EDGAR 10-K Filing

Company CIK: 1834645
Filing Year: 2024
Filename: 1834645_10-K_2024_0000950170-24-091127.json

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ITEM 1. BUSINESS
Item 1. Business.
SUMMARY
Peak Bio is a clinical-stage biopharmaceutical company focused on developing innovative therapeutics addressing significant unmet need in the areas of cancer, inflammatory and rare diseases. We will continue to explore and partner with researchers, clinicians, patient advocacy groups, academic institutions, governmental agencies, and our investors to continue to expand treatment options and partnerships to meet those expectations.
In the near-term, Peak Bio will focus on its proprietary “Peak Bio R&D Discovery Toxin and ADC Platform Engine”. To achieve this, we believe Peak Bio’s management team are well suited to drive this strategic initiative, having combined 50 plus years of industry experience in drug development of small molecules, antibodies, and antibody-drug-conjugates (ADCs), and having successfully led companies that created therapeutics in above categories during their tenures. During his career, Dr. Huh, our founder and chairman has founded or co-founded companies such as pH Pharma and BridgeBio (NASDAQ: BBIO) and been a partner of McKinsey & Co (Healthcare/ Technology sector). He has held various leadership positions including Chairman at companies such as Pliant Therapeutics (NASDAQ: PLRX), CytomX Therapeutics (NASDAQ: CTMX), Geron Corporation (NASDAQ: GERN), Epizyme (NASDAQ: EPZM), Chief Executive Officer of BiPar Sciences (acquired by Sanofi) and has served on the Board of Directors for Facet Biotech (acquired by Abbott) and Nektar Therapeutics (NASDAQ: NKTR).
The company has determined that our lead clinical candidate, PHP-303, will move forward with external partnering/collaboration and are focused on identifying a strategic partner for this program.
Peak Bio has leveraged two decades of industry learnings in advancing novel payloads, an important area of the ADC field allowing for highly targeted treatments in cancer. In some indications, ADCs have replaced conventional chemotherapies and targeted therapies by delivering potent antibody-directed payloads selectively to their tumors, releasing payloads in the tumor environment via improved linker technology, avoiding the potential for significant off-target toxicities observed in systemic chemotherapies. These incremental improvements in cancer treatments for patients and specifically ADCs have also led to the growing commercial success of ADCs currently on the market and likely for those currently in development. A quick scan of the deal flow associated with ADCs over the past 5 years is encouraging both from their continued clinical and commercial success. We believe Peak Bio is well-positioned to take advantage of this field with novel payload platform driven ADC-based therapeutics.
We are poised to launch off a platform of proprietary in-house technologies that differentiate our ADCs from existing on-market and in-development antibody or ADC programs.
Why do we postulate that our approach could be a very important next step in the ADC field?
•Despite the incremental gains in patient survival owing to scientific advancements in ADC technology and/ or patient adverse effect management, there continues to be a need for novel mechanism-of-action (MoA) ADCs that deliver potent, yet different, antibody-directed payloads. Efficacy in subsequent lines where patients have demonstrated resistance to microtubule and topoisomerase family toxins necessitate use of ADCs with alternate MoA payloads as opposed to ADCs bearing payloads of the same class seeking out different cancer targets.
•Secondly, we believe that adding an immunomodulatory effect to our toxin(s) that engages our immune systems to assist in the cancer killing would contribute to a long-term tumor regression.
Based on the clinical and commercial successes of checkpoint inhibitors that activate immune cell mediated killing of tumors, our programs have taken the traditional approach of an ADC and added an important immunomodulatory component. In essence, we hypothesize that our combination of Antibody + Linker + Peak Bio Toxin with Immune Modulation is potentially a better ‘Mousetrap.’
Our most advanced platform in oncology utilizes our toxin, PH-1 or Thailanstatin (a spliceosome modulator) to generate a pipeline of proprietary ADC product candidates that are differentiated from traditional ADC-based therapies so that we may address unmet need in cancer patients. Differentiation is the first, and necessary step, towards the development of therapies serving an unmet need in patients. For e.g., the tumor may already be resistant to an approved ADC with payload A but may still respond to an investigational ADC with payload B, as the MoA is different. In that regard, PH-1 is a novel ADC payload and targets the proper splicing of introns. These mis-spliced RNAs are subjected to mRNA decay depriving cancer cells of thousands of essential proteins vital to survival and proliferation. In addition, PH-1 creates mis-spliced proteins or neoepitopes which the
immune cells can target well after the initial “chemotherapy” is delivered, in essence creating a second mechanism for cancer killing.
Our first product candidate is an ADC targeting Trop2, which is an antigen broadly expressed in solid tumors of epithelial origin. Our Trop2 ADC and other undisclosed discovery-stage ADC candidates are products of our proprietary Peak Bio R&D Discovery Toxin and ADC Platform Engine, specifically the PH-1 payloads targeting RNA splicing. We will continue to identify cancer targets that are well suited to our technology. The goal over time and with the appropriate investment, Peak Bio desires to create a series of differentiated next generation cancer therapies targeting difficult to treat cancers and contribute to increased cancer survival to the benefit of patients, care givers, our potential future partners with the added benefit to our investors.
Even though Peak Bio’s PH1 platform approach has been initiated, and our first ADC targeting Trop2 has been nominated, we are still working on two additional toxins that are in early R&D to add to our armamentarium of novel payloads. We envision the Peak Bio R&D Discovery Toxin and ADC Platform Engine of the future will conceive multiple ADCs derived from different payloads with differing and complementary MoAs.
The company’s rare disease portfolio contains a small molecule inhibitor of human Neutrophil Elastase (NE) that Peak Bio is developing for the potential treatment of a genetic disorder known as alpha-1 antitrypsin (AAT) deficiency (AATD). AATD is a life-threatening condition that results in severe debilitating symptoms, including early-onset pulmonary emphysema and liver complications. Scientific data indicate that the increased risk of lung tissue injury in AATD patients may be due to inadequately controlled NE protease activity caused by the insufficient amounts of AAT, the major antiprotease that inhibits NE activity in lungs. We believe that by inhibiting NE, PHP-303 has the potential to reduce the destruction of lung tissue and stabilize clinical deterioration in AATD patients.
PHP-303 is a selective and reversible NE inhibitor (NEI) with sub-nanomolar potency against the bioactive form of NE (von Nussbaum et al., 2015, Chem Med Chem 10:1163). This 5th generation NEI asset was in-licensed from Bayer Pharmaceuticals with a demonstrated IC50 potency of 0.65 nanomolar (highly potent) for the inhibition of human NE which Bayer had tested in phase 2 as an oral once-daily regimen (low doses) to suppress NE activity in Chronic Obstructive Pulmonary Disorder (COPD) patients.
The company has evaluated PHP-303 at higher dose levels in phase 1 human clinical trials in both single ascending dose (SAD) and multiple ascending dose (MAD) formats and demonstrated dose-dependent pharmacokinetics, pharmacodynamics, and an acceptable safety profile. The drug has been tested in nearly 186 subjects including the most recent SAD and MAD studies with largely Grade 1 or 2 treatment-related adverse effects (AEs). From pharmacodynamic perspective, the NEI achieved greater than 90% inhibition at the 10 or 20 mg dose levels and achieved the recommended phase 2 dose (RP2D). However, a Maximum Tolerated Dose (MTD) for PHP-303 was not established as the highest dose was tolerated without significant AEs (See clinical characterization of PHP-303 section below; von Nussbaum & Lee, 2015, Bioorg & Med Chem Let 25: 4370-438;4381). The pharmacokinetic profile and lack of serious AEs in our phase 1 clinical studies support a phase 2 clinical evaluation of PHP-303 as an investigational therapy for the treatment of AATD in the chronic setting.
We believe that Peak Bio and the management team are well-positioned to collaborate effectively with a potential future partner by introducing them to our researchers, clinicians, patient advocacy groups, academic institutions, governmental agencies, and provide hands-on experience/ knowledge gained during the SAD and MAD clinical studies. Thus, we can continue to address significant unmet medical need for patients with AATD, and their advocacy groups with whom we have developed relationships over the years.
At this time, we believe that the company and shareholders are best served with finding external partnerships for our clinical stage asset PHP-303 while continuing to use our resources on advancing and expanding our ADC Toolkit of novel toxins, linkers, and the ADCs the company has in play and will likely nominate new candidates in the near term horizon.
Overview
Peak Bio is a clinical-stage biopharmaceutical company focused on commercializing innovative therapeutics that aim to improve and address significant unmet medical need for patients with cancer, inflammatory and/or rare diseases. We will continue to explore and partner with researchers, clinicians, patient advocacy groups, academic institutions, governmental agencies, and our investors to continue to expand treatment options and partnerships to meet those expectations. Peak Bio will continue to grow our clinical and preclinical pipeline by executing our clinical plans for our existing program, ideally add new clinical assets through acquisition and through our internal oncology platform engine.
Our clinical stage, phase 2 ready asset, PHP-303, is being investigated for the treatment of alpha-1 antitrypsin deficiency (AATD), a rare genetic disorder and exploring opportunities with PHP-303 for the treatment of acute respiratory distress
syndrome (ARDS). We believe our portfolio is well diversified because our product candidates employ different mechanisms of action and target separate indications. We intend to develop and potentially commercialize our rare disease product candidates and potentially future acquired opportunities to maximize potential future sales and marketing synergies. We will also consider potentially seeking strategic partnerships and relationships for further potential clinical development and/or commercialization of these assets.
As part of our historical strategic business plan, we sought and acquired a clinical stage asset that is a small molecule, a neutrophil elastase inhibitor. As stated above, Peak Bio has made the strategic decision to focus our limited resources on our oncology portfolio (proprietary ADC platform) while ensuring that our clinical stage asset efforts are focused on strategic partnering initiatives. In addition to the Peak Bio senior management team’s business acumen and drug development and commercialization experiences across a multitude of therapeutic areas and technologies, we have maintained long-standing relationships with senior executives of large pharmaceutical, smaller biotech companies, key academic institutions, and investment banks, which we believe enhances our ability to identify and acquire additional product candidates.
We acquired PHP-303 from Bayer through our existing executives’ professional longstanding relationships with Bayer. PHP-303 products’ data package included substantial pre-clinical, clinical, and manufacturing data sets from Bayer, a well-known, well-regarded, multinational healthcare company. We have since completed two additional clinical studies (see clinical studies a Summary of PHP-303 Clinical Development Program table below), including a single ascending dose (SAD) and a multiple ascending dose (MAD) studies, that verify tolerability, and NE inhibition by PHP-303.
Our Pipeline
The following table summarizes our pipeline. We have global commercial rights to all our product candidates.
Our portfolio consists of the following product candidates:
Antibody-drug-conjugates (ADC):
Peak Bio has leveraged two decades of industry learnings in expanding an important area of the antibody-drug-conjugate (ADC) field allowing for highly targeted treatments in cancer. Despite the continued scientific advancements in the cancer field that has led to the many incremental improvements in patient cancer survival, there continues to be a need for ADCs that not only deliver antibody-directed payloads selectively to their tumors, but to also release them via improved linker technology avoiding the potential for significant off-target toxicities. Secondly, based on the success of immune checkpoint inhibitors, we believe that adding an immunomodulatory effect to our toxin(s) that engages our immune systems to assist in the cancer killing would contribute to increased tumor regression.
These incremental improvements in cancer treatments for patients and specifically ADCs have also led to the growing commercial success of ADCs currently on the market and likely for those currently in development. A quick scan of the deal flow associated with ADCs over the past 5 years is encouraging both from their continued clinical and commercial success. We believe Peak Bio is well-positioned to take advantage of this field with our proprietary ADC based therapeutics. We are poised to launch our platform of proprietary in-house technologies that enable us to design ADCs that we believe potentially offers improved ADC characteristics such as a dual mechanism of action (MoA), immune stimulation, and being refractory to multi-drug resistance (MDR)- related forms of resistance.
Antibody drug conjugates are an established therapeutic approach in oncology where an antibody is used to selectively deliver a potent toxin directly to tumor cells. The goal is to focus and maximize the ADC’s activity at the tumor site, sparing normal tissues and organs, resulting in a wide therapeutic index. There are four important aspects of an ADC approach/ program- 1) an antigen, a carbohydrate or protein moiety that is expressed preferentially on tumor cells, or cells in the tumor microenvironment contributing to its survival, 2) an antibody, a protein from the immunoglobulin family that is highly selective for seeking out the tumor antigen wherever tumor cells reside, 3) a toxin that is often a small molecule or a protein (also called
payload or warhead) that is 10-10,000 times more potent than conventional chemotherapy, or sometimes a chemotherapy itself and 4) a linker that serves to attach the small molecule to the antibody.
Cell-surface receptor internalization and recycling is a process that is physiological to normal and cancer cells and most ADCs that complex with target antigen receptors are internalized within the cancer cells, delivering, and releasing the payload, triggering cell death. Additionally, some ADCs also may have a feature engineered into their linkers that allow the payload to be released in the tumor environment by exploiting some feature specific to a tumor, for e.g., low pH conditions, or high tumor expression of certain enzymes such as beta-glucuronidase.
ADCs have demonstrated therapeutic efficacy in clinical trials and an increasing number of ADCs are standards of care in various hematologic and solid cancers (see below). Most ADC research has primarily focused on antigen and target discovery as opposed to payload discovery where Peak Bio is making progress.
FDA-approved ADCs through 2023
ADC
Trade
name
Target
Company
Indication
Approval
Year
Microtubule inhibitor payload class
Brentuximab vedotin
Adcetris
CD30
Seattle Genetics,
Millennium/
Takeda
relapsed HL and relapsed sALCL
Trastuzumab emtansine
Kadcyla
HER2
Genentech,
Roche
HER2-positive metastatic breast cancer (mBC) following treatment with trastuzumab and a Maytansinoid
Polatuzumab vedotin-piiq
Polivy
CD79
Genentech,
Roche
relapsed or refractory (R/R) diffuse large B-cell lymphoma (DLBCL)
Previously untreated DLBCL not otherwise specified or high-grade B cell lymphoma International Prognostic Index 2 or greater
Enfortumab vedotin
Padcev
Nectin-4
Astellas/ Seattle
Genetics
adult patients with locally advanced or metastatic urothelial cancer who have received a PD-1 or PD-L1 inhibitor, and a Pt-containing therapy
EV+ pembrolizumab in locally advanced or metastatic urothelial cancer in 1st line for Pts ineligible for Pt-containing therapy
Belantamab mafodotin-blmf
Blenrep
BCMA
GlaxoSmithKline
(GSK)
adult patients with relapsed or refractory multiple myeloma
(Withdrawn)
Tisotumab vedotin-tftv
Tivdak
Tissue factor
Seagen Inc, Pfizer
Recurrent or metastatic cervical cancer
Recurrent or metastatic cervical cancer progressed on chemotherapy
Disitamab vedotin
Aidixi
Her2
Remegen
Biosciences/
Seagen Inc
HER2 expressing urothelial cancer
Mirvetuximab soravtansine
Elahere
FR alpha
Immunogen, Abbvie
Platinum-resistant ovarian cancer
Folate receptor-alpha (FRα)-positive, platinum-resistant epithelial ovarian, fallopian tube, or primary peritoneal cancer, who have received one to three prior systemic treatment regimens
DNA-acting payload class
Gemtuzumab ozogamicin
Mylotarg
CD33
Pfizer/ Wyeth
relapsed acute myelogenous leukemia (AML)
Inotuzumab ozogamicin
Besponsa
CD22
Pfizer/ Wyeth
relapsed or refractory CD22-positive B-cell precursor acute lymphoblastic leukemia
Pediatric acute lymphoblastic leukemia
Loncastuximab tesirine-lpyl
Zynlonta
CD19
ADC
Therapeutics
Large B-cell lymphoma
Topoisomerase I inhibitor payload class
Trastuzumab deruxtecan
Enhertu
HER2
AstraZeneca/
Daiichi Sankyo
adult patients with unresectable or metastatic HER2-positive breast cancer who have received two or more prior anti-HER2 based regimens. unresectable or metastatic breast cancer patients with HER2-low lesions and NSCLC patients with HER2-mutations
Her2+ solid tumors
Sacituzumab govitecan
Trodelvy
Trop-2
Immunomedics, Gilead
adult patients with metastatic triple-negative breast cancer (mTNBC) who have received at least two prior therapies for patients with relapsed or refractory metastatic disease.
Locally advanced or metastatic urothelial cancer
patients with HR+ Her2- Breast cancer who have received endocrine-based therapy and at least 2 systemic therapies in metastatic setting
Peptide toxin class
Moxetumomab pasudotox
Lumoxiti
CD22
AstraZeneca
adults with relapsed or refractory hairy cell leukemia (HCL)
(Withdrawn)
Peak Bio antibody catalog:
We leverage our team’s deep experience and proficiency in oncology research for selecting our target antigens. If there is scientific validation from academia or industry in peer-reviewed journals or clinical validation by any form of oncology therapeutic, then these targets are given weighted preference. Here the primary focus is directed towards engineering in desired features in combination with our novel payload(s). Also, we utilize our expertise in data mining of publicly available clinical data sets to seek out under-represented targets that may be relevant to hematologic and solid cancers.
Once short-listed, we perform literature searches for published monoclonal antibodies that have been described to target those candidates. Using such information, we generate a catalog of proof-of-concept (POC) antibodies to be used in combination with our proprietary toxins to create differentiated ADCs. Where needed, we may also generate our own monoclonal antibodies in normal or humanized mice. To date, we have generated over twenty POC antibodies and expressed them in monomeric IgG format in Chinese hamster ovary cells for exploratory evaluation at laboratory scale. Using processes described above and platforms such as Oncomine and Megasampler, we have identified over 50 cancer-associated targets that we intend to evaluate with antibody-based therapeutics.
Need for new ADC Toxin strategies:
The ADC field started with the most potent toxins- for e.g., calicheamicin (Wyeth/ Pfizer). After observing the pre-clinical and clinical toxicities of these toxin warheads, the field moved down the potency scale towards the maytansines and the auristatins- monomethyl auristatin E/ F abbreviated MMAE/ MMAF (Seattle Genetics/ SeaGen), Auristatin Au101 (Pfizer)- and towards the camptothecins (Immunogen). This is where the moderate potency payload containing ADCs achieved clinical successes with multiple different targets. Those ADC programs working with the more potent toxin warheads focused on linker stability and identifying targets with low to normal tissue expression to achieve acceptable therapeutic indices.
Of the 14 ADCs that have been approved by the FDA (including accelerated approvals), eight feature microtubule inhibitors- vedotin/ MMAE (5), mafodotin/ MMAF (1), soravtansine/ DM4 (1) and emtansine/ DM1 (1); two feature topoisomerase inhibitors- govitecan (1) and deruxtecan/ DXd (1); three feature DNA-acting payloads- ozogamicin/ calicheamicin (2) and tesirine (1); and lastly, one featuring a peptide toxin from the bacterium Pseudomonas aeruginosa- pasudotox (1).
Based on published results, even after opting for lower potency, these payloads have been linked to the following toxicities in multiple approved ADCs- MMAE (neutropenia, peripheral neuropathy and gastrointestinal), MMAF (thrombocytopenia and ocular), DM1 (thrombocytopenia, neutropenia and gastrointestinal), calicheamicin (thrombocytopenia, gastrointestinal and hepatic veno-occlusive disease) and DXd (stomatitis and interstitial lung disease).
Research and investment into novel payloads are also necessary from the viewpoint of durable efficacy and reducing the potential for resistance. Like several chemotherapies, ADC payloads such as MMAE are substrates of MDR pumps (also called ABC transporters or P-glycoprotein) and MDR-mediated resistance to ADC therapy are being highlighted in scientific publications. Finally, topoisomerase I mutations associated with resistance to camptothecin/ irinotecan family of payloads have also been identified.
The above factors limit the ability of current ADC payloads to maintain durable tumor regression and reemphasize the need for new ADC payloads in drug development. We, therefore, focused on payload research, to provide optionality for our patients.
Our strategy was to select for a payload with nanomolar potency with sufficient cytotoxic ability and select for MoA that would include a second complementary punch to provide additional potency.
Given the clinical success of various checkpoint inhibitors, it was reasonable to hypothesize that the modulation of the innate or adaptive immune system by an ADC payload could perform this complementary, yet orthogonal function. Immune cells are nature’s defense against foreign invaders- bacteria and viruses- but fail to identify and destroy cancer cells as a) the latter are derived from self, and b) immune cells are prone to active suppression by the tumor. We leveraged our understanding of oncology, immunology, and immuno-oncology to prioritize biologies that would have this dual activity. It is this concept that we believe allows for a potentially more robust cancer therapeutic approach.
In theory, these dual acting payloads would have:
1.A mechanism for inducing cell death that would be distinct from that of approved clinical ADC payloads. This could potentially give rise to ADCs with different AEs and risk profiles.
2.A mechanism for modulating the immune system as a) the latter’s entire function is to seek and destroy cells with a target antigen, b) these cells have the inherent VDJ recombination diversity to match the evolving landscape of tumor mutations and escape, c) can affect long term durable regressions due to immune activation and memory cells that may be activated during recurrence, d) can expand the scope of therapy beyond the ADC’s target antigen by recognizing other antigens (termed epitope spreading) on the cancer cell surface, and e) potentially reduce the payload dose by not being reliant on the cytotoxic mechanism alone. As it takes at least 2 weeks to obtain an adaptive immune response, this second mechanism would follow the initial payload-induced cytotoxicity in time and kill the tumor cells that were not killed by or escaped the ADC treatment.
PH-1 family of payloads targeting splicing:
a) Biology of splicing:
In higher organisms, eukaryotes, coding regions of the genome called exons are interrupted by noncoding sequences known as introns or “junk DNA”. Genes are expressed by a two-step process. The first step called transcription that expresses deoxyribonucleic acid (DNA) as an intermediate called ribonucleic acid (RNA). It is at this intermediate step that introns are removed to generate a mature and functional mRNA molecule. The splicing machinery, known as spliceosomes, comprises five small nuclear ribonucleoprotein particles (snRNPs) that interact with more than 200 different auxiliary and regulatory factors that work in concert to precisely remove introns and connect the coding exons end-to-end and generate the final “mature” RNA. The removal of introns from mRNA is referred to as alternative splicing (AS) or simply splicing. In step two, the mature RNA is translated into various functional proteins.
Over the past 15 years, the role of alternative splicing in human disease has become apparent. When the human genome project was completed, in silico analysis predicted that at least 75% of human genes underwent splicing and that 15-50% of
genetic diseases were related to aberrant splicing events. With growing knowledge in the areas of algorithms that accurately predict splicing, and advances in areas of high-throughput validation of spliced protein isoforms (proteomics and immunopeptidomics), we now know that this percentage is even higher.
We now know splicing has been implicated in malignant progression of hematologic and solid tumors, enhancing development of features such as increased cell proliferation, invasion, and recruitment of tumor blood vessels. This happens in different ways:
1.The molecular hallmark of the above features is that alternative splicing switches (AS switches) out protein variants or isoforms that function much like oncogenes in stimulating the same molecular signaling pathways as oncogenic driver mutations do. Alternatively, mutations in spliceosome component genes such as SF3B1, PH5A, and U2AF1, and genes affecting their regulation, may also drive AS switches as was detected in multiple studies across 33 different cancer types. These “hotspot” mutations in spliceosome proteins affect AS on a global scale and affect multiple signaling pathways contributing to malignant transformation. Conversely, cancers with splicing hotspot mutations also had reduced T-cell infiltration as determined by gene signatures suggesting that cancers with defective splicing may respond to immune stimulation.
2.During oncogenic transformation of hematopoietic cancers such as acute myeloid leukemia (AML) and myelodysplastic syndrome (MDS), AS maintained the “stem-cell” state of healthy stem cell progenitors and changed during the malignant transition.
3.In addition to the altered RNA processing role of splicing in cancer, other studies implicated AS and splice variants in development of drug resistance due to emergence of new variants that were not susceptible to current standards of care. Alternatively, higher intron retention was observed in chronic myelogenous leukemia (CML) patients undergoing remission as opposed to healthy donors. The latter observation suggests that CML remission may be linked to a form of correction or reversal associated with splicing.
4.Finally, mutations in SF3B1 and SRFSF1 spliceosome genes have been associated with synthetic lethality during malignant hematopoiesis. Where function of one normal copy of the gene is lost during the malignant transformation process of MDS, AML, and chronic lymphocytic leukemia (CLL) cancers, if the remaining functional copy is targeted by genetic deletion or its function by inhibitors, it results in defective hematopoiesis of leukemia cells.
Therefore, we hypothesized that ADC payloads targeting splicing may have the following effects:
1.Global effects on splicing of thousands of genes vital to the cancer cell survival and proliferation, even AS switches functioning as oncogenic drivers. Assuming fail-safe mechanisms called nonsense-mediated decay (NMD) functioned normally, identified, and prevented the mis-spliced RNAs from being translated into protein, this would result in global depletion of genes vital to the cancer cell and result in cell death.
2.Depending on potency, accumulation of thousands of aberrant mis-spliced, and potentially mis-folded unnatural proteins within the cell may cause death by endoplasmic reticulum (ER) stress and unfolded protein response.
3.Induce synthetic lethality in cancers containing one functional copy of spliceosome genes.
4.Reduction in some aspect or feature of malignancy.
5.Increased sensitivity to some standards of care and/ or targeted therapies.
6.Finally, if a significant fraction of mis-spliced RNAs overcame NMD, the resultant proteins containing unnatural or neopeptides (also known as neoepitopes) could aid in immune recognition of cancer cells as foreign and result in their eradication.
Thus, having identified a biology for ADC payload that may simultaneously a) induce cytotoxicity by a mechanism different from conventional ADCs, and b) stimulate and activate immune cells, we turned our focus towards spliceosome modulators.
b) Thailanstatin payloads:
In nature, bacteria and fungi are the source of many toxins.
One such bacterium Pseudomonas sp. 2663 produced a small molecule toxin termed FR901464 or Spliceostatin A. FR901464 biosynthesis by Pseudomonas sp. 2663 was performed by a cluster of genes called fr9. Screening of fr9-like gene clusters in other bacteria identified a bacterium by the name of Burkholderia thailandensis MSMB43, that produced the toxin
Thailanstatin. Research groups then proceeded to purify Thailanstatins A, B and C from fermentation broth and demonstrated its cytotoxic effect on cell lines and confirmed its anti-splicing MoA.
We focused on Thailanstatin as an ideal ADC payload with the potential to induce cytotoxicity and immune activation creating two distinct ways to enhance the killing of targeted cancer cells.
Over time, we generated and evaluated a series of 13 non-natural Thailanstatin (Th) analogs through structure activity relationship (SAR) studies and optimized for potency and metabolic stability. These naked analogs were evaluated for potency and permeability against a panel of a dozen cell lines. Those analogs that were amenable to linker addition and suited for ADC development were given preference. Test conjugations of Th linker-toxin analogs were performed with clinical-grade Trastuzumab, purified to remove free toxin, and laboratory-grade ADC preparations were evaluated against a panel of Her2-high, Her2-low, and Her2-negative cell lines to determine baseline levels of ADC potency and specificity. Using this approach, we made SAR-based changes in three generations, making modifications, and optimizing for potency, stability, specificity, and conjugation ability as we went along. The first Generation yielded analog 3 (ThA3), second Generation yielded analog 9 (ThA9), and the third Generation gave us analog 13 (ThA13). Based on our results, a derivative of ThA13 was selected as our final analog.
Unlike conventional ADC toxins where linkers and toxins are separate and modular, and one linker is applied to multiple toxins for e.g., alanine-alanine, valine-valine, valine-alanine, or valine-citrulline formats; Th-compatible linkers had to be designed and then built into the synthesis route of the toxin analog. Subsequently, the synthetic route for each toxin analog and its derivative linker toxin was determined, then optimized for better yield at each step. Unlike other ADCs, where the linker and the toxin are coupled in the last steps, Th-linker toxins were assembled during the chemosynthetic process. Furthermore, where possible, we made both non-cleavable and cleavable versions of linkers (L) for conjugation to either lysine or cysteine amino acids.
The Thailanstatin ThA13 suite comprising the PH-1 family of validated linker-toxins (L-Ts) comes with a set of seven related molecules with distinct ADC features that have been extensively characterized in vitro and in vivo as Her2 ADCs:
1)Lysine non-cleavable L-Ts ThA13L2 and ThA13L22
2)Lysine cleavable L-Ts ThA13L91, ThA13L92 and ThA13L94
3)Cysteine non-cleavable L-T ThA13L18
4)Cysteine cleavable L-T ThA13L11
All above ThA13 L-Ts and ADCs derived from them are collectively referred to as the PH-1 ADC platform. Stability and performance of these L-Ts has been characterized on at least two different antibodies targeting different antigens, Her2 and Trop2, yielding similar results. After proving selectivity on target-positive (vs target-negative cells), a measure of off-target activity, we tested their ability to shrink pre-implanted target-positive 200 mm3 sized-tumors in therapeutic mode. Of these, the lead L-T that yielded the maximum anti-tumor growth inhibition (TGI) in in vivo xenograft studies as a Her2 or Trop2 ADC conjugate was the non-cleavable L-T ThA13L22, later renamed PH1.
After reviewing the adverse effects associated with various non-cleavable vs cleavable ADCs for e.g., T-DM1 vs T-DXd, we concluded that PH1 ADCs in non-cleavable format are likely to be associated with fewer serious toxicities due reduced systemic exposure of the free payload. To corroborate this viewpoint, we refer to the meta-analysis performed by Wynn et al (DOI: 10.1200/JCO.2022.40.16_suppl.3032 Journal of Clinical Oncology 40, no. 16_suppl (June 01, 2022) 3032-3032) of commercially available ADCs that showed that ADCs with non-cleavable linkers were associated with significantly less toxicity than those with cleavable linkers. ADCs with cleavable linkers tended to have greater instances of >Grade 3 adverse events (AEs). 47% of patients (total 1082) treated with 7 cleavable L-Ts developed AEs > grade 3 compared to 34% of patients (total 1335) treated with 2 non-cleavable L-Ts. This was significantly different (weighted risk difference -12.9%; 95% Confidence Interval ranging from -17.1% to -8.8%). There was also a significant difference favoring non-cleavable ADCs for > grade 3 neutropenia (-9.1%; 95% CI -12% to -6.2%) and > grade 3 anemia.
We therefore decided to proceed with the non-cleavable L-T PH1 as a) our non-cleavable format was associated with better TGI conjugated to Her2 and Trop2 antibodies, b) 57% and 14% of TNBC patients treated with cleavable Trop2 ADC (Trodelvy®) presented with >Grade 3 hematologic and gastrointestinal AEs, respectively (Bardia et al 2019)., and c) non-cleavable ADCs were likely to be associated with less systemic exposure and toxicity.
Microtubule inhibitor payloads are known to induce immunogenic cell death and/ or induce anti-tumor immunity in combination with checkpoint inhibitors for e.g., MMAE in Adcetris® and Tivdak®, and DM1 in Kadcyla®. Therefore, we compared PH1 with DM1 in their abilities to induce immunogenicity over and above that of vehicle control treatment.
We performed an unbiased comparison of PH1-, DM1- and DMSO- treated human gastric cancer cells by RNA sequencing of all genes and looked for sequences that would give rise to aberrant proteins (neoepitopes). After identifying the normal and novel RNA species, we highlighted the neoepitope-containing species that increased in response to DM1 vs DMSO and PH1 vs DMSO treatments (red dots in figure below). As expected, DM1-treated cells contained 89 more neoepitope-containing RNA species than control, proving that microtubule inhibitor payloads are indeed immunogenic. However, PH1-treated cells contained 765 neoepitope-containing species, suggesting that PH1 payload may be highly proficient at recruiting immune cells to the tumor and impacting immune-cell mediated cancer cell death. We believe that this ability to recruit immune cells may evolve into an important future differentiator for our PH1 program and current and ensuing ADC constructs.
When we looked for genes that were negatively impacted and reduced in quantity (blue dots in figure above), we found 660 different RNA species were depleted in PH1-treated cells. Likely due to the combined effects of our payload targeting splicing with NMD-mediated degradation, these RNAs encompassed genes fueling proliferation, growth, and malignancy, and therefore, vital to the survival of the cancer cell. This was due to PH1’s global impact on splicing and largely reflected this payload’s MoA as opposed to DM1, where the payload functions by targeting microtubules.
We then evaluated PH1’s performance vs auristatins such as MMAE that are substrates of multi-drug transporter (MDR) pumps. MMAE is actively pumped out of the cancer cells, giving rise to ADC resistance. Even within the normal course of ADC administration there are concerns about increased resistance to these payloads over time and why potentially this attribute could serve as an important market differentiator.
We evaluated PH1 and MMAE’s ability to kill MES cells with normal vs high levels of MDR. We found that MMAE, not PH1, was recognized by these pumps, and the presence of high levels of these pumps reduced the in vitro cytotoxicity (IC50) of MMAE 198-fold. The presence of high levels of these pumps had no significant effect on the cytotoxic potency of PH1, as the latter were not substrates and therefore not recognized by MDRs nor pumped out of the cell. The MDR-specific inhibitor Elacridar prevented MDR pumps in MDR-high MES cells from pumping MMAE payload out of the cell, allowing its accumulation, and returning MMAE’s cell killing potency back to baseline. This finding confirmed that the loss of MMAE’s potency was specific to increase in the elevated number of MDR pumps and did not occur even in the presence of increased
numbers, when we blocked MDR’s ability to pump out the payload using Elacridar. This is important because MDR transporters are known to be implicated in the emergence of resistance against many chemotherapies, including some ADC payloads. Furthermore, if MDRs recognized PH1, it would have reduced its potency, and restricted its cytotoxicity to only targets that were highly expressed in cancer cells.
c) Properties of PH1 ADCs:
We used the Her2-targeted antibody Trastuzumab to tease out the differentiating properties of PH1 ADCs. As trastuzumab is an FDA-approved therapeutic, both as a naked antibody and as an ADC (trastuzumab emtansine, also known as T-DM1, or Kadcyla®), with well-published pre-clinical TGI and toxicology profiles in animal models, we decided to use clinical grade Trastuzumab for conjugation with PH1. The resulting ADC, Tras PH1, was benchmarked against Kadcyla® to determine how our payload would fare relative to microtubule targeting payload DM1 on the same antibody backbone.
When conjugated at drug-to-antibody ratio (DAR) of 3.3, Tras PH1 ADC demonstrated cytotoxic potency in the sub-nanomolar range. The ADCs were then evaluated against pre-established Her2-high expressing tumors in athymic mice; mice that lack an intact immune system to prevent rejection of human tumors. We then paid attention to the ADC dose that a) showed
statistically significant TGI and b) shrank established 200 mm3 tumors, and we evaluated both the short- (30-day) and the long-term or durable (5 months or more) responses of the two ADCs.
The short-term TGI of both ADCs was indistinguishable in doses ranging from 1- 15 mg/kg. Both ADCs showed statistically significant tumor growth inhibition at 1 mg/kg and both ADCs shrank established 200 mm3 tumors equally at 3 mg/kg or higher doses. The results suggested that a DAR-matched ADC containing PH1 was at least as effective as DM1 in vitro and in vivo.
When we followed the mice for extended observations, we noted that in the high-dose 15 mg/kg- treated animals, Kadcyla®-treated tumors occasionally rebounded within 3-months and Tras PH1-treated tumors rebounded in around 5 months. Tras PH1 ADC showed dose-dependent pharmacokinetics and the linker was stable in mouse circulation.
Previously, we showed that PH1 had an increased propensity to stimulate neoepitopes due to its anti-splicing MoA. To evaluate the immunogenic potential of our payload, we evaluated tumor growth inhibition in syngeneic mice with an intact immune system. We used murine MC38 colorectal cancer cells that were genetically engineered to swap out the mouse Her2 gene with its human counterpart, so that our ADCs targeting human Her2 could be evaluated in this tumor model.
•3% Colon/colorectal cancer is Her2+
•15% of Colon/ colorectal cancers have high microsatellite instability or are mismatch repair deficient, and are eligible for immunotherapy
•Tras PH1 ADC completely regresses 74% of Her2+ colon tumors when combined with checkpoint inhibitor therapy
•Checkpoint inhibitor alone regresses 33%
•Kadcyla single agent and combination completely regress 0% and 42%, respectively
Arms
Median Survival
Fraction surviving
(D149)
Vehicle
33 days
0.0%
I/O drug
96 days
41.7%
Tras PH1
65 days
11.8%
Tras PH1 + I/O drug
Not reached
73.7%
Kadcyla
58 days
0.0%
Kadcyla + I/O drug
149 days
42.1%
Also, 15% of colorectal cancer patients are eligible to receive checkpoint inhibitor therapy and we selected this particular murine cell line as it is responsive to different immuno-oncology (I/O) therapies.
We then evaluated a DAR-matched Tras PH1 ADC with Kadcyla®, separately and in combination with checkpoint inhibitor therapy (termed I/O drug) and compared short- and long-term responses. TGI of Tras PH1 and Kadcyla® were largely similar, except for a small proportion of complete regressions observed only in Tras PH1-treated mice. As anticipated, the tumor model responded to standard-of-care I/O drug administered as a single agent.
When administered as a combination with checkpoint inhibitor therapy, the Tras PH1 ADC induced complete regressions (CRs) in 14 mice whereas 5 tumors rebounded after initial shrinkage (n=19 mice per arm). As a result, 73% of Tras PH1 + I/O treated mice showed complete regressions and were still on study at 5 months and the median survival was not reached. In Kadcyla® combination arm, there were 8 CRs, and 11 tumor rebounds, and 42% of Kadcyla® + I /O treated mice were tumor-free at 5 months. The median survival of Kadcyla® combination was 149 days.
The above results support our theory that immunostimulatory ADC payloads will induce longer and deeper responses due to greater immune cell engagement with tumor cells. In checkpoint blocked tumor cells, this deep response may require checkpoint alleviation. Also, the Tras PH1 combo-treated CR mice rejected a rechallenge with a fresh round of tumor cells, suggesting the presence of anti-tumor immunity. This immunity rejected MC38 cells with or without human Her2, suggesting that the immune response had spread beyond the original protein that the Her2 ADC targeted. This phenomenon of epitope spreading is characteristic of immune B and T cells that surveil many surrounding epitopes of the cancer cell and are not restricted to the target protein.
This is an advantage of immunostimulatory payloads such as PH1 that attract immune cells to the tumor. As payload delivery, and therefore cytotoxicity is directly proportional to the amount of target antigen receptors, target heterogeneity (for e.g., high-Her2 and low-Her2 expressing cells) within the same tumor is often a problem. It is likely that ADCs may not be able to deliver sufficient cytotoxic payload to kill the tumor cells with lower expression.
To solve this problem, different ADC programs have taken various approaches:
1.Increase potency of the payload.
2.Engineer unstable linkers that release the toxin in the tumor environment, killing both high- and low-expression cells.
3.Engineer or identify toxins with chemical bystander activity that can kill the targeted cell, and upon release by the dead cell, kill the neighboring cells that may/ may not express the target.
All above approaches have consequences relating to off-target cell killing.
We have focused our efforts and prefer that our payloads have inherent immunostimulatory properties that attract immune cells. Having derived from self, immune T and B cells do not have the toxicity concerns of a payload gaining access to the systemic circulation.
Our DAR-matched Trastuzumab ADC was then evaluated in non-human primates (NHP) to assess the toxicology and toxicokinetic (TK) properties of Tras PH1 ADC.
The Maximally Tolerated single IV Dose (MTD) of Tras PH1 ADC was 20 mg/kg. Below 15 mg/kg dose, there were no Tras PH1 ADC-related clinical signs, changes in body weight, food consumption, or clinical pathology parameters (hematology, serum chemistry). Below 15 mg/kg dose, there were no test article-related organ weight changes, nor macroscopic or microscopic histology findings. At MTD, moderate elevations in liver enzymes and moderate decreases in platelets were noted; and yet both changes were completely reversed to baseline after 10 days. These changes were also noted and published for Kadcyla® at the highest non-severe toxic dose (HNSTD) by Poon, et al.
Remarkably at MTD with Tras PH1 ADC, histology of bone marrow smears was within normal limits and there was no evidence of neutropenia by hematology. Also, no gross lesions were observed in eyes and optic nerves (ocular toxicity) and sciatic nerves (peripheral neuropathy) of animals treated at MTD with Tras PH1 ADC.
The toxicology data suggested PH1 ADCs would also be differentiated from conventional payload ADCs by toxicology parameters, in addition to pharmacology (TGI).
These findings support differentiated features, creating a pipeline of PH1 ADCs against multiple targets using our catalog of POC antibodies.
PH5 payloads targeting DNA mismatch repair (MMR) and/ or DNA damage response (DDR):
Biology of MMR:
Cancer cells are associated with uncontrolled cell division. Before cells divide, they replicate their DNA to forward one chromosome copy to each daughter cell. Largely, DNA replication is a robust process controlled by enzymes with precise fidelities, low error rates, and the presence of correction mechanisms termed DNA mismatch repair (MMR). Due to rapid and
frequent cell division, cancer cells tend to accumulate errors such as mutations, single-, and double-stranded DNA breaks, that are corrected in real time by MMR enzymes. Errors left uncorrected trigger a set of cellular responses collectively termed the DNA damage response (DDR). The DDR engages signaling pathways that regulate the recognition of DNA damage, the recruitment of DNA repair factors, the initiation and coordination of DNA repair pathways, and transition through the cell division cycle. If the cells are at a significant survival disadvantage, DDR processes activate apoptosis and trigger cell death.
When cancer cells are treated with DNA-damaging chemotherapeutic agents for e.g., such as the DNA alkylating agent platinum, cancer cells activate DDR and MMR processes, and when the errors are significant in terms of cellular liability and cannot be repaired, they are committed to programmed cell death.
In adult cancer patients, cancer cells are likely to be actively involved in cell division compared to normal differentiated cells. Therefore, ADC payloads that target DNA DDR and/or MMR is likely to preferentially target proliferating cancer cells. If we prevent the repair mechanisms, cancer cells are likely to be committed to cell death because of the errors they incorporate. We may even choose to accelerate the process by combining with certain chemotherapies.
Conversely, mutations in MMR and DDR genes may provide a selective advantage to the cancer cell by not correcting the mutation that would offer a significant growth or survival advantage. MMR-deficiency (dMMR) is common in many colorectal, gastrointestinal, and endometrial cancers and found in lower frequency in other solid cancers of breast, prostate, bladder, and thyroid. Here, dMMR patients can have increasing numbers of microsatellite repeats, also called high microsatellite instability (MSI-H). Both dMMR and MSI-H are considered biomarkers and predict response to checkpoint therapy and may go hand in hand with the neoepitopes that are formed when errors in DNA go uncorrected.
It is therefore likely that an ADC payload targeting MMR/ DDR biology may have a dual punch, inducing apoptosis in targeted cells on the one hand and activating the immune system by the other. This biology is compatible with Peak Bio philosophy of generating ADC payloads with multiple, orthogonal MoAs.
We are currently evaluating the first generation of PH5 linker-toxins against an undisclosed MMR/ DDR target. The toxin is bystander-enabled for killing the neighboring cell and may be adapted for low and heterogenous target expression. This is in addition to potential killing by immune activation via neoepitopes.
PH6 payloads targeting immune suppression:
Protein synthesis is integral to most biological functions. Even slow-growing, stem cell-like progenitors of tumor cells that divide less frequently synthesize proteins to support vital functions. DNA is transcribed into RNA and RNA is translated into protein. Theoretically, both inhibitors of transcription and translation may function as ADC payloads if one can partition them selectively to cancer cells using target-specific antibodies that can differentiate them from a normal cell. PH6 is an undisclosed payload that prevents protein synthesis at the stage of transcription.
Tumors containing an active population of immune cells capable of responding to immunogenic stimuli and killing cancer cells are referred to as immune “hot” tumors. Conversely, those tumors that have a low population of immune cells or have immune cells that are actively suppressed or co-opted into working for the tumor are referred to as immune “cold”. An extreme form of immune cold tumors called immune desert reflects tumors where immune cells are confined to the tumor periphery.
Immune cold tumors are hard to target and are typically unresponsive to immunotherapy. Checkpoint inhibitor therapy and immune stimulation approaches have largely been unsuccessful due the immune cells being suppressed or co-opted. These tumors have regulatory T cells (T-regs) that suppress T cell activation or express soluble factors that induce immune deserts. In this case, Peak Bio is testing payloads that a) induce cytotoxicity in tumor cells, and b) suppress immunosuppressive immune cells. This dual action protein synthesis inhibitor payload may potentially have a second function where tumor immunogenicity is increased by killing co-opted immune cells or suppressing function(s) of immunosuppressive cells.
We are currently evaluating the first generation of PH6 linker-toxins against an undisclosed target and validating its second MoA. Due to the varied effects of new protein synthesis inhibition, this toxin may also prevent the formation or recruitment of new blood vessels to the tumor.
Antibody-based Platforms:
Our objective is to use our expertise in antibodies and our novel technologies to develop our product pipeline and discover new product candidates for the treatment of cancer and related diseases. Our strategy includes initiatives to:
•Continue to identify and develop novel monoclonal antibodies (mAbs). Together with advances in Next-gen sequencing (NGS), significant technological advances in antibody generation in humanized mouse platforms and high throughput B-cell sequencing methods, thousands of potential new targets are being continuously discovered. Antibodies that bind to these targets can be generated rapidly and in a cost-effective manner. We believe that antibodies will be one of the primary areas for therapeutic development for the foreseeable future, particularly as genomic research identifies new disease targets. We have focused on the research and development of antibodies since our inception and have successfully identified novel antibodies with potential therapeutic applications. We will continue to apply our expertise in antibodies and utilize our technologies to identify novel antibodies that bind to these new targets.
