate or would otherwise protect us from liabilities or damages if we fail to comply with Data Protection
Requirements related to information security or Security Incidents.
We cannot be sure that
our insurance coverage will be adequate or otherwise protect us from or adequately mitigate liabilities or damages with respect to claims,
costs, expenses, litigation, fines, penalties, business loss, data loss, regulatory actions or material adverse impacts arising out of
our Processing operations, privacy and security practices, or Security Incidents we may experience. The successful assertion of one or
more large claims against us that exceeds our available insurance coverage, or results in changes to our insurance policies (including
premium increases or the imposition of large excess or deductible or co-insurance requirements), could materially adversely affect our
business, financial condition, operating results and prospects.
We are subject to stringent and changing
obligations related to data privacy and security. Our actual or perceived failure to comply with such obligations could lead to regulatory
investigations or actions; litigation; fines and penalties; a disruption of our business operations, including our clinical trials; harm
to our reputation; and other adverse effects on our business or prospects.
In the ordinary course of
business, we collect, receive, store, process, use, generate, transfer, disclose, make accessible, protect, secure, dispose of, transmit,
and share, or collectively, Process or Processing of, personal data and other sensitive and confidential information, including information
we collect about patients in connection with clinical trials, sensitive third-party data or, as necessary to operate our business, for
legal and marketing purposes, and for other business-related purposes.
Accordingly, we are, or
may become, subject to numerous federal, state, local and international data privacy and security laws, regulations, guidance and industry
standards as well as external and internal privacy and security policies, contracts and other obligations that apply to the Processing
of personal data by us and on our behalf, collectively, Data Protection Requirements. The number and scope of Data Protection Requirements
are changing, subject to differing applications and interpretations, and may be inconsistent between jurisdictions or in conflict with
each other. If we fail, or are perceived to have failed, to address or comply with Data Protection Requirements, we could face significant
consequences. These consequences may include, but are not limited to, government enforcement actions against us that could include investigations,
fines, penalties, audits and inspections, additional reporting requirements and/or oversight, temporary or permanent bans on all or some
Processing of personal data, orders to destroy or not use personal data, and imprisonment of company officials (for example, under HIPAA).
Further, individuals or other relevant stakeholders could bring a variety of claims against us for our actual or perceived failure to
comply with the Data Protection Requirements. Any of these events could have a material adverse effect on our reputation, business, or
financial condition, and could lead to a loss of actual or prospective customers, collaborators or partners; interrupt or stop clinical
trials; result in an inability to Process personal data or to operate in certain jurisdictions; limit our ability to develop or commercialize
our products; or require us to revise or restructure our operations, or each, a material adverse impact.
We are, or may become, subject
to U.S. privacy laws. For example, in the United States, there are a broad variety of data protection laws and regulations that may apply
to our activities such as state data breach notification laws, state personal data privacy laws (for example, the California Consumer
Privacy Act of 2018, or CCPA), state health information privacy laws, and federal and state consumer protection laws.
The CCPA requires covered
businesses that process personal data of California residents to disclose their data collection, use and sharing practices. Further,
the CCPA provides California residents with new data privacy rights (including the ability to opt out of the sale of personal data),
imposes new operational requirements for covered businesses, provides for civil penalties for violations (up to $7,500 per violation),
as well as a private right of action for certain data breaches (that is expected to increase data breach class action litigation and
result in significant exposure to costly legal judgements and settlements). Aspects of the CCPA and its interpretation and enforcement
remain uncertain. Further, the new California Privacy Rights Act, or CPRA, substantially expands the CCPA’s requirements effective
January 1, 2023. The CPRA, among other things, gives California residents the ability to limit use of certain sensitive personal data,
establish restrictions on the retention of personal data, expand the types of data breaches subject to the CCPA’s private right
of action, and establish a new California Privacy Protection Agency to implement and enforce the new law. Although there are limited
exemptions for clinical trial data under the CCPA and the CPRA, the CCPA and the CPRA may increase compliance costs and potential liability
with respect to other personal data we maintain about California residents. Other states have enacted data privacy laws. For example,
Virginia passed its Consumer Data Protection Act, and Colorado passed the Colorado Privacy Act, both of which differ from the CPRA and
become effective in 2023. The federal government is also considering comprehensive privacy legislation.
Outside the United States,
an increasing number of laws, regulations, and industry standards apply to data privacy and security. For example, the European Union’s
General Data Protection Regulation, or EU GDPR, the United Kingdom’s GDPR, or UK GDPR, and Brazil’s General Data Protection
Law (Lei Geral de Proteção de Dados Pessoais, or LGPD) (Law No. 13,709/2018) impose strict requirements for processing
personal data. For example, under the EU GDPR, government regulators may impose temporary or definitive bans on data processing, as well
as fines of up to 20 million euros or 4% of annual global revenue, whichever is greater. Further, individuals may initiate litigation
related to processing of their personal data.
European data protection
laws (including the EU GDPR and UK GDRP) are wide-ranging in scope and impose numerous, significant and complex compliance burdens in
relation to the Processing of personal data, such as: limiting permitted Processing of personal data to only that which is necessary
for specified, explicit and legitimate purposes; requiring the establishment of a legal basis for Processing personal data; broadening
the definition of personal data; creating obligations for controllers and processors to appoint data protection officers in certain circumstances;
increasing transparency obligations to data subjects; introducing the obligation to carry out data protection impact assessments in certain
circumstances; establishing limitations on the collection and retention of personal data through ‘data minimization’ and
‘storage limitation’ principles; introducing obligations to honor increased rights for data subjects; formalizing a heightened
standard to obtain data subject consent; establishing obligations to implement certain technical and organizational safeguards to protect
the security and confidentiality of personal data; introducing the obligation to provide notice of certain significant personal data
breaches to the relevant supervisory authority(ies) and affected individuals; and mandating the appointment of representatives in the
UK and/or EU in certain circumstances. In particular, the Processing of “special categor[ies] [of] personal data” (such as
personal data related to health and genetic information), which could be relevant to our operations in the context of our clinical trials,
imposes heightened compliance burdens under European data protection laws and is a topic of active interest among relevant regulators.
Certain jurisdictions have
enacted data localization laws and cross-border personal data transfer laws, which could make it more difficult to transfer information
across jurisdictions (such as transferring or receiving personal data that originates in the EU or in other foreign jurisdictions). Existing
mechanisms that facilitate cross-border personal data transfers may change or be invalidated. For example, absent appropriate safeguards
or other circumstances, the EU GDPR generally restricts the transfer of personal data to countries outside of the European Economic Area,
or EEA, that the European Commission does not consider to provide an adequate level of data privacy and security, such as the United
States. The European Commission released a set of “Standard Contractual Clauses,” or SCCs, that are designed to be a valid
mechanism to facilitate personal data transfers out of the EEA to these jurisdictions. Currently, these SCCs are a valid mechanism to
transfer personal data outside of the EEA, but there exists some uncertainty regarding whether the SCCs will remain a valid mechanism.
Additionally, the SCCs impose additional compliance burdens, such as conducting transfer impact assessments to determine whether additional
security measures are necessary to protect the at-issue personal data.
In addition, Switzerland
and the UK similarly restrict personal data transfers outside of those jurisdictions to countries that they do not consider to provide
an adequate level of personal data protection, such as the United States, and certain countries outside Europe (e.g. Brazil) have also
passed or are considering laws requiring local data residency or otherwise impeding the transfer of personal data across borders, any
of which could increase the cost and complexity of doing business.
If we cannot implement a
valid compliance mechanism for cross-border data transfers, we may face increased exposure to regulatory actions, substantial fines,
and injunctions against processing or transferring personal data from Europe or other foreign jurisdictions. Inability to import personal
data to the United States may significantly and negatively impact our business operations, including by limiting our ability to conduct
clinical trial activities in Europe and elsewhere; limiting our ability to collaborate with parties subject to European and other data
protection laws or requiring us to increase our personal data processing capabilities in Europe and/or elsewhere at significant expense.
These laws exemplify the
vulnerability of our business to the evolving regulatory environment related to personal data and may require us to modify our Processing
practices at substantial costs and expenses in an effort to comply. Given the breadth and evolving nature of Data Protection Requirements,
preparing for and complying with these requirements is rigorous, time-intensive and requires significant resources and a review of our
technologies, systems and practices, as well as those of any third-party collaborators, service providers, contractors or consultants
that Process personal data on our behalf.
We may publish privacy policies
and other documentation regarding our Processing of personal data and/or other confidential, proprietary or sensitive information. Although
we endeavor to comply with our published policies and other documentation, we may at times fail to do so or may be perceived to have
failed to do so. Moreover, despite our efforts, we may not be successful in achieving compliance if our employees, third-party collaborators,
service providers, contractors or consultants fail to comply with our policies and documentation. Such failures can subject us to potential
regulatory action if they are found to be deceptive, unfair, or misrepresentative of our actual practices. Moreover, subjects about whom
we or our partners obtain information, as well as the providers who share this information with us, may contractually limit our ability
to use and disclose the information. Claims that we have violated individuals’ privacy rights or failed to comply with data protection
laws or applicable privacy notices even if we are not found liable, could be expensive and time-consuming to defend and could result
in adverse publicity that could harm our business or have other material adverse impacts.