EDGAR 10-K Filing

Company CIK: 1472091
Filing Year: 2022
Filename: 1472091_10-K_2022_0001140361-22-012244.json

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ITEM 1. BUSINESS
ITEM 1.
Business
Company Overview
We are a clinical-stage immunotherapy company developing a growing pipeline of molecularly targeted immunotherapies designed to overcome the limitations of current immunotherapy and vaccine technologies. We own the proprietary T-cell activating platforms designed to train the immune system to better attack and destroy disease; Versamune®, for treatments in oncology and Infectimune™, for treatments in infectious disease. When paired with an antigen, which is a disease-related protein that is recognizable by the immune system, Versamune and Infectimune have both been shown to induce, in vivo, large quantities of high-quality, highly potent polyfunctional CD4+ helper and CD8+ killer T-cells, a specific sub-type of T-cell that is more effective at killing infected or target cells. Infectimune is also designed to promote the induction of disease-specific neutralizing antibodies. Our immuno-oncology product candidates are of potential interest for use as a component of combination product candidates (for example, in combination with other leading technologies such as checkpoint inhibitors) to provide more effective treatments across a range of advanced and/or refractory cancers. We are also evaluating our immunotherapies as monotherapies in early-stage disease for oncology. We are developing targeted product candidates to treat several cancers including Human Papillomavirus (HPV) associated cancers, melanoma, colorectal, lung, breast and prostate cancers. Our infectious disease candidates are of potential interest as vaccines to prevent COVID-19 and universal influenza.
Our current pipeline of Versamune-based targeted immunotherapies and Infectimune-based therapies focuses on the use of selected disease-associated antigens that have been demonstrated to be associated with a variety of solid tumors, as well as specific infectious diseases. Our pipeline is shown below:
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Immunotherapy Overview
Immunotherapy is a treatment that uses the person’s own immune to fight disease by recognizing, attacking and eliminating cancer and also neutralizing infectious agents. Immunotherapies, specifically for cancer treatment, come in a variety of forms including, but not limited to, killer T-cell stimulators, checkpoint inhibitors, CAR T-cell therapy and monoclonal antibodies.
Cancer remains a leading cause of morbidity and mortality despite improvements in treatment. The Versamune platform belongs to a class of promising new treatments that have emerged from the convergence of the oncology and immunology fields. These novel therapies, that harness the power of the immune system to fight cancer, are called immunotherapies. Cancer immunotherapies have significant potential to treat a broad range of cancers, and several have been approved by the United States Food and Drug Administration (“FDA”). While progress has been made in developing new anti-cancer immunotherapeutic technologies and products, significant challenges continue to limit their broad clinical effectiveness. We are developing the Versamune based treatments with the goal of overcoming the limitations and safety concerns presented by other anti-cancer treatments. PDS Biotechnology seeks to develop safe and effective therapies for cancer patients.
On a basic immunological level, there are considerable hurdles impeding the ability of immunotherapy to harness the body’s immune system. Although approved checkpoint inhibitors have been demonstrated to be effective in a small percentage of patients. However, for those patients who respond, the durability and duration of their responses can be significant. However, the reported rates of response for checkpoint inhibitors are only in the range of 15-20%. Importantly, immune therapies, including checkpoint inhibitors, CAR-Ts and live-vector vaccines, present the potential for significant systemic toxicities limiting their use both in the treatment of early-stage cancer or in combination with other approved anti-cancer treatments. In contrast to the above described immunotherapies, we believe Versamune may have a unique combination of potency and safety therefore presenting a significant commercial opportunity in both early and late-stage disease.
The challenges to effective immunotherapy
The inability to generate adequate quantities of high-quality killer (CD8+) T-cells, to minimize systemic toxicities, to overcome the immune system’s tolerance of the cancer and to generate immunological memory, all limit the clinical effectiveness of immunotherapies. On a fundamental biological or immunological level, one of the most significant challenges facing the industry is the development of simple and easy to administer therapies that can effectively treat cancer with minimal side effects. Suboptimal activation of killer (CD8+) T-cells remains a key limitation of immunotherapies. Potential hurdles exist at various stages of the immunological process, including poor uptake of the antigen by the dendritic cells as well as inadequate processing and presentation of the tumor antigen into the correct immunological pathways.
Cancer Immunotherapy
Cancer immunotherapy is a form of cancer treatment that utilizes the power of the body’s own immune system to recognize, attack and eliminate cancer. The ultimate goal of cancer immunotherapy is to improve patient quality of life and to extend patient life by slowing down the rate of spread of the cancer, shrinkage of the tumors and in some cases eradication of the cancer. The body’s immune system is a complex, biological network designed to defend against germs, other microscopic invaders, and cancer cells. Once the immune system recognizes an organism or cell as foreign or dangerous, it begins a series of complex reactions to identify, target and eliminate them. This process of events is referred to as mounting an immune response. Cancer immunotherapy takes advantage of the fact that most cancer cells express unique proteins, also called tumor antigens, not normally expressed by healthy cells that can be recognized by the immune system as abnormal. Because the immune system is precise, for the most part, a resulting immune response can target these dangerous cancer cells exclusively while sparing healthy cells. However, the challenge remains that cancer cells are able by various mechanisms to evade the immune system’s surveillance, so the body becomes tolerant to them.
An ideal cancer immunotherapy should have the following attributes to maximize the opportunity for clinical effectiveness in patients. It should:
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Stimulate both tumor-specific killer and helper T-cells within the body
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Activate, arm and expand large numbers of T-cells that recognize the tumor
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Alter or de-camouflage the tumor microenvironment (TME) to make the cancer more visible or susceptible to attack by the immune system
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Generate immune memory, so that if the cancer cells return, the immune system can recognize and eliminate them
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Optimize safety and tolerability by limiting systemic inflammation and toxicity
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As stated in the June 2019 issue of The Journal of Immunology, a leading peer-reviewed journal in the field of immunology, our Versamune platform possesses each of these attributes, inducing potent anti-tumor responses in preclinical studies. (Gandhapudi, et al., J. Immunology, June 2019; Rumfield et al, J. Journal for ImmunoTherapy of Cancer, May 2020). We believe our Versamune technology platform is unique in its ability to successfully encompass the mechanistic attributes required to induce a safe and effective anti-cancer immune response.
How does cancer immunotherapy work?
An important function of the body’s immune system is to scan for proteins not normally expressed in healthy tissue (antigens). Once an antigen has been identified as foreign, abnormal or dangerous, the antigen is presented to T-cells, a type of white blood cell effective at eliminating cancer cells and infectious agents (e.g. bacteria and viruses). The presentation of an antigen to T-cells is implemented primarily in the lymph nodes by specialized antigen presenting cells known as dendritic cells which are programmed specially to identify foreign antigens, process them and to present them to T-cells. Unique proteins on the surface of dendritic cells, known as major histocompatibility complex (MHC) molecules, bind to the foreign antigen and display them on the cell surface for recognition by the appropriate T-cells. Then, once presented, a sub-population of T-cells known as the CD8+ or killer T-cells, are primed and respond to the specific foreign antigen by attacking and killing the cells containing the abnormal protein. Other T-cell sub-populations, such as CD4+ or helper T-cells, are also critical in regulating immune responses.
Cells communicate via chemical signaling. For an immune response to be triggered and to be effective, important immune signaling pathways must be activated to enable the body to induce messenger proteins known as cytokines and chemokines. Some of these cytokines and chemokines serve both to activate and expand T-cells and to arm the T-cells with the appropriate cancer-killing function.
An effective cancer immunotherapy must modulate these complex processes, enhancing activation and producing robust expansion of the critically important high-quality, tumor-specific T-cell populations, most notably CD8+ killer cells. As will be reviewed in more detail in the section below, the ability to promote the induction of therapeutic quantities of high-quality tumor-targeting CD8+ killer T-cells within a patient’s own body has been a major limitation of cancer immunotherapy.
Production of adequate numbers of high-quality CD8+ killer T-cells alone, however, is insufficient to eradicate all cancer cells. One of the difficulties in treating cancer, stems from the fact that cancer cells have the unique ability to evade the immune system; they camouflage themselves or suppress T-cell attack by activating immune mechanisms that suppress the ability of T-cells to detect or attack them. They accomplish this in part by increasing the population of immune suppressive cells, including cells known as regulatory T-cells (Treg) as well as other cell types, within the tumor microenvironment. An effective immunotherapy must overcome the tumor’s immune suppressive mechanisms in order to successfully locate and attack the cancer cells.
Finally, cancers can be difficult to cure because they may recur even after successful initial treatment due to micro-metastatic (hidden) tumors that are not completely eradicated after treatment and that eventually expand. It is yet another task of the immune system to remain vigilant over a sustained period to mitigate the risk of recurrence. Such vigilance may be mediated by memory T-cells which serve as the immune system’s long-term memory. To be durable and effective over an extended period after treatment, and to minimize the likelihood of cancer recurrence, an immunotherapy should enhance this immune function as well.
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Versamune Products
Versamune has shown the potential to overcome the challenges of immunotherapy
Versamune is a proprietary non-viral (synthetic) vector or T-cell activating platform designed to overcome the challenges of current immunotherapy and improve the treatment outcomes of patients with cancer. Versamune-derived products are based on positively charged (cationic) and immune activating lipids that form spherical nanoparticles in aqueous media. These lipids include the R-enantiomer of 1,2-dioleoyl-e-trimethyl-ammonium-propane (R-DOTAP). Cationic lipids are positively charged molecules that have a water-soluble portion (head group) attached to a water insoluble tail. The water-soluble portion of the molecule has a positive charge and the water-insoluble portion is made up of hydrocarbon (also called fatty acid) chains. The nanoparticles, which are coated with a positive charge, are deliberately sized to mimic viruses, facilitating detection by the body’s immune system and uptake by dendritic cells.
To treat a specific cancer, the unique or overexpressed antigen found on the surface of the cancer cells is manufactured, then mixed with the Versamune nanoparticles to create a pharmaceutical product for simple subcutaneous injection.
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Versamune has the potential to promote dendritic cell update of antigens
One of the biggest challenges in developing a potent immunotherapy has been dendritic cell uptake. Versamune is designed specifically to be taken up by dendritic cells in the skin. As noted, Versamune nanoparticles are sized comparably to viruses normally taken up as part of the natural function of the dendritic cells, facilitating efficient uptake of the Versamune-based immunotherapy. Studies evaluating the uptake of Versamune nanoparticles by dendritic cells and epithelial cells, found almost exclusive uptake by the dendritic cells. Four hours following a single subcutaneous injection, about 80% of the dendritic cells in the draining lymph node were found to have taken up the Versamune-based immunotherapy.
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Versamune has the potential to promote efficient antigen processing and T-cell presentation
When dendritic cells take up Versamune nanoparticles they become activated, mature and begin recruiting additional dendritic cells. Once inside the dendritic cell, the tumor-associated antigen is released and processed into the requisite small peptides (pieces of protein) in the cell compartment known as the cytoplasm. An important potential advantage of Versamune is its ability to fuse with and destabilize endosomes in the cell, promoting efficient entry of the antigen into the cell compartment where processing can take place. Processed antigen is turned into peptides that then present in both the MHC class I and class II pathways. The MHC class I pathway is critical to programming CD8+ killer T-cells and the MHC class II pathway to programming CD4+ helper T-cells to recognize tumor antigens. When Versamune-induced maturation occurs, the dendritic cells express costimulatory molecules on their surface, which facilitate the highly efficient uptake and presentation of antigens to the T-cells. We believe this activity overcomes one of the most significant limitations of current immunotherapy development - the efficient priming of critical CD8+ killer T-cells against tumor antigens. Interestingly, Versamune has been demonstrated to promote presentation of antigens to CD4+ helper cells as well.
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Versamune has the potential to promote efficient activation and robust expansion of high quality polyfunctional CD8+ killer T-cells in Lymph Nodes
Ultimately mature dendritic cells migrate into lymph nodes, small glands located throughout the body containing white blood cells including T-cells, where much of the key immunological activity pertaining to the priming and expansion of T-cells takes place. In the lymph nodes the dendritic cells present the tumor antigens to T-cells resulting in activation or priming of the T-cells to recognize the particular antigen expressed by the cancer. Importantly, Versamune has also demonstrated the potential to upregulate type I interferon genes (type I IFN), which are responsible for critical immunological processes. Upregulation of type I IFN induces an important immunological protein called CD69 that facilitates interactions between the dendritic cell and T-cells in the lymph nodes.
Upregulation of type I IFN signaling also induces multiple immune messenger proteins called cytokines and chemokines that further signal T-cells to infiltrate into the lymph nodes. Powerful activators of CD8+ killer T-cells, such as CCL2 and CXCL10 are documented to be induced by Versamune as well. As the Versamune-induced production of chemokines appears to be restricted to the lymph nodes, the site of T-cell activation, it provides for both superior activation and expansion of CD8+ killer T-cells. Localization of these immune messengers within the lymph nodes and their limited presence in the blood circulation enhances the safety of the Versamune-based immunotherapies. Thus, through the versality of its mechanisms of action, as understood to date, we believe that Versamune may safely promote the efficient and robust expansion in-vivo of large numbers of highly potent (polyfunctional) CD8+ killer T-cells, both critical factors in developing a successful immunotherapy.
Versamune has the potential to overcome immune suppression
Regulatory T-cells (Treg) are a sub-population of white blood cells normally responsible for recognizing normal healthy cells and for preventing autoimmune disease. In cancer however, they are utilized by the cancer cells to suppress immune detection. Versamune may contribute to significant alteration of the tumor microenvironment by dramatically reducing the Treg to killer CD8+ T-cell ratio thus making the tumors more susceptible to destruction by killer T-cells. Preclinical studies have demonstrated that lowering the Treg to CD8+ killer T-cell ratio with polyfunctional CD8+ killer and CD4+ helper T-cells promotes effective tumor lysis and regression. Overcoming a tumor’s immune tolerance and minimizing its ability to evade detection is a significant goal of a successful cancer immunotherapy that together with potent T-cell induction may translate to enhanced tumor elimination.
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In preclinical studies, Versamune (R-DOTAP) nanoparticles demonstrated a reduction in the Treg/CD8+ T-cell ratio
Results of Comparative Preclinical Testing of Versamune and Other Immunotherapies for the eradication of a Tumor
Using the tumor model, the Versamune based therapy was unique in its ability to reduce the tumor size and eventually completely regress the tumors. The results from the Versamune based treatment are attributed to its ability to induce: (i) powerful activation of the critical immunological signaling pathways, (ii) robust production of both CD8+ killer and CD4+ helper T-cells, and (iii) the degradation of the tumor’s protective immune suppression mechanism.
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Versamune has the potential to induce Immune Memory
Memory T-cells allow the body to maintain tumor-recognizing and attacking T-cells for an extended period after treatment, with the ideal outcome of reducing cancer recurrence. Preliminary studies demonstrated that Versamune protected mice that had experienced tumor regression against tumor reestablishment even when the mice were reinjected with the same tumor cells. This sustained protection was evidence of immune memory: persistence of antigen-specific T-cells to recognize tumor proteins associated with a particular cancer, as the animals were not protected against establishment of different tumors. Evidence of the potential for Versamune-based immunotherapies to induce immune memory was also demonstrated in a phase 1 clinical trial in humans.
Enhancing tumor-specific memory responses to monitor for tumor antigens and eradicate cancer cells well after initial treatment we believe provides potential for significant durable clinical benefit by possibly reducing the incidence of tumor recurrence and improving survival of patients.
Today, many cancer immunotherapies produce serious systemic autoimmune effects due to blockage of existing regulatory mechanisms such as the immune checkpoints as well as inflammatory toxicities due to the increased presence and spikes of cytokines in the blood circulation. We believe the mechanism of action of Versamune as well as its design have the potential to contribute to the localization of cytokines in the lymph nodes and specific targeting of CD8+ killer T-cells to antigens in tumor tissue. Therefore, the hypothesis is that Versamune-based therapies may exhibit an improved and favorable safety profile compared to currently available treatments.
As noted, Versamune is injected subcutaneously (under the skin) and its mechanisms of action are localized primarily in the lymph nodes. Further supporting these observations are data demonstrating that negligible levels of Versamune-induced cytokines were detected in the blood of mice. Very low quantities of Versamune were detected in the blood or in any organ outside of the lymph nodes.
Additionally, Versamune is broken down (hydrolyzed) in the body into fatty acids and excreted, showing in these preliminary studies that it could mitigate the potential for short- or long-term accumulation of the nanoparticles. These preclinical observations have been confirmed by early clinical data documenting that this localized and highly specific cascade of immune activity was associated with an absence of significant systemic toxicity at all doses tested. In a phase 1 clinical trial designed to evaluate safety, all patients had transient swelling and redness at the injection site due to initiation of the immunological cascade at the injection site which cleared completely within 3-7 days and no dose-limiting toxicities or long-term safety concerns were observed. Similarly, in our ongoing Phase 2 trials in combination with other treatments, no dose-limiting toxicities or long-term safety concerns were attributed to PDS0101 since three of the four studies were initiated in 2020.
In choosing and designing a Versamune-based therapy for development, careful attention is paid to selecting specific, appropriate antigens because, as described above, Versamune induces a strong T-cell response to the antigen. All of the antigens currently being evaluated in combination with Versamune are present primarily in cancer cells which should therefore result in tumor-specific T-cell attack, thereby minimizing off-target toxicity and potential destruction of healthy cells and tissue.
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Versamune’ s potential as a cancer immunotherapy platform
The unique ability of Versamune to modulate and enhance numerous critical steps required for an effective immune response and to be combined with targeted specific antigens found on tumor cells, offers several exciting opportunities to treat a variety of cancers. Further, its diverse mechanisms of action together with its favorable safety profile suggest therapeutic promise when used in combination with other treatment modalities or immunotherapies such as checkpoint inhibitors as well as in the single-agent monotherapy setting.
PDS0101: Human Papillomavirus (HPV)-Related Cancers
Despite the successful introduction of HPV preventive vaccines, HPV-related cancers remain a significant component of the global cancer burden. HPV infection occurs in both men and women and is associated with head and neck (oropharyngeal), cervical, anal, vaginal, vulvar and penile cancers.
PDS0101 is our lead Versamune-based immunotherapy. PDS0101 combines Versamune with a mixture of short proteins (peptides) derived from the cancer-causing HPV16 viral protein. HPV16 is the most pervasive and difficult to treat HPV amongst the 13 different high-risk, cancer-causing HPV types. In a preclinical study in the most widely utilized animal HPV-cancer tumor model, PDS0101 uniquely induced complete regression of the tumors after a single sub-cutaneous injection. These data prompted a phase 1 open-label, dose-escalation, proof of concept study of PDS0101 in women with cervical intraepithelial neoplasia (CIN) infected with high-risk HPV types. The data demonstrated that PDS0101 was immunologically active at all three doses studied, confirmed induction of high levels of active HPV-specific CD8+ killer T-cells, and was associated with clinical regression of the cervical lesions that often occurred rapidly. These results suggest that PDS0101 activated the critical mechanisms in humans resulting in potent T-cells which target and effectively kill human HPV-positive cancer cells. All patients who experienced regression remained disease-free over the 2-year retrospective evaluation period, suggesting potential durability or memory of the immune response. The clinical data were presented at the 34th Annual Society for the Immunotherapy of Cancer Conference in November 2019 (Wood, et al., 2019). Based on these encouraging preclinical and human data, PDS0101 is being studied in multiple phase 2 clinical studies in various HPV-related cancers in collaboration with the NCI, Merck, MD Anderson Cancer Center and Mayo Clinic. We are currently conducting 4 phase 2 clinical studies for PDS0101.
PDS0102: T-cell receptor gamma Alternate Reading frame Protein (TARP)-Related Cancers
The TARP antigen is strongly associated with prostate and breast cancers. In the U.S. 450,000 patients are projected to be diagnosed with prostate or breast cancer this year. Approximately 90% of prostate cancers and 50% of breast cancers overexpress the TARP tumor antigen. In a human clinical trial, the National Cancer Institute demonstrated that its proprietary TARP antigens were effectively recognized by the immune system in prostate cancer patients with PSA biochemical recurrence leading to a notable reduction in tumor growth rate. In preclinical studies, a dramatically enhanced TARP-specific killer T-cell response was observed when our designed TARP antigens were combined with Versamune. As discussed further below, in November 2021, we entered into the NCI Patent License Agreement with the U.S. Department of Health and Human Services, as represented by the National Cancer Institute, (“NCI”) of the National Institutes of Health (“NIH”). We obtained a nonexclusive worldwide license to the patent rights for NCI’s T-cell receptor gamma alternate reading frame protein (“TARP”) to develop and commercialize TARP peptide-based therapies in combination with our Versamune technology for the treatment of Acute Myeloid Leukemia, prostate and breast cancers. Preclinical development is ongoing.
PDS0103: Mucin-1 (MUC1)-Related Cancers
MUC1 is highly expressed in multiple solid tumor types and has been shown to be associated with drug resistance and poor disease prognosis. We are developing PDS0103, a Versamune-based therapy in combination with novel, highly immunogenic, agonist epitopes of the MUC1 oncogenic C-terminal region to treat ovarian, breast, colorectal and lung cancers. In preclinical studies, similar to PDS0102, a dramatically enhanced MUC1-specific killer T-cell response was observed when the novel antigens were combined with Versamune. Preclinical development is ongoing.
Versamune has demonstrated immunological compatibility with a wide array of tumor and pathogenic antigens. While our current oncology pipeline pairs Versamune with 4 different tumor antigens, to address over 10 cancer types, more than 75 tumor antigens have been identified and reported. The versatility of the platform suggests that Versamune could work well with a wide range of identified tumor antigens and neoantigens. We are exploring the expansion of our Versamune-based pipeline by pairing the technology with multiple tumor antigens to develop additional product candidates.
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Infectimune’ s potential as an infectious disease vaccine platform
PDS Biotechnology has developed a second cationic platform that is being applied to the development of infectious disease vaccines and this specific formulation has been trademarked Infectimune. It has been formulated to activate the immune system to induce rapid and longer-lasting neutralizing antibody responses for improved protection against infectious pathogens. It has the potential to induce T-cell responses including memory T-cell responses to provide the immune system with long-term memory and potential sustained protection against infectious pathogens over an extended period of time that may exceed traditional antibody-based protection. It could provide safe and effective vaccines that are well tolerated by healthy individuals.
PDS0201: Tuberculosis
PDS0201 combines the utility of the Versamune platform with bacillus Mycobacterium tuberculosis (M. tuberculosis) antigens. Tuberculosis (TB) is the leading cause of death from a single infectious agent and is caused by the bacillus Mycobacterium tuberculosis, which is spread when people who are sick with TB expel bacteria into the air. About a quarter of the world’s population is infected with M. tuberculosis and thus at risk of developing TB disease. It has been reported that a total of 1.5 million people died from TB in 2020. Worldwide, TB is one of the top 10 causes of death and the leading cause from a single infectious agent (above HIV/AIDS). It is estimated that 10 million people fell ill with TB worldwide - 5.7 million men, 3.2 million women and 1.1 million children. There were cases in all countries and age groups. Multidrug-resistant TB (MDR-TB) remains a public health crisis and a health security threat. The World Health Organization (WHO) estimates that there were 484,000 new cases with resistance to rifampicin - the most effective first-line drug, of which 78% had MDR-TB. WHO has identified TB as a global priority and is focused on eradication of the disease. The only licensed vaccine for prevention of TB disease was developed almost 100 years ago. PDS0201 is currently in preclinical development.
PDS0202: Universal influenza vaccine
According to the World Health Organization, influenza causes 3 to 5 million cases and approximately 290,000 to 650,000 deaths each year. Due to the existence of multiple strains of flu, a new seasonal flu vaccination is usually developed to provide protection against the strains predicted to be prevalent in an upcoming flu season. As a result, the protective efficacy of the current vaccines varies widely from season to season. We are developing a new generation of flu vaccines with the potential to provide long-lasting, and broad protection against multiple strains of the virus. We believe that the successful development of a universal flu vaccine could eliminate the need to create a vaccine to protect against each year’s predicted variants. Our Infectimune platform is combined with computationally optimized broadly reactive antigen (COBRA) to potentially provide longer lasting, more effective response to the influenza vaccine. The preclinical work is complete, and we are working to obtain nondilutive financing to fund the next steps in development. In the fourth quarter of 2021, we entered into the UGA Patent License Agreement with the University of Georgia which provides a nonexclusive license to the patent rights for the University of Georgia’s COBRA antigens to develop and commercialize a universal influenza vaccine worldwide. The UGA Patent License Agreement includes customary milestone payments and royalties. Preclinical work is ongoing.
PDS0203: SARS-CoV-2 vaccine
Our Infectimune platform based COVD-19 vaccine combines our nanoparticle technology with a SARS-CoV-2 recombinant protein derived from the spike (S) protein. Notably, the protein in this fully synthetic vaccine includes conserved and non-mutating regions of the virus. The vaccine has demonstrated strong potential in preclinical studies to efficiently promote the induction of killer (CD8+) and helper (CD4+) helper T-cells that recognize and induce immune responses against such non-mutating regions of the virus. The protein also includes regions of the spike protein that result in the induction of neutralizing antibodies. Development is being conducted in Brazil by our collaborator Farmacore, who is fully responsible for the development program, and clinical trials will be conducted in Brazil following all necessary regulatory approvals. Farmacore is continuing to work on manufacturing and scale up process for the antigen component of the vaccine.
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Versamune Development Strategy
The unique combination of high potency and excellent safety of the Versamune platform observed in preclinical studies was corroborated in the successfully-completed 12-patient PDS0101 Phase 1/2a clinical trial. In September 2019, we reported retrospective clinical outcome data from this trial. Despite most of the patients being infected with multiple HPV strains including or excluding HPV 16, regression was seen in 8 out of 10 patients, with complete regression of pre-cancerous lesions documented in 6 out of 10 patients at their first post-treatment evaluation, which occurred within 1-3 months of completing treatment. In addition, the fact that no disease recurrence occurred over the two-year evaluation period strongly suggested a robust and durable therapeutic immune response due to the induction of T-cells by PDS0101 administration that were clinically active. As a result of this information and the documentation in the trial of PDS0101’s ability to generate potent and biologically active CD8+ T-cells in-vivo, we focused our clinical strategy on areas of more severe unmet medical need in which PDS0101 is combined with other immune-modulating agents, including checkpoint inhibitors and standard of care e.g., chemoradiotherapy, to provide improved clinical benefit to patients.
We believe that rational design of combination immunotherapies using complementary agents that promote synergy with each other and reduce the potential for compounded toxicity will substantially enhance the potential for combination therapies to deliver improved clinical benefit for cancer patients. Versamune appears to activate an appropriate combination of immunological pathways to promote strong CD8+ T-cell induction while also altering the tumor microenvironment to make tumors more susceptible to T-cell attack, which we believe makes it an ideal complement to checkpoint inhibitors and other immune-modulating agents by enhancing their potency as part of combination therapies. In addition, the differences in mechanism of action between Versamune and checkpoint inhibitors, as well as the initial demonstrated safety profile of Versamune, suggests that these combinations may be potentially much better tolerated by patients than other combination therapies involving checkpoint inhibitors and other cancer treatments such as immune-cytokines and chemotherapy.
VERSATILE-002: PDS0101 + KEYTRUDA®
In November 2020, our VERSATILE-002 Phase 2 clinical trial evaluating the combination of PDS0101 in combination with Merck’s anti-PD-1 therapy, KEYTRUDA® (pembrolizumab) which is the FDA-approved standard of care for first-line treatment of recurrent/ metastatic head and neck cancer opened and is actively recruiting patients. The clinical trial will evaluate the efficacy and safety of this therapeutic combination as a first-line treatment in patients with recurrent or metastatic head and neck cancer and high-risk human papillomavirus-16 (HPV16) infection.
In this PDS Biotech-sponsored trial, patients whose cancer has returned or spread following initial treatment, will be able to avoid chemotherapy and take this combination of two immuno-therapy drugs. Enrolling patients with more functional immune systems that have not been compromised by extensive chemotherapy may allow improved efficacy of the combination. Patients in the trial will receive a total of 5 cycles of combination therapy in the context of standard of care KEYTRUDA® therapy administered every three weeks until disease progression. The primary endpoint of VERSATILE-002 is the objective response rate - or ORR - at six months following initiation of treatment. There are two cohorts in the trial. Cohort 1 is for patients that are yet to be treated with a checkpoint inhibitor (CPI naïve) and cohort 2 which consists of patients that have failed checkpoint inhibitor therapy (CPI refractory).
In the February 2022, we announced we had achieved the preliminary efficacy milestone of at least four or more objective responses of the first 17 patients in the CPI naïve arm which now allows that arm to proceed to full enrollment. We also announced detailed preliminary safety data which showed that the combination is likely safe and well tolerated without evidence of enhanced or significant toxicity in the first 18 patients in the CPI naïve arm. We continue to enroll patients in the first stage of the CPI refractory arm.
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National Cancer Institute: PDS0101+ M9241 +Bintrafusp Alfa
In June 2020, the first patient was dosed under a PDS0101 Cooperative Research and Development Agreement (CRADA), in NCI, led Phase 2 clinical trial evaluating PDS0101 with NHS-IL12 (M9241), and M7824 (Bintrafusp Alfa), both of which are owned by EMD Serono (Merck KGaA) in patients with advanced/refractory HPV-associated cancers who have failed prior treatment. In February 2021, we announced that the NCI’s Phase 2 clinical trial of PDS0101 for the treatment of advanced/refractory HPV-associated cancers achieved its preliminary objective response target in patients naïve to checkpoint inhibitors which allowed for full enrollment of approximately 20 patients in this group. In addition, based on promising results in the CPI naïve arm, the trial was amended to allow enrollment of a separate cohort of checkpoint inhibitor-refractory patients for assessment of safety and activity of the triple combination. Preliminary efficacy assessment of the triple combination in this added group of 20 checkpoint inhibitor refractory patients is ongoing. The NCI recently achieved the intended enrollment objective of 30 patients in the CPI refractory arm of the trial. The trial has enrolled 45 patients and enrollment in the trial will continue until the total enrollment of 56 patients is achieved.