•Use our technologies to enhance potency of monoclonal antibody therapies. Antibodies make excellent delivery vehicles since they bind specifically to cell surface targets. We can transform highly specific mAbs into drug candidates by improving the cancer cell killing potency of mAb-based therapeutics through our antibody-toxin conjugates (ADC), antibody-PROTAC and bispecific antibody programs. We are also actively developing additional technologies where our vision is to grow the portfolio and simultaneously de-risk current programs. We plan to file patent applications at the appropriate time to ensure the patent life encompasses a significant development span of our therapeutics. Furthermore, our technology provides us with an opportunity to develop our own product candidates, but also enables us to add significant value to mAbs and targets owned by other companies, and opens up partnership opportunities, co-development strategies, and additional sources of funding.
•Develop a broad portfolio of products. We are developing multiple products for many potential indications simultaneously, thereby increasing our opportunities to identify successful drugs. Our drug candidates utilize multiple MoAs and target a variety of different receptors expressed in several types of cancer cells.
•Acquire attractive toxins, small molecules and/ or antibodies. In addition to our own development efforts, we will continue to identify products and technologies to in-license. We believe that we are well positioned to continue to attract in-licensing and acquisition candidates because of our expertise in mAbs, toxins, and ADCs. Previously, we successfully in-licensed our lead small molecule PHP-303 from Bayer. While we expect that many new product candidates will arise from our internal research programs, we will continue to seek in-licensing opportunities to build our product candidate pipeline.
•Establish strategic collaborations. We intend to enter into corporate collaborations at various stages in the research and development process. We may seek a corporate collaborator prior to initiating phase 1 clinical trials or may choose to partner some products at a later stage to increase our potential downstream participation in product sales. We believe our collaboration strategy provides us with distinct advantages, including:
•it builds on our fundamental strength in research and discovery of innovative mAb-based products such as ADCs
•it capitalizes on our future corporate partners’ strengths in product development, manufacturing, and commercialization
•it enables us to develop a greater number of leads and programs than otherwise would be possible
•it reduces our financing requirements.
Summarized below is an average R&D workflow for a typical ADC program:
Peak Bio has additional discovery research programs directed towards identifying and developing new mAb-based products and technologies to treat cancer. Our discovery programs are currently focused on identifying and screening cancer-relevant targets, mAbs, ADCs, antibody-PROTACs and bispecific antibody therapies.
Our preclinical candidates:
Trop2 PH1 ADC is a Clinically validated target: Trophoblast antigen 2 (Trop2) or Tumor- Associated Calcium Signal Transducer 2 (TACSTD2) is a transmembrane glycoprotein that is highly expressed in many cancers over and above that of levels observed in normal healthy tissue, making this protein a prime ADC target. Trop2 levels are elevated in several solid tumor cancers (see table below). Trop2 overexpression in metastatic tissues makes it an attractive and potential therapeutic target for late-stage diseases.
Expression of Trop2 target in various cancers
Cancer
Trop2 Expression
Prognostic Significance
Anaplastic large cell lymphoma (ALCL)
No expression, implicating that its expression may not be involved in tumor growth
No
Breast
Elevated in some types; reduced in others
Yes
Cervical carcinoma
Elevated
Suggested
Colon cancer
Elevated
Yes
Colorectal carcinoma
Elevated
Yes
Endometrioid endometrial cancer (EEC)
Elevated; higher tumor grade and cervical involvement
Yes
Esophagus
Elevated
Suggested
Gastric cancer
Elevated
Yes
Glioma
Elevated
Yes
Head and neck squamous cell carcinoma
Not elevated on tumors
No
Hilar cholangiocarcinoma
Elevated
Yes
Kidney
mRNA expression is reduced
Suggested
Large intestine
mRNA expression is elevated
Suggested
Lung and non-small cell lung cancer (NSCLC)
Reduced in most lung cell lines
Yes, low Trop2 expression is significant
Chronic lymphocytic lymphoma (CLL)
Elevated
Possible
Extra nodal NK/T-cell lymphoma, nasal type (ENKTL)
Elevated
Yes
Non-Hodgkin’s lymphoma (NHL)
Elevated
Possible
Small-sized Pulmonary adenocarcinoma
Elevated
Yes
Squamous cell carcinoma of the oral cavity
Elevated
Yes
Ovarian
Elevated
Yes
Pancreatic
Elevated
Yes
Prostate
Elevated
Yes
Stomach carcinoma
Elevated
Suggested
Thyroid carcinoma
Elevated
Suggested
Urinary bladder carcinoma
Elevated
Suggested
Uterine
Elevated
Suggested
Table from Shvartsur and Bonavida (2015) doi: 10.18632/genesandcancer.40
The Trop2 ADC approach has been clinically validated and has outperformed standard-of-care in at least two cancer settings- metastatic triple negative breast cancer (TNBC) and in Her2-negative Hormone Receptor (HR)-positive breast cancer . The Trop2 ADC Trodelvy®, also known as Sacituzumab govitecan or IMMU-132, has obtained approvals in the above indications after demonstrating significant improvement in clinical efficacy. Due to the potential of targeting Trop2 in multiple cancer settings (see table above), different companies have tried to carve out their niche using the advantages/ properties of their payloads (see table below). While Datopotamab DXd and Sacituzumab Tirumotecan are currently being tested in Phase 2 clinical trial on NSCLC and Gastric cancer patients, respectively, and have proceeded to Phase 3 clinical trials, others such as BAT8003 and PF-06664178 have discontinued their Trop2 programs for different reasons. The status of the other Trop2 ADC programs is as indicated in the table below.
ADC-based Trop2 therapeutics in clinical trials
Product (alias)
Company
Description
Clinical stage
Trodelvy® (Sacituzumab govitecan/ IMMU-132)
Gilead (formerly Immunomedics)
Humanized IgG1 mAb conjugated to irinotecan metabolite (SN-38) warhead via a maleimide-PEG-acid-sensitive cleavable carbonate linker
Approved for metastatic TNBC
Accelerated approval for advanced urothelial cancer. Results in confirmatory Phase 3.
Several combination trials ongoing (Phase 2 and 3)
Datopotamab deruxtecan (DS-1062)
Daiichi Sankyo, AstraZeneca
Humanized IgG1 mAb conjugated via a thioether bond to DNA topoisomerase I inhibitor exatecan derivative (DXd) warhead using an enzymatically cleavable tetrapeptide linker
Phase 1 ongoing (TNBC)
Phase 2 ongoing (NSCLC, TNBC)
Phase 3 ongoing (EGFR mut/ Non-Squamous NSCLC) BLA under review
Sacituzumab Tirumotecan (SKB264)
Klus Pharma
Sichuan Kelun Pharmaceutical Research Institute
Merck
Humanized IgG1 mAb conjugated to topoisomerase I inhibitor belotecan via a cleavable linker
Phase 1/2 Ongoing (unresectable/ metastatic solid tumors refractory to standard treatment- TNBC, ovarian, SCLC, NSCLC, urothelial, gastric or gastroesophageal junction (GEJ) adenocarcinoma with TROP2 expression,)
Phase 2 ongoing (NSCLC, Her2- BC)
Phase 3 ongoing (EGFR mut NSCLC)
DB-1305/ BNT325
DualityBio
BioNtech
Trop2 mAb conjugated with topoisomerase inhibitor P1021
Phase 1/2 Ongoing (advanced solid tumors)
Fast track designation platinum resistant ovarian cancer
SHR-A1921
Jiangsu Hengrui Pharmaceuticals (China)
Orum Therapeutics
Atridia Pty Ltd.
Trop2 antibody conjugated with exatecan analog
Phase 1/2 Ongoing (Advanced solid tumors)
Phase 2 Ongoing (Salivary gland)
STI-3258/ ESG401
Sorrento Therapeutics, Inc. Escugen
anti-Trop2-SN38 antibody drug conjugate
Phase 1 Ongoing (solid tumors)
Phase 2 Protocol updated (R/R solid tumors)
GQ1010/ PBI-410
GeneQuantum Healthcare (China), Pyramid Biosciences
Trop2 ADC with nextgen camptothecin analog
Phase 1/2 Ongoing (Advanced solid tumors)
BL-M02D1
Sichuan Baili Pharmaceutical Co.
SystImmune Inc.
Trop2 antibody conjugated with MMAE
Phase 1/2 Ongoing (NSCLC)
Phase 1 Ongoing (Locally advanced GI tumor)
Phase 1 Ongoing (TNBC)
FZ-AD004
Shanghai Fudan-Zhangjiang (China)
Trop2 mAb conjugated with topoisomerase inhibitor BB05
Phase 1 Ongoing (Advanced solid tumors)
Shanghai Fudan-Zhangjiang (China)
Trop2 mAb conjugated to irinotecan metabolite (SN-38)
Phase 1 Ongoing (Advanced solid tumors)
BAT8003/ BAT8008
Bio-Thera Solutions (Guangzhou, China)
Humanized IgG1 mAb with afucosylated Fc conjugated to microtubule-binding maytansine derivative batansine via a non-cleavable linker
BAT8008/ Phase 1 Ongoing (Advanced solid tumors)
BAT8003/ Phase 1 Terminated
BIO-106
BioOneCure Therapeutics
mAb targeting Trop2 conjugated to unknown tubulin inhibitor payload
Phase 1/2 Ongoing (advanced cancers)
JS-108/ DAC-002
Shanghai Junshi Bioscience Co., Ltd.
DAC Biotech (Hangzhou, China)
Humanized IgG1 mAb conjugated to tubulysin B analog Tub196 warhead via a 2,3-disubstituted long side chain hydrolysis-resistant linker
Phase 1 (SCLC)
Phase 1 (solid tumors, Terminated)
LCB84
Ligachembio
(South Korea)
2G10 mAb targeting cleaved Trop2 conjugated to MMAE
Preclinical
YH012
Biocytogen Pharmaceuticals
Eucure Biopharma Co.
Bispecific ADC targeting Her2 and Trop2
Preclinical
BCG033
Biocytogen Pharmaceuticals
Bispecific ADC targeting PTK-7 and Trop2
Preclinical
PF-06664178
Pfizer
Humanized IgG1 mAb conjugated to microtubule inhibitor auristatin (Aur0101) warhead using a cleavable linker and site-specific transglutaminase
Discontinued in phase 1 for business reasons
The Trop2 ADCs under advanced development have topoisomerase I- targeting payloads such as the irinotecan active metabolite SN38 (Trodelvy®), deruxtecan (DS-1062), and belotecan (SKB264).
Members of the camptothecin family of topoisomerase inhibitors such as irinotecan/ SN38 and topotecan are substrates of the MDR family of transporters and may be pumped out of the cancer cell, giving rise to resistance. Non-transport mechanisms of resistance have also been described wherein patients under Trodelvy® therapy for 6 months had progressed due to resistance mutations in the topoisomerase I (Top1) gene. In a study performed at Massachusetts General Hospital, Top1 mutations such as E418K and -p.-122 frameshift rendered cancer cells refractory to topoisomerase inhibition, and Trop2 T256R mutations reducing cell surface translocation of Trop2, resulted in resistance to Trodelvy® therapy and metastasis to liver and peri-aortic lymph nodes. Since our payload has a different MoA, it will not be subject to these topoisomerase-specific forms of resistance.
Furthermore, the immunostimulatory properties of the PH1 payload may induce:
1.immune memory: Since the selection pressure resulting from sustained ADC regimen gives rise to resistance mutations in patients, in theory, the immune memory component of our MoA does not necessitate the sustained dosing of our ADC.
2.epitope spreading: Since the selection pressure resulting from sustained ADC regimen may give rise to Trop2 T256R mutations impacting cell-surface Trop2 giving rise to resistance, PH1-induced epitope spreading beyond Trop2 may keep the anti-tumor response evolving to other neoepitopes and cancer-related proteins.
Properties of Peak Bio Trop2 PH1 ADC:
After evaluating the Trop2 ADCs that are currently FDA-approved or heading towards approval in clinical trials, we investigated the potential of a differentiated Trop2 PH1 ADC with favorable resistance and immunogenicity characteristics from PH1 payload.
We optimized a fully- humanized antibody that was selective for the human and non-human primate versions of Trop2 but did not recognize rodent forms of Trop2. While compatible with evaluation of cytotoxic potency in vitro and evaluation of anti-xenograft tumor growth inhibition in athymic mice, this meant we had to engineer mouse cell lines with human Trop2 to test the immunostimulatory MoA in syngeneic mice models.
Since our antibody did not recognize rodent Trop2, standard evaluations of body weight loss in rodent models such as mice and rats would not provide meaningful toxicology data other than to reflect uncoupling of the payload from the ADC. The NHP model would provide the relevant toxicology data.
Trop2 PH1 Antibody Drug Conjugate Shows Nanomolar Potency in Various Indications
Cell No.
Cell lines
Absolute IC50
% Inhibition at top conc.
Trop2 PH1 (nM)
Cisplatin (µM)
Trop2 PH1 (nM)
Cisplatin (µM)
Pancreatic 1
1.21
15.35
88.52%
93.41%
Pancreatic 2
1.50
0.39
88.62%
99.98%
Pancreatic 3
7.52
0.70
82.82%
99.94%
Gastric 1
1.32
2.36
85.07%
97.52%
Gastric 2
4.03
10.03
88.93%
92.97%
Bladder 1
1.77
4.12
95.19%
99.97%
Bladder 2
1.97
1.29
93.54%
99.99%
Lung 1
1.63
3.08
90.31%
99.96%
Lung 2
1.88
9.00
74.29%
95.28%
Lung 3
3.69
4.15
63.30%
91.17%
Lung 4
4.65
2.36
81.52%
99.71%
Breast 1
7.77
7.03
83.38%
99.67%
Breast 2
12.30
1.52
77.55%
99.53%
Uterine 1
9.68
0.93
74.10%
99.96%
Even without the immunostimulatory mechanism, our investigational Trop2 PH1 ADC demonstrated nanomolar cytotoxic potency against cancer cells in vitro. In a parallel arm of the same study, cisplatin, a conventional chemotherapy exhibited micromolar cytotoxic potency. Also, these studies demonstrated that the potency of our Trop2 ADC was specific to the target and did not kill lung cancer cell lines that lacked Trop2. This is important to prevent off-target effects of our ADC against normal cells that lack Trop2.
As previously mentioned in our Thailanstatins section, PH1 belongs to the lysine non-cleavable class of payloads and was specially selected to reduce off-target effects of our Trop2 ADCs. While Trop2 is elevated significantly in solid tumors, there is small yet significant Trop2 expression in normal lung epithelium, prostate, skin, tongue, and salivary glands. This may be relevant as stomatitis (inflammation of the tongue and mouth) was observed as the dose-limiting toxicity in the TROPION PanTumor01 clinical trial for DS-1062. This meant that in addition to preventing off-target effects in our Trop2 PH1 ADCs, we may have to mitigate potential on-target effects.
In PH1, we selected a payload that potentially prevents reduced on and off-target effects by generating metabolites that are impermeable to neighboring cells. The low expression of Trop2 in normal tissue, potency range of PH1, and impermeability of generated active payload species are designed to limit the side effects of incidental Trop2 targeting with our ADC. Trodelvy® and DS-1062 are both bystander-enabled to extract maximal tumor cell killing. However, the payload’s function in Trop2 PH1 ADC is to stimulate initial tumor debulking, induce neoepitopes and stimulate the immune system whereupon the immune-mediated cell-killing MoA would kick in. In addition to opting for a non-bystander payload, we also opted for lower drug-to-antibody (DAR) ratio of 4 to reduce on-target toxicity to normal cells. By not opting for chemical bystander activity and by opting for lower DAR, we introduced control elements to differentiate our ADC program from a toxicology standpoint. Heterogenous Trop2 expression in cancer tissue would be addressed by immunostimulatory and epitope-spreading features of PH1 described previously.
Further supporting our hypothesis, not only did our cysteine and lysine cleavable Trop2 ADC versions kill cancer cell lines non-specifically i.e., they had higher baseline activity against non-target cells, but also had lower TGI in vivo in animal models. Therefore, our best strategy was to allow toxin accumulation within the target cell and have an inactive or impermeable payload species when released by lysed target cells. The active payload species of PH1 ADCs such as the Trop2 PH1 ADC would only be “cytotoxic” when internalized as an ADC by the target cancer cells, and impermeable as the active payload species to neighboring cells or other organs when in blood circulation, further reducing the potential for off-target effects. We therefore decided to
proceed with PH1 for the Trop2 ADC program and tested low DAR ADCs for TGI against human tumors in animal xenograft models.
•Graphs -
oX-axes	reflect the drug concentrations at which treated cells were killed. Units are expressed in nanomolar.
oY-axes 	reflect percentage of cells killed in vitro with the indicated drugs.
• Investigational drugs were-
oA) Trop2 PH1= Peak Bio ADC targeting Trop2, using PH1 toxin
oB) Trodelvy® = Comparator ADC targeting Trop2 	approved for TNBC and Bladder cancer
oC) Isotype PH1 = Control ADC not targeting Trop2, using PH1 toxin
•Normal or cancer cell lines were treated in vitro with above ADCs for a period of 5 days and the percentage cell death was plotted as a function of ADC concentration
• A vs C reflects target specificity + linker stability of Peak Bio ADC
To demonstrate target-specific killing of cancer cells, we compared the cytotoxic potency of our Trop2 PH1 ADC with an ADC made from an isotype control mAb (not targeting Trop2) conjugated to the same PH1 L-T at a similar DAR, against gastric, pancreatic and bladder cancer cell lines. As the isotype antibody targets viral proteins and is characteristically absent on cancer cells, the wide margin between on-target and off-target killing against all above cell lines can be attributed to the stability of our linker. In this context, if the linker fell apart on Trop2 PH1 and Isotype control ADCs, it would release the toxin and kill the cells whether Trop2 was present on the cells or not, and this would be observable as activity for the Isotype PH1 ADC.
As Trop2 expression is mainly observed in cells of epithelial origin, we evaluated the cytotoxic potency of our Trop2 PH1 vs Isotype PH1 ADC and found no significant killing against normal human fibroblasts. Some cell death was observed upon confluence in all cell lines and occurred even on untreated cells.
Trodelvy® is the first-in-class Trop2 ADC with an acid-labile carbonate linker. It was included as an experimental arm in the above cytotoxicity assays and demonstrated potent in vitro activity against gastric, pancreatic and bladder cancer cell lines. Trodelvy® showed some off-target killing against normal human fibroblast cells in this setting.
To further corroborate our in vitro observations, we evaluated Trop2 PH1 ADC and Trodelvy® against the same Trop2high gastric carcinoma cell-line derived xenograft (CDx) grown as tumors in mice. For the studies to translate to a clinical setting, Trodelvy® (DAR 7.6) was administered on Day 1 and Day 8 as 10 mg/kg doses (QWx2). Trop2 PH1 ADCs at lower DARs (2 and 4) were tested only at 3 mg/kg. This was purely to evaluate the TGI from the Trop2 PHI ADC’s cytotoxic MoA alone in the absence of PH1’s immunostimulatory MoA, in xenograft tumor-bearing athymic mice lacking an immune system. The purpose of the experiment was to evaluate whether Trop2 PH1 ADC’s first MoA alone was sufficient for TGI in Trop2high expressing tumors.
When administered in therapeutic mode, against pre-established tumors of 200 mm3 size, all three ADCs induced tumor regression between 3-6 weeks. The TGIs for 10mg/kg Trodelvy®, 3mg/kg Trop2 PH1 ADC (DAR 2) and 3mg/kg Trop2 PH1 ADC (DAR 4) were 79 + 2.1%, 80.5 + 1.8%, and 87.7 + 1.0% at 21 days and 83.3 + 2.4%, 78.5 + 3.2%, and 90.3 + 1.8% at 41 days, respectively. At these times, the TGI associated with the Trop2 PH1 ADC (DAR 4) arm was significantly different from the Trop2 PH1 ADC (DAR2) and Trodelvy® arms (p<0.05) and is indicated in the table.
At DAR4- tumor
regression in 50% of
treated mice over a
period of ~5 months
At DAR2- Stable
disease in 50% of
treated mice over a
period of ~5 months
Model: Nude mice bearing human gastric tumors
Horizontal dotted line indicates mean tumor volume
of 200 mm3 size at which treatment was initiated.
Group
TGI ± Std
Err
(Day 20)
p Value
vs Trop2
PH1
(DAR4)
(Day 20)
TGI ± Std
Err
(Day 41)
p Value
vs Trop2
PH1
(DAR4)
(Day 41)
Tumor shrinkage below this line was considered
regression
Trop2 PH1
(DAR 4 )
87.7 ± 1.0
90.3 ± 1.8
Dosing regimen: Two doses in the first week
Trop2 PH1
(DAR 2 )
80.5 ± 1.8
1.40e-04
78.5 ± 3.2
1.42e-03
TR= tumor regression
TGI= tumor growth inhibition
Trodelvy
(DAR 7.6 )
79.0 ± 2.1
2.79e-05
83.3 ± 2.4
3.54e-02
Upon extended observation, some tumors from each arm rebounded across all treatment groups, Trodelvy® and Trop2 PH1 ADCs. Around 2 months after treatment, 80% of Trodelvy®-treated tumors rebounded, until finally, only 20% of the mice showed significant tumor regression at 5+ months. 50% of Trop2 PH1 ADC (DAR4) showed tumor regression at 5+ months and 50% of Trop2 PH1 ADC (DAR2) showed stable disease in the same time frame with their tumors failing to grow past 400 mm3.
We conclude that Trop2 PH1 ADC has effective TGI at low DAR and dose even without PH1’s immunostimulatory MoA. Tumor cells that escape treatment tend to rebound. This is why we had envisioned the second immunostimulatory MoA when we conceptualized PH1.
To determine whether Trop2 PH1 ADC had retained the immunostimulatory activity characterized previously on PH1 payload alone or demonstrated by our POC Tras PH1 ADC, we evaluated the combination of the DAR4 Trop2 PH1 ADC with checkpoint inhibitor therapy against a syngeneic bladder cancer (urothelial) mouse model.
First-line checkpoint inhibitor therapy is standard-of-care (SOC) for platinum-ineligible patients that have recurrent, resistant, or metastatic urothelial cancer. Also, Trodelvy® is approved for treatment of metastatic urothelial cancers. Therefore, we used a urothelial model that was sensitive to checkpoint blockade and evaluated whether Trop2 PH1 ADC combination would result in an improvement upon SOC in this syngeneic mouse model.
In these studies, Trop2 PH1 ADC showed single agent tumor growth inhibition that was equivalent to SOC for bladder cancer. At day 14, the combination was significantly superior in terms of TGI (p=0.01) and prolonged overall survival (OS) (p=0.013). Therefore, like the POC Tras PH1 ADC, our Trop2 PH1 ADC retained the ability to combine with checkpoint inhibitors and prolong OS.
To further de-risk our program, we performed toxicology studies in non-human primate model and determined the tolerability of our Trop2 PH1 ADC in NHP. We evaluated our ADCs at DARs of 2 and 4 and performed a repeat-dose study wherein three ADC doses were intravenously administered every 3 weeks followed by a 3-week recovery period. For an idea of maximal cumulative effects, animals were evaluated 2 days after receiving all 3 doses. Reversibility was addressed in another set of animals that received all 3 doses but were allowed a 3-week recovery period. As Trop2 PH1 ADC was a likely candidate for pipeline nomination, histopathology was performed unilaterally for all tissues in both sets of animals.
3 x 6 mg/kg Q3W doses of both DAR2 and DAR4 Trop2 PH1 ADCs were well tolerated without clinical signs or body weight loss. In these treatment groups, a mild increase in liver enzymes and mild decrease in platelets were noted that reset to baseline within 7-10 days of administration of each dose. Histological evaluation of the bone marrow revealed no evidence of reduced cellularity (no bone marrow toxicity), although an altered myeloid:erythroid ratio was noted. The latter finding was probably due to the MoA of PH1 that induces an anti-tumor myeloid response. There were no other histologic findings below MTD.
At the >MTD of 18 mg/kg for Trop2 PH1 ADC, we did not observe the pathologies associated with other Trop2 ADCs in the clinic- e.g., neutropenia, gastrointestinal-, oral (stomatitis)- or lung- lesions with fibrotic or cellular infiltrates indicative of ILD were characteristically absent from our findings. Our NHP data suggests our Trop2 ADC is likely to be differentiated from a toxicology standpoint, in addition to pharmacology.
Unmet need and epidemiology
There is significant unmet need in Trop2-expressing cancers as is illustrated in the table below. Currently, the Trop2 ADC Trodelvy® has been only approved in TNBC and Her2- HR+ breast cancer and has accelerated approval in bladder cancer. Early indications in phase 2 clinical trial suggested DS-1062 improved Progression-Free Survival (PFS) in in non-squamous NSCLC patients. Similarly, phase 2 data suggest SKB264 improved PFS in the Gastric cancer setting. Restricting ourselves to current indications in which Trop2 ADCs have FDA approvals (Trodelvy®) or have advanced phase 1/2 data in (DS-1062/ SKB264), the number of annual deaths worldwide and in USA alone account for 2.28 million and 117,733 patients, respectively (assuming 15% and 60-70% of all breast cancers are TNBC or Her2- HR+, respectively, and 56% of all lung cancers are Non-squamous NSCLC in the table below). Prior to Trodelvy®’s approval in 2020, these patients did not benefit from standard-of-care in these indications. Therefore, there is significant unmet need in Trop2-expressing cancers based on these three indications alone.
Since Trop2 expression is elevated in multiple solid tumors, there is untapped clinical and market potential of expanding the scope of Trop2 ADC therapies to reach a wide number of cancer indications. We cannot predict the total number of patients current and future Trop2 ADC therapies may expand to; however, at maximum, Trop2 ADCs may have the potential to impact the lives of 13 million cancer patients annually.
New cases and deaths for Trop2-relevant cancers (worldwide and USA statistics)
Globocan Statistics for 2020 tracking 36 cancers in 185 Countries
American cancer society Statistics for 2021 (USA only)
Cancer type
New cases
New Deaths
Estimated New cases
Estimated New Deaths
Female breast
2,261,419
684,996
281,550
43,600
Lung
2,206,771
1,796,144
235,760
131,880
Prostate
1,414,259
375,304
248,530
34,130
Stomach
1,089,103
768,793
26,560
11,180
Colon
1,148,515
576,858
104,270
52,980
Rectum
732,210
339,022
45,230
*
Cervical
604,127
341,831
14,480
4,290
Esophagus
604,100
544,076
19,260
15,530
Thyroid
586,202
43,646
44,280
2,200
Bladder
573,278
212,536
83,730
17,200
Non-Hodgkin lymphoma
544,352
259,793
81,560
20,720
Pancreas
495,773
466,003
60,430
48,220
Chronic lymphocytic leukemia
**
**
21,250
4,320
Uterine
417,367
97,370
66,570
12,940
Lip, oral cavity
377,713
177,757
54,010
10,850
Ovary
313,959
207,252
21,410
13,770
Brain, nervous system***
308,102
251,329
24,530
18,600
Gallbladder
115,949
84,695
11,980
4,310
All patients across all sites
19,292,789
9,958,133
****
****
Annual patient pool that may be impacted by Trop2 therapy (maximum)
13,793,199
7,227,405
1,445,390
446,720
Globocan stats cited from Hyuna Sung et al https://doi.org/10.3322/caac.21660
Estimated new cases are based on 2003-2017 incidence data reported by the North American Association of Central Cancer Registries (NAACCR). Estimated deaths are based on 2004-2018 US mortality data, National Center for Health Statistics, Centers for Disease Control and Prevention.
*In US stats, rectal cancer deaths are not separated from colon cancer deaths
** In Globocan data, all leukemias are grouped together
*** Includes all brain cancers, not just gliomas
**** Data not provided
Our Preclinical Development Programs
We have evaluated multiple targets for our second candidate PH1 ADC. We are currently performing target validation for an ADC2 program against target M5. We may generate our own proprietary mAb against target M5 in humanized mice.
We are also in the process of evaluating the first Generation of two new research-stage toxins PH5 and PH6. These platforms may need optimization and need further structure-activity-relationship (SAR) studies requiring a second or third generation to be viable payloads for the Peak Bio pipeline.
Time and resource- permitting, we have identified additional opportunities utilizing our teams’ expertise to expand our portfolio by developing other modalities such as bispecifics and antibody-PROTACs. These are currently in early validation stages.
PHP-303: PHP-303 is a potentially novel, oral, once daily, small molecule inhibitor of Neutrophil Elastase (NE) that Peak Bio was initially investigating for two indications, AATD and ARDS. As mentioned above, Peak Bio is strategically exploring external partnerships and opportunities to further develop the PHP-303 asset. PHP-303 (or BAY-85-8501) was licensed from Bayer, who previously conducted multiple non-clinical and clinical trials summarized below. These data support a potential clinical application of PHP-303 for treatment of patients with AATD, a genetic disorder that may result in lung or liver disease, or for ARDS. In 2021, we received a non-dilutive preclinical grant from the Department of Defense to explore PHP-303 treatment for COVID-19- related ARDS to support advancing PHP-303 potentially in this second clinical indication.
AATD is a potentially life-threatening, rare, under/mis-diagnosed and under-treated, genetic condition caused by a lack of the antiprotease alpha-1 antitrypsin, a protein that protects the lungs from enzymatic degradation by endogenous proteases. The disease manifests as early-onset pulmonary emphysema, caused by irreversible destruction of lung tissue supporting normal gas exchange (https://www.lung.org/lung-health-diseases/lung-disease-lookup/alpha-1-antitrypsin-deficiency/learn-about-alpha-1-antitrypsin-defiency). There are an estimated 70,000-100,000 patients in the United States and 120,000 patients in Europe with severe AATD (https://www.rarediseaseadvisor.com/disease-info-pages/alpha-1-antitrypsin-deficiency-epidemiology-aatd; Torres-Duran et al. 2018, Orpha J of Rare Dis 13:114). PHP-303 is designed to selectively inhibit the neutrophil enzyme called Neutrophil Elastase or NE, which is the major protease protecting lung tissue from destruction.
The graphic below highlights potential disease areas for NEIs such as PHP-303. The unchecked imbalance of protease-antiprotease that occurs in many disease states is depicted, and in addition to AATD, it highlights ARDS as another potential disease indication for PHP-303. We will explore PHP-303 as an investigational therapy for ARDS pending demonstration of preclinical benefit or alleviation of ARDS-related complications in preclinical models under the purview of the DOD grant, or other sources of non-dilutive funding.
Acute Respiratory Distress Syndrome (ARDS) is a serious lung condition characterized by acute, diffuse, inflammatory lung injury resulting from a range of predisposing etiologies (https://www.uptodate.com/contents/image?imageKey=PULM%2F58759 Gonzales et al., 2015 June 4, Austin J Vasc Med 2:1). ARDs generally progresses from a stage of damage or compromise to the “gas (air)” exchange units called alveoli to a state of lung fibrosis and scarring that happens after the body’s repair and inflammatory response kicks in. Typically, ARDS impacts 64.2- 78.9 cases/100,000 people in the US with 75% of these patients presenting with moderate to severe disease resulting in an increase in morbidity, mortality and healthcare costs. (reviewed in Diamond et al., 2021, Acute Respiratory Distress Syndrome - StatPearls-NCBI). The COVID-19 pandemic had led to an increase in the incidence of ARDS in a significant number of hospitalized COVID-19 patients (Gibson et al., 2020, Med J Aust 213:54).
Neutrophils are one of the first immune cells to be recruited to a site of an infection or tissue damage (Brinkmann et al., 2004, Science 303:1532; Potey et al., 2019, J Pathol, 247: 67; Rosales, 2018 Front Physiol, 9: article 113). Neutrophils use
secreted and cell-associated proteases such as Neutrophil Elastase, NE, to help degrade connective tissue allowing neutrophils to move about freely and reach sites of infection. Neutrophils contribute to killing of pathogens by 3 mechanisms: by directly engulfing them via phagocytosis, releasing destructive proteolytic enzymes that degrade bacteria via degranulation, and by releasing Neutrophil Extracellular Traps (NETs). NETs are large webs containing cell-free DNA and proteases from dead/ dying and inflammatory cells that both form a physical barrier by localizing the spread of pathogens and destroy them through action of concentrated proteolytic enzymes. This process is termed NETosis. In heightened pro-inflammatory states, as occurs in patients with COVID-19- associated ARDS, neutrophils and NETosis become dysregulated (Janoff 1985, Am Rev Respir Dis, 132:417-433; Barnes et al., 2020; Pechous, 2017, Front in Cell and Infect Microbio|, 7: Article 16). By overwhelming the body’s endogenous antiprotease balance, NETosis results in further lung damage activating platelets, their coagulation, contributing to thrombosis or blood clotting in lungs.
We believe the inhibition of NE has the potential to protect AATD and ARDS patients from further lung damage by decreasing the impact of high NE tissue concentrations that are insufficiently opposed by endogenous antiproteases. In AATD, the body is unable to produce adequate levels of AAT for sufficient inhibition of NE. In ARDS, NE production and release overwhelms endogenous antiprotease activity leading to tissue damage. Thus, both diseases are, at least in part, due to an overabundance of NE in the lung that causes damage. It is reasonable to hypothesize that a selective NE inhibitor such as PHP-303 may inhibit this excess NE and may potentially alleviate symptoms of AATD and ARDS patients. Furthermore, since NE is required for the production of NETs, an NEI may decrease the NETosis in ARDS patients potentially alleviating lung injury and/or thrombosis.
Supporting the above rationale in AATD, a comparator’s NEI demonstrated significant reduction in biomarkers desmosine/ isodesmosine and Aa -Val360. Desmosine and isodesmosine are by-products of mature elastin breakdown, proteins that crosslink mature elastin fibers in lung connective tissue and that contribute to viscoelasticity of lungs; their elevation is linked to impaired lung function. Similarly, Aa-Val360, a product that is formed when NE acts on the blood clotting factor fibrinogen and elevated levels of Aa-Val360 is correlated with COPD and emphysema. Recently desmosine/ isodesmosine and Aa-Val360 levels were accepted as surrogate biomarkers reflecting disease severity of AATD patients in the phase 2 ASTRAEUS trial, paving the regulatory path forward for future trials for NEIs (https://www.atsjournals.org/doi/abs/10.1164/ajrccm-conference.2023.207.1_MeetingAbstracts.A2844; https://www.atsjournals.org/doi/abs/10.1164/ajrccm-conference.2024.209.1_MeetingAbstracts.A1211). Currently, Peak Bio has approved Clinical Trial Applications in the UK and Ireland with all approvals necessary and may or may not need to update these protocols in light of these new developments in US regulatory pathway. Additionally, we have a relationship with and a research agreement with the Alpha-1 Project Foundation. We believe that patient advocacy groups will assist in patient access, and unite clinicians, thought leaders and patients for our future clinical trials.
Preclinical studies characterizing PHP-303 in models of acute lung injury and COVID-19 infection were funded by the US Department of Defense (DoD). These studies will inform the role of NE and NETosis in COVID-19 and non-COVID-19 associated ARDS.
Our Strategy
Identify a strategic partner to drive the future development of PHP-303 for AATD or other potential disease areas.
•We view PHP-303 as a phase 2 ready clinical asset for evaluation in AATD. We believe a strategic partner could rapidly develop PHP-303 having obtained commercialization and patent rights for this product from Peak Bio.
Leverage our expertise in business development to expand our pipeline of product candidates.
•Our senior management team has extensive relationships with large pharmaceutical and biotechnology companies. We intend to leverage these relationships to grow our pipeline with a future focus on rare diseases by identifying, acquiring, developing, and ultimately commercializing novel product candidates that have received significant investment from large pharmaceutical companies.
•In the future, we will continue to focus in a disciplined approach on acquiring product candidates with either proof-of-concept clinical data in our target indication or with clinical data in a related disease and a strong scientific rationale that supports development in our target indication to continue to build a diverse portfolio of product candidates.
Summary of PHP-303 clinical development program
Clinical
Stage and
Test No.
(Report)
Nation
(Number of
organization)
Target
Test purpose
Number of subjects (Test group/ placebo group)
Administration and frequency
Test Design
Primary and secondary Endpoints
Whether Endpoints were met
Persons/ Entities that conducted trial
Number of subjects that experienced drug-related adverse event
Phase 1
BAY 85-8501
/14431
Germany (1)
Healthy
Volunteers
Evaluation of
safety,
tolerability,
pharmacokinetic,
pharmacodynamic
evaluation
N = 37
(27/10)
Single-dose
administration
Single-
center,
randomized,
single-
blind,
parallel-
group,
placebo-
controlled,
inter-group
comparison,
single
ascending
dose
Primary: safety
and tolerability
Secondary:
pharmacokinetics
Yes
Bayer
7/27 treated
subjects -
11 AEs;
5/10
untreated
subjects -
6 AEs
Phase 1
BAY85-8501/
Germany (1)
Healthy
Volunteers
Evaluation of
safety,
tolerability,
pharmacokinetic
properties, and
relative
bioavailability
N = 12
(12/0)
Single-dose
administration
Single-
center,
randomized,
open-label,
single-dose,
4-fold
crossover
test
Primary: safety,
tolerability, and
pharmacokinetics
No secondary
endpoints
Yes
Bayer
7/12 over 48
treatment
doses -
12 AEs
Phase 1
BAY85-8501
/16332
Germany (1)
Healthy
Volunteers
Evaluation of
safety,
tolerability, and
pharmacokinetic
properties
N = 34
(26/8)
Single
administration
at day 1. A
single dose
once a day for
13 days from
the 3rd day
Single-
center,
randomized,
single-
blind,
parallel-
group,
placebo-
controlled,
inter-group
comparison,
repeated
ascending
dose
Primary: safety,
tolerability, and
pharmacokinetics
No secondary
endpoints
Yes
Bayer
7/26 treated
subjects -
7 AEs;
3/8 placebo
subjects -
4 AEs
Phase 1
PHP-303-N101
(Sponsor: pH
Pharma)
Safety,
tolerability,
maximum
tolerated dose
(MTD),
pharmacokinetic
properties
Exploratory:
effects on
neutrophil
elastase (NE)
engagement
N = 48
(36/12)
Ascending
dose cohorts
(6 active and
2 placebos per
cohort)
conducted
sequentially
with a 2-week
interval
(before
ascending the
dose)
Single
ascending
dose
Primary: safety,
tolerability, and
maximum
tolerated dose
(MTD)
Secondary:
pharmacokinetics
Yes
pH
Pharma
10/36
treated
subjects -
8 AEs;
5/12
untreated
subjects -
12 AEs
Clinical
Stage and
Test No.
(Report)
Nation
(Number of
organization)
Target
Test purpose
Number of subjects (Test group/ placebo group)
Administration and frequency
Test Design
Primary and secondary Endpoints
Whether Endpoints were met
Persons/ Entities that conducted trial
Number of subjects that experienced drug-related adverse event
Phase 1
PHP-303-N102
(Sponsor: pH
Pharma)
Overweight
or obese but
otherwise
healthy male
and female
subjects
Safety,
tolerability, MTD,
pharmacokinetic
properties.
Exploratory:
effects on NE
engagement;
proof-of-
mechanism as an
insulin sensitizer
N = 50
(40/10)
PHP-303 Oral
IR tablets of
1, 2, 5, 10,
and 20 mg;
cohorts of 10
subjects (8
active and 2
placebo)
Phase 1,
single
center,
randomized,
double-
blind,
placebo-
controlled,
multiple
ascending-
dose
Primary: safety,
tolerability, and
maximum
tolerated dose
(MTD)
Secondary:
pharmacokinetics
Yes
pH
Pharma
14/40
treated
subjects -
32 AEs;
1/10
placebo
subjects -
1 AE
Phase 2a/
BAY85-8501/
Germany,
U.K., Italy,
Spain (28)
Non-cystic
fibrosis
bronchiectasis
patients (NCBF)
Safety, efficacy
evaluation
N=94
(47/47)
28 days
One dose per
day
Multi-
national,
multi-
center,
randomized,
double-
blind,
parallel-
group,
placebo-
controlled,
inter-group
comparison,
repeated
ascending
dose study
Primary: safety
and tolerability
Secondary:
Effect on
pulmonary
function,
inflammation,
and
pharmacokinetics
Partially,
results of
one of the
lung
function
tests met
the
expected
criteria in
the treated
subjects
compared
with the
placebo
group,
other
endpoints
did not
meet
expected
trends
(treatment
duration
insufficient
for effect
to be
observed)
Bayer
92 subjects
analyzed for
safety 11/45
treated
subjects -
14 AEs;
12/47
placebo
subjects -
7 AEs
PHP-303 has been studied in five phase 1 clinical trials in healthy subjects, exploring a range of doses and schedules and one phase 2 clinical trial in patients with non-cystic fibrosis bronchiectasis (NCFB). Please refer to the table above.
Clinical characterization of PHP-303
186 subjects have been exposed to one or more doses of PHP-303, and the data shows that PHP-303 was tolerated with no serious AEs (SAEs) reported. PHP-303 is rapidly absorbed in the fasted state, where median peak concentrations of drug were achieved in < 1 hour and half-life was in the range of 110 to 175 hours. Exposure pharmacokinetics appeared to increase proportionally with increasing dose to 40 mg. With multiple dosing, steady-state concentrations are reached by Day 21. Food delayed the rate of absorption of PHP-303 and therefore moderately decreased maximum serum concentration, but there was no effect on overall exposure to PHP-303. PHP-303 administered in an oral, daily schedule causes inhibition of NE, suggesting potential benefit in several NE and/or NET mediated diseases including AATD and ARDS.
PHP-303 tolerability and adverse effects
The phase 1 clinical studies were not designed to evaluate statistical significance on clinically approvable endpoints. The phase 2 clinical study results and analysis are described in (Watz et al., 2019, Pulm Pharmacol Ther, 56:86). Some 186 subjects have received one or more doses of PHP-303 in clinical studies conducted by Bayer and Peak Bio. These include 141 healthy volunteers and 45 subjects with Non-Cystic Fibrosis Bronchiectasis (NCFB). Doses studied range from 0.05 mg to 20 mg daily, with maximum study duration of 28 days. No SAEs have been attributed to drug administration in this program. Across all studies, 84 drug-related adverse events were reported. The most commonly reported AEs observed across clinical studies of PHP-303 include headache, nasopharyngitis, and cough. There was no apparent dose relationship to the reported adverse events and subjects who received placebo had similar frequencies and types of adverse events. Mild, sporadic, and transient elevations in liver function tests (LFTs), lipase, and CPK were uncommonly observed, but these events did not appear to be drug related.
Confirmation of NE inhibitory effect of PHP-303 in vivo
In study 16332, Bayer evaluated whole blood NE activity using an ex vivo zymosan challenge assay. Zymosan is a yeast cell wall component that activates neutrophils and release of NE. Samples were collected at baseline and several time points after dosing and induced with zymosan to determine NE levels/ activation status.
PHP-303 resulted in dose and time-dependent inhibition of human NE activity. Repeated dosing at 0.3, 0.6 and 1mg dose levels achieved and exceeded 50% NE inhibition at the lowest or trough concentration (Day 14 pre-dose) at all tested dose levels. This regimen achieved 90 to 100% maximal inhibition after the last dose at the mid and high dose levels. Importantly, daily dosing of PHP-303 at doses of 0.5 mg or 1.0 mg achieved > 24-hour(s) inhibition of NE. Similar systemic inhibitions of NE activity were also observed in Bayer Phase 2a Study 16359 in NCFB patients.
Correlation of plasma NE activity with the timing of PHP-303 dosing as studied using the ex-vivo zymosan challenge assay: Maximal inhibition range as a function of dose and time.
(IC50, IC90 values based on in vitro assay)
(Source: Clinical Trial Investigator Data Collection, PHP-303_16332 Clinical Test Results Report
Drug Concentration in Blood by Dose Levels After administration of a Single Oral Dose PHP-303 in Liquid Form (Source: PHP-303-14431 Clinical Test Result Report: PHP-303 Data Package _Page 45)
Peak Bio (pH Pharma) Conducted Phase 1 Clinical Trials with PHP-303
To better characterize and improve the chances for future clinical success, Peak Bio, (pH Pharma) tested elevated drug levels in follow-up Phase 1trials at single ascending doses (SAD) and multiple ascending doses (MAD), after acquiring the asset from Bayer. The studies reconfirmed that PHP-303 was tolerated with mainly Grade 1 AEs reported in either study. In both studies dose proportional PK exposure was observed. Dose-dependent NE inhibition was greatest in the 10 and 20 mg cohorts and steady state was achieved between 11 and 18 days in the MAD study.
P1B ASCENDING DOSE STUDY IN HEALTHY SUBJECTS
Cohorts/Doses
1, 2, 5, 10, 20, 40 mg, Placebo
Cohort Size
6 (drug) + 2 (placebo)
Dosing Duration
Single dose
Endpoints
Safety and PK
Study Period
3Q18-4Q18
•PHP-303 was tolerated; no severe AEs reported
•Dose proportional pharmacokinetic (PK) properties
•Phase 1 clinical trial results & PK profile supported a MAD study in overweight and obese healthy volunteers
Phase 1: Multiple Ascending Dose Trial in overweight Obese Subjects (MAD)
P1B MULTIPLE ASCENDING DOSE STUDY IN OVERWEIGHT/OBESE SUBJECTS
Cohorts/Doses
1, 2, 5, 10, 20 mg, Placebo
Cohort Size
8 (drug) + 2 (placebo)
Dosing Duration
28 days of dosing + 28 days of follow-up
Endpoints
Safety and PK, PD measurements
•NE Activity
•Plasma neutrophil elastase activity after zymosan challenge
Study Period
3Q18-4Q18
•PHP-303 was tolerated at doses up to 20 mg QD for 28 days in healthy overweight/obese subjects;
•Majority of AEs were mild (Grade 1); no dose limiting toxicities were observed;
•Proportional dose-dependent pharmacokinetics (PK);
•Steady state was achieved between 11 and 18 days;
•Dose-dependent inhibition of NE activity;
•Maximum inhibition was observed at doses of 10-20 mg QD;
Pharmacodynamic correlation of PHP-303- treated Healthy/ Obese patients with Inhibition of Neutrophil Elastase Activity
As expected, elevated dose levels of the NE inhibitor were correlated with lower NE Activity. Sustained, dose-dependent suppression of NE activity was observed and appeared to be more complete at doses >5mg. The 10-20 mg dose levels may be
tested in future Phase 2 trials as these MAD cohorts demonstrated greater than 90% NE inhibition over a 24-hour period. Since PHP-303 induced NE blockade was associated with rapid onset < 2-4 hours, the drug was tolerated with largely low-grade adverse events, the results suggest that PHP-303 may be suitable for long-term therapy in a chronic disease setting such as AATD.
Phase 1: Multiple Ascending Dose Trial in overweight Obese Subjects (MAD) - Neutrophil Elastase Activity
Peak Bio Clinical Trial/Program Status
While Peak Bio is currently planning on partnering this program, the company still has approved Clinical Trial Applications in both UK and Ireland for planned Phase 2 trials in AATD patients. Any future/ potential strategic partners may need to have additional conversations with above regulatory agencies in lieu of the accepted biomarkers by the US FDA. The specific gene mutation responsible for AATD disease is mainly found in individuals of Scandinavian origin, thus we were considering Western Europe and North America for commercialization. While Peak has not filed applications for clinical trials in the US or Canada, the company is maintaining an active IND with the FDA and maintaining approved CTAs in UK/ Ireland for our patients with unmet medical need and to facilitate our future partners. Given the affected population, the future clinical development and commercialization of PHP-303 is likely to be regulated by agencies such as the Medicines and Healthcare Products Regulatory Agency (MHRA) in the UK, the European Medicines Agency (EMA) for countries in the European Union/ EU, the Food and Drug Administration (FDA) in the US and/or other national authorities such as Health Canada.
In addition to being able to launch off a platform of approved CTAs and INDs, Peak Bio believes that AATD is a rare disease and may be recognized with an Orphan Drug Designation by US FDA and by the EU. If a future partner is able to obtain FDA approval, PHP-303 may be eligible for benefits of an Orphan Drug Designation that are potentially afforded to developing this program in AATD.
Ongoing healthcare legislative and regulatory reform measures may have a material adverse effect on our business by impacting our ability to partner this clinical stage asset. Changes in regulations, statutes, or the interpretation of existing regulations governing the regulatory clearance or approval, country specific healthcare cost-containment initiatives, manufacture, and marketing of regulated products, or the pricing, coverage and reimbursement, thereof could impact eventual market approvals, uptake/acceptance/sales of a given product in the future.
Manufacturers and their facilities are required to comply with extensive FDA and comparable foreign regulatory authority requirements, including ensuring that quality control and manufacturing procedures conform to cGMP regulations. Upon transfer of SOPs and CTAs to potential future partners they will be responsible for and required to maintain all aspects of regulatory compliance including but not limited to quality assurance, manufacturing, risk evaluation and mitigation strategies, submissions of safety and other post-marketing information and reports and registration. The FDA may impose consent decrees or withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. The above factors may impact Peak Bio’s revenue from any future out-licensing of PHP-303.
To balance the above risk(s), “Orphan drug” status is highly sought after as it adds a 7-10-year exclusivity period for drug sales and profitability. It does not help that an Orphan drug and rare disease populations are defined differently in different countries. Under the Orphan Drug Act of 1983, the FDA may designate a product candidate as an orphan drug if it is intended to
treat a rare disease or condition, which is generally defined as having a patient population of fewer than 200,000 individuals in the US, or a patient population greater than 200,000 in the US where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the US. To obtain orphan designation in the European Economic Area, or EEA, the product must fulfill certain challenging criteria. Under Article 3 of Regulation (EC) 141/2000, a medicinal product may be designated as an orphan medicinal product if it meets the following criteria: (1) such product is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition; (2) either the prevalence of such condition must not be more than five in 10,000 persons in the EU when the application is made, or without the benefits derived from orphan status, it must be unlikely that the marketing of the medicine would generate sufficient return in the EU to justify the investment needed for its development; and (3) there exists no satisfactory method of diagnosis, prevention or treatment of such condition authorized for marketing in the EU or if such a method exists, the product will be of significant benefit to those affected by the condition, as defined in Regulation (EC) 847/2000.
Additionally, Peak Bio’s future out-licensing revenue may also be impacted even the partner receives a US, MHRA and/or EMA orphan drug designation, we may not be able to realize the benefits of such designation, including potential marketing exclusivity of our product candidates, if approved. Regulatory agencies are in no obligation to grant orphan drug designation to our product candidates even if product candidates of other companies have been granted the same for the treatment of AATD. Generally, if a product candidate with an orphan drug designation receives the first marketing approval for the indication for which it has such designation, the product is entitled to a period of marketing exclusivity, which precludes the FDA or foreign regulatory authorities from approving another marketing application for a product that constitutes a similar medicinal product treating the same indication for that marketing exclusivity period, except in limited circumstances. The applicable period is seven years in the United States and ten years in the EEA. The ten-year period of market exclusivity in the EEA can be extended by a further two years if the product qualifies for a pediatric extension but can be reduced to a period of six years if the orphan designation criteria are no-longer met after the fifth year. Even if orphan drug exclusivity was obtained for a product candidate, that exclusivity may not effectively protect the product candidate from competition because different drugs can be approved for the same condition in the US or EEA. Even after an orphan drug is approved, the FDA or EMA may subsequently approve another drug for the same condition if the FDA or EMA, as applicable, concludes that the latter drug is not a similar medicinal product or is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care.
Accordingly, our future revenues could be harmed by a variety of factors, including: economic weakness, including inflation, or political instability in varying economies and markets; differing regulatory requirements for drug approvals in non-European Union (EU) countries; differing jurisdictions could present different issues for securing, maintaining, or obtaining freedom to operate for our intellectual property in such jurisdictions; such jurisdictions; potentially reduced protection for intellectual property rights; difficulties in compliance with non-US laws and regulations; changes in non-U.S. regulations and customs, tariffs, and trade barriers; changes in non-U.S. currency exchange rates of the USD and currency controls; changes in a specific country’s or region’s political or economic environment, trade protection measures, import or export licensing requirements or other restrictive actions by the USA or non-U.S. governments; differing reimbursement regimes and price controls in certain non-U.S. markets; negative consequences from changes in tax laws; compliance with tax, employment, immigration, and labor laws for employees living or traveling outside of the USA; business interruptions resulting from geo-political actions, including war and terrorism, health epidemics and other widespread outbreaks of contagious disease, or natural disasters, including earthquakes, typhoons, hurricanes, floods, and fires; and business interruptions resulting from the COVID-19 pandemic or any other similar pandemic.
PHP-303 for the Treatment of AATD
Overview
For reasons discussed above, we had initially focused on AATD as the therapeutic area for PHP-303. PHP-303 is a novel, selective, oral, once-daily, small molecule that is designed to inhibit the bioactive form of NE. Scientific data indicated that the increased risk of lung tissue injury in AATD patients may be due to inadequately controlled NE caused by insufficient AAT. We hypothesized that by inhibiting NE, PHP-303 may have the potential to reduce the destruction of lung tissue and stabilize clinical (lung) deterioration in AATD patients.
Background of Alpha-1-Antitrypsin Deficiency: AATD is a rare genetic disease that results in quantitative and/or qualitative defects in the AAT protein (https://www.lung.org/lung-health-diseases/lung-disease-lookup/alpha-1-antitrypsin-deficiency). Individuals can be characterized by the genotype of the SERPINA1 gene. In general, single nucleotide polymorphisms give rise to gene variants resulting in AAT proteins with single amino acid alterations. Each SERPINA1 allele from each parent contributes 50 percent to the serum AAT protein level (autosomal codominant), and therefore the presence of a normal allele alleviates or mitigates the symptoms of the mutant SERPINA1 allele (autosomal recessive). Most severely affected AATD patients include individuals where both parents contributed (homozygous for) the Z allele (PI*ZZ), the null allele, or the F (PI*FF) allele. These individuals experience emphysema at young age of onset with risk dramatically increased by exposure to
cigarette smoke or occupational exposures. Patients with PI*ZZ genotype are also at a high risk of liver cirrhosis, due to abnormal intracellular protein folding of mutant AAT resulting in damage to liver cells. The F allele results in a functionally abnormal protein without anti-protease activity, although AAT levels are normal. Non-smoker heterozygotes (PI*MZ or PI*SZ genotypes) experience a lower risk of lung disease, though risk increases in smokers.
There are estimated to be 70,000 to 100,000 individuals with AATD in the US. Worldwide, more than 3 million people are at risk of severe deficiency of AAT (https://www.rarediseaseadvisor.com/disease-info-pages/alpha-1-antitrypsin-deficiency-epidemiology-aatd). Like smoking-related COPD, AATD patients present clinically with dyspnea, cough, sputum production and wheezing. Lung function testing reveals fixed airflow obstruction and reduced diffusing capacity. Two distinct features of AATD are younger age of onset and a particular pattern of emphysema on lung imaging. The presentation of emphysema in a non-smoker or an individual with a family history of liver disease is also suggestive. Laboratory diagnosis of AATD has also advanced: current approaches favor simultaneous testing of the serum AAT level and targeted genotyping for the most common variants. Prognosis of AATD patients is variable, with liver dysfunction accounting for mortality in most patients less than 40 years old. Longitudinal studies demonstrate progressive loss of lung function in older individuals, with annual rates of FEV1 decline of 44 -110 ml/year in non-smokers and much higher rates among smokers with AATD. Mortality rates increased dramatically as FEV1 fell below 35% predicted levels.
In addition to smoking abstinence or cessation, supportive treatments for AATD include those traditionally provided for COPD care such as nutritional support, pulmonary rehabilitation, prophylactic vaccines and supplemental oxygen. Guidelines support the administration of bronchodilators and corticosteroids. Replacement therapy for AAT is used for individuals with low serum levels of AAT and airflow obstruction. Pooled human AAT is administered by weekly infusion and is associated with adverse events and vein collapse necessitating a central line with long-term weekly intravenous infusions and include such products as Prolastin, Aralast, Zemaira, Trypsone, Alfalastin, Glassia, and Respreeza. These agents have been approved in the United States and Europe based on biochemical efficacy or demonstration of increased plasma levels of AAT. The 2015 RAPID trial demonstrated that replacement therapy reduced the rate of decline of lung density assessed by High- Resolution CT imaging, suggesting likely clinical benefit. This effect was sustained for a four-year treatment period (Chapman et al., 2015, Lancet 386:360). Lung transplantation is an option for selected subjects with advanced emphysema. Experimental therapies in development for AATD include NEI, (such as PHP-303), RNA interference agents, AAT correctors and gene therapy. None of these experimental approaches has yet demonstrated compelling clinical benefit nor gained regulatory approval.
Our Approach
Our product candidate for treating AATD is PHP-303, a selective and reversible NE inhibitor (NEI) with sub-nanomolar potency against the bioactive form of NE (von Nussbaum et al., 2015, Chem Med Chem 10:1163). Like other NEI, PHP-303 has the potential to reduce the enzymatic destruction of lung tissue in these patients. pH Pharma (now Peak Bio Co., Ltd.) have a relationship with and a research agreement with the Alpha-1 Project Foundation, a for-profit organization that advocates for treatments of AATD to enhance the lives of patients with this disease. We believe that patient advocacy groups such as Alpha-1 Project will assist in patient access, and unite clinicians, thought leaders and patients for our strategic partner’s future clinical trials. The convenient once-daily, oral dosing of PHP-303 could provide a significant advantage compared to the current treatments for AATD which are surgery and/or weekly intravenous AAT augmentation therapy.
Approved Phase 2 AATD Clinical Trial Design in Ireland/UK
pH Pharma, now Peak Bio Co., Ltd., has contracted a principal investigator at the Royal College of Surgeons in Ireland and a principal investigator at the University of Birmingham to conduct the Phase 2 AATD trial in Ireland and UK, each of whom have numerous publications and experience in the area of AATD clinical trials (For e.g., European Respiratory Journal 2019 53: 1900138; DOI: 10.1183/13993003.00138-2019). Data from this trial will inform the design of a pivotal trial with registrational intent.
Clinical Trial Applications are approved for a randomized, double-blinded placebo-controlled trial with AATD patients (PHP-303-A201 protocol). Primary endpoints include evaluation of safety for two PHP-303 dose levels over a 3-month once daily oral administration period. Secondary endpoints include pharmacodynamic readouts such as inhibition of NE activity in sputum and plasma, and surrogate biomarkers or predictors of efficacy such as evaluation of lung function, frequency and degree of disease progression, COPD assessment test, and St. George’s respiratory questionnaire.
As stated previously, Peak Bio is planning on partnering this program, the company is maintaining the above approved CTAs in both UK and Ireland for planned Phase 2 trials for the benefit of AATD patients. Any future/potential strategic partners may need to have additional conversations with above regulatory agencies in lieu of the accepted biomarkers by the US FDA and use the approved CTAs/ INDs as a platform to launch a Phase 2 clinical trial.
Material Agreements
The Bayer Agreement
In March 2017, the Company entered into an Assignment, License, Development and Commercialization Agreement with Bayer (the “Bayer Agreement”) in regard to the assignment by Bayer to the Company of Bayer’s patents covering the neutrophil elastase inhibitor compound BAY-85-8501 (referred throughout as PHP-303) and a license by Bayer to the Company of Bayer’s know-how for the development, manufacture and commercialization of the compound.
Under the Bayer Acquisition Agreement, the Company is committed to pay certain development and regulatory milestones up to an aggregate amount of $23,500,000 and high single digit royalties based on the sale of products developed based on the licensed compound. Royalties will be payable on a licensed product-by-licensed product and country-by-country basis until the later of ten years after the first commercial sale of such licensed product in such country and expiration of the last patent covering such licensed product in such country that would be sufficient to prevent generic entry.
The Bayer Agreement is terminable by either party for material breach by the other party or in the event of bankruptcy or insolvency of the other party, in each case, subject to an opportunity to cure of 90 and 60 days respectively. The Bayer Agreement is also terminable by the Company at any time for convenience or in the event of Company safety concerns.
Alpha-1 Project Research Agreement
On June 28, 2019, the Alpha-1 Project, Inc. (TAP) entered into a sponsored Research Agreement with pH Pharma Co, Ltd, (now referred to as Peak Bio Co., Ltd). TAP is a for-profit entity focused on identifying, funding, providing expertise and accelerating diagnostic and therapeutic interventions for patients with the rare disease AATD. Peak Bio Co., Ltd. has entered an agreement with TAP- $100,000 USD was provided by TAP towards research, and, Peak Bio Co., Ltd. issued TAP 4,800 shares of its common stock at the share price at that time. The funding is for the sole purpose of the clinical trial activities, investigating a potential role for PHP-303 in the treatment of AATD, where, Peak Bio Co., Ltd. is solely responsible for the management, conduct, oversight of the Research Plan and the generation of a final report/ results. TAP has the right to participate in any future external grant funding activities of Peak Bio Co., Ltd. and TAP may elect to participate in such funding on a “most favored nations” basis. Peak Bio and TAP formed a “steering committee” to oversee the funded activities during the term of the agreement and to act as a forum for TAP to provide reasonable comments and input on the scientific progress of the research.
TAP and Peak Bio Co., Ltd. have rights to publish data within the scope that does not compromise Peak Bio’s confidential information or proprietary know-how or trade secrets or that does not compromise securing patent protection of any inventions arising from the research plan. In addition, Peak Bio Co., Ltd. is required to acknowledge the support of TAP in any future publications from the research. Peak Bio Co., Ltd. will own all arising data and intellectual property arising from the research plan, and accordingly, TAP hereby assigned to Peak Bio Co., Ltd. (and shall cooperate with Peak Bio Co., Ltd. to execute assignment documents as necessary to perfect the assignment to Peak Bio Co., Ltd.) of any and all such intellectual property rights arising out of the research plan. TAP will acquire no ownership interest or other rights or licenses of any kind whatsoever in any intellectual property, data or results or any patents or patent applications or know-how arising out of the research plan.
TAP will be entitled to receive milestone payments as a percentage of total funding, with such payments due if, as and when the following events occur, during the development and commercialization of any product derived from the research plan. Milestone payments in aggregate will not exceed 350% of any money funded by TAP to Peak Bio for regulatory approval, achievement of first commercial sale and after cumulative net sales considerations. To date, the amount of the funded research proceeds provided to Peak Bio Co., Ltd. by TAP is $100,000 USD that would be subject to this payment calculation.
Department of Defense (DoD) grant for the evaluation of PHP-303 in Covid-19- related ARDS
In January 2021, we entered into an agreement with the U.S. DoD to perform “Preclinical Studies of PHP-303, a Neutrophil Elastase Inhibitor to Treat Severe COVID-19 Associated Acute Respiratory Distress Syndrome and Lung Injury”. We have been awarded up to $3,954,626 in expense reimbursement for preclinical studies to obtain pharmacokinetic data with PHP-303, and to determine if PHP-303 can inhibit NETosis and/or oppose the damaging effects of the large amounts of NE released into tissue during this biological process. And, if PHP-303 does inhibit NETosis, would this inhibition translate to improved outcomes in animal models of acute lung injury including a COVID-19 model.
We own all study data generated under the DoD Agreement, whether generated by us or the DoD, and the DoD will have no ownership interest in any inventions resulting from the agreement. Accordingly, any therapeutic or prototype developed under the agreement will be owned by Peak Bio. Under the DoD agreement, we are required to use commercially reasonable efforts to complete specified research activities for the prototype project based on the estimated cost for such prototype. In connection with
the DoD Agreement, we are eligible to receive up to $3,954,626 in the aggregate from DoD, subject to continued compliance with the terms of the DoD agreement and future pricing strategy. We are not obligated to pay any royalties or other future consideration under this agreement. The DoD agreement was extended to expire March 31, 2023, but has been temporarily placed on hold pending reprioritization of Peak’s pipeline and strategic objectives and hiring of staff. The DoD has the right to terminate the agreement in its entirety for convenience or in whole or in part for our material breach of the agreement.
The following statements are required to accompany any public release of information pertaining to the agreement:
(1)“The U.S. Army Medical Research Acquisition Activity, 820 Chandler Street, Fort Detrick MD 21702-5014 is the awarding and administering acquisition office.”
(2)“This work was supported by the Assistant Secretary of Defense for Health Affairs, through the Peer Reviewed Medical Research Program under Award No. W81XWH2110042. Opinions, interpretations, conclusions and recommendations are those of the author and are not necessarily endorsed by the Department of Defense.”
(3)“In conducting research using animals, the investigator(s) adheres to the laws of the United States and regulations of the Department of Agriculture.”
(4)“In the conduct of research utilizing recombinant DNA, the investigator adhered to NIH Guidelines for research involving recombinant DNA molecules.”
(5)“In the conduct of research involving hazardous organisms or toxins, the investigator adhered to the CDC-NIH Guide for Biosafety in Microbiological and Biomedical Laboratories.”
Manufacturing
We have been using raw materials and finished products supplied directly from Bayer in Germany, which has the highest level of CMC (manufacturing/quality) technology among global pharmaceutical companies and have used them to supply our preclinical and initial clinical trials. For our finished products, we have transferred the technology to Catalent, the largest contract producer in the United States, for manufacture, allowing for the establishment of a very stable and efficient partnership for the supply of clinical investigational drugs and the development of commercial products.
PHP-303 Clinical Reagent Manufacturer
Although PHP-303 is currently in early clinical development stage, we licensed the technology after Bayer had already achieved kilogram (kg) scale synthesis at high-purity, so late-stage clinical supply is possible with the current methods. The finished product has also been developed with a stable formulation, so PHP-303’s CMC process development has been completed from adding of high-capacity tablets to large-scale commercial production.
Division
Performer
Production of drug substance
Proton Pharma Solutions Ltd.
Production of finished drug
Sherpa Clinical Packaging
QC
Catalent
We do not own or operate facilities for the manufacturing of our product candidates, nor do we have plans to develop our own manufacturing operations in the foreseeable future. We had entered into manufacturing agreements with a number of drug substance, drug product, and other manufacturers and suppliers for PHP-303, and we intended to enter into additional manufacturing agreements as necessary. Following our license of PHP-303, we acquired certain clinical trial materials from Bayer. Our manufacturing contacts, KOLs, SOPs, supplies of drug substances and drug products are available for any future partner should they choose to avail of this platform to accelerate their entry into phase 2 clinical trial. Future partners are free to continue with our manufacturers and suppliers, our CMC lots of PHP-303, or internalize and/or partner as they see fit with other contract manufacturers and generate new lots of PHP-303 for future trials. For this reason, we have not yet entered into any contractual relationships for the manufacture of commercial supplies of PHP-303 to offer strategic options for a future partner.
Commercialization, Sales, and Marketing
We do not have our own marketing, sales, or distribution capabilities.
Competition AATD
We compete directly with other biopharmaceutical and pharmaceutical companies that focus on the treatment of AATD or ARDS. We may also face competition from academic research institutions, governmental agencies, and other various public and private research institutions. We expect to face increasingly intense competition as new technologies become available. Any
product candidates, including PHP-303 that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future.
Currently, approved alpha1-proteinase inhibitors that are administered intravenously during AAT augmentation therapy may be considered PHP-303’s closest potential competitor in the treatment of AATD. Currently, there are four inhibitors on the market in the United States: Grifols’s Prolastin-C, Shire’s Aralast, CSL’s Zemaira and Kamada’s Glassia. Kamada is also investigating an inhaled version of augmentation therapy and Apic Bio and Adverum are in the early stages of developing gene-therapy approaches for AATD. Santhera has in-licensed an inhaled NEI and is planning a multiple ascending dose study, with the initial indication targeted being cystic fibrosis.
Another investigational NEI, Alvelestat (MPH-966) developed through a partnership of Mereo Biopharma with AstraZeneca, was investigated as a phase 2 clinical trial in patients with severe AATD-associated emphysema. The double-blind, placebo-controlled “ASTRAEUS” study evaluated two different doses of alvelestat (high or low [120mg] dose) administered twice daily, versus placebo, over a 12-week period. As mentioned previously, three primary biomarker endpoints linked to AATD-related lung disease progression were also evaluated in this trial. On May 9, 2022, Mereo announced positive top-line efficacy and safety results from this trial showing that at the high dose, alvelestat demonstrated statistically significant changes versus placebo in all three primary biomarker endpoints that included ~90% inhibition of NE at the high undisclosed dose (https://www.atsjournals.org/doi/abs/10.1164/ajrccm-conference.2023.207.1_MeetingAbstracts.A2844; https://www.atsjournals.org/doi/abs/10.1164/ajrccm-conference.2024.209.1_MeetingAbstracts.A1211). As biomarkers desmosine/ isodesmosine and Aa-Val360 levels were accepted as surrogate biomarkers reflecting disease severity of AATD patients in the phase 2 ASTRAEUS trial, this paves the regulatory path for future trials for NEIs. It is our belief these Mereo data support target and pathway engagement in AATD patients by a NEI at clinically available doses. To the extent these are class effects, these data also potentially de-risks the Peak Bio PHP-303 AATD program.
As discussed previously, PHP-303 has demonstrated greater than 90% NE inhibition at doses of 5mg, 10mg and 20mg as a once daily oral administration. Additionally, PHP-303 appears to inhibit the bioactive form of NE. This will be explored more in-depth as we progress the program forward.
Intellectual Property:
IP Summary:
Oncology Platform PH-1 & PHP-303 Patent Status
Programs
Type
PCT
Global
Total
applied
granted
PHP-303
material 1
material 2
material 3
material 4
crystal form
use NASH
use AATD
1 (filed)
PH-1 ADC
material PH-1
material PH-1/
Trop 2 ADC
1 (filed)
Total
Peak Bio (Previously pH Pharma) secured patent protection for PH-1 & PHP-303 with over 66 patents granted in over 25 countries worldwide.
PH-1 & PHP-303 Patent Classes
Type
Content
Status
Material 1
Material patent of 4-(4-Cyano-2-Thioaryl) Dihydropyrimidinones including PHP-303
Granted in 22 countries + EPO including US, UK, and Japan
Material 2
Material patent of PHP-303 analogues (1,4-diaryl-pyrimidopyridazine-2,5-diones)
Granted in 8 countries + EPO including US, UK, and Japan
Material 3
Material patent of PHP-303 analogues (Triazolo and tetrazolo pyrimidine derivatives)
Granted in 8 countries + EPO including US, UK, and Japan
Material 4
Material patent of PHP-303 analogues (Sulfonic amide and sulfoximine-substituted diaryl-dihydropyrimidinones)
Granted in 10 countries + EPO including US, UK, and Japan
Crystalline form
Crystalline form (A) of PHP-303 and method for producing PHP-303
Granted in 8 countries + EPO including US, UK, and Japan
Use
PHP-303 use in liver diseases as a NHE inhibitors
Application in 5 countries + EPO including China, Korea, Hong Kong; granted in US
Use
PHP-303 use in lung disease including AATD as a NHE inhibitors
PCT application including US and EPO
Material 1
Novel Thailanstatin toxin analogs
Granted in 4 countries including US, China and Israel. Application in 10 countries + EPO
Material 2 + Use
Antibodies and ADCs, methods of use and Synthetic Processes and Intermediates
PCT filed claiming priority to US provisional applications
PHP-303 Patent Status
As of December 31, 2023, our patent portfolio relating to our product candidate PHP-303 consisted of six issued U.S. patents and 56 issued foreign patents, and 22 pending patent applications. The patent of PHP-303 for its crystalline form (A) applicable to actual clinical trials has been registered in the United States and granted in 8 other countries. The crystalline form patent will not expire earlier than 2036.
Peak Bio acquired full rights to patents from Bayer in 2017. We have global patent protection on 9 inventions on the compound that include the following:
•For AATD, use patent application in 2020 in the US and global with IP coverage through 2040
•For NASH, crystalline form (A) & use patents granted in the US and under review globally. IP coverage through 2040.
•Data exclusivity and pediatric extension possible in major markets including US, EU, and JP
We have acquired or exclusively licensed a comprehensive intellectual property portfolio from Bayer. We strive to protect and enhance the proprietary technologies, inventions, and improvements that we believe are important to our business, including seeking, maintaining, and defending patent rights, whether developed internally or acquired or licensed from third parties. Our policy is to seek to protect our proprietary position by, among other methods, pursuing and obtaining patent protection in the United States and in jurisdictions outside of the United States related to our proprietary technology, inventions, improvements, platforms, and our product candidates that are important to the development and implementation of our business.
PH-1 Patent Status
•Peak Bio created and generated our toxin program (PH-1) developed in-house with full rights to patents.
•The PH-1 toxin patent applied has a protection period of 20 years with IP coverage through at least 2038 and has been granted in US and China.
•We have filed US provisional patent 63/459,961 describing novel Thailanstatin diasteromer payloads, novel Trop2 antibodies, Trop2 ADCs derived from the conjugation of above antibodies and payloads, and the cancer indications these Trop2 ADCs have preclinical efficacy in.
•We have filed US provisional patent 63/459,956 describing a large scale chemosynthetic (CMC) process for payload synthesis.
•We have filed PCT/US24/24997 claiming priority to above provisional applications 63/459,961 and 63/459,956.
•We are planning to file composition of matter patents for other newly developed novel ADCs and combinations with standards-of-care therapies.
•Peak Bio will continue to create novel composition of matter patents to cover new ADCs not limited to new usage of Linkers, formulations, CMC and/or SOC combination patents to secure additional protection period after the PH-1 toxin patent expires.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors.
Investing in our securities involves risks. Before you make a decision to buy our securities, in addition to the risks and uncertainties discussed above under “Cautionary Note Regarding Forward-Looking Statements,” you should carefully consider the specific risks set forth herein. If any of these risks actually occur, it may materially harm our business, financial condition, liquidity and results of operations. As a result, the market price of our securities could decline, and you could lose all or part of your investment. Additionally, the risks and uncertainties described in this prospectus, any prospectus supplement or in any document incorporated by reference herein or therein are not the only risks and uncertainties that we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may become material and adversely affect our business.
Summary Risk Factors
•The potential ADC product candidates in our pipeline such as Trop2 PH1 ADC are in the preclinical and IND-enabling stages of development, with only PHP-303 having progressed to clinical stages of development. Trop2 PH1 ADC has never been tested in human subjects. We may be unable to advance any current or future potential product candidates through the completion of clinical development, obtain regulatory approval and ultimately commercialize any of our product candidates, or experience significant delays in doing so.
•We may expend our limited resources and access to capital to pursue a particular product candidate; these decisions may prove to be wrong and may adversely impact our business. Because we have limited financial and managerial resources, we intend to focus our efforts on specific R&D programs, including our clinical development of product candidate(s) PHP-303, and Trop2 PH1 ADC, our lead oncology ADC candidate, and eventually advancing additional research programs progressing from our Peak Bio R&D Discovery Toxin and ADC Platform Engine.
•The effects of health epidemics, such as the recent COVID-19 pandemic, geopolitical instability, the conflict in Eastern Europe and in regions where we, or the third parties on which we rely, have business operations could adversely impact our business, including our preclinical studies, anticipated clinical trials, and contract manufacturing capabilities. The geopolitical instability in Eastern Europe could materially affect our operations, which have been affected by supply chain issues subject to foreign policy changes and/or executive orders, and at our future clinical trial sites, as well as the business or operations of our contract research organizations (“CROs”), contract and development manufacturing organizations (“CDMOs”), or other third parties with whom we conduct business and could be adversely impacted and cause significant disruptions and delays which could greatly impact our business and may continue to impact planned preclinical and clinical plans.
•We depend on enrollment of patients in our clinical trials for our product candidates. If we are unable to enroll patients in our clinical trials, or enrollment is slower than anticipated, in particular for our product candidates with rare disease indications, our research and development efforts could be adversely affected.
•Our business is subject to risks associated with conducting business internationally. We source research and development, manufacturing, consulting, and other services from companies based throughout the United States, the EU, and select Asian countries and we will be planning and conducting our clinical trials in the United States, Canada, certain European countries, in the near-term and in the future.
•Our product candidates are at an early stage of development, and we may not be able to successfully develop and commercialize them.
•Our ability to commercialize our product candidates or our strategic partners depends on first receiving Food and Drug Administration (FDA) approval.
•Prior to our acquisition of PHP-303, we were not involved in its development and, as a result, we are dependent on Bayer having accurately reported the results and correctly collected and interpreted the data from all clinical trials conducted prior to our acquisition.
•We may or any strategic partners we have enlisted may choose to, or may be required to, suspend, repeat, or terminate our clinical trials if they are not conducted in accordance with regulatory requirements, the results are negative or inconclusive or the trials are not well designed.
•We rely, and expect to continue to rely, on third parties, including independent investigators and CROs, to conduct our clinical trials.
•Because manufacturing processes and those of our contractors are highly complex and are subject to a lengthy FDA approval process, alternative qualified production capacity may not be available on a timely basis or at all. Difficulties or delays in our or our contractors’ manufacturing and supply of existing or new products could increase
our costs, cause us to lose revenue or market share, damage our reputation and could result in a material adverse effect on our product sales, financial condition, and results of operations.
•We rely on patents and other intellectual property rights to protect our product candidates, the obtainment, enforcement, defense, and maintenance of which may be challenging and costly. Failure to enforce or protect these rights adequately could harm our ability to compete and impair our business.
•We have no experience in commercializing products on our own.
•Our existing and future product candidates may not gain market acceptance, in which case our ability to generate product revenues will be compromised.
•Our business operations and current and future relationships with investigators, healthcare professionals, consultants, third-party payors, patient organizations, and customers will be subject to applicable healthcare regulatory laws, which could expose us to penalties.
•Although the clinical trial process is designed to identify and assess potential side effects, it is always possible that a drug, even after regulatory approval, may exhibit unforeseen side effects. If our product candidates were to cause adverse side effects during clinical trials or after approval, we may be exposed to substantial liabilities.
•We cannot assure you that an active public market for our Common Stock will develop or be sustained. The market price of our Common Stock could be subject to wide fluctuations in response to many risk factors listed in this section, and others beyond our control.
•Nasdaq has delisted our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.
•Our stock may be traded infrequently and in low volumes, so you may be unable to sell your shares at or near the quoted bid prices if you need to sell your shares.
•There currently is no active public market for our Common Stock and there can be no assurance that an active public market will ever develop. Failure to develop or maintain a trading market could negatively affect the value of our common stock and make it difficult or impossible for you to sell your shares.
•Our existing stockholders have significant control of our management and affairs, which they could exercise against your best interests.
•We incur increased costs and obligations as a result of being a public company.
•Future sales, or the perception of future sales, by us or our stockholders in the public market could cause the market price for our Common Stock to decline.
Risks Relating to Our Business and Programs
The potential ADC product candidates in our pipeline such as Trop2 PH1 ADC are in the preclinical and IND-enabling stages of development, with only PHP-303 having progressed to clinical stages of development. Trop2 PH1 ADC has never been tested in human subjects. We may be unable to advance any current or future potential product candidates through the completion of clinical development, obtain regulatory approval and ultimately commercialize any of our product candidates, or experience significant delays in doing so.
•We do not have the infrastructure necessary for manufacturing to support clinical studies or commercialization of a therapeutic drug product.
•Our ability to identify our product candidates and advance them into preclinical and clinical development and obtain future regulatory approvals and commercialization depends on successful contract manufacturing and/or collaboration.
•We would need to forge such a collaboration or build the infrastructure processes necessary for large scale manufacturing and/or commercialization. We would depend on this ‘future partner’ or contract manufacturer for timely manufacturing of therapeutics ahead of various clinical studies.
•To advance our R&D Discovery Toxin and ADC Platform Engine we will need to hire key additional staff to guide the preclinical, IND-enabling translational and non-clinical work, and potentially even for future clinical studies. We may not be able to attract or hire the required personnel to guide and oversee our lead programs. The hiring process is competitive and may take time to identify, hire and retain staff.
•We have to be consistent calling it one thing. Then it becomes a brand name.
•Our lead programs, PHP-303 (AATD) and Trop2 PH1 ADC (Solid tumors) are in the clinical and IND-enabling stages of development, respectively. We have no other identified product candidates at this stage. We may never identify any future product candidates or advance past IND-enabling studies or clinical stage development.
•None of our potential future Oncology product candidates have ever been tested in humans. Before obtaining regulatory approval for the commercial distribution of any product candidates, we, either alone or through a collaboration, must conduct extensive preclinical studies, followed by clinical trials to demonstrate the safety and efficacy of our product candidates in humans.
•We cannot be certain of the timely completion or outcome of our research and development activities or our planned preclinical studies and cannot predict if the FDA or other regulatory authorities will accept our proposed clinical programs or if the outcome of our preclinical studies will ultimately support the further development of our future product candidates.
•We have not yet met with or discussed our product development plans with FDA or any other regulatory authorities for Trop2 PH1 ADC (Oncology IND Candidate). As a result, we cannot be sure that we will be able to submit INDs or similar applications for our current discovery programs on the timelines we expect, if at all, and we cannot be sure that submission of INDs or similar applications will result in the FDA or other regulatory authorities allowing clinical trials to begin.
•Our Trop 2 PH1 ADC and future programs are subject to the risks of failure inherent in the identification of potential product candidates and the research and development of those product candidates based on novel approaches, targets, and mechanisms of action.
•You should consider our prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by preclinical stage biopharmaceutical companies such as ours. Although we expect to out-license/partner our Phase 2 clinical asset, there can be no guarantee that we will be able to do so profitably or even recover costs incurred in this program. Considering that clinical trial enrollment could be impacted by the ability of a future partner to recruit, conduct and gain trial results in a timely fashion. Additionally, the ongoing Geopolitical conflicts could impact or upend clinical trial enrollment in both the US and with special considerations and impact from Europe. In addition, you should consider our prospects in the face of the unknown and Force Majeure, elements over which we have no control.
•We may not have the financial resources or cannot find an appropriate strategic partner to continue development of, or to enter into new collaborations for, the product candidates that may result from our PHP-303 and Trop2 PH1 ADC programs or any potential future product candidates involving PH1, PH5, PH6. This may be exacerbated if we experience any issues that delay or prevent regulatory approval of, or our ability to commercialize, any product candidate that we identify, such as:
•negative or inconclusive results from our preclinical trials, leading to a decision to conduct additional preclinical studies or abandon a program;
•negative or inconclusive results from our clinical trials or the clinical trials of others for product candidates similar to ours, leading to a decision or requirement to conduct additional preclinical studies or clinical trials or abandon a program;
•our clinical safety data in humans do not match the industry-standard practice of conducting pre-clinical safety evaluation in non-human primates;
•our strategy of deploying toxins PH1, PH5 and PH6 as antibody-drug-conjugates (ADC) fail to mitigate known toxicities of those classes of small molecules delivered as systemic chemotherapies;
•our clinical data do not match the preclinical data supporting antibody selectivity, linker stability, pharmacokinetics, anti-tumor efficacy, or any other key attributes;
•product-related side effects experienced by participants in our clinical trials or by individuals using drugs or therapeutic antibodies similar to ours;
•delays in submitting IND applications or comparable foreign applications, or delays or failure in obtaining the necessary approvals from regulators to commence a clinical trial, or a suspension or termination of a clinical trial once commenced;
•conditions imposed by the FDA, or other regulatory authorities regarding the scope or design of our clinical trials;
•delays in enrolling research subjects in clinical trials;
•high drop-out rates and high failure rates of research subjects;
•inadequate supply or quality of product candidate components or materials or other supplies necessary for the conduct of our clinical trials;
•greater-than-anticipated clinical trial costs;
•poor effectiveness of our product candidates during clinical trials;
•unfavorable FDA or other regulatory agency inspection and review of a clinical trial or manufacture site;
•failure of our third-party contractors or investigators to comply with regulatory requirements or otherwise meet their contractual obligations in a timely manner, or at all;
•delays and changes in regulatory requirements, policies and guidelines;
•the FDA or other regulatory agencies interpreting our data differently than we do;
•or adverse impacts caused by any future, pandemics related to ongoing COVID-19 or other concerning pathogens, ongoing Geopolitical considerations in Europe and other countries which could heighten any of the foregoing risks.
•Further, we and any potential future partners may never receive approval to market and commercialize any product candidate or the regulatory approval may be for targets, disease indications or patient populations that are not as broad as we intended or desired or may require labeling that includes significant use or distribution restrictions, safety warnings or post marketing testing requirements.
•We may not be successful in our efforts to use and expand our Peak Bio Research and Discovery (R&D) Toxin and ADC Platform Engine to build a pipeline of product candidates with our current Toxins PH1, PH5, PH6 or any future identified opportunities either as new toxins or new nominated ADCs generated from our platform.
•Even if we are successful in identifying a pipeline of product candidates with our proprietary Peak Bio R&D Toxin and ADC Platform Engine, we may not have or be able to raise sufficient capital to pursue them due to our commitments to PHP-303 and/ or Trop2 PH1 ADC clinical development.
•A key element of our strategy is to use and expand our Peak Bio R&D and ADC Platform Engine to build a pipeline of product candidates and progress these product candidates through preclinical and clinical development for the treatment of various diseases.
•Although our research efforts to date suggests that our novel approach to toxin and ADC drug development has potentially created a novel toxin portfolio, whether that allows us to create a novel cadre of future clinical and eventually commercially viable ADC candidates depends upon its performance in future phase 1 and phase 2 clinical trials.
•Our concept is to create novel ADC drug candidates that:
•Potentially enhance tumoricidal activity beyond cytotoxicity;
•Potentially engage the Host Response (T and B cells) that can potentially co-evolve and can counter resistance mutations;
•Potentially create ADC payloads that act as poor substrates for MDR Transporters; and
•Potentially creating immune memory cells that may expand and re-engage upon patient relapse and/or tumor recurrence.
•We may not be able to adequately engage the immune response or reverse the effects of immune suppression in certain cancers with or without combination with checkpoint inhibitors.
•Conversely, we may elicit a heightened response from the human immune system resulting in mild or acute cytokine release syndrome which may result in reduction, discontinuation, or spreading a certain dose over time. This in turn may result in failure to achieve the preclinically recommended phase 2 dose for anti-tumor efficacy.
•The additional mechanism of action of engaging the human immune system may not be significant over and above the payload’s ability to kill cancer cells, restoring or activating the human immune system with/ without checkpoint inhibitor combination may not have the desired anti-tumor effects, or be counter-productive from safety or any other perspective.
•While immune activation has been a successful clinical approach for various checkpoint blockade strategies, for e.g., PD-1 and PD-L1; not all PD-1 or PD-L1 inhibitors have been successful in the same indication. We may have to explore several combination strategies in phase 1 to determine potential pairing strategies.
•Even when a combination is proven safe by phase 1 clinical study, we may have combined with the immunotherapy that fails to contribute to the anti-tumor effect. Alternatively, our ADC may not significantly improve the efficacy of the immunotherapy which may well be the standard-of-care for that kind of cancer. Additional attempts, new strategies and new clinical trials may be required for further development.
•We may incur greater costs related to additional manufacturing, new trials, develop new strategic partnerships and require additional fund-raising events to finally see the development candidate become a marketed product.
Our Peak Bio R&D Toxin and ADC Platform Engine is evolving and may not reach a state at which building a pipeline of product candidates is possible.
•Even if we are successful in building our Oncology pipeline of product candidates, the potential product candidates that we identify may not be suitable for clinical development or generate acceptable clinical data, including unacceptable toxicity or other characteristics that indicate that they are unlikely to be products that will receive marketing approval from the FDA or other regulatory authorities or achieve market acceptance, limited commercial success leading to inability to generate sufficient product revenues in the future.
•Our approach to developing and identifying our therapeutic product candidates using the Peak Bio R&D Toxin and ADC Platform Engine is novel and unproven and may not result in marketable products.
•We plan to develop a pipeline of product candidates using our Peak Bio R&D Toxin and ADC Platform Engine including those already generated from our PH1 and in the future our early-stage toxin programs PH5 and PH6. We believe that we may be able to overcome certain key limitations of the current oncology ADC based drug discovery and development paradigms by focusing on our ability to generate novel toxins, that are engineered to:
•Potentially enhance tumoricidal activity beyond cytotoxicity;
•Potentially engage the Host Response (T and B cells) and can potentially co-evolve and can counter resistance mutations;
•Potentially creating ADC payloads that act as poor substrate for MDR Transporters (reduced resistance); and
•Potentially creating immune memory cells that may expand and re-engage upon patient relapse and/or tumor recurrence.
•We may not be correct in our beliefs about the differentiated nature of the Peak Bio R&D Toxin and ADC Platform to competing technologies, our data may be relevant to a niche, and our platform may not prove to be superior in all settings. Additionally, clinical data may not support our preclinical findings, for e.g., if humans were to degrade PH1 differently, and this new catabolite is a substrate for MDR transporters. Alternatively, said PH1 ADC benefits may be neutralized, for e.g., patients were to develop resistance to PH1 independently by known or unknown mechanisms such as potential mutations in spliceosomes.
•If our Peak Bio R&D Toxin and ADC Platform is not able to develop approved ADC constructs that are effective at the necessary speed or scale, it could have a material and adverse effect on our business, financial condition, results of operations and prospects.
•In the future we may not be successful in our efforts to identify and acquire additional product candidates, novel new IP, or licenses from academic or industry sources and this may impact our ability to grow the company and improve our ability to develop and commercialize additional products.
We may expend our limited resources and access to capital to pursue a particular product candidate; these decisions may prove to be wrong and may adversely impact our business. Because we have limited financial and managerial resources, we intend to focus our efforts on specific R&D programs, such as our Trop2 PH1 ADC, our lead oncology ADC candidate, and eventually advancing additional research programs progressing from our Peak Bio R&D Discovery Toxin and ADC Platform Engine, seeking strategic partners for new ADC programs, while we seek a strategic partner for our clinical development product candidate(s) PHP-303.
•As a result, we may forgo or delay the pursuit of other opportunities, including with potential future product candidates that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities.
•Our spending on current and future R&D programs and product candidates for specific indications may not yield any commercially viable product candidates. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through partnership, licensing, or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.
The effects of health epidemics, geopolitical instability including what was encountered with the COVID-19 pandemic or the impact of any future pathogens of concern, the conflict in Eastern Europe and in regions where we, or the third parties on which we rely, have business operations could adversely impact our business, including our preclinical studies, anticipated clinical trials, and contract manufacturing capabilities. Similar or unrelated pandemics and/or the geopolitical instability in Eastern Europe could materially affect our operations, which have been affected by supply chain issues subject to foreign policy changes and/or executive orders, and at our future clinical trial sites, as well as the business or operations of our CROs, CDMOs, or other third parties with whom we conduct business and could be adversely impacted and cause significant disruptions and delays which could greatly impact our business and may continue to impact planned preclinical and clinical plans.
•Further, from time to time there have been declarations from the President of the United States, State Governors and Ex-US country leadership declaring that the COVID-19 pandemic a national, state or country emergency, on occasions where the spread and increased incidence of varying strains of COVID-19 or any future pathogens of concern both in severity and incidence have invoked restrictive measures that have, and could, in the future, impact our business as well as other businesses materially.
•In response to these public health directives and orders, we have previously implemented at various times work-from-home policies to support the community efforts to reduce the transmission of COVID-19 and protect employees, complying with guidance from federal, state/provincial, or municipal government and health authorities.
•We have previously implemented from time to time several measures to ensure employee safety and business continuity.
•Instituted polices directing desk employees to work from home from time to time, while those needing to work in laboratory facilities have been divided into shifts to reduce the number of people gathered at one time coupled with measures to reduce the risk of COVID-19 transmission, while these measures may have resulted in decreased productivity of our workforce from time to time.
•Additionally, business travel can be restricted from time to time, (though no longer currently suspended), and we have utilized online and teleconference technology to meet virtually rather than in person.
•While certain of the restrictions in California and other locations in which we have employees or independent contractors have recently been relaxed or lifted, these restrictions may be re-implemented or new restrictions imposed if rates or incidence of infection increase for COVID-19 or any future pathogens of concern.
•The effects of the executive orders and our work-from-home policies may negatively impact productivity, disrupt our business and delay advancing our programs and timelines which may impact our business moving forward. The global pandemic and ensuing outbreaks, quarantines, shelter-in-place and similar government orders, or the perception that such orders, shutdowns or other restrictions on the conduct of business operations could be imposed or re-instituted, related to COVID-19 or other infectious diseases could impact personnel at third-party facilities, including those from which we currently obtain tissue and blood samples, or on which we may in the future rely for manufacturing, in the United States and other countries, or the availability or cost of materials, which would disrupt our supply chain. The 2020/21 COVID-19 pandemic has created worldwide shortages in supply chains for items ranging from laboratory plasticware to chemicals for manufacture. This is impacting multiple facets of biotechnology and pharmaceutical companies and manifesting as shortages in their product(s) vaccines, chemotherapies, clinical trial supplies and has had the impact of slowing clinical, and even preclinical, R&D. This in turn has resulted in increased demand, rising prices, and ultimately cost of research.
•Similarly, disruption in operations or any third-party facilities on which they are dependent may affect our collaboration and our ability to nominate an ADC candidate for further development and could create disruptions to resources, inability of workers to carry out their jobs effectively, disruptions to manufacturing, supply chains, including inability to travel.
•The requirement by governments to stay at home or to “social distance” limits normal communications and may also increase cyber security risk or create data accessibility concerns.
•For any future clinical trials, we or a future strategic partner may conduct could impact patient enrollment negatively. Patients that may not be able or willing to comply with clinical trial protocols if quarantines impede patient movement or due to limitations on travel imposed or recommended by federal, state/ provincial or municipal governments interrupt healthcare services. It may cause interruptions in our ability to obtain meaningful data from clinical trials or increased rates of patients may withdraw from our clinical trials following enrollment as a result of health crises or being forced to quarantine or being unable to visit clinical trial locations or otherwise comply with clinical trial protocols.
We or a future strategic partner depend on enrollment of patients in our clinical trials for our product candidates. If we or a future strategic partner are unable to enroll patients in our clinical trials, or enrollment is slower than anticipated, in particular for our product candidates with rare disease indications, research and development efforts could be adversely affected.
•Successful and timely completion of clinical trials for our product candidates will require that we or a future strategic partner are able to enroll a sufficient number of patients.
•Trials may be subject to delays as a result of the limited number of patients with the diseases that these product candidates target, patient enrollment taking longer than anticipated or patient withdrawal.
•Our program(s) will compete with other companies in enrolling the same limited population of patients, which may further challenge our ability to timely enroll patients in our clinical trials.
•Due to the small number of patients for any rare disease or tumor type, it may be difficult for us to enroll a sufficient number of patients in our clinical trials for our product candidates with indications in rare diseases or enrollment for these product candidates may take significantly longer than we anticipate.
•There are an estimated 50,000 and 60,000 persons in North America and Europe, respectively, with the genotypes that we intend to enroll in our clinical trials for AATD, the target indication for PHP-303.
•Patient enrollment depends on many factors, including the size and nature of the patient population, eligibility criteria for the trial, the proximity of patients to clinical sites, the design of the clinical protocol, the availability of competing clinical trials, the availability of new drugs or biologics approved for the indication the clinical trial is investigating, and clinicians’ and patients’ perceptions as to the potential advantages of the drug being studied in relation to other available therapies.
•These factors may make it difficult to enroll enough patients to complete clinical trials in a timely and cost-effective manner. For example, our Phase 2 PHP-303 trial will recruit individuals with alpha-1 antitrypsin deficiency-related lung disease, who are potentially at greater risk from COVID-19 exposure.
•Any future pandemic related situations and for example the past COVID-19 pandemic, or any future respiratory pathogen related pandemics could impact recruitment into our or a strategic partner(s) Phase 2 alpha-1 antitrypsin deficiency study could be delayed.
•Delays in the completion of any clinical trial of our product candidates will increase our costs, slow down our development and approval of our product candidates, and delay or potentially jeopardize our ability to commence product sales and generate revenue.
•In addition, some of the factors that cause or lead to a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.
•We may become exposed to costly and damaging liability claims, either when testing our product candidates in the clinic or at the commercial stage, and our product liability insurance may not cover all damages from such claims.
•We or a future partner may experience a delay in availability of drug product for PHP-303 due to lack of manufacturing capacity and/or raw materials at our third-party contract manufacturing organizations (“CMOs”).
•We, or our future partners, may experience a delay in their ability to close and negotiate third-party partnerships or collaborations with CMOs, which may result in interruptions and delays in manufacturing activities, and missed milestones as a result of the government mandated “stay-at-home” guidelines; delay in responses from regulatory authorities in relation to approvals, amendments or other regulatory engagements required for our ongoing development activities; supply chain interruptions; or diversion of CMO activities and raw materials to COVID-19 products, including restrictions imposed by various governments, causing delays to clinical trial supplies. Ultimately, these may result in lost revenue or delayed milestones from our partnering activities.
Our business is subject to risks associated with conducting business internationally. We source research and development, manufacturing, consulting, and other services from companies based throughout the United States, the EU, and select Asian countries.
•Accordingly, our future results could be harmed by a variety of factors, including: economic weakness, including inflation, or political instability in varying economies and markets; differing regulatory requirements for drug approvals in non-European Union (EU) countries; differing jurisdictions could present different issues for securing, maintaining, or obtaining freedom to operate for our intellectual property in such jurisdictions; such jurisdictions; potentially reduced protection for intellectual property rights; difficulties in compliance with non- US laws and regulations; changes in non-U.S. regulations and customs, tariffs, and trade barriers; changes in non-U.S. currency exchange rates of the USD and currency controls; changes in a specific country’s or region’s political or economic environment, trade protection measures, import or export licensing requirements or other restrictive actions by the USA or non-U.S. governments; differing reimbursement regimes and price controls in certain non-U.S. markets; negative consequences from changes in tax laws; compliance with tax, employment, immigration, and labor laws for employees living or traveling outside of the USA; business interruptions resulting from geo-political actions, including war and terrorism, health epidemics and other widespread outbreaks of contagious disease, or natural disasters, including earthquakes, typhoons, hurricanes, floods and fires; and business interruptions resulting from the recent COVID-19 pandemic or any other similar pandemic.
If our future product candidates acquired or those derived or developed from our Peak Bio R&D Toxin and ADC Platform, continue in clinical trials, or are eventually initiated in clinical trials in human subjects, they may not demonstrate the combination of safety and efficacy necessary to become approvable or commercially viable.
•For example, we have not tested our Trop2 PH1 ADC nominated program or any other future nominated product candidates in human clinical trials. We may ultimately discover that our product candidates we develop do not possess certain properties that we believe will be helpful for therapeutic effectiveness and safety.
•Further, although our PH1 toxin program has exhibited encouraging results in preclinical research, it may not demonstrate similar results in further research or exhibit the same properties in humans and may interact with human biological systems in unforeseen, ineffective, or harmful ways. As a result, we may never succeed in developing a marketable product based on our PH1 based toxin programs or based on our overall Peak Bio R&D Toxin and ADC Platform, including our additional toxins PH5 and PH6.
•If the product candidates resulting from our PH1 based toxin programs from our Peak Bio R&D Toxin and ADC Platform or any of our potential future product candidates prove to be ineffective, unsafe or commercially unviable, our entire pipeline could have little, if any, value, which could require us to change our focus and approach to R&D, which would have a material and adverse effect on our business, financial condition, results of operations and prospects.
Our product candidates are at an early stage of development, and we may not be able to successfully develop and commercialize them.
•Significant further research and development, financial resources and personnel will be required to develop commercially viable products and obtain regulatory approvals.
•Much of our efforts and expenditures over the next few years will be devoted to (Clinical) Trop2 PH1 ADC, (IND-enabling) and newly nominated ADC programs based on our PH1 toxin or any of our future toxins PH5, PH6 and with a reduced spend on developing but partnering of PHP-303.
•These are our only product candidates in preclinical development or clinical trials.
•We have no drugs that have received regulatory approval for commercial sale.
•We expect that none of our product candidates will be commercially available in the near term.
Our ability to commercialize our product candidates depends on first receiving Food and Drug Administration (FDA) approval.
•The future commercial success of these product candidates will depend upon their acceptance by physicians, patients, and other key decision-makers as therapeutic and cost-effective alternatives to currently available products.
•Because we have very limited data to date regarding our product candidates, we are unable to predict with any degree of certainty whether they will ever be approved by the FDA, the EMA, or comparable foreign authorities or if approved, will achieve market acceptance.
•If we fail to produce a commercially successful product, we may not be able to earn sufficient revenues to continue as a going concern.
•We may continue to need significant amounts of additional capital and we cannot be sure that additional capital will be available to us.
•We have consumed limited amounts of cash to date but expect capital outlays and operating expenditures to significantly increase over the next several years as we hire additional employees, expand our infrastructure, and accelerate our preclinical development and clinical trial activities.
•We believe that the net proceeds made available from the Business Combination, along with our existing cash and investment securities, milestone payments and research grants, will be sufficient to fund our operations for at least the next two years. However, changes in our business may occur that would consume available capital resources sooner than we expect.
•If adequate funds are not available to us, we may be required to delay, reduce the scope of, or eliminate one or more of our development programs.
•We do not know whether additional financing will be available when needed, or that, if available, we will obtain financing on terms favorable to our stockholders or us.
•To the extent that we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution.
•To the extent that we raise additional funds through collaboration and licensing arrangements, we may be required to relinquish some rights to our technologies or product candidates or grant licenses on terms that are not favorable to us.
•Clinical trials for our product candidates are expensive and time-consuming and their outcome is uncertain.
•Before we, or a strategic partner, can obtain regulatory approval for the commercial sale of any product candidate that we wish to develop, we will be required to complete preclinical development, manufacturing, and extensive clinical trials in humans to demonstrate its safety and efficacy.
•Each of these trials requires the investment of substantial expense and time.
•We are currently planning on partnering our most advanced product candidate PHP-303 and we cannot predict the commencement of any future clinical trials at this point in time. The target indication is AATD.
•There are numerous factors that could delay our future clinical trials or prevent us from completing these trials successfully.
•The length of time required to submit an investigational new drug application (IND) and get the approval from FDA to initiate clinical trials varies significantly and may be difficult to predict. This is true for other regulatory authorities as well.
•Success in preclinical and early clinical trials does not ensure that large-scale trials will be successful, nor does it predict the final result.
•Acceptable results in early trials may not be repeated in later trials.
•It is not unknown for companies in the biotechnology/ pharmaceutical industry to have suffered setbacks in advanced clinical trials, even after having promising results in earlier trials.
•Negative or inconclusive results or treatment-related adverse events during a clinical trial could cause it to be redone or terminated.
•In addition, failure to construct appropriate clinical trial protocols could result in the test or control group experiencing a disproportionate number of adverse events and could cause a clinical trial to be redone or terminated. The length of time necessary to complete clinical trials and to submit a business license application (BLA) for marketing approval for a final decision by the FDA or another regulatory authority varies significantly and may be difficult to predict.
•To date, we have limited clinical data and have not seen any significant toxicity data however, trials in later stages may show or deem this program to not be safe or efficacious which would not allow us to obtain the requisite regulatory approvals for these product candidates or any other potential product candidates.
•Because our Trop2 PH1 ADC preclinical ADC program and our PHP-303 clinical program are our only product candidates, and we have decided to partner our clinical asset, any delays, or difficulties we encounter may impact our ability to generate revenue and cause our stock price to decline significantly.
We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability, an ongoing military conflict between Russia and Ukraine, and high inflation. Our business, financial condition and results of operations could be materially adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine, geopolitical tensions or high inflation.
U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine. On February 24, 2022, a full-scale military invasion of Ukraine by Russian troops was reported. Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions, which has led to high inflation globally. We are continuing to monitor inflation, the situation in Ukraine and global capital markets and assessing the potential impacts on our business.
The global economy has been, and may continue to be, negatively impacted by Russia’s invasion of Ukraine. As a result of Russia's invasion of Ukraine, the U.S., the European Union, the United Kingdom, and other G7 countries, among other countries, have imposed substantial financial and economic sanctions on certain industry sectors and parties in Russia. Broad restrictions on exports to Russia have also been imposed. These measures include: (i) comprehensive financial sanctions against major Russian banks; (ii) additional designations of Russian individuals with significant business interests and government connections; (iii) designations of individuals and entities involved in Russian military activities; and (iv) enhanced export controls and trade sanctions limiting Russia's ability to import various goods. Russian military actions and the resulting sanctions could continue to adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets, potentially making it more difficult for us to obtain additional funds. Further, there are current geopolitical tensions with China. Recently, the Biden administration has signed multiple executive orders regarding China. One particular executive order titled Advancing Biotechnology and Biomanufacturing Innovation for a Sustainable, Safe, and Secure American Bioeconomy, signed on September 12, 2022, will likely impact the pharmaceutical industry to encourage U.S. domestic manufacturing of pharmaceutical products. Any additional executive orders or potential sanctions with China could materially impact our manufacturing partners.
In addition, on October 7, 2023, Hamas militants and members of other terrorist organizations infiltrated Israel’s southern border from the Gaza Strip and conducted a series of terror attacks on civilian and military targets. Thereafter, Hamas launched extensive rocket attacks on Israeli population and industrial centers located along the Israeli border with the Gaza Strip. Shortly following the attack, Israel’s security cabinet declared war against Hamas and launched an aerial bombardment of various targets within the Gaza Strip. The Israeli government subsequently called for the evacuation of over one million residents of the northern part of the Gaza Strip and initiated ground operations in the Gaza Strip. It is possible that other terrorist and/or regional organizations will join the hostilities as well, including Hezbollah in Lebanon, and Palestinian military organizations in the West Bank, resulting in a widening of the conflict. The intensity and duration of Israel’s current war against Hamas is difficult to predict as are such war’s economic implications on the global economy.
Although our business has not been materially impacted by these geopolitical tensions to date, it is impossible to predict the extent to which our operations, or those of our suppliers and manufacturers, will be impacted in the short and long term, or the ways in which the conflict may impact our business. The extent and duration of the conflict in Ukraine, geopolitical tensions, record inflation, sanctions and resulting market disruptions are impossible to predict, but could be substantial. Any such disruptions may also magnify the impact of other risks described herein.
Climate change or legal, regulatory or market measures to address climate change may negatively affect our business, results of operations, cash flows and prospects.
We believe that climate change has the potential to negatively affect our business and results of operations, cash flows and prospects. We are exposed to physical risks (such as extreme weather conditions or rising sea levels), risks in transitioning to a low-carbon economy (such as additional legal or regulatory requirements, changes in technology, market risk and reputational risk) and social and human effects (such as population dislocations and harm to health and well-being) associated with climate change. These risks can be either acute (short-term) or chronic (long-term).
The adverse impacts of climate change include increased frequency and severity of natural disasters and extreme weather events such as hurricanes, tornados, wildfires (exacerbated by drought), flooding, and extreme heat. Extreme weather and sea-level rise pose physical risks to our facilities as well as those of our suppliers. Such risks include losses incurred as a result of physical damage to facilities, loss or spoilage of inventory, and business interruption caused by such natural disasters and extreme weather events. Other potential physical impacts due to climate change include reduced access to high-quality water in certain regions and the loss of biodiversity, which could impact future product development. These risks could disrupt our operations and its supply chain, which may result in increased costs.
New legal or regulatory requirements may be enacted to prevent, mitigate, or adapt to the implications of a changing climate and its effects on the environment. These regulations, which may differ across jurisdictions, could result in us being subject to new or expanded carbon pricing or taxes, increased compliance costs, restrictions on greenhouse gas emissions, investment in new technologies, increased carbon disclosure and transparency, upgrade of facilities to meet new building codes, and the redesign of utility systems, which could increase our operating costs, including the cost of electricity and energy used by us. Our supply chain would likely be subject to these same transitional risks and would likely pass along any increased costs to us.
Environmental, social and governance matters may impact our business and reputation.
Governmental authorities, non-governmental organizations, customers, investors, external stakeholders and employees are increasingly sensitive to environmental, social and governance, or ESG, concerns, such as diversity and inclusion, climate change, water use, recyclability or recoverability of packaging, and plastic waste. This focus on ESG concerns may lead to new requirements that could result in increased costs associated with developing, manufacturing and distributing our products, when applicable. Our ability to compete could also be affected by changing customer preferences and requirements, such as growing demand for more environmentally friendly products, packaging or supplier practices, or by failure to meet such customer expectations or demand. While we strive to improve our ESG performance, we risk negative stockholder reaction, including from proxy advisory services, as well as damage to our brand and reputation, if we do not act responsibly, or if we are perceived to not be acting responsibly in key ESG areas, including equitable access to medicines and vaccines, product quality and safety, diversity and inclusion, environmental stewardship, support for local communities, corporate governance and transparency, and addressing human capital factors in our operations. If we do not meet the ESG expectations of our investors, customers and other stakeholders, we could experience reduced demand for our products, loss of customers, and other negative impacts on our business and results of operations.
Risks Relating to Development, Clinical Testing, Manufacturing and Regulatory Approval
Prior to our acquisition of PHP-303, we were not involved in its development and, as a result, we are dependent on Bayer having accurately reported the results and correctly collected and interpreted the data from all clinical trials conducted prior to our acquisition.
•We had no involvement with or control over PHP-303 CMC process development or pre-clinical and clinical development prior to our acquisition of PHP-303. Going forward, upon partnering the asset, we may have no control on PHP-303 lots for phase 2, 3 and registrational clinical studies.
•We are dependent on Bayer Healthcare (“Bayer”) having conducted their R&D in accordance with the applicable protocols and legal, regulatory, and scientific standards; having accurately reported the results of all clinical trials conducted prior to our acquisition; and having correctly collected and interpreted the data from these trials.
•To the extent that Bayer, or a future partner, has not done this, the clinical development, regulatory approval, or commercialization of our product and future indications associated with this product may be adversely affected.
•Interim “top-line” , preliminary and data from clinical trials that is announced or published from time to time may change subject to variation arising from different CMC/ manufacturing practices.
•From time to time, our future partner may publish interim “top-line” or preliminary data from our assets. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data becomes available.
•Preliminary or “top-line” data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we have previously published.
•As a result, interim and preliminary data should be viewed with caution until the final data are available.
•Adverse differences or contradictory data could significantly harm our profitability (milestones), reputation and our business prospects.
•Our product candidates may have serious adverse, undesirable, or unacceptable side effects which may delay or prevent marketing approval or lead to the withdrawal of approval after it has been granted.
•If such side effects are identified during the development of these product candidates or following approval, if any, we may need to abandon our development of these product candidates, the commercial profile of any approved label may be limited, or we may be subject to other significant negative consequences following marketing approval, if any.
•Undesirable side effects that may be caused by PHP-303 or our future named ADC candidates or toxins used internally, licensed out, acquired by third parties could cause us or regulatory authorities to interrupt, delay or halt clinical trials for us or for any of our future partners, collaborators or licensors and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA, the EMA, or other comparable regulatory or foreign authorities.
•PHP-303 has completed one or more clinical trials and in the trials conducted prior to our ownership and following our ownership, adverse events observed have included the following: for the two clinical trials conducted by pH Pharma, the most frequently documented treatment emergent adverse events occurred within the gastrointestinal disorders system organ class (14.0% of the 50 subjects dosed) with dyspepsia reported by 3 subjects (6.0% of 50 subjects dosed) and diarrhea, nausea, and vomiting reported by 2 subjects (4.0% each of the 50 randomized subjects). No serious adverse events or other significant adverse events were reported in the trials conducted by pH Pharma. Safety findings were consistent with the known safety profile of PHP-303, including gastrointestinal (GI) AEs which had been identified in the previous sponsor’s studies.
We, or a future strategic partner, face risks associated with the clinical development for PHP-303 and for our future ADC nominated candidates that are currently in preclinical development.
•Results of our future clinical trials conducted by Peak Bio or a strategic partner, or results from clinical trials for other similar product candidates could reveal a high and unacceptable severity and prevalence of adverse side effects.
•In such an event, our trials could be suspended or terminated and the FDA, EMA, or other comparable foreign regulatory authorities could order us to cease further development of or deny approval of our product candidates for any or all targeted indications.
•Drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete a trial or result in potential product liability claims. Additionally, if any of our product candidates receives marketing approval and we or others later identify undesirable or unacceptable side effects caused by these product candidates, a number of potentially significant negative consequences could result, including:
•regulatory authorities may withdraw approvals of any such product and require removal from the market;
•regulatory authorities may require the addition of labeling statements, specific warnings, a contraindication or field alerts to physicians and pharmacies, specialty pharmacies and other pharmacy related distribution networks (for example, oncology therapies do have inherent risks and labeling considerations that in many instances require additional regulatory labeling requirements);
•regulatory authorities may require a medication guide outlining the risks of such side effects for distribution to patients, or that we implement a risk evaluation and mitigation strategy (a “REMS”) plan to ensure that the benefits of the product outweigh its risks;
•we may be required to change the way a product is administered, including changes in dosing regimens, frequency of dose, or reduction in dosing and may require us to conduct additional clinical trials or change the labeling of a product;
•we may be subject to limitations on how we may promote the product leading to the potential for sales of the product may decrease significantly;
•third-party private or government payors may not offer, or may offer inadequate, reimbursement coverage for our product candidates, or reimbursement payments may be delayed or impossible to recover; and
•we may be subject to litigation or product liability claims; and our reputation may suffer.
•Any of these events could prevent us or any collaborators from achieving or maintaining market acceptance of our product candidates or could substantially increase commercialization costs and expenses, which in turn could delay or prevent us from generating significant revenue from the sale of our product candidates.
•Our preclinical nominated Trop2 PH1 ADC product candidate for which a target indication has yet to be determined may have known adverse effects of anti-Trop2 ADCs such as neutropenia and diarrhea exhibited by Trodelvy or stomatitis and interstitial lung disease seen for Datopotamab DXd, or may have entirely different or more severe toxicities due to a different payload. It is hard to predict how this may affect the future marketability of Trop2 PH1 ADC.
The success of our current product candidates will depend on many factors, including the following:
•we may not be able to demonstrate that any of our current product candidates is safe and effective as a treatment for the targeted indications to the satisfaction of the applicable regulatory authorities;
•the applicable regulatory authorities may require additional clinical trials of our current product candidates, which would increase our costs and prolong development;
•the results of clinical trials of our current product candidates may not meet the level of statistical or clinical significance required by the applicable regulatory authorities for marketing approval;
•the applicable regulatory authorities may disagree with the number, design, size, conduct, or implementation of our planned and future clinical trials for our current product candidates;
•the CROs that we retain to conduct clinical trials may take actions outside of our control that materially adversely impact clinical trials for our current product candidates;
•the applicable regulatory authorities may not find the data from clinical trials sufficient to demonstrate that the clinical and other benefits of our current product candidates outweigh their safety risks;
•the applicable regulatory authorities may disagree with our interpretation of data from our clinical trials or may require that we conduct additional trials;
•the applicable regulatory authorities may not accept data generated at our clinical trial sites;
•if we submit a BLA or NDA to the FDA, and it is reviewed by an advisory committee, the FDA may have difficulties scheduling an advisory committee meeting in a timely manner or the advisory committee may recommend against approval of our application or may recommend that the FDA require, as a condition of approval, additional pre-clinical studies or clinical trials, limitations on approved labeling, or distribution and use restrictions;
•the applicable regulatory authorities may require development of a risk evaluation and mitigation strategy (REMS) as a condition of approval;
•the applicable regulatory authorities may identify deficiencies in the product and process CMC development activities defining our manufacturing processes or facilities of our third-party manufacturers;
•the applicable regulatory authorities may change their approval policies or adopt new regulations;
•through our clinical trials, we may discover factors that limit the commercial viability of our current product candidates or make the commercialization of any of our current product candidates unfeasible; and
•if approved, acceptance of our current product candidates by patients, the medical community, and third-party payors; our ability to compete with other therapies to treat certain oncology indications, AATD, ARDS, NASH or other future indications of interest;
•continued acceptable safety profiles following approval of our current product candidates; and
•our ability to qualify for, maintain, enforce, and defend our intellectual property rights and claims.
We or a future strategic partner may choose to, or may be required to, suspend, repeat, or terminate our clinical trials if they are not conducted in accordance with regulatory requirements, the results are negative or inconclusive or the trials are not well designed.
•Clinical trials must be conducted in accordance with the FDA’s Good Clinical Practices and are subject to oversight by the FDA and institutional review boards at the medical institutions where the clinical trials are conducted.
•In addition, clinical trials must be conducted with product candidates produced under the FDA’s Good Manufacturing Practices, or GMP, and may require large numbers of test patients.
•Clinical trials may be suspended by the FDA at any time if the FDA finds deficiencies in the conduct of these trials or it is believed that these trials expose patients to unacceptable health risks.
•In addition, we or the FDA might delay or halt our clinical trials of a product candidate for various reasons, including:
•the product candidate may have unforeseen adverse side effects;
•the time required to determine whether the product candidate is effective may be longer than expected;
•fatalities arising during a clinical trial due to medical problems that may not be related to clinical trial treatments;
•the product candidate may not appear to be more effective than standard of care therapies;
•insufficient statistical power due to significant patient dropout or crossover to other therapies;
•insufficient patient enrollment in the clinical trials; or
•we may not be able to produce sufficient quantities of the product candidate to complete the trials.
•Furthermore, the process of obtaining and maintaining regulatory approvals for new therapeutic products is lengthy, expensive, and uncertain.
•It can vary substantially, based on the type, complexity and novelty of the product involved.
•Accordingly, our current product candidates or any of our other future product candidates could take a significantly longer time to gain regulatory approval than we expect or may never gain approval, which would have a significant adverse impact on our business and results of operations.
We are subject to environmental and other risks.
•We use certain hazardous materials in connection with our research and manufacturing activities. In the event such hazardous materials are stored, mishandled, incorrectly disposed, or accidentally released into the environment in violation of law or any permit, we could be subject to loss of our permits, government fines or penalties and/or other adverse governmental or private actions.
•The levy of a substantial fine or penalty, the payment of significant environmental remediation costs or the loss of a permit or other authorization to operate or engage in our ordinary course of business could materially adversely affect our business.
•We currently lease facilities in California built above an underground water table, that may be subject to continuing moisture and mold mitigation that may put sensitive and expensive lab equipment and facilities at risk and may reduce their operational lives, require frequent decontamination and recertification cycles to maintain operationality. Together with strict local environmental laws, we may be forced to shut down operations for significant periods of time. As we grow, we may seek out other nearby facilities that are prone to similar and/or other environmental issues and resultant impact is unknown at this juncture but could pose future risks which may require us to pay significant clean-up or other costs in order to maintain our operations on those properties. Such events include, but are not limited to, changes in environmental laws, discovery of new contamination, or unintended exacerbation of existing contamination. The occurrence of any such event could materially affect our ability to continue our business operations on those properties.
Risks Relating to Our Dependence on Third Parties
We rely, and expect to continue to rely, on third parties, including independent investigators and CROs, to conduct our clinical trials.
•If these CROs do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our product candidates, or such approval or commercialization may be delayed, and our business could be substantially harmed.
•For PHP-303 in clinical trials, we rely on drug products that were produced and vialed by our contract manufacturers. For the foreseeable future, we will continue to rely on contract manufacturers to produce sufficient quantities of our product candidates for use in our clinical trials.
•Contract manufacturers have a limited number of facilities in which our product candidates can be produced.
•Contract manufacturers may not perform or may discontinue their business for the time required by us to successfully produce and market our product candidates.
•We have relied upon and plan to continue to rely upon independent clinical investigators and CROs to conduct our clinical trials and to monitor and manage data for our ongoing clinical programs.
•We rely on these parties for the execution of our clinical trials and control only certain aspects of these parties’ activities.
•Nevertheless, we are responsible for ensuring that each of our studies and trials is conducted in accordance with the applicable protocol and legal, regulatory and scientific standards, and our reliance on these third parties does not relieve us of our regulatory responsibilities. Such standards may change, affecting the ability of contract manufacturers to produce our product candidates on the schedule we require for our clinical trials.
•Our contract manufacturers may be subject to existing and new environmental compliance related legislation that may adversely impact our expenses or our timelines.
•We and our independent investigators and CROs are required to comply with GxP requirements, which are regulations and guidelines enforced by the FDA, the Competent Authorities of the Member States of the European Economic Area, and comparable foreign regulatory authorities for all of our product candidates in clinical development. Regulatory authorities enforce these GxP requirements through periodic inspections of trial sponsors, principal investigators and trial sites. At any point in time, the FDA may revoke or suspend the license of our contract manufacturer for failure to maintain standards resulting in business losses for us.
•If we fail to exercise adequate oversight over any of our independent investigators or CROs or if we or any of our independent investigators or CROs fail to comply with applicable GxP requirements, the clinical data generated in our clinical trials may be deemed unreliable and the FDA, the EMA, or foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that upon a regulatory inspection of us or our independent investigators or CROs, such regulatory authority will determine that any of our clinical trials complies with GxP requirements. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process.
•Further, these independent investigators and CROs are not our employees and we are not able to control, other than by contract, the amount of resources, including time, which they devote to our clinical trials.
•If our independent investigators or CROs fail to devote sufficient resources to the development of our product candidates, or if their performance is substandard, it may delay or compromise the prospects for approval and commercialization of our product candidates.
•In addition, the use of third-party service providers requires us to disclose our proprietary information to these parties, which could increase the risk that this information is misappropriated.
•If any of our relationships with our independent investigators or CROs terminate, we may not be able to enter into arrangements with alternative independent investigators or CROs or to do so on commercially reasonable terms.
•Switching or adding additional investigators or CROs involves additional cost and potential delays and requires our management’s time and focus.
•In addition, there is a natural transition period when a new independent investigator or CRO commences work. As a result, delays could occur, which could materially impact our ability to meet our desired clinical development timelines.
•If our independent investigators or CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to a failure to adhere to our clinical protocols, regulatory requirements, or for other reasons, our clinical trials may be extended, delayed, or terminated and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates.
•As a result, our results of operations and the commercial prospects for our product candidates would be harmed, our costs could increase and our ability to generate revenue could be delayed.
Manufacturing biotherapeutics, especially ADCs, is difficult and complex, and requires facilities specifically designed and validated for this purpose and we will use Contract Development Manufacturing Organizations (CDMOs) through various contract-manufacturing arrangements.
•We currently rely on third-party CDMOs for the production of clinical supply of our product candidates and intend to rely on CDMOs for the production of commercial supply of our product candidates, if approved. Our dependence on CDMOs may impair the development of our product candidates and may impair the commercialization of our product candidates, which would adversely impact our business and financial position.
•We have limited personnel with experience in manufacturing and CMC development requirements and we do not own facilities for manufacturing our product candidates.
•Instead, we rely on and expect to continue to rely on CDMOs for the supply of cGMP grade clinical trial materials, performance of process and product development activities to facilitate supply of commercial quantities of our product candidates.
•If approved, reliance on CDMOs may expose us to more risk than if we were to manufacture our product candidates ourselves. However, the shortage of, and diversion of, certain raw material supplies due to the COVID-19 pandemic response have demonstrated that both internal and external manufacturing activities have been subject to disruption and risk.
•Bayer previously provided clinical supplies for PHP-303 and certain transitional services.
•We have transitioned the clinical supply manufacture for these product candidates to CDMOs while demonstrating the manufactured product is equivalent to the Bayer form.
•We will follow all relevant regulatory guidance for the development and manufacture of our products.
•Given our preclinical oncology candidates are derived from mammalian cell culture, all requirements for prevention of adventitious agents are followed.
•While we provide oversight of manufacturing activities, we do not and will not control the execution of our manufacturing activities by, and are or will be essentially dependent on, our CDMOs for compliance with cGMP requirements for the manufacture of our product candidates.
•We aim to minimize this risk by entering into quality agreements, by auditing the CDMOs and by ongoing review of all activities linked to product manufacture.
•Due to this dependence on CDMOs, we are potentially subject to the risk that our product candidates may have manufacturing defects that we have limited ability to prevent.
•If a CDMO cannot successfully manufacture material that conforms to our specifications and the regulatory requirements it may delay ongoing clinical studies as we will not be able to secure or maintain regulatory approval for the use of our investigational medicinal product candidates in clinical trials, or for commercial distribution of our product candidates, if approved.
•In addition, while we have limited direct control over the ability of our CDMOs to maintain adequate quality control, quality assurance and qualified personnel, we aim to maintain control through the use of quality agreements and manufacturing supply agreements.
•If the FDA, the EMA, or the comparable foreign regulatory authority does not approve these facilities for the manufacture of GMP certified products including our product candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would delay our development program and significantly impact our ability to develop, obtain regulatory approval for or commercialize our product candidates, if approved.
•In addition, any failure to achieve and maintain compliance with these laws, regulations and standards could subject us to the risk that we may have to suspend the manufacturing of our product candidates or that obtained approvals could be revoked.
•Furthermore, CDMOs may breach existing agreements they have with us because of factors beyond our control.
•They may also terminate or refuse to renew their agreement at a time that is costly or otherwise inconvenient for us.
•In addition, our preclinical oncology candidate(s) are biologics and the manufacture of biologics involves expensive and complex processes and worldwide capacity at CDMOs for the manufacture of biologics is currently limited.
•Chemical synthetic routes for toxins are complex multistep processes and CDMOs may find it difficult or be unable to reproduce our processes at a larger scale. Yield loss at each step could result in wastage of expensive raw material intermediates and make it difficult to manufacture sufficient quantities of toxin.
•The number of CDMOs that can perform all ADC services- process development, manufacture an antibody, a linker-toxin, perform large-scale conjugations and perform necessary analytical quality control evaluations are few and heavily sought after.
•There are a designated number of manufacturing slots that a CDMO facility can support per year in between manufacturing and disinfecting cycles. Due to demand, these slots must be reserved months ahead of time, and if for any reason (e.g., supply chain issues) we cannot use our reserved slot, we may have to bear additional costs, in addition to lost time.
•The number of CDMOs that can fill-finish a toxic biologic with cytotoxic properties is limited.
•In addition, we may need to record period charges associated with manufacturing or inventory failures or other production-related costs that are not absorbed into inventory or incur costs to secure additional sources of capacity.
•Furthermore, there are inherent uncertainties associated with forecasting future demand, especially for newly introduced products of ours, and consequently we may over or underestimate our own demands resulting in losses.
•To maintain an adequate future supply to keep up with the potential for a growing demand for our future products, we will need to contract with CDMOs well in advance of any future product launch(s) and will need to maintain and ensure a state of regulatory compliance at all our CDMO production sites.
•If we for any reason fail to obtain future capacity enhancements on schedule, fail to operate at or near capacity, fail to maintain a state of regulatory compliance, or if actual demand significantly exceeds our future internal forecasts, we may be unable to maintain an adequate supply of our product to meet all demand.
•Furthermore, certain of our raw materials (Intermediates) and supplies required for the future production of our future products we make for ourselves, or future collaborators, may only be available only through sole source suppliers (the only recognized supplier available to us) or single source suppliers (the only approved supplier for us among other sources), and such raw materials cannot be obtained from other sources without significant delay or at all.
•If such sole source or single source suppliers were to limit or terminate production or otherwise fail to supply these materials for any reason, such failures could also have a material adverse impact on our future product sales and our business operations.
•Any prolonged interruption in the operations of our contractors’ manufacturing facilities could result in cancellations of shipments, loss of product in the process of being manufactured, or a shortfall or stock-out of available product for clinical trials or other research activities, any of which could have a material adverse impact on our business. A number of factors could cause prolonged interruptions, including:
•the inability of a supplier to provide raw materials used for manufacture of our products;
•equipment obsolescence, malfunctions or failures;
•product contamination problems;
•damage to a facility, labs, offices due to natural disasters (e.g., earthquakes can pose a particular risk to our California facilities which are located in areas where earthquakes could occur);
•changes in FDA regulatory requirements or standards that require modifications to our manufacturing processes;
•action by the FDA or by us that results in the halting or slowdown of production of one or more of our products due to regulatory issues;
•a contract manufacturer going out of business or failing to produce product as contractually required; and
•other similar factors.
Because manufacturing processes and those of our contractors are highly complex and are subject to a lengthy FDA approval process, alternative qualified production capacity may not be available on a timely basis or at all. Difficulties or delays in our or our contractors’ manufacturing and supply of existing or new products could increase our costs, cause us to lose revenue or market share, damage our reputation and could result in a material adverse effect on our product sales, financial condition, and results of operations.
•This situation has been exacerbated in the recent past due to the additional constraints caused by the priority given to the manufacture of COVID-19 therapeutics and vaccines, and the resultant decrease in available CDMO capacity.
•CDMO capacity in relation to the manufacture of clinical trial and commercial supplies is a key focus and most likely means additional CDMO capacity will be a future priority to secure sufficient supplies.
•If we or our partners were unable to find an acceptable CDMO within a reasonable timeframe, our clinical trials could be delayed or our commercial activities could be negatively impacted.
•We rely on and will continue to rely on CDMOs to purchase from third-party suppliers the raw materials meeting our specifications that are necessary to produce our product candidates.
•We do not and will not have control over the process or timing of the acquisition of these raw materials by our CDMOs. Moreover, we currently do not have any agreements for the production of these raw materials. Supplies of raw material could be interrupted from time to time and we cannot be certain that alternative supplies could be obtained within a reasonable timeframe, at an acceptable cost, or at all.
•In addition, a disruption in the supply of raw materials could delay the commercial launch of our product candidates, if approved, or result in a shortage in supply, which would impair our ability to generate revenues from the sale of our product candidates.
•Growth in the costs and expenses of raw materials and intermediates may also impair our ability to cost effectively manufacture our product candidates. There are a limited number of suppliers for the raw materials that we may use to manufacture our product candidates and we may need to assess alternate suppliers to prevent a possible disruption of the manufacture of our product candidates.
•The recent restrictions imposed by various governments, including the United States, United Kingdom, and EU, among others, on use of certain raw materials required for the manufacture of therapeutics and vaccines in response to the current COVID-19 pandemic has demonstrated this vulnerability.
•This vulnerability, for not only our company but other companies large and small, likely will continue in the coming months or years given the pandemic situation.
•We rely on our CDMOs to conduct all product and process development activities necessary to support regulatory submissions.
•These activities are critical to meeting the regulatory expectations and if these studies are not considered adequate by FDA, the EMA or comparable foreign regulatory authority then significant delays could be encountered as a result.
•This risk is mitigated by following all relevant guidance’s and using staff knowledge and previous experience to guide the product and process development programs but is still a potential risk of regulatory non-compliance.
•Finding new CDMOs or third-party suppliers involves additional cost and requires our management’s time and focus.
•In addition, there is typically a transition period when a new CDMO commences work.
•Although we generally do not begin a clinical trial unless we believe we have on hand, or will be able to obtain, a sufficient supply of our product candidates to complete the clinical trial, any significant delay in the supply of our product candidates or the raw materials needed to produce our product candidates, could considerably delay conducting our clinical trials and potential regulatory approval of our product candidates.
•As part of their manufacture of our product candidates, our CDMOs and third-party suppliers are expected to comply with and respect the proprietary rights of others.
•If a CDMO or third-party supplier fails to acquire the proper licenses or otherwise infringes the proprietary rights of others in the course of providing services to us, we may have to find alternative CDMOs or third-party suppliers or defend against claims of infringement, either of which would significantly impact our ability to develop, obtain regulatory approval for or commercialize our product candidates, if approved.
•We intend to enter into strategic relationships with third parties, based on a product-by-product assessment, for the development of some of our product candidates.
•If we fail to enter into these arrangements, our business, development and commercialization prospects could be adversely affected.
•Our development program for our product candidates, particularly as we enter late-stage development for some of our product candidates, will require substantial additional funds.
•We may potentially enter into strategic relationships with pharmaceutical, biopharmaceutical or other partners for the continued development of our product candidates
•Alternatively, we may seek to sell or out-license one or more of our product candidates.
•The types of development arrangements referred to above are complex and time-consuming to negotiate and document, and we may not be able to enter into these arrangements on favorable terms or at all.
•In addition, we face significant competition from other companies in seeking out these types of development arrangements.
•If we are successful in entering into such an arrangement, we will be subject to other risks, including our inability to control the amount of time and resources the third party will dedicate to our product candidates, financial or other difficulties experienced by such third party, relinquishing important rights to such third party, and the arrangement failing to be profitable to us.
•If we are unable to enter into an appropriate arrangement for the development of our product candidates, we may have to reduce, delay, or terminate the development of such product candidates.
•We could also seek to sell or out-license one or more of our product candidates. If we, instead, decide to increase our expenditure to fund development activities on our own, we will need to obtain additional capital, which may not be available to us on acceptable terms or at all. As a result, our business may be substantially harmed.
In some circumstances we may rely on current and future collaborators to assist in our R&D activities. If any of our partners do not satisfy their obligations under our agreements with them, or if they terminate our licenses, partnerships, or collaborations with them, we may not be able to develop or commercialize our licensed or partnered product candidates as planned.
•Our existing relationship with Bayer for PHP-303 (formally BAY 85-8501) granted us assignment, license, development and commercialization rights that we entered into in 2017.
•We intend to continue to develop alliances with third party collaborators to develop and market our current and future product candidates.
•We may not be able to locate or attract third party collaborators to license to, develop, and market other product candidates and we may lack the capital and resources necessary to develop all our product candidates alone.
•If our collaborators do not prioritize and commit substantial resources to programs associated with our product candidates in timely fashion, we may be unable to commercialize our product candidates, which would limit our ability to generate revenue and become profitable.
•Our partner(s) might not fulfill all of their obligations under these agreements, and in certain circumstances including our licensing agreement with, they or we may terminate our partnerships with them.
•In either event, we may be unable to assume the development and commercialization responsibilities covered by these agreements or enter into alternative arrangements with a third-party to develop and commercialize product candidates.
•If a future partner elected to promote alternative products and product candidates such as its own products and product candidates in preference to those licensed with us, does not devote an adequate amount of time and resources to our product candidates or is otherwise unsuccessful in its efforts with respect to our product candidates, the
development and commercialization of product candidates covered by the agreements could be delayed or terminated and our business and financial condition could be materially and adversely affected.
•Accordingly, our ability to receive any revenue from future product candidates’ collaboration covered by these future agreements is dependent on the efforts of our future partners.
•If a future partner terminates or breaches its agreements with us, otherwise fails to complete its obligations in a timely manner or alleges that we have breached our contractual obligations under these agreements, the chances of successfully developing or commercializing product candidates under the collaboration could be materially and adversely affected.
•We could also become involved in disputes with a future or current partner, which could lead to delays in or termination of our development and commercialization programs and time-consuming and expensive litigation or arbitration. Furthermore, termination of an agreement by a partner could have an adverse effect on the share price.
Risks Relating to Intellectual Property
We rely on patents and other intellectual property rights to protect our product candidates, the obtainment, enforcement, defense, and maintenance of which may be challenging and costly. Failure to enforce or protect these rights adequately could harm our ability to compete and impair our business.
•Our commercial success depends in part on obtaining and maintaining patents and other forms of intellectual property protection, for example, for compositions-of-matter of our product candidates, formulations of our product candidates, analogs of our toxins, linkers or antibodies, methods used to manufacture our product candidates, methods for manufacturing of the final drug product candidates, and methods of using our product candidates for the treatment of the indications we are developing or plan to develop, or on in-licensing such rights.
•Our patent portfolio comprises patents and patent applications which cover our PHP-303 product candidate from which the licenses were exclusively purchased from Bayer and their respective assignments of those patents and patent applications which we acquired from Bayer have been registered with the relevant authorities in key territories.
•Our other patent portfolio includes a series of patents covering our intellectual property rights around our Toxin PH1 (US 2019/0233430 A1). Following acceptance of this SEC filing, Peak Bio will file composition of matter patents covering our Trop2 antibody, ADC, it’s immunostimulatory properties, and ability to combine with checkpoint blockade.
•There is no assurance that our pending patent applications will result in issued patents, or if issued as patents, will include claims with sufficient scope of coverage to protect our product candidates, or that any pending patent applications will be issued as patents in a timely manner.
•Further, the patent prosecution process is expensive and time-consuming and we or our licensors may not be able to prepare, file and prosecute all necessary or desirable patent applications for a commercially reasonable cost or in a timely manner or in all jurisdictions.
•It is also possible that we or our licensors may 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 for them.
•Moreover, depending on the terms of any future in-licenses to which we may become a party, we may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, covering technology in-licensed from third parties. Therefore, these patents and patent applications may not be prosecuted and enforced in a manner consistent with the best interests of our business.
The issuance, scope, validity, enforceability, and commercial value of our and our current or future licensors’ patent rights are highly uncertain.
•Our and our licensors’ pending and future patent applications may not result in issued patents that protect our technology or product candidates, in whole or in part, or that effectively prevent others from commercializing competitive technologies and product candidates.
•The patent examination process may require us or our licensors to narrow the scope of the claims of our or our licensors’ pending and future patent applications, which may limit the scope of patent protection that may be obtained, and we cannot assure that all of the potentially relevant prior art relating to our patents and patent
applications has been found. If such prior art exists, it can invalidate a patent or prevent a patent application from being issued as a patent.
•Even if patent applications do successfully issue as patents and even if such patents cover our product candidates, third parties may initiate an opposition, interference, reexamination, post grant review, inter partes review, nullification or derivation action in courts or before patent offices, or similar proceedings challenging the validity, enforceability, or scope of such patents, which may result in the patent claims being narrowed or invalidated.
•Our and our licensors’ patent applications cannot be enforced against third parties practicing the technology claimed in such applications unless and until a patent is issued from such patent applications, and then only to the extent the issued claims cover the technology. And because patent applications are confidential for a period of time after filing, and some remain so until issued, we cannot be certain that we or our licensors were the first to file any patent application related to our product candidates.
•Furthermore, in the United States, if third parties have filed such patent applications on or before March 15, 2013, the date on which the United States changed from a first to invent to a first to file patent system, an interference proceeding can be initiated by such third parties to determine who was the first to invent any of the subject matter covered by the patent claims of our applications.
•If third parties have filed such applications after March 15, 2013, a derivation proceeding can be initiated by such third parties to determine whether our invention was derived from such third parties’ product candidates, and even where we have a valid and enforceable patent, we may not be able to exclude others from practicing our invention where the other party can show that they used the invention in commerce before our filing date or the other party benefits from a compulsory license.
With respect to certain patents, we enjoy only limited geographical protection, and as a consequence we may not be able to protect our intellectual property rights throughout the world.
•It would be prohibitively expensive to file and prosecute patent applications and maintain and defend patents covering our product candidates in all countries throughout the world and competitors may use our and our licensors’ technologies in jurisdictions where we have not obtained patent protection to develop their competitor’s own product candidates and, further, may export otherwise infringing product candidates to territories where we and our licensors have patent protection, but enforcement rights are not as strong as that in the United States or Europe.
•As a result, these product candidates may compete with our product candidates, and our and our licensors’ patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
•Further, may decide to abandon national and regional patent applications before grant. The examination of each national or regional patent application is an independent proceeding. As a result, patent applications in the same family may issue as patents in some jurisdictions, such as in the United States, but may issue as patents with claims of different scope or may even be refused in other jurisdictions, such as in China, which has different requirements for patentability and it is also quite common that depending on the country, the scope of patent protection may vary for the same product or technology.
•As maintaining patents in multiple countries over their lifetimes (usually a period of 20 years) is expensive, we may decide to abandon granted national and regional patent applications for financial considerations, or, strategically, when projects are reprioritized, or for any other reason. In hindsight, these decisions may hurt us, our revenue stream from licensing activities, and ultimately profitability.
•In addition, the laws of some jurisdictions do not protect intellectual property rights to the same extent as the laws or rules and regulations in the United States, The UK and Europe, and many companies have encountered significant difficulties in protecting and defending such rights in such jurisdictions.
•The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, which could make it difficult for us to stop the infringement of our patents or marketing of competing product candidates in violation of our proprietary rights generally.
•Proceedings to enforce our patent rights in other jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing as patents, and could provoke third parties to assert claims against us. Should we seek legal redress, we may not prevail or if we do prevail, the damages or other remedies awarded may not be meaningful.
•As a result, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
•While we intend to protect our intellectual property rights in our expected significant markets, we cannot ensure that we will be able to initiate or maintain similar efforts in all jurisdictions in which we may wish to market our product candidates.
•Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate, which may have an adverse effect on our ability to successfully commercialize our product candidates in all of our expected significant foreign markets.
•If we or our licensors encounter difficulties in protecting, or are otherwise precluded from effectively protecting, the intellectual property rights important for our business in such jurisdictions, the value of these rights may be diminished, and we may face additional competition from others in those jurisdictions.
•Another risk we face is that some countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties and some countries limit the enforceability of patents against government agencies or government contractors. As a result, in those countries, the patent owner may have limited remedies, which could materially diminish the value of such patents.
Our intellectual property rights may not adequately protect our technologies and product candidates and may not necessarily address all potential threats to our competitive advantage.
•The degree of protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business, or permit us to maintain our competitive advantage. For example:
•others may be able to make compounds that are the same as or similar to our product candidates but that are not covered by the claims of the patents that we own or have exclusively licensed;
•the patents of third parties may impair our ability to develop or commercialize our product candidates;
•the patents of third parties may be extended beyond the expected patent term and thus may impair our ability to develop or commercialize our product candidates;
•we or our licensors or any future strategic collaborators might not have been the first to conceive or reduce to practice the inventions covered by the issued patents or pending patent applications that we own or have exclusively licensed;
•we or our licensors or any future strategic collaborators might not have been the first to file patent applications covering our inventions, our product candidates, or uses of the product candidates in the indications under our development or to be developed;
•it is possible that the pending patent applications that we own or have exclusively licensed may not lead to issued patents;
•issued patents that we own or have exclusively licensed may not provide us with any competitive advantage, or may be held invalid or unenforceable, as a result of legal challenges by our competitors;
•issued patents that we own or have exclusively licensed may not provide coverage for all aspects of our product candidates in all countries, such as for uses of our product candidates in the indications under our development or to be developed;
•others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights;
•our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive product candidates for sale in our major commercial markets;
•others performing manufacturing or testing for us using our product candidates or technologies could use the intellectual property of others without obtaining a proper license; or
•our or our licensors’ inventions or technologies may be found to be not patentable; and we may not develop additional technologies that are patentable.
•We may become subject to third parties’ claims alleging infringement of third-party patents and proprietary rights, or we may be involved in lawsuits to protect or enforce our patents and other proprietary rights, which could be costly and time consuming, delay or prevent the development and commercialization of our product candidates, or put our patents and other proprietary rights at risk.
Our commercial success depends, in part, upon our ability to develop, manufacture, market, sell and partner our product candidates without alleged or actual infringement, misappropriation, or other violation of the patents and proprietary rights of third parties. Litigation relating to patents and other intellectual property rights in the biopharmaceutical and pharmaceutical industries is common, including patent infringement lawsuits and interferences, oppositions, and reexamination proceedings before the U.S. Patent and Trademark Office (the “USPTO”), and foreign patent offices.
•The various markets in which we plan to operate are subject to frequent and extensive litigation regarding patents and other intellectual property rights. In addition, many companies in intellectual property-dependent industries, including in the biopharmaceutical and pharmaceutical industries, have employed intellectual property litigation as a means to gain an advantage over their competitors.
•Numerous U.S., European, and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing product candidates.
•Some claimants may have substantially greater resources than we have and may be able to sustain the costs of complex intellectual property litigation to a greater degree and for longer periods of time than we could.
•In addition, patent holding companies that focus solely on extracting royalties and settlements by enforcing patent rights may target us. As the biopharmaceutical and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may be subject to claims of infringement of the intellectual property rights of third parties.
•We may be subject to third-party claims including infringement, interference or derivation proceedings, post-grant review and inter partes review before the USPTO, or similar adversarial proceedings or litigation in the U.S. and other jurisdictions.
•Even if we believe such claims are without merit, a court of competent jurisdiction could hold that these third-party patents are valid, enforceable, and infringed, and the holders of any such patents may be able to block our ability to commercialize the applicable product unless we obtained a license under the applicable patents, or until such patents expire or are finally determined to be invalid or unenforceable.
•Similarly, if any third-party patents were held by a court of competent jurisdiction to cover aspects of our compositions, formulations, or methods of treatment, prevention, or use, the holders of any such patents may be able to block our ability to develop and commercialize the applicable product unless we obtained a license or until such patent expires or is finally determined to be invalid or unenforceable.
•In addition, defending such claims would cause us to incur substantial expenses and could cause us to pay substantial damages, if we are found to be infringing a third party’s patent rights.
•These damages potentially include increased damages and attorneys’ fees if we are found to have infringed such rights willfully.
•Any of our patents may be challenged, narrowed, circumvented, or invalidated by third parties.
•The issuance of a patent is not conclusive as to its inventorship, scope, validity, or enforceability, and our patents may be challenged in the courts or patent offices in the United States and abroad.
•We may be subject to a third party pre-issuance submission of prior art to the USPTO or become involved in opposition, derivation, revocation, reexamination, post- grant and inter partes review, or interference proceedings challenging our patent rights or the patent rights of others.
•An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights.
•Moreover, we may have to participate in interference proceedings declared by the USPTO to determine priority of invention or in post-grant challenge proceedings, such as oppositions in a foreign patent office, that challenge priority of invention or other features of patentability.
•Such proceedings also may result in substantial cost and require significant time from us, even if the eventual outcome is favorable to us.
•Further, if a patent infringement suit is brought against us or our third-party service providers, our development, manufacturing, or sales activities relating to the product or product that is the subject of the suit may be delayed or terminated.
•As a result of patent infringement claims, or in order to avoid potential infringement claims, we may choose to seek, or be required to seek, a license from the third party, which would be likely to include a requirement to pay license fees or royalties or both.
•These licenses may not be available on acceptable terms or at all. Even if a license can be obtained on acceptable terms, the rights may be nonexclusive, which would give our competitors access to the same intellectual property rights.
•If we are unable to enter into a license on acceptable terms, we could be prevented from commercializing one or more of our product candidates, or forced to modify such product candidates, or to cease some aspect of our business operations, which could harm our business significantly.
•We might, if possible, also be forced to redesign our product candidates so that we no longer infringe the third-party intellectual property rights, which may result in significant cost and delay to us, or which redesign could be technically infeasible.
•Any of these events, even if we were ultimately to prevail, could require us to divert substantial financial and management resources that we would otherwise be able to devote to our business.
•If we were to initiate legal proceedings against a third party to enforce a patent covering one of our product candidates, the defendant could counterclaim that our patent is invalid or unenforceable. In patent litigation in the United States and in Europe, defendant counterclaims alleging invalidity or unenforceability are commonplace.
•Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, for example, lack of novelty, obviousness, or non-enablement. Third parties might allege unenforceability of our patents because someone connected with prosecution of the patent withheld relevant information, or made a misleading statement, during prosecution.
•The outcome of proceedings involving assertions of invalidity and unenforceability during patent litigation is unpredictable.
•With respect to the validity of patents, for example, we cannot be certain that there is no invalidating prior art of which we and the patent examiner were unaware during prosecution.
•There is a risk that in connection with such proceedings, a court will decide that a patent of ours is invalid or unenforceable, in whole or in part, and that we do not have the right to stop the other party from using the invention at issue.
•If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our product candidates. There is also a risk that, even if the validity of such patents is upheld, the court will construe the patent’s claims narrowly or decide that we do not have the right to stop the other party from using the invention at issue on the grounds that our patent claims do not cover the invention.
•Even if we establish infringement, the court may decide not to grant an injunction against further infringing activity and instead award only monetary damages, which may or may not be an adequate remedy.
•An adverse outcome in a litigation or proceeding involving one or more of our patents could limit our ability to assert those patents against those parties or other competitors, and, may curtail or preclude our ability to exclude third parties from making and selling similar or competing product candidates.
•In addition, if the breadth or strength of protection provided by our patents is threatened, it could dissuade companies from collaborating with us to license, develop, or commercialize our current or future product candidates.
•Furthermore, our patents and other intellectual property rights also will not protect our technology if competitors and other third parties design around our protected technology without infringing our patents or other intellectual property rights. For example, a third party may develop a competitive product that provides benefits similar to our product candidates but that uses a technology that falls outside the scope of our patent protection.
•Our competitors may also seek approval to market generic versions of any approved products and in connection with seeking such approval may claim that our patents are invalid, unenforceable, or not infringed. In these circumstances, we may need to defend or assert our patents, or both, including by filing lawsuits alleging patent infringement.
•In any of these types of proceedings, a court or other agency with jurisdiction may find our patents invalid or unenforceable, or that our competitors are competing in a non-infringing manner. Thus, even if we have valid and enforceable patents, these patents still may not provide protection against competing products or processes sufficient to achieve our business objectives.
•If the patent protection provided by the patents and patent applications we hold or pursue with respect to our product candidates is not sufficiently broad to impede such competition, our ability to successfully commercialize our product candidates could be negatively affected.
•Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.
•Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our technical and management personnel from their normal responsibilities. Such litigation or proceedings could substantially increase our operating losses and reduce our resources available for development activities.
•We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings.
•Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their substantially greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have an adverse effect on our ability to compete in the marketplace.
•There could also be public announcements of the results of hearings, motions, or other interim proceedings or developments.
•If securities analysts or investors view these announcements in a negative light, the price of our stock could be adversely affected.
•We may not identify relevant third-party patents or may incorrectly interpret the relevance, scope or expiration of a third-party patent which might adversely affect our ability to develop, manufacture and market our product candidates.
We cannot guarantee that any of our, our licensors’, or the previous owners’ patent searches or analyses, including but not limited to the identification of relevant patents, the scope of patent claims, or the expiration of relevant patent applications or patents, are complete or thorough, nor can we be certain that we have identified each and every third-party patent and patent application in the United States, Europe and elsewhere that is relevant to or necessary for the commercialization of our product candidates in any jurisdiction.
•For example, in the United States, patent applications filed before November 29, 2000 and, upon request, certain patent applications filed after that date that will not be filed outside the United States, remain confidential until those patent applications issue as patents.
•Patent applications in the United States, EU, and elsewhere are published approximately 18 months after the earliest filing for which priority is claimed, with such earliest filing date being commonly referred to as the priority date. Therefore, patent applications covering our product candidates could have been filed by others without our knowledge, including any such patent applications that may claim priority from patent applications for patents that we have determined will expire before we commercialize our product candidates.
Additionally, pending patent applications that have been published can, subject to certain limitations, be later amended in a manner that could cover our product candidates or the use of our product candidates.
•As we study our product candidates during development, we may learn new information regarding their structure, composition, properties, or functions that may render third-party patent applications or patents that we had not identified as being, or that we had not believed to be, relevant to our product candidates instead to be relevant to or necessary for the commercialization of our product candidates in a jurisdiction.
•The scope of a patent claim is determined by an interpretation of the law, the written disclosure in the patent, and the patent’s prosecution history.
•Our interpretation of the relevance or the scope of a patent or a pending patent application may be incorrect.
•We may incorrectly determine that our product candidates are not covered by a third-party patent or may incorrectly predict whether a third party’s pending patent application will issue with claims of relevant scope.
•Our determination of the expiration date or the possibility of an extension of patent term of any patent in the United States, Europe, or elsewhere that we consider relevant also may be incorrect.
•Any of the foregoing circumstances, failures, or errors may negatively impact our ability to develop and market our product candidates.
•If we fail to comply with our obligations under our existing and any future intellectual property licenses with third parties, we could lose license rights that are important to our business, and our business may be substantially harmed as a result.
If we or our licensors fail to maintain the patents and patent applications covering our product candidates or if we or our licensors otherwise allow our patents or patent applications to be abandoned or lapse, our competitors might be able to enter the market, which would hurt our competitive position and could impair our ability to successfully commercialize our product candidates in any indication for which they are approved.
•We are party to agreements with Bayer, under which we in-licensed, were assigned and acquired certain intellectual property certain patents and patent applications related to our business.
•We may enter into additional license agreements in the future.
•Future license agreements are likely to impose various diligence, milestone payment, royalty, insurance, and other obligations on us.
•We may not be successful in maintaining necessary rights to our product candidates or obtaining patent or other intellectual property rights important to our business through acquisitions and in-licenses.
•We currently own and have in-licensed rights to intellectual property, including patents, patent applications and know-how, relating to our product candidates, and our success will likely depend on maintaining these rights.
•Because our programs may require the use of proprietary rights held by third parties, the growth of our business will likely depend in part on our ability to continue to acquire, in-license, maintain, or use these proprietary rights. Currently, we hold the research license for DNA constructs to produce antibodies at laboratory scale for in vitro and animal testing. We will need to obtain commercial licenses if we go into manufacturing, clinical trials, and finally commercialization. We may have to offer annual fees for rights-for-access for many years and royalties from our sales as part of obtaining commercial manufacturing license. We may have to seek other commercial licenses and offer significant part of our revenues.
•In addition, our product candidates may require specific formulations to work effectively and the rights to those formulations or methods of making those formulations may be held by others.
•We may be unable to acquire or in-license any compositions, methods of use, processes, or other third-party intellectual property rights that we identify as necessary for the development and commercialization of our product candidates.
•The licensing and acquisition of third-party intellectual property rights is a competitive area, and a number of more established companies also are pursuing strategies to license or acquire third-party intellectual property rights that we may consider attractive.
•These established companies may have a competitive advantage over us due to their size, cash resources, and greater clinical development and commercialization capabilities.
•In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We may also be unable to license or acquire third-party intellectual property rights on a timely basis, on terms that would allow us to make an appropriate return on our investment, or at all.
•Even if we are able to obtain a license to intellectual property of interest, we may not be able to secure exclusive rights, in which case others could use the same rights and compete with us.
•If we are unable to successfully obtain a license to third-party intellectual property rights necessary for the development of our product candidates or a development program on acceptable terms, we may have to abandon development of our product candidates or that development program.
•Obtaining and maintaining our 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 over the lifetime of a patent.
•In addition, the USPTO and other foreign patent agencies require compliance with a number of procedural, documentary, fee payment, and other similar provisions during the patent application process. While an inadvertent failure to make payment of such fees or to comply with such provisions 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 such non-compliance will result in the abandonment or lapse of the patent or patent application, and the partial or complete loss of patent rights in the relevant jurisdiction.
•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, and non-payment of fees and failure to properly legalize and submit formal documents within prescribed time limits.
We may be subject to claims challenging the inventorship of our patents and patent applications or ownership of our intellectual property.
•In particular, we may be subject to claims that former employees or other third parties have an interest in our patents or other intellectual property as an inventor or co-inventor.
•While it is our policy to require our employees and contractors who may be involved in the conception or development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property that we regard as our own.
•For example, the assignment of intellectual property rights may not be self-executing or the assignment agreements may be breached, countries may have different assignment of intellectual property rights or we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing our product candidates.
•Litigation may be necessary to defend against these and other claims challenging inventorship.
•If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property.
•Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.
•Changes in patent laws or patent jurisprudence could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.
•As is the case with other biopharmaceutical and pharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents.
•Obtaining and enforcing patents in the biopharmaceutical and pharmaceutical industries involve both technological complexity and legal complexity.
•Therefore, obtaining and enforcing biopharmaceutical and pharmaceutical patents is costly, time-consuming and inherently uncertain.
•In addition, the America Invents Act (the “AIA”), which was passed in September, 2011, resulted in significant changes to the U.S. patent system.
•An important change introduced by the AIA is that, as of March 16, 2013, the United States transitioned to a “first-to-file” system for deciding which party should be granted a patent when two or more patent applications are filed by different parties claiming the same invention.
•A third party that files a patent application in the USPTO after that date but before us could therefore be awarded a patent covering an invention of ours even if we made the invention before it was made by the third party. This will require us to be cognizant going forward of the time from invention to filing of a patent application, but circumstances could prevent us from promptly filing patent applications on our inventions.
•Among some of the other changes introduced by the AIA are changes to the limitation where a patent may be challenged, thus providing opportunities for third parties to challenge any issued patent in the USPTO. This applies to all of our U.S. patents, even those issued before March 16, 2013. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in U.S. federal courts necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action.
•Accordingly, a third party may attempt to use the USPTO proceedings to invalidate our patent claims that would not have been invalidated if first challenged by the third party as a defendant in a district court action. It is not clear what, if any, impact the AIA will have on the operation of our business. However, the AIA and its implementation could increase the uncertainties and costs surrounding the prosecution of our or our licensors’ patent applications and the enforcement or defense of our or our licensors’ issued patents.
•Additionally, the U.S. Supreme Court has ruled on several patent cases in recent years either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations.
•In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.
•Similarly, the complexity and uncertainty of European patent laws have also increased in recent years. In addition, the European patent system is relatively stringent in the type of amendments that are allowed during prosecution. Complying with these laws and regulations could limit our ability to obtain new patents in the future that may be important for our business.
Depending upon the timing, duration, and conditions of FDA marketing approval of our product candidates, one or more of our U.S. patents may be eligible for patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the “Hatch-Waxman Amendments.”
•If we do not obtain protection under the Hatch-Waxman Amendments and similar non-U.S. legislation for extending the term of patents covering our product candidates, our ability to compete effectively could be impaired.
•The Hatch-Waxman Amendments permit a patent term extension of up to five years for a patent covering an approved product or method of use as compensation for patent term lost during product development and the FDA regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval. Similar patent term extensions may be available in other jurisdictions.
•For example, a supplementary protection certificate in Europe may be applied for approval to recover some of the time lost between the patent application filing date and the date of first marketing authorization.
•However, we may not receive an extension if we fail to apply within applicable deadlines, fail to apply prior to expiration of relevant patents, or otherwise fail to satisfy applicable requirements. Moreover, the length of the extension could be less than we request. If we are unable to obtain patent term extension or the term of any such extension is less than we request, the period during which we can enforce our patent rights for that product will be shortened and our competitors may obtain approval to market competing product candidates sooner.
•As a result, our revenue from applicable product candidates could be reduced, possibly materially.
If our trademarks and trade names are not adequately protected, we may not be able to build name recognition in our markets of interest and our competitive position may be adversely affected.
•We currently own registered trademarks. We may not be able to obtain trademark protection in territories that we consider of significant importance to us.
•In addition, any of our trademarks or trade names, whether registered or unregistered, may be challenged, opposed, infringed, cancelled, circumvented, or declared generic, or determined to be infringing on other marks, as applicable.
•We may not be able to maintain and protect our rights to these trademarks and trade names, which we will need to build name recognition by potential collaborators or customers in our markets of interest.
•Over the long term, if we are unable to establish name recognition based on our trademarks and trade names, we may not be able to compete effectively, and our business may be adversely affected.
•If we are unable to protect the confidentiality of our trade secrets and know-how, our business and competitive position would be harmed.
•We consider proprietary trade secrets and confidential know-how and unpatented know-how to be important to our business.
•In addition to seeking patents for some of our technology and product candidates, we also may rely on trade secrets or confidential know-how to protect our technology, especially where patent protection is believed to be of limited value. However, trade secrets and confidential know-how are difficult to maintain as confidential.
•To protect this type of information against disclosure or appropriation by competitors, our policy is to require our employees, consultants, contractors, and advisors to enter into confidentiality agreements with us.
•We also seek to preserve the integrity and confidentiality of our data, trade secrets, and know-how by maintaining physical security of our premises and physical and electronic security of our information technology systems.
•Monitoring unauthorized uses and disclosures is difficult, and we cannot know whether the steps we have taken to protect our proprietary technologies will be effective.
•In addition, current or former employees, consultants, contractors, and advisers may unintentionally or willfully disclose our confidential information to competitors, and confidentiality agreements may not provide an adequate remedy in the event of unauthorized disclosure of confidential information.
•We therefore cannot guarantee that our trade secrets and other proprietary and confidential information will not be disclosed or that competitors will not otherwise gain access to our trade secrets. Enforcing a claim that a third party obtained illegally and is using trade secrets or confidential know-how is expensive, time consuming, and unpredictable. The enforceability of confidentiality agreements may vary from jurisdiction to jurisdiction.
•Furthermore, if a competitor lawfully obtained or independently developed any of our trade secrets, we would have no right to prevent such competitor from using that technology or information to compete with us, which could harm our competitive position.
•Additionally, if the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for misappropriating the trade secret.
•Failure to protect or maintain trade secrets and confidential know-how could adversely affect our business and our competitive position.
•Moreover, our competitors may independently develop substantially equivalent proprietary information and may even apply for patent protection in respect of the same.
•If successful in obtaining such patent protection, our competitors could limit our use of our own trade secrets or confidential know-how.
We may be subject to claims by third parties asserting that we or our employees have misappropriated third-party intellectual property, or claiming ownership of what we regard as our own intellectual property. These claims may be costly to defend and if we do not successfully do so, we may be required to pay monetary damages and lose valuable intellectual property rights or personnel.
•Some of our employees, including our senior management, were previously employed at other biopharmaceutical or pharmaceutical companies, including our competitors or potential competitors. Some of these employees executed proprietary rights, non-disclosure and non-competition agreements in connection with such previous employment.
•Although we try to ensure that our employees do not use the know-how, trade secrets, or other proprietary information of others in their work for us, we may be subject to claims that we or these employees have used or disclosed confidential information or intellectual property, including know-how, trade secrets, or other proprietary information, of any such employee’s former employer.
•Litigation may be necessary to defend against these claims.
•If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel.
•A loss of key research personnel or their work product could hamper or undermine our ability to develop and commercialize our product candidates, which would severely harm our business.
•In addition, if such intellectual property rights were to be awarded to a third party, we could be required to obtain a license from such third party to commercialize our technology or product candidates. Such a license may not be available on commercially reasonable terms or at all, which could hamper or undermine our ability to develop and commercialize our product candidates, which would severely harm our business.
•Even if we successfully prosecute or defend against such claims, litigation could result in substantial costs and distract management from the development and commercialization of our product candidates.
•Our proprietary information may be lost or we may suffer security breaches.
•In the ordinary course of our business, we collect and store sensitive data, including intellectual property, clinical trial data, proprietary business information, personal data and personally identifiable information of our clinical trial subjects and employees, in our data centers and on our networks. The secure processing, maintenance and transmission of this information is critical to our operations.
•Despite our security measures, our information technology and infrastructure and those of our CROs or other contractors or consultants may be vulnerable to attacks by hackers or breached due to employee error, malfeasance, or other disruptions.
•The loss of clinical trial data from completed, ongoing, or planned trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Although, to our knowledge, we have not experienced any such material security breach to date, any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost, or stolen.
•Any such access, disclosure, or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, and significant regulatory penalties; disrupt our operations; damage our reputation; and cause a loss of confidence in us and our ability to conduct clinical trials, which could adversely affect our reputation and delay our clinical development of our product candidates.
•This could increase our cyber security risk, create data accessibility concerns, and make us more susceptible to communication disruptions.
•Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations or prospects.
Risks Relating to Competitive Employment for Key Personnel and other Matters related to Managing Company Growth
•Because of the specialized nature of our business, the termination of relationships with our key management and scientific personnel may prevent us from developing our technologies, conducting clinical trials, and obtaining financing.
•Further, the inability to recruit and retain additional personnel may have an adverse effect on our ability to successfully operate our business.
•Additionally, we have several scientific personnel with significant and unique expertise in mAbs and mAb-related technologies, on whom we depend for timely progress of these projects. The loss of these scientific personnel may cause a delay in program progress.
•Since our formation, Dr. Huh and other key team members have played a significant role in our research efforts. Dr. Huh is a director serving our board of directors and we are highly dependent on Dr. Huh and he has played a critical role in our research and development programs, raising financing, and conducting clinical trials.2
•The competition for qualified personnel in the biotechnology field is intense, and we rely heavily on our ability to attract and retain qualified scientific, technical, and managerial personnel.
•Our future success depends upon our ability to attract, retain, and motivate highly skilled employees and the loss of key managers and senior physicians or scientists could delay our acquisition and development activities.
•Our success depends upon the continued contributions of our key management, including all of our senior management team, and scientific and technical personnel, many of whom have been instrumental for us and have substantial experience with rare and non-rare diseases and the biopharmaceutical and pharmaceutical industries.
•If our recruitment and retention efforts in key scientific and management personnel are unsuccessful in the future, it may be difficult for us to achieve our development objectives, raise additional capital, and implement our business strategy.
•To manage our planned future growth, we must continue to implement and improve our managerial, operational, and financial systems, expand our facilities, or acquire new facilities, and continue to retain, recruit and train additional qualified personnel.
•The expansion of our operations may lead to significant costs and may divert our management and business development resources.
•Any inability to manage growth could delay the execution of our business plans or disrupt our operations.
We face intense competition and rapid technological change.
•The biotechnology and pharmaceutical industries are highly competitive and subject to significant and rapid technological change. We are aware of several pharmaceutical and biotechnology companies that are actively engaged in R&D in areas related to ADC therapy.
•Some of these companies have commenced clinical trials of antibody products or have successfully commercialized antibody products.
•Many of these companies are developing products for the same disease indications as us. Some of these competitors have received regulatory approval or are developing or testing product candidates that do or may in the future compete directly with our product candidates.
•Other potential competitors include large, fully integrated pharmaceutical companies and more established biotechnology companies, which have significant resources and expertise in R&D, manufacturing, testing, obtaining regulatory approvals and marketing.
•Also, academic institutions, government agencies and other public and private research organizations conduct research, seek patent protection, and establish collaborative arrangements for research, development, manufacturing, and marketing. It is possible that these competitors will succeed in developing technologies that are more effective or sooner than those being developed by us or that would render our technology obsolete or noncompetitive.
Our competitors may have superior products, manufacturing capability or marketing expertise.
•Our business may fail because we face intense competition from major pharmaceutical companies and specialized biotechnology companies engaged in the development of other products directed in rare orphan disorders and cancer.
•Many of our competitors have greater financial and human resources and more experience. Our competitors may, among other things:
•develop safer or more effective products;
•implement more effective approaches to sales and marketing;
•develop less costly products;
•obtain quicker regulatory approval;
•have access to more manufacturing capacity;
•form more advantageous strategic alliances; or
•establish superior proprietary positions.
•In addition, if we receive regulatory approvals, we may compete with well-established, FDA-approved therapies that have generated substantial sales over a number of years.
•We anticipate that we will face increased competition in the future as new companies enter our market and scientific developments surrounding other cancer therapies continue to accelerate.
We have no experience in commercializing products on our own.
•We do not have a sales and marketing force and cannot be certain that we would be able to develop this capacity. If we are unable to establish sales and marketing capabilities, we will need to enter into sales and marketing agreements to market our products in the United States.
•For sales outside the United States, we will likely enter third-party arrangements. In these foreign markets, if we are unable to establish successful distribution relationships with pharmaceutical companies, we may fail to realize the full sales potential of our product candidates.
•If we are unable to establish sales and marketing capabilities or enter into agreements with pharmaceutical companies to sell and market our therapeutics, we may experience difficulty generating revenues.
Risks Relating to Commercialization
•We operate in a highly competitive and rapidly changing industry, which may result in others acquiring, developing, or commercializing competing product candidates before or more successfully than we do.
•The biopharmaceutical and pharmaceutical industries are highly competitive and subject to significant and rapid technological change.
•Our success is highly dependent on our ability to acquire, develop, and obtain marketing approval for new product candidates on a cost-effective basis and to market them successfully.
•If PHP-303 or any of our preclinical assets in oncology become approved for any of the indications we or a strategic partner are currently or in the future seek, we will face intense competition from a variety of businesses, including large, fully integrated pharmaceutical companies, non-rare pharmaceutical companies, and biopharmaceutical companies in the United States, Europe, and other jurisdictions.
•These organizations may have significantly greater resources than we have and conduct similar research; seek patent protection; and establish collaborative arrangements for research, development, manufacturing, and marketing of product candidates that may compete with our product candidates.
Market acceptance of our products is uncertain.
•Our product candidates may not gain market acceptance among physicians, patients, healthcare payors and the medical community. Our failure to successfully achieve significant market acceptance will affect our ability to generate revenues and impact our business and financial condition.
•In addition, we may not achieve market acceptance even if clinical trials demonstrate safety and efficacy, and the necessary regulatory and reimbursement approvals are obtained.
•The degree of market acceptance of approved product candidates will depend on a number of factors, including:
•establishment and demonstration of clinical efficacy and safety;
•cost-effectiveness of a product;
•its perceived and proven advantage over alternative treatment methods;
•competitor and/or insurance lobby for alternative treatments;
•reimbursement policies of government, insurance companies, and third-party payors; and
•marketing and distribution support for the product.
•Physicians will not recommend or utilize therapies using our products unless approved by the FDA, the EMA, and comparable foreign authorities.
•Even if the clinical safety and efficacy of our therapies is established, physicians may elect not to recommend the therapies for any number of other reasons, including whether the method of administration of our products is effective for certain indications or whether clinical data or other factors demonstrate better safety and efficacy of such procedures as compared to standard of care or whether mitigating circumstances and/or predispositions prevent the administration of our therapy or favor alternate therapies as opposed to ours.
•In addition, our product candidates, if successfully developed, may compete with a number of drugs and therapies manufactured and marketed by major pharmaceutical and other biotechnology companies that may have streamlined cost and outreach to patients.
•For these and other reasons, physicians, patients, third-party payors, and the medical community may not favor or utilize any product candidates that we develop even when FDA-approved for use.
Our existing and future product candidates may not gain market acceptance, in which case our ability to generate product revenues will be compromised.
•Even if the FDA, the EMA, or any other regulatory authority approves the marketing of our product candidates, whether developed on our own or with a collaborator, physicians, healthcare providers, patients, or the medical community may not accept or use our product candidates.
•If our product candidates do not achieve an adequate level of acceptance, we may not generate significant product revenue or any profits from operations.
•The degree of market acceptance of our product candidates will depend on a variety of factors, including:
•the timing of market introduction;
•the number and clinical profile of competing product candidates;
•the clinical indications for which our product candidates are approved;
•our ability to provide acceptable evidence of safety and efficacy;
•the prevalence and severity of any side effects;
•relative convenience and ease of administration;
•cost-effectiveness;
•marketing and distribution support;
•availability of adequate coverage, reimbursement, and adequate payment from health maintenance organizations and other insurers, both public and private; and
•other potential advantages over alternative treatment methods.
•If our product candidates fail to gain market acceptance, our ability to generate revenues will be adversely affected. Even if our product candidates achieve market acceptance, the market may prove not to be large enough to allow us to generate significant revenues.
•Any product candidates for which we intend to seek approval as biologic product candidates in the United States may face competition sooner than anticipated.
•In the United States, the Biologics Price Competition and Innovation Act of 2009 (the “BPCIA”) created an abbreviated approval pathway for biological product candidates 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 pre-clinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity, and potency of its product. The law is complex and is still being interpreted and implemented by the FDA and its ultimate impact, implementation, and meaning are subject to uncertainty.
•While it is uncertain when processes intended to implement the BPCIA may be fully adopted by the FDA, any such processes could adversely affect the future commercial prospects for any biological product candidates. We believe that if any product is approved as a biological product under a BLA, it 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 product candidates for competing product candidates,
potentially creating the opportunity for generic 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 a reference product in a way that is similar to traditional generic substitution for non-biological product candidates is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing.
•In the EU, Marketing Authorization Applications (“MAAs”) for product candidates that are biosimilar to an already authorized biological product, the so-called reference product, can rely on the safety and efficacy data contained in the dossier of the reference product. To qualify as a biosimilar product the marketing authorization applicant must demonstrate, through comprehensive comparability studies with the reference product, that its product is: (i) highly similar to the reference product notwithstanding the natural variability inherent to all biological medicines, and (ii) that there are no clinically meaningful differences between the biosimilar and the reference product in terms of safety, quality, and efficacy. Biosimilars can only be authorized for use after the period of exclusivity of the reference biological medicine has expired. In general, this means that the biological reference product must have been authorized for at least 10 years before a biosimilar can be made available by another company.
We expect to face competition.
•We consider PHP-303’s current closest potential competitors for the treatment of AATD to be existing approved AATD augmentation therapies, (also called replacement therapies), as well as other therapies under development and listed below are:
•Augmentation therapies are alpha1-proteinase inhibitors that are administered intravenously in AAT augmentation therapy. Currently, there are four inhibitors on the market in the United States and the EU: Prolastin-C from Grifols, S.A. (“Grifols”), Aralast from Shire plc, now a subsidiary of Takeda Pharmaceutical Company Ltd (“Shire”), Zemaira from CSL Limited (“CSL”), and Glassia from Kamada Ltd. (“Kamada”). In this category products from InhibRx Inc, Apic Bio Inc., Vertex Pharmaceuticals Inc., Takeda, Centessa, Santhera Pharmaceuticals, Chiesi Farmaceutici, and Mereo/AstraZeneca may be considered competitors.
•We also anticipate that new companies will enter these markets in the future. If we successfully develop and commercialize our lead PHP-303, it will compete with existing therapies and new therapies that may become available in the future.
•With regard to our nominated Trop2 PH1 ADC program, we are aware of other Trop2 ADC agents, and other oncology and immune-oncology therapeutics currently approved as standard of care in their respective indications and other future agents that may gain approval before us. Some of these risks are highlighted below:
•As detailed in the business summary section, we are aware of large pharmaceutical companies having entered into partnerships for competitor Trop2-directed ADCs- Gilead for Trodelvy, AstraZeneca for Datopotamab deruxtecan, Merck for SKB264 and BioNtech for DB-1305. These programs are likely to be well-funded, have the required cash runway for late-stage development and approval, and will likely outpace our program.
•In addition to the known Trop2 ADC programs under clinical trial, there may be other similar programs, unknown to us, under preclinical development buoyed by the approval of first-in-class anti-Trop2 agents such as Trodelvy. For example, after approval of Kadcyla in Her2- positive breast and gastric cancers, Beacon Targeted therapies stats tracked 20+ Her2-ADC therapies in various stages of development.
•As a preclinical program, our ADC platform is untested in human clinical trial. We are yet to demonstrate tolerability and safety in phase 1 clinical trial. Even after we demonstrate safety and tolerability, if we are able to demonstrate such, in phase 2 studies we may also have to compete with and outperform proven standard of care immune-oncology therapeutics or demonstrate improved combination with approved or future immune checkpoint inhibitors (ICIs) directed against PD-1, anti-PD-L1, LAG3, CTLA-4 and others. Initially approved in second line setting, this class of immune-oncology therapeutics has been slowly moving to first line in many different cancers and raise the bar for many new therapeutics.
•Similarly, for each indication, we are aware of established or potential standard of care of therapies which may be ADCs against other targets or even other modalities such as antibodies, bispecifics, small molecules- targeted or chemotherapies. For e.g., the Trop2 ADC Trodelvy® has been approved for therapy of recurrent urothelial (bladder) cancer where another ADC targeting Nectin-4 (Enfortumab vedotin or EV) is also approved. Recently, EV plus pembrolizumab became the standard of care in front-line urothelial cancer while Trodelvy®’s confirmatory phase 3 trial failed to demonstrate significant overall survival benefit in the same setting.
•The highly competitive nature of and rapid technological changes in the biopharmaceutical and pharmaceutical industries could render our product candidates obsolete, less competitive, or uneconomical.
•Our potential future competitors may, among other things, have significantly greater name recognition, financial, manufacturing, marketing, drug development, technical, and human resources than we do, and future mergers and acquisitions in the biopharmaceutical and pharmaceutical industries may result in even more resources being concentrated in our competitors, which could enable them to:
•develop and commercialize product candidates that are safer, more effective, less expensive, more convenient, or easier to administer, or have fewer or less severe effects, or in certain cases could be curative for the condition;
•obtain quicker regulatory approval;
•establish superior proprietary positions covering our product candidates and technologies;
•implement more effective approaches to sales and marketing; or
•form more advantageous strategic alliance
•Smaller and other early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.
•These third parties compete with us in recruiting and retaining qualified scientific and management personnel; establishing clinical trial sites and patient registration; and in acquiring technologies complementary to, or necessary for, our programs.
•Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize product candidates that are more effective, have fewer or less severe side effects, are more convenient or are less expensive than our product candidates.
•Our potential future competitors may also obtain FDA, EMA, or other regulatory approval for their product candidates more rapidly than we may obtain approval for our own product candidates, which could result in our competitors establishing a strong market position before we are able to enter the market.
•In addition, existing products approved for other indications could be used off-label and may compete with our products for which we would have limited control over.
•Under the Orphan Drug Act of 1983 (the “Orphan Drug Act”), the FDA may designate a product as an orphan drug if it is intended to treat a rare disease or condition, defined as one occurring in a patient population of fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the United States.
•In the EU, the EMA’s Committee for Orphan Medicinal Products (“COMP”) recommends to the European Commission the granting of orphan designation to promote the development of medicinal products that are intended for the diagnosis, prevention, or treatment of a life-threatening or chronically debilitating condition affecting not more than five in 10,000 persons in the EU.
•Additionally, designation is granted for medicinal products intended for the diagnosis, prevention, or treatment of a life-threatening, seriously debilitating, or serious and chronic condition when, without incentives, it is unlikely that sales of the drug in the EU would be sufficient to justify the necessary investment in developing the drug or biological product or where there is no satisfactory method of diagnosis, prevention, or treatment, or, if such a method exists, where the medicine can demonstrate that it is of significant benefit to those affected by the condition.
•We have yet to obtain orphan drug designation for PHP-303 but we or a future strategic partner likely will apply for this designation forAATD, but we cannot predict if orphan drug status will be granted in the US or EU at this juncture.
•Similarly, we or a strategic partner may be unable to maintain the benefits associated with orphan drug designation, including the potential for orphan drug exclusivity, for PHP-303 or any other products for which we obtain orphan drug designation.
•The benefits or process to apply for Orphan Drug designation in the US or EU could change before we or a strategic partner can apply, be accepted and commercialize our opportunities.
•In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax credits for qualified clinical testing, and user-fee waivers.
•In addition, if a product receives the first FDA approval of that drug for the indication for which it has orphan designation, the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other application to market the same drug for the same indication for a period of seven years, except in limited circumstances, such as a showing of clinical superiority over the product with orphan exclusivity or where the manufacturer is unable to assure the availability of sufficient quantities of the orphan drug to meet the needs of patients with the rare disease or condition.
•Under the FDA’s regulations, the FDA will deny orphan drug exclusivity to a designated drug upon approval if the FDA has already approved another drug with the same active ingredient for the same indication, unless the drug is demonstrated to be clinically superior to the previously approved drug.
•In the EU, orphan designation entitles a party to financial incentives such as reduction of fees or fee waivers and ten years of market exclusivity following approval.
•This period can be extended by two years if studies in children are performed in accordance with a PIP. In addition, this period may be reduced to six years if the orphan drug designation criteria are no longer met, including where it is shown that the drug is sufficiently profitable not to justify maintenance of market exclusivity or where the manufacturer is unable to supply the treatment.
•In the EU, a marketing authorization for an orphan designated product will not be granted if a similar drug has been approved in the EU for the same therapeutic indication, unless the applicant can establish that its product is safer, more effective, or otherwise clinically superior.
•A similar drug is a product containing a similar active substance or substances as those contained in an already authorized product. Similar active substance is defined as an identical active substance, or an active substance with the same principal molecular structural features (but not necessarily all of the same molecular features) and which acts via the same mechanism.
We or a future strategic partner plan to seek orphan drug designation for PHP-303 and future rare disease product candidates.
•Even with orphan drug designation, we or a strategic partner may not be the first to obtain marketing approval for any particular orphan indication due to the uncertainties associated with developing pharmaceutical product candidates, which could prevent us from marketing our product candidates if another company is able to obtain orphan drug exclusivity before we do.
•In addition, exclusive marketing rights in the United States may be unavailable if we seek approval for an indication broader than the orphan-designated indication or the opportunity may be lost in the United States if the FDA later determines that the request for designation was materially defective or if we are unable to assure sufficient quantities of the drug to meet the needs of patients with the rare disease or condition following approval.
•Further, even if we obtain orphan drug exclusivity, that exclusivity may not effectively protect our product candidates from competition because different drugs with different active moieties can be approved for the same condition.
•In addition, the FDA and the EMA can subsequently approve product candidates with the same active moiety for the same condition if the FDA or the EMA concludes that the later drug is safer, more effective, or makes a major contribution to patient care. Orphan drug designation neither shortens the development time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval process.
•In addition, while we or a strategic partner may intend to seek orphan drug designation for other existing and future product candidates, including PHP-303, we may never receive such designations.
•There have been legal challenges to aspects of the FDA’s regulations and policies concerning the exclusivity provisions of the Orphan Drug Act, and future challenges could lead to changes that affect the protections afforded to our product candidates in ways that are difficult to predict. In 2014, a U.S. district court invalidated the FDA’s denial of orphan exclusivity to an orphan designated drug, which the FDA had based on its determination that the drug was not proven to be clinically superior to a previously approved “same drug.”
•In response to the decision, the FDA released a policy statement stating that the court’s decision is limited to the facts of that particular case and that the FDA will continue to deny orphan drug exclusivity to a designated
drug upon approval if the drug is the “same” as a previously approved drug, unless the drug is demonstrated to be clinically superior to that previously approved drug.
•Since then, similar legal challenges have been initiated against the FDA for its denial of orphan drug exclusivity to other designated drugs, and in 2017, Congress amended the Orphan Drug Act to require a demonstration of clinical superiority upon approval as a condition of receiving orphan drug exclusivity when another “same drug” has already been approved for the same indication.
•In the future, there is the potential for additional legal challenges to the FDA’s orphan drug regulations and policies, and it is uncertain how ongoing and future challenges might affect our business.
•If any of our future BLA in the United States for our preclinical stage assets are approved in an Orphan Disease, Peak Bio may be eligible to receive a priority review voucher from the FDA, which can be redeemed to obtain priority review for any subsequent marketing application and may be sold or transferred to other companies for their programs, as has been done by other voucher recipients.
We or any future strategic collaboration partners may seek and fail to obtain breakthrough therapy designation by the FDA for PHP-303 or any future product candidates or access to the PRIME scheme by the EMA for PHP-303 or any future product candidates.
•Even if we obtain such designation or access, the designation or access may not lead to faster development or regulatory review or approval, and it does not increase the likelihood that our product candidates will receive marketing approval.
•In 2012, the FDA established a breakthrough therapy designation which is intended to expedite the development and review of product candidates that treat serious or life-threatening diseases where preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically-significant endpoints, such as substantial treatment effects observed early in clinical development.
•The designation of a product as a breakthrough therapy provides potential benefits that include but are not limited to more frequent meetings with the FDA to discuss the development plan for the product and ensure collection of appropriate data needed to support approval; more frequent written correspondence from the FDA about such things as the design of the proposed clinical trials and use of biomarkers; intensive guidance on an efficient drug development program, beginning as early as Phase 1; and organizational commitment involving senior managers; and eligibility for rolling review and priority review.
•Drugs and biologics designated as breakthrough therapies by the FDA are also eligible for accelerated approval.
•Similarly, the EMA has established the PRIME scheme to expedite the development and review of product candidates that show a potential to address to a significant extent an unmet medical need, based on early clinical data.
•Designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe one of our product candidates meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation.
•We cannot be sure that our evaluation of our product candidates as qualifying for breakthrough therapy designation will meet the FDA’s expectations.
•In any event, the receipt of a breakthrough therapy designation for a product may not result in a faster development process, review, or approval compared to product candidates considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA.
•In addition, even if one or more of our product candidates qualify as breakthrough therapies, the FDA may later decide that such product candidates no longer meet the conditions for qualification or decide that the time period for FDA review or approval will not be shortened.
•Similarly, access to the PRIME scheme is at the discretion of the EMA, and we cannot be sure that PHP-303 or any future product candidates will be granted access to the scheme; that participation in the scheme will result in expedited regulatory review or approval of our product candidates; or that access to the scheme, once granted, will not be revoked.
We likely will commercialize or co-commercialize our product candidates for rare diseases and potentially rare tumor types and seek strategic relationships with third parties for the development and/or commercialization of our other product candidates.
•If we are unable to develop our own sales, marketing, and distribution capabilities or enter into business arrangements, we may not be successful in commercializing our product candidates.
•We have no marketing, sales, or distribution capabilities and we currently have no experience with marketing, selling or distributing pharmaceutical product candidates.
•We also currently have no strategic relationships in place for the commercialization of our product candidates.
•We may seek to partner PHP-303 or programs/products in our oncology platform portfolio following further preclinical, clinical development or regulatory approval.
•We currently will seek to enter into strategic relationships with pharmaceutical, biopharmaceutical or other partners for the continued development of our programs if this is in the best business interests of the company as determined at the discretion of the leadership and board of Peak Bio.
•These arrangements would also likely include the commercialization of a product.
•Alternatively, we may seek to sell or out-license one or more of our non-core disease product candidates in the future.
•As a result of entering into any such planned partnerships or arrangements, our revenue from product sales may be lower than if we directly marketed or sold these product candidates on our own.
•In addition, any revenue we receive will depend upon the terms of such partnership or arrangement, which may not be as favorable to us as possible, and the efforts of the other party, which may not be adequate or successful and are likely to be beyond our control.
•We may not be successful in identifying a suitable partner or partners, and we may not be able to reach agreement with them at all.
•If we are unable to enter into these partnerships or arrangements on acceptable terms or at all, we may not be able to successfully commercialize these product candidates.
•These commercialization approaches are expensive and time consuming, and some or all of the costs associated with such efforts may be incurred in advance of any approval of our product candidates.
•If we are not successful in commercializing our product candidates, either on our own or through strategic relationships with third parties, our future product revenue will suffer and we may incur significant losses.
•The successful commercialization of our product candidates will depend in part on the extent to which governmental authorities and health insurers establish adequate coverage, reimbursement levels, and pricing policies. Failure to obtain or maintain coverage and adequate reimbursement for our product candidates, if approved, could limit our ability to market those product candidates and decrease our ability to generate revenue.
•The availability and adequacy of coverage and reimbursement by governmental healthcare programs such as Medicare and Medicaid, private health insurers, and other third-party payors are essential for most patients to be able to afford prescription medications such as our product candidates, assuming approval.
•Our ability to achieve acceptable levels of coverage and reimbursement for product candidates by governmental authorities, private health insurers, and other organizations will have an effect on our ability to successfully commercialize our product candidates.
•Assuming we obtain coverage for our product candidates by a third-party payor, the resulting reimbursement payment rates may not be adequate or may require co-payments that patients find unacceptably high.
•Third-party payors may also elect to restrict coverage to a subset of patients that could potentially be treated with our products, if approved.
•We cannot be sure that coverage and reimbursement in the United States, the EU, or elsewhere will be available for our product candidates or any product that we may develop, and any reimbursement that may become available may be decreased or eliminated in the future.
•Third-party payors increasingly are challenging prices charged for pharmaceutical product candidates and services, and many third-party payors may refuse to provide coverage and reimbursement for particular drugs or biologics when an equivalent generic drug, biosimilar, or a less expensive therapy is available.
•It is possible that a third-party payor may consider our product candidates as substitutable and only offer to reimburse patients for the less-expensive product.
•Even if we show improved efficacy or improved convenience of administration with our product candidates, pricing of existing drugs may limit the amount we will be able to charge for our product candidates.
•These payors may deny or revoke the reimbursement status of a given product or establish prices for new or existing marketed product candidates at levels that are too low to enable us to realize an appropriate return on our investment in our product candidates.
•We may have to provide our life-saving therapies at highly discounted pricing to low-income countries. While Healthcare reform and restrictions on reimbursements globally may limit our financial returns on our products
•In many countries, the prices of medical product candidates are subject to varying price control, reimbursement schemes, technology assessments, regulatory, market, price trade-offs mechanisms as part of national health systems in many key countries and markets.
•Health technology assessments, including cost-effectiveness evaluations, Health economic evaluations all may require or conducted prior to country specific market entry in order to assess the medical value or added clinical benefit of a therapy and to gain pricing and reimbursement coverage.
•Additionally, there are many other statutory and country specific mechanisms for gaining price, reimbursement and we expect continued pressure on pricing and reimbursement mechanisms that likely could impact our future products whether we are commercializing ourselves or with partners. Many of these processes delay market entry and hence delay sales and the ability to generate and grow our revenue.
•Furthermore, rules and regulations regarding reimbursement change frequently, in some cases at short notice, and we believe that changes in these rules and regulations are likely. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize our product candidates and may not be able to obtain a satisfactory financial return on our product candidates.
Risks Relating to Healthcare Laws and Other Legal Compliance Matters
•Enacted and future healthcare legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and may affect the prices we may set.
•In the US, EU, the UK and other jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes and proposed changes to the healthcare system that could affect our future results of operations.
•In particular, there have been and continue to be a number of initiatives at the U.S. federal and state levels that seek to reduce healthcare costs and improve the quality of healthcare. For example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (as so amended, the “ACA”) was enacted, which substantially changed the way healthcare is financed by both governmental and private insurers.
•Among the provisions of the ACA, those of greatest importance to the pharmaceutical and biotechnology industries include the following:
•an annual, non-deductible fee payable by any entity that manufactures or imports certain branded prescription drugs and biologic agents (other than those designated as orphan drugs), which is apportioned among these entities according to their market share in certain government healthcare programs;
•a Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D;
•requirements to report certain financial arrangements with physicians and teaching hospitals, including reporting “transfers of value” made or distributed to prescribers and other healthcare providers and reporting investment interests held by physicians and their immediate family members;
•an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13.0% of the average manufacturer price (“AMP”) of branded and generic drugs, respectively, and capped the total rebate amount for innovator drugs at 100% of the AMP; a methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs and biologics, including our product candidates, that are inhaled, infused, instilled, implanted, or injected;
•extension of a manufacturer’s Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;
•expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability;
•a Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research;
•creation of the Independent Payment Advisory Board, which, once empaneled, would have the authority to recommend certain changes;
•Medicare program that could result in reduced payments for prescription drugs and those recommendations could have the effect of law unless overruled by a supermajority vote of Congress. The Bipartisan Budget Act of 2018 repealed the creation of the Independent Payment Advisory Board before it could take effect;
•establishment of a Center for Medicare Innovation at the Centers for Medicare & Medicaid Services (“CMS”), to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending;
•expansion of the entities eligible for discounts under the Public Health Service program; and
•a licensure framework for follow on biologic product candidates.
•Since its enactment, there have been judicial and congressional challenges to certain aspects of the ACA, as well as efforts by the last presidential administration to repeal or replace certain aspects of the ACA. A bipartisan bill to appropriate funds for cost-sharing reduction (“C-SR”) payments has been introduced in the Senate, but the future of that bill is uncertain.
•In addition, CMS has proposed regulations that would give states greater flexibility in setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required under the ACA for plans sold through such marketplaces. Further, each chamber of Congress has put forth multiple bills designed to repeal or repeal and replace portions of the ACA. Although none of these measures have been enacted by Congress to date, Congress may consider other legislation to repeal and replace elements of the ACA. We continue to evaluate the effect that the ACA and its possible repeal and replacement has on our business. It is uncertain the extent to which any such changes may impact our business or financial condition.
•Other legislative changes have been proposed and adopted in the United States since the ACA was enacted. In August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers of 2% per fiscal year.
•These reductions went into effect in April 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2025 unless additional action is taken by Congress. 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.
•These new laws or any other similar laws introduced in the future may result in additional reductions in Medicare and other health care funding, which could negatively affect our future customers and accordingly, our financial operations.
•Additionally, there has been increasing legislative and enforcement interest in the United States with respect to non-rare drug pricing practices.
•Specifically, there have been several recent U.S. Congressional inquiries and proposed federal and state 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. Moreover, payment methodologies may be subject to changes in healthcare legislation and regulatory initiatives.
•We expect that additional U.S. federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that the U.S. federal government will pay for healthcare product candidates and services, which could result in reduced demand for our product candidates or additional pricing pressures.
•Individual states in the United States have also become increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
•Legally-mandated price controls on payment amounts by third-party payors or other restrictions could harm our business, results of operations, financial condition, and prospects. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical product candidates and which suppliers will be included in their prescription drug and other healthcare programs. This could reduce the ultimate demand for our product candidates or put pressure on our product pricing.
We face product liability risks and may not be able to obtain adequate insurance.
•We currently have no products that are available for commercial sale.
•However, the current use of any of our product candidates in clinical trials, and the sale of any approved products in the future, may expose us to liability claims.
•These claims might be made directly by consumers and healthcare providers or indirectly by pharmaceutical companies, our corporate collaborators or others selling such products.
•We may experience financial losses in the future due to product liability claims.
•We have obtained limited product liability insurance coverage for our clinical trials.
•We intend to expand our insurance coverage to include the sale of commercial products if marketing approval is obtained for product candidates in development.
•However, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses.
•We are exposed to potential product liability and professional indemnity risks that are inherent in the development, manufacturing, marketing, and use of pharmaceutical product candidates.
•These claims might be made by patients that use the product, healthcare providers, pharmaceutical companies, our collaborators, or others selling these product candidates.
•Any claims against us, regardless of their merit, could be difficult and costly to defend and could adversely affect the market for our product candidates or any prospects for commercialization of our product candidates. In addition, regardless of the merits or eventual outcome, liability claims may result in:
•decreased demand for our product candidates;
•injury to our reputation;
•withdrawal of clinical trial participants;
•costs to defend related litigation;
•diversion of management’s time and our resources;
•substantial monetary awards to trial participants or patients;
•regulatory investigation, product recalls or withdrawals, or labeling, marketing or promotional restrictions; and
•loss of revenue; and the inability to commercialize, co-commercialize or promote our product candidates.
•If a successful product liability claim or series of claims is brought against us for uninsured liabilities or in excess of insured liabilities, our business, financial condition and results of operations may be materially and adversely affected.
Our business operations and current and future relationships with investigators, healthcare professionals, consultants, third-party payors, patient organizations, and customers will be subject to applicable healthcare regulatory laws, which could expose us to penalties.
•Our business operations and current and future arrangements with investigators, healthcare professionals, consultants, third-party payors, patient organizations, and customers, may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations.
•These laws may constrain the business or financial arrangements and relationships through which we conduct our operations, including how we research, market, sell, and distribute our product candidates, if approved.
•Such laws include the following:
•The U.S. federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, offering, receiving, or providing any remuneration (including any kickback, bribe, or certain rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, lease, order, or recommendation of, any good, facility, item, or service, for which payment may be made, in whole or in part, under U.S. federal and state healthcare programs such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. The U.S. federal Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers, and formulary managers on the other hand.
•The U.S. federal false claims and civil monetary penalties laws, including the civil False Claims Act (“FCA”) which, among other things, impose criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the U.S. federal government, claims for payment or approval that are false or fraudulent, knowingly making, using or causing to be made or used, a false record or statement material to a false or fraudulent claim, or from knowingly making a false statement to avoid, decrease or conceal an obligation to pay money to the U.S. federal government.
•In addition, the government may assert that a claim including items and services resulting from a violation of the U.S. federal Anti- Kickback Statute constitutes a false or fraudulent claim for purposes of the FCA. As a result of a modification made by the Fraud Enforcement and Recovery Act of 2009, a claim includes “any request or demand” for money or property presented to the federal government.
•In addition, manufacturers can be held liable under the FCA even when they do not submit claims directly to government payors if they are deemed to “cause” the submission of false or fraudulent claims.
•The U.S. federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement, in connection with the delivery of, or payment for, healthcare benefits, items or services; similar to the U.S. federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.
•HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”) and its respective implementing regulations, which impose, among other things, specified requirements relating to the privacy, security and transmission of individually identifiable health information without appropriate authorization by covered entities subject to the rule, such as health plans, healthcare clearinghouses and healthcare providers as well as its business associates that perform certain services involving the use or disclosure of individually identifiable health information. HITECH also created 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 the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions; the U.S. federal Food, Drug and Cosmetic Act (“FDCA”), which prohibits, among other things, the adulteration or misbranding of drugs, biologics, and medical devices.
•The U.S. Public Health Service Act (“PHSA”), which prohibits, among other things, the introduction into interstate commerce of a biological product unless a biologics license is in effect for that product.
•The U.S. federal legislation commonly referred to as the “Physician Payments Sunshine Act,” enacted as part of the ACA, and its implementing regulations, which requires certain manufacturers of drugs, devices, biologics, and medical supplies that are reimbursable under Medicare, Medicaid, or the Children’s Health Insurance Program to report annually to the government information related to certain payments and other transfers of value to physicians and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members; analogous U.S. state laws and regulations, including, state anti-kickback and false claims laws, which may apply to our business practices, including but not limited to, research, distribution, sales, and marketing arrangements and claims involving healthcare items or services reimbursed by any third-party payor, including private insurers.
•State laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources.
•State laws and regulations that require drug manufacturers to file reports relating to pricing and marketing information, which requires tracking gifts and other remuneration and items of value provided to healthcare professionals and entities.
•State laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
•Similar healthcare laws and regulations in the EU, the UK and other jurisdictions, including reporting requirements detailing interactions with and payments to healthcare providers.
Our employees and independent contractors, including principal investigators, CROs, CMOs, consultants, vendors, and any other third parties we may engage in connection with the development and commercialization of our product candidates may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could adversely affect our business.
•Misconduct by our employees and independent contractors, including principal investigators, CROs, CMOs, consultants, vendors, and any other third parties we may engage in connection with the development and commercialization of our product candidates, could include intentional, reckless, or negligent conduct or unauthorized activities that violate: (i) the laws and regulations of the FDA, the EMA and other similar regulatory authorities, including those laws that require the reporting of true, complete and accurate information to such authorities; (ii) manufacturing standards; (iii) data privacy, security, fraud and abuse, and other healthcare laws and regulations; or (iv) laws that require the reporting of true, complete, and accurate financial information and data.
•Specifically, sales, marketing, and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing, and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs, and other business arrangements.
•Activities subject to these laws could also involve the improper use or misrepresentation of information obtained in the course of clinical trials, creation of fraudulent data in pre-clinical studies or clinical trials, or illegal misappropriation of drug product, which could result in regulatory sanctions and cause serious harm to our reputation.
•It is not always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with such laws or regulations.
•Additionally, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. If any such 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 and results of operations, including the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgements, possible exclusion from participation in Medicare, Medicaid, other U.S. federal healthcare programs or healthcare programs in other jurisdictions, individual imprisonment, other sanctions, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations.
We are subject to governmental regulation and other legal obligations related to privacy, data protection and data security. Our actual or perceived failure to comply with such obligations could harm our business.
•We are subject to diverse laws and regulations relating to data privacy and security in the USA, EU, and other countries in which we may or will conduct business.
•New global privacy rules are being enacted and existing ones are being updated and strengthened. We are likely to be required to expend capital and other resources to ensure ongoing compliance with these laws and regulations.
•The General Data Protection Regulation (GDPR) applies extraterritorially and implements stringent operational requirements for controllers and processors of personal data. For example, the GDPR in both the EU and UK (i) requires detailed disclosures to data subjects; (ii) requires disclosure of the legal basis on which personal data is processed; (iii) makes it harder to obtain valid consent for processing; (iv) requires the appointment of a data protection officer where sensitive personal data (i.e. health data) is processed on a large scale; (v) provides more robust rights for data subjects; (vi) introduces data breach notification requirements with a very low threshold; (vii) imposes additional obligations when contracting with service providers; and (viii) requires an appropriate privacy governance framework to be implemented including policies, procedures, training and data audit.
•The EU GDPR permits member state derogations for certain issues and allows member states, in some instances, to impose additional requirements. Accordingly, we are also subject to EU national laws relating to the processing of certain data such as genetic data, biometric data and data concerning health. Complying with these numerous, complex, and often changing regulations is expensive and difficult. Failure by us, or our partners or service providers, to comply with the GDPR could result in regulatory investigations, enforcement notices and/or significant fines.
•In addition to the foregoing, any breach of privacy laws or data security laws, particularly those resulting in any security incident or breach involving the misappropriation, loss or other unauthorized use or disclosure of sensitive or confidential patient or consumer information, could have a material adverse effect on our business, reputation and financial condition.
•As a data controller, we are accountable for any third-party data service providers we engage to process personal data on our behalf.
•We attempt to address the associated risks by performing security assessments, detailed due diligence and regularly performing privacy and security reviews of our vendors and requiring all such third-party providers with data access to sign agreements, including business associate agreements, and where required under EU or country laws, obligating them to only process data according to our instructions and to take sufficient security measures to protect such data.
•There is no assurance that these contractual measures and our own privacy and security-related safeguards will protect us from the risks associated with the third-party processing, storage and transmission of such information. Any violation of data or security laws by our third-party processors could have a material adverse effect on our business and result in the fines and penalties outlined above.
We are also subject to evolving European privacy laws on electronic marketing and cookies.
•The EU is in the process of replacing the e-Privacy Directive (2002/58/EC) (the “e-Privacy Directive”) with a new set of rules taking the form of a regulation, which will be directly applicable to the laws of each EU member state, without need for further implementation. The draft e-Privacy Regulation (the “e-Privacy Regulation”), if enacted, is expected to maintain strict opt-in marketing rules with limited exceptions for business-to-business communications, maintain restrictive rules on the use of non-essential cookies, web beacons and similar technology and significantly increase fining powers to the same levels as the EU GDPR (i.e. the greater of 20 million euros or 4% of total global annual revenue). While the e-Privacy Regulation was originally intended to be adopted on May 25, 2018 (alongside the GDPR), it is still going through the European legislative process.
•Due to our planned international operations, we may be subject to anti-corruption laws, as well as export control laws, customs laws, sanctions laws and other laws governing our operations. If we fail to comply with these laws, we could be subject to civil or criminal penalties, other remedial measures and legal expenses.
•Our operations are subject to anti-corruption laws, including the U.S. Foreign Corrupt Practices Act (the “FCPA”); and other anti-corruption laws that apply in countries where we do business and may do business in the future. The FCPA, and these other laws generally prohibit us, our officers and our employees and intermediaries from bribing, being bribed by, or providing prohibited payments or anything else of value to government officials or other persons to obtain or retain business or gain some other business advantage.
•We may in the future operate in jurisdictions that pose a high risk of potential Bribery Act or FCPA violations, and we may participate in collaborations and relationships with third parties whose actions could potentially subject us to liability under the Bribery Act, the FCPA, or local anti-corruption laws.
•In addition, we cannot predict the nature, scope, or effect of future regulatory requirements to which any of our international operations might be subject or the manner in which existing laws might be administered or interpreted.
•We are also subject to other laws and regulations governing any international operations, including regulations administered by the governments of the United States, including applicable export control regulations, economic sanctions on countries and persons and customs requirements (collectively, the “Trade Control Laws”).
•There is no assurance that we will be completely effective in ensuring our compliance with all applicable anti-corruption laws, including the FCPA, or other legal requirements, including Trade Control Laws. If we are not in compliance with the FCPA, and other anti-corruption laws or Trade Control Laws, we may be subject to criminal and civil penalties, disgorgement, and other sanctions and remedial measures and legal expenses.
•Any investigation of any potential violations of the FCPA, other anti-corruption laws, or Trade Control Laws by U.S., or other authorities, even if it is ultimately determined that we did not violate such laws, could be costly and time-consuming, require significant personnel resources, and harm our reputation.
•We will seek to build and continuously improve our systems of internal controls and to remedy any weaknesses identified.
•There can be no assurance, however, that the policies and procedures will be followed at all times or effectively detect and prevent violations of the applicable laws by one or more of our employees, consultants, agents, collaborators or other persons who performs services on our behalf and, as a result, we could be subject to fines, penalties, or prosecution.
Although the clinical trial process is designed to identify and assess potential side effects, it is always possible that a drug, even after regulatory approval, may exhibit unforeseen side effects. If our product candidates were to cause adverse side effects during clinical trials or after approval, we may be exposed to substantial liabilities.
•Physicians and patients may not comply with any warnings that identify known potential adverse effects and patients who should not use our product candidates.
•Although we maintain product liability insurance for our product candidates, it is possible that our liabilities could exceed our insurance coverage.
•We intend to expand our coverage to include the sale of commercial product candidates if we obtain marketing approval for any of our product candidates.
•However, we may not be able to maintain insurance coverage at a reasonable cost or obtain insurance coverage that will be adequate to satisfy any liability that may arise.
•If a successful product liability claim or series of claims is brought against us for uninsured liabilities or in excess of insured liabilities, our assets may not be sufficient to cover such claims and our business operations could be impaired.
•If there are changes in the application of legislation or regulatory policies, or if problems are discovered with a product or the manufacture of a product, or if we or one of our distributors, licensees, or co-marketers fails to comply with regulatory requirements, the regulatory authorities could take various actions.
•These include imposing fines on us, imposing restrictions on our product or its manufacture, and requiring us to recall or remove a product from the market.
•The regulatory authorities could also suspend or withdraw our marketing authorizations, or require us to conduct additional clinical trials, change our product labeling, or submit additional MAAs.
•If any of these events occurs, our ability to sell our product may be impaired, and we may incur substantial additional expense to comply with regulatory requirements.
We may be exposed to future liabilities and/or obligations with respect to sales or out-licensing arrangements or partnerships.
•We may be required to set aside provisions for warranty claims or contingent liabilities in respect of such sales or out-licensing arrangements.
•We may be required to pay damages (including, but not limited to, litigation costs) to a purchaser or licensee to the extent that any representations or warranties that we had given to that purchaser or licensee prove to be inaccurate or to the extent that we have breached any of our covenants or obligations contained in the disposal documentation.
•In certain circumstances, it is possible that any incorrect representations and warranties could give rise to a right by the purchaser or licensee to unwind the contract in addition to receiving damages. Furthermore, we may become involved in disputes or litigation in connection with such product candidates.
•Certain obligations and liabilities associated with our prior management of the development of any current or disposed product candidate can also continue to exist notwithstanding any sale, such as liabilities arising from the infringement of intellectual property rights of others.
•As a result of the above, the total amount of costs and expenses that may be incurred with respect to liabilities associated with a sale or out-license may exceed our expectations, and we may experience other unanticipated adverse effects, all of which could adversely affect our business, financial condition, results of operations, and prospects.
•Our business is subject to economic, political, regulatory and other risks associated with international operations.
Additional Risks Relating to Ownership of Company Securities
Nasdaq has delisted our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.
Currently, our Common Stock is publicly traded on the OTC Markets Pink tier. No assurance can be given that our securities will trade on a national securities exchange, such as the Nasdaq Stock Market LLC (the “Nasdaq”) or the New York Stock Exchange (the “NYSE”), or the OTC Markets’ OTCQB or OTCQX tiers in the future or that the trading prices of our Common Stock on the OTC Markets will be indicative of the prices of our Common Stock if our Common Stock were traded on a national securities exchange. As previously disclosed, on November 1, 2022, we received written notice from the Staff of the Listing Qualifications Department of Nasdaq (the “Staff”) stating that the Staff has determined that the Company has not complied with the requirements of IM-5101-2 because (i) the Company has not demonstrated that its common stock complies with the minimum 1,000,000 unrestricted publicly held shares requirement in Listing Rule 5505(a)(2) (the “Unrestricted Publicly Held Shares Requirement”) and (ii) the Company’s public warrants (the “Public Warrants”) do not qualify for initial listing since the security underlying the warrants, the Company’s Common Stock, does not qualify. The Company timely requested a hearing before the Nasdaq Hearings Panel (the “Panel”) and such hearing has been conducted, which ultimately stayed the suspension of the Company’s Common Stock and Public Warrants and the filing by Nasdaq of a Form 25-NSE (the “Form 25”), pending the Panel’s decision. On January 6, 2023, the Company received a determination letter (the “Determination Letter”) from the Panel to delist the Company’s Common Stock and Public Warrants from Nasdaq. The Determination Letter indicated Nasdaq will suspend trading in the Company’s Common Stock and Public Warrants effective at the open of business on January 10, 2023 and indicated that it intends to file a Form 25-NSE Notification of Delisting with the SEC once all applicable appeal and review periods have expired in order to effect the formal delisting of the Company’s securities from Nasdaq. The Determination Letter provided that the Company may request an appeal of the Panel’s decision to the Nasdaq Listing and Hearing Review Council within 15 days of the date of the Determination Letter. Since the Company did not request an appeal, the Form 25 was filed
thereafter by Nasdaq. Upon suspension from Nasdaq, the Company’s Common Stock began to trade on the OTC Markets “Pink” tier. As of the date of this Annual Report on Form 10-K, the Company's Common Stock is listed on the OTC Grey Market.
As a result of the delisting of our securities by Nasdaq, we may face significant material adverse consequences until we are able to list our securities on another national securities exchange, including:
•a limited availability of market quotations for our securities;
•reduced liquidity for our securities;
•a determination that our Common Stock is a “penny stock” which will require brokers trading in our Common Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;
•a limited amount of news and analyst coverage; and
•a decreased ability to issue additional securities or obtain additional financing in the future.
The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Since our Common Stock and warrants are no longer currently listed on the Nasdaq, they are not deemed “covered securities.” Therefore, we may be subject to regulation in each state in which we offer our securities, which could materially adversely affect our business, financial condition and results of operations.
Our stock may be traded infrequently and in low volumes, so you may be unable to sell your shares at or near the quoted bid prices if you need to sell your shares.
Until our Common Stock is listed on a national securities exchange, our Common Stock may only trade on one of the OTC Markets (if we are successful in applying to trade on such marketplaces) or on the OTC Grey Market. In those markets, however, the shares of our Common Stock may trade infrequently and in low volumes, meaning that the number of persons interested in purchasing our Common Stock at or near bid prices at any given time may be relatively small or non-existent. An investor may find it difficult to obtain accurate quotations as to the market value of our common stock or to sell his or her shares at or near bid prices or at all. In addition, if we fail to meet the criteria set forth in SEC reporting regulations, various requirements would be imposed by law on broker-dealers who sell our securities to persons other than established customers and accredited investors. Consequently, such regulations may deter broker-dealers from recommending or selling our common stock, which may further affect the liquidity of our common stock. This would also make it more difficult for us to raise capital.
There currently is no active public market for our Common Stock and there can be no assurance that an active public market will ever develop. Failure to develop or maintain a trading market could negatively affect the value of our Common Stock and make it difficult or impossible for you to sell your shares.
There is currently no active public market for shares of our Common Stock, and one may never develop. Our Common Stock is currently traded on the OTC Grey Market. The OTC Grey Market is a thinly traded market and lacks the liquidity of certain other public markets with which some investors may have more experience. We may not ever be able to satisfy the requirements to be quoted on the OTC Markets or satisfy the listing requirements to be listed on a national securities exchange, which are often more widely traded and liquid markets. Some, but not all, of the factors which may delay or prevent the quotation or listing of our common stock on a more widely-traded and liquid market include the following: our stockholders’ equity may be insufficient; the market value of our outstanding securities may be too low; our net income from operations may be too low; our Common Stock may not be sufficiently widely held; we may not be able to secure market makers for our Common Stock; and we may fail to meet the rules and requirements mandated by the several exchanges and markets to have our Common Stock listed. Should we fail to satisfy the initial listing standards of the national exchanges or OTC Markets, or our Common Stock is otherwise rejected for listing or quotation, and remains traded on the OTC Grey Market, the trading price of our Common Stock could suffer and the trading market for our Common Stock may be less liquid, and our Common Stock price may be subject to increased volatility, making it difficult or impossible to sell shares of our Common Stock.
We cannot assure you that an active public market for our Common Stock will develop or be sustained. The market price of our Common Stock could be subject to wide fluctuations in response to many risk factors listed in this section, and others beyond our control, including:
•The market price for our stock and the value of your investment could materially decline.
•The trading price of our stocks may fluctuate and is likely to continue to fluctuate, substantially. The stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies.
•The market price of our stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:
•positive or negative results from, or delays in, testing or clinical trials conducted by us or our competitors;
•delays in entering into strategic relationships with respect to development or commercialization of our product candidates or entry into strategic relationships on terms that are not deemed to be favorable to us;
•technological innovations or commercial product introductions by us or competitors;
•changes in government regulations;
•developments concerning proprietary rights, including patents and litigation matters;
•the impact of public health epidemics, such as the ongoing COVID-19 pandemic, and government efforts to slow their spread;
•economic, public health, financial or geopolitical events that affect us or the financial markets generally, including the duration and severity of the impact of the ongoing COVID-19 pandemic;
•public concern relating to the commercial value or safety of our product candidates;
•financing or other corporate transactions;
•publication of research reports or comments by securities or industry analysts, and variances in our periodic results of operations from securities analysts’ estimates;
•general market conditions in the biopharmaceutical and pharmaceutical industries or in the economy as a whole;
•the loss of any of our key scientific or senior management personnel;
•sales of our stock by us, our senior management and board members, holders of our stock or our other security holders in the future;
•actions by institutional shareholders;
•speculation in the press or the investment community; or other events and factors, many of which are beyond our control;
•fluctuations in the valuation of companies perceived by investors to be comparable to us;
•performance of similar companies;
•share price and volume fluctuations attributable to inconsistent trading volume levels of our shares; and
•investors purposefully introducing volatility for short term gains.
•There have been high levels of volatility in the market prices of securities of biotechnology companies.
•These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions, interest rate changes or international currency fluctuations, may negatively impact the market price of our common shares.
•These and other market and industry factors may cause the market price and demand for our stock to fluctuate substantially, regardless of our actual operating performance, which may limit or prevent investors from readily selling our stock and may otherwise negatively affect the liquidity of our stock.
•In addition, the stock market in general, and emerging companies in particular, have experienced significant price and volume fluctuations that often have been unrelated to the operating performance of the companies affected by these fluctuations.
•These broad market fluctuations may adversely affect the trading price of our stock, regardless of our operating performance.
•Furthermore, the trading prices for our stock as well as the ordinary shares of our competitors have been highly volatile as a result of the recent geopolitical issues taking place in Eastern Europe and the Middle East but impacting financial markets globally.
•In the past in the United States, when the market price of a security has been volatile, holders of that security have often instituted securities class action litigation against the issuer of such securities.
•If any of the holders of shares in our company were to bring such a lawsuit against us, we could incur substantial costs defending the lawsuit and the attention of our senior management would be diverted from the operation of our business.
•Any adverse determination in litigation could also subject us to significant liabilities.
•If securities or industry analysts do not publish research or publish inaccurate research or unfavorable research about our business, the price and trading volume of our shares could decline.
•The trading market for our stock depends in part on the research and reports that securities or industry analysts publish about us or our business.
•If one or more of the analysts who covers us downgrades our stock price or publishes incorrect or unfavorable research about our business, the price of our shares would likely decline.
•If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, or downgrades our stock, demand for our stock could decrease, which could cause the price of our stock and/or ordinary shares and/or trading volume to decline.
Our existing stockholders have significant control of our management and affairs, which they could exercise against your best interests.
•Following the closing of the Business Combination, our executive officers and directors and greater than 5% stockholders, together with entities that may be deemed affiliates of or related to such persons or entities, beneficially owned in excess of 50% of our outstanding Common Stock (inclusive of the shares held by the Sponsor and the PIPE Shares).
•As a result, these stockholders, acting together, may be able to control our management and affairs and matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as mergers, consolidations, or the sale of substantially all our assets.
•Consequently, this concentration of ownership may have the effect of delaying, deferring, or preventing a change in control, including a merger, consolidation, takeover, or other business combination involving us or discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control, which might affect the market price of our common stock.
Risks Relating to future indebtedness if debt financing is needed
•In the future Peak Bio may require debt financing and this indebtedness could adversely affect our operations and financial results and prevent us from fulfilling our obligations under the notes.
•Future indebtedness could have important consequences to you. For example, it could:
•increase our vulnerability to general adverse economic and industry conditions;
•require us to dedicate a substantial portion of any of our potential future cash flow from operations to payments on our indebtedness, which would reduce the availability of our cash flow to fund working capital, capital expenditures, R&D, expansion efforts and other general corporate purposes;
•limit our future flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and
•place us at a competitive disadvantage compared to our competitors that have less debt.
To service any of our future indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control.
•Our ability to make payments on indebtedness, and to fund planned capital expenditures, R&D, as well as required stock repurchases and expansion efforts will depend on our ability to generate cash in the future.
•This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are and will remain beyond our control. Contractual provisions or laws, as well as any future subsidiaries’ financial condition and operating requirements, may limit our ability to obtain cash from our subsidiaries.
•Until such time, if ever, as we can generate substantial product revenues, we may seek to finance our cash needs through securities offerings, debt financings, license and collaboration agreements, or other capital raising transactions.
•If we raise capital through securities offerings, your ownership interest will be diluted, and the terms of the securities we issue in such transactions may include liquidation or other preferences that adversely affect your rights as a holder of our shares.
•Debt financing, if available, could result in fixed payment obligations, and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, to acquire, sell or license intellectual property rights, to make capital expenditures, to declare dividends, or other operating restrictions.
•In addition, we could also be required to seek funds through arrangements with collaborators or others at an earlier stage than otherwise would be desirable.
•Raising additional capital through any of these or other means could adversely affect our business and the holdings or rights of our security holders, and may cause the market price of our stock to decline.
Fluctuations in our operating results could affect the price of our common stock. Our operating results may vary from period to period for several reasons including:
•The overall competitive environment for our products as described in “We face competition” above.
•The amount and timing of future sales to customers in the U.S. For example, sales of a product may increase or decrease due to pricing changes, future mandated discounts, rebates, governmental price controls, formularies, health care plans acceptance of products, healthcare or insurance companies changing operations in a geographical area or fluctuations in future distributor buying patterns or future sales initiatives that we may undertake from time to time.
•The availability and extent of government and private third-party reimbursements for the cost of therapy.
•The future effectiveness and safety of our various products as determined both in clinical testing and by the accumulation of additional information on each product after the FDA approves it for sale.
•The future rate of adoption by physicians and use of our products for approved indications and additional indications. Among other things, the rate of adoption by physicians and use of our products may be affected by results of clinical studies reporting on the benefits or risks of a product.
•The potential introduction of new products and additional indications for existing products.
•The ability to successfully manufacture sufficient quantity of any future marketed product that we may bring to market or partner with collaborators versus the ability of our competitors to do the same with their products.
•To support scaling of preclinical and clinical activities, we will need to provide proportionate operational general and administrative support in areas of IT, HR, PR, Finance, Legal and Regulatory. We would need to hire these future staff and they will play a role in determining our operating results.
•Portions of our information technology infrastructure may experience interruptions, delays or cessations of service or produce errors.
We incur increased costs and obligations as a result of being a public company.
•As a public company, we are and will continue to be subject to the requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) the listing standards of the applicable securities exchange where our securities are listed and other applicable securities rules and regulations.
•We expect that the requirements of these rules and regulations will continue to increase our legal, accounting, and financial compliance costs, make some activities more difficult, time-consuming and costly, and place significant strain on our personnel, systems, and resources.
•For example, the Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and results of operations.
•As a result of the complexity involved in complying with the rules and regulations applicable to public companies, our management’s attention may be diverted from other business concerns, which could harm our business, financial condition, and results of operations, although we have already hired additional employees to assist us in complying with these requirements, we may need to hire more employees in the future or engage outside consultants, which will increase our operating expenses.
Because there are no current plans to pay cash dividends on our Common Stock for the foreseeable future, you may not receive any return on investment unless you sell your common stock for a price greater than that which you paid for it.
We intend to retain future earnings, if any, for future operations, expansion and debt repayment and there are no current plans to pay any cash dividends for the foreseeable future. The declaration, amount and payment of any future dividends on shares of our Common Stock will be at the sole discretion of our board of directors. Our board of directors may take into account general and economic conditions, our financial condition and results of operations, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax, and regulatory restrictions, implications on the payment of dividends by us to our stockholders or by its subsidiaries to it and such other factors as our board of directors may deem relevant. In addition, our ability to pay dividends is limited by covenants of our existing and outstanding indebtedness and may be limited by covenants of any future indebtedness that we incur. As a result, you may not receive any return on an investment in our Common Stock unless you sell our Common Stock for a price greater than that which you paid for it.
If securities analysts do not publish research or reports about our business or if they downgrade our stock or our sector, our stock price and trading volume could decline.
The trading market for our Common Stock will rely in part on the research and reports that industry or financial analysts publish about us or our business. We will not control these analysts. In addition, some financial analysts may have limited expertise with our model and operations. Furthermore, if one or more of the analysts who do cover the downgrade of our stock or industry, or the stock of any of our competitors, or publish inaccurate or unfavorable research about our business, the price of our stock could decline. If one or more of these analysts ceases coverage of us or fails to publish reports on it regularly, we could lose visibility in the market, which in turn could cause its stock price or trading volume to decline.
Future sales, or the perception of future sales, by us or our stockholders in the public market could cause the market price for our Common Stock to decline.
The sale of shares of our Common Stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of shares of our Common Stock. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that it deems appropriate.
In addition, Common Stock reserved for future issuance under our equity incentive plans will become eligible for sale in the public market once those shares are issued, subject to provisions relating to various vesting agreements, lock-up agreements and, in some cases, limitations on volume and manner of sale applicable to affiliates under Rule 144, as applicable. The aggregate number of shares of our Common Stock reserved for future issuance under our equity incentive plan is 3,756,816. We will file one or more registration statements on Form S-8 under the Securities Act of 1933, as amended (the “Securities Act”) to register shares of Common Stock or securities convertible into or exchangeable for shares of Common Stock issued pursuant to our equity incentive plans. Any such Form S-8 registration statements will automatically become effective upon filing. Accordingly, shares registered under such registration statements will be available for sale in the open market.
Depending upon market liquidity at the time, sales of shares of our Common Stock under the White Lion Purchase Agreement may cause the trading price of our Common Stock to decline. After White Lion has acquired shares under the White Lion Purchase Agreement, it may sell all, some or none of those shares. Sales to White Lion by us pursuant to the White Lion Purchase Agreement may result in substantial dilution to the interests of other holders of our Common Stock. The sale of a substantial number of shares of our Common Stock to White Lion, or anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales.
However, we have the right to control the timing and amount of any sales of our shares to White Lion, and the White Lion Purchase Agreement may be terminated by us at any time at our discretion without penalty.
The sale of substantial amounts of shares of our Common Stock or warrants, or the perception that such sales could occur, could cause the prevailing market price of shares of our Common Stock to decline significantly. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. We believe the likelihood that warrant holders will exercise their Warrants is dependent upon the market price of our Common Stock.
In the future, we may also issue its securities in connection with investments or acquisitions. The amount of shares of Common Stock issued in connection with an investment or acquisition could constitute a material portion of our then-outstanding shares of Common Stock. Any issuance of additional securities in connection with investments or acquisitions may result in additional dilution to our stockholders.
Warrants will become exercisable for our Common Stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to our existing stockholders.
Each Public and Private Placement Warrant, initially issued by Ignyte Sponsor LLC, entitles the holder thereof to purchase one (1) share of our Common Stock at a price of $11.50 and $0.60 per share for the Convertible Note Warrants (as defined below), subject to adjustment. Warrants may be exercised only for a whole number of shares of Common Stock. To the extent such warrants are exercised, additional shares of our Common Stock will be issued, which will result in dilution to the then existing holders of our Common Stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of our Common Stock.
Convertible notes may be converted for our Common Stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to our existing stockholders.
Each April 2023 Convertible Note (as defined below) entitles the holder thereof to convert each dollar of outstanding principal and accrued interest into one (1) share of our Common Stock at a price of $0.60 per share, subject to adjustment.
Each December 2023 Convertible Note and May 2024 Convertible Note (as defined below) automatically converts each dollar of outstanding principal and accrued interest into one (1) share of our Common Stock at a per share price equal to the 30 day volume weighted average price of the surviving company multiplied by a discount rate of 70% and 50%, respectively. This automatic conversion is contingent on closing of a Business Combination (as detailed below). The December 2023 Notes entitles the holder thereof to convert each dollar of outstanding principal and accrued interest into one (1) share of our Common Stock at a per share price equal to the 30 day volume weighted average price of the Company multiplied by a discount rate of 90%. This optional conversion is contingent on the Company maintaining a listing on a Public Exchange.
Convertible Notes may be converted only for a whole number of shares of Common Stock. To the extent such notes are converted, additional shares of our Common Stock will be issued, which will result in dilution to the then existing holders of our Common Stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of our Common Stock.
Our management and auditors have expressed substantial doubt about our ability to continue as a going concern.
Our auditors’ report to our December 31, 2023 financial statements includes an explanatory paragraph that expressed substantial doubt about our ability to continue as a going concern. Our current cash level raises substantial doubt about our ability to continue as a going concern without immediate short-term financing required to get us through consummation of the Business Combination. Additionally, our management has independently determined that there is substantial doubt about Peak Bio’s ability to continue as a going concern because our cash flows generated from operations may not be sufficient to meet our current operating costs. In addition, our future financial statements may include similar qualifications about our ability to continue as a going concern. Peak Bio’s financial statements were prepared assuming that it will continue as a going concern and do not include any adjustments that may result from the outcome of this uncertainty. If Peak Bio is unable to meet its current operating costs, Peak Bio would need to seek or additional financing or modify or cease its operational plans. If Peak Bio seeks additional financing to fund its business activities in the future and there remains substantial doubt about its ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding to Peak Bio on commercially reasonable terms or at all.
The JOBS Act permits “emerging growth companies” like us to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies.
We qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, which we refer to as the “JOBS Act.” As such, we will take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as it continues to be an emerging growth company, including (i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (iii) reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements. As a result, our stockholders may not have access to certain information they deem important. We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year (a) following February 1, 2026, the fifth anniversary of the closing of Ignyte’s IPO, (b) in which we have total annual gross revenue of at least $1.235 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Common Stock that are held by non-affiliates exceeds $700 million as of the last business day of our prior second fiscal quarter, and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as Porch is an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
We cannot predict if investors will find our Common Stock less attractive because we will rely on these exemptions. If some investors find our Common Stock less attractive as a result, there may be a less active trading market for Common Stock and our stock price may be more volatile.
Anti-takeover provisions in our organizational documents could delay or prevent a change of control.
Certain provisions of our Amended and Restated Charter and Amended and Restated Bylaws have an anti-takeover effect and may delay, defer or prevent a merger, acquisition, tender offer, takeover attempt or other change of control transaction that a stockholder might consider in its best interest, including those attempts that might result in a premium over the market price for the shares held by our stockholders.
These provisions provide for, among other things:
•the ability of our board of directors to issue one or more series of preferred stock;
•advance notice for nominations of directors by stockholders and for stockholders to include matters to be considered at our annual meetings;
•certain limitations on convening special stockholder meetings;
•limiting the ability of stockholders to act by written consent; and
•our board of directors have the express authority to make, alter or repeal our Amended and Restated Bylaws.
These anti-takeover provisions could make it more difficult for a third party to acquire us, even if the third party’s offer may be considered beneficial by many of our stockholders. As a result, our stockholders may be limited in their ability to obtain a premium for their shares. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and to cause us to take other corporate actions you desire. See “Description of Securities.”
Our Amended and Restated Charter designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.
Our Amended and Restated Charter provides that, subject to limited exceptions, any (1) derivative action or proceeding brought on behalf of us, (2) action asserting a claim of breach of a fiduciary duty owed by any director, officer, stockholder or employee to us or our stockholders, (3) action asserting a claim arising pursuant to any provision of the DGCL or our Amended and Restated Charter or our Amended and Restated Bylaws, or (4) action asserting a claim governed by the internal affairs doctrine shall, to the fullest extent permitted by law, be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, another state or federal court located within the State of Delaware. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to have consented to the provisions of our Amended and Restated Charter described above. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or its directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and employees. Alternatively, if a court were to find these provisions of our Amended and Restated Charter inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.
We have identified a material weakness in our internal control over financial reporting which could, if not remediated, result in material misstatements in our financial statements.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes, in accordance with generally accepted accounting principles in the United States. Due to inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness of the internal control over financial reporting to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies and procedures may deteriorate.
Our management, under the supervision and with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our internal control over financial reporting as of the end of the period covered by this Annual Report on Form 10-K. As a result of this evaluation, management identified control deficiencies that constituted a material weakness in our internal control over financial reporting. The Company’s internal control over financial reporting is ineffective with respect to its financial closing process with respect to (i) preparation, review and approval of journal entries including the reasonableness of critical accounting estimates, (ii) timely closings as required to maintain compliance with reporting deadlines under applicable Securities and Exchange Commission regulations, (iii) evaluation of third party financial reporting advisors’ capabilities and the monitoring and evaluation of the accuracy and completeness of their work product, and (iv) accuracy of diluted earnings per share calculation. The Company experienced difficulties in applying complex accounting principles including (i) financial instruments accounted for under ASC 480 and ASC 815-10, (ii) differentiating between contractual liabilities and gain and loss contingencies, and (iii) fair value measurements.
Management continues to work to improve its controls related to our material weaknesses, specifically implementing improved processes and internal controls to ensure the proper application of accounting practices and guidance. We also intend to increase our accounting staff as soon as economically feasible and sustainable to remediate these material weaknesses. These material weaknesses will not be considered to be remediated until the applicable remediated controls are operating for a sufficient period of time and management has concluded that these controls are operating effectively. Until remediated, these material weaknesses could result in future errors to our financial statements. However, we can give no assurance that the measures we take will remediate the material weakness or that additional material weaknesses will not arise in the future. Any failure to remediate the material weakness, or the development of new material weaknesses in our internal control over financial reporting, could result in material misstatements in our financial statements and cause us to fail to meet our reporting and financial obligations, which in turn could have a negative impact on our financial condition.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments.
None.

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ITEM 2. PROPERTIES
Item 2. Properties.
Our principal executive office is located in Pleasanton, California, which consists of general office space. We are in the process of seeking laboratory facilities to replace the previous facility in Palo Alto, California. We believe that our existing facilities are adequate to meet our needs and that existing needs and future growth can be accommodated by leasing alternative or additional space.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings.
The Company is not currently a party to any material legal proceedings. At each reporting date, the Company evaluates whether a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company expenses the costs related to its legal proceedings as incurred.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures.
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information and Holders
Our Common Stock and Public Warrants were historically quoted on the Nasdaq under the symbols “IGNY” and “IGNYW,” respectively. On November 2, 2022, our Common Stock and Public Warrants were initially listed on the Nasdaq under the new trading symbols of “PKBO” and “PKBOW,” respectively. On January 10, 2023, our Common Stock and Public Warrants have been suspended from trading on the Nasdaq and our Common Stock began trading on the OTC Markets “Pink” tier under the symbol “PKBO.” As of the date of this Annual Report on Form 10-K, the Company's Common Stock is listed on the OTC Grey Market.
As of June 30, 2024, there were approximately 50 record holders or our Common Stock and approximately 33 records holders of our warrants.
Dividends
We have not paid any cash dividends on our Common Stock to date. We may retain future earnings, if any, for future operations, expansion and debt repayment and have no current plans to pay cash dividends for the foreseeable future. Any decision to declare and pay dividends in the future will be made at the discretion of our board of directors and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions and other factors that our board of directors may deem relevant. In addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness we or our subsidiaries incur. We do not anticipate declaring any cash dividends to holders of our Common Stock in the foreseeable future.
Stock Performance Graph
Not applicable.
Sale of Unregistered Securities
None.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Securities Authorized for Issuance Under Equity Incentive Plan
At the special meeting of Ignyte’s stockholders in lieu of our 2022 annual meeting held on October 25, 2022, our stockholders considered and approved the Peak Bio, Inc. 2022 Long-Term Incentive Plan (the “Incentive Plan”). The Incentive Plan was previously approved, subject to stockholder approval, by the Ignyte board of directors on April 27, 2022. The Incentive Plan became effective immediately upon the closing of the Business Combination. Pursuant to the Incentive Plan, 4,150,470 shares of Common Stock have been reserved for issuance under the Incentive Plan.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. Reserved

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of Peak Bio’s financial condition and results of operations together with Peak Bio’s audited consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K. Certain of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to plans and strategy for Peak Bio’s business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the section entitled “Risk Factors,” Peak Bio’s actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. You should carefully read the section entitled “Risk Factors” to gain an understanding of the important factors that could cause actual results to differ materially from Peak Bio’s forward-looking statements. Please also see the section entitled “Cautionary Note Regarding Forward-Looking Statements.”
Unless otherwise indicated or the context otherwise requires, references in this Peak Bio’s Management’s Discussion and Analysis of Financial Condition and Results of Operations section to “Peak Bio,” “we,” “us,” “our” and other similar terms refer to Peak Bio Co., Ltd. prior to the Business Combination and to Peak Bio, Inc. and its consolidated subsidiaries after giving effect to the Business Combination.
Overview
Peak Bio is a clinical-stage biopharmaceutical company focused on developing therapeutics addressing significant unmet need in the areas of oncology, inflammation and rare diseases. Our management team has a combined 50 years of industry experience in the areas of small molecules, antibodies, and antibody-drug-conjugates (ADC).
With our current strategic focus, we have leveraged two decades of industry learning in the antibody-drug-conjugate (ADC) field to develop a platform of proprietary technologies that enable us to design ADCs to have improved efficacy, safety, and tolerability relative to existing antibody or ADC therapies. Our most advanced platform, PH-1 or Thailanstatin is being used to generate a pipeline of proprietary ADC product candidates to address patient populations with improved efficacy relative to traditional ADC-based therapies. Our second product candidate is an ADC targeting Trop2, an antigen broadly expressed in solid tumors. We expect our Trop2 ADC to enter clinical development by late 2024. Our Trop2 ADC and other undisclosed discovery-stage product candidates are based on our proprietary PH-1 platform of toxin payloads targeting RNA splicing.
Despite commercial success of the ADCs currently on the market, there continues to be a need for ADCs that not only deliver antibody-directed payloads selectively to their tumors, but to also release them safely via improved linker technology and avoid off- target toxicities. Secondly, we believe that adding an immunomodulatory effect to our toxin(s) that engages our immune systems to assist in the cancer killing would contribute to improved tumor killing.
Our lead product candidate for which we are seeking a strategic partner for, PHP-303 is a small molecule, 5th generation Phase 2 clinical-ready neutrophil elastase (NE) inhibitor (NEI). We are planning a Phase 2 clinical study in Alpha-1 anti-trypsin deficiency (AATD) patients. We have completed two Phase 1 trials of PHP-303 in healthy volunteers testing higher doses of PHP-303 by single-ascending dose (SAD) and multiple-ascending dose (MAD). PHP-303 demonstrated dose- dependent pharmacokinetics and the recommended Phase 2 dose was achieved in these trials. A maximum tolerated dose for PHP-303 was not achieved in these Phase 1 trials.
We do not have any products available for commercial sale, and we have not generated any product revenue from our portfolio of product candidates or other sources. Our ability to generate revenue sufficient to achieve profitability, if ever, will depend on the successful development and eventual commercialization of our potential therapies, which we expect, if it ever occurs, will take a number of years. The research and development efforts require significant amounts of additional capital and adequate personnel infrastructure. There can be no assurance that our research and development activities will be successfully completed, or that our potential therapies will be commercially viable.
We have incurred significant losses since the commencement of our operations. Our net loss was $12.8 million and $13.1 million for the years ended December 31, 2023 and 2022, respectively. Since the beginning of 2024, we raised aggregate gross proceeds of approximately $0.7 million from the issuance of December 2023 Convertible Notes, $0.75 million from the issuance of secured Founder promissory notes, and $3.5 million from the issuance of May 2024 Convertible Notes. We expect to incur significant expenses and operating losses for the foreseeable future as we continue our efforts to identify product candidates and seek regulatory approvals within our portfolio.
We will need additional financing to fund our ongoing activities and to close the Merger with Akari (defined below). We may raise this additional funding through the sale of equity, debt financings or other capital sources, including potential collaborations with other companies or other strategic transactions and funding under government contracts.
On November 1, 2022, we received written notice (the “Notice”) from the Staff of the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market LLC (“Nasdaq”) stating that the Staff determined that we had not complied with the
listing requirements because (i) we had not demonstrated that our common stock complied with the minimum 1,000,000 unrestricted publicly held shares requirement. We requested, and received, a hearing with the Hearings Panel (the “Panel”) on December 8, 2022 to appeal Nasdaq’s determination, which request stayed the suspension of our common stock and warrants and the filing by Nasdaq of a Form 25-NSE pending the Panel’s decision.
On January 6, 2023, we received the determination letter (the “Determination Letter”) from the Panel to delist our common stock and warrants from Nasdaq. Nasdaq suspended trading in our common stock and warrants effective at the open of business on January 10, 2023. Upon suspension from Nasdaq, our securities began trading on the OTC Markets’ “OTC Pink Market” tier.
We may be unable to raise additional funds or enter into other arrangements when needed on favorable terms, or at all. There can be no assurances that other sources of financing will be available. Due to these uncertainties, there is substantial doubt about our ability to continue as a going concern.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or classification of liabilities that might result from the outcome of the uncertainties discussed above.
Recent Developments
Akari Merger
Merger Agreement
On March 4, 2024, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Akari Therapeutics, Plc, a public company limited by shares incorporated in England and Wales (“Akari”), and Pegasus Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Akari (“Merger Sub”), pursuant to which, upon the terms and subject to the conditions thereof, Merger Sub will be merged with and into Peak Bio (the “Merger”), with Peak Bio surviving the Merger as a wholly-owned subsidiary of Akari.
Pursuant to the Merger Agreement, and upon the terms and subject to the conditions thereof, at the effective time of the Merger (the “Effective Time”), each issued and outstanding share of Common Stock (other than (x) shares of Common Stock held by us as treasury stock, or shares of Common Stock owned by Akari, Merger Sub or any direct or indirect wholly-owned subsidiaries of Akari and (y) Dissenting Shares (as defined in the Merger Agreement)), will be converted into the right to receive Akari American Depositary Shares (“Akari ADSs”) representing a number of Akari ordinary shares, par value $0.0001 per share (the “Akari Ordinary Shares”), equal to an exchange ratio calculated in accordance with the Merger Agreement (the “Exchange Ratio”), each such share duly and validly issued against the deposit of the requisite number of Akari Ordinary Shares in accordance with the Deposit Agreement (as defined in the Merger Agreement). The Exchange Ratio will be calculated such that the total number of shares of Akari ADSs to be issued as merger consideration for the Peak Common Stock will be expected to be, upon issuance, approximately 50% of the outstanding shares of Akari ADSs (provided, certain adjustments to this ratio will be made in respect of the net cash, as determined in accordance with the Merger Agreement, of each of Peak Bio and Akari at the close of business one business day prior to the anticipated consummation of the Merger). The Merger Agreement provides that, under certain circumstances, additional Akari ADSs may be issued to the holders of shares of Peak Common Stock following the consummation of the Merger equal to an exchange ratio calculated in accordance with the Merger Agreement (the “Additional Exchange Ratio”).
At the Effective Time, each warrant to purchase capital stock of Peak Bio (“Peak Warrant”) outstanding immediately prior to the Effective Time will be converted into and exchangeable for warrants to purchase a number of Akari Ordinary Shares or Akari ADSs, as determined by Akari (each, an “Adjusted Warrant”), on substantially similar terms and subject to substantially similar conditions as were applicable to such Peak Warrant immediately prior to the Effective Time, except (i) for terms rendered inoperative by reason of the transactions contemplated by the Merger Agreement, (ii) as provided in the following sentence and (iii) such amendments to the terms of the Adjusted Warrants as are necessary to comply with applicable Law (as defined in the Merger Agreement). The number of Akari Ordinary Shares (or the number of Akari Ordinary Shares underlying Akari ADSs, as applicable) subject to each Adjusted Warrant will be equal to the number of shares of Peak Common Stock issuable upon exercise of such Peak Warrant immediately prior to the Effective Time multiplied by the Exchange Ratio, with any fractional Akari Ordinary Shares or Akari ADSs rounded down to the nearest whole Akari Ordinary Share or Akari ADS, as applicable, and the exercise price with respect to each Akari Ordinary Share (or each Akari Ordinary Share underlying Akari ADSs, as applicable) underlying such Adjusted Warrant will be equal to the exercise price of such Peak Warrant immediately prior to the Effective Time divided by the Exchange Ratio. The grant of the Adjusted Warrants will be effected as of the Effective Time, or as soon
thereafter as is reasonably practicable, taking into account Parent’s administrative procedures. The Adjusted Warrants will be further adjusted, if applicable, to give effect to the impact of the Additional Exchange Ratio.
Each option to acquire shares of Peak Common Stock (“Peak Option”) that is outstanding and unexercised immediately prior to the Effective Time, whether or not vested, will be assumed and converted into an option to purchase a number of Akari ordinary shares or Akari ADSs, as determined by Akari (each, an “Adjusted Option”). The number of Akari Ordinary Shares (or the number of Akari Ordinary Shares underlying Akari ADSs, as applicable) subject to the Adjusted Option will be equal to the product of (i) the total number of shares of Peak Common Stock subject to such Peak Option immediately prior to the Effective Time multiplied by (ii) the Exchange Ratio, with any fractional Akari Ordinary Shares or Akari ADSs rounded down to the nearest whole Akari Ordinary Share or Akari ADS, as applicable, and the exercise price per share of each Adjusted Option will be equal to the exercise price of such Peak Option immediately prior to the Effective Time divided by the Exchange Ratio. The Adjusted Options will be further adjusted, if applicable, to give effect to the impact of the Additional Exchange Ratio.
Voting Agreements
Concurrently with the Merger Agreement, we and Akari entered into voting and support agreements (the “Voting Agreements”) with certain stockholders of Peak Bio (the “Peak Stockholders”) and certain shareholders of Akari (the “Akari Shareholders” and, together with the Peak Stockholders, the “Supporting Holders”). The Supporting Holders have agreed to, among other things, vote their shares in favor of the Merger Agreement and the Merger or the issuance of Akari Ordinary Shares in connection therewith, as applicable, in accordance with the recommendation of the respective boards of directors of Peak Bio and Akari.
Bylaws Amendment
In connection with the execution of the Merger Agreement, on March 3, 2024, our Board approved an amendment to our Amended and Restated Bylaws (the “Bylaws Amendment”), which became effective immediately. The Bylaws Amendment requires that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, employee or stockholder (including a beneficial owner) of the Company to the Company or the Company’s stockholders, (iii) any action asserting a claim against any director, officer, employee or stockholder (including a beneficial owner) of the Company arising under any provision of the Delaware General Corporation Law (“DGCL”) or the bylaws or the certificate of incorporation of the Company, or (iv) any action asserting a claim governed by the internal affairs doctrine shall, to the fullest extent permitted by law, be the Court of Chancery of the State of Delaware (or if the Court of Chancery for the State of Delaware does not have jurisdiction, a state court located within the State of Delaware or, if no state court located within the State of Delaware has subject matter jurisdiction, the federal district court for the District of Delaware). In addition, the Bylaws Amendment provides that unless the Company consents in writing to the selection of an alternative forum, the federal district courts of the United States shall be the exclusive forum for the resolution of any claim or cause of action arising under the Securities Act of 1933, as amended.
Financing
Key Company Stockholder Agreements
In May 2021, we received proceeds from a loan in the amount of approximately $750,000 Dr. Huh. The loan, which was scheduled to mature on May 31, 2022, bore interest at a rate of 1.0% per annum. The loan could be prepaid by the Company at any time prior to maturity with no prepayment penalties. In August 2021, we received proceeds from the additional loan in the amount of approximately $750,000 from Dr. Huh. The loan, which was scheduled to mature on July 31, 2022, bore interest at a rate of 1.0% per annum. The loan could be prepaid by the Company at any time prior to maturity with no prepayment penalties.
We made a $150,000 payment on the Founder Loans in December 2022. On April 28, 2023, $448,940 of the principal balance of this related party loan, and $26,830 of accrued interest, was settled through the issuance of the April 2023 Convertible Notes, related party (see below). As of December 31, 2023 and 2022, $901,060 and $1,375,000 was outstanding under this loan.
In March 2023, we received proceeds from an additional Founder Loans in the amount of $250,000. The loan had the maturity date of December 31, 2023 and bore interest at a rate of 5.0% per annum. The loan could be prepaid by us at any time prior to maturity without the consent of the lender. On April 28, 2023, this related party loan, including the accrued interest of $1,199, was settled through the issuance of the April 2023 Convertible Notes, related party (see below).
In January 2024, we received proceeds from a Senior Secured Promissory Note (the “Secured Note”) in the amount of $750,000 from our founder and director, Hoyoung Huh (the “Key Company Stockholder”). In accordance with the terms of the
Secured Note, the Company, together with its subsidiaries, also entered into a Security Agreement with Dr. Huh (the “Security Agreement”). The Secured Note has a maturity date on January 23, 2025 and carries an interest rate of 15% per annum. As security for payment of the Secured Note, the Security Agreement grants and assigns to Dr. Huh a security interest in all of the assets of the Company and its subsidiaries.
Convertible Notes
2022 Convertible Note
On November 1, 2022, we issued a $1,512,500 convertible note to EarlyBirdCapital, Inc., the sole book running manager of Ignyte’s IPO, in lieu of the deferred underwriting fee that was payable at the Closing. The convertible note accrued interest at a rate of 8% per annum and was payable on October 31, 2023, provided however that we agree to make mandatory prepayments on this note (which shall first be applied to accrued interest and then to principal) from time to time in amounts equal to 15% of the gross proceeds received by us from any equity lines, forward purchase agreements or other equity financings consummated by us prior to the maturity date.
On the maturity date, the note holder had the right, in its sole and absolute discretion, to convert all or part of the principal and/or accrued interest of this convertible note into shares of our common stock of at a per share conversion price equal to 90% of the volume weighted average price of a share of our common stock for the five trading days immediately prior to the maturity date.
On November 1, 2023, we entered into an amended and restated promissory note whereby the principal amount was reduced to $650,000. The loan matures on December 31, 2024, bears interest at a rate of 6.0% per annum, and has no conversion features. Further, the loan required us to make a payment of $300,000 by December 31, 2023, which was paid.
April 2023 Convertible Note
In April 2023, we entered into separate subscription agreements for the issuance of convertible promissory notes (the “April 2023 Convertible Notes”) in the aggregate principal amount of $2,195,034 and an aggregate amount of 3,658,390 warrants (the “April 2023 Convertible Note Warrants”). The April 2023 Convertible Notes are convertible into shares of our common stock at $0.60 per share. For each share into which an April 2023 Convertible Note is convertible, the investor received April 2023 Convertible Note Warrants to purchase an equal amount of shares of our common stock at $0.60 per share, exercisable for a period of 5 years. In connection with the issuance of the April 2023 Convertible Notes and the April 2023 Convertible Note Warrants, in consideration for its services in respect of the financing described above, we also issued the Placement Agent purchase warrants (the “Placement Agent Warrant”) to purchase 209,670 shares of our common stock at a price per share of $0.60. The Placement Agent Warrant has a 5-year term. In addition, we paid the Placement Agent a commission of approximately $125,000.
In April 2023, we entered into a subscription agreement with Dr. Huh to settle $1,130,775 in related party loans made to us. We issued a $1,130,775 related party unsecured convertible promissory note, with the same terms as the April 2023 Convertible Notes, and warrants to purchase 1,884,625 shares of our common stock, with the same terms as the April 2023 Convertible Note Warrants.
As at December 31, 2023, the April 2023 Convertible Notes were in default.
December 2023 Convertible Note
In December 2023, we entered into additional subscription agreements for the issuance of convertible promissory notes, pursuant to which we issued convertible notes in the aggregate principal amount of $1,000,000 (the “December 2023 Convertible Notes”). In addition, certain holders of April 2023 Convertible Notes agreed to exchange the aggregate amount of $187,950 of April 2023 Convertible Notes, including the accrued interest, into the same amount of December 2023 Convertible Notes.
In January 2024, we completed an additional close of the December 2023 Convertible Notes pursuant to which (i) we issued December 2023 Convertible Notes in the aggregate principal amount of $675,000 and (ii) certain April 2023 Convertible Notes previously issued in the aggregate original principal amount of $240,000 were exchanged for December 2023 Convertible Notes.
In February 2024, we completed a final closing of the December 2023 Convertible Notes and entered into separate subscription agreements in the aggregate principal amount of $63,000.
The December 2023 Convertible Notes bear an interest rate of 10% per annum and have a maturity date of December 18, 2024. The terms of the December 2023 Convertible Notes provide for automatic conversion of the outstanding principal amount of the December 2023 Convertible Notes and all accrued and unpaid interest upon a business combination (as defined in the agreement) into our common stock at the Conversion Price (the “Automatic Conversion Feature”). The Conversion Price is determined by reference to the purchase price payable in connection with such business combination, multiplied by 70%, where
the price per share of the common stock is determined by reference to the 30-day volume weighted average price of our common stock on the public exchange immediately prior to conversion, resulting in 43% discount on the issuance price in the a business combination (the Automatic Discount”). If a business combination does not occur prior to the maturity date of the December 2023 Convertible Notes and if our Common Stock is listed on a public exchange as of such date, then the holders have the right, at their option, to convert the outstanding principal amount of the December 2023 Convertible Notes (and all accrued and unpaid interest thereof) into the shares of our common stock at a price equal to the 30-day volume weighted average price of our common stock on the public exchange on which it is traded multiplied by 90% (the “Optional Conversion Feature”).
In consideration for its services in respect of the financing described above, we paid the Placement Agent a commission of $147,040. Further, upon conversion of the December 2023 Convertible Notes into our Common Stock, the Placement Agent will receive shares of our restricted Common Stock equal to (i) 4% of the total number of shares of Common Stock received upon conversion of the December 2023 Convertible Notes issued for the aggregate principal of $1,738,000 new capital and (ii) 1% of the total number of shares of Common Stock received upon conversion of the December 2023 Convertible Notes issued for the aggregate principal of $420,000 in exchange of the April 2023 Convertible Notes.
In December 2023, we issued a $500,000 related party December 2023 Convertible Note to Dr. Huh. This note has the same terms as the December 2023 Convertible Notes outlined above.
May 2024 Convertible Notes
In May 2024, the Company entered into a secured convertible promissory note agreement pursuant to which the Company issued convertible notes in the aggregate principal amount of $1,324,500 (the “May 2024 Convertible Notes”).
In July 2024, the Company completed a final closing of the May 2024 Convertible Notes and entered into a secured convertible promissory note agreement pursuant to which the Company issued convertible notes in the aggregate principal amount of $2,175,000 (the “May 2024 Convertible Notes”).
The May 2024 Convertible Notes carry an interest rate of 10% per annum, have a maturity date of December 18, 2024. The terms of the May 2024 Convertible Notes provide for automatic conversion of the outstanding principal amount of the notes and all accrued and unpaid interest upon a business combination (as defined in the agreement) into the Company common stock at the Conversion Price. The Conversion Price is determined by reference to the purchase price payable in connection with such business combination, multiplied by 50%, where the price per share of the common stock is determined by reference to the 30-day volume weighted average price of our common stock on the public exchange immediately prior to conversion. In conjunction with the May 2024 Convertible Notes, we entered into the Security Agreement which grants and assigns the May 2024 convertible note holders a senior security interest in all of the assets of the Company and its subsidiaries.
In consideration for its services in respect of the financing described above, the Company paid Paulson Investment Company, LLC (the “May 2024 Placement Agent”) the commission of $200,000. Further, upon conversion of the May 2024 Convertible Notes into Common Stock of the Company, the May 2024 Placement Agent will receive shares of restricted common stock of the Company equal to 4% of the total number of shares of common stock received upon conversion of May 2024 Convertible Notes on certain notes with a principal value of $2,500,000.
White Lion Common Stock Purchase and Registration Rights Agreements
On November 3, 2022, we entered into a Common Stock Purchase Agreement (the “White Lion Purchase Agreement”) and Registration Rights (the “White Lion RRA”) with White Lion Capital, LLC, a Delaware limited liability company (“White Lion”). Pursuant to the White Lion Purchase Agreement, we have the right, but not the obligation, to require White Lion to purchase, from time to time, up to $100,000,000 in aggregate gross purchase price of newly issued shares of our Common Stock, subject to certain limitations and conditions set forth in the White Lion Purchase Agreement. Capitalized terms used but not otherwise defined in this section shall have the meanings given to such terms by the White Lion Purchase Agreement and the White Lion RRA.
We are obligated under the White Lion Purchase Agreement and the White Lion RRA to file a registration statement with the SEC to register the Common Stock under the Securities Act, for the resale by White Lion of shares of Common Stock that we may issue to White Lion under the White Lion Purchase Agreement.
Subject to the satisfaction of certain customary conditions including, without limitation, the effectiveness of a registration statement registering the shares issuable pursuant to the White Lion Purchase Agreement, our right to sell shares to White Lion will commence on the effective date of the registration statement and extend until November 1, 2025. During such term, subject to the terms and conditions of the White Lion Purchase Agreement, we may notify White Lion when we exercise our right to sell shares (the effective date of such notice, a “Notice Date”).
The number of shares sold pursuant to any such notice may not exceed (i) the lower of (a) the Purchase Notice Fixed Limit (described below) and (b) the product of (1) the Average Daily Trading Volume (as defined in the White Lion Purchase
Agreement), and (2) the applicable Percentage Limit (as defined in the White Lion Purchase Agreement). The Purchase Notice Fixed Limit is $500,000 upon payment of the Initial Commitment Shares (as defined in the White Lion Purchase Agreement) and can be increased in two tranches: (A) to $1,000,000 following an aggregate purchase of $5,000,000 shares and issuance by us to White Lion of an additional $250,000 in Commitment Shares, and (B) to $2,000,000 following an aggregate purchase of $10,000,000 shares and issuance by the for payment of an additional $250,000 in Commitment Shares (as defined in the White Lion Purchase Agreement).
The applicable Percentage Limit is 40% or 150% depending on the price we agree to sell shares to White Lion. At an applicable Percentage Limit of 40%, the Purchase Price to be paid by White Lion for any such shares will equal 97% of lowest daily volume-weighted average price of Common Stock during a period of two consecutive Trading Days following the applicable Purchase Notice Date (as defined in the White Lion Purchase Agreement) until an aggregate of $50,000,000 in Purchase Notice Shares (as defined in the White Lion Purchase Agreement) have been purchased under White Lion Purchase Agreement, at which point the Purchase Price (as defined in the White Lion Purchase Agreement) to be paid by White Lion will equal 98% of the lowest daily volume-weighted average price of Common Stock during a period of two consecutive Trading Days following the applicable Purchase Notice Date. At an applicable Percentage Limit of 150%, the Purchase Price to be paid by White Lion for any such shares will equal 94.5% of the lowest daily volume-weighted average price of Common Stock during a period of three consecutive Trading Days following the applicable Purchase Notice Date.
We will have the right to terminate the White Lion Purchase Agreement at any time after commencement, at no cost or penalty, upon three (3) Trading Days’ prior written notice. Additionally, White Lion will have the right to terminate the White Lion Purchase Agreement upon three (3) days’ prior written notice to us if (i) there is a Fundamental Transaction (as defined in the White Lion Purchase Agreement), (ii) we are in breach or default in any material respect of the White Lion RRA, (iii) there is a lapse of the effectiveness, or unavailability of, the registration statement for a period of 45 consecutive Trading Days or for more than an aggregate of 90 Trading Days in any 365-day period, (iv) the suspension of trading of the Common Stock for a period of five (5) consecutive Trading Days, (v) the material breach of the White Lion Purchase Agreement by us, which breach is not cured within the applicable cure period or (vi) a Material Adverse Effect (as defined in the White Lion Purchase Agreement) has occurred and is continuing. No termination of the White Lion Purchase Agreement will affect the registration rights provisions contained in the White Lion RRA.
In consideration for the commitments of White Lion, as described above, we have agreed that it will issue to White Lion shares of Common Stock having a value of $250,000 based upon the Closing Sale Price (as defined in the White Lion Purchase Agreement) of Common Stock two Trading Days prior to the filing of the Initial Registration Statement as Initial Commitment Shares. We may increase the number of shares it may sell to White Lion by issuing additional Commitment Shares in two additional tranches of $250,000 each. We issued Initial Commitment Shares of 50,200 shares of Common Stock to White Lion, based upon the Closing Sale Price of our Common Stock of $4.98 per share on November 30, 2022.
Concurrently with the execution of the White Lion Purchase Agreement, we entered into the White Lion RRA with White Lion in which we have agreed to register the shares of Common Stock purchased by White Lion with the SEC for resale within 30 days of the consummation of a business combination. The White Lion RRA also contains usual and customary damages provisions for failure to file and failure to have the registration statement declared effective by the SEC within the time periods specified.
The White Lion Purchase Agreement and the White Lion RRA contain customary representations, warranties, conditions and indemnification obligations of the parties. The representations, warranties and covenants contained in such agreements were made only for purposes of such agreements and as of specific dates, were solely for the benefit of the parties to such agreements and may be subject to limitations agreed upon by the contracting parties.
In March 2023, we entered into an amendment to the White Lion Purchase Agreement to give us the right, but not the obligation to require White Lion to purchase shares of our common stock while trading on the OTC Market. Under the terms of the amendment, we will issue to White Lion within five (5) Trading Days following the effective date of the amendment fully paid, non-assessable shares of our Common Stock equal to the quotient obtained by dividing (i) $250,000 and (ii) the lowest traded sale price of the common stock of the 10 (ten) Trading Days prior to the effective date of the amendment, minus 50,200. In March 2023, as compensation for its commitment to enter into the amendment, we issued 412,763 shares of our common stock to White Lion.
In August 2023, we and White Lion entered into a second amendment to the Common Stock Purchase Agreement (the “Second Amendment”). The Second Amendment includes, among other things, the right of the Company to issue a Purchase Notice (defined in the Second Amendment as an “Accelerated Purchase Notice”) requesting White Lion to purchase newly issued shares of common stock from us, subject to acceptance by White Lion, with pricing of the shares to be sold by us to White Lion under such Accelerated Purchase Notice determined on the date of issuance by us of the Accelerate Purchase Notice and acceptance by White Lion (the date of such notice defined as the “Accelerated Valuation Period”). Such accelerated purchases pursuant to an Accelerated Purchase Notice will be sold to White Lion at a price, defined as an “Accelerated Purchase Price,”
equal to the lower of (i) the opening price of common stock during the Accelerated Valuation Period, (ii) the closing price of the common stock during Accelerated Valuation Period, or (iii) the volume weighted average price of the common stock during Accelerated Valuation Period; provided, however, that if at the time we deliver an Accelerated Purchase Notice to Investor the price of the common stock is lower than the opening price of the common stock during the Accelerated Valuation Period, the Accelerated Purchase Price will be discounted by 20%. In addition, the Second Amendment provides for an “Accelerated Purchase Notice Limit” equal to 200%.
In addition, in the event we do not issue Purchase Notices (as defined in the White Lion Purchase Agreement) to White Lion providing for the purchase of at least $1,250,000 of Purchase Shares (as defined in the White Lion Purchase Agreement and Second Amendment) in the aggregate within 180 days following the effective date of the amendment, we will issue to White Lion an additional number of fully paid, non-assessable shares of common stock equal to the quotient obtained by dividing (i) $150,000 and (ii) the lowest Closing Sale Price (as defined in the White Lion Purchase Agreement and Second Amendment) of common stock of the 10 (ten) Trading Days prior to the 180th day following the effective date of the amendment.
During September 2023, we issued the notices to purchase the total of 729,000 common shares to White Lion for the total proceeds of $105,317.
Release of Certain Lock-Up Restrictions
In order to comply with Nasdaq listing requirements, on January 4, 2023, we released 30% of the Target Consideration Shares (excluding shares held by Dr. Huh) from the six-month lock-up restrictions entered into in connection with the Business Combination (representing a total of 3,057,599 shares for release, of which, we estimate that approximately one-third will have been purchased below the closing price of our Common Stock of $4.21 on December 29, 2022). The release of those shares from lock-up restrictions may cause the market price of our securities to decline or increase the volatility in the market price of our securities. Additionally, since the Target Consideration Shares that may be offered for resale pursuant to this prospectus represent approximately 88% of the shares outstanding as of December 29, 2022 (after giving effect to redemptions and repurchases), the sale of all the securities being offered in this prospectus, or the perception that these sales could occur, could result in a significant decline in the public trading price of our securities.
Components of Results of Operations
Results prior to the Spin-Off
Prior to March 1, 2022, we operated as pH Pharma Ltd, a Korean company. Effective March 1, 2022, we spun off certain assets to a newly formed company in Korea (the “Spin-Off”). The Spin-Off resulted in the Company retaining the PHP-303 and PH-1 ADC Platform programs. Prior to April 1, 2022, our consolidated financial statements have been extracted from the accounting records of pH Pharma, Ltd. on a carve-out basis. The historical results of operations, financial position, and cash flows may not be indicative of what we would have been had we been a separate stand-alone entity, nor are they indicative of what the results of operations, financial position and cash flows may be in the future.
The consolidated financial statements prior to the Spin-Off have been extracted from the accounting records of pH Pharma, Ltd. The historical results of operations, financial position, and cash flows may not be indicative of what we would have been had we been a separate stand-alone entity, nor are they indicative of what the results of operations, financial position and cash flows may be in the future.
Revenue
Our revenue has historically been generated through grants from government organizations. We currently have no commercially approved products. Grant revenue is recognized during the period that the research and development services occur, as qualifying expenses are incurred or conditions of the grants are met. Qualifying expenses are recognized when incurred as research and development expenses. Expenses for grants are tracked by using a project code specific to the grant, and the employees also track hours worked by using the project code.
Grant Revenue
Our grant revenues are derived from research programs with the Department of Defense, US Army Medical Research Acquisition Activity for work on a COVID-19 therapeutic.
Grants awarded to us for research and development by government entities are outside the scope of the contracts with customers and contributions guidance. This is because these granting entities are not considered to be customers and are not receiving reciprocal value for their grant support provided to us. These grants provide us with payments for certain types of expenditures in return for research and development activities over a contractually defined period.
We recognize grant revenue based on the reimbursable costs that are incurred during the period, up to pre-approved award limits. The expenses associated with these reimbursements are reflected as a component of research and development expense in our consolidated statements of operations and comprehensive loss.
Research and Development Expense
We expense research and development costs as incurred. Research and development expense consist primarily of costs related to personnel, including salaries and other personnel related expenses, contract manufacturing and supply, consulting fees, and the cost of facilities and support services used in drug development. Assets acquired that are used for research and development and have no future alternative use are expensed as in-process research and development.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation, related to our executive, finance, business development, legal, human resources and support functions. Other general and administrative expenses include professional fees for auditing, tax, consulting and patent-related services, rent and utilities and insurance.
Results of Operations for the Years Ended December 31, 2023 and 2022
The following table provides selected financial information for the years ended December 31, 2023 and 2022:
Year Ended December 31,
Change
Amount
Revenues
$
367,877
$
607,681
$
(239,804
)
Operating expenses
Research and development
1,627,389
3,924,253
(2,296,864
)
General and administrative
8,292,072
8,531,276
(239,204
)
Impairment Loss
3,513,999
-
3,513,999
Total operating expenses
13,433,460
12,455,529
977,931
Loss from operations
(13,065,583
)
(11,847,848
)
(1,217,735
)
Other income (expense), net
239,666
(1,314,869
)
1,554,535
Loss before income tax expense
$
(12,825,917
)
$
(13,162,717
)
$
336,800
Revenue
Our revenue has historically been generated through grants from government organizations. The total revenue for government grants was $367,877 and $607,681, respectively, for the years ended December 31, 2023 and 2022.
Research and Development Expense
The following table summarizes our research and development expenses:
Year Ended December 31,
Third-party direct project expenses
PHP-303
$
293,539
$
362,221
PH-1 ADC Platform
222,973
532,271
General program expenses and other pre-clinical programs
-
222,365
Total third-party direct project expenses
516,512
1,116,857
Other research and development costs
Personnel costs
780,007
1,363,572
Facilities and other costs
330,870
1,443,824
Total other research and development costs
1,110,877
2,807,396
Total research and development costs
$
1,627,389
$
3,924,253
Research and development expense decreased by $2.3 million during the year ended December 31, 2023 compared to the prior year. The decrease was primarily due to decreases in direct project expenses related to the PHP-303 program of $68,682, the PH-1 ADC Platform of $309,298 and other general and pre-clinical programs of $222,365 as a result of delays in our ongoing and planned research activities. In addition, there was a decrease in personnel costs and facilities costs of $0.6 million and $1 million
driven by a reduction of staff and overhead. We reduced our average headcount from 21 to 6 employees as well as moved to a smaller facility as a result of scaling back our clinical activities.
General and Administrative Expense
General and administrative expense decreased by $0.2 million during the year ended December 31, 2023 compared to the prior year. The decrease was primarily driven by a reduction in facilities expenses and reduction in headcount for general and administrative employees.
Impairment Loss on Operating Lease Right-of-Use Asset
We recognized an impairment loss on the operating lease right-of-use asset of $3.5 million due to the abandonment of the premises in Palo Alto, California during the year ended December 31, 2023.
Other Income (Expense), Net
Other income (expense), net increased by $1.6 million during the year ended December 31, 2023 as compared to the prior year, primarily due to the gain from the changes in the fair value of the warrant liability and derivative liabilities, partially offset by the increase in interest expense.
We recognized additional $2.7 million in interest expense, including the amortization of related discounts, during the year ended December 31, 2023 as compared to the prior year, related to the November 2022 Convertible Notes, April 2023 Convertible Notes and December 2023 Convertible Notes.
During the year ended December 31, 2023, we recognized a $2.1 million gain from the change in the fair value of the warrant liability primarily related to the warrants issued in April 2023 to the holders of the April 2023 Convertible Notes. We recognized $0.8 million gain from the change in the fair value of the derivative liabilities related to the April 2023 Convertible Notes and December 2023 Convertible notes. These gains are related to the decrease in the price of the Company’s stock.
During the year ended December 31, 2022, we recognized a $1.2 million loss on the change in the fair value of the convertible notes primarily related to increase in the fair value of the 2022 Pre-Business Combination Convertible Notes between their issuance date and the closing date of the Ignyte Business Combination.
Liquidity and Capital Resources
Sources of Liquidity
Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from our operations. Our net loss was $12.8 million and $13.1 million for the years ended December 31, 2023 and 2022, respectively. At December 31, 2023 we had cash of $0.4 million. In 2023, we received proceeds of $3.7 million from the issuance of convertible debt and $250,000 from a loan with our founder and director, Dr. Huh. Our primary uses of cash to date have been to fund our research and development activities, business planning, establishing and maintaining our intellectual property portfolio, capital investments and providing general and administrative support for our operations.
Since the beginning of 2024, we raised aggregate gross proceeds of approximately $0.7 million from the issuance of December 2023 Convertible Notes and $1.3 million from the issuance of May 2024 Convertible Notes.
Funding Requirements
We expect to incur losses from operations for the foreseeable future primarily due to research and development expenses, including expenses related to conducting research activities, pre-clinical expenses and clinical trials. Our future capital requirements will depend on a number of factors, including:
•the scope, progress, results and costs of our clinical trials, including but not limited to PHP-303 and our PH-1 ADC Platform;
•the cost of manufacturing drug supply for our clinical and preclinical studies;
•the future results of on-going preclinical research and subsequent clinical trials for treatments for oncology, genetic disease, liver disease, inflammation, and other pipeline candidates we may identify from time to time, including our ability to obtain regulatory approvals;
•any changes in regulatory standards relating to the review of our product candidates; and our ability to timely obtain such required regulatory approvals;
•the number and development requirements of other product candidates that we pursue;
•the emergence of competing technologies and other adverse market developments;
•our ability, and the ability of our third-party manufacturers, to manufacture or supply sufficient quantities of clinical products;
•the costs of future commercialization activities, if any, including establishing sales, marketing, manufacturing and distribution capabilities, for any of our product candidates for which we receive marketing approval;
•our ability to achieve the degree of market acceptance necessary for future commercial success of our product candidates for which we receive marketing approval, if any;
•the costs of preparing, filing, and prosecuting patent applications and maintaining, enforcing, and defending intellectual property-related claims;
•the impact of litigation that may be brought against us or of litigation that we may pursue against others;
•the extent to which we acquire or invest in businesses, products, and technologies;
•our ability to successfully integrate acquired products and technologies into our business, including the possibility that the expected benefits of the transactions will not be fully realized by us or may take longer to realize than expected;
•our ability to establish and maintain collaborations, partnerships or other similar arrangements and to obtain or satisfy any milestone, royalty, or other payments from any such collaborations;
•the extent to which our business could be adversely impacted by the effects of COVID-19 outbreak, including due to actions by us, governments, suppliers or other third parties to control the spread of COVID-19, or by other health epidemics or pandemics; and
•the costs of operating as a public company.
We expect to incur significant expenses and operating losses for the foreseeable future as we continue our efforts to identify product candidates and seek regulatory approvals within our gene therapy portfolio.
Additional financing will be needed to fund our ongoing activities. We may raise this additional funding through the sale of equity, debt financings or other capital sources, including potential collaborations with other companies or other strategic transactions and funding under government contracts. We may be unable to raise additional funds or enter into such other arrangements or arrangement when needed on favorable terms, or at all. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate certain of our research and development programs. There can be no assurances that other sources of financing would be available. Due to these uncertainties, there is substantial doubt about our ability to continue as a going concern.
Our future operations are highly dependent on a combination of factors, including (i) the timely and successful completion of additional financing; (ii) the success of our research and development programs; (iii) the development of competitive therapies by other biotechnology and pharmaceutical companies, (iv) our ability to attract and retain key employees, (v) our ability to manage growth of the organization; (vi) our ability to protect our proprietary technology; and ultimately (vii) regulatory approval and market acceptance of our product candidates.
Cash Flows Discussion
The following table summarizes our cash flows for the periods indicated:
Year Ended December 31,
Net cash used in operating activities
$
(4,758,020
)
$
(7,485,625
)
Net cash used in investing activities
-
(142,249
)
Net cash provided by financing activities
4,281,285
8,135,213
Net (decrease) increase in cash, cash equivalents and restricted cash
$
(476,735
)
$
507,339
Operating Activities
Net cash used in operating activities was approximately $4.8 million and $7.5 million for the years ended December 31, 2023 and 2022, respectively. The decrease in operating spending was a result of our reduction in facilities expenses, reduction in headcount of general and administrative employees,and decreases in direct project expenses related to the PHP-303 program, the
PH-1 ADC Platform, and other general and pre-clinical programs as a result of delays in our ongoing and planned research activities.
Investing Activities
During the year ended December 31, 2022, net cash used in investing activities was $142,249, primarily due to capital expenditures for furniture and fixtures related to the office in South San Francisco, California.
Financing Activities
During the year ended December 31, 2023 net cash provided by financing activities was $4.2 million, including the proceeds from the issuance of convertible notes of $3.4 million, proceeds from a related party loan of $0.25 million, proceeds from the issuance of common stock for $1.1 million partially offset by repayments on convertible notes of $0.3 million and repayments on insurance financing of $0.3 million.
During the year ended December 31, 2022, net cash provided by financing activities was $8.1 million including the proceeds from the issuance of long-term debt of $1.3 million, proceeds from a related party loan of $0.5 million, proceeds from the Business Combination with Ignyte of $3.9 million, and the issuance of common stock for $5.2 million partially offset by the $3.8 million settlement of the Forward Share Purchase agreement assumed from Ignyte in the Business Combination.
Contractual Obligations and Commitments
In October 2021, we entered into a lease for laboratory and office facilities in Palo Alto, California that expires in March 2027 with a five-year renewal option and opened a secured letter of credit with a third-party financial institution in lieu of a security deposit for $177,000. Base rent for this sublease is approximately $89,000 monthly with annual escalations of 3%. In March 2023, we vacated the premises and returned possession of the premises to the landlord in April 2023. We are still responsible for the outstanding payments under the lease.
At the date of the Spin-Off, we and pH Pharma Co., Ltd entered into an administrative services and facilities agreement whereby pH Pharma Co., Ltd would perform services, functions and responsibilities for us. Under the agreement, we paid pH Pharma Co., Ltd $100,000 per month through August 30, 2022 and $15,000 per month from September 1, 2022 through February 28, 2023 based on the estimated value of the level of service to be performed. Additionally, we reimbursed pH Pharma Co., Ltd $3,000 per month in lease payments from the date of the Spin-Off through February 28, 2023. At December 31, 2023 and 2022, the amounts payable to pH Pharma Co., Ltd under this agreement totaled $309,534 and $426,673, respectively, included in accounts payable in the consolidated balance sheets. On January 31, 2024, we and pH Pharma Co., Ltd entered into a settlement agreement, settled the outstanding debt for a one-time payment of $85,000, resulting in a gain on debt extinguishment of $207,967, and terminated the administrative services and facilities agreement.
Off-Balance Sheet Arrangements
We had no off-balance sheet arrangements as of December 31, 2023 and 2022.
Critical Accounting Policies and Significant Judgments and Estimates
Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements included within this Annual Report on Form 10-K, which we have prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and judgments, including those described in greater detail below. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We believe that the following discussion represents our critical accounting policies.
Grant Revenue
Our grant revenues are derived from research programs with the Department of Defense, US Army Medical Research Acquisition Activity for work on a COVID-19 therapeutic.
Grants awarded to us for research and development by government entities are outside the scope of the contracts with customers and contributions guidance. This is because these granting entities are not considered to be customers and are not receiving reciprocal value for their grant support provided to us. These grants provide us with payments for certain types of expenditures in return for research and development activities over a contractually defined period.
We recognize grant revenue based on the reimbursable costs that are incurred due the period, up to pre-approved award limits. The expenses associated with these reimbursements are reflected as a component of research and development expense in the accompanying consolidated statements of operations and comprehensive loss.
Share-based Compensation
We account for stock option awards in accordance with ASC 718, Compensation-Stock Compensation (“ASC 718”). The estimated grant date fair value of the stock option awards are recognized as compensation expense over the requisite service period of the awards (usually the vesting period) on a straight-line basis. We estimate the fair value of each stock-based award on the date of grant using the Black-Scholes option pricing model. The Black-Scholes option pricing model incorporates various assumptions, such as the value of the underlying common stock, the risk-free interest rate, expected volatility, expected dividend yield, and expected life of the options. Expected volatility is based on the historical volatility of a publicly traded set of peer companies. Our historical share option exercise experience does not provide a reasonable basis upon which to estimate an expected term because of a lack of sufficient data. Therefore, we estimate the expected term by using the simplified method, which calculates the expected term as the average of the time-to-vesting and the contractual life of the options. The risk-free interest rate is based on U.S. Treasury, zero-coupon issues with a remaining term equal to the expected life assumed at the date of grant (or modification, as applicable). Equity-based compensation expense is classified in the statements of operations in the same manner in which the award recipients’ payroll costs or service payments are classified. Forfeitures are recognized as a reduction of stock-based compensation expense as they occur.
Derivative Instruments
We issued warrants to its investors and accounts for warrant instruments as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the warrants and applicable authoritative guidance in ASC 480 and ASC 815, “Derivatives and Hedging” (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to our own stock and whether the holders of the warrants could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification.
The Key Company Stockholder Forward Purchase Liability entered into on April 28, 2022 resulted in us holding a put option on shares to be purchased. The Forward Share Purchase Agreement entered into on October 22, 2022 resulted in us holding a put option on shares to be purchased. The White Lion Purchase Agreement includes an embedded put option and an embedded forward option (see Note 11). Pursuant to ASC 815, these instruments meet the definition of a derivative and accordingly were recognized at fair value and are remeasured at fair value at each period end.
Recently Issued Accounting Standards
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2, Summary of Significant Accounting Policies, to our audited consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.
Internal Control Over Financial Reporting
Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP. Under standards established by the Public Company Accounting Oversight Board, or PCAOB, a deficiency in internal control over financial reporting exists when the design or operation of a control does not allow management or personnel, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. The PCAOB defines a material weakness as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented, or detected and corrected, on a timely basis.
JOBS Act Accounting Election
We qualify as an “emerging growth company” as defined in the JOBS Act. An emerging growth company may take advantage of reduced reporting requirements that are not otherwise applicable to public companies. These provisions include, but are not limited to:
•being permitted to present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Annual Report on Form 10-K;
•not being required to comply with the auditor attestation requirements on the effectiveness of our internal controls over financial reporting;
•not being required to comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis);
•reduced disclosure obligations regarding executive compensation arrangements; and
•exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
We may use these provisions until the last day of our fiscal year in which the fifth anniversary of the completion of this offering occurs. However, if certain events occur prior to the end of such five-year period, including if we become a “large accelerated filer,” our annual gross revenue exceeds $1.235 billion, or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period.
We have elected to take advantage of certain of the reduced disclosure obligations in this Annual Report on Form 10-K and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that we provide to our shareholders may be different than the information you receive from other public companies in which you hold stock.
The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards, until those standards apply to private companies. We have elected to take advantage of the benefits of this extended transition period and, therefore, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards. Until the date that we are no longer an emerging growth company or affirmatively and irrevocably opt out of the exemption provided by Section 7(a)(2)(B) of the Securities Act upon issuance of a new or revised accounting standard that applies to our financial statements and that has a different effective date for public and private companies, we will disclose the date on which we will adopt the recently issued accounting standard.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Concentration of Credit Risk
We received 100% of our revenue through a grant from a government organization during the years ended December 31, 2023 and 2022. To date, no receivables have been written off.
Interest Rate Risk
As of December 31, 2023 and 2022, we had a cash balance of $0.4 million and $0.6 million, respectively, all of which were maintained in business checking accounts and money market accounts in the U.S. and South Korea. Our primary exposure to market risk is to interest income volatility, which is affected by changes in the general level of interest rates. As such rates are at a near record low, a 10% change in the market interest rates would not have a material effect on our business, financial condition or results of operations.
Foreign Currency Risk
We conduct our business in U.S. dollars and, thus, are not exposed to financial risks from exchange rate fluctuations between the U.S. dollar and other currencies.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data.
Our consolidated financial statements, together with the reports of our independent registered public accounting firms, appear beginning on page of this Annual Report on Form 10-K for the year ended December 31, 2023.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures.
Disclosure Controls and Procedures
Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2023. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, mean controls and other procedures of a company that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2023, our chief executive officer and chief financial officer concluded that, as of such date, our internal controls over financial reporting were not effective as of the end of the period covered by this Annual Report on Form 10-K due to material weaknesses as describe herein.
A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (United States) Auditing Standard No. 2) or combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Management has identified the following material weaknesses:
•Formal documentation of the Company’s internal control over financial reporting including risk assessments and processes needed to mitigate critical risks does not exist.
•The Company lacks sufficient resources with respect to the number of people employed in its accounting department and the adequacy of their training in relation to its financial reporting requirements.
•The Company’s internal control over financial reporting is ineffective with respect to its financial closing process in the following areas:
oPreparation, review and approval of journal entries including the reasonableness of critical accounting estimates;
oTimely closings as required to maintain compliance with reporting deadlines under applicable Securities and Exchange Commission regulations;
oAccuracy of diluted earnings per share calculation; and
oEvaluation of third party financial reporting advisors’ capabilities and the monitoring and evaluation of the accuracy and completeness of their work product.
•The Company experienced difficulties in applying complex accounting principles including:
oFinancial instruments accounted for under ASC 480 and ASC 815-10;
oDifferentiating between contractual liabilities and gain and loss contingencies; and
oFair value measurements.
Planned Remediation
Management continues to work to improve its controls related to our material weaknesses, specifically implementing improved processes and internal controls to ensure the proper application of accounting practices and guidance. We also intend to increase our accounting staff as soon as economically feasible and sustainable to remediate these material weaknesses. These material weaknesses will not be considered to be remediated until the applicable remediated controls are operating for a sufficient period of time and management has concluded that these controls are operating effectively.
Management’s Annual Report on Internal Controls Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes, in accordance with generally accepted accounting principles in the United States. Due to inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness of the internal control over financial reporting to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies and procedures may deteriorate. Our management, under the supervision and with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our internal control over financial reporting as of the end of the period covered by this Annual Report on Form 10-K based on the framework in Internal Control---Integrated Framework (2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. Based on such evaluation, our management concluded that our internal control over financial reporting was not effective as of the end of the period covered by this Annual Report on Form 10-K.
This Annual Report on Form 10-K does not include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. Our auditors will not be required to opine on the effectiveness of our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002 until we are no longer (i) an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 or (ii) a non-accelerated filer, as defined under the Exchange Act.
Changes in Internal Control Over Financial Reporting
Except as noted above, there was no change in our internal control over financial reporting that occurred during the fiscal year ended December 31, 2023 covered by this Annual Report on Form 10-K that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitation on the Effectiveness of Internal Control
Our management, including our Interim Chief Executive Officer and Acting Chief Financial Officer, does not expect that our disclosure controls and procedures, or our internal controls, will prevent all error and all fraud. A control system, no matter
how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information.
During the fourth quarter of 2023, our directors and/or executive officers (as defined in Section 16 of the Exchange Act) did not adopt or terminate any Rule 10b5-1 trading arrangements (as defined in Item 408(a)(1)(i) of Regulation S-K) or non-Rule 10b5-1 trading arrangements (as defined in Item 408(c) of Regulation S-K).
During the fourth quarter of 2023, the Company did not adopt or terminate a Rule 10b5-1 trading arrangement (as defined in Item 408(a)(1)(i) of Regulation S-K).

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance.
Management and Board of Directors
The following table sets forth certain information regarding our directors and executive officers as of July 31, 2024 who are responsible for overseeing the management of our business.
For biographical information concerning the executive officers and directors, see below.
Name
Age
Position
Hoyoung Huh, MD, PhD
Class II Director
Stephen LaMond, PharmD, MBA
Interim Chief Executive Officer, Chief Operating Officer and Secretary and Class II Director (5)
Timothy Cunningham, MBA, CPA
Acting Chief Financial Officer (3)
Divya Patel, CPA
Acting Chief Financial Officer (4)
Satyajit Mitra, PhD
Executive Director, Head of Oncology
Nevan Charles Elam, JD
Class I Director (Lead Independent Director) (1)
James Neal, MS, MBA
Class I Director (Lead Independent Director)
David Rosenberg
Class III Director (5)
Michael Friedman
Class III Director (2) (5)
(1) Resigned effective June 21, 2023.
(2) Appointed effective August 25, 2023.
(3) Resigned effective August 31, 2023.
(4) Appointed effective July 19, 2024.
(5) Resigned as director effective July 19, 2024
Executive Officers
Hoyoung Huh, MD, PhD, is the founder of Peak Bio Co., Ltd. (f/k/a pH Pharma) and has held positions of Chief Executive Officer and Board Chairman since founding pH Pharma in 2015. He currently serves as a director on the board of directors (the “Board”) of the Company. Dr. Huh is a Silicon Valley-based entrepreneur and investor in healthcare and technology-based businesses and has served as Lead Director of Pliant Therapeutics since December 2017. Dr. Huh was a Managing Director of Konus Advisory Group, Inc. from January 2012 to September 2014. Prior to founding Konus Advisory Group, Inc., Dr. Huh was Chief Executive Officer and Chairman of the board of directors of BiPar Sciences, Inc. from February 2008 until December 2010. In addition, Dr. Huh has been involved in the formation, management and board positions of multiple biotechnology and innovation-based companies. He previously served as the Chairman of the board of directors of Geron Corporation from September 2011 to December 2018, and CytomX Therapeutics, Inc. from February 2012 to December 2018, a member of the board of directors of Rezolute, Inc. (f/k/a AntriaBio, Inc.) from 2013 to January 2019, the Chairman of the board of directors of Epizyme, Inc. from October 2009 to February 2012, and as a member of the board of directors of Facet Biotech Corporation, Nektar Therapeutics, Inc., Addex Therapeutics Ltd. and EOS, S.p.A (Milano, Italy). Earlier in his career, Dr. Huh was a partner at McKinsey & Company. He holds A.B. in Biochemistry from Dartmouth College, an M.D. from Cornell University Medical College and a Ph.D. in Cell Biology and Genetics from Cornell University Sloan Kettering Institute. We believe Dr. Huh’s extensive management and operational experience as President and Chief Executive Officer of numerous biotechnology companies and his significant knowledge and expertise of biotechnology and pharmaceutical collaborations, qualifies Dr. Huh to serve as a director and Chairman of the Board of Peak Bio.
Stephen LaMond, PharmD, MBA, has been the Chief Operating Officer and Secretary of Peak Bio Co., Ltd. since March 1, 2022. He currently serves as Interim Chief Executive Officer and as a director of the Company. Prior to his current role, Dr. LaMond has been both an employee and independent consultant to Peak Bio (f/k/a pH Pharma). Peak Bio consists of the merged entity of Ignyte and the selected assets from pH Pharma. Dr. LaMond served as both a consultant and one of the original executives with pH Pharma and its affiliated companies serving in corporate and business development roles in addition to
serving in a clinical program management capacity. Dr. LaMond has been directly involved with pH Pharma in both the U.S. and Korea and now at Peak Bio since 2016. Dr. LaMond has previously held management and executive roles in marketing, new product planning, corporate and business development at numerous companies including Tria Beauty, Corium International, Zoll Medical, GE Healthcare, Nektar Therapeutics and Pfizer Inc. across multiple therapeutic areas and has worked on some of the most innovative products over his tenure. Dr. LaMond received his PharmD and Executive MBA degrees from the University of Michigan, Ann Arbor and has executive finance training from Columbia and Stanford Universities. We believe Dr. LaMond’s extensive experience in operations, business development, corporate development, marketing, regulatory and market access with biopharmaceutical and biotechnology companies qualifies him to serve on the Board.
Timothy Cunningham, MBA, CPA, serves as the Acting Chief Financial Officer of the Company following the closing of the Business Combination. He brings more than 30 years of finance and operations leadership experience in the life sciences and technology industries with a proven track record of driving growth. He is currently Chief Financial Officer at Danforth Advisors, a company that provides strategic and operational finance and accounting support for life science companies. Prior to joining Danforth, Mr. Cunningham served as Chief Financial Officer at Organogenesis, where he took the company public and raised over $250M in equity and debt financing to facilitate the company’s growth. Earlier, he held leadership positions with DialogTech, GFI Software SA, Metatomix, Mediabridge, IBM, PWC, and KPMG. Tim holds an MBA from Boston University, a BS in Accounting from Boston College and is a CPA in the state of Florida.
Divya Patel, CPA, serves as the Corporate Controller of Peak Bio Inc. In this role, she has overall responsibility for the financial reporting activities for Peak Bio Inc. and its global subsidiaries. She has served as controller and treasurer in the private sector for medical device companies including the international brand Tria Beauty. Ms. Patel has over 10 years experience in finance and accounting experience and holds a Certified Public Accountant designation. Ms. Patel has also served as an auditor and international tax manager with accounting firms in Canada, including Canadian national firm MNP LLP. She obtained her Bachelors in Business Administration from Simon Fraser University and also holds a Chartered Professional Accounting Designation in Canada.
Satyajit Mitra, PhD, is the Executive Director and Head of Oncology for Peak Bio. As the Head of Oncology, he has been responsible for Peak Bio Co., Ltd.’s preclinical research activities at our CA research sites since January 2021. Dr. Mitra heads up a team of talented research associates, scientists, consultants, CROs and CDMOs and has been instrumental in advancing our novel toxin platform and ADC pipeline. From March 2019 to December 2020, Dr. Mitra headed up Cancer Biology at Peak Bio Co., Ltd. and was responsible for in vivo and pharmacology functions that led to the nomination of the current Peak Bio lead toxin (PH1), which then led to Peak Bio’s initial proof-of-concept (POC) efforts for an ADC. These POC efforts led to the nomination of Peak Bio’s first ADC pipeline candidate targeting Trop2. He previously served as a Senior Scientist, at VasGene Therapeutics, and was involved with IND-enabling studies for novel antibody targets. Dr. Mitra’s initial corporate scientific experience was at OncoMed Pharmaceuticals for 5 years where he worked on Target Validation. He was instrumental in identifying the first-in-class Wnt-pathway biologics, advancing these projects from early stage to an IND. In addition to Dr. Mitra’s oncology company experiences, he also previously worked as a research scientist at the University of Southern California in Los Angeles. He completed his postdoctoral fellowship at the Department of Immunology at Scripps Research Institute at La Jolla, California. He obtained his Ph.D. from the Centre for Cellular and Molecular Biology at Hyderabad, India an institute affiliated with the Jawaharlal Nehru University (JNU), New Delhi, India.
Non-Employee Directors
James Neal, MS, MBA serves as a director on the Board of the Company. He comes to Peak Bio’s board of directors as an experienced business professional serving as XOMA Corporation’s Chief Executive Officer and Chairman of the Board, joining that company in 2009. Mr. Neal brings more than 25 years’ experience in forming and maximizing business and technology collaborations globally and in bringing novel products and technologies to market. Prior to XOMA, Mr. Neal was Acting Chief Executive Officer of Entelos, Inc., a leading biosimulation company that acquired Iconix Biosciences, a privately held company where Mr. Neal was Chief Executive Officer. At Iconix, Mr. Neal established multi-year collaborations with Bristol-Myers Squibb, Abbott Labs, Eli Lilly and the U.S. Food and Drug Administration. From, 1999-2002, he was Executive Vice President of Incyte Genomics, leading the global commercial activities with pharmaceutical company collaborators and partners including Pfizer, Aventis and Schering-Plough, as well as sales, marketing and business development activities for the company. Earlier, he was associated with Monsanto Company in positions of increasing responsibility. Mr. Neal earned his B.S. in Biology and his M.S. in Genetics and Plant Breeding from the University of Manitoba, Canada, and holds an Executive MBA degree from Washington University in St. Louis, Missouri. We believe Mr. Neal’s significant experience with biopharmaceutical companies, including as a board member and CEO, qualifies him to serve on our board of directors.
David Rosenberg has been Ignyte’s Chairman of the Board and co-Chief Executive Officer since its formation. Mr. Rosenberg serves as a director on the Board of the Company. Mr. Rosenberg brings over 20 years of investment banking experience focused on growth companies. Since December 2011, Mr. Rosenberg has been Co-President and Co-Chief Executive Officer of Ladenburg Thalmann & Co. Inc., a leading underwriter of blank check companies or SPACs. Mr. Rosenberg is also a
member of Board of Directors of Ladenburg Thalmann & Co. Inc. From 2006 to 2011, Mr. Rosenberg was a Managing Director and Co-Chief Operating Officer of Ladenburg Thalmann & Co. Inc. Since joining Ladenburg Thalmann in 2006, Mr. Rosenberg has managed more than 1,000 public offerings including but not limited to initial public offerings and follow on offerings raising in excess of $75 billion for small and mid-cap companies, as well as advising on numerous merger and acquisition transactions. Mr. Rosenberg also serves as member of the Board of Directors of Dianomi Therapeutics. Prior to joining Ladenburg Thalmann, from 2004 to 2006, Mr. Rosenberg was co-founder and Chief Executive Officer of BroadWall Capital, LLC, an investment banking firm. Mr. Rosenberg received a B.A. from the University of Wisconsin-Madison. We believe Mr. Rosenberg is well qualified to serve on our board of directors because of his significant investment banking, equity capital markets and executive management experience.
Michael Friedman, MS, MBA serves as a director on the Board of the Company. Mr. Friedman served as Senior Vice President at Ladenburg Thalmann & Co. Inc. Healthcare Investment Banking where he focused on M&A and capital markets from 2017 to 2023. Mr. Friedman has worked with numerous biotech, pharmaceutical and healthcare services companies for over 15 years and has executed a significant number of M&A, IPO, leveraged finance, and equity follow-on transactions. Previously, Mr. Friedman was an investment banker for Bank of America Merrill Lynch, Jefferies and Baird. He holds an MBA from the University of Chicago, Booth School of Business and he received his BBA from the University of Wisconsin. The Company’s Board of Directors believes Mr. Friedman’s significant experience advising biopharmaceutical companies in M&A and finance qualifies him to serve on our board of directors.
Number and Terms of Office of Officers and Directors of Peak Bio
Our Board is divided into three classes with only one class of directors being elected in each year and each class serving a three-year term.
Our officers are appointed by the board of directors and serve at the discretion of the board of directors, rather than for specific terms of office. Our board of directors is authorized to appoint persons to the offices set forth in our bylaws as it deems appropriate. Our bylaws provide that our officers may consist of a Chairman of the Board, one or more Chief Executive Officers, Chief Financial Officer, President, Vice Presidents, Secretary, Treasurer, Assistant Secretaries and such other offices as may be determined by the board of directors.
Committees of the Board of Directors
The standing committees of our board of directors include an audit committee, a compensation committee and a nominating and corporate governance committee. Each of the committees reports to the board of directors as they deem appropriate and as the board of directors may request. The composition, duties and responsibilities of these committees are set forth below.
Audit Committee
The principal functions of the audit committee include, among other things:
•reviewing and discussing with management and the independent auditor the annual audited financial statements, and recommending to the board whether the audited financial statements should be included in our Form 10-K;
•discussing with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of our financial statements;
•discussing with management major risk assessment and risk management policies;
•monitoring the independence of the independent auditor;
•verifying the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law;
•reviewing and approving all related-party transactions;
•inquiring and discussing with management our compliance with applicable laws and regulations;
•pre-approving all audit services and permitted non-audit services to be performed by our independent auditor, including the fees and terms of the services to be performed;
•appointing or replacing the independent auditor;
•determining the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work; and
•establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or reports which raise material issues regarding our financial statements or accounting policies.
Our audit committee consists of James Neal and Michael Friedman, with Mr. Neal serving as the chair of the audit committee. Each of Messrs. Neal and Friedman qualify as independent directors according to the rules and regulations of the SEC with respect to audit committee membership. Mr. Friedman qualifies as our “audit committee financial expert,” as that term is defined in Item 401(h) of Regulation S-K. Our board of directors has adopted a written charter for the Audit Committee, which is available free of charge on our corporate website. The information on our website is not part of this Annual Report on Form 10-K.
Compensation Committee
The principal functions of the compensation committee include, among other things:
•reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation;
•reviewing and approving the compensation of all of our other executive officers;
•reviewing our executive compensation policies and plans;
•implementing and administering our incentive compensation equity-based remuneration plans;
•assisting management in complying with our proxy statement and annual report disclosure requirements;
•approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our executive officers and employees;
•if required, producing a report on executive compensation to be included in our annual proxy statement; and
•reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors.
Our compensation committee consists of James Neal and Michael Friedman, with Mr. Neal serving as the chair of the compensation committee. Each of Messrs. Neal and Friedman qualify as independent directors according to the rules and regulations of the SEC with respect to compensation committee membership. Our board of directors has adopted a written charter for the compensation committee, which is available free of charge on our corporate website. The information on our website is not part of this Annual Report on Form 10-K.
Nominating Committee
The principal functions of the nominating committee include, among other things:
•should have demonstrated notable or significant achievements in business, education or public service;
•should possess the requisite intelligence, education and experience to make a significant contribution to the board of directors and bring a range of skills, diverse perspectives and backgrounds to its deliberations; and
•should have the highest ethical standards, a strong sense of professionalism and intense dedication to serving the interests of the stockholders.
The Nominating Committee will consider a number of qualifications relating to management and leadership experience, background and integrity and professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to time and will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board members. The nominating committee does not distinguish among nominees recommended by stockholders and other persons.
Our Nominating Committee consists of James Neal and David Rosenberg, with Mr. Neal serving as the chair of the Nominating Committee. We expect that our board of directors will adopt a written charter for the Nominating Committee, which
is available free of charge on our corporate website. The information on our website is not part of this Annual Report on Form 10-K.
Code of Ethics
We have adopted a Code of Ethics applicable to our directors, executive officers and employees. Our code of business conduct and ethics is available free of charge on our corporate website. In addition, we intend to post on our website all disclosures that are required by law or the listing standards concerning any amendments to, or waivers from, any provision of the code. References to our website address do not constitute incorporation by reference of the information contained at or available through our website, and such information should not be considered to be a part of this Annual Report on Form 10-K. We also intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report on Form 8-K. You may review these documents by accessing public filings at the SEC’s website at www.sec.gov.
Compensation Committee Interlocks and Insider Participation
None of our officers currently serves, or in the past year has served, as a member of the compensation committee of any entity that has one or more officers serving on our board of directors.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires our executive officers, directors and persons who beneficially own more than 10% of a registered class of our equity securities to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. These executive officers, directors, and greater than 10% beneficial owners are required by SEC regulation to furnish us with copies of all Section 16(a) forms filed by such reporting persons. Based solely on our review of such forms furnished to us and written representations from certain reporting persons, we are not aware of any failure of any such person to comply with the requirements of Section 16(a) of the Exchange Act, except for the following which were not filed in a timely manner: one Form 4 filed by Hoyoung Huh.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation.
This section discusses the material components of the executive compensation program for our named executive officers who are identified in the 2023 Summary Compensation Table below. This discussion may contain forward-looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs.
Overview
This section discusses the material components of the executive compensation program for our executive officers who are named in the “2023 Summary Compensation Table” (the “named executive officers”). As an emerging growth company, we comply with the executive compensation disclosure rules applicable to “smaller reporting companies,” as such term is defined in the rules promulgated under the Securities Act. Our named executive officers for fiscal year 2023 and 2022 were as follows:
•Hoyoung Huh, M.D., Ph.D., Director and Founder, Chief Executive Officer of Peak Bio Co., Ltd.;1
•Stephen LaMond, PharmD, Interim Chief Executive Officer and Chief Operating Officer;
•Satyajit Mitra, Ph.D., Executive Director, Head of Oncology;
•David Rosenberg, Former Co-Chief Executive Officer of Ignyte Acquisition Corp.;2 and
•David Strupp, Jr., Former Co-Chief Executive Officer of Ignyte Acquisition Corp. 3
Dr. Huh is the Chief Executive Officer of our principal subsidiary in Korea, Peak Bio Co., Ltd.
Mr. Rosenberg was Co-Chief Executive Officer of Ignyte Acquisition Corporation until closing of the Business Combination on November 1, 2022.
Mr. Strupp was Co-Chief Executive Officer of Ignyte Acquisition Corporation until closing of the Business Combination on November 1, 2022.
2023 Compensation of Named Executive Officers
Summary Compensation Table
The following table sets forth certain summary information for the years indicated concerning total compensation earned by our named executive officers.
Name and Position
Fiscal Year
Salary
($)(1)
Bonus
($)(2)
Option
Awards
($)
All Other Compensation ($)(3)
Total ($)
Hoyoung Huh,
659,000
-
-
-
659,000
Chief Executive Officer Peak Bio Co., Ltd.
1,669,838
-
-
-
1,669,838
Stephen LaMond,
415,000
-
162,944
-
577,944
Interim Chief Executive Officer and
Chief Operating Officer
234,167
250,000
193,508
15,000
692,675
Satyajit Mitra,
225,000
-
-
79,144
-
304,144
Executive Director, Head of Oncology
206,232
110,991
93,900
-
411,123
Divya Patel,
100,000
-
-
-
100,000
Controller
20,833
-
-
-
20,833
David Rosenberg,
-
-
-
-
-
Former Co-Chief Executive Officer of Ignyte (4)
-
-
-
-
-
David Strupp, Jr.,
-
-
-
-
-
Former Co-Chief Executive Officer of Ignyte (5)
-
-
-
-
-
(1)
Salary for Dr. Huh includes $631,542 and $1,524,852 of salary earned but not yet paid for the year ended December 31, 2023 and 2022, respectively. Salary for Dr. LaMond, Mr. Mitra and Ms. Patel includes salary earned but not yet paid of $595,834, $204,741 and $41,667, respectively for the year ended December 31, 2023.
(2)
Bonus amounts for 2022 represent success fees for the consummation of Peak Bio’s Business Combination with Ignyte Acquisition Corporation. These fees were earned in 2022, but have not yet been paid.
(3)
All other compensation amounts consist of consultant compensation of $15,000 for Dr. LaMond for 2022.
(4)
Mr. Rosenberg was Co-Chief Executive Officer of Ignyte Acquisition Corporation until closing of the Business Combination on November 1, 2022.
(5)
Mr. Strupp was Co-Chief Executive Officer of Ignyte Acquisition Corporation until closing of the Business Combination on November 1, 2022.
2023 Outstanding Equity Awards at Fiscal Year-End
The following table presents, for each of our named executive officers, information regarding outstanding stock options as of December 31, 2023.
Number of Securities Underlying Unexercised Options
Name
Grant Date
Exercisable
Unexercisable
Option Exercise Price
Option Expiration Date
Hoyoung Huh,
Chief Executive Officer Peak Bio Co., Ltd.
Stephen LaMond,
Interim Chief Executive Officer and
Chief Operating Officer
January 26, 2022
-
65,265
$
8.05
January 26, 2029
Satyajit Mitra,
Executive Director, Head of Oncology
June 11, 2019
18,647
$
6.10
June 11, 2026
January 26, 2022
31,700
$
8.05
January 26, 2029
Divya Patel,
Controller
David Rosenberg,
Former Co-Chief Executive Officer of Ignyte
David Strupp, Jr.,
Former Co-Chief Executive Officer of Ignyte
(1)
Stock options in Peak Bio Co., Ltd. were converted to stock options in Peak Bio, Inc. (f/k/a Ignyte Acquisition Corp.) at the Exchange Ratio set forth in the Business Combination Agreement.
Equity Compensation
We will, from time-to-time, grant equity awards to our named executive officers, which are generally subject to vesting based on each named executive officer’s continued service. Each of our named executive officers currently holds outstanding options to purchase shares of common stock that were granted under Peak Bio Co., Ltd.’s form of stock option agreements issued in accordance with Korean law. Information on our named executive officer’s equity awards is set forth in the table above titled “2023 Outstanding Equity Awards at Fiscal Year-End.”
Director Compensation
For fiscal years 2023 and 2022, we did not provide director compensation to our non-employee directors. However, all of our non-employee directors are reimbursed for their reasonable out-of-pocket expenses related to their services as a member of our board of directors.
Potential payments upon termination or change of control
Employment Agreements
Dr. Huh’s employment agreement, updated as of January 10, 2022, provides for Dr. Huh to serve as Peak Bio’s Chief Executive Officer (Dr. LaMond will serve as Interim Chief Executive Officer of Peak Bio while Dr. Huh is taking a leave of absence during the pendency of a personal legal proceeding). The employment agreement terms, which were subject to completion of the Business Combination, provide for Dr. Huh to receive an annual base salary and to participate in a cash bonus plan with a target of up to 65% of base salary based on annual performance standards to be established by the board of directors. In addition, the employment agreement provides for repayment to Dr. Huh of backpay for years of forwent salary in the amount of $1,524,852 and repayment of an outstanding loan in the amount of $1,500,000 made by Dr. Huh to Peak Bio Co, Ltd. Further, the employment agreement provides for the payment of success fees in connection with future business or corporate development transactions (licensing, product development and acquisitions).
If Dr. Huh’s employment is terminated due to his death or disability, the employment agreement provides that Peak Bio will pay to Dr. Huh or Dr. Huh’s estate or designated beneficiary his accrued and unpaid salary plus his accrued and unused vacation pay.
If Dr. Huh’s employment is terminated by him for “good reason” or if Peak Bio terminates his employment without “cause,” then Peak Bio will pay to Dr. Huh his accrued and unpaid salary, his accrued and unused vacation pay, and continuation of his base salary for twelve months. For purposes hereof, “good reason” means, the occurrence of any of the following events: (i) the failure of Peak Bio or applicable subsidiary to pay any wages, or provide any benefits due to Dr. Huh within five (5) days after written notice thereof from Dr. Huh; (ii) a material change in Dr. Huh’s responsibilities, duties, reporting relationships or authorities as an employee of Peak Bio as they existed prior to such change; or (iii) a move of Dr. Huh’s principal place of work to a location more than fifty (50) miles distant therefrom. Termination with “cause” shall be deemed to exist if Dr. Huh engages in the following: (i) theft, dishonesty, misconduct or falsification of Peak Bio’s or its successor’s records or property; (ii) unauthorized use or disclosure of Peak Bio’s or its successor’s confidential or proprietary information or trade secrets; (iii) substantial negligence or misconduct; (iv) failure to perform such assigned duties and responsibilities as shall be consistent with the duties and responsibilities of an employee of Peak Bio in a similar job position after receipt of a written notice of specific deficiencies and failure to cure any such deficiencies within fifteen (15) days after the receipt of such notice; (v) a material breach by Dr. Huh of any agreement between Dr. Huh and Peak Bio, and such breach has not been cured by you within fifteen days (15) after written notice of breach by Peak Bio; (vi) commission of a felony or other crime involving moral turpitude; or (vii) Dr. Huh’s failure to cooperate in good faith with a governmental investigation of Peak Bio or its directors, officers or employees, if Peak Bio has requested his cooperation.
Dr. LaMond’s employment agreement, updated as of March 1, 2022, provides for Dr. LaMond to serve as Peak Bio ’s Chief Operating Officer. The employment agreement terms, which were subject to completion of the Business Combination, provide for Dr. LaMond to receive an annual base salary and to participate in a cash bonus plan with a target of up to 55% of base salary based on annual performance standards to be established by the board of directors. In addition, the employment agreement provides for confirmation of Peak Bio’s previously agreed upon success fee payment to Dr. LaMond upon consummation of the Business Combination in the amount of $250,000. Further, the employment agreement provides for the payment of success fees in connection with future business or corporate development transactions (licensing, product development and acquisitions).
Dr. LaMond is also eligible to participate in Peak Bio’s Long-Term Incentive Plan with a target recommended grant of 1.25% or greater of the outstanding shares of Peak Bio’s stock, subject to approval of Peak Bio’s board of directors.
The employment agreement permits Dr. LaMond to serve on up to three (3) outside boards of directors at the discretion of Peak Bio’s board of directors and to provide limited consulting services to non-affiliated third parties provided they are not in direct conflict with Peak Bio’s business activities.
If Dr. LaMond’s employment is terminated by Peak Bio without “cause,” then Peak Bio will pay Dr. LaMond his accrued and unpaid salary and continuation of his base salary for twelve months.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth information known to us regarding the beneficial ownership of our Common Stock as of December 31, 2023, after giving effect to the Closing, by:
•each person who is known by us to be the beneficial owner of more than five percent (5%) of the outstanding shares of any class of our Common Stock;
•each of our current executive officers and directors; and
•all of our current executive officers and directors, as a group.
Beneficial ownership for the purposes of the following table is determined in accordance with the rules and regulations of the SEC. A person is a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of the security, or “investment power”, which includes the power to dispose of or to direct the disposition of the security or has the right to acquire such powers within 60 days.
The beneficial ownership percentages set forth in the table below are based on 23,124,888 shares of Common Stock issued and outstanding as of December 31, 2023 and do not take into account the issuance of any shares of Common Stock upon the exercise of warrants or stock options.
Unless otherwise noted in the footnotes to the following table, and subject to applicable community property laws, the persons and entities named in the table have sole voting and investment power with respect to their beneficially owned common stock.
Name of Beneficial Owners(1)
Number of
Shares of
Common
Stock
Beneficially
Owned
Percentage of
Outstanding
Common
Stock
5% Stockholders:
SBI Investment KOREA Co., Ltd. (7)
3,621,489
15.7
%
Executive Officers and Directors:
Hoyoung Huh(2)
8,710,682
37.7
%
Stephen LaMond
19,850
0.1
%
Timothy Cunningham
-
-
Satyajit Mitra(3)
18,647
*
James Neal
-
-
David I. Rosenberg(4)
1,117,755
4.8
%
Michael Friedman
18,692
0.1
%
All directors and executive officers as a group (7 individuals)
9,885,626
42.7
%
*
Indicates less than 1 percent
(1)
Unless otherwise indicated, the business address of each of the individuals is c/o Peak Bio, Inc., 4900 Hopyard Road, Pleasanton, CA 94588.
(2)
Includes 8,337,742 shares of Common Stock held by Hoyoung Huh and 372,940 shares of Common Stock held by Hannol Ventures LLC of which Mr. Huh is the sole member and who has voting and dispositive power over such shares.
(3)
Includes 18,647 shares underlying options to purchase Common Stock that are fully vested and currently exercisable.
(4)
Includes 389,630 shares of Common Stock and 728,125 Private Warrants previously held by the Sponsor, of which David Rosenberg is a managing member.
(5)
Includes 320,206 shares of Common Stock held by SBI Investment KOREA Co., Ltd. (“SBI”), 251,418 shares of Common Stock held by SBI Cross-border Advantage Fund, an affiliate of SBI, 599,202 shares of Common Stock
held by SBI Healthcare Fund 1, an affiliate of SBI, 1,601,067 shares of Common Stock held by IBKC-SBI Bio Fund 1, an affiliate of SBI, 83,800 shares Common Stock held by SBI KIS 2016-1 Fund, an affiliate of SBI, 167,600 shares of Common Stock held 2014 KIF-SBI IT Investment Fund, an affiliate of SBI, 419,017 shares of Common Stock held by Global Gateway Fund 1, an affiliate of SBI and 179,179 shares of Common Stock held by 2019 SBI Job Creation Fund, an affiliate of SBI. The business address of SBI is 14th FL., NC Tower, 509, Teheran-ro, Gangnam-gu, Seoul, Korea.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence.
See (i) Note 6 - Related Party Transactions and Shared Service Costs, Note 10- Debt and Note 14 - Subsequent Events of the notes accompanying our audited financial statements for the fiscal year ended December 31, 2023 and (ii) “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Recent Developments” included elsewhere in this Annual Report on Form 10-K.
Procedures with Respect to Review and Approval of Related Person Transactions
Upon consummation of the Business Combination, our board of directors adopted a written related person transaction policy that sets forth the following policies and procedures for the review and approval or ratification of related person transactions.
A “Related Person Transaction” is a transaction, arrangement or relationship in which we or any of our subsidiaries was, is or will be a participant, the amount of which involved exceeds $120,000, and in which any related person had, has or will have a direct or indirect material interest. A “Related Person” means:
•any person who is, or at any time during the applicable period was, one of our executive officers or a member of our board of directors;
•any person who is known by us to be the beneficial owner of more than five percent (5%) of our voting stock;
•any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, daughter-in-law, brother-in-law or sister-in-law of a director, officer or a beneficial owner of more than five percent (5%) of our voting stock, and any person (other than a tenant or employee) sharing the household of such director, executive officer or beneficial owner of more than five percent (5%) of our voting stock; and
•any firm, corporation or other entity in which any of the foregoing persons is a partner or principal or in a similar position or in which such person has a 10 percent (10%) or greater beneficial ownership interest.
We also adopted policies and procedures designed to minimize potential conflicts of interest arising from any dealings it may have with its affiliates and to provide appropriate procedures for the disclosure of any real or potential conflicts of interest that may exist from time to time. Specifically, pursuant to our audit committee charter, the audit committee will have the responsibility to review related person transactions.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accounting Fees and Services.
The following is a summary of fees paid or to be paid to Marcum LLP, or Marcum, the Company’s independent registered public accounting firm.
Audit Fees. Audit fees consist of fees billed for professional services rendered for the audit of our financial statements included in this Annual Report on Form 10-K, and review of financial statements included in our quarterly reports on Form 10-Q and services that are normally provided by our independent registered public accounting firm, in connection with regulatory filings and public offerings. The aggregate fees billed by Marcum for professional services rendered for the audit of our annual financial statements and other required filings with the SEC for each of the fiscal years ended December 31, 2023 and 2022 totaled $310,000 and $883,291. The above amounts include interim procedures and audit fees, as well as attendance at audit committee meetings.
Audit-Related Fees. Audit-related services consist of fees billed for assurance and related services that are reasonably related to performance of the audit or review of our financial statements and are not reported under “Audit Fees.” These services include attest services that are not required by statute or regulation and consultations concerning financial accounting and reporting standards. We did not pay Marcum for consultations concerning financial accounting and reporting standards during the years ended December 31, 2023 and 2022.
Tax Fees. We did not pay Marcum for tax planning and tax advice for the years ended December 31, 2023 and 2023.
All Other Fees. We did not pay Marcum for other services for the years ended December 31, 2023 and 2022.
Pre-Approval Policy
Our Audit Committee was formed upon the consummation of our Business Combination. As a result, the audit committee did not pre-approve all of the foregoing services, although any services rendered prior to the formation of our audit committee were approved by our board of directors. Since the formation of our audit committee, and on a going-forward basis, the audit committee has and will pre-approve all auditing services and permitted non-audit services to be performed for us by our auditors, including the fees and terms thereof (subject to the de minimis exceptions for non-audit services described in the Exchange Act which are approved by the audit committee prior to the completion of the audit).
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits, Financial Statement Schedules.
(1)For a list of the financial statements included herein, see Index to the Consolidated Financial Statements on page of this Annual Report on Form 10-K, incorporated into this Item by reference.
(2)Financial statement schedules have been omitted because they are either not required or not applicable or the information is included in the consolidated financial statements or the notes thereto.
(3)Exhibits:
Exhibit
Number
Description
2.1
Business Combination Agreement, dated as of April 28, 2022, by and among Ignyte Acquisition Corp., Ignyte Korea Co., Ltd. and Peak Bio Co., Ltd. (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed with the SEC on April 29, 2022).
2.2***
Agreement and Plan of Merger, dated as of March 4,2024, by and among Akari Therapeutics, Plc, Peak Bio, Inc. and Pegasus Merger Sub, Inc. (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed with the SEC on March 5, 2024).
3.1
Second Amended and Restated Certificate of Incorporation of Peak Bio, Inc. (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the SEC on November 7, 2022).
3.2
Amended and Restated Bylaws of Peak Bio, Inc. (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K filed with the SEC on November 7, 2022).
3.3
Amendment to the Amended and Restated Bylaws of Peak Bio, Inc. (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the SEC on March 5, 2024).
4.1
Form of Warrant Certificate of the Company (incorporated by reference to Exhibit 4.1 to of the Company’s Current Report on Form 8-K filed with the SEC on November 7, 2022).
4.2
Form of Amended and Restated Warrant Agreement, dated as of October 31, 2022, by and between Ignyte Acquisition Corp. and Continental Stock Transfer & Trust Company, as warrant agent (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed with the SEC on November 2, 2022).
4.3*
Description of Securities
10.1
Form of Convertible Note and Warrant Subscription Agreement, dated April 28, 2023, by and between Peak Bio, Inc. and the Investors party thereto (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on May 1, 2023).
10.2
Form of Convertible Note, dated April 28, 2023 (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on May 1, 2023).
10.3
Form of Warrant, dated April 28, 2023 (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC on May 1, 2023).
10.4
Key Company Stockholder Subscription Agreement, dated April 28, 2023, by and between Peak Bio, Inc. and Hoyoung Huh (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed with the SEC on May 1, 2023).
10.5
Warrant, dated April 28, 2023, issued to Paulson Investment Company, LLC (incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed with the SEC on May 1, 2023).
10.6
Second Amendment to Common Stock Purchase Agreement, dated as of August 14, 2023, by and between Peak Bio, Inc. and White Lion Capital LLC (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on August 15, 2023).
10.7
Form of Convertible Note Subscription Agreement, dated December 18, 2023, by and between Peak Bio, Inc. and the Investors party thereto (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on December 22, 2023).
10.8
Form of Convertible Note (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on December 22, 2023).
10.9
Form of Senior Secured Promissory Note, dated January 23, 2024, by and between Peak Bio, Inc. and the Hoyoung Huh (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on January 29, 2024).
10.10
Form of Security Agreement, dated January 23, 2024, by and among Peak Bio, Inc., Peak Bio Co., Ltd. Inc., Peak Bio CA, Inc. and Hoyoung Huh (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on January 29, 2024).
10.11
Form of Voting and Support Agreement, dated as of March 4, 2024, by and among Akari, and certain stockholders of Peak Bio (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on March 5, 2024).
10.12
Form of Voting and Support Agreement, dated as of March 4, 2024, by and among Peak Bio and certain shareholders of Akari (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on March 5, 2024).
10.13
Form of Convertible Note (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on June 7, 2024).
10.14
Form of Convertible Note (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on July 17, 2024).
21.1
Subsidiaries of Registrant (incorporated by reference to Exhibit 21.1 of the Company’s Registration Statement on Form S-1 (File No. 333-268801).
24.1*
Power of Attorney (included on signature page to this Annual Report on Form 10-K).
31.1*
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
Cover Page Interactive Data File (embedded within the Inline XBRL document)
* Filed herewith.
** Furnished