Preclinical study results arising from this CRADA were recently published in the Journal for ImmunoTherapy of Cancer, Immunomodulation to enhance the efficacy of an HPV therapeutic vaccine (Journal for ImmunoTherapy of Cancer 2020;8:e000612. doi:10.1136/ jitc-2020-000612), indicating that PDS0101 generated both HPV-specific T-cells and an associated antitumor response when used as a monotherapy. When PDS0101 was combined with two other novel clinical-stage anti-cancer agents, Bintrafusp Alfa and M9241, the preclinical data suggested that all three therapeutic agents worked synergistically to provide superior tumor T-cell responses and subsequent tumor regression when compared to any of the agents alone or the 2-component combinations. If the published preclinical data demonstrating powerful activity of the triple combination is successfully confirmed in the ongoing Phase 2 trial, this triple combination could form the basis of a unique platform providing improved cancer treatments across multiple cancers.
In June 2021, at the American Society of Clinical Oncology (ASCO) conference the NCI announced interim data in this trial which included, data in both CPI naïve and refractory patients. In the CPI naïve group 83% (5/6) of patients had an objective response, and 1 subject had achieved a complete response with no evidence of disease. 100% of the CPI naïve patients were alive at a median duration of 8 months. In the CPI refractory group 42% (5/12) of patients had an objective response, and 1 subject had achieved a complete response with no evidence of disease. 10/12 (83%) of CPI refractory patients were alive at a median duration of 8 months. An update provided in January 2022 showed as of December 31, 2021, that >40 subjects had been recruited into the trial and 30 HPV16-positive patients had been evaluated. The median survival of all patients (3:1 CPI refractor to naïve) was 12 months and progressing. The historical survival of CPI naïve and CPI refractory advanced HPV-associated cancers when treated with CPI are 7-11 months and 3-4 months respectively.
MD Anderson Cancer Center (IMMUNOCERV): PDS0101+ Chemoradiotherapy
In October 2020, a third PDS0101 Phase 2 clinical study was initiated with The University of Texas MD Anderson Cancer Center and is actively recruiting patients. This clinical trial is investigating the safety and anti-tumor efficacy of PDS0101 in combination with standard-of-care chemo-radiotherapy, or CRT, and their correlation with critical immunological biomarkers in patients with locally advanced cervical cancer. PDS believes that Versamune’s strong T-cell induction has the potential to meaningfully enhance efficacy of the current standard of care CRT treatment in this indication. Enrollment rate in this trial had been negatively impacted by the COVID-19 pandemic and enrollment is on-going.
Mayo Clinic: PDS0101 Monotherapy and in combination with KEYTRUDA®
In February 2022 we announced the initiation of an Investigator-Initiated Trial (ITT), MC200710, for PDS0101 alone or in combination with the checkpoint inhibitor, KEYTRUDA®, in patients with HPV-associated oropharyngeal cancer (HPV(+)OPSCC) at high risk of recurrence. The trial is being led by Drs. David Routman, Katharine Price, Kathryn Van Abel, and Ashish Chintakuntlawar of Mayo Clinic, a nationally and internationally recognized center of excellence for the treatment of head and neck cancers. We believe that this upcoming trial not only broadens our addressable patient population of those affected by the increasing incidence of HPV(+)OPSCC, but also allows us to better understand the activity of PDS0101 alone or in combination with KEYTRUDA® in earlier stages of disease. This trial is currently open for enrollment.
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In this trial treatment will be administered before patients proceed to transoral robotic surgery (TORS) with curative intent. Treatment in this setting is referred to as neoadjuvant treatment. PDS0101 has been shown to induce killer T-cells that target and kill HPV-positive cancers, either alone or in combination with checkpoint inhibitors in preclinical studies, and in combination in clinical studies of patients with advanced recurrent/metastatic HPV-associated cancers. This trial will explore whether PDS0101 with or without checkpoint inhibition may increase HPV-specific anti-tumor responses, potentially resulting in tumor shrinkage, pathologic regression, and decreases in circulating tumor DNA (ctDNA).
Our clinical development strategy of combining PDS0101 with standard of care treatment is designed to mitigate risk in our proof-of-concept phase 2 trials. It is also designed to demonstrate the potential for significantly enhanced clinical benefit to patients over the standard of care, without compounding toxicity. If we achieve this goal, we believe that we will have a clear path towards commercialization of PDS0101 in multiple indications. After initial commercial approval, our strategy of combining PDS0101 with standard of care also positions us for rapid market penetration and expansion.
Our clinical development strategy of combining PDS0101 with standard of care treatment is designed to mitigate risk in our proof-of-concept phase 2 trials. It is also designed to demonstrate the potential for significantly enhanced clinical benefit to patients over the standard of care, without compounding toxicity. If we achieve this goal, we believe that we will have a clear path towards commercialization of PDS0101 in multiple indications.
PDS0102
PDS0102 is an investigational immunotherapy utilizing tumor-associated and immunologically active T-cell receptor gamma alternate reading framed protein (TARP) from the NCI. PDS0102 is designed to treat TARP-associated cancers including, acute myeloid leukemia (AML), prostate and breast cancer. In our preclinical work, the administration of PDS0102, the Versamuine+TARP antigen combination led to the induction of large numbers of tumor targeted killer T-cells. In addition, the TARP tumor antigen alone has already been studied at the NCI in men with prostate cancer and been shown to be safe, immunogenic with slowing tumor growth rates (NCT00972309). We are evaluating the next steps in the clinical development of PDS0102 and are seeking nondilutive financings to move to human trials.
PDS0103
In April 2020, the above mentioned, PDS-NCI CRADA was expanded beyond PDS0101 to include clinical and preclinical development of PDS0103. PDS0103 is an investigational immunotherapy owned by us and designed to treat cancers associated with the mucin-1, or MUC-1, oncogenic protein. These include cancers such as ovarian, breast, colorectal and lung cancers. PDS0103 combines Versamune with novel highly immunogenic agonist epitopes of MUC-1 developed by the NCI and licensed by PDS. PDS0103 is currently in late preclinical development.
MUC1 is highly expressed in several types of cancer and has been shown to be associated with drug resistance and poor disease prognosis in breast, colorectal, lung and ovarian cancers, for which PDS0103 is being developed. Expression of MUC-1 is often associated with poor disease prognosis, due in part to drug resistance. In preclinical studies, and similarly to PDS0101, PDS0103 demonstrated the ability to generate powerful MUC1-specific CD8 killer T-cells. In the first quarter of 2022, we held a pre-IND meeting with the FDA on PDS0103. We were satisfied with the responses and believe we will submit our IND package in the third or fourth quarter of 2022 and will start human trials at the end of 2022.
Infectimune Development Strategy
We believe that the key differentiating attributes of the Infectimune platform technology, are strong induction of CD8+ and CD4+ T-cells as well as antibodies, which can be leveraged to improve treatment and preventive options in several infectious disease indications. Specifically, the COVID-19 pandemic has provided a unique opportunity to highlight Infectimune’s potentially transformative utility in the development of more effective and longer lasting protective vaccines. Our expanded infectious diseases pipeline now covers three infectious pathogens and vaccines. Current preventive and prophylactic vaccine approaches and technologies predominantly focus on creating strong induction of antibody responses. However, the induction of T-cell responses, in addition to antibody responses, provides more durable and broad protection against infectious diseases.
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PDS0203: COVID-19
Farmacore is developing PDS0203 under a licensing agreement with PDS Biotechnology. PDS0203 is a second-generation Infectimune-based COVID-19 vaccine candidate: a simple subunit vaccine that utilizes a recombinant protein derived from the Spike protein of SARS-CoV-2, as opposed to an inactivated virus-based vaccine. Preclinical studies of PDS0203 have shown the induction of strong neutralizing antibodies, virus-specific polyfunctional CD8+ (killer) and CD4+ (helper) T-cells, and long-term memory T-cell responses. Initial financial support for the program has been provided by the Brazilian government for preclinical development.
On February 22, 2021, PDS Biotechnology and Farmacore announced that Blanver Farmoquímica e Farmacêutica S.A joined their efforts (collectively the “Consortium”) to develop and commercialize a novel COVID-19 vaccine in Latin America. Under the terms of the agreement, São Paulo-based Blanver will manufacture, promote, distribute, and commercialize the Infectimune-based COVID-19 vaccine in Latin America.
On March 11, 2021 we announced that the Consortium received a commitment from the Secretary for Research and Scientific Training of the MCTI, Brazil to fund up to approximately US$60 million to support the clinical development and commercialization of an Infectimune-based COVID-19.
The progression of the Farmacore development program was delayed in the fourth quarter of 2021. After a review of the program by PDS and Farmacore, the agreement with Farmacore was extended for six months to May 31, 2022 to provide additional time to Farmacore to commence manufacturing and scale up of drug product for use in clinical trials and any necessary process development work. PDS will continue to monitor Farmacore’s progress with this program.
PDS0203 is being designed with the goal to potentially provide long-term and broad protection against infection from COVID-19 and its potential mutations, based on the understood potential of Infectimune to prime the immune system to generate both antibodies for near term protection and T-cell responses for long term protection against pathogens. Preclinical data of studies performed at the University of Kentucky indicates that PDS0203 elicits the induction of highly active and potent virus-specific CD8 killer and CD4 helper T-cells within 14 days of treatment. The study also showed induction of the long-lasting virus-specific memory T-cells necessary for longer term protection. A 30-45-fold increase in COVID-19 specific T-cells was observed by Day 14 when compared to the vaccine without Versamune. These preclinical studies also indicated induction of strong anti-SARS-CoV-2 neutralizing antibodies within 14 days, with a 20-25-fold increase when compared to the vaccine without Versamune.
The peer-reviewed scientific publication “A Newcastle Disease Virus (NDV) Expressing a Membrane-Anchored Spike as a Cost-Effective Inactivated SARS-CoV-2 Vaccine” by Sun et al. Vaccines (2020, volume 8, issue 4, page 771) also provides strong rationale for clinical development of an Infectimune-based COVID-19 vaccine to maximize the full breadth of immune responses induced against SARS-CoV-2. This research conducted at the Mount Sinai Icahn School of Medicine, NY, indicated that there is powerful antibody induction by Versamune against SARS-CoV-2 at low antigen doses suggesting potential for an effective antigen dose sparing COVID-19 vaccine. These data are based on preclinical studies combining our Infectimune technology with an inactivated Newcastle disease virus (NDV)/SARS-CoV-2 vaccine (NDV vaccine) developed at Mount Sinai.
The preclinical study compared various treatment regimens in their ability to induce antibodies against SARS-CoV-2:
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the NDV vaccine alone at doses of 5µg, 10µg and 20µg,
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the NDV vaccine in combination with Versamune at 0.2µg, 1µg and 5µg,
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and the NDV vaccine in combination with Addavax, an adjuvant well-known for its ability to induce powerful antibody responses, at 0.2µg, 1µg and 5µg.
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As seen in Figure 3B of the publication, shown below, the NDV vaccine with R-DOTAP nanoparticles (Infectimune) yielded the strongest antibody responses. Figure 3C, also shown below, highlighted Infectimune’s ability to induce the highest levels of neutralizing antibodies even at the lowest studied antigen dose of 0.2µg. Challenge studies also indicated that the Infectimune-containing vaccine conferred protection against challenge with the SARS-CoV-2 virus.
We understand this broader projected range of effective immunity to be a result of Infectimune’s activation of Type I interferons (IFNs) critical to developing effective anti-viral immune responses, and also to promote presentation of the unique disease-associated protein or peptide to the appropriate compartment of the dendritic cells of the immune system. As a result of this capability, Infectimune has indicated there is potential for enhanced immunogenicity in the context of dose sparing of both flu and COVID-19 antigens through strong induction of neutralizing antibodies. Finally, in light of the chemical composition of PDS0203 as a subunit vaccine, we believe manufacturing scale-up for global deployment may encounter fewer challenges than is generally observed with more complex product candidates.
PDS0202; Universal Flu
Based on the key characteristics of Infectimune we are progressing development of PDS0202, a universal influenza vaccine candidate, which combines Infectimune with novel Computationally Optimized Broadly Reactive (COBRA) influenza vaccine antigens designed by renowned influenza expert Dr. Ted Ross and licensed from the University of Georgia. PDS0202 preclinical development was supported by an agreement with the National Institute of Allergy and Infectious Diseases Collaborative Influenza Vaccine Innovation Centers, or CIVICs, program, with a goal of progressing into a human clinical trial. Preclinical development studies were performed at three sites: our Princeton, NJ laboratories, The University of Kentucky School of Medicine, and the CIVICs Center for Influenza Vaccine Research for High-Risk Populations. The data produced in the preclinical showed significant levels of hemagglutinin inhibition (HAI) titer levels when utilizing PDS0202 as compared to COBRA antigens alone ranging from 28x to 62x on various strains of the H1N1 influenza virus.
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The preclinical data also showed all animals in the control group when challenged by the flu virus became sick and died while all animals treated with either a 3mcg (high dose) or .012mcg (low dose) of PDS0102 remained alive and healthy.
We are seeking nondilutive financing for the next stage of clinical development.
PDS0201: Tuberculosis
In December 2019, we entered into an Amended and Restated Material Transfer Agreement (MTA) with Farmacore to develop a novel tuberculosis, or TB, immunotherapy based on a combination of Farmacore’s proprietary TB antigens with Infectimune. In preliminary evaluations, our Infectimune-based TB product, PDS0201, demonstrated highly promising TB-specific T-cell induction in-vivo.
Under the Farmacore MTA, we will undertake product development and Farmacore will conduct in-vivo preclinical studies to evaluate product efficacy. Testing is to be performed in Brazil although development was put on hold to prioritize PDS0203. The term of the agreement extends until the end of the initial product testing period. The research plan has been delayed due to COVID-19 research restrictions in Brazil.
Since our inception we have devoted substantially all our resources to developing our Versamune and Infectimune platforms and our Versamune and Infectimune -based products, advancing preclinical programs, conducting clinical trials, manufacturing PDS0101 for clinical trials, and providing general and administrative support. We have funded our operations primarily from the issuance of common stock. We have not generated any product revenue to date. We have never been profitable and have incurred net losses in each year since our inception.
Our future funding requirements will depend on many factors, including the following:
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the timing and costs of our planned clinical trials;
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the timing and costs of our planned preclinical studies of our Versamune and Infectimune-based products;
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the outcome, timing and costs of seeking regulatory approvals;
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the impact of COVID-19 on our operations;
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the terms and timing of any future collaborations, licensing, consulting or other arrangements that we may enter into;
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the amount and timing of any payments we may be required to make in connection with the licensing, filing, prosecution, maintenance, defense and enforcement of any patents or patent applications or other intellectual property rights; and
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the extent to which we license or acquire other products and technologies.
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Leadership
We are led by a team of executives and directors with significant experience in drug discovery, development and commercialization. Our founder and CEO Frank Bedu-Addo has been responsible for developing and launching products for KBI BioPharma Inc., Schering-Plough, Merck, Elan Corporation, and the National Cancer Institute. Our other co-founder and Chief Scientific Officer, Dr. Gregory Conn has more than 35 years of drug-development experience, including development of antiviral and anticancer drugs through to commercialization. Our Chief Medical Officer, Dr. Lauren V. Wood has over 30 years of translational clinical research experience and held senior positions at the National Cancer Institute Center for Cancer Research. Our Chief Financial Officer, Matthew Hill has over 25 years of experience in finance and held prior roles as Chief Financial Officer and in operational leadership roles at several public life science companies.
We are supported by scientific leaders in the field of vaccine development and oncology. Dr. Lisa Rohan, one of our founders, is Chair of the Scientific Advisory Board. She is a professor in the department of Pharmaceutical Sciences at the University of Pittsburgh where she also holds appointments in the Department of Obstetrics, Gynecology and Reproductive Sciences in the School of Medicine and the Clinical Translational Science Institute. Dr. Einstein, Professor and Chair in the Department of OB/ GYN & Women’s Heath at Rutgers University Medical School is an expert in HPV-related pathogenesis, therapy and prevention of lower anogenital tract and gynecologic cancers. He is an active leader for management guidelines and translating clinical study and translational data for the World Health Organization, American Cancer Society, Society of Gynecologic Oncology and the American College of Obstetrics and Gynecology. Professor Leaf Huang, one of our founders, is a Distinguished Professor of Pharmaco-engineering and Molecular Pharmaceutics at the Eshelman School of Pharmacy, University of North Carolina at Chapel Hill pioneered the liposome design and manufacture of cationic lipid vector nanoparticles as a delivery system for cDNA, mRNA, siRNA, proteins and peptides for tumor growth inhibition and for vaccines in treating cancer and infectious diseases. Dr. Olivera Finn is a Distinguished Professor of Immunology at the University of Pittsburgh School of Medicine and she discovered the MUC1 antigen. Our Principal Investigator for the PDS0101 Head and Neck Trial with KEYTRUDA® for first-line treatment of recurrent/ metastatic Head and Neck Cancer is Dr. Jared Weiss, Associate Professor of Medicine, University of North Carolina Lineberger Comprehensive Cancer Center, who is an expert in head and neck thoracic oncology with a focus on immunotherapeutic approaches for these diseases.
Facilities & Manufacturing and Commercial scale up
Product candidates using our Versamune and Infectimune development platforms are manufactured using a readily scalable, fill-finish process with well-defined and reproducible operations. We do not own or operate cGMP compliant manufacturing facilities to produce any of our product candidates and we do not have plans to develop our own manufacturing operations in the foreseeable future. We currently rely on third-party contract manufacturing organizations to produce the amounts of our product candidates necessary for our preclinical research and clinical studies. As part of the manufacture and design process for our product candidates, we rely on internal, scientific and manufacturing know-how and trade secrets and the know-how and trade secrets of third-party manufacturers. We currently employ internal resources to manage our manufacturing contractors.
Our research and development activities are located at the Princeton Innovation Center BioLabs, 303A College Road East, Princeton, NJ 08540, which provides first-rate development facilities for biotech companies. All animal toxicology and efficacy testing are done via third party contracts and collaborations to provide maximum flexibility and to minimize operational costs and overhead. This approach allows for independent validation of our data, and we believe it has historically been a cost-efficient way to progress our development programs.
We do not intend to incur the costs of building, staffing and maintaining manufacturing facilities in the near term. The supply chain integrity was not negatively impacted by COVID-19 thus far. Our management team has formulation, manufacturing and operations expertise, including past senior executive management roles in contract drug development and manufacturing. Our management team plans to utilize its expertise and knowledge to identify suitable alternative contract manufacturers who will be capable of efficiently manufacturing our products.
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Regulatory Pathway
For our lead product candidate, PDS0101, the next step in the product development process are our ongoing Phase 2 clinical trials. This process is described further under “U.S. Product Development Process.” The final protocols for all phase 2 clinical trials were submitted to the FDA prior to trial initiation and information for all three trials are on www.clinicaltrials.gov. To conform to the FDA electronic Common Technical Document format requirement and submission of the CGMP material that will be used in the Phase 2 trials for PDS0101, we submitted a Chemistry, Manufacturing, and Controls amendment to our Investigational New Drug application, related to PDS’s Phase 2 studies with PDS0101 to the FDA in 2020.
If Phase 2 clinical trials support further development, under standard FDA processes we would then need to complete a registrational Phase 2/3 clinical trial while continuing to gather other necessary application data and information for PDS0101 to seek marketing authorization.
We anticipate that we would seek marketing authorization from the FDA for our product candidates through the Biologics License Application pathway, under Section 351(a) of the Public Health Service Act. This process and the requirements are described further under “U.S. Product Development Process.”
For our earlier stage, preclinical product candidates PDS0102 and PDS0103, we plan to work to develop data with the goal of progressing to an IND submission in 2022 or early 2023 and progressing clinical development to first-in-human trials with these products. We have engaged with the FDA and received useful initial feedback on the clinical trial design for the PDS0103 program and this information will influence our strategy for regulatory submissions and the protocol development.
Intellectual Property
PATENTS
We seek to maintain high barriers to entry around our product candidates and the markets in which they are utilized by using a multiple layered approach to our patents, patent applications, and substantial know-how and trade secrets related to the Versamune platform. We strive to protect and enhance the proprietary technology, inventions and improvements that are commercially important to its business, including seeking, maintaining, and defending patent rights. We also rely on trade secrets relating to its platform and on know-how, continuing technological innovation to develop, strengthen and maintain its proprietary position in the vaccine field. In addition, we rely on regulatory protection afforded through data exclusivity, market exclusivity and patent term extensions where available. We also utilize trademark protection for our company name and we expect to do so for products and/or services as they are marketed.
PDS has developed numerous patents and patent applications and owns substantial know-how and trade secrets related to its Versamune platform. As of December 31, 2021, PDS holds six (6) U.S. patents with granted claims directed to its platform technology and sixteen (16) pending U.S. patent applications. These issued patents will expire in 2028, 2029, 2031 and 2033. Should the more recently submitted patent applications currently in prosecution be issued, these will expire in 2033 through 2037 assuming no patent term extensions are granted. As of March 1, 2022, PDS holds seventy (70) issued foreign patents and thirty-eight (38) pending or published foreign patent applications. Most of our international issued patents are issued in multiple countries including Europe, Japan and Australia, and all of which cover compositions of matter and methods of use related to its platform technology. These issued patents will expire in 2031-2037, or later if patent term extension applies. Most recently, the USPTO allowed an application for our HPV 16 immunotherapy which when granted will run until October 2037.
Licensed Patents
We have an exclusive worldwide license from Merck & Cie to (R)-DOTAP and its crystal forms, manufacturing methods, and pharmaceutical compositions using the compounds., which are owned by Merck Patent GmbH, for use in our immunotherapy compositions and immunotherapies. Merck & Cie has informed us that it has rights to license these patent families through an intra-company agreement with Merck Patent GmbH. These licensed patents are significant to Versamune and Infectimune platforms, as they are directed to the currently utilized Versamune ingredient.
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We have licensed patented antigens from the US government for use worldwide in our cationic lipid immunotherapies. We have licensed T-cell receptor gamma alternate reading frame protein (“TARP”) from the National Cancer Institute (“NCI”) to develop and commercialize TARP peptide-based therapies in combination with the Company’s Versamune technology and any other of the Company’s proprietary technologies for prostate and breast cancers and Acute Myeloid Leukemia. These patents are directed to Immunogenic Peptides and Peptide Derivatives for The Treatment of Prostate and Breast Cancer Treatment and Multi-Epitope TARP Peptide Vaccine and Uses Thereof. These antigens are incorporated in PDS0102 with Versamune. We have licensed mucin-1 (“MUC1”) novel highly immunogenic agonist epitopes of MUC1 developed by the National Cancer Institute. MUC1is highly expressed in multiple solid tumors and has been shown to be associated with drug resistance and poor disease prognosis in breast, colorectal, lung and ovarian cancers, for which PDS0103 is being developed. We have been granted patents and are pursuing additional patents that cover compositions and methods of use of cationic lipid immunotherapies with each of the licensed technologies.
We entered into a non-exclusive agreement to license COBRA universal influenza antigens with the University of Georgia Research Foundation to develop, manufacture and use COBRA antigens in a clinical trial for a universal influenza vaccine worldwide. These antigens are developed by Dr. Ted Ross at the University of Georgia. We believe that the combination of these antigens with our proprietary Infectimune technology, representing PDS0202, has the potential to induce a broad immune response as a universal flu vaccine, based on preclinical development studies performed to date.
Trade Secrets and Other Proprietary Information
In contrast to patent protection or regulatory exclusivities, trade secret protection is a form of intellectual property that does not require disclosure of the subject information as part of the process, but instead depends on maintaining the subject information as strictly confidential. Companies may in some circumstances rely on trade secrets to protect certain aspects of their proprietary know-how and technological advances, especially where they do not believe patent protection is appropriate or obtainable. Trade secret protection depends in part on confidentiality agreements with employees, consultants, outside scientific collaborators, sponsored researchers and other advisors that prohibit disclosure of designated proprietary information. Trade secrets can be difficult to protect. Confidentiality agreements may not succeed in preventing a person or parties from disclosing confidential information, and in that event the rights of the trade secret holder are subject to the viability of an adequate remedy at law, typically under state law modeled on the Uniform Trade Secrets Protection Act, to stop, mitigate or compensate for the unauthorized disclosure of confidential information. Costly and time-consuming litigation could be necessary to enforce and determine the scope of the proprietary rights. Finally, there is always at least some risk that others may independently discover the trade secrets and proprietary information.
Material License Agreements and Research and Development Agreements
Patent License Agreements with National Institutes of Health.
Effective January 5, 2015, we entered into a Patent License Agreement (the “Patent License Agreement”) as Amended by First Amendment to Patent License Agreement (“First Amendment”) of August 5, 2015, with an agency within the Department of Health and Human Services (“HHS”), pursuant to which NIH granted PDS a nonexclusive license to certain patent rights for the development of a therapeutic cancer vaccine specifically in combination with PDS’s proprietary Versamune technology for ovarian, breast, colon and lung cancers. The Patent License Agreement expires when the last licensed patent expires if the Patent License Agreement is not terminated prior to that date. NIH may terminate the Patent License Agreement if PDS is in default in the performance of any material obligation under the Patent License Agreement. PDS may unilaterally terminate the Patent License Agreement in any country or territory upon sixty (60) days written notice.
Under the Patent License Agreement and First Amendment PDS agreed to pay NIH: (a) a noncreditable, nonrefundable royalty in the amount of $30,000 upon execution of the Patent License Agreement; (b) a noncreditable, nonrefundable royalty in the amount of $60,000 upon execution of the First Amendment to Patent License Agreement (c) a nonrefundable minimum annual royalty of $5,000; (d) earned royalties of two percent (2%) on net sales, reducible by a half percent (0.5%) for any earned royalties PDS must pay to third parties; (e) benchmark royalties as follows: (i) $25,000 upon successful completion of each Phase 2 Clinical Studies of a licensed product for breast, colon, lung or ovarian cancer within each licensed territory; (ii) $50,000 upon initiation of the first Phase 3 Clinical Trial of a licensed product for breast, colon, lung or ovarian cancer within each licensed territory; (iii) $750,000 upon the first commercial sale in the licensed territory utilizing and/or directed to licensed product(s) and/or licensed process(es) within the licensed patent rights for breast, colon, lung or ovarian cancer; and (f) additional sublicensing royalties for each sublicense required to be approved by NIH of four percent (4%) on the fair market value of any consideration received for granting such sublicense.
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Effective as November 5, 2021, we entered into a Patent License Agreement (the “NCI Patent License Agreement”) with the U.S. Department of Health and Human Services, as represented by NCI of NIH. Pursuant to the NCI Patent License Agreement, the Company obtained a nonexclusive, worldwide license to the patent rights for TARP to develop and commercialize TARP peptide-based therapies in combination with the Versamune technology and any other of our proprietary technologies for prostate and breast cancers and Acute Myeloid Leukemia. The NCI Patent License Agreement expires when the last licensed patent expires if the Patent License Agreement is not terminated prior to that date. NCI may terminate the Patent License Agreement if we are in default in the performance of any material obligation under the Patent License Agreement. We may unilaterally terminate the NCI Patent License Agreement in any country or territory upon sixty (60) days written notice. Under the NCI Patent License Agreement, we agreed to pay NCI certain non-creditable, nonrefundable license issue royalties, unreimbursed patent expenses for the licensed patent rights, a nonrefundable minimum annual royalty, earned royalties as a percentage of net sales and benchmark royalties.
DOTAP Chloride Enantiomer License Agreement with Merck Eprova AG.
Effective November 1, 2008, we entered into a DOTAP Chloride Enantiomer License (the “DOTAP License Agreement”) with Merck Eprova AG (“EPRO”), pursuant to which we obtained an exclusive license from EPRO technology to undertake development of products relating to the R-enantiomer and S-enantiomer of DOTAP Chloride for worldwide commercialization in a composition and method of inducing an immune response in a subject by administering at least one cationic lipid with or without an antigen. The DOTAP License Agreement expires on a licensed product-by-licensed product and country-by-country basis until the expiration of the obligation to pay royalties applicable to such licensed product in such country. We have the right to unilaterally terminate the DOTAP License Agreement (in its entirety or on a licensed product-by-licensed product or country-by-country basis) at any time for any reason upon prior written notice. We paid a one-time royalty of CHF 100,000 as a result of the reverse merger between PDS and Edge Therapeutics, Inc.
Cooperative Research and Development Agreement for Intramural-PHS Clinical Research with The U.S. Department of Health and Human Services.
Effective February 2, 2016, we entered into a Cooperative Research and Development Agreement (the “CRADA”) with the U.S. Department of Health and Human Services, as represented by the National Cancer Institute (“NCI”), pursuant to which the parties agreed to perform certain research and development activities as defined by the exhibited Research Plan. The principal goal of the CRADA is to determine whether our Versamune immunotherapeutic technology will be effective for enhancing delivery of cancer vaccines or viral vaccines or other immunotherapies developed by the Vaccine Branch, Center for Cancer Research, NCI, in mouse models and in human clinical studies. The CRADA provides for development, testing and studies to be conducted in conjunction with the Vaccine Branch involving Versamune and Multi-epitope (ME) T cell receptor gamma alternate reading frame protein peptide (TARP) to develop a treatment for prostate cancer using autologous dendritic cells and co- administered locally with ME TARP peptides co-formulated with Versamune immunotherapeutic technology in a non-cellular vaccine platform.
The term of the CRADA is five (5) years, starting February 2, 2016. Pursuant to Appendix A, PDS agreed to provide up to $1,000,000 but no less than $500,000 during the first year of the CRADA and up to $1,000,000 but no less than $750,000 per year for the remaining years of the CRADA for NCI to use in connection with acquiring technical, statistical, and administrative support for the clinical research activities, as well as to pay for supplies and travel expenses and, upon consent of the parties, to acquire support for a postdoctoral research fellow to conduct additional preclinical studies. The CRADA may be terminated by either party at any time by mutual written consent. Either party may unilaterally terminate the CRADA at any time by providing sixty (60) days written notice. If we terminate prior to the completion of all approved or active study protocol(s) pursuant to the CRADA, we must supply enough study test product to complete these study protocol(s) unless termination is for safety reasons. If the CRADA is mutually or unilaterally terminated by us before its expiration, we must pay non-cancellable obligations for personnel for a period of six (6) months after the termination date or until the expiration date of the CRADA, whichever is sooner. If we suspend development on the test article without the transfer of its active development efforts, assets, and obligations to a third party within ninety (90) days of discontinuation, NCI may continue development. In such event, we must transfer all information necessary to enable NCI to contract for the manufacture of the test article and grant NCI a nonexclusive, irrevocable, worldwide, paid-up license regarding same.
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Cost Reimbursement Agreement with University of Kentucky Research Foundation - I. with University of Kentucky Research Foundation - I.
Effective November 1, 2015, we entered into an annual Research Agreement (the “Cost Reimbursement Agreement”) with the University of Kentucky Research Foundation (“UKRF”), pursuant to which UKRF agreed to test PDS’s preclinical and clinical-stage formulations based on HPV, TARP, MUC-1, Melanoma antigens as specified more fully in the statement of work. The Cost Reimbursement Agreement has been renewed annually, and was renewed on July 1, 2021, for an anticipated cost of $404,502. The agreement terminates on June 30, 2022, unless extended by written mutual agreement of parties or is terminated by one of the parties. Either party may terminate the Cost Reimbursement Agreement for any reason with thirty (30) days written notice.
Cost Reimbursement and Sponsored Agreement with University of Kentucky Research Foundation - II.
Effective November 1, 2015, we entered into an annual Research Agreement (the “Cost Reimbursement Agreement”) with the University of Kentucky Research Foundation (“UKRF”), pursuant to which UKRF agreed to test PDS’s preclinical and clinical-stage formulations based on HPV, TARP, MUC-1, Melanoma antigens as specified more fully in the statement of work. The Cost Reimbursement Agreement has been renewed annually, and was renewed on July 1, 2021, for an anticipated cost of $13,998. The agreement terminates on June 30, 2022, unless extended by written mutual agreement of parties or is terminated by one of the parties. Either party may terminate the Cost Reimbursement Agreement for any reason with thirty (30) days written notice.
Clinical Trial Collaboration and Supply Agreement with MSD International GmbH.
Effective May 19, 2017, we entered into a Clinical Trial Collaboration and Supply Agreement (the “CTCSA”) with MSD International GmbH (“Merck”) pursuant to which we and Merck agreed to collaborate in a Phase 2 clinical trial to evaluate the safety, and preliminary efficacy of the concomitant and/or sequenced administration of the combination of a Merck compound (i.e., pembrolizumab, a humanized anti-human PD-1 monoclonal antibody) and our compound (i.e., PDS0101, a cationic lipid-based therapeutic vaccine combining HPV peptides) in treatment of patients with recurrent or metastatic head and neck cancer and high-risk human papillomavirus-16 (HPV 16) infection. The term of the CTCSA commenced on May 19, 2017 and will continue until the earlier of (i) delivery of the final study report and (ii) Study Completion (i.e., upon database lock of the Study results), or until terminated by either party. In the event the CTCSA is terminated by Merck upon a material breach by PDS, PDS must reimburse Merck for its direct manufacturing costs, such as manufacturing fees, raw materials, direct labor, freight and duty, factory overhead costs and its indirect manufacturing costs, such as allocations of indirect factory overhead and site support costs. This agreement was amended on October 28, 2019 to reflect the trial will be for first in line treatment of disease.
On October 28, 2019, we entered into an amendment to the clinical trial collaboration agreement with Merck to evaluate the combination of our lead Versamune-based immunotherapy, PDS0101, with Merck’s anti-PD-1 therapy, KEYTRUDA® (pembrolizumab), in a Phase II clinical trial. The modification to the clinical trial design to evaluate PDS0101 in combination with KEYTRUDA® as first-line treatment comes as a result of Merck’s approval by the FDA on June 10, 2019 for first line treatment of patients with metastatic or unresectable recurrent HNSCC using KEYTRUDA® in combination with platinum and fluorouracil (FU) for all patients and as a single agent for patients whose tumors express PD-L1 as determined by an FDA-approved test. The trial was initiated in November of 2020 to evaluate the efficacy and safety of the combination as a first-line treatment in patients with recurrent or metastatic head and neck cancer and high-risk human papillomavirus-16 (HPV16) infection.
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Other Research and Development Agreements
Cooperative Research and Development Agreement for Intramural-PHS Clinical Research with The U.S. Department of Health and Human Services.
Effective April 22, 2019, PDS entered into a Cooperative Research and Development Agreement (the “CRADA”) with the U.S. Department of Health and Human Services, as represented by the National Cancer Institute (“NCI”), pursuant to which the parties agreed to perform certain research and development activities as defined by the exhibited Research Plan. Under the agreement, PDS will collaborate with the NCI’s Genitourinary Malignancies Branch (GMB) and Laboratory of Tumor Immunology and Biology (LTIB) with plans to conduct a Phase 2 clinical trial evaluating PDS0101 with novel immune-modulating agents M7824 and NHS-IL12 being studied at NCI as part of a CRADA with EMD Serono (Merck KGaA). The phase 2 clinical trial was initiated in June of 2020. The CRADA also involves preclinical evaluation of PDS0101 in combination with other therapeutic modalities upon the mutual agreement of both parties. In April 2020, this agreement was amended to include PDS0103, in preclinical and clinical development for treatment of ovarian, breast, colorectal and lung cancers.
The term of the CRADA is five (5) years, starting April 22, 2019. Pursuant to Appendix A, we agreed to provide $110,000 annually, the first payment of which is to be made on the first anniversary the of the CRADA Effective date or upon the initiation of a Phase II clinical trial as the NIH Clinical Center, whichever comes first for NCI to use in connection with acquiring technical, statistical, and administrative support for the clinical research activities, as well as to pay for supplies and travel expenses and infrastructure costs. The CRADA may be terminated by either party at any time by mutual written consent. Either party may unilaterally terminate the CRADA at any time by providing sixty (60) days written notice. If we terminate prior to the completion of all approved or active study protocol(s) pursuant to the CRADA, we must supply enough study test product to complete these study protocol(s) unless termination is for safety reasons. If the CRADA is mutually or unilaterally terminated by PDS before its expiration, we must pay non-cancellable obligations for personnel for a period of six (6) months after the termination date or until the expiration date of the CRADA, whichever is sooner. If we suspend development on the test article without the transfer of its active development efforts, assets, and obligations to a third party within ninety (90) days of discontinuation, NCI may continue development. In such event, we must transfer all information necessary to enable NCI to contract for the manufacture of the test article and grant NCI a nonexclusive, irrevocable, worldwide, paid-up license regarding same.
Amended and Restated Material Transfer Agreement with Farmacore Biotechnology
On December 4, 2019, we entered into an Amended and Restated Material Transfer Agreement with Farmacore Biotechnology to develop a novel tuberculosis (TB) immunotherapy based on Farmacore’s proprietary TB antigens and Versamune. A prior material transfer agreement under which preliminary work commenced was Amended and Restated due to promising early preclinical results and to progress to the next development phase. We will undertake product development and Farmacore will conduct preclinical studies to evaluate the efficacy of the product. The term of the agreement extends until the end of the product testing period and may be terminated at any time by either party with 30 days’ notice. This research plan has been delayed by the COVID-19 research restrictions in Brazil.
License and Collaboration Agreement with Farmacore Biotechnology
In June 2020, we announced a second collaboration with Farmacore to develop PDS0204, a vaccine to prevent COVID-19, combining Versamune with Farmacore’s recombinant SARS-CoV-2 antigen. Based on the highly promising antibody and T-cell data generated with PDS0203, we and Farmacore amended the agreement to prioritize the advancement of PDS0203 to human clinical trials. Farmacore will retain commercialization rights in Latin America and revenues from Latin American sales will be shared between us and Farmacore. Under the Agreement, Farmacore leads the regulatory and clinical trial effort and we contribute scientific expertise and operational support. The Agreement term extends until the next phase of development and may be terminated with 30 days’ notice. This Agreement has been extended through May 31, 2022.
Option to License with the University of Georgia Research Foundation of Georgia Research Foundation
On October 25, 2021, we entered into a non-exclusive agreement to license Computationally Optimized Broadly Reactive Antigen (COBRA) with the University of Georgia Research Foundation. This agreement allows us to develop, manufacture and use COBRA antigens in a clinical trial for a universal influenza vaccine worldwide. The term of the agreement extends twelve months after initiation of first Phase 1 clinical trial and may be extended upon agreement of the parties. We may convert the option to a full agreement any time prior to the conclusion of the term.
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COVID-19 Impact on Business and Operations
In December 2019, a novel (new) coronavirus known as SARS-CoV-2 was first detected in Wuhan, Hubei Province, People’s Republic of China, causing outbreaks of the coronavirus disease, known as COVID-19, that has now spread globally. On January 30, 2020, the World Health Organization (WHO) declared COVID-19 a public health emergency. The Secretary of Health and Human Services declared a public health emergency on January 31, 2020, under section 319 of the Public Health Service Act (42 U.S.C. 247d), in response to the COVID-19 outbreak. On March 11, 2020, the WHO declared COVID-19 a pandemic and on March 13 the President declared a national emergency in response to the pandemic. The full impact of the COVID-19 pandemic is unknown and rapidly evolving. The COVID-19 pandemic has and could continue to negatively affect the Company’s liquidity and operations. Since the pandemic began, variants of the disease have caused continuous waves of widespread transmission and illness, causing broad economic and supply chain disruptions. The FDA issued and since updated guidance to assist sponsors in assuring the safety of trial participants, maintaining compliance with Good Clinical Practice (GCP) and minimizing risks to trial integrity. Clinical trial sites have implemented institution-specific measures securing the safety of patients and staff to ensure the integrity of the trials in the face of the ongoing pandemic. The evolving COVID-19 pandemic has impacted the pace of enrollment in clinical trials in general and we may be negatively affected with our trials. COVID-19 related travel and other restrictions may also impact the potential for on-site monitoring visiting and audits and inspections by us, third parties, and regulators. There may be shortages of site personnel and equipment necessary for the timely completion of our trials. We are providing support to address these challenges, but these mitigation measures may not overcome the obstacles that the pandemic has wrought which continue to impede progress of clinical trials.
Competition
The biotechnology and pharmaceutical industries are characterized by intense competition to develop new technologies and proprietary products. We are aware of various established companies, including major pharmaceutical companies, broadly engaged in immunotherapies and vaccines in research and development that may compete directly with the products we are developing including Jansen Pharmaceuticals (part of J&J), Sanofi-Aventis, GlaxoSmithKline plc, Merck and Pfizer, among others. In addition, there are also many development-stage biotechnology companies in various immunotherapy and vaccine development including, but not limited to Inovio, Advaxis, Kite Pharma, Hookipa, Moderna, ZIOPHARM Oncology, Heat Biologics, Harpoon Therapeutics, Oncosec Medical, BioNTech, Osivax, Medicago, Vaxart, and Flugen. If one or more of these companies is successful in developing their technologies, it could materially impact our business.
While we believe that the Versamune and Infectimune platforms provide us with competitive advantages, we face competition from many different sources, including biotechnology and pharmaceutical companies, academic institutions, government agencies, as well as public and private research institutions. Any products that we may commercialize will have to compete with existing products and therapies as well as new products and immunotherapies that may become available in the future.
We anticipate that it will face intense and increasing competition as new immunotherapies enter the market and advanced technologies become available. PDS expects any products that it develops and commercializes to compete based on, among other things, efficacy, safety, convenience of administration and delivery, price, availability of therapeutics, the level of generic competition and the availability of reimbursement from government and other third-party payors. PDS’s competitors may obtain FDA or other regulatory approval for their products more rapidly than it may obtain approval for its products, which could result in our competitors establishing a strong market position before it is able to enter the market. In addition, our ability to compete may be affected in many cases by insurers or other third-party payors seeking to encourage the use of generic products.
Government Regulation and Product Approval
Federal, state and local government authorities in the United States and in other countries extensively regulate, among other things, the research, development, testing, manufacturing, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of biological and pharmaceutical products such as those we are developing. Our product candidates must be approved by the FDA before they may be legally marketed in the United States and by the appropriate foreign regulatory agency before they may be legally marketed in foreign countries. Generally, its activities in other countries will be subject to regulation that is similar in nature and scope as that imposed in the United States. The process for obtaining regulatory marketing approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources.
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U.S. Product Development Process
In the United States, the FDA regulates biological drug products under the Federal Food, Drug and Cosmetic Act, or FDCA, and the Public Health Service Act, or PHSA, and implementing regulations. Products are also subject to certain other federal, state and local statutes and regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or post-approval, may subject an applicant to administrative or judicial action. FDA decisions or enforcement actions could include, among other actions, refusal to approve pending applications, withdrawal of an approval, a clinical hold, warning letters, product recalls or withdrawals from the market, product seizures, total or partial suspension of production or distribution injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on PDS.
The process required by the FDA before a biological drug product may be marketed in the United States generally involves the following:
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completion of nonclinical laboratory tests and animal studies according to good laboratory practice regulations, or GLP, and applicable requirements for the humane use of laboratory animals or other applicable regulations;
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submission to the FDA of an investigational new drug application, or an IND, which must become effective before human clinical studies may begin;
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performance of adequate and well-controlled human clinical studies according to the FDA’s regulations commonly referred to as good clinical practice, or GCP, and any additional requirements for the protection of human research subjects and their health information, to establish the safety and efficacy of the proposed biological product for its intended use;
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submission to the FDA of a Biologics License Application, or BLA, for marketing approval that meets applicable requirements to ensure the continued safety, purity, and potency/efficacy of the product that is the subject of the BLA based on results of nonclinical testing and clinical studies (including among other things clinical data, chemistry, and manufacturing and controls (CMC) data);
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satisfactory completion of an FDA inspection of the manufacturing facility or facilities where the biological product is produced, to assess compliance with cGMP, to assure that the facilities, methods and controls are adequate to preserve the biological product’s identity, strength, quality and purity;
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pre-approval inspection by the FDA of the sponsor (or any third party service providers) relative to oversight of clinical studies, clinical trial sites that generated the data in support of the BLA, and any manufacturing facilities; and
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FDA review and approval, or licensure, of the BLA.
Before testing any product candidate in humans, the product enters the preclinical testing stage. Preclinical tests, also referred to as nonclinical studies, include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies to assess the potential safety and activity of the product candidate. The conduct of the preclinical tests must comply with federal regulations and requirements including GLP. The clinical study sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol, to the FDA as part of the IND. Some preclinical testing may continue even after the IND is submitted. The results of preclinical studies and early clinical studies of product candidates with small patient populations may not be predictive of the results of later-stage clinical studies or the results once the applicable clinical studies are completed. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA raises concerns or questions regarding the proposed clinical studies and places the study on a clinical hold within that 30-day time period. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical study can begin. The FDA may also impose clinical holds on a biological product candidate at any time before or during clinical studies due to safety concerns or non-compliance. If the FDA imposes a clinical hold, studies may not recommence without FDA authorization and then only under terms authorized by the FDA. Accordingly, PDS cannot be sure that submission of an IND will result in the FDA allowing clinical studies to begin, or that, once begun, issues will not arise that suspend or terminate such studies.
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Clinical trials involve the administration of the biological product candidate to volunteers or patients under the supervision of qualified investigators, generally physicians not employed by or under the trial sponsor’s control. Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection (for example, inclusion and exclusion criteria), and the parameters to be used to monitor subject safety, including stopping rules that assure a clinical trial will be stopped if certain adverse events should occur. Each protocol and any amendments to the protocol must be submitted to the FDA as part of the IND and require IRB approval. Clinical trials must be conducted and monitored in accordance with the FDA law including GCP requirements, including the requirement that all research subjects provide informed consent. Further, each clinical trial must be reviewed and approved by an independent institutional review board, or IRB, at or servicing each institution at which the clinical trial will be conducted. An IRB is charged with protecting the welfare and rights of trial participants and considers such items as whether the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the form and content of the informed consent that must be signed by each clinical trial subject or his or her legal representative and must monitor the clinical trial until completed. Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:
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Phase 1. The biological product is initially introduced into healthy human subjects and tested for safety. In the case of some products for severe or life-threatening diseases, especially when the product may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing is often conducted in seriously ill subjects. These studies are designed to test the safety, dosage tolerance, absorption, metabolism and pharmacologic actions of the investigational product in humans, the side effects associated with increasing doses, and, if possible, to gain early evidence of effectiveness.
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Phase 2. The biological product is evaluated in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance, optimal dosage and dosing schedule. Multiple Phase 2 clinical studies may be conducted to obtain information prior to beginning larger and more expensive Phase 3 clinical studies.
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Phase 3. Clinical studies, which must be adequate and well-controlled, are undertaken to further evaluate dosage, clinical efficacy, potency, and safety in an expanded patient population generally at geographically dispersed clinical trial sites. These clinical studies are intended to establish the overall risk to benefit ratio of the product and provide an adequate basis for product labeling.
Although these are the typical phases of progression, and characteristics of the phases of a clinical development program, certain expedited programs allow for variations that could support a marketing application based on surrogate endpoints, intermediate clinical endpoints, or single-arm as opposed to comparative or placebo-controlled studies (for example, FDA could rely on well-controlled Phase 2 studies for evidence of effectiveness under certain circumstances).
Post-approval clinical studies, sometimes referred to as Phase 4 clinical studies, may be conducted after initial marketing approval. These clinical studies are used to gain additional experience from the treatment of patients in the intended therapeutic indication, particularly for long-term safety follow-up, or to gain other information about the product.
During all phases of clinical development, regulatory agencies require extensive monitoring and auditing of all clinical activities, clinical data, and clinical trial investigators. Annual progress reports detailing the results of the clinical trials must be submitted to the FDA. Written IND safety reports must be promptly submitted to the FDA and the investigators of potential safety risks, from clinical trials or any other source, including for serious and unexpected adverse events and serious and unexpected suspected adverse reactions, any findings from other studies suggesting a significant risk in humans exposed to the drug, tests in laboratory animals or in vitro testing that suggest a significant risk for human subjects, or any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. The sponsor must submit an IND safety report within 15 calendar days after the sponsor determines that the information qualifies for reporting. The sponsor also must notify the FDA of any unexpected fatal or life-threatening suspected adverse reaction as soon as possible but no later than within seven calendar days after the sponsor’s initial receipt of the information. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, if at all. The FDA, the sponsor or its data safety monitoring board, or DSMB, may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the biological product has been associated with unexpected serious harm to subjects.
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Information about certain clinical trials must be submitted within specific timeframes to the National Institutes of Health, or NIH, for public dissemination on their ClinicalTrials.gov website, and other jurisdictions have similar laws that may apply.
Concurrently with clinical trials, companies usually complete additional studies and must also develop additional information about the physical characteristics of the biological product as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. To help reduce the risk of the introduction of adventitious agents with use of biological products, the PHSA emphasizes the importance of manufacturing controls for products whose attributes cannot be precisely defined. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other criteria, the sponsor must develop methods for testing the identity, strength, quality, potency and purity of the final biological product. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the biological product candidate does not undergo unacceptable deterioration over its shelf life.
U.S. Review and Approval Processes
After the completion of clinical trials of a biological product, FDA approval of a BLA must be obtained before commercial marketing of the biological product. The BLA must include results of product development, laboratory and animal studies, human trials, information on the manufacture and composition of the product, proposed labeling and other relevant information. The testing and approval processes require substantial time and effort and there can be no assurance that the FDA will accept the BLA for filing and, even if filed, that any approval will be granted on a timely basis, if at all.
Under the Prescription Drug User Fee Act, or PDUFA, as amended, each BLA must be accompanied by a significant application fee. For approved drugs, including BLA-licensed biological products, PDUFA also imposes an annual PDUFA program fee. The FDA adjusts the PDUFA user fees on an annual basis. Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for the first application filed by a small business. No user fees are assessed on BLAs for products designated as orphan drugs unless the application for the product also includes a non-orphan indication.
Within 60 days following submission of the application, the FDA reviews a BLA submitted to determine if it is substantially complete before the agency accepts it for filing. The FDA may refuse to file any BLA that it deems incomplete or not properly reviewable at the time of submission and may request additional information. In this event, the BLA must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review of the BLA. The FDA reviews the BLA to determine, among other things, whether the proposed product is safe, potent, and/or effective for its intended use, and has an acceptable purity profile, and whether the product is being manufactured in accordance with cGMP to assure and preserve the product’s identity, safety, strength, quality, potency and purity. The FDA may refer an application to an advisory committee for review, evaluation and recommendation as to whether the application should be approved, and applications for new molecular entities and original BLAs are generally discussed at advisory committee meetings unless the FDA determines that this type of consultation is not needed under the circumstances. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. During the biological product approval process, the FDA also will determine whether a Risk Evaluation and Mitigation Strategy, or REMS, is necessary to assure the safe use of the biological product. If the FDA concludes a REMS is needed, the sponsor of the BLA must submit a proposed REMS. The FDA will not approve a BLA without a REMS, if required.
Before approving a BLA, the FDA will typically inspect the facilities at which the product is manufactured. The FDA will not approve the product unless it is satisfied that the manufacturing establishments and processes supporting the BLA meet the appropriate requirements and comply with the applicable regulations (including cGMP requirements and adequate assurance for consistent commercial production of the product within required specifications). Additionally, before approving a BLA, the FDA will typically conduct a pre-approval inspection of regulated participants in clinical trials (for example, the sponsor, investigators responsible for specific sites, and CROs) to assure that the clinical trials were conducted in compliance with the IND and GCP requirements. To assure cGMP and GCP compliance, an applicant must incur significant expenditure of time, money and effort in the areas of training, record keeping, production, and quality control.
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Notwithstanding the submission of relevant data and information, the FDA may ultimately decide that the BLA does not satisfy its regulatory criteria for approval and deny approval. Data obtained from clinical studies are not always conclusive and the FDA may interpret data differently than PDS interprets the same data. If the agency decides not to approve the BLA in its present form, the FDA will issue a complete response letter that describes all of the specific deficiencies in the BLA identified by the FDA. The deficiencies identified may be minor, for example, requiring labeling changes, or major, for example, requiring additional clinical studies. Additionally, the complete response letter may include recommended actions that the applicant might take to place the application in a condition for approval. If a complete response letter is issued, the applicant may either resubmit the BLA, addressing all of the deficiencies identified in the letter, or withdraw the application.
If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product.
Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling. The FDA may impose restrictions and conditions on product distribution, prescribing, or dispensing in the form of a risk management plan, or otherwise limit the scope of any approval. In addition, the FDA may require post marketing clinical studies, sometimes referred to as Phase 4 clinical studies, designed to further assess a biological product’s safety and effectiveness, and testing and surveillance programs to monitor the safety of approved products that have been commercialized.
In addition, under the Pediatric Research Equity Act, a BLA or supplement to a BLA for a new indication, dosage form, dosage regimen, or route of administration must contain data that are adequate to assess the safety and effectiveness of the product for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements.
Post-Approval Requirements
Any products for which PDS receives FDA approvals are subject to continuing regulation by the FDA, including, among other things, record-keeping requirements, reporting of adverse experiences with the product, providing the FDA with updated safety and efficacy information, product sampling and distribution requirements, and complying with FDA promotion and advertising requirements, which include, among others, standards for direct-to-consumer advertising, restrictions on promoting products for uses or in patient populations that are not described in the product’s approved uses or consistent with the approved labeling, known as ‘off-label’ use, limitations on industry-sponsored scientific and educational activities, and requirements for promotional activities involving the internet. Although physicians may prescribe legally available products for off-label uses, if the physicians deem to be appropriate in their professional medical judgment, manufacturers may not market or promote such off-label uses. Recent court decisions have impacted the FDA’s enforcement activity regarding off-label promotion in light of First Amendment considerations; however, there are still significant risks in this area in part due to the potential False Claims Act exposure. Further, the FDA has not materially changed its position on off-label promotion following legal setbacks on First Amendment grounds and the DOJ has consistently asserted in FCA briefings that “speech that serves as a conduit for violations of the law is not constitutionally protected.”
In addition, quality control and manufacturing procedures must continue to conform to applicable manufacturing requirements after approval to ensure the long-term stability of the product. cGMP regulations require among other things, quality control and quality assurance as well as the corresponding maintenance of records and documentation and the obligation to investigate and correct any deviations from cGMP. Manufacturers and other entities involved in the manufacture and distribution of approved products are required to register their establishments with the FDA and certain state agencies and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP and other laws. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance. Discovery of problems with a product after approval may result in restrictions on a product, manufacturer, or holder of an approved BLA, including, among other things, recall or withdrawal of the product from the market. In addition, changes to the manufacturing process are strictly regulated, and depending on the significance of the change, may require prior FDA approval before being implemented. Other types of changes to the approved product, such as adding new indications and claims, are also subject to further FDA review and approval.
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The Drug Supply Chain Security Act, or DSCSA imposes obligations on manufacturers of prescription biopharmaceutical products for commercial distribution, regulating the distribution of the products at the federal level, and sets certain standards for federal or state registration and compliance of entities in the supply chain (manufacturers and repackagers, wholesale distributors, third-party logistics providers, and dispensers). The DSCSA preempts certain previously enacted state pedigree laws and the pedigree requirements of the Prescription Drug Marketing Act, or PDMA. Trading partners within the drug supply chain must now ensure certain product tracing requirements are met that they are doing business with other authorized trading partners; and they are required to exchange transaction information, transaction history, and transaction statements. Product identifier information (an aspect of the product tracing scheme) is also now required. The DSCSA requirements, development of standards, and the system for product tracing have been and will continue to be phased in over a period of years, with the FDA indicating enforcement discretion on certain aspects due to the COVID-19 pandemic. The distribution of product samples continues to be regulated under the PDMA, and some states also impose regulations on drug sample distribution.
The FDA also may require post-marketing testing, known as Phase 4 testing, and surveillance to monitor the effects of an approved product. Discovery of previously unknown problems with a product or the failure to comply with applicable FDA requirements can have negative consequences, including adverse publicity, judicial or administrative enforcement, warning letters from the FDA, mandated corrective advertising or communications with doctors, and civil or criminal penalties, among others. Newly discovered or developed safety or effectiveness data may require changes to a product’s approved labeling, including the addition of new warnings and contraindications, and also may require the implementation of other risk management measures. Also, new government requirements, including those resulting from new legislation, may be established, or the FDA’s policies may change, which could delay or prevent regulatory approval of its product candidates under development.
Regulatory Exclusivities Applicable to Biologics and Related Matters
Abbreviated Licensure Pathway for Biosimilars: The Biologics Price Competition and Innovation Act of 2009 (BPCIA) amended the PHSA to create an abbreviated approval pathway for “biosimilar” biologics, that is, those shown to be highly similar to an already-FDA-licensed reference biologic. The abbreviated approval process for biosimilars under the BPCIA is similar in concept to the Abbreviated New Drug Application (“ANDA”) for generic small molecule drugs established by the Drug Price Competition and Patent Term Restoration Act of 1984 (“Hatch-Waxman”) amendments to the FDCA. As with Hatch-Waxman, the goal of the BPCIA was to increase access to lower-priced versions of drugs, while balancing the need to continue incentivizing innovation in drug development. Biosimilarity is defined to mean that the proposed biologic is highly similar to the reference product notwithstanding minor differences in clinically inactive components and that there are no clinically meaningful differences between the biological product and the reference product in terms of the safety, purity and potency of the product. Further, a biosimilar may be determined to be “interchangeable” with the reference product, in which case the biosimilar may be substituted for the reference product under state substitution laws, similar to the way generic small molecule drugs are substituted. The higher standard of interchangeability requires a showing that the biosimilar is expected to produce the same clinical result as the reference biologic in any given patient, and further that the risk to the patient in terms of safety, purity, and/or potency pf switching between the biosimilar and the reference product is no more than using the reference product without switching.
Regulatory Exclusivities Applicable to Biologics Under the BPCIA: The BPCIA established certain regulatory exclusivities that provide reference biologics with prescribed periods of time during which competing biosimilars or interchangeable biosimilars may not be approved or may not be marketed. Once its BLA is approved (“date of first licensure) the reference biologic is entitled to a period of four years after its date of first licensure during which time FDA is prohibited from accepting a marketing application that would seek approval of any products that are biosimilar to the branded product. In addition, the reference biologic is entitled to a period of 12 years after its date of first licensure during which time FDA is prohibited from approving marketing applications for any products that are biosimilar to the branded product. In addition, the first interchangeable biosimilar may be entitled to a period of one year after its date of first licensure, or other periods keyed to the outcome of patent litigation if instituted, during which FDA is prohibited from finding that any other biosimilars are interchangeable to the same reference biologic. The reference biologic may also be entitled to regulatory exclusivity under other statutory provisions that apply to biologics and small molecule drugs.
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Orphan Drug Exclusivity: Under the Orphan Drug Act, the FDA may grant orphan drug designation to biological products indicated for a rare disease or condition, generally a disease or condition that affects fewer than 200,000 individuals in the United States, or in the alternative there is no reasonable expectation that the cost of developing and making a product available in the United States for such disease or condition will be recovered from sales of the product. Orphan designation must be requested before submitting a BLA. After the FDA grants orphan drug designation, the identity of the biological product and its potential orphan use are disclosed publicly by the FDA. The first BLA sponsor to receive FDA approval for a particular active moiety to treat a particular disease with FDA orphan drug designation is entitled to a period of 12 years after its date of first licensure during which time FDA is prohibited from approving marketing applications for any products that are biosimilar to the branded product. There is an exception in certain limited circumstances, such as for a showing of clinical superiority to the product with orphan drug exclusivity. A product is clinically superior if it is safer, more effective or makes a major contribution to patient care. Orphan drug exclusivity does not prevent the FDA from approving a different drug or biological product for the same disease or condition, or the same biological product for a different disease or condition. Other benefits of orphan drug designation include tax credits for certain research and a waiver of the BLA user fee.
Pediatric Study Requirements and Pediatric Exclusivity: Under the Best Pharmaceuticals for Children Act (BPCA), a sponsor qualifies for “pediatric exclusivity” if it complies with a Written Request (WR) issued by FDA for pediatric studies. The sponsor may apply to FDA to issue a WR. Pediatric exclusivity operates by adding six months of exclusivity on to the end of the latest-expiring form of exclusivity and may apply to patent rights or to FDA regulatory exclusivities. To qualify for pediatric exclusivity, at least one of those rights must still be currently in force at the time FDA approves the pediatric studies.
Patent Term Extensions: Patents have a limited lifespan. In most countries, including the U.S., the standard expiration of a patent is 20 years from the effective filing date. Various extensions of patent terms may be available in certain circumstances, for example where there are delays in obtaining FDA regulatory approvals that result in a reduction of the period of time during which we could market a product under patent protection. In the U.S., such possible extensions include those permitted under Hatch-Waxman, which permits a patent term extension of up to five years to cover an FDA-approved product. The actual length of the extension will depend on the amount of patent term lost while the product was in clinical trials, and FDA must agree with our calculation of the time lost in regulatory review.
Other U.S. Healthcare Laws and Compliance Requirements
In the United States, PDS’s activities are potentially subject to regulation, either directly or indirectly, by various federal, state and local authorities in addition to the FDA, including but not limited to, the Centers for Medicare and Medicaid Services, or CMS, other divisions of the U.S. Department of Health and Human Services, for instance the Office of Inspector General (OIG), the U.S. Department of Justice (DOJ), and individual U.S. Attorney offices within the DOJ, and state and local governments. For example, sales, marketing and scientific/educational grant programs must comply with the anti-fraud and abuse provisions of the Social Security Act, the criminal provisions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA), the federal Anti-Kickback Statute, the federal false claims laws, the physician payment transparency laws, and similar state laws, each as amended. The compliance and enforcement landscape, and related risk, is informed by government enforcement precedent and settlement history, Advisory Opinions, and Special Fraud Alerts. Our approach to compliance may evolve over time in light of these types of developments.
The federal Anti-Kickback Statute prohibits, among other things, any person or entity, from knowingly and willfully offering, paying, soliciting or receiving any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any item or service reimbursable under Medicare, Medicaid or other federal healthcare programs. The term remuneration has been interpreted broadly to include anything of value. The Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers, and formulary managers on the other. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution. The exceptions and safe harbors are drawn narrowly and practices that involve remuneration that may be alleged to be intended to induce prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor, however, does not make the conduct per se illegal under the Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of its facts and circumstances. PDS’s practices may not in all cases meet all of the criteria for protection under a statutory exception or regulatory safe harbor. The lack of uniform court interpretation of the Anti-Kickback Statute combined with emerging, novel enforcement theories, makes compliance with the law difficult. The potential safe harbors available are subject to change through legislative and regulatory action, and we may decide to adjust our business practices or be subject to heightened scrutiny as a result. Violations of the federal Anti-Kickback Statute can result in significant criminal fines, exclusion from participation in Medicare and Medicaid and follow-on civil litigation, among other things, for both entities and individuals.
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Additionally, the intent standard under the Anti-Kickback Statute was amended by the Affordable Care Act to a stricter standard such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. In addition, the Affordable Care Act codified case law that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a per se false or fraudulent claim for purposes of the federal False Claims Act, as discussed below.
The Criminal Healthcare Fraud statute, 18 U.S.C. § 1347 prohibits knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private third-party payers. Federal criminal law at 18 U.S.C. § 1001, among other sections, prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.
The civil monetary penalties statute imposes penalties against any person or entity that, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.
The federal False Claims Act prohibits, among other things, any person or entity from knowingly presenting, or causing to be presented, a false claim for payment to, or approval by, the federal government or knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government. The qui tam provisions of the False Claims Act and similar state laws allow a private individual to bring civil actions on behalf of the federal or state government and to share in any monetary recovery. 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 U.S. government, whether directly or indirectly. Recently, several pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product.
Other companies have been prosecuted for causing false claims to be submitted because of the companies’ marketing of the product for unapproved, and thus non-reimbursable, uses.
HIPAA created new federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by means of false or fraudulent pretenses, representations or promises, any money or property owned by, or under the control or custody of, any healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, concealing or covering up by trick, scheme or device, a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Similar to the 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.
Also, many states have enacted similar fraud and abuse statutes or regulations that apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor, even extending to self-pay items and services.
PDS may be subject to data privacy and security regulations by both the federal government and the states in which it conducts its business. We are not a covered entity under HIPAA and have not functioned as a business associate under HIPAA that would cause the HIPAA Security Rule and provisions of the Privacy Rule to apply directly to us as a business associate. To the extent that we ever function in a business associate capacity, HIPAA, as amended by the HITECH Act, and its respective implementing regulations, including the final omnibus rule published on January 25, 2013, imposes requirements relating to the privacy, security and transmission of individually identifiable health information. Following enactment of the HITECH Act, HIPAA’s privacy and security standards now directly apply to business associates of covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also created four new tiers of civil monetary penalties, 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. In addition, state laws govern the privacy and security of health information in specified circumstances, many of which differ from each other in significant ways, and may apply more broadly thus complicating compliance efforts (for example, California recently enacted legislation - the California Consumer Privacy Act, or CCPA - which went into effect on January 1, 2020 and among other things, creates new data privacy obligations for covered companies and provides new privacy rights to California residents, including the right to opt out of certain disclosures of their information, and creates a private right of action with statutory damages for certain data breaches. The CCPA was recently amended by the California Privacy Rights Act, or CPRA, expanding certain consumer rights such as the right to know. It remains unclear what, if any, additional modifications will be made to these laws by the California legislature or how these laws will be interpreted and enforced. The potential effects of the CCPA and CPRA and implementing regulations are significant and may cause us to incur substantial costs and expenses to comply.
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Even for entities that are not deemed “covered entities” or “business associates” under HIPAA, according to the United States Federal Trade Commission, or the FTC, failing to take appropriate steps to keep consumers’ personal information secure constitutes unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act, or the FTCA, 15 USC § 45(a). The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. Medical data is considered sensitive data that merits stronger safeguards. The FTC’s guidance for appropriately securing consumers’ personal information is similar to what is required by the HIPAA Security Rule. The FTC’s authority under Section 5 is concurrent with HIPAA’s jurisdiction and with any action taken under state law.
Additionally, the Federal Physician Payments Sunshine Act under the Affordable Care Act, and its implementing regulations, require that certain manufacturers of drugs, devices, biological and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with certain exceptions, report information related to certain payments or other transfers of value made or distributed to physicians and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals and to report annually certain ownership and investment interests held by physicians and their immediate family members. Failure to submit timely, accurately, and completely the required information may result in civil monetary penalties of up to an aggregate of $150,000 per year and up to an aggregate of $1 million per year for “knowing failures”. In 2022 the Sunshine Act reporting will be extended to payments and transfers of value to physician assistants, nurse practitioners, and other mid-level practitioners (with reporting requirements going into effect in 2022 for payments made in 2021). Certain states also mandate implementation of compliance programs, impose restrictions on pharmaceutical manufacturer marketing practices and/or require the tracking and reporting of gifts, compensation and other remuneration to healthcare providers and entities.
In order to distribute products commercially, PDS must also comply with state laws that require the registration of manufacturers and wholesale distributors of drug and biological products in a state, including, in certain states, manufacturers and distributors who ship products into the state even if such manufacturers or distributors have no place of business within the state. Several states have enacted legislation requiring pharmaceutical and biotechnology companies to establish marketing compliance programs, file periodic reports with the state, make periodic public disclosures on sales, marketing, pricing, clinical studies and other activities, and/or register their sales representatives, as well as to prohibit pharmacies and other healthcare entities from providing certain physician prescribing data to pharmaceutical and biotechnology companies for use in sales and marketing, and to prohibit certain other sales and marketing practices. All of PDS’s activities are potentially subject to federal and state consumer protection and unfair competition laws.
The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations. Federal and state enforcement bodies have recently increased their scrutiny of interactions between pharmaceutical companies and providers and patients, which has led to a number of investigations, prosecutions, convictions and settlements in the industry. Ensuring that business arrangements with third parties comply with applicable healthcare laws, as well as responding to possible investigations by government authorities, can be time- and resource-consuming and can divert management’s attention from the business, even if investigators ultimately find that no violation has occurred.
If PDS operations are found to be in violation of any of the federal and state healthcare laws described above or any other governmental regulations that apply to it, PDS may be subject to penalties, including without limitation, civil, criminal and/or administrative penalties; damages; fines; disgorgement; exclusion from participation in government programs, such as Medicare and Medicaid; injunctions; private “qui tam” actions brought by individual whistleblowers in the name of the government, or refusal to allow it to enter into government contracts; contractual damages; reputational harm; administrative burdens; diminished profits and future earnings; and the curtailment or restructuring of its operations; any of which could adversely affect PDS’s ability to operate its business and its results of operations.
In addition to the laws discussed above, we may see more stringent state and federal privacy legislation in the future, as the increased cyber-attacks during the COVID-19 pandemic have heightened attention to data privacy and security in the U.S. and other jurisdictions. We cannot predict where new legislation might arise, the scope of such legislation, or the potential impact to our business and operations.
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Coverage, Pricing and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any product candidates for which PDS obtains regulatory approval. In the United States and markets in other countries, sales of any products for which PDS receives regulatory approval for commercial sale will depend, in part, on the extent to which third-party payors provide coverage, and establish adequate reimbursement levels for such products. In the United States, third-party payors include federal and state healthcare programs, private managed care providers, health insurers and other organizations. The process for determining whether a third-party payor will provide coverage for a product may be separate from the process for setting the price of a product or for establishing the reimbursement rate that such a payor will pay for the product. Third-party payors may limit coverage to specific products on an approved list, also known as a formulary, which might not include all of the FDA-approved products for a particular indication. Third-party payors are increasingly challenging the price, examining the medical necessity and reviewing the cost-effectiveness of medical products, therapies and services, in addition to questioning their safety and efficacy. PDS may need to conduct expensive pharmaco-economic studies in order to demonstrate the medical necessity and cost-effectiveness of its tablet product candidates, in addition to the costs required to obtain the FDA approvals. PDS’s product candidates may not be considered medically necessary or cost-effective. A payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage for the product. Adequate third-party reimbursement may not be available to enable PDS to maintain price levels sufficient to realize an appropriate return on its investment in product development.
Different pricing and reimbursement schemes exist in other countries. Some jurisdictions operate positive and negative list systems under which products may only be marketed once a reimbursement price has been agreed. To obtain reimbursement or pricing approval, some of these countries may require the completion of clinical studies that compare the cost-effectiveness of a particular product candidate to currently available therapies. Other countries allow companies to fix their own prices for medicines, but monitor and control company profits. The downward pressure on health care costs has become very intense. As a result, increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross-border imports from low-priced markets exert a commercial pressure on pricing within a country.
The marketability of any product candidates for which it receives regulatory approval for commercial sale may suffer if the government and third-party payors fail to provide adequate coverage and reimbursement, or require onerous prior approvals or other restricted access. In addition, emphasis on managed care in the United States has increased and PDS expects the pressure on healthcare pricing will continue to increase. Coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which PDS receives regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
U.S. Healthcare Reform
In recent years, there have been numerous initiatives on the federal and state levels in the United States for comprehensive reforms affecting the payment for, the availability of and reimbursement for healthcare services. There have been a number of federal and state proposals during the last few years regarding the pricing of pharmaceutical and biopharmaceutical products, limiting coverage and reimbursement for drugs and other medical products, government control and other changes to the healthcare system in the United States. PDS anticipates that current and future U.S. legislative healthcare reforms may result in additional downward pressure on the price that PDS receives for any approved product, if covered, and could seriously harm its business. Any reduction in reimbursement from Medicare and other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent PDS from being able to generate revenue, attain profitability or commercialize its product candidates. In addition, it is possible that there will be further legislation or regulation that could harm its business, financial condition and results of operations.
For example, the Affordable Care Act (ACA) which was signed into law in the United States in March 2010, was enacted to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for health care and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. Since its enactment, there have been judicial, executive and Congressional challenges to certain aspects of the ACA. On June 17, 2021, the U.S. Supreme Court dismissed the most recent judicial challenge to ACA brought by several states without specifically ruling on the constitutionality of the Act. Prior to the Supreme Court’s decision, President Biden issued an executive order to initiate a special enrollment period from February 15, 2021 through August 15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is unclear how other healthcare reform measures of the Biden administration or other efforts, if any, to challenge, repeal or replace the ACA will impact health care laws and regulations PDS’s business.
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There has been increasing legislative and enforcement interest in the United States with respect to drug pricing practices. For example, U.S. federal prosecutors have issued subpoenas to pharmaceutical companies seeking information about pricing practices in connection with an investigation into pricing practices being conducted by the U.S. Department of Justice. Several state attorneys general also have commenced drug pricing investigations and filed lawsuits against pharmaceutical companies, and the U.S. Senate has publicly investigated a number of pharmaceutical companies relating to price increases and pricing practices. Proposed legislation has been 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. Drug pricing is and will remain a key legislative issue in the coming year, although we do not know the steps the Biden Administration will take with respect to drug pricing.
At the state level, legislatures have increasingly passed legislation and implemented 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. In addition, regional health care authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other health care programs. These measures could reduce the ultimate demand for our products or put pressure on our product pricing. We expect that additional state healthcare reform measures will be adopted in the future, which could limit the amounts that state governments will pay for healthcare products and services and result in additional pricing pressures. The boom in state laws targeting drug pricing is unprecedented and the requirements are not uniform from state to state, creating additional compliance and commercialization challenges for manufacturers. If PDS is able to obtain marketing approval for one or more of our products, our revenue and future profitability could be negatively affected if these or other inquiries were to result in legislative or regulatory proposals that limit our ability to increase the prices of any products for which we obtain marketing approval.
Foreign Regulation
In order to market any product outside of the United States, we would need to comply with numerous and varying regulatory requirements of other countries and jurisdictions regarding quality, safety and efficacy and governing, among other things, clinical studies, marketing authorization, commercial sales and distribution of its products. Whether or not PDS obtains FDA approval for a product, it would need to obtain the necessary approvals by the comparable foreign regulatory authorities before it can commence clinical studies or marketing of the product in foreign countries and jurisdictions. Although many of the issues discussed above with respect to the United States apply similarly in the context of the European Union, the approval process varies between countries and jurisdictions and can involve additional product testing and additional administrative review periods. The time required to obtain approval in other countries and jurisdictions might differ from and be longer than that required to obtain FDA approval. Regulatory approval in one country or jurisdiction does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country or jurisdiction may negatively impact the regulatory process in others.
European Union member states and other foreign jurisdictions, including Switzerland, have adopted data protection laws and regulations which impose significant compliance obligations. Moreover, the collection and use of personal health data in the European Union, which was formerly governed by the provisions of the European Union Data Protection Directive, was replaced with the European Union General Data Protection Regulation, or the GDPR, in May 2018. The GDPR, which is wide-ranging in scope, imposes several requirements relating to the consent of the individuals to whom the personal data relates, the information provided to the individuals, the security and confidentiality of the personal data, data breach notification and the use of third-party processors in connection with the processing of personal data. The GDPR also imposes strict rules on the transfer of personal data out of the European Union to the United States, provides an enforcement authority and imposes large penalties for noncompliance, including the potential for fines of up to €20 million or 4% of the annual global revenues of the noncompliant company, whichever is greater. The recent implementation of the GDPR has increased our responsibility and liability in relation to personal data that we process, including in clinical trials, and we may in the future be required to put in place additional mechanisms to ensure compliance with the GDPR, which could divert management’s attention and increase our cost of doing business. In addition, new regulation or legislative actions regarding data privacy and security (together with applicable industry standards) may increase our costs of doing business. In this regard, we expect that there will continue to be new proposed laws, regulations and industry standards relating to privacy and data protection in the United States, the European Union and other jurisdictions, and we cannot determine the impact such future laws, regulations and standards may have on our business.
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Employees and Human Capital Management
Our management team possesses considerable experience in drug development research, manufacturing, clinical development and regulatory matters. PDS’ virtual operating strategy of collaborating with scientific and clinical experts in cancer immunology, tumor immunology and gynecological oncology provides additional considerable experience in immunotherapy development, clinical design and execution. We have no collective bargaining agreements with our employees and we have not experienced any work stoppages.
As of December 31, 2021, we had 22 employees. Our employees are highly skilled, and many hold advanced degrees. We consider our relationship with our employees to be good. Our future performance depends significantly upon the continued service of our key scientific, technical, and senior management personnel and our continued ability to attract and retain highly skilled employees. We provide our employees with market salaries and bonuses, opportunities for equity ownership, development programs that enable continued learning and growth and a robust employment package that promotes well-being across all aspects of their lives. In addition to salaries, these programs include potential annual discretionary bonuses, stock awards, a 401(k) plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, and flexible work schedules, among other benefits.
We have taken proactive, aggressive action throughout the COVID-19 pandemic to protect the health and safety of our employees. We expect to continue to implement these measures until we determine that the COVID-19 pandemic is adequately contained for purposes of our business. We may take further actions, in compliance with all appropriate government regulations, that we determine to be in the best interest of our employees.
Environmental Regulations
We believe we are compliant in all material respects with applicable environmental laws. Presently, we do not anticipate such compliance will have a material effect on capital expenditures, earnings, or our competitive position with respect to any of our operations.

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ITEM 1A. RISK FACTORS
ITEM 1A.
Risk Factors
The risks described below may not be the only ones relating to our company. Additional risks that we currently believe are immaterial may also impair our business operations. Our business, financial conditions and future prospects and the trading price of our common stock could be harmed as a result of any of these risks. Investors should also refer to the other information contained or incorporated by reference in this Annual Report on Form 10-K, including our financial statements and related notes, and our other filings from time to time with the Securities and Exchange Commission or SEC.
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Risk Factors Summary
Our business is subject to a number of risks and uncertainties, including those risks discussed at length below. These risks include, among others, the following principal risk factors that make an investment in our company speculative or risky. You are encouraged to carefully review our full discussion of the material risk factors relevant to an investment in our business, which follows the brief bulleted list of our principal risk factors set forth below:
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We have incurred significant losses since our inception and expect to continue to incur significant losses for the foreseeable future and may never achieve or maintain profitability.
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We are dependent on the success of our Versamune and Infectimune products, which are still in early-stage clinical development, and if our Versamune and Infectimune products do not receive regulatory approval or are not successfully commercialized, our business may be harmed.
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We have a limited operating history and have never generated any product revenue.
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We will require additional capital to fund our operations, and if we fail to obtain necessary financing, we may not be able to complete the development and commercialization of our Versamune and Infectimune Products.
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Raising additional funds by issuing securities may cause dilution to existing stockholders and raising funds through lending and licensing arrangements may restrict our operations or require us to relinquish proprietary rights.
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We will need to expand our organization, and may experience difficulties in managing this growth, which could disrupt operations.
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Our employees, independent contractors, principal investigators, consultants, commercial collaborators, service providers and other vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have an adverse effect on our results of operations.
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If we fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately report our financial condition, results of operations or cash flows, which may adversely affect investor confidence in us and, as a result, the value of our common stock. Further, we continue to incur significant increased costs as a result of operating as a public company, and our management is required to devote substantial time to compliance initiatives.
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Our business and operations would suffer, and could be negatively affected, in the event of system failures or cyberattacks.
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Periodic reporting requirements under the Exchange Act and compliance with the Sarbanes-Oxley Act of 2002, including establishing and maintaining acceptable internal control over financial reporting, are costly and may increase substantially and, as a ® reporting company, we may take advantage of reduced reporting requirements which may make our common stock less attractive to investors.
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Clinical trials are very expensive, time-consuming, difficult to design and implement and involve an uncertain outcome, and if they fail to demonstrate safety and efficacy to the satisfaction of the FDA, or similar regulatory authorities, we will be unable to commercialize PDS0101 and other Versamune and Infectimune based products.
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Enrollment and retention of subjects in clinical trials is an expensive and time-consuming process and could be made more difficult or rendered impossible by multiple factors outside our control.
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We face significant competition from other biotechnology and pharmaceutical companies, and our operating results will suffer if we fail to compete effectively.
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Our product candidates are in various stages of development and we will not be able to commercialize our product candidates if our preclinical studies do not produce successful results and/or our clinical trials do not demonstrate the safety and efficacy of our product candidates; early results and early understanding of product candidate potential may not be predictive of later success.
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We have limited to no manufacturing, sales, marketing or distribution capability and we must rely upon third parties for such activities.
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If we are unable to establish sales, marketing and distribution capabilities either on our own or in collaboration with third parties, it may not be successful in commercializing PDS0101 and other candidates, if approved.
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If we obtain approval to commercialize PDS0101 and other candidates outside of the United States, a variety of risks associated with international operations could harm our business.
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Recently enacted and future healthcare legislation, regulations, and policy initiatives may increase the difficulty and cost for us to obtain marketing approval of and commercialize PDS0101 and other candidates and affect the prices we may obtain and our profitability.
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We rely, and intend to continue to rely, on third parties to conduct our clinical trials and perform some of our research and preclinical studies. If these third parties do not satisfactorily carry out their contractual duties, fail to comply with applicable regulatory requirements or do not meet expected deadlines, our development programs may be delayed or subject to increased costs or we may be unable to obtain regulatory approval, each of which may have an adverse effect on our business, financial condition, results of operations and prospects.
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Our stock price is expected to be volatile, and the market price of our common stock may drop in the future.
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We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.
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If we are unable to establish or manage strategic collaborations in the future, our revenue and drug development may be limited.
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Our business could be adversely affected by the effects of health epidemics, pandemics, or outbreaks of infectious diseases, including the recent COVID-19 pandemic and its variants, in regions where we or third parties on which we rely have significant manufacturing facilities, concentrations of clinical trial sites or other business operations. The COVID-19 pandemic could materially affect our operations, including at our headquarters in New Jersey, and at our clinical trial sites, as well as the business or operations of our manufacturers, CROs or other third parties with whom we conduct business.
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If we are unable to obtain and maintain patent protection for our Versamune and Infectimune platforms, PDS0101, or other products or candidates or if the scope of the patent protection obtained is not sufficiently broad, we may not be able to compete effectively in our markets.
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We may be involved in lawsuits to protect or enforce our patents, the patents of our licensors or our other intellectual property rights, or defend our products and methods against the property rights of others, which could be expensive, time consuming and unsuccessful.
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If we fail to comply with federal and state healthcare regulatory laws, including in our relationships with healthcare providers and customers and third-party payors, we could face criminal prosecution and sanctions, substantial civil penalties, damages, fines, disgorgement, exclusion from participation in governmental healthcare programs, contractual damages, reputational harm, and the curtailment of our operations, any of which could harm our business.
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Our effective tax rate may increase in the future, including as a result of tax legislation changes, which may have a material adverse effect on our business, financial condition and results of operations.
Risks Related to Our Business, Financial Position and Capital Requirements
We have a limited operating history and have never generated any product revenue.
We are a clinical-stage biopharmaceutical company with a limited operating history. Our operations to date have been limited to organizing our company and developing the Versamune platform and related immunotherapy product candidates that incorporate the technology of our Versamune platform. We have not yet successfully completed a large-scale, pivotal clinical trial, obtained marketing approval, manufactured Versamune at commercial scale, or conducted sales and marketing activities that will be necessary to successfully commercialize our Versamune products. Consequently, predictions about our future success or viability may not be as accurate as they could be if we had a longer operating history or a history of successfully developing and commercializing immunotherapies.
Our ability to generate revenue and achieve and maintain profitability will depend upon our ability to successfully complete the development of our Versamune-based oncology products PDS0101, PDS0102, PDS0103, or PDS0104, and Infectimune to treat infectious diseases and to obtain the necessary regulatory approvals. We have never generated any product revenue and have no immunotherapy candidate in late-stage clinical development or approved for commercial sale.
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Even if we receive regulatory approval for the sale of the Versamune and Infectimune Products, we do not know when we will begin to generate revenue from PDS0101, if at all. Our ability to generate revenue depends on a number of factors, including our ability to:
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set an acceptable price for Versamune-based immunotherapy candidates, including the Versamune Products, and obtain coverage and adequate reimbursement from third-party payors;
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establish sales, marketing, manufacturing and distribution systems;
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add operational, financial and management information systems and personnel, including personnel to support our clinical, manufacturing and planned future clinical development and commercialization efforts and operations as a public company;
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develop manufacturing capabilities for bulk materials and manufacture commercial quantities of PDS0101 and other Versamune Products at acceptable cost levels;
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achieve broad market acceptance of PDS0101 and other Versamune and Infectimune based-products in the medical community and with third-party payors and consumers;
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attract and retain an experienced management and advisory team;
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launch commercial sales of PDS0101 and other Versamune and Infectimune based-products, whether alone or in collaboration with others; and
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maintain, expand and protect our intellectual property portfolio.
Because of the numerous risks and uncertainties associated with immunotherapy development and manufacturing, we are unable to predict the timing or amount of increased development expenses, or when we will be able to achieve or maintain profitability, if at all. Our expenses could increase beyond expectations if we are required by the U.S. Food and Drug Administration, or FDA, or comparable non-U.S. regulatory authorities, to perform studies or clinical trials in addition to those we currently anticipate. Even if PDS0101 is approved for commercial sale, we anticipate incurring significant costs associated with the commercial launch of and the related commercial-scale manufacturing requirements for PDS0101 and other Versamune and Infectimune products. If we cannot successfully execute on any of the factors listed above, our business may not succeed, and your investment will be adversely affected.
We have incurred significant losses since our inception and expect to continue to incur significant losses for the foreseeable future and may never achieve or maintain profitability.
We have never generated any product revenues and expect to continue to incur substantial and increasing losses as we continue to develop PDS0101 and other Versamune and Infectimune-based products. PDS0101 has not been approved for marketing in the United States and may never receive such approval. As a result, we are uncertain when or if we will achieve profitability and, if so, whether we will be able to sustain it. Our ability to generate revenue and achieve profitability is dependent on our ability to complete development, obtain necessary regulatory approvals, and have PDS0101 manufactured and successfully marketed. We cannot assure you that we will be profitable even if we successfully commercialize PDS0101 or other Versamune and Infectimune-based products. If we successfully obtain regulatory approval to market PDS0101, our revenues will be dependent, in part, upon, the size of the markets in the territories for which regulatory approval is received, the number of competitors in such markets for the approved indication, and the price at which we can offer PDS0101. If the indication approved by regulatory authorities is narrower than we expect, or the treatment population is narrowed by competition, physician choice or treatment guidelines, we may not generate significant revenue from sales of PDS0101, even if approved. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. If we fail to become and remain profitable the market price of our common stock and our ability to raise capital and continue operations will be adversely affected.
We expect research and development expenses to increase significantly for PDS0101 and other Versamune and Infectimune-based products. In addition, even if we obtain regulatory approval, significant sales and marketing expenses will be required to commercialize PDS0101. As a result, we expect to continue to incur significant and increasing operating losses and negative cash flows for the foreseeable future. These losses have had and will continue to have an adverse effect on our financial position and working capital. As of December 31, 2021 and 2020, we had an accumulated deficit of $60.7 and $43.8 million, respectively.
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We are dependent on the success of our Versamune and Infectimune products, which are still in early-stage clinical development, and if our Versamune and Infectimune products do not receive regulatory approval or are not successfully commercialized, our business may be harmed.
PDS0101 is only in mid clinical development, and as a consequence, it is too early to determine whether the Versamune and Infectimune-based products will ever be approved for commercial sale or be marketable. We expect that a substantial portion of our efforts and expenditures over the next few years will be devoted to PDS0101 and other Versamune and Infectimune-based products. Accordingly, our business currently depends heavily on the successful development, regulatory approval and commercialization of PDS0101. PDS0101 may not receive regulatory approval or be successfully commercialized even if regulatory approval is received. The research, testing, manufacturing, labeling, approval, sale, marketing and distribution of PDS0101 is and will remain subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries that each have differing regulations. We are not permitted to market PDS0101 in the United States until it receives approval of a biologics license application, or BLA, from the FDA, or in any foreign countries until it receives the requisite approval from such countries. To date, we have only completed Phase 1/2A clinical trials for certain applications of PDS0101. As a result, we have not submitted a BLA to the FDA or comparable applications to other regulatory authorities and do not expect to be in a position to do so for the foreseeable future. Obtaining approval of a BLA is an extensive, lengthy, expensive and inherently uncertain process, and the FDA may delay, limit or deny approval of PDS0101 for many reasons, including:
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we may not be able to demonstrate that PDS0101 is safe and effective to the satisfaction of the FDA;
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the FDA may not agree that the completed Phase 2 clinical trials of PDS0101 satisfy the FDA’s requirements and may require us to conduct additional testing;
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the results of our future clinical trials may not meet the level of statistical or clinical significance required by the FDA for marketing approval;
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the FDA may disagree with the number, design, size, conduct or implementation of one or more of our clinical trials;
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the contract research organizations, or CROs, that we retain to conduct clinical trials may take actions outside of our control that materially and adversely impact our clinical trials;
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the FDA may not find the data from our preclinical studies and clinical trials sufficient to demonstrate that the clinical and other benefits of PDS0101 outweigh the safety risks;
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the FDA may disagree with our interpretation of data from our preclinical studies and clinical trials;
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the FDA may not accept data generated at our clinical trial sites;
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if our BLA 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 preclinical studies or clinical trials, limitations on approved labeling or distribution and use restrictions;
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the FDA may require development of a risk evaluation and mitigation strategy, or REMS, as a condition of approval;
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the FDA may identify deficiencies in our manufacturing processes or facilities; or
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the FDA may change its approval policies or adopt new regulations.
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We will require additional capital to fund our operations, and if we fail to obtain necessary financing, we may not be able to complete the development and commercialization of our Versamune and Infectimune based products.
We expect to spend substantial amounts to complete the development of, seek regulatory approvals for and commercialize PDS0101. Even with our current cash reserves, we will require substantial additional capital to complete the development and potential commercialization of PDS0101 and the development of other Versamune and Infectimune based products. If we are unable to raise capital or find appropriate partnering or licensing collaborations or other nondilutive financing, when needed or on acceptable terms, if at all, we could be forced to delay, reduce or eliminate one or more of our development programs or any future commercialization efforts. In addition, attempting to secure additional financing may divert the time and attention of our management from day-to-day activities and harm our development efforts.
Based upon our current operating plan, we believe that our cash reserves will be sufficient to fund our operating expenses and capital expenditure requirements for at least the next 24 months from the date of this report. Our estimate as to what we will be able to accomplish is based on assumptions that may prove to be inaccurate, and we could exhaust our available capital resources sooner than is currently expected. Because the length of time and activities associated with successful development of PDS0101 is highly uncertain, we are unable to estimate the actual funds we will require for development and any approved marketing and commercialization activities. Our future funding requirements, both near and long-term, will depend on many factors, including, but not limited to:
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the initiation, progress, timing, costs and results of our planned clinical trials;
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the outcome, timing and cost of meeting regulatory requirements established by the FDA and other comparable foreign regulatory authorities;
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the cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights;
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the cost of defending potential intellectual property disputes, including any patent infringement actions brought by third parties against us now or in the future;
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the effect of competing technological and market developments;
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the cost of establishing sales, marketing and distribution capabilities in regions where we choose to commercialize PDS0101 on our own; and
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the initiation, progress, timing and results of the commercialization of PDS0101, if approved, for commercial sale.
Additional funding may not be available on acceptable terms, or at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization of PDS0101 or potentially discontinue operations. In July 2019, we entered into a common stock purchase agreement, or the Aspire Purchase Agreement, with Aspire Capital, which provides that, upon the terms and subject to the conditions and limitations set forth therein, at our discretion, Aspire Capital is committed to purchase up to an aggregate of $20.0 million of shares of our common stock, or the Purchased Shares, over the 30-month term of the Aspire Purchase Agreement. We may sell an aggregate of 1,034,979 shares of our common stock (which represented 19.99% of the Company’s outstanding shares of common stock on the date of the Aspire Purchase Agreement) without stockholder approval. We may sell additional shares of our common stock above the 19.99% limit provided that (i) we obtain stockholder approval or (ii) stockholder approval has not been obtained at any time the 1,034,979 share limitation is reached and at all times thereafter the average price paid for all shares issued under the Aspire Purchase Agreement, is equal to or greater than $5.76, which was the consolidated closing bid price of our common stock on July 26, 2019. On July 29, 2019, we issued 100,654 shares of our common stock to Aspire Capital, as consideration for entering into the Aspire Purchase Agreement, which we refer to as the Commitment Shares. As of December 31, 2021, no Purchase Shares have been sold to Aspire Capital under the Aspire Purchase Agreement. The Aspire Purchase Agreement expired in January 2022 and we have no plans to raise capital under the Aspire Purchase Agreement.
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Raising additional funds by issuing securities may cause dilution to existing stockholders and raising funds through lending and licensing arrangements may restrict our operations or require us to relinquish proprietary rights.
We expect that significant additional capital will be needed in the future to continue our planned operations. Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, strategic alliances and license and development agreements in connection with any collaborations. In February 2020, we completed an underwritten public offering, in which we sold 10,000,000 shares of common stock at a public offering price of $1.30 per share. The shares sold included 769,230 shares issued upon the exercise by the underwriter of its option to purchase additional shares at the public offering price. We received gross proceeds of approximately $13 million and net proceeds of approximately $11.9 million after deducting underwriting discounts and commissions. In July 2020, we filed a shelf registration statement, or the 2020 Shelf Registration Statement, with the SEC, for the issuance of common stock, preferred stock, warrants, rights, debt securities and units, which we refer to collectively as the Shelf Securities, up to an aggregate amount of $100 million. The 2020 Shelf Registration Statement was declared effective on July 31, 2020. On August 13, 2020, we sold 6,900,000 shares of its common stock at a public offering price of $2.75 per share pursuant to the 2020 Shelf Registration Statement, which includes 900,000 shares issued upon the exercise by the underwriter of its option to purchase additional shares at the public offering price, minus underwriting discounts and commissions. We received gross proceeds of approximately $19.0 million and net proceeds of approximately $17.1 million, after deducting underwriting discounts and offering expenses. In June 2021, we completed an underwritten public offering in which we sold 6,088,235 shares of common stock at a public offering price of $8.50 per share pursuant to the 2020 Shelf Registration Statement, which includes 794,117 shares issued upon the exercise by the underwriter of its option to purchase additional shares at the public offering price, minus underwriting discounts and commissions. We received gross proceeds of approximately $51.7 million and net proceeds of approximately $48.5 million, after deducting underwriting discounts and offering expenses. Approximately $29,300,000 of Shelf Securities remain available for future sale under the 2020 Shelf Registration Statement.
To the extent that we raise additional capital by issuing equity securities, our existing stockholders’ ownership may experience substantial dilution, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, declaring dividends, creating liens, redeeming our stock or making investments.
If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or Versamune Products or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, or through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties on acceptable terms, we may be required to delay, limit, reduce or terminate our PDS0101 development or future commercialization efforts or grant rights to develop and market other Versamune and Infectimune products that we would otherwise develop and market.
Our future success depends on our ability to retain executive officers and attract, retain and motivate qualified personnel.
We are highly dependent on our executive officers and the other principal members of the executive and scientific teams, particularly our President and Chief Executive Officer, Dr. Frank K. Bedu-Addo, our Chief Medical Officer, Dr. Lauren Wood, our Chief Financial Officer, Mr. Matthew Hill and our Chief Scientific Officer, Dr. Gregory L. Conn. The loss of the services of any of our senior executive officers could impede the achievement of our research, development and commercialization objectives. We do not maintain “key person” insurance for any executive officer or employee.
Recruiting and retaining qualified scientific, clinical, and operational personnel is also critical to our success. We may not be able to attract and retain these personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. we also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. Our industry has experienced an increasing rate of turnover of management and scientific personnel in recent years. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in devising our research and development and commercialization strategy. Our consultants and advisors may be employed by third parties and have commitments under consulting or advisory contracts with other entities that may limit their availability to advance our strategic objectives. If any of these advisors or consultants can no longer dedicate a sufficient amount of time to the company, our business may be harmed
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If we fail to obtain or maintain adequate coverage and reimbursement for PDS0101, our ability to generate revenue could be limited.
The availability and extent of reimbursement by governmental and private payors is essential for most patients to be able to afford expensive treatments. Sales of any of PDS0101 that receive marketing approval will depend substantially, both in the United States and internationally, on the extent to which the costs of PDS0101 will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or reimbursed by government health administration authorities, private health coverage insurers and other third-party payors. If reimbursement is not available, or is available only on a limited basis, we may not be able to successfully commercialize PDS0101. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain adequate pricing that will allow it to realize a sufficient return on our investment.
Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe, Canada and other countries may cause us to price PDS0101 on less favorable terms than we currently anticipate. In many countries, particularly the countries of the European Union, the prices of medical products are subject to varying price control mechanisms as part of national health systems. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of PDS0101 to other available therapies. In general, the prices of products under such systems are substantially lower than in the United States. Other countries allow companies to fix their own prices for products, but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for PDS0101. Accordingly, in markets outside the United States, the reimbursement for our products may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenues and profits.
Moreover, increasing efforts by governmental and third-party payors, in the United States and internationally, to cap or reduce healthcare costs may cause such organizations to limit both coverage and level of reimbursement for newly approved products and, as a result, they may not cover or provide adequate payment for PDS0101. We expect to experience pricing pressures in connection with the sale of PDS0101 due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products into the healthcare market.
We are unable to predict the future course of federal or state healthcare legislation in the United States directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. The ACA and any further changes in the law or regulatory framework that reduce our revenue or increase our costs could also have a material and adverse effect on our business, financial condition and results of operations.
We will need to expand our organization, and may experience difficulties in managing this growth, which could disrupt operations.
Our future financial performance and our ability to commercialize PDS0101 and compete effectively will depend, in part, on our ability to effectively manage any future growth. As of December 31, 2021, we had 22 employees and 2 consultants. We expect to hire additional employees for our managerial, clinical, scientific and engineering, operational, manufacturing, sales and marketing teams. We may have operational difficulties in connection with identifying, hiring and integrating new personnel. Future growth would impose significant additional responsibilities on our management, including the need to identify, recruit, maintain, motivate and integrate additional employees, consultants and contractors. Also, our management may need to divert a disproportionate amount of our attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities. We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Our expected growth could require significant capital expenditures and may divert financial resources from other projects, such as the development of PDS0101. If we are unable to effectively manage our growth, our expenses may increase more than expected, our ability to generate and/or grow revenues could be reduced, and we may not be able to implement our business strategy.
Many of the other pharmaceutical companies that we compete against for qualified personnel and consultants have greater financial and other resources, different risk profiles and a longer history in the industry than us. They also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high-quality candidates and consultants than what it has to offer. If we are unable to continue to attract and retain high-quality personnel and consultants, the rate and success at which we can select and develop PDS0101 and our business will be limited.
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Our employees, independent contractors, principal investigators, consultants, commercial collaborators, service providers and other vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have an adverse effect on our results of operations.
We are exposed to the risk that our employees and contractors, including principal investigators, consultants, commercial collaborators, service providers and other vendors may engage in fraudulent or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or other unauthorized activities that violate the laws and regulations of the FDA and other similar regulatory bodies, including those laws that require the reporting of true, complete and accurate information to such regulatory bodies, manufacturing standards, federal and state healthcare fraud and abuse and health regulatory laws and other similar foreign fraudulent misconduct laws, or laws that require the true, complete and accurate reporting of financial information or data. Misconduct by these parties may also involve the improper use or misrepresentation of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter third-party misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. 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 financial results, including the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
Our business and operations would suffer, and could be negatively affected, in the event of system failures or cyberattacks
Our computer systems and those of our service providers, including our CROs, are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. If such an event were to occur and cause interruptions in our or their operations, it could result in a material disruption of our development programs. For example, the loss of preclinical or 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. To the extent that any disruption or security breach were to result in a loss of or damage to data or applications, or inappropriate disclosure of personal, confidential or proprietary information, we could incur liability and the further development of PDS0101 could be delayed.
A cyberattack or similar incident could occur and result in information theft, data corruption, operational disruption, damage to our reputation or financial loss. Our industry has become increasingly dependent on digital technologies to conduct certain development and financial activities. Our technologies, systems, networks, or other proprietary information, and those of our vendors, suppliers and other business partners, may become the target of cyberattacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of proprietary and other information, or could otherwise lead to the disruption of our business operations. Cyberattacks are becoming more sophisticated and certain cyber incidents, such as surveillance, may remain undetected for an extended period and could lead to disruptions in critical systems or the unauthorized release of confidential or otherwise protected information. These events could lead to financial loss from remedial actions, loss of business, disruption of operations, damage to our reputation or potential liability. Our systems and insurance coverage for protecting against cybersecurity risks may not be sufficient. Further, as cyberattacks continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any vulnerability to cyberattacks.
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Our failure to comply with international data protection laws and regulations could lead to government enforcement actions and significant penalties against us, and adversely impact our operating results.
EU member states and other foreign jurisdictions, including Switzerland, have adopted data protection laws and regulations which impose significant compliance obligations. Moreover, the collection and use of personal health data in the EU, which was formerly governed by the provisions of the EU Data Protection Directive, was replaced with the EU General Data Protection Regulation, or the GDPR, in May 2018. The GDPR, which is wide-ranging in scope, imposes several requirements relating to the consent of the individuals to whom the personal data relates, the information provided to the individuals, the security and confidentiality of the personal data, data breach notification and the use of third-party processors in connection with the processing of personal data. The GDPR also imposes strict rules on the transfer of personal data out of the EU to the U.S., provides an enforcement authority and imposes large penalties for noncompliance, including the potential for fines of up to €20 million or 4% of the annual global revenues of the noncompliant company, whichever is greater. The GDPR requirements apply not only to third-party transactions, but also to transfers of information between us and our subsidiary, including employee information. The recent implementation of the GDPR has increased our responsibility and liability in relation to personal data that we process, including in clinical trials, and we may in the future be required to put in place additional mechanisms to ensure compliance with the GDPR, which could divert management’s attention and increase our cost of doing business. In addition, new regulation or legislative actions regarding data privacy and security (together with applicable industry standards) may increase our costs of doing business. In this regard, we expect that there will continue to be new proposed laws, regulations and industry standards relating to privacy and data protection in the United States, the EU and other jurisdictions, and we cannot determine the impact such future laws, regulations and standards may have on our business.
Our failure to comply with state and/or national data protection laws and regulations could lead to government enforcement actions and significant penalties against us, and adversely impact our operating results.
There are numerous other laws and legislative and regulatory initiatives at the federal and state levels addressing privacy and security concerns, and some state privacy laws apply more broadly than the Health Insurance Portability and Accountability Act, or HIPAA, and associated regulations. For example, California recently enacted legislation - the California Consumer Privacy Act, or CCPA - which went into effect January 1, 2020. The CCPA, among other things, creates new data privacy obligations for covered companies and provides new privacy rights to California residents, including the right to opt out of certain disclosures of their information. The CCPA also creates a private right of action with statutory damages for certain data breaches, thereby potentially increasing risks associated with a data breach. The CCPA was recently amended by the California Privacy Rights Act, or CPRA, expanding certain consumer rights such as the right to know. It remains unclear what, if any, additional modifications will be made to these laws by the California legislature or how these laws will be interpreted and enforced. The potential effects of the CCPA and CPRA and implementing regulations are significant and may cause us to incur substantial costs and expenses to comply.
If we fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately report our financial condition, results of operations or cash flows, which may adversely affect investor confidence in us and, as a result, the value of our common stock. Further, we continue to incur significant increased costs as a result of operating as a public company, and our management is required to devote substantial time to compliance initiatives.
As a public company, we continue to incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC and Nasdaq, impose various requirements on public companies, including requiring establishment and maintenance of effective disclosure controls and internal control over financial reporting and changes in corporate governance practices. Our management and other personnel devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have increased our legal and financial compliance costs and have made some activities more time-consuming and costly.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act, may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting once that firm begins its Section 404 reviews or becomes aware of either during the conduct of an audit, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by the Nasdaq Capital Market, the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.
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Periodic reporting requirements under the Exchange Act and compliance with the Sarbanes-Oxley Act of 2002, including establishing and maintaining acceptable internal control over financial reporting, are costly and may increase substantially and, as a smaller reporting company, we may take advantage of reduced reporting requirements which may make our common stock less attractive to investors.
We are subject to the periodic reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Our disclosure controls and procedures are designed to reasonably assure that information required to be disclosed by us in reports we file or submit under the Exchange Act is accumulated and communicated to management, recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Our management and other personnel devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have increased our legal and financial compliance costs and will make some activities more time-consuming and costly.
In addition, the Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In particular, Section 404 of the Sarbanes-Oxley Act will require us to perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on, and our independent registered public accounting firm to attest to, the effectiveness of our internal control over financial reporting. We are currently a “smaller reporting company,” but we will cease to be a smaller reporting company if we have a non-affiliate public float in excess of $250 million and annual revenues in excess of $100 million, or a non-affiliate public float in excess of $700 million, determined on an annual basis. As a smaller reporting company, we could take advantage of certain reduced governance and disclosure requirements, including not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting. As a result, investors and others may be less comfortable with the effectiveness of our internal controls and the risk that material weaknesses or other deficiencies in internal controls go undetected may increase. In addition, as a smaller reporting company, we take advantage of our ability to provide certain other less comprehensive disclosures in our SEC filings, including, among other things, providing only two
years of audited financial statements in annual reports and simplified executive compensation disclosures. Consequently, it may be more challenging for investors to analyze our results of operations and financial prospects, as the information we provide to stockholders may be different from what one might receive from other public companies.
Risks Related to Clinical Development, Regulatory Approval and Commercialization
Clinical trials are very expensive, time-consuming, difficult to design and implement and involve an uncertain outcome, and if they fail to demonstrate safety and efficacy to the satisfaction of the FDA, or similar regulatory authorities, we will be unable to commercialize PDS0101 and other Versamune and Infectimune-based products.
PDS0101 is still in early-stage clinical development and will require extensive additional clinical testing before we are prepared to submit a BLA for regulatory approval for any indication or for any other treatment regime. We cannot predict with any certainty if or when it might submit a BLA for regulatory approval for PDS0101 and other Versamune based products or whether any such BLAs will be approved by the FDA. Human clinical trials are very expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. For instance, the FDA may not agree with our proposed endpoints for any clinical trial we propose, which may delay the commencement of our clinical trials. The clinical trial process is also time-consuming. We estimate that the clinical trials we need to conduct to be in a position to submit BLAs for PDS0101 will take several years to complete. We cannot predict the timeline for review of submissions to any regulatory authorities or when any of our product candidates will receive marketing approval, if at all. The timeline for regulatory approval can be affected by a variety of factors, including disruptive effects of the COVID-19 pandemic, budget and funding levels, agency staffing, and statutory, regulatory and policy changes.
Furthermore, failure can occur at any stage of the trials, and we could encounter problems that cause us to abandon or repeat clinical trials. In later stages of clinical trials, PDS0101 may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials, and the results of current clinical trials of PDS0101 therefore may not be predictive of the results of our continued or planned Phase 2 and 3 trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier stages of clinical trials.
Moreover, preclinical and clinical data are often susceptible to multiple interpretations and analyses. Many companies that have believed their immunotherapies performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products. Success in preclinical testing and early clinical trials does not ensure that later clinical trials, which involve many more subjects and different indications than we have studied in Phase 2 clinical trials to date, and the results of later clinical trials may not replicate the results of prior clinical trials and preclinical testing.
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We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize PDS0101 and other Versamune based products, including that:
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regulators or institutional review boards may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;
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we may have delays in reaching or fail to reach agreement on acceptable clinical trial contracts with prospective trial sites, or they may be unwilling to conduct studies based on out protocols;
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clinical trials of PDS0101 may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon product development programs;
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the number of subjects required for clinical trials of PDS0101 and other Versamune based products may be larger than we anticipate; enrollment in these clinical trials may be slower than we anticipate, or participants may drop out of these clinical trials at a higher rate than we anticipate;
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Our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;
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regulators or institutional review boards may require that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks;
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the cost of clinical trials of PDS0101 and other Versamune based products may be greater than we anticipate; and
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the supply or quality of PDS0101 or other materials necessary to conduct clinical trials of PDS0101 and other Versamune based products may be insufficient or inadequate.
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If we are required to conduct additional clinical trials or other testing of PDS0101 beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of PDS0101 or other testing, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may:
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be delayed in obtaining marketing approval for PDS0101;
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not obtain marketing approval at all;
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obtain approval for indications or patient populations that are not as broad as intended or desired;
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obtain approval with labeling that includes significant use or distribution restrictions or safety warnings, including boxed warnings;
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be subject to additional post-marketing testing requirements; or
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have the product removed from the market after obtaining marketing approval.
Product development costs will also increase if we experience delays in testing or in receiving marketing approvals. We do not know whether any clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize PDS0101, could allow our competitors to bring products to market before we do, and could impair our ability to successfully commercialize PDS0101, any of which may harm our business and results of operations.
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Enrollment and retention of subjects in clinical trials is an expensive and time-consuming process and could be made more difficult or rendered impossible by multiple factors outside our control.
We may encounter delays in enrolling, or be unable to enroll, a sufficient number of participants to complete any of our clinical trials. Once enrolled, we may be unable to retain a sufficient number of participants to complete any of our trials. Late-stage clinical trials of PDS0101 may require the enrollment and retention of large numbers of subjects. Subject enrollment and retention in clinical trials depends on many factors, including the size of the subject population, the nature of the trial protocol, the existing body of safety and efficacy data with respect to the study drug, the number and nature of competing treatments and ongoing clinical trials of competing drugs for the same indication, the proximity of subjects to clinical sites and the eligibility criteria for the study. Moreover, the current pandemic is negatively impacting enrollment in many oncology clinical trials.
Furthermore, any negative results we may report in clinical trials of PDS0101 may make it difficult or impossible to recruit and retain participants in other clinical trials of PDS0101. Delays or failures in planned subject enrollment or retention may result in increased costs, program delays or both, which could have a harmful effect on our ability to develop PDS0101, or could render further development impractical. In addition, we expect to rely on CROs and clinical trial sites to ensure proper and timely conduct of our future clinical trials and, while we intend to enter into agreements governing their services, we will be limited in our ability to compel their actual performance in compliance with applicable regulations. Enforcement actions brought against these third parties may cause further delays and expenses related to our clinical development programs.
The successful development of immunotherapies is highly uncertain.
Successful development of immunotherapies is highly uncertain and is dependent on numerous factors, many of which are beyond our control. Immunotherapies that appear promising in the early phases of development may fail to reach, or be delayed in reaching, the market for several reasons including: preclinical study results that may show the immunotherapy to be less effective than desired (e.g., the study failed to meet its primary objectives) or to have harmful or problematic side effects; clinical study results that may show the immunotherapy to be less effective than expected (e.g., the study failed to meet its primary endpoint) or to have unacceptable side effects; failure to receive the necessary regulatory approvals or a delay in receiving such approvals. Among other things, such delays may be caused by slow enrollment in clinical studies, length of time to achieve study endpoints, delays in receiving the necessary products or supplies for the conduct of clinical or preclinical trials, additional time requirements for data analysis, or Biologics License Application preparation, discussions with the FDA, an FDA request for additional preclinical or clinical data, FDA delays in inspecting manufacturing establishments, failure to receive FDA approval for manufacturing processes or facilities, or unexpected safety or manufacturing issues; manufacturing costs, formulation issues, pricing or reimbursement issues, or other factors that make the immunotherapy uneconomical; and the proprietary rights of others and their competing products and technologies that may prevent the immunotherapy from being commercialized. Success in preclinical and early and interim clinical studies does not ensure that large-scale clinical studies will be successful. Clinical results are frequently susceptible to varying interpretations that may delay, limit or prevent regulatory approvals. The length of time necessary to complete clinical studies and to submit an application for marketing approval for a final decision by a regulatory authority varies significantly from one immunotherapy to the next and may be difficult to predict. Even if our product candidates are approved, they may be subject to limitations on the indicated uses and populations for which they may be marketed. They may also be subject to other conditions of approval, may contain significant safety warnings, including boxed warnings, contraindications, and precautions, may not be approved with label statements necessary or desirable for successful commercialization, or may contain requirements for costly post-market testing and surveillance, or other requirements, including the submission of a REMS, to monitor the safety or efficacy of the products. If we do not receive FDA approval for, and successfully commercialize our product candidates, we will not be able to generate revenue from these product candidates in the United States in the foreseeable future, or at all. Any significant delays in obtaining approval for and commercializing our product candidates will have a material adverse impact on our business and financial condition.
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We face significant competition from other biotechnology and pharmaceutical companies, and our operating results will suffer if we fail to compete effectively.
The biotechnology and biopharmaceutical industries are characterized by rapid technological developments and a high degree of competition. As a result, PDS0101 or other Versamune and Infectimune-based products could become obsolete before we recoup any portion of our related research and development and commercialization expenses. Competition in the biopharmaceutical industry is based significantly on scientific and technological factors. These factors include the availability of patent and other protection for technology and products, the ability to commercialize technological developments and the ability to obtain governmental approval for testing, manufacturing and marketing. We compete with specialized biopharmaceutical firms in the United States, Europe and elsewhere, as well as a growing number of large pharmaceutical companies that are applying biotechnology to their operations. Many biopharmaceutical companies have focused their development efforts in the human therapeutics area, including cancer. Many major pharmaceutical companies have developed or acquired internal biotechnology capabilities or made commercial arrangements with other biopharmaceutical companies. These companies, as well as academic institutions and governmental agencies and private research organizations, also compete with us in recruiting and retaining highly qualified scientific personnel and consultants. Our ability to compete successfully with other companies in the pharmaceutical field will also depend to a considerable degree on the continuing availability of capital to us.
We are aware of certain investigational new drugs under development or approved products by competitors that are used for the prevention, diagnosis, or treatment of certain diseases we have targeted for drug development. Various companies are developing biopharmaceutical products that have the potential to directly compete with PDS0101 even though their approach to may be different. We believe our top clinical-stage competitors pursuing cancer immunotherapies and/or vaccines for infectious diseases include, but not limited to Jansen Pharmaceuticals (part of J&J), Sanofi-Aventis, GlaxoSmithKline plc, Merck and Pfizer, Inovio, Advaxis, Kite Pharma, Hookipa, Moderna, ZIOPHARM Oncology, Heat Biologics, Harpoon Therapeutics, Oncosec Medical, BioNTech, Osivax, Medicago, Vaxart, and Flugen. Many of these companies have substantially greater financial, marketing, and human resources than we do (including, in some cases, substantially greater experience in clinical testing, manufacturing, and marketing of pharmaceutical products). If one or more of these companies is successful in developing their technologies, it could materially impact our business. We also experience competition in the development of our immunotherapies from universities and other research institutions and competes with others in acquiring technology from such universities and institutions.
Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors may succeed in developing, acquiring or licensing, on an exclusive basis, drugs that are more effective or less costly than PDS0101 or our other Versamune and Infectimune-based products.
We will face competition from other drugs currently approved or that will be approved in the future for the treatment of the other cancers and infectious diseases we are currently targeting. Therefore, our ability to compete successfully will depend largely on our ability to:
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develop and commercialize immunotherapies that are superior to other alternatives in the market;
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demonstrate through our clinical trials that PDS0101 is differentiated from existing and future therapies;
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attract qualified scientific, immunotherapy development and commercial personnel;
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obtain additional patent or other proprietary protection for PDS0101 and other Versamune and Infectimune-based products;
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obtain required regulatory approvals;
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obtain coverage and adequate reimbursement from, and negotiate competitive pricing with, third-party payors; and
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successfully develop and commercialize, independently or with collaborators, new applications for PDS0101 or immunotherapies.
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The availability of our competitors’ immunotherapies and other treatments could limit the demand, and the price we are able to charge, for PDS0101. The inability to compete with existing or subsequently introduced immunotherapies and other treatments would have an adverse impact on our business, financial condition and prospects.
Established pharmaceutical companies may invest heavily to accelerate discovery and development of novel compounds or to license novel compounds that could make PDS0101 less competitive. In addition, any new immunotherapy that competes with an approved treatment must demonstrate compelling advantages in efficacy, convenience, tolerability and safety in order to overcome price competition and to be commercially successful. Accordingly, our competitors may succeed in obtaining patent protection, discovering, developing, receiving the FDA’s approval for or commercializing medicines before we do, which would have an adverse impact on our business and results of operations.
PDS0101 may cause adverse effects or have other properties that could delay or prevent its regulatory approval or limit the scope of any approved label or market acceptance.
Adverse events caused by PDS0101 could cause reviewing entities, clinical trial sites or regulatory authorities to interrupt, delay or halt clinical trials and could result in the denial of regulatory approval. If clinical trials for PDS0101 report an unacceptable frequency or severity of adverse events, our ability to obtain regulatory approval for PDS0101 may be negatively impacted.
Furthermore, if PDS0101 is approved and then causes serious or unexpected side effects, a number of potentially significant negative consequences could result, including:
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regulatory authorities may withdraw their approval of PDS0101 or impose restrictions on its distribution or other risk management measures;
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regulatory authorities may require the addition of labeling statements, such as warnings or contraindications;
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we may be required to change the way PDS0101 is administered or to conduct additional clinical trials;
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we could be sued and held liable for injuries sustained by patients;
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we could elect to discontinue the sale of PDS0101;
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our entire Versamune and Infectimune-based pipeline could be then put at risk; and
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our reputation may suffer.
Any of these events could prevent us from achieving or maintaining market acceptance of PDS0101 and could substantially increase the costs of commercialization.
If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we will not be able to commercialize, or will be delayed in commercializing, PDS0101, and our ability to generate revenue will be impaired.
PDS0101 and the activities associated with its development and commercialization, including its design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDA and other regulatory agencies in the United States and by comparable authorities in other countries. Failure to obtain marketing approval for PDS0101 will prevent us from commercializing PDS0101. We have not received approval to market PDS0101 from regulatory authorities in any jurisdiction. We have only limited experience in filing and supporting the applications necessary to gain marketing approvals and expect to rely on CROs to assist us in this process. Securing regulatory approval requires the submission of extensive preclinical and clinical data and supporting information to the various regulatory authorities for each therapeutic indication to establish the safety and efficacy of PDS0101. Securing regulatory approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the relevant regulatory authority. PDS0101 may not be effective, may be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude it from obtaining marketing approval or prevent or limit commercial use.
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The process of obtaining marketing approvals, both in the United States and elsewhere, is expensive, may take many years and can vary substantially based upon a variety of factors. We cannot assure you that we will ever obtain any marketing approvals in any jurisdiction. Changes in marketing approval policies during the development period, changes in or the enactment of additional statutes or regulations or changes in regulatory review for each submitted product application may cause delays in the approval or rejection of an application. The FDA and comparable authorities in other countries have substantial discretion in the approval process and may refuse to accept any application or may decide that our data is insufficient for approval and require additional preclinical or other studies, and clinical trials. In addition, varying interpretations of the data obtained from preclinical testing and clinical trials could delay, limit or prevent marketing approval of PDS0101. Additionally, any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.
We rely, and intend to continue to rely, on third parties to conduct our clinical trials and perform some of our research and preclinical studies. If these third parties do not satisfactorily carry out their contractual duties, fail to comply with applicable regulatory requirements or do not meet expected deadlines, our development programs may be delayed or subject to increased costs or we may be unable to obtain regulatory approval, each of which may have an adverse effect on our business, financial condition, results of operations and prospects.
There is no guarantee that any such CROs, clinical trial investigators or other third parties on which we rely will devote adequate time and resources to our development activities or perform as contractually required. If any of these third parties fail to meet expected deadlines, adhere to our clinical protocols or meet regulatory requirements, otherwise perform in a substandard manner, or terminate their engagements with us, the timelines for our development programs may be extended or delayed or our development activities may be suspended or terminated. If our clinical trial site terminates for any reason, we may experience the loss of follow-up information on subjects enrolled in such clinical trial unless we are able to transfer those subjects to another qualified clinical trial site, which may be difficult or impossible. In addition, certain of our scientific advisors or consultants who receive compensation from us are clinical trial investigators for our clinical trial. Although we believe our existing relationships are within the FDA’s guidelines, if these relationships and any related compensation result in perceived or actual conflicts of interest, or the FDA concludes that the financial relationship may have affected the interpretation of the trial, the integrity of the data generated at the applicable clinical trial site may be questioned and the utility of the clinical trial itself may be jeopardized, which could result in the delay or rejection of any marketing application we submit by the FDA. Any such delay or rejection could prevent us from commercializing PDS0101 or any other product candidates.
Even if we obtain FDA approval in the United States, we may never obtain approval for or commercialize PDS0101 in any other jurisdiction, which would limit our ability to realize each product’s full market potential.
In order to market PDS0101 in a particular jurisdiction, we must establish and comply with numerous and varying regulatory requirements on a country-by-country basis regarding safety and efficacy. Approval by the FDA in the United States does not ensure approval by regulatory authorities in other countries or jurisdictions.
In addition, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not guarantee regulatory approval in any other country. Approval processes vary among countries and can involve additional testing and validation and additional administrative review periods. Seeking foreign regulatory approval could result in difficulties and costs for us and require additional preclinical studies or clinical trials that could be costly and time consuming. Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of PDS0101 in those countries. PDS0101 is not approved for sale in any jurisdiction, including in international markets, and we do not have experience in obtaining regulatory approval in international markets. If we fail to comply with regulatory requirements in international markets or to obtain and maintain required approvals, or if regulatory approvals in international markets are delayed, our target market will be reduced.
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Interim, topline and preliminary data from our clinical trials that we announce or publish from time to time may change as more subject data become available and are subject to audit and verification procedures that could result in material changes in the final data.
From time to time, we may publicly disclose interim, topline or preliminary data from our sponsored or investigator initiated clinical trials, such as preliminary topline results which are based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a full analysis of all data related to the particular trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. In addition, we may report preliminary analyses of only certain endpoints rather than all endpoints. As a result, the interim, topline or preliminary results that we report may differ from future results of the same trials, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Topline data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, interim, topline and preliminary data should be viewed with caution until the final data are available. We may also disclose interim data from our clinical trials. 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 subject enrollment continues and more subject data become available. Adverse differences between interim, topline or preliminary data and final data could significantly harm our reputation and business prospects. Further, disclosure of interim, topline or preliminary data by us or by our competitors could result in volatility in the price of our common stock.
Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the potential of the particular program, the likelihood of marketing approval or commercialization of the particular drug candidate, any approved product, and our company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is derived from information that is typically extensive, and you or others may not agree with what we determine is material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding a particular program, drug candidate or our business.
If the interim, topline or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our drug candidates may be harmed, which could harm our business, operating results, prospects or financial condition.
Our product candidates are in various stages of development and we will not be able to commercialize our product candidates if our preclinical studies do not produce successful results and/or our clinical trials do not demonstrate the safety and efficacy of our product candidates; early results and early understanding of product candidate potential may not be predictive of later success.
Our oncology and infectious disease product candidates are susceptible to the risks of failure inherent at any stage of product development, including the occurrence of unexpected or unacceptable adverse events or the failure to demonstrate efficacy in clinical trials. Clinical development is expensive and can take many years to complete, and its outcome is inherently uncertain.
The results of preclinical studies, preliminary study results, and early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials. Our product candidates may not perform as we expect, may ultimately have a different or no impact than expected, may have a different mechanism of action than we initially understand or that we expect in humans, and may not ultimately prove to be safe and effective.
Preliminary and final results from preclinical studies and early-stage trials, and trials in compounds that we believe are similar to ours, may not be representative of results that are found in larger, controlled, blinded, and longer-term studies. Product candidates may fail at any stage of preclinical or clinical development. Product candidates may fail to show the desired safety and efficacy traits even if they have progressed through preclinical studies or initial clinical trials. Preclinical studies and clinical trials may also reveal unfavorable product candidate characteristics, including safety concerns. A number of companies in the biopharmaceutical industry have suffered significant setbacks in clinical trials, notwithstanding promising results in earlier preclinical studies or clinical trials or promising mechanisms of action. In some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same product candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of the patient populations, changes in and adherence to the clinical trial protocols and the rate of dropout among clinical trial participants. Moreover, should there be an issue with the design of a clinical trial, our results may be impacted. We may not discover such a flaw until the clinical trial is at an advanced stage.
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We may also experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our product candidates. There may be emerging new data or regulatory questions or disagreements regarding interpretations of data and results at any stage. For example, the FDA or comparable foreign regulatory authorities may disagree with our study design, including endpoints, or our interpretation of data from preclinical studies and clinical trials or find that a product candidate’s benefits do not outweigh its safety risks.
Even if we obtain regulatory approval, we will still face extensive ongoing regulatory requirements and PDS0101 and other candidates may face future development and regulatory difficulties.
Marketing of PDS0101, if approved, along with the manufacturing processes, post- approval clinical data, labeling, packaging, distribution, adverse event reporting, storage, recordkeeping, export, import, advertising and promotional activities for PDS0101, among other things, will be subject to extensive and ongoing requirements of and review by the FDA and other regulatory authorities. These requirements include submissions of safety, efficacy and other post-marketing information and reports, establishment registration and drug listing requirements, continued compliance with current Good Manufacturing Practice, or cGMP, requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping and current Good Clinical Practice, or cGCP requirements for any clinical trials that we conduct post-approval. Even if marketing approval of PDS0101 is granted, the approval may be subject to limitations on the indicated uses for which PDS0101 may be marketed or to the conditions of approval. If PDS0101 receives marketing approval, an accompanying label may limit the approved use of PDS0101, which could limit sales.
The FDA may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety and/or efficacy of PDS0101. The FDA closely regulates the post-approval marketing and promotion of drugs to ensure drugs are marketed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA imposes stringent restrictions on manufacturers’ communications regarding off-label use and if we promote or otherwise market PDS0101 for indications other than those for which it is approved, we may be subject to certain enforcement actions. Violations of the Federal Food, Drug, and Cosmetic Act relating to the promotion of prescription biopharmaceutical products may lead to FDA enforcement actions and investigations alleging violations of federal and state health care fraud and abuse laws, as well as state consumer protection laws.
In addition, later discovery of previously unknown adverse events or other problems with PDS0101, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may yield various results, including:
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restrictions on manufacturing PDS0101;
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restrictions on the labeling or marketing of PDS0101;
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restrictions on PDS0101 distribution or use;
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requirements to conduct post-marketing studies or clinical trials;
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warning letters;
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withdrawal of PDS0101 from the market;
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refusal to approve pending applications or supplements to approved applications that we submit;
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recalls of PDS0101;
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fines, restitution or disgorgement of profits or revenues;
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suspension or withdrawal of marketing approvals;
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refusal to permit the import or export of PDS0101;
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seizures of PDS0101; or
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injunctions or the imposition of civil or criminal penalties.
The FDA’s policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of PDS0101. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approvals or licenses that we may have obtained.
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Even if PDS0101 receives licensure, it may fail to achieve market acceptance by physicians, patients, third-party payors or others in the medical community necessary for commercial success.
If PDS0101 receives marketing approval, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community. If PDS0101 does not achieve an adequate level of acceptance, we may not generate significant revenues and become profitable. The degree of market acceptance, if approved for commercial sale, will depend on a number of factors, including but not limited to:
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the efficacy and potential advantages compared to alternative treatments;
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effectiveness of sales and marketing efforts;
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the cost of treatment in relation to alternative treatments;
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our ability to offer PDS0101 for sale at competitive prices;
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the convenience and ease of administration compared to alternative treatments;
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the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;
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the willingness of the medical community to offer customers PDS0101 in addition to or in the place of other immunotherapies;
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the strength of marketing and distribution support;
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the availability of third-party coverage and adequate reimbursement;
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the prevalence and severity of any side effects; and
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any restrictions on the use of PDS0101 together with other medications.
Because we expect sales of PDS0101, if approved, to generate substantially all of our revenues for the foreseeable future, the failure of PDS0101 to achieve market acceptance would harm our business and could require us to seek additional financing sooner than we otherwise plan.
We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.
Because we have limited financial and managerial resources, we are initially developing our lead product candidate, PDS0101 and the other Versamune and Infectimune-based products. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to timely capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products. 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 collaboration, 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.
If we fail to comply with federal and state healthcare regulatory laws, including in our relationships with healthcare providers and customers and third-party payors, we could face criminal prosecution and sanctions, substantial civil penalties, damages, fines, disgorgement, exclusion from participation in governmental healthcare programs, contractual damages, reputational harm, and the curtailment of our operations, any of which could harm our business.
Although we do not provide healthcare services or submit claims for third-party reimbursement, we are subject to healthcare fraud and abuse regulation and enforcement by federal and state governments, which could significantly impact our business, particularly if and when we commercialize any product candidates and if and when payment becomes available from payors for our products. Additionally, our future arrangements with third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute our medicines for which we obtain marketing approval. The laws that may affect our ability to operate include, but are not limited to:
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The Federal Anti-Kickback Statute (AKS), which prohibits, among other things, persons and entities from knowingly and willfully soliciting, receiving, offering, or paying remuneration, directly or indirectly, in cash or in kind, in exchange for or to induce 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 federal healthcare programs such as Medicare and Medicaid. The Affordable Care Act, among other things, amended the intent requirements of the federal AKS. A person or entity can now be found guilty of violating the AKS without actual knowledge of the statute or specific intent to violate it. In addition, the Affordable Care Act provides that a claim including items or services resulting from a violation of the federal AKS constitutes a false or fraudulent claim for purposes of the FCA.
The False Claims Act’s civil provisions, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid or other third-party payors that are false or fraudulent; knowingly making using, or causing to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the government; or knowingly making, using, or causing to be made or used, a false record or statement to avoid, decrease or conceal an obligation to pay money to the federal government. Intent to deceive is not required to establish liability under the civil False Claims Act.
The False Claims Act’s criminal provisions, which imposes criminal fines or imprisonment against individuals or entities who make or present a claim to the government knowing such claim to be false, fictitious or fraudulent.
The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended, prohibits, among other actions, executing or attempting to execute, a scheme to defraud or to 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, a healthcare benefit program, regardless of whether the payor is public or private, knowingly and willfully embezzling or stealing from a health care benefit program, willfully obstructing a criminal investigation of a health care offense, and knowingly and willfully falsifying, concealing, or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items, or services relating to healthcare matters.
HIPAA, as amended by the HITECH Act, and its respective implementing regulations, now makes HIPAA’s privacy and security standards directly applicable to business associates independent contractors or agents of covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity.
Section 5(a) of the Federal Trade Commission Act, or the FTCA, 15 USC § 45(a), given that even for entities that are not deemed “covered entities” or “business associates” under HIPAA, according to the United States Federal Trade Commission, or the FTC, failing to take appropriate steps to keep consumers’ personal information secure constitutes unfair acts or practices in or affecting commerce in violation of its laws. The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. Medical data is considered sensitive data that merits stronger safeguards. The FTC’s guidance for appropriately securing consumers’ personal information is similar to what is required by the HIPAA Security Rule.
The federal ”Sunshine” and “Open Payments” requirements under the Patient Protection and Affordable Care Act, as amended by the Health Care Education Reconciliation Act, or collectively, the Affordable Care Act, which require certain manufacturers of drugs, devices, biologics, and medical supplies to report annually to the U.S. Department of Health and Human Services information related to payments and other transfers of value to physicians, other healthcare providers, and teaching hospitals, and ownership and investment interests held by physicians and other healthcare providers and their immediate family members. Failure to submit timely, accurately, and completely the required information may result in civil monetary penalties of up to an aggregate of $150,000 per year and up to an aggregate of $1 million per year for “knowing failures.” In 2022 the Sunshine Act will be extended to payments and transfers of value to physician assistants, nurse practitioners, and other mid-level practitioners (with reporting requirements going into effect in 2022 for payments made in 2021). In addition, Section 6004 of the ACA requires annual reporting of information about drug samples that manufacturers and authorized distributors provide to healthcare providers.
State law equivalents of each of the above federal laws and state laws otherwise addressing the pharmaceutical and healthcare industries, such as anti-kickback and false claims laws that may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by any third-party payor, including commercial insurers, and in some cases that may apply regardless of payor, i.e., even if reimbursement is not available; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines (the PhRMA Code) and the relevant compliance program guidance promulgated by the federal government (HHS-OIG), or otherwise prohibit, restrict or impose tracking and disclosure requirements related to payments, gifts, or others remuneration that may be made to healthcare providers and other potential referral sources, or marketing practices to such persons and entities or drug pricing information; data privacy and security laws and regulations in foreign jurisdictions that may be more stringent than those in the United States (such as the European Union, which adopted the General Data Protection Regulation, which became effective in May 2018) and state laws governing the privacy and security of information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, and may apply more broadly than HIPAA, thus complicating compliance efforts.
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In our business, healthcare providers, physicians and third-party payors will play a primary role in the recommendation and prescription of our product candidates, if approved for marketing. Moreover, while we do not plan to submit claims and our customers will make the ultimate decision on how to submit claims, from time to time, we may provide reimbursement guidance to our customers. Current or future arrangements with physicians and other healthcare providers and customers, and third-party payors, may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute our medicines for which we obtain marketing approval. If a government authority were to conclude that we provided improper advice to our customers or encouraged the submission of false claims for reimbursement or failed to comply with government price reporting requirements, or engaged in off-label promotion of products, we could face action by government authorities. Any violations of these laws, or any action against us for violation of these laws, even if we successfully defend against it, could result in a material adverse effect on our reputation, business, results of operations and financial condition.
We have entered into consulting and employment arrangements with individuals, physicians and other healthcare providers. While we have worked to structure our arrangements to comply with applicable laws, because of the complex and far-reaching nature of these laws, regulatory agencies may view these transactions as prohibited arrangements that must be restructured, or discontinued, or for which we could be subject to other significant penalties. We could be adversely affected if regulatory agencies interpret our financial relationships with providers who serve as clinical investigators in our clinical trials, or influence the ordering of and use our products to be in violation of applicable laws.
The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations. Federal and state enforcement bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry.
Responding to investigations can be time- and resource-consuming and can divert management’s attention from the business. Additionally, as a result of these investigations, healthcare providers and entities may have to agree to additional onerous compliance and reporting requirements as part of a consent decree or corporate integrity agreement. Any such investigation or settlement could increase our costs or otherwise have an adverse effect on our business.
Product liability lawsuits against us could cause us to incur substantial liabilities and could limit the commercialization of PDS0101.
We face an inherent risk of product liability exposure related to the testing of PDS0101 in human clinical trials and will face an even greater risk if we commercially sell any products that we may develop after approval. Regardless of merit or eventual outcome, liability claims may result in:
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decreased demand for PDS0101 or other immunotherapies that we may develop;
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injury to our reputation and significant negative media attention;
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withdrawal of clinical trial participants;
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significant costs to defend any related litigation;
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substantial monetary awards to trial subjects or patients;
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loss of revenue; and
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the inability to commercialize any products we may develop.
Although we maintain product liability insurance coverage in the amount of up to $10 million per claim and $10 million in the aggregate, it may not be adequate to cover all liabilities that it may incur. We anticipate that we will need to increase our insurance coverage as we continue clinical trials and if we successfully commercialize any products. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.
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If we are unable to establish sales, marketing and distribution capabilities either on our own or in collaboration with third parties, we may not be successful in commercializing PDS0101, if approved.
We do not have any infrastructure for the sales, marketing or distribution of PDS0101, and the cost of establishing and maintaining such an organization may exceed the cost-effectiveness of doing so. In order to market PDS0101, we must build our sales, distribution, marketing, managerial and other non-technical capabilities or make arrangements with third parties to perform these services. To achieve commercial success for PDS0101, we will need either our own, or a third party’s, sales and marketing organization. There are significant expenses and risks involved with creating teams for, or contracting for, sales, marketing and distribution capabilities. Any failure or delay in the development of our sales, marketing and distribution capabilities, either internally or in collaboration with third parties, could delay the launch of PDS0101, which would adversely affect commercialization.
We may be competing with many companies that currently have extensive and well-funded marketing and sales operations. Without an internal team or the support of a third-party to perform marketing and sales functions, we may be unable to compete successfully against these more established companies.
If we obtain approval to commercialize PDS0101 outside of the United States, a variety of risks associated with international operations could harm our business.
If PDS0101 is approved for commercialization, we may enter into agreements with third parties to market them in certain jurisdictions outside the United States. We expect that we will be subject to additional risks related to international operations or entering into international business relationships, including:
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different regulatory requirements for drug approvals and rules governing drug commercialization in foreign countries;
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reduced protection for intellectual property rights;
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unexpected changes in tariffs, trade barriers and regulatory requirements;
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economic weakness, including inflation, or political instability in particular foreign economies and markets;
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compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;
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foreign reimbursement, pricing and insurance regimes;
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foreign taxes;
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foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country;
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workforce uncertainty in countries where labor unrest is more common than in the United States;
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potential noncompliance with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act 2010 and similar anti-bribery and anticorruption laws in other jurisdictions;
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shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and
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business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods and fires.
We have no prior experience in these areas. In addition, there are complex regulatory, tax, labor and other legal requirements imposed by both the European Union and many of the individual countries in Europe with which we will need to comply.
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Recently enacted and future healthcare legislation, regulations, and policy initiatives may increase the difficulty and cost for us to obtain marketing approval of and commercialize PDS0101 and affect the prices we may obtain and our profitability.
In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could, among other things, prevent or delay marketing approval of PDS0101, restrict or regulate post-approval activities and affect our ability to profitably sell PDS0101.
For example, in March 2010, the Affordable Care Act, or ACA, was enacted to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for health care and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. Since its enactment, there have been judicial, executive and Congressional challenges to certain aspects of the ACA. On June 17, 2021, the U.S. Supreme Court dismissed the most recent judicial challenge to ACA brought by several states without specifically ruling on the constitutionality of the Act. Prior to the Supreme Court’s decision, President Biden issued an executive order to initiate a special enrollment period from February 15, 2021 through August 15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is unclear how other healthcare reform measures of the Biden administration or other efforts, if any, to challenge, repeal or replace the ACA will impact health care laws and regulations or our business.
As another example, the Drug Supply Chain Security Act imposes obligations on manufacturers of prescription biopharmaceuticals in finished dosage forms for commercial distribution. We have not yet adopted the significant measures that will be required to comply with this law. We are not sure whether additional legislative changes will be enacted, or whether the current regulations, guidance or interpretations will be changed, or what the impact of such changes on our business, if any, may be.
We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for immunotherapies, which could result in reduced demand for PDS0101 or additional pricing pressures.
Risks Related to Our Dependence on Third Parties
We have no manufacturing, sales, marketing or distribution capability and we must rely upon third parties for such.
We currently have agreements with various third-party manufacturing facilities for production of our products for research and development and testing purposes. We depend on third-party manufacturers to supply our preclinical and clinical materials and will be reliant on a third-party manufacturer to produce PDS0101 on a commercial scale, should that product receive regulatory approval. Third-party manufacturers must be able to meet our deadlines and adhere to quality standards and specifications. Our predominant reliance on third parties for the manufacture of PDS0101 and all of our Versamune and Infectimune-based products creates a dependency that could severely disrupt our research and development, clinical testing, and sales and marketing efforts if the source of such supply proves to be unreliable or unavailable. There is no assurance that any third-party manufacturers will be able to meet commercialized scale production requirements in a timely manner or in accordance with applicable standards or cGMP.
We intend to rely on third parties to conduct, supervise and monitor our clinical trials, and if those third parties perform in an unsatisfactory manner, it may harm our business.
We intend to rely on CROs and clinical trial sites to ensure the proper and timely conduct of our clinical trials, and we expect to have limited influence over their actual performance.
We intend to rely upon CROs to monitor and manage data for our clinical programs. We expect to control only certain aspects of our CROs’ activities. Nevertheless, we will be responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards and our reliance on the CROs does not relieve us of our regulatory responsibilities.
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We and our CROs will be required to comply with the Good Laboratory Practices and GCPs, which are regulations and guidelines enforced by the FDA and are also required by the Competent Authorities of the Member States of the European Economic Area and comparable foreign regulatory authorities in the form of International Conference on Harmonization guidelines for our products. The Regulatory authorities enforce GCPs through periodic inspections of trial sponsors, principal investigators and clinical trial sites. If we or our CROs fail to comply with GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. Accordingly, if our CROs fail to comply with these regulations or fail to recruit a sufficient number of subjects, we may be required to repeat clinical trials, which would delay the regulatory approval process.
Our CROs will not be our employees, and we will not control whether or not they devote sufficient time and resources to our future clinical and nonclinical programs. These CROs may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials, or other drug development activities which could harm our competitive position. We face the risk of potential unauthorized disclosure or misappropriation of our intellectual property by CROs, which may reduce our trade secret protection and allow our potential competitors to access and exploit our proprietary technology. If our CROs do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for any 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 PDS0101. As a result, our financial results and the commercial prospects for PDS0101 would be harmed, our costs could increase, and our ability to generate revenues could be delayed.
If our relationship with these CROs terminate, we may not be able to enter into arrangements with alternative CROs or do so on commercially reasonable terms. Switching or adding additional CROs involves substantial cost and requires management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines. Though we intend to carefully manage our relationships with our CROs, there can be no assurance that we will not encounter challenges or delays in the future or that these delays or challenges will not have an adverse impact on our business, financial condition and prospects.
If we are unable to establish or manage strategic collaborations in the future, our revenue and drug development may be limited.
Our strategy may include potential reliance upon strategic collaborations for marketing and commercialization of PDS0101 and other Versamune and Infectimune Products. We also rely on strategic collaborations for research, development, marketing and commercialization for PDS0101 and other Versamune Products. We have also been heavily reliant upon third party outsourcing for our clinical trials execution and production of drug supplies for use in clinical trials.
Establishing strategic collaborations is difficult and time-consuming. Our discussions with potential collaborators may not lead to the establishment of collaborations on favorable terms, if at all. We face significant competition in seeking appropriate collaborators. Whether we reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA or similar regulatory authorities outside the United States, the potential market for PDS0101 and other Versamune Products, the costs and complexities of manufacturing and delivering PDS0101 and other Versamune Products to patients, the potential of competing products, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge and industry and market conditions generally. The collaborator may also consider alternative immunotherapies for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with us for PDS0101 and other Versamune Products.
Our current collaborations, as well as any future new collaborations, may never result in the successful development or commercialization of PDS0101 and other Versamune and Infectimune Products or the generation of sales revenue. To the extent that we have entered or will enter into co-promotion or other collaborative arrangements, PDS0101 and other Versamune Products revenues are likely to be lower than if we directly marketed and sold any products that we develop.
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Management of our relationships with our collaborators will require:
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significant time and effort from our management team;
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financial funding to support said collaboration;
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coordination of our research and development programs with the research and development priorities of our collaborators; and
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effective allocation of our resources to multiple projects.
If we continue to enter into research and development collaborations, our success will in part depend on the performance of our collaborators. We will not directly control the amount or timing of resources devoted by our collaborators to activities related to PDS0101 and other Versamune Products. Our collaborators may not commit sufficient resources to our research and development programs or the commercialization, marketing or distribution of PDS0101 and other Versamune Products. If any collaborator fails to commit sufficient resources, our preclinical or clinical development programs related to this collaboration could be delayed or terminated. Also, our collaborators may pursue existing or other development-stage products or alternative technologies in preference to those being developed in collaboration with us. If we fail to make required milestone or royalty payments to our collaborators or to observe other obligations in our agreements with them, our collaborators may have the right to terminate those agreements. Additionally, our collaborators may seek to renegotiate agreements we have entered into, or may disagree with us about the terms and implementation of these agreements. If collaborators disagree with us about the terms or implementation of our agreements, we may face legal claims that may involve considerable expense and could negatively affect our financial results.
The failure of third parties to meet their contractual, regulatory, and other obligations could adversely affect our business.
We rely on suppliers, vendors, outsourcing partners, consultants, alliance partners and other third parties to research, develop, manufacture and commercialize our products and manage certain parts of our business. Using these third parties poses a number of risks, such as:
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they may not perform to our standards or legal requirements;
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they may not produce reliable results;
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they may not perform in a timely manner;
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they may not maintain confidentiality of our proprietary information;
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disputes may arise with respect to ownership of rights to technology developed with our partners, and those disputes may be resolved against us; and
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disagreements could cause delays in, or termination of, the research, development or commercialization of our products or result in litigation or arbitration.
Moreover, some third parties are located in markets subject to political and social risk, corruption, infrastructure problems and natural disasters, in addition to country-specific privacy and data security risk given current legal and regulatory environments. Failure of third parties to meet their contractual, regulatory, legal and other obligations may materially affect our business.
Our business could be adversely affected by the effects of health epidemics, pandemics, or outbreaks of infectious diseases, including the recent COVID-19 pandemic, in regions where we or third parties on which we rely have significant manufacturing facilities, concentrations of clinical trial sites or other business operations. The COVID-19 pandemic could materially affect our operations, including at our headquarters in New Jersey, and at our clinical trial sites, as well as the business or operations of our manufacturers, CROs or other third parties with whom we conduct business.
Our business could be adversely affected by health epidemics in regions where we have concentrations of clinical trial sites or other business operations and could cause significant disruption in the operations of third-party manufacturers and CROs upon whom we rely.
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For example, in December 2019, a novel strain of coronavirus, COVID-19, was identified in Wuhan, China. This virus spread globally and in March 2020, the World Health Organization declared COVID-19 a pandemic. The COVID-19 pandemic negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets. In response to the COVID-19 outbreak, “shelter in place” orders and other public health guidance measures were implemented across much of the United States, Europe and Asia, including in the locations of our offices, clinical trial sites, key vendors and partners. Our clinical development program timelines were negatively affected by COVID-19, as evidenced by the delay in the initiation of our planned Phase 2 trial of PDS0101 in combination with KEYTRUDA® in first-line treatment of recurrent/metastatic head and neck cancer and initiation of the Phase 2 clinical trial at The MD Anderson Cancer Center in combination with CRT. Even though both of these studies have since been initiated despite the pandemic challenges, the COVID-19 pandemic impacted the pace of enrollment in clinical trials and we may be affected by similar delays as patients may avoid or may not be able to travel to healthcare facilities and physicians’ offices. Such facilities and offices have been and may continue to be required to focus limited resources on non-clinical trial matters, including treatment of COVID-19 patients, thereby decreasing availability, in whole or in part, for clinical trial services. Further, due to “shelter in place” orders and other public health guidance measures, we implemented a work-from-home policy for all staff members excluding those necessary to maintain minimum basic operations. Our increased reliance on personnel working from home may negatively impact productivity, or disrupt, delay or otherwise adversely impact our business. In addition, the COVID-19 pandemic has affected and may continue to affect the operations of the FDA and other health authorities, which could result in delays of reviews and approvals. For example, during the course of the pandemic the FDA has at points delayed both domestic and foreign inspections.
As a result of the COVID-19 outbreak, or similar pandemics, and related “shelter in place” orders and other public health guidance measures, we have and may in the future experience disruptions that materially and adversely impact our clinical trials, business, financial condition and results of operations. Potential disruptions include but are not limited to:
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delays or difficulties in enrolling patients in our clinical trials;
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delays or difficulties in initiating or expanding clinical trials, including delays or difficulties with clinical site initiation and recruiting clinical site investigators and clinical site staff;
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increased rates of patients withdrawing from our clinical trials following enrollment as a result of contracting COVID-19 or other health conditions or being forced to quarantine;
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diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;
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interruption of key clinical trial activities, such as clinical trial site data monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others or interruption of clinical trial subject visits and study procedures, which may impact the integrity of subject data and clinical study endpoints;
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interruption or delays in the operations of the FDA or other regulatory authorities, which may impact review and approval timelines;
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delays or disruptions in preclinical experiments and investigational new drug application-enabling studies due to restrictions of on-site staff and unforeseen circumstances at contract research organizations and vendors;
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interruption of, or delays in receiving, supplies of our product candidates from our contract manufacturing organizations due to staffing shortages, production slowdowns or stoppages and disruptions in delivery systems;
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limitations on our ability to recruit and hire key personnel due to our inability to meet with candidates because of travel restrictions and “shelter in place” orders;
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limitations on employee resources that would otherwise be focused on the conduct of our preclinical studies and clinical trials, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people; and
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interruption or delays to our sourced discovery and clinical activities.
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Further, on March 25, 2020, the FDA issued Guidance on Conduct of Clinical Trials of Medical Products during the COVID-19 pandemic for Industry, Investigators, and Institutional Review Boards to assist sponsors in assuring the safety of trial participants, maintaining compliance with good clinical practices, and minimizing risks to trial integrity during the COVID-19 pandemic, or the COVID-19 Guidelines. This Guidance was updated on August 30, 2021 and is intended to remain in effect only for the duration of the Public Health Emergency (PHE) related to COVID-19 declared by the Department of Health and Human Services on January 31, 2020 and these guidelines are continuing. We have implemented several procedures in accordance with the COVID-19 Guidelines to address patient safety and clinical trial conduct during the COVID-19 pandemic, including remote monitoring of patients through telemedical visits, remote monitoring of sites by our clinical trial monitors, remote data entry, and follow-up visits at sites other than the site where the patient was initially treated. Our implementation of the COVID-19 Guidelines and potential disruptions to patient follow up, site monitoring or the timely completion of our trials may have a negative effect on our ability to complete trials and associated regulatory filings.
While the potential economic impact brought by, and the duration of, the COVID-19 pandemic is difficult to assess or predict, the impact of the COVID-19 pandemic on the global financial markets has reduced and may continue to reduce our ability to access capital, which could negatively impact our short-term and long-term liquidity.
We do not yet know the full extent of potential delays or impacts on our business, financing or clinical trial activities or on healthcare systems or the global economy as a whole. However, these effects have had and may continue to have a material impact on our liquidity, capital resources, operations and business and those of the third parties on which we rely and a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock. In addition, the trading prices for our common stock and other biopharmaceutical companies have been highly volatile as a result of the COVID-19 pandemic. We will continue to monitor the COVID-19 situation closely.
Risks Related to Our Intellectual Property
If we are unable to obtain and maintain patent protection for our Versamune platform, PDS0101, or other Versamune-based Products or if the scope of the patent protection obtained is not sufficiently broad, we may not be able to compete effectively in our markets.
We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property related to Versamune. Our success depends in large part on our ability to obtain and maintain patent protection in the United States and other countries. We seek to protect our proprietary position by filing patent applications in the United States and abroad related to Versamune and Infectimune-based products. The patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner.
It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. The patent applications that we own or license may fail to result in issued patents with claims that cover Versamune and Infectimune-based products or applications in the United States or in other countries. There is no assurance that all potentially relevant prior art relating, which can invalidate a patent or prevent a patent from issuing from a pending patent application is known to us. Even if patents do successfully issue, third parties may challenge their validity, enforceability or scope, which may result in such patents being narrowed, invalidated, or held unenforceable. Any successful challenge to these patents or any other patents owned by or licensed to us could deprive us of rights necessary for the successful commercialization of PDS0101 and other Versamune and Infectimune-based products that we may develop. Further, if we encounter delays in regulatory approvals, the period of time during which we could exclusively market PDS0101 and other Versamune and Infectimune-based products under patent protection could be reduced.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the United States. For example, European patent law restricts the patentability of methods of treatment of the human body more than U.S. law does. Publications of discoveries in scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot know with certainty whether we were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, or that we were the first to file for patent protection of such inventions. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our pending and future patent applications may not result in patents being issued which protect PDS0101 or other Versamune and Infectimune-based products, in whole or in part, or which effectively prevent others from commercializing competitive technologies and immunotherapies. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection. Recent Russian Federal Law, No. 46-FZ of March 8, 2022, allows the Russian Government to designate goods for which IP rights are exempted and this rule applies to all IP rights, including trademarks and this rule may affect our IP in the Russian Federation. There is no guidance on how broadly this rule will be applied, though the rule appears to be limited only to the year 2022.
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Moreover, we may be subject to a third-party pre-issuance submission of prior art to the U.S. Patent Office, or become involved in derivation, reexamination, inter parties review, post-grant review or interference proceedings challenging its patent rights or the patent rights of others. In other countries, we may be subject to or become involved in opposition proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such submission or proceeding could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or immunotherapies and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize PDS0101 without infringing third- party patent rights. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize PDS0101 and other Versamune and Infectimune-based products.
The issuance of a patent is not conclusive as to our inventorship, scope, validity or enforceability, and our owned and licensed patents may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and immunotherapies, or limit the duration of the patent protection of our technology and immunotherapies. Moreover, patents have a limited lifespan. In the United States and other countries, the natural expiration of a patent is generally 20 years after it is filed. Various extensions may be available; however, the life of a patent, and the protection it affords, is limited. Without patent protection for PDS0101 and other Versamune and Infectimune-based products, we may be open to competition from generic versions of PDS0101 or other similar products using our technology. Given the amount of time required for the development, testing and regulatory review of new immunotherapy candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing immunotherapies similar or identical to ours.
We may be involved in lawsuits to protect or enforce our patents, the patents of our licensors or our other intellectual property rights, or defend our products and methods against the property rights of others, which could be expensive, time consuming and unsuccessful.
Competitors may infringe or otherwise violate our patents, the patents of our licensors or our other intellectual property rights. To counter infringement or unauthorized use, we may be required to file legal claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours or our licensors is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that such patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing. The initiation of a claim against a third-party may also cause the third-party to bring counter claims against us, such as claims asserting that our patents are invalid or unenforceable. In patent litigation in the United States, 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, including lack of novelty, obviousness, non-enablement or lack of statutory subject matter. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant material information from the USPTO, or made a materially misleading statement, during prosecution. Third parties may also raise similar validity claims before the USPTO in post-grant proceedings such as inter partes review, or post-grant review, or oppositions or similar proceedings outside the United States, in parallel with litigation or even outside the context of litigation. The outcome following legal assertions of invalidity and unenforceability is unpredictable. We cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. For the patents and patent applications that we have licensed, we may have limited or no right to participate in the defense of any licensed patents against challenge by a third-party. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of any future patent protection on PDS0101 and other Versamune and Infectimune-based products. Such a loss of patent protection could harm our business.
We may also face claims that our products infringe patents that our competitors hold. Claims for alleged infringement and any resulting lawsuit, if successful, could subject us to significant liability for damages and invalidations of our proprietary rights. Any such lawsuit, regardless of our success, would likely be time consuming and expensive to resolve and would divert management time and attention. Any potential intellectual property litigation could also force us to do one or more of the following: (a) stop selling our products; (b) obtain a license(s), from the owner of any asserted intellectual property, to sell or use the relevant technology, which license may not be available on reasonable terms, or at all; or (c) redesign our products to avoid using the relevant technology.
We may not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States. Our business could be harmed if in litigation the prevailing party does not offer us a license on commercially reasonable terms. Any litigation or other proceedings to enforce our intellectual property rights may fail, and even if successful, may result in substantial costs and distract our management and other employees.
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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. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have an adverse effect on the price of our common stock.
Changes in patent law in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our products.
As is the case with other biotechnology companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biotechnology industry involves both technological and legal complexity, and is therefore costly, time-consuming and inherently uncertain. Patent reform legislation in the United States and in other jurisdictions could increase those uncertainties and costs.
The United States has enacted and implemented wide-ranging patent reform legislation. The United States 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 actions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce patents that we have licensed or that we might obtain in the future.
We may not be able to protect our intellectual property rights throughout the world, which could impair our business.
Filing, prosecuting and defending patents covering Versamune and Infectimune-based products throughout the world would be prohibitively expensive. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own immunotherapies and, further, may export otherwise infringing immunotherapies to territories where we may obtain patent protection, but where patent enforcement is not as strong as that in the United States. These immunotherapies may compete with PDS0101 in jurisdictions where we do not have any issued or licensed patents and any future patent claims or other intellectual property rights may not be effective or sufficient to prevent them from so competing.
Many countries, including European Union countries, India, Japan and China, have compulsory licensing laws under which a patent owner may be compelled under specified circumstances to grant licenses to third parties. In those countries, we may have limited remedies if patents are infringed or if we are compelled to grant a license to a third party, which could materially diminish the value of those patents. This could limit our ability to pursue strategic alternatives, including identifying and consummating transactions with potential third-party partners, to further develop, obtain marketing approval for and/or commercialize our drug candidates, and consequently our potential revenue opportunities. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed.
We seek to protect our proprietary technology in part by entering into confidentiality agreements with third parties and, if applicable, material transfer agreements, consulting agreements or other similar agreements with our advisors, employees, third-party contractors and consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential information, including our trade secrets. Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, on our know-how and trade secrets, a competitor’s discovery of our trade secrets or other unauthorized use or disclosure would impair our competitive position and may have an adverse effect on our business and results of operations.
In addition, these agreements typically restrict the ability of our advisors, employees, third-party contractors and consultants to publish data potentially relating to our trade secrets, although our agreements may contain certain limited publication rights. Despite our efforts to protect our trade secrets, our competitors may discover our trade secrets, either through breach of our agreements with third parties, independent development or publication of information by any of our third-party collaborators. A competitor’s discovery of our trade secrets would impair our competitive position and have an adverse impact on our business.
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General Market Risk Factors
Our stock price is expected to be volatile, and the market price of our common stock may drop in the future.
The market price of our common stock may be subject to significant fluctuations in the future. Market prices for securities of early-stage pharmaceutical, biotechnology and other life sciences companies have historically been particularly volatile. Some of the factors that may cause the market price of our common stock to fluctuate include:
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the ability of us and our partners to develop product candidates and conduct clinical trials that demonstrate such product candidates are safe and effective;
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the ability of us or our partners to obtain regulatory approvals for product candidates, and delays or failures to obtain such approvals;
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failure of any of our product candidates to demonstrate safety and efficacy, receive regulatory approval and achieve commercial success;
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failure by us to maintain our existing third-party license, manufacturing and supply agreements;
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impact of COVID-19 and its variants on business operations and clinical trials;
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failure by us or our licensors to prosecute, maintain, or enforce our intellectual property rights;
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changes in laws or regulations applicable to our product candidates;
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any inability to obtain adequate supply of product candidates or the inability to do so at acceptable prices;
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adverse regulatory authority decisions;
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introduction of new or competing products by our competitors;
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failure to meet or exceed financial and development projections we may provide to the public;
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the perception of the pharmaceutical industry by the public, legislatures, regulators and the investment community;
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announcements of significant acquisitions, strategic partnerships, joint ventures, or capital commitments by us or our competitors;
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disputes or other developments relating to proprietary rights, including patents, litigation matters, and our ability to obtain intellectual property protection for our technologies;
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additions or departures of key personnel;
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significant lawsuits, including intellectual property or stockholder litigation;
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if securities or industry analysts do not publish research or reports about us, or if they issue an adverse or misleading opinions regarding our business and stock;
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if large short positions are taken in our stock and or negative reports are provided, whether they are based in fact or otherwise;
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changes in the market valuations of similar companies;
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general market or macroeconomic conditions;
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sales of our common stock by us or our stockholders in the future;
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trading volume of our common stock;
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adverse publicity relating to our markets generally, including with respect to other products and potential products in such markets;
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changes in the structure of health care payment systems; and
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period-to-period fluctuations in our financial results.
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Moreover, the stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of individual companies. These broad market fluctuations may also adversely affect the trading price of our common stock.
In the past, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigation against those companies. Such litigation, if instituted, could result in substantial costs and diversion of management attention and resources, which could significantly harm our profitability and reputation.
We are required to meet the Nasdaq Capital Market’s continued listing requirements and other Nasdaq rules, and if we fail to meet such rules and requirements, we may be subject to delisting. Delisting could negatively affect the price of our common stock, which could make it more difficult for us to sell securities in a future financing or for you to sell our common stock.
We are required to meet the continued listing requirements of the Nasdaq Capital Market and other Nasdaq rules, including those regarding director independence and independent committee requirements, minimum stockholders’ equity, minimum share price and certain other corporate governance requirements. In particular, we are required to maintain a minimum bid price for our listed common stock of $1.00 per share. If we do not meet these continued listing requirements, our common stock could be delisted. Delisting from the Nasdaq Capital Market would cause us to pursue eligibility for trading of these securities on other markets or exchanges, including the OTC BB or QB markets, or on the OTC “pink sheets.” In such case, our stockholders’ ability to trade, or obtain quotations of the market value of our common stock would be severely limited because of lower trading volumes and transaction delays. These factors could contribute to lower prices and larger spreads in the bid and ask prices of our securities. There can be no assurance that our securities, if delisted from the Nasdaq Capital Market in the future, would be listed on a national securities exchange, a national quotation service, the OTC markets or the pink sheets. Delisting from the Nasdaq Capital Market, or even the issuance of a notice of potential delisting, would also result in negative publicity, make it more difficult for us to raise additional capital, cause us to lose eligibility to register the sale or resale of our shares on Form S-3 and the automatic exemption from registration under state securities laws for exchange-listed securities, adversely affect the market liquidity of our securities, decrease securities analysts’ coverage of us or diminish investor, supplier and employee confidence.
We do not anticipate that we will pay any cash dividends in the foreseeable future.
We currently expect to retain our future earnings, if any, to fund the development and growth of our business. As a result, capital appreciation, if any, of our company will be the sole source of our stockholders’ gain, if any, for the foreseeable future.
Future sales of shares by existing stockholders could cause our stock price to decline.
If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market after certain legal restrictions on resale lapse, the trading price of our common stock could decline. As of December 31, 2021, we had 28,448,612 shares of common stock outstanding. Approximately 27,113,462 of such shares are freely tradable, without restriction, in the public market. Approximately 1,335,150 of such shares of common stock are held by directors, executive officers and other affiliates and will be subject to volume limitations under Rule 144 under the Securities Act and various vesting agreements.
Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.
Our executive officers, directors, and 5% stockholders and their affiliates beneficially owned an aggregate of approximately 4.7% of the outstanding shares of our common stock as of December 31, 2021. Accordingly, these executive officers, directors and their affiliates, acting as a group, may have substantial influence over the outcome of corporate actions requiring stockholder approval, including the election of directors, any merger, consolidation or sale of all or substantially all of our assets or any other significant corporate transactions. These stockholders may also delay or prevent a change of control of our company, even if such a change of control would benefit our other stockholders. This concentration of ownership could delay or prevent any acquisition of our company on terms that other stockholders may desire, and may adversely affect the market price of our common stock.
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Because the Merger resulted in an ownership change under Section 382 of the Code for Edge, pre-merger U.S. net operating loss carryforwards and certain other tax attributes will be subject to limitations.
On March 15, 2019, we, then operating as Edge Therapeutics, Inc., or Edge, completed a reverse merger with privately held PDS Biotechnology Corporation, or Private PDS, pursuant to and in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated as of November 23, 2018, as amended on January 24, 2019, by and among us, Echos Merger Sub, a wholly-owned subsidiary of Edge, or Merger Sub, and Private PDS, whereby Private PDS merged with and into Merger Sub, with Private PDS surviving as our wholly-owned subsidiary, which we refer to as the Merger. In connection with and immediately following completion of the Merger, we changed our corporate name from Edge Therapeutics, Inc. to PDS Biotechnology Corporation, and Private PDS changed its name to PDS Operating Corporation.
As of December 31, 2018, prior to completion of the Merger, Edge had federal and state net operating loss carryforwards, or NOLs, of $128.6 million and $27.1 million, respectively, due to prior period losses. If a corporation undergoes an “ownership change” within the meaning of Section 382 of the Code, the corporation’s U.S. net operating loss carryforwards and certain other tax attributes arising from before the ownership change are subject to limitations on use after the ownership change. In general, an ownership change occurs if there is a cumulative change in the corporation’s equity ownership by certain stockholders that exceeds fifty percentage points over a rolling three-year period. Similar rules may apply under state and foreign tax laws. We believe that Edge may have already undergone one or more ownership changes prior to the Merger. However, the Merger also resulted in an ownership change for Edge and, accordingly, Edge’s U.S. net operating loss carryforwards and certain other tax attributes available to us are subject to limitations on their use.
Our effective tax rate may increase in the future, including as a result of tax legislation changes, which may have a material adverse effect on our business, financial condition and results of operations.
Our effective tax rate may be impacted by changes in or interpretations of tax laws in the United States or in any given jurisdiction in which we operate, utilization of or limitations on our ability to utilize any tax credit carry-forwards, changes in geographical allocation of revenue and expense and changes in management’s assessment of matters such as our ability to realize the value of deferred tax assets.
In particular, the U.S. government may enact significant changes to the taxation of business entities including, among others, an increase in the corporate income tax rate, the imposition of minimum taxes or surtaxes on certain types of income, significant changes to the taxation of income derived from international operations, and an addition of further limitations on the deductibility of business interest. While certain draft legislation has been publicly released and is under development in Congress at this time, the likelihood of these changes being enacted or implemented is unclear.
Our effective tax rate could also increase due to several factors, including:
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changes in tax rates, tax treaties, and regulations or the interpretation of them;
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changes to our assessment about our ability to realize deferred tax assets that are based on estimates of our future results, the prudence and feasibility of possible tax planning strategies, and the economic and political environments in which we do business;
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the outcome of any future tax audits, examinations, or administrative appeals; and
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the effects of any acquisitions;
There can be no assurance that our effective income tax rate will not change in future periods. Accordingly, if our effective tax rate were to increase, it may have a material adverse effect on our business, financial condition and results of operations.
Anti-takeover provisions under Delaware law could make an acquisition more difficult and may prevent attempts by our stockholders to replace or remove our current or future management.
Because we are incorporated in Delaware, our company is governed by the provisions of Section 203 of the DGCL, which prohibits stockholders owning in excess of 15% of our voting stock from merging or combining with us. Although we believe these provisions collectively will provide for an opportunity to receive higher bids by requiring potential acquirors to negotiate with our board of directors, they would apply even if the offer may be considered beneficial by some stockholders. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove then current management by making it more difficult for stockholders to replace members of the board of directors, which is responsible for appointing the members of management.
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Our eighth amended and restated certificate of incorporation, as amended, provides that, unless we consent to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum, to the fullest extent permitted by law, for: (a) any derivative action or proceeding brought on our behalf; (b) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders; (c) any action asserting a claim arising pursuant to the DGCL, our eighth amended and restated certificate of incorporation, as amended, or our amended and restated bylaws; or (d) any action asserting a claim against us governed by the internal affairs doctrine. This choice of forum provision does not preclude or contract the scope of exclusive federal or concurrent jurisdiction for any actions brought under the Securities Act or the Exchange Act. Accordingly, our exclusive forum provision will not relieve us of our duties to comply with the federal securities laws and the rules and regulations thereunder, and our stockholders will not be deemed to have waived our compliance with these laws, rules and regulations.
Any person or entity purchasing or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to these provisions. These exclusive-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum of its’ choosing for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees.
If a court were to find the choice of forum provision contained in our eighth amended and restated certificate of incorporation, as amended, to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations, and financial condition. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management and other employees.
Provisions in our amended and restated bylaws could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the U.S. shall be the exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act. This provision limits the ability of our stockholders to bring claims under the Securities Act in any court other than the U.S. federal courts, which ultimately may disadvantage our stockholders or be cost prohibitive. Notwithstanding the foregoing, there is uncertainty as to whether a court (other than state courts in the State of Delaware, which have recently upheld the validity of such a provision) would enforce such a provision and whether investors can waive compliance with the federal securities laws and the rules and regulations thereunder. Furthermore, the exclusive forum provision only applies to claims brought under the Securities Act and does not apply to actions arising under the Exchange Act, which is already subject to federal courts as the exclusive forum.
If a court were to find these provisions of our amended and restated bylaws 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, results of operations and financial condition. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management and other employees.
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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
We maintain a month-to-month lease for our research facilities at the Princeton Innovation Center BioLabs located at 303A College Road E, Princeton, NJ 08540.
We entered into a temporary month-to-month lease as of September 1, 2019 for office space located at 830 Morris Turnpike, Short Hills, NJ 07078 until we entered into a new lease for permanent office space. This lease was terminated on May 31, 2020.
On March 10, 2020, we entered into a sublease agreement, effective as of March 5, 2020, to occupy our corporate and executive office located at 25B Vreeland Road, Suite 300, Florham Park, NJ. The sublease commenced on May 1, 2020 and continues for a term of approximately forty (40) months with an option to renew through October 31, 2027. On March 17, 2020, the master lessor provided its consent to the sublease in accordance with the terms of the sublease.
On July 8, 2019, we entered into a lease termination agreement for our office space located at 300 Connell Drive, Suite 4000, Berkeley Heights, NJ 07922 effective August 31, 2019, or the Lease Termination Agreement. Pursuant to the Lease Termination Agreement, we were required to pay 50% of the remaining lease payments of $665,802 over three installments on September 1, 2019, December 1, 2019, and March 1, 2020.
We believe our current facilities are suitable and adequate to meet our current needs.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3.
Legal Proceedings
The information in Note 11 to the Consolidated Financial Statements contained in Part IV, Item 15 of this Annual Report on Form 10-K is incorporated herein by reference. There are no matters which constitute material pending legal proceedings to which we are a party other than those incorporated into this item by reference from Note 11 to our Consolidated Financial Statements for the year ended December 31, 2021 contained in this Annual Report on Form 10-K.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4.
Mine Safety Disclosures
Not applicable.
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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
Our common stock is listed on the Nasdaq Capital Market under the symbol “PDSB”.
Holders
As of March 25, 2022, there were 44 stockholders of record, which excludes stockholders whose shares were held in nominee or street name by brokers.
Dividends
We have never declared or paid any cash dividends on our common stock and do not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors, subject to applicable laws, and will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions, general business conditions, and any other factors that our board may deem relevant.
Equity Compensation Plans
Information regarding our equity compensation plans is incorporated by reference from the information in our Proxy Statement for our 2022 Annual Meeting of Stockholders, which we will file with the SEC within 120 days after the end of the fiscal year to which this Annual Report on Form 10-K relates.
Issuer Purchases of Equity Securities
We did not purchase any of our registered equity securities during the period covered by this Annual Report.
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ITEM 6. SELECTED FINANCIAL DATA

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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 our financial condition and results of operations together with our consolidated financial statements and related notes appearing elsewhere in this Annual Report. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors. We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this Annual Report, including those set forth under Item 1A. “Risk Factors” and under “Forward-Looking Statements” in this Annual Report.
Introduction to PDS Biotechnology Corporation
We are a clinical-stage immunotherapy company developing a growing pipeline of molecularly targeted immunotherapies designed to overcome the limitations of current immunotherapy and vaccine technologies. We own proprietary T-cell activating platforms designed to train the immune system to better attack and destroy disease; Versamune®, for treatments in oncology and Infectimune™, for treatments in infectious disease. When paired with an antigen, which is a disease-related protein that is recognizable by the immune system, Versamune and Infectimune have both been shown to induce, in vivo, large quantities of high-quality, highly potent polyfunctional CD4+ helper and CD8+ killer T-cells, a specific sub-type of T-cell that is more effective at killing infected or target cells. Infectimune is also designed to promote the induction of disease-specific neutralizing antibodies. Our immuno-oncology product candidates are of potential interest for use as a component of combination product candidates (for example, in combination with other leading technologies such as checkpoint inhibitors) to provide more effective treatments across a range of advanced and/or refractory cancers. We are also evaluating our immunotherapies as monotherapies in early-stage disease. We are developing targeted product candidates to treat several cancers including Human Papillomavirus (HPV)-associated cancers, melanoma, colorectal, lung, breast and prostate cancers. Our infectious disease candidates are of potential interest as vaccines to prevent COVID-19 and universal influenza.
It is well documented that the most critical attribute of an effective cancer immunotherapy is the induction of high levels of active antigen-specific CD8+ (killer) T-cells. Priming adequate levels of active CD8+ T-cells in-vivo continues to be a major obstacle facing immunotherapy. PDS0101 in its first human clinical trial provided data supporting the earlier promising preclinical study results and demonstrated the unique in-vivo induction of high levels of active HPV-specific CD8+ T-cells in humans.
We believe that the Versamune platform has the potential to become an industry-leading immuno-oncology technology and is currently being applied to the development of a robust pipeline of valuable “new-generation, multi-functional” immunotherapies, both as single agents and as part of combination therapies with other leading immuno-oncology technologies.
We believe that the key differentiating attributes of the Infectimune platform technology, are strong induction of CD8+ and CD4+ T-cells as well as antibodies, which can be leveraged to improve treatment and preventive options in several infectious disease indications. Specifically, the COVID-19 pandemic has provided a unique opportunity to highlight Infectimune’s potentially transformative utility in the development of more effective and longer lasting protective vaccines.
PDS0101 in Combination with KEYTRUDA® Clinical Trial:
In November 2020, our VERSATILE-002 Phase 2 clinical trial evaluating the combination of PDS0101 (Versamune plus a mixture of HPV16 antigens) in combination with Merck’s anti-PD-1 therapy, KEYTRUDA® (pembrolizumab) for first-line treatment of recurrent/ metastatic HPV16-positive head and neck cancer opened and is actively recruiting patients. The clinical trial will evaluate the efficacy and safety of this therapeutic combination as a first-line treatment in patients with recurrent or metastatic head and neck cancer and high-risk HPV16 infection.
In this sponsored trial, patients whose cancer has returned or spread following initial treatment, will take this combination of two immuno-therapy drugs in lieu of chemotherapy. Enrolling patients with more functional immune systems earlier in disease recurrence that have not been compromised by extensive chemotherapy may allow improved efficacy of the combination. Patients in the trial will receive a total of 5 cycles of combination therapy in the context of standard of care KEYTRUDA® therapy administered every three weeks until disease progression or intolerance to therapy.
The original trial design for this combination trial was restricted to patients naïve to checkpoint inhibitor (CPI) therapy. PDS amended the protocol in May 2021 to expand this trial to include patients with advanced head and neck cancer who have failed multiple treatments, including CPI therapy (CPI refractory patients), a treatment refractory population with extremely high unmet medical need. The amended trial design is a Simon two stage design that will evaluate objective response rate- or ORR - at six months following initiation of treatment in both the original CPI naïve arm and in the expansion CPI refractory arm. Objective response is measured by radiographic tumor responses according to RECIST 1.1. There will be a lead-in cohort of 12 patients for the entire trial to assess the safety of the combination. In the CPI naïve arm of the trial, the first seventeen (17) patients will be evaluated for efficacy with a minimum of four (4) or more patients with documented objective response required to progress to full enrollment of this arm. In the expansion CPI refractory arm, the first twenty-one (21) patients will be evaluated for efficacy with a minimum of two (2) or more patients with documented objective response required to progress to full enrollment of this arm.
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In the first quarter of 2022, at the Multidisciplinary Head and Neck Cancers Symposium, we announced the safety data for this trial in more detail, which showed that PDS0101 in combination with KEYTRUDA® for the treatment of recurrent or metastatic head and neck cancer is likely safe and well tolerated without evidence of enhanced or significant toxicity.
Also, in the first quarter of 2022, we announced we had met the preliminary efficacy milestone in the checkpoint inhibitor naïve arm and the arm could proceed to full enrollment of 54 patients. As pre-specified in the clinical trial design, the achievement of an objective response as measured by radiographic tumor responses according to RECIST 1.1 (tumor reduction of 30% or more) confirmed by two separate measurements among at least four or more of the first 17 patients in the CPI naïve arm to progress to full enrollment. The enrollment continues in the first stage of the CPI refractory arm.
PDS0101 in Combination with Bintrafusp alfa (M7824) and NHS-IL12 NCI-led Clinical Trial:
In June 2020, the first patient was dosed under a PDS0101 Cooperative Research and Development Agreement, which we refer to as the CRADA, in a National Cancer Institute, or NCI, led Phase 2 clinical trial evaluating PDS0101, in combination with two investigational immune-modulating agents Bintrafusp alfa (M7824), a bifunctional “trap” fusion protein targeting TGF-β and PD-L1, and NHS-IL12 (M9241), a tumor-targeting immune-cytokine. Both Bintrafusp alfa and NHS-IL12 are owned by and are being developed by Merck KGaA, Darmstadt, Germany. The NCI-led trial is evaluating the novel triple combination for the treatment of both CPI naïve and refractory patients with advanced HPV-associated cancers that have progressed or returned after treatment. Almost all types of HPV-related cancers (anal, cervical, head and neck, vaginal and vulvar cancers) are represented among the trial subjects to date. Objective response (tumor reduction > 30%) is measured by radiographic tumor responses according to RECIST 1.1. The NCI recently achieved the intended enrollment objective of 30 patients in the CPI refractory arm of the trial. The trial has enrolled 45 patients and enrollment in the trial will continue until the total enrollment of 56 patients is achieved.
The trial was accepted for oral presentation at the 2021 meeting of the American Society of Clinical Oncology (ASCO) held June 4-8, 2021. On May 20, 2021, we announced the abstract summarizing interim data of 14 patients from the trial. Objective responses were observed in 83% (5 of 6) of HPV16-positive checkpoint inhibitor naïve patients with advanced disease. Objective responses were observed in 63% (5 of 8) of HPV16-positive advanced cancer patients who had also failed checkpoint inhibitor therapy.
On June 7, 2021, updated interim data (Abstract 2501) was presented at ASCO by the trial’s Principal Investigator Dr. Julius Strauss. This data included an update on the initial 14 patients with an additional four (4) subsequently recruited CPI refractory HPV16-positive patients whose data became available after the abstract submission as well as an additional seven (7) HPV16-negative patients (patients whose cancer was not caused by HPV16 infection) who were not discussed in the abstract. Tumor reduction and objective response was seen in 83% (5/8) of CPI naïve patients with one (1) achieving a complete response. After a median of eight (8) months of follow-up, 100% (6/6) of these patients were alive, compared to the historical median survival of 7-11 months. In the CPI refractory arm, tumor reduction was observed in 58% (7/12) patients. These 12 patients included the initial 8 patients reported in the abstract where 5 of 8, or 63% had tumor reduction. Of the 4 additional patients in this updated data set, 2 patients already had ongoing tumor reduction but had not yet met the criteria for objective response. Objective response was achieved in 42% (5/12) patients with one (1) achieving a complete response in this refractory arm. The objective response rates reported in checkpoint refractory, advanced HPV-cancer patients are lower than those naïve to checkpoint inhibitors, generally only 5-12%. Importantly, 83% (10/12) of all checkpoint inhibitor refractory patients were still alive at median eight (8) months of follow-up; historic average median survival for this patient population is 3-4 months. Overall, tumor reduction occurred in 67% (12/18) of the HPV16-positive patients, including both CPI naïve and CPI refractory patients. Of note, in the 7 HPV16-negative patients- those with an HPV type other than HPV16 that do not express the molecular target of PDS0101, zero (0) of seven (7) patients experienced tumor reduction or an objective response, providing insight into the potential role of PDS0101 in the observed activity of the triple combination. These data suggest that HPV16-specific CD8+ and CD4+ T-cell induction by PDS0101 as demonstrated in preclinical studies and phase 1 clinical studies, may promote tumor reduction and enhanced clinical benefit of the triple combination.
Moreover, PDS0101 did not appear to compound the toxicities already reported to be induced by Bintrafusp alfa and NHS-IL12. This is an important consideration for combination oncology treatment regimens where a key goal is to avoid additional or excess toxicity associated with limited anti-tumor activity. As would be expected with both PDS0101 and M9241 being delivered subcutaneously, injection site reactions were seen in 20% of patients. No new or additional toxicities have been observed to date from the addition of PDS0101 to the combination of the other two immunotherapies.
In the first quarter of 2022, the NCI provided us with data that as of December 31, 2021, the median survival of all patients had increased to 12 months and on-going.
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PDS0101 in Combination with Chemo-Radiotherapy Clinical Trial (IMMUNOCERV):
In October 2020, a third PDS0101 phase 2 clinical trial was initiated with The University of Texas MD Anderson Cancer Center and is actively recruiting patients. This clinical trial is investigating the safety and preliminary anti-tumor efficacy of PDS0101 in combination with standard-of-care chemo-radiotherapy, or CRT, and their correlation with critical immunological biomarkers in patients with locally advanced cervical cancer. The trial goals include evaluation of the rate of regression in patients with a primary tumor that is greater than or equal to 5cm among approximately thirty-five (35) patients. The rate of complete metabolic response is measured by PET-CT at day 170 and the rate of > 90% tumor volume reduction evaluated by MRI at 30-40 days from the start of treatment. Preliminary data is expected from this trial in 2022. We believe that Versamune’s strong T-cell induction has the potential to meaningfully enhance efficacy of the current standard of care CRT treatment in this indication.
PDS0101 as a Monotherapy and in Combination with KEYTRUDA® in a Pre-Surgical Oropharynx Clinical Trial (Mayo Clinic):
In February 2022, a fourth phase 2 clinical trial was initiated with Mayo Clinic. This study is currently open for enrollment. This investigator initiated clinical trial (MC200710), for PDS0101 as a monotherapy or in combination with KEYTRUDA®, in patients with HPV oropharynx cancer (HPV+OPSCC) at high risk for recurrence. The trial treatment will be administered before patients proceed to transoral robotic surgery with curative intent. Treatment in this setting is referred to as neoadjuvant treatment. This trial will explore wither PDS0101 with or without checkpoint inhibition may increase HPV-specific anti-tumor responses, potentially resulting in tumor shrinkage, pathologic regression and decrease in circulating tumor DNA (ctDNA).
Other Versamune -Based Products in Development:
PDS0102 - Versamune + TARP antigens
The TARP antigen is over-expressed in acute myelogenous leukemia (AML), prostate and breast cancers. In the U.S. 450,000 patients are projected to be diagnosed with prostate or breast cancer this year and 19,900 patients are projected to be diagnosed with AML. One hundred percent of adult and pediatric AML overexpress the TARP tumor antigen while approximately 90% of prostate cancers and 50% of breast cancers overexpress TARP, providing a potentially significant therapeutic opportunity to impact these diseases. In an early human clinical study, the National Cancer Institute demonstrated that its proprietary TARP antigens (TARP mix) were recognized by the immune system in prostate cancer patients with PSA biochemical recurrence leading to a notable reduction in tumor growth rates. In preclinical studies, a dramatically enhanced TARP-specific CD8+ killer T-cell response was observed when our designed TARP antigens were combined with Versamune (PDS0102). Preclinical development is ongoing. On November 5, 2021 PDS and NCI entered into a non-exclusive, worldwide Patent License Agreement to develop and commercialize a product including TARP antigens. The patent for the TARP antigens extends through 2034. This license agreement is an important step in the development of PDS0102. We are evaluating the next steps in the clinical development of PDS0102 and are seeking nondilutive financings to move to human trials.
PDS0103 - Versamune + MUC1 antigens
In April 2020, the PDS-NCI CRADA was expanded beyond PDS0101 to include clinical and preclinical development of PDS0103. PDS0103 is an investigational immunotherapy owned by PDS and designed to treat cancers associated with the mucin-1, or MUC1, oncogenic protein. PDS0103 combines Versamune with novel highly immunogenic agonist epitopes of MUC1 developed by the NCI and licensed by PDS. MUC1 is highly expressed in multiple solid tumors and has been shown to be associated with drug resistance and poor disease prognosis in breast, colorectal, lung and ovarian cancers, for which PDS0103 is being developed. In preclinical studies, and similarly to PDS0101 and PDS0102, PDS0103 demonstrated the ability to generate powerful MUC1-specific CD8+ killer T-cells. PDS0103 is currently in late preclinical development, and we requested a pre-IND meeting with the FDA to align on a clinical development plan. In the first quarter of 2022, we held a pre-IND meeting with the FDA on PDS0103. We were satisfied with the responses and believe we will submit our IND package and will start human trials at the end of 2022.
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PDS0104 - Versamune + TRP-2 and melanoma antigens
Rates of melanoma have been rising rapidly over the past few decades and approximately 96,480 new melanomas will be diagnosed this year alone. More than 7,000 of these will prove fatal. PDS0104 combines Versamune with various melanoma antigens including the Tyrosinase-related protein 2 (TRP2) antigen which is highly expressed in melanoma. In preclinical B16 animal models of aggressive melanoma, PDS0104 has been shown to have unique and significant anti-tumor activity as a monotherapy and has also demonstrated strong anti-tumor synergy in combination with checkpoint inhibitors. As the first approval indications for checkpoint inhibitors occurred in melanoma, there is a growing unmet medical need to identify combination regimens with potential activity in checkpoint inhibitor refractory patients with this disease. Preclinical development is ongoing.
Infectious Diseases
Our primary focus remains on developing our oncology products and progressing the clinical trials described above. However, we are also developing preventive vaccines to address several infectious diseases. Based on the key characteristics of Versamune we are progressing preclinical development of PDS0202, a universal influenza vaccine candidate, which combines Versamune with COBRA (Computationally Optimized Broadly Reactive Antigen) antigens. These COBRA antigens were designed by renowned influenza expert Dr. Ted Ross at the University of Georgia. PDS0202 leverages Versamune’s ability to induce the immune system to generate high levels of flu-specific neutralizing antibodies, CD4 helper and CD8 killer T-cells, as well as long-acting memory T-cells to potentially provide broad and long-term protection against multiple influenza strains. PDS0202 preclinical development is being supported by an agreement with the National Institute of Allergy and Infectious Diseases Collaborative Influenza Vaccine Innovation Centers, or CIVIC program. We have completed preclinical formulation and we have entered into an agreement to license COBRA antigens with the University of Georgia initially to progress into a human clinical trial.
PDS0203 is being designed with the goal to potentially provide long-term and broad protection against infection from COVID-19 and its potential mutations, based on the understood potential of Versamune to prime the immune system to generate both antibodies for near term protection and T-cell responses for immune memory and long-term protection against pathogens. Farmacore Biotechnology has licensed Versamune in Latin America to develop PDS0203 in Brazil. Farmacore is developing and manufacturing the antigen component of the vaccine, leads all regulatory and clinical trial efforts in Brazil and has selected a top clinical research organization to conduct clinical trials.
On February 22, 2021, PDS Biotechnology and Farmacore announced that Blanver Farmoquímica e Farmacêutica S.A joined their efforts (collectively the “Consortium”) to develop and commercialize a novel COVID-19 vaccine in Latin America. Under the terms of the agreement, São Paulo-based Blanver will manufacture, promote, distribute, and commercialize the Infectimune-based COVID-19 vaccine in Latin America.
On March 11, 2021 we announced that the Consortium received a commitment from the Secretary for Research and Scientific Training of the MCTI, Brazil to fund up to approximately US$60 million to support the clinical development and commercialization of an Infectimune-based COVID-19.
The progression of the Farmacore development program was delayed in the fourth quarter of 2021. After a review of the program by PDS and Farmacore, the agreement with Farmacore was extended for six months to May 31, 2022 to provide additional time to Farmacore to commence manufacturing and scale up of drug product for use in clinical trials and any necessary process development work. PDS will continue to monitor Farmacore’s progress with this program.
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Our current pipeline of Versamune-based targeted immunotherapies and Infectimune-based therapies focuses on the use of selected disease-associated antigens that have been demonstrated to be associated with a variety of solid tumors, as well as specific infectious diseases. Our pipeline is shown below:
We have never been profitable and have incurred net losses in each year since inception. Our net losses were $16.9 million, and $14.8 million for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, we had an accumulated deficit of $60.7 million. Substantially all of our net losses have resulted from costs incurred in connection with its research and development programs and from general and administrative costs associated with these operations.
As of December 31, 2021, we had $65.2 million in cash and cash equivalents.
Our future funding requirements will depend on many factors, including the following:
●
the timing and costs of our planned clinical trials;
●
the timing and costs of our planned preclinical studies of our Versamune platform;
●
the outcome, timing and costs of seeking regulatory approvals;
●
the terms and timing of any future collaborations, licensing, consulting or other arrangements that we may enter into;
●
the amount and timing of any payments we may be required to make in connection with the licensing, filing, prosecution, maintenance, defense and enforcement of any patents or patent applications or other intellectual property rights; and
●
the extent to which we license or acquire other products and technologies.
Index
Selected Financial Operations Overview
Revenue
We have not generated any revenues from commercial product sales and do not expect to generate any such revenue in the near future. We may generate revenue in the future from a combination of research and development payments, license fees and other upfront payments or milestone payments.
Research and Development Expenses
Research and development expenses include employee-related expenses, licensing fees to use certain technology in our research and development projects, costs of acquiring, developing and manufacturing clinical trial materials, as well as fees paid to consultants and various entities that perform certain research and testing on our behalf. Costs for certain development activities, such as clinical trials, are recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations or information provided by vendors on their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the consolidated financial statements as prepaid or accrued expenses. Costs incurred in connection with research and development activities are expensed as incurred.
We expect that our research and development expenses will increase significantly over the next several years as we advance our Versamune-based immuno-oncology, or I-O, candidates into and through clinical trials, pursues regulatory approval of our injectable Versamune candidates and prepare for a possible commercial launch, all of which will also require a significant investment in contract and internal manufacturing and inventory related costs.
The process of conducting human clinical trials necessary to obtain regulatory approval is costly and time consuming. We may never succeed in achieving marketing approval for our injectable I-O candidates. The probability of successful commercialization of our I-O candidates may be affected by numerous factors, including clinical data obtained in future trials, competition, manufacturing capability and commercial viability. As a result, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of any of our product candidates.
The following table summarizes our research and development expenses incurred for the periods indicated (in thousands):
Year Ended December 31,
PDS projects
$
6,173
$
4,601
Clinical consulting
Salaries and other costs
4,349
2,381
Total
$
11,254
$
7,924
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation, related to our executive, finance, legal, business development and support functions. Other general and administrative expenses include travel expenses, professional fees for auditing, tax and legal services and facility-related costs.
Other Income
Other income consists of interest income earned on our cash and cash equivalents.
Index
Critical Accounting Policies
Our accounting policies are more fully described in Note 2 to the consolidated financial statements included in this Annual Report on Form 10-K. As described in Note 2, the preparation of these 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 financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various market specific and other relevant assumptions 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. Estimates are assessed each period and updated to reflect current information. Actual results may differ from these estimates. We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective and complex judgments.
Income Taxes
We file U.S. federal income tax returns and New Jersey state tax returns. Our deferred tax assets are primarily comprised of federal and state tax net operating losses and tax credit carryforwards and are recorded using enacted tax rates expected to be in effect in the years in which these temporary differences are expected to be utilized. At December 31, 2021, we had federal net operating losses, or NOLs, carryforwards of approximately $108.7 million, $30.0 million of which expire at various dates between 2028 and 2037, losses generated in 2018 or later of $78.7 million will carry forward indefinitely. At December 31, 2021, we had federal research and development credits carryforwards of approximately $1.7 million. We may be subject to the net operating loss utilization provisions of Section 382 of the Internal Revenue Code. The effect of an ownership change would be the imposition of an annual limitation on the use of NOL carryforwards attributable to periods before the change. The amount of the annual limitation depends upon our value immediately before the ownership change, changes to our capital during a specified period prior to the change, and the federal published interest rate. Although we have not completed an analysis under Section 382 of the Code, it is likely that the utilization of the NOLs will be limited.
Accrued Clinical Expenses
When preparing our financial statements, we are required to estimate our accrued clinical expenses. This process involves reviewing open contracts and communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual cost. If we underestimate or overestimate the cost associated with a trial or service at a given point in time, adjustments to research and development expenses may be necessary in future periods. Historically, our estimated accrued clinical expenses have approximated actual expense incurred.
Stock-based Compensation
We estimate the fair value of our stock-based option awards to employees, directors and non-employees using the Black-Scholes option-pricing model, which requires the following assumptions: (1) the expected volatility of our stock is based on volatilities of a peer group of similar companies in the biotechnology industry whose share prices are publicly available, (2) the expected term of the award is based on the simplified method, which is the midpoint between the requisite service period and the contractual term of the option, as we have a limited history of being a public company from March 15, 2019 (the date of closing of the reverse merger between us and Edge Therapeutics, Inc.) to develop reasonable expectations about future exercise patterns and employment duration for our options, (3) the risk-free interest rate based on U.S. Treasury notes with a term approximating the expected life of the option and (4) expected dividend yield of 0, since we have never paid cash dividends and have no present intention to pay cash dividends.
Index
Results of Operations
Comparison of the Years Ended December 31, 2021 and 2020
Year Ended December 31,
Increase (Decrease)
$
%
(in thousands)
Operating expenses:
Research and development expenses
$
11,254
$
7,924
$
3,330
%
General and administrative expenses
10,185
6,978
3,207
%
Total operating expenses
21,439
14,902
6,537
%
Loss from operations
(21,439
)
(14,902
)
(6,537
)
%
Interest income, net
(51
)
(93
)%
Benefit from income taxes
4,516
-
4,516
%
Net loss and comprehensive loss
$
(16,918
)
$
(14,847
)
$
(2,071
)
%
Research and Development Expenses
For the year ended December 31, 2021, research and development expenses increased to approximately $11.3 million compared to approximately $7.9 million for the year ended December 31, 2020. The increase of $3.4 million was primarily attributable to an increase in regulatory and clinical costs of $2.6 million, non-cash stock-based compensation of $1.1 million and personnel costs of $0.4 million, partially offset by an overall decrease in manufacturing and facility costs of $0.7 million.
General and Administrative Expenses
For the year ended December 31, 2021, general and administrative expenses increased to approximately $10.2 million compared to approximately $7.0 million for the year ended December 31, 2020. The $3.2 million increase was primarily attributable to an increase in personnel costs of $1.0 million, non-cash stock-based compensation of $2.5 million, and facilities costs of $0.1 million, partially offset by a decrease in professional fees of $0.4 million.
Benefit from Income Taxes
Income tax benefit was $4.5 million for the year ended December 31, 2021. In the second quarter of 2021, we recognized approximately $4.5 million as a Benefit from Income Taxes from the sale of our NJ tax benefits pursuant to the New Jersey Technology Business Tax Certificate Transfer Net Operating Loss program. This transaction reduced our reported net loss and comprehensive income for the year ended December 31, 2021 to approximately $16.9 million, or approximately $2.1 million less than reported for the same period in 2020 which did not include a similar sale of NJ tax benefits.
Liquidity and Capital Resources
In July 2019, we entered into a common stock purchase agreement, or the Aspire Purchase Agreement, with Aspire Capital pursuant to which, we have the right, in our sole discretion, to present Aspire Capital Fund, LLC, or Aspire Capital, with a purchase notice, directing Aspire Capital (as principal) to purchase up to 100,000 shares of our common stock per business day, in an aggregate amount of up to $20.0 million of our common stock, or the Purchased Shares, over the 30-month term of the Aspire Purchase Agreement. We may sell an aggregate of 1,034,979 shares of our common stock (which represented 19.99% of our outstanding shares of common stock on the date of the Aspire Purchase Agreement) without stockholder approval. We may sell additional shares of our common stock above the 19.99% limit provided that (i) we obtain stockholder approval or (ii) stockholder approval has not been obtained at any time the 1,034,979 share limitation is reached and at all times thereafter the average price paid for all shares issued under the Aspire Purchase Agreement, is equal to or greater than $5.76, which was the consolidated closing bid price of our common stock on July 26, 2019. The minimum price at which we can sell shares under the Aspire Purchase Agreement is $0.50. On July 29, 2019, we issued 100,654 shares of our common stock to Aspire Capital, as consideration for entering into the Aspire Purchase Agreement, which we refer to as the Commitment Shares. We recorded the fair value of the shares at July 29, 2019 of $603,924 as an expense in the third quarter of 2019. Concurrently with the Aspire Purchase Agreement, we entered into a registration rights agreement with Aspire Capital, or the Registration Rights Agreement. In accordance with the Registration Rights Agreement, on August 20, 2019 we filed a Registration Statement on Form S-1 (File No. 333-232988) to cover the resale of the Commitment Shares and any Purchased Shares issuable to Aspire Capital under the Aspire Purchase Agreement. As of December 31, 2021, no Purchase Shares have been sold to Aspire Capital under the Aspire Purchase Agreement. The Aspire Purchase Agreement expired in January 2022.
Index
In February 2020, we completed an underwritten public offering, in which we sold 10,000,000 shares of common stock at a public offering price of $1.30 per share. The shares sold included 769,230 shares issued upon the exercise by the underwriter of its option to purchase additional shares at the public offering price, minus underwriting discounts and commissions. We received gross proceeds of approximately $13 million and net proceeds of approximately $11.9 million after deducting underwriting discounts and commissions.
In July 2020, we filed a shelf registration statement, or the 2020 Shelf Registration Statement, with the SEC, for the issuance of common stock, preferred stock, warrants, rights, debt securities and units, which we refer to collectively as the Shelf Securities, up to an aggregate amount of $100 million. The 2020 Shelf Registration Statement was declared effective on July 31, 2020. On August 13, 2020, we sold 6,900,000 shares of its common stock at a public offering price of $2.75 per share pursuant to the 2020 Shelf Registration Statement, which includes 900,000 shares issued upon the exercise by the underwriter of its option to purchase additional shares at the public offering price, minus underwriting discounts and commissions. We received gross proceeds of approximately $19.0 million and net proceeds of approximately $17.1 million, after deducting underwriting discounts and offering expenses.
In May 2021, we received approximately $4.5 million from the net sale of tax benefits to an unrelated, profitable New Jersey corporation pursuant to our participation in the New Jersey Technology Business Tax Certificate Transfer Net Operating Loss program for State Fiscal Year 2020.
In June 2021, we sold 6,088,235 shares of our common stock at a public offering price of $8.50 per share pursuant to the 2020 Shelf Registration Statement, which includes 794,117 shares issued upon the exercise by the underwriter of its option to purchase additional shares at the public offering price, minus underwriting discounts and commissions. We received gross proceeds of approximately $51.7 million and net proceeds of approximately $48.5 million, after deducting underwriting discounts and offering expenses. Approximately $29,300,000 of Shelf Securities remain available for future sale under the 2020 Shelf Registration Statement
As of December 31, 2021, we had $65.2 million of cash and cash equivalents.
Our primary uses of cash are to fund operating expenses, primarily research and development expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.
We evaluated whether there are any conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year beyond the filing of this Annual Report on Form 10-K. Our budgeted cash requirements in 2022 and beyond include expenses related to continuing development and clinical studies. Based on our available cash resources and cash flow projections as of the date the consolidated financial statements were available for issuance, we believe there are sufficient funds to continue operations and research and development programs for at least 12 months from the date of this report.
We plan to continue to fund our operations and capital funding needs through equity and/or debt financings. However, we cannot be certain that additional financing will be available when needed or that, if available, financing will be obtained on terms favorable to us or our existing stockholders. We may also enter into government funding programs and consider selectively partnering for clinical development and commercialization. The sale of additional equity would result in additional dilution to our stockholders. Incurring debt financing would result in debt service obligations, and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations. If we are unable to raise additional capital in sufficient amounts or on acceptable terms, we may be required to delay, limit, reduce, or terminate our product development or future commercialization efforts or grant rights to develop and market immunotherapies that we would otherwise prefer to develop and market ourselves. Any of these actions could harm our business, results of operations and prospects. Failure to obtain adequate financing also may adversely affect its ability to operate as a going concern.
Index
Cash flows
The following table shows a summary of our cash flows for each of the years indicated (in thousands):
Year Ended December 31,
Net cash used in operating activities
$
(12,486
)
$
(13,149
)
Net cash provided by financing activities
48,889
29,827
Net increase in cash
$
36,403
$
16,678
Net Cash Used in Operating Activities
Net cash used in operating activities was $12.5 million and $13.1 million for the years ended December 31, 2021 and 2020, respectively. The decrease in cash used in operating activities of $0.6 million includes the $4.5 million NOL sale. Excluding the NOL sale, net cash used in operating activities would have increased $3.9 million primarily due to the increase in the loss before income taxes of $6.6 million, prepaid expenses and other assets of $0.9 million, offset by an increase in stock-based compensation of $3.6 million.
Net Cash Provided by Financing Activities
Net cash provided by financing activities for the year ended December 31, 2021 was primarily due to the receipt of net proceeds from the issuance of common stock of $48.5 million.
Net cash provided by financing activities for the year ended December 31, 2020 was primarily due to the receipt of net proceeds from the issuance of common stock of $29.8 million.
Operating Capital Requirements
To date, we have not generated any product revenue. We do not know when, or if, we will generate any product revenue and we do not expect to generate significant product revenue unless and until we obtain regulatory approval and commercialize one of our current or future product candidates. We anticipate that we will continue to generate losses for the foreseeable future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, our tablet vaccine candidates, and begin to commercialize any approved vaccine candidates. We are subject to all of the risks incident to the development of new products, and may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may harm our business. We expect to incur additional costs associated with operating as a public company and anticipate that we will need substantial additional funding in connection with our continuing operations.
We evaluated whether there are any conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year beyond the filing of this Annual Report. Our budgeted cash requirements in 2022 and beyond include expenses related to continuing development and clinical studies. We believe that our existing cash and cash equivalents as of December 31, 2021 are sufficient to continue operations and research and development programs for at least the next 12 months from the date of this Annual Report. Until we can generate significant cash from our operations, we expect to continue to fund our operations with available financial resources. These financial resources may not be adequate to sustain our operations.
Index
We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all of our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:
●
the initiation, progress, timing, costs and results of our planned clinical trials;
●
the effects of health epidemics, pandemics, or outbreaks of infectious diseases, including the recent COVID-19 pandemic, on our business operations, financial condition, results of operations and cash flows;
●
the outcome, timing and cost of meeting regulatory requirements established by the U.S. Food and Drug Administration, or FDA, the European Medicines Agency, or EMA, and other comparable foreign regulatory authorities;
●
the cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights;
●
the cost of defending potential intellectual property disputes, including patent infringement actions brought by third parties against us now or in the future;
●
the effect of competing technological and market developments;
●
the cost of establishing sales, marketing and distribution capabilities in regions where we choose to commercialize our tablet vaccines on our own; and
●
the initiation, progress, timing and results of our commercialization of our tablet vaccine candidates, if approved, for commercial sale.
Please see the section titled “Risk Factors” elsewhere in this Annual Report on Form 10-K for additional risks associated with our operations.
Purchase Commitments
We have no material non-cancelable purchase commitments with service providers as we have generally contracted on a cancelable, purchase order basis.
Operations and Liquidity
While the potential economic impact brought by and over the duration of the COVID-19 pandemic may be difficult to assess or predict, the COVID-19 pandemic has resulted in significant disruption of global financial markets, which could in the future negatively affect our liquidity. In addition, a recession or market volatility resulting from the COVID-19 pandemic could affect our business. We have taken proactive, aggressive action throughout the COVID-19 pandemic to protect the health and safety of our employees and expect to continue to implement these measures until we determine that the COVID-19 pandemic is adequately contained for purposes of our business. We may take further actions as government authorities require or recommend or as we determine to be in the best interests of our employees. Given the nature and type of our short-term investments, we do not believe that the COVID-19 pandemic will have a material impact on our current investment liquidity.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Index
Smaller Reporting Company
As of January 1, 2021, we are no longer an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. However, we remain a “smaller reporting company,” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended. We will cease to be a smaller reporting company if we have a non-affiliate public float in excess of $250 million and annual revenues in excess of $100 million, or a non-affiliate public float in excess of $700 million, determined on an annual basis. Even though we no longer qualify as an emerging growth company, we may still qualify as a smaller reporting company. As a smaller reporting company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not smaller reporting companies. These exemptions include:
•
being permitted to provide only two years of audited consolidated financial statements in this Annual Report on Form 10-K, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure;
•
reduced disclosure obligations regarding executive compensation;
•
not being required to furnish a contractual obligations table in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”; and
•
not being required to furnish a stock performance graph in our annual report.
We expect to continue to take advantage of some or all of the available exemptions.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8.
Financial Statements and Supplementary Data
The financial statements required to be filed pursuant to this Item 8 are appended to this report. An index of those financial statements is found in Item 15.

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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.

---

ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A.
Controls and Procedures
Limitations of Internal Control System
Because of the inherent limitations in a cost-effective control system, no evaluation of internal control over financial reporting can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within our company have been detected. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud.
Index
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures, (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)), as of December 31, 2021. Based on that evaluation, management has concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Management’s Report on Internal Control over Financial Reporting
Our Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our management conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework established in the 2013 Internal Control-Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, our management has determined that our internal control over financial reporting was effective as of December 31, 2021.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting in our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
ITEM 9B.
Other Information
Not applicable.
Index
PART III
Certain information required by Part III is omitted from this Annual Report on Form 10-K because we will file a definitive Proxy Statement for the Annual Meeting of Stockholders pursuant to Regulation 14A of the Securities Exchange Act of 1934 (the Proxy Statement), not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, and the applicable information included in the Proxy Statement is incorporated herein by reference.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10.
Directors, Executive Officers and Corporate Governance
The information required by this Item is incorporated herein by reference to the Proxy Statement.

---

ITEM 11. EXECUTIVE COMPENSATION
ITEM 11.
Executive Compensation
The information required by this Item is incorporated herein by reference to the Proxy Statement.

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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 information required by this Item is incorporated herein by reference to the Proxy Statement.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13.
Certain Relationships and Related Transactions, and Director Independence
The information required by this Item is incorporated herein by reference to the Proxy Statement.

---

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14.
Principal Accounting Fees and Services
The information required by this Item is incorporated herein by reference to the Proxy Statement.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15.
Exhibits, Financial Statement Schedules
(a) The following documents are filed as part of this report:
(1)
Financial Statements:
Report of Independent Registered Public Accounting Firm (PCAOB ID 185)
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Loss
Consolidated Statements of Changes in Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(2)
Financial Statement Schedules:
All financial statement schedules have been omitted because they are not applicable, not required or the information required is shown in the financial statements or the notes thereto.
(3)
Exhibits. The exhibits filed as part of this Annual Report are set forth on the Exhibit Index immediately following our consolidated financial statements. The Exhibit Index is incorporated herein by reference